Allegiance to buy Post Oak as Houston consolidation heats up

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Allegiance Bancshares in Houston has agreed to buy Post Oak Bancshares in Houston.

The $2.9 billion-asset Allegiance said in a press release Monday that it will pay $350 million in stock for the $1.4 billion-asset Post Oak. The deal, which is expected to close in the fourth quarter, prices Post Oak at 223% of its tangible book value.

Post Oak has 13 branches, $1.2 billion in loans and $1.2 billion in deposits. Most of its operations are in the Houston area. It is the latest area bank to agree to be sold in recent months.

“I have admired the leadership and growth that the entire Post Oak organization has achieved, and I am elated that we will soon be on the same team,” George Martinez, Allegiance’s chairman and CEO, said in the release. “The combined company will be well-positioned to take advantage of organic and strategic growth opportunities that will further enhance shareholder value as Houston’s largest community bank.”

Roland Williams, Post Oak’s chairman, president and CEO, will become executive vice chairman of Allegiance’s bank. Three Post Oak directors will join Allegiance’s board.

Allegiance said it expects the deal to be 6% to 7% accretive to its 2019 earnings per share. The accretion should increase to 8% to 9% in 2020. It should take less than five years to earn back the expected 7% dilution to Allegiance’s tangible book value.

Allegiance plans to cut 35% of Post Oak’s annual noninterest expense. The company also expects to incur about $22.5 million in merger-related expenses.

Post Oak's latest bank acquisition was State Bank of Texas in April 2017.

Post Oak was advised by Performance Trust Capital Partners and Fenimore Kay Harrison & Ford. Allegiance was advised by Bracewell, while Raymond James issued a fairness opinion.

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