Bank Cadence Set to Acquire Industry Bancshares
In a significant move, Cadence Bank has agreed to acquire Industry Bancshares, a Texas-based bank, in a deal worth approximately $103.6 million. The acquisition, which includes 27 branches across central and southeast Texas, will add $4.4 billion in assets, $1.1 billion in loans, and $4.5 billion in deposits to Cadence Bank.
However, the deal comes with regulatory implications due to Industry Bancshares being subject to consent orders from the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC). These orders are typically issued due to capital deficiencies, unsafe or unsound banking practices, or management failures.
The acquisition process will involve heightened regulatory scrutiny on Cadence Bank, with both the OCC and FDIC closely examining the bank's management capacity, risk controls, compliance history, and capital adequacy. The regulators aim to ensure Cadence Bank can assume the risks and resolve the problems of the troubled bank under consent orders.
The merger application review process might be more extensive and cautious, with acquisitions involving problem banks under consent orders facing more in-depth due diligence and regulatory conditions. The acquiring bank is expected to implement corrective measures to address the underlying issues prompting the consent orders.
The FDIC has authority to intervene if the bank is critically undercapitalized or failing. The acquisition structure might require coordination with the FDIC for loss sharing or receivership planning.
Cadence Bank plans to immediately sell $1.4 billion of Industry's securities post-closing and reinvest the proceeds in loans and other earning assets. This move is aimed at addressing the negative tangible common equity and net income of Industry Bancshares due to significant unrealized losses of $869 million in its available-for-sale securities portfolio.
Despite these challenges, Cadence Bank expects no significant branch reductions as a cost-saving measure, with only one or two branch closures due to overlap. The acquisition will enhance Cadence Bank's Texas footprint, making it the fifth-largest regional deposit market share in the state post-closing.
The deal aligns well with Cadence Bank's community banking foundation, as stated by Dan Rollins, chairman and CEO of Cadence Bank. Executives from Industry Bancshares, including Doak Hartley, Michelle Hodge, Mike Mueller, Brent Jones, Gary Durrenberger, Kyle Holloway, Lisa Moeller, and Mike Kalina, will continue in key roles in their respective communities within the combined entity.
The acquisition is expected to close during the second half of 2025, subject to regulatory and shareholder approvals. The Federal Deposit Insurance Corp (FDIC) hit three other subsidiaries of Industry Bancshares with consent orders for shortcomings in capital position, liquidity, staffing, and risk management. Despite this, a statement by Carl J. Chaney, executive chairman of Industry Bancshares, indicated that the merger will allow continued personal service and trusted expertise for customers.
Cadence Bank has also announced its 2025 repurchase authorization of up to 10 million shares of its common stock. The acquisition of FCB Financial, the parent company of First Chatham Bank, is within 61 days of the announcement.
In essence, acquiring a bank under OCC and FDIC consent orders involves not only completing the merger approvals with these regulators but also meeting enhanced expectations for capital, risk management, compliance remediation, and safeguarding the Deposit Insurance Fund, all while coordinating closely with supervisory agencies to resolve the troubled bank’s issues.
The acquisition of Industry Bancshares by Cadence Bank will lead to increased scrutiny from financial regulators, particularly the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC), as Industry Bancshares is under consent orders. The deal, requiring extensive due diligence, aims to address the underlying issues prompting the consent orders.
The acquisition process involves regulatory expectations for Cadence Bank to address capital, risk management, compliance remediation, and safeguarding the Deposit Insurance Fund, given Industry Bancshares' shortcomings in capital position, liquidity, staffing, and risk management.
