BancorpSouth to acquire Houston bank in $145 million deal

Tupelo, Miss.-based BancorpSouth Bank announced after the close of market on Wednesday (April 18) it is expanding deeper into Texas with the purchase of Houston-based Icon Bank in a stock-and-cash deal valued at nearly $145 million.

Icon, which has assets of $794 million and total deposits of $692 million, operates seven full-service banking offices in the Houston area. Those branches will be combined with BancorpSouth’s two full-service banking locations, one mortgage loan production office, and a regional insurance office in the Houston market.

“We are very pleased to have the opportunity to meaningfully expand our presence in the vibrant Houston, Texas metropolitan area,” BancorpSouth Chairman and CEO Dan Rollins said in  a statement. “We entered this market in 2014 with the opening of loan production offices in Friendswood and Sugar Land, which were recently converted to full-service branches. The co-founders of Icon, Mark Reiley and John Green, are both highly regarded bankers in this market. The Icon team will be an integral part of our ability to continue to grow strategically both broadly as a Company and more specifically in this market.”

Under terms of the agreement, BancorpSouth will issue 4,125,000 shares of common stock, plus $17.5 million in cash, for all outstanding shares of Icon Capital capital stock, subject to certain conditions and adjustments. BancorpSouth’ shares (NYSE: BXS) fell 25 cents to $30.85 in early trading which would value the stock portion of the deal at $127.25 million.

The Icon acquisition has been unanimously approved by the boards of directors of both companies and is expected to close in the second half of 2018, subject to normal state and federal regulatory approvals. After close, Icon’s Reiley, chairman and CEO of the Houston community bank, will serve as BancorpSouth’s Houston area chairman. Green, Icon’s vice chairman and co-founder, will be the company’s Houston area president.

BancorpSouth also reported record quarterly net income of $53.5 million, or 54 cents per share, after the close of business on Wednesday. That compares with net income of $38.1 million, or 41 cents per share, a year ago. The bank’s total assets jumped to $17.2 billion, compared to $14.9 billion in the same period of 2017.

The deal with Icon will allow BancorpSouth, which has 42 branches in 29 cities in Arkansas, to make up ground on similarly sized Arkansas rivals like Bank of the Ozarks, Arvest Bank, Simmons Bank and Centennial Bank, which have all seen strong post-recession growth fueled mostly by the Federal Deposit Insurance Corp.’s “failed bank” auctions.

However, BancorpSouth has struggled in recent years to keep stride with its acquisition-hungry regional banking peers because of legal and regulatory proceedings related to the bank’s lending and mortgage practices to mostly African-American consumers.

In January 2014, BancorpSouth first announced plans to acquire Ouachita Bancshares Corp. of Monroe, La., and Central Community Corp. of Temple, Texas in a combined deal valued at $325 million in stock and cash. The FDIC notified BancorpSouth in August 2016 that its Community Investment Act rating was lowered from “satisfactory” to “needs to improve,” causing the Mississippi banking group to postpone the mergers prior to close.

The FDIC downgrade came after the bank reached a settlement agreement with the Consumer Financial Protection Bureau (CFPB) and the Department of Justice regarding the bank’s alleged practice of “redlining” predominantly black and minority consumers in Memphis and parts of neighboring communities in Mississippi and Arkansas.

Under the settlement deal, BancorpSouth agreed to pay nearly $7 million in relief for impacted individuals and neighborhoods; invest at least $800,000 in advertising, outreach and community partnership efforts; pay a $3 million civil penalty and amend its policies, standards and training to ensure compliance with fair lending obligations.

In late 2017, BancorpSouth finally received the necessary regulatory approvals to close the Ouachita Bancshares and Central Community deals after several extensions. Both mergers were completed on Jan. 15, four years and three months after the deal was first announced. Those deals grew BancorpsSouth’s operations to 276 full-service branches, mortgage, insurance and loan production offices across Alabama, Arkansas, Florida, Louisiana, Mississippi, Missouri, Tennessee and Texas.