Three weeks after pushing back their merger deadline, Allegiance Bancshares and CBTX received approval Wednesday from the Federal Reserve Board to combine into a single bank.
Having secured all of the regulatory approvals they need, the two Houston-based companies are now set to merge into an entity that will be called Stellar Bancorp, which will operate Stellar Bank. Executives have said that Stellar Bank should have about $11 billion of assets and rank sixth in deposits in the Houston market, helping it better compete with large and regional banks.
The Federal Deposit Insurance Corp. approved the deal in June. As part of the FDIC's approval, the combined company must create an action plan to not only attract more mortgage loan applications from African American borrowers, but to increase the number of mortgage loans made to African American borrowers, according to the Fed's order approving the transaction.
The action plan must be approved by the FDIC, the Fed said.
The anticipated completion date of the deal wasn't immediately known Wednesday, and neither bank responded to an email seeking more information. Allegiance CEO Steve Retzloff told analysts in July that "once [the two parties] get the nod from the Federal Reserve, we are prepared to schedule the merger close and get closer to operating Stellar Bank."
Retzloff, who has been CEO of the $6.7 billion-asset Allegiance since 2020, will serve as the executive chairman of Stellar Bancorp. Robert Franklin, who has been the chairman, president and CEO of the $4.3 billion-asset CBTX since 2013, will become CEO of the combined company, whose board of directors will initially have 14 members — seven directors from each bank.
The Fed's approval comes amid heightened federal scrutiny of bank mergers and acquisitions and, in several cases, extended timelines by which to complete such deals. Pending deals whose timelines have been delayed due to a lack of regulatory signoffs include the New York Community Bancorp-Flagstar Bancorp
When Allegiance and CBTX
In addition to the FDIC, the companies also received approval from the Texas Department of Banking in June. Shareholders of both companies gave the thumbs-up in May.
The Houston banks have set a new deadline of Nov. 1 to finalize their deal, marking yet example of banks' facing a longer-than-expected decision process by the Federal Reserve. CBTX's chief said last month the wait has been "very frustrating."
Allegiance Bancshares is the parent company of Allegiance Bank, which operates 26 offices mostly in the Houston metropolitan area. CBTX is the parent company of CommunityBank of Texas, which has more than 30 offices primarily in the Houston and Beaumont markets.
According to the Fed's order of approval, the Fed received 18 public comments on the proposed transaction, all in support except one comment objecting to the deal based on allegations that both banks made fewer home loans to African American borrowers in 2020 than to white borrowers.
The commenter also cited the $1 million civil money penalty against CommunityBank, which the Office of the Comptroller of the Currency
When the deal was announced, CBTX said that it would be the legal acquirer and Allegiance would be the accounting acquirer. The companies said that Allegiance shareholders would own about 54% of the combined entity and CBTX shareholders would own the remaining shares.
At the time, neither company disclosed a sale price, but they did estimate that together they would have a market capitalization of $1.5 billion. They also projected cost savings of $35.5 million by 2023, or about 15% of their combined annual operating expenses.
