NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) releases a comment on Allegiance Bancshares, Inc.’s (NASDAQ: ABTX), (“Allegiance” or “the Company”) pending acquisition of Post Oak Bancshares, Inc. (“Post Oak”). Houston, Texas based Allegiance Bancshares, Inc. announced a definitive merger agreement with Post Oak Bancshares, Inc., the privately held holding company of Post Oak Bank, N.A, whereby Post Oak would merge with and into Allegiance. The 100% stock transaction is valued at approximately $350 million, or 2.23x tangible book value. The transaction is expected to close in the fourth quarter of 2018, following regulatory and shareholder approval.
As of March 31, 2018, Post Oak, on a consolidated basis, reported $1.43 billion in total assets, $1.15 billion in total loans, and $1.24 billion in total deposits. The combined company would have pro forma total assets of approximately $4.5 billion. The acquisition is expected to provide operational scale with improved efficiency that includes 35% in noninterest expense cost savings (0% realized in 2018, 80% in 2019, 100% thereafter). In KBRA’s view, the proposed acquisition is potentially a credit positive to ABTX over time, strengthening the Company’s deposit franchise by expanding its footprint into four new counties surrounding the Houston MSA, and pushing Allegiance into a top 10 deposit market share in the fifth largest MSA in the U.S. Furthermore, ABTX’s pro forma loan-to-deposit ratio would improve to 97%, with a potential decline in the Company’s cost of deposits. Post Oak has a solid earnings profile with ROAA consistently above 1% since 2015, and an efficiency ratio below 60%. The all-stock transaction is expected to have minimal impact on ABTX’s strong capital position, carrying a pro forma TCE ratio of 9.6% at close.
In November of 2017, KBRA assigned ratings, including a senior unsecured debt rating of BBB for Allegiance Bancshares, Inc. and a senior unsecured debt rating of BBB+ for Allegiance Bank. The Outlook on all long-term ratings is Stable. Though KBRA does not currently rate Post Oak Bancshares, Inc. or its subsidiary, Post Oak Bank, N.A., on a long-term basis, both institutions appear to be in sound financial condition. This is further evidenced by KBRA's Subscription Rating Service financial strength rating of “B” for Post Oak Bank, N.A.
The ratings are based on KBRA’s Global Bank and Bank Holding Company Rating Methodology published on February 19, 2016.
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KBRA is a full service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.
