Texas Capital Bancshares Inc. is selling its insurance premium financing subsidiary in a $3.4 billion deal that gives it cash to invest in ‘creating the flagship full-service financial services company in Texas,” the company announced Tuesday.
The Dallas-based parent company of Texas Capital Bank has agreed to sell its BankDirect Capital Finance business, including a $3.1 billion loan portfolio, to AFCO Credit Corp. AFCO is a subsidiary of Truist Financial Corp.
“The sale of BankDirect represents an important step for Texas Capital, allowing us to refocus our capital and expense base in line with our strategy of building the leading full-service financial services company in Texas,” said Rob C. Holmes. , CEO of Texas Capital. said in a prepared statement. “The sale follows a deliberate process designed to maximize shareholder value, strengthen our balance sheet, simplify our business model and free up additional resources to redeploy to our core businesses. ”
The all-cash deal represents an 8.5% premium to the divested loan portfolio, according to Texas Capital.
Texas Capital said the deal would improve its loan-to-deposit ratio — an important measure of banks’ financial condition. The company had $21.6 billion in total loans and $25.8 billion in deposits as of March 31, according to the most recent data filed with the Texas Department of Banking. Its total assets were $31 billion, making it the 11th largest bank in the state.
The sale of BankDirect is expected to close later this year, subject to regulatory approvals.
“At the close of this transaction in the fourth quarter, Texas Capital will be better capitalized than it has ever been and with great liquidity, a strong strategy, … a very strong loan portfolio,” Holmes told analysts during a call to discuss the assignment. “We are now in the most favorable capital position in our company’s history.”
Texas Capital’s lending to commercial and industrial companies increased this year by $1.5 billion, or about 20%, “making this assignment effective,” Holmes said. The move coincided roughly with the one-year anniversary of Holmes’ plan to create a Texas-focused, full-service financial services company.
Truist called the deal a strategic investment for the Charlotte, North Carolina-based company and said BankDirect’s loan portfolio expands its life insurance business. The loan portfolio includes both P&C and life insurance products nationwide.
“The addition of BankDirect broadens our team, further diversifies the risk management solutions we can provide to our customers and creates new opportunities to fulfill our purpose of inspiring and building better lives and communities,” said Truist President and CEO Bill Rogers in a prepared statement.
BankDirect, founded in 2005 and based in Chicago, has grown through four acquisitions. Its 122 employees work in five US offices.
“BankDirect brings a strong track record of growth and success in the premium finance industry,” said John Howard, chief insurance officer of Truist. “With this acquisition, we will expand our business into life insurance, a growing market for premium financing, and expand our geographic reach, particularly on the West Coast.”
It is the second multi-billion dollar deal this week involving Dallas companies. On Monday, homecare provider Signify Health agreed to sell to pharmaceutical giant CVS Health in an $8 billion deal.