31 May, 2024

SouthState snatches scale in Texas with 5th-biggest bank deal in state history

By Claire Lawson and Zuhaib Gull


Winter Haven, Fla.-based SouthState Corp.'s deal for McKinney, Texas-based Independent Bank Group Inc. is historically large for a bank M&A transaction in the Lone Star State, and depository investment bankers doubt many other buyers can find targets with similar reach in the state that are ready to pull the trigger on a sale.

The $2.02 billion deal, which ranks as the fifth-largest Texas bank deal ever, is the 10th in the state to top $1.0 billion and the first over that level since April 2021, according to S&P Global Market Intelligence data, excluding terminated deals. Performance Trust Managing Director Dan Bass, a veteran depository investment banker, expects to see more acquisitions in Texas.

"But it will be on the smaller side," Bass said in an interview.

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Texas active in bank deals

Texas is typically one of the most active states for small bank M&A. In 2022, Texas came second in number of bank deal announcements with 14, and it tied for the most in 2021 with 16. However, bank M&A dried up across most of the US in 2023, and Texas saw its total number of deals plummet to three.

The pace of 2024 announcements still lags behind figures from 2021 and 2022, but this year's total of four has surpassed the full-year total of 2023. Independent's deal inflated Texas' total target assets by $18.9 billion, accounting for 94.1% of assets sold in the state this year.

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Entering the coveted Texas market

For SouthState, the Independent deal presented an opportunity for an out-of-state buyer to enter Texas with some scale. Advisers say out-of-state banks remain hungry for Texas market share.

"As long as you have these positive trends — economic, demographic growth — it's going to remain an attractive state," said Jacob Thompson, a managing director of investment banking at SAMCO Capital Markets. "And banks that aren't here or maybe aren't here in a meaningful way, they see that as an opportunity."

The SouthState and Independent deal shows that for the right target, an out-of-state buyer will go beyond its footprint to enter Texas.

"They jumped over Alabama, Mississippi and Louisiana to land on Texas," Thompson said about SouthState. "Those challenges of jumping all the way over into Texas are outweighed by the market positives."

However, small deals are not always attractive to out-of-state buyers. Thompson said a target with less than $1 billion in assets might have too little market share to attract out-of-state buyers.

"What you might need to see is some further consolidation within the market here to get to that level where you would see another large transformative deal like this," Thompson said.

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