Equity Bancshares in Wichita, Kansas, has agreed to acquire crosstown rival American State Bancshares for $73 million in stock.
The deal, expected to close in October, would be the biggest bank acquisition in Equity’s 19-year history. The company plans no slowdown in its merger-and-acquisition activity, Chairman and CEO Brad Elliott said Monday on a conference call with analysts.
“There are a lot of things we’re working on outside this transaction," Elliott said. “I think we can handle other [deals] that come along.”
Equity has completed 17 bank acquisitions since 2003, including nine since its initial public offering in 2015. Its largest landed the $475 million-asset Community First Bancshares in November 2016.
The American State deal will make Equity Bancshares a $5 billion institution with 69 branches, No. 7 in deposit market share in Kansas and No. 2 in commercial banking market share in Wichita, Elliott said.
Elliott, Equity’s founder, said discussions with $779 million-asset American State about a possible deal stretch back as far as 2004, barely a year after Equity opened its own doors. The 44-year-old American State considered other opportunities before accepting Equity’s offer, Elliott added.
“This is something we’ve worked on for a long time,” Elliott said. “It’s been around the hoop. I’m glad it came together at this time.”
The $73 million price tag amounts to 111% of American State’s tangible book value on March 31. It is 3.7% dilutive to Equity’s tangible book value, but the company expects to earn it back in just under three years.
According to Elliott, there are no immediate plans to close any of American State’s 17 branches. Even so, Equity is projecting $5.8 million of cost savings, or 34% of Equity’s noninterest expense base. Equity expects to close the deal the first weekend in October and have the cost savings fully phased in by the end of the first quarter of 2022.
Equity is projecting $11.2 million in pretax merger expenses. The pro forma company will start with a 76% loan-to-deposit ratio, 67% excluding Paycheck Protection Program loans. The goal is to push the loan-to-deposit ratio past 90%, according to Craig Anderson, Equity’s president.
Several senior American State executives and bankers will join the combined company, Elliott said. American State Chairman Lee Borck will join the Equity Bancshares board, while CEO Doug Thurman will join the board of Equity’s bank subsidiary, Equity Bank.
“Equity Bank is already the leader in Southwest and West Kansas,” Borck said on the conference call. “To combine these banks makes us all stronger.”
Equity reported first-quarter net income of $15.1 million, up 21% from the previous quarter. American State reported a $1 million first-quarter profit, about what it reported for the fourth quarter of 2020.
