The
Independent, based in McKinney, has $18.9 billion of assets, $15.7 billion of deposits and $14.6 billion of loans. In addition to Texas, it also operates in central Colorado.
Should the deal close as planned in the first quarter of 2025, the combined company would have $65 billion of assets, deposits of $55 billion, loans of $48 billion, and a market capitalization of approximately $8.2 billion based on SouthState's stock price at the close of trading last week.
SouthState CEO John Corbett said during a call with analysts Monday that he has long had his sights on Texas because of its diverse economy, relatively low costs given its moderate regulations and the absence of a state income tax, as well as its swelling big-city populations. Markets such as Austin have boomed this decade in part by attracting people from high-cost states such as California.
"We are regularly asked on earnings calls about our ideal M&A partner. We've said we would be comfortable with a partner that would make up about a third of the company, and we wanted to invest in high-growth markets, and we've specifically called out Tennessee and Texas," Corbett said.
"So why Texas? And the answer is not complicated," he continued. "We believe it's wise to allocate capital to markets where the state governments encourage business growth and they don't penalize it with tax and regulatory burdens. We also believe it's wise to allocate capital where people are moving to, not where they're leaving from."
SouthState closed a string of bank acquisitions over the past decade and early this decade, though the Independent deal marks its first deal since early 2022, when it
The bank's footprint would now stretch from Florida across much of the South to Texas, though it would still have a gap in Tennessee.
"We've been preparing for an opportunity like this for the last four years," Corbett said, pointing to investments in technology platforms and the company's risk management infrastructure. Additionally, "we've been accumulating excess capital and building reserves above our peers so that we have the dry powder to invest when the time is right."
SouthState estimated the deal would generate earnings-per-share accretion of 27%. It expects to earn back tangible book value dilution of 9.6% within two years.
Those estimates are based on SouthState's plans to trim about 25% of Independent's annual noninterest expense base. SouthState projected $175 million of pretax merger expenses.
Three Independent Bank directors, including Chairman and CEO David Brooks and lead independent director Stacy Smith, plan to join the SouthState board.
During the call Monday, Brooks echoed Corbett in noting that the two banks had long entertained the possibility of a merger.
"John and I, as well as our teams, have been building this relationship for over five years now," Brooks said. "I have long believed that SouthState Bank was the best possible long-term partner for us."
The bid for Independent marks the largest bank transaction announced so far this year, edging out Kansas City, Missouri-based UMB Financial's $1.99 billion all-stock
Also in April, Wintrust Financial in Rosemont, Illinois,
Jacob Thompson, managing director of investment banking at Samco Capital Markets in Texas, said deal talks are on the rise this year after a lull in 2023 imposed by fallout from a spike in interest rates.
"You are starting to see more deals and larger deals over the last few weeks, and anecdotally I can tell you I've been getting more calls over the past 30 days or so from both buyers and sellers," Thompson said in an interview Monday. "Certainly, there are more conversations taking place, and that could translate into real momentum."
U.S. banks announced 100 acquisitions in 2023 with a total deal value of $4.2 billion, according to S&P Global data. That was well below the 157 deals and total deal value of $9 billion a year earlier.
In the first quarter of this year, ahead of the large deals announced in April and May, activity had already picked up. There were 26 bank sales announced in the first quarter with an aggregate value of $1.1 billion, according to the S&P Global data. That was up from the year-earlier quarter, when there were 20 bank deals worth $433 million.
Thompson said that SouthState's interest in both Independent and the Texas economy has merit.
"Independent has built up an attractive franchise in the key Texas markets," he said. "It may just have been a matter of time before they received an offer they couldn't refuse. … And this comes at a time when the Texas economy is very robust, and the demographics are very attractive."
