Dive Brief:

• The Federal Reserve has approved the proposed merger between Allegiance Bank and Community Bank of Texas, the central bank announced Wednesday.
• The sign-off came roughly three weeks after the banks extended — until Nov. 1 — the date on which either party could terminate the deal.
• The banks now expect the transaction to close around Oct. 1, they said in a press release Thursday. After that point, the combined entity will change its name to Stellar Bank, a moniker the banks announced in May. However, banking locations will operate under their legacy name until integration is complete sometime in the first quarter of 2023, the banks estimated.

Dive Insight:

The Allegiance-CBTX deal will create an $11 billion-asset bank set to rank sixth in deposit share in the Houston area. When the banks announced the transaction last November, they estimated completion by the second quarter of 2022.

In a statement Thursday, CBTX CEO Robert Franklin, who is set to become Stellar’s CEO, said he is “pleased” the deal received the green light from the Fed.

“The scale of this combination reinforces its value as we share common cultures with the commitment to enhance and deliver long-term value to our customers, employees, shareholders and communities we serve,” he said.

Allegiance and CBTX are hardly the first banks forced to wait longer than expected to get regulator approval on a pending merger.

U.S. Bank and MUFG Union Bank on Friday extended the termination date for their proposed combination until Dec. 31, from Sept. 30.

U.S. Bank CEO Andy Cecere told attendees at a Barclays-hosted conference this week the new timeline will push the conversion of accounts and systems by roughly three months. The bank was eyeing the three-day Presidents Day weekend in February but now is looking at Memorial Day in May 2023, Cecere said.

The bank’s CFO, Terry Dolan, said at the same gathering that the Minneapolis-based lender will realize a greater proportion of cost savings — 50% to 60% — in 2024. The bank earlier estimated it would see 75% of merger-related cost savings in 2023, according to American Banker.

When announcing the $8 billion deal in September 2021, U.S. Bank predicted it would close in the first half of 2022.

In another example, New York Community Bank and Flagstar Bank in April extended their merger timeline through Oct. 31 and are aiming to switch to a national charter — perhaps in an attempt to avoid needing approval from the Federal Deposit Insurance Corp. (FDIC).

The Allegiance-CBTX deal received sign-off in June from the FDIC and later from the Texas Department of Banking.

“Receiving the necessary approvals paves the way for the great opportunity that we have ahead of us to create a powerful partnership that will further set us apart as a leader and competitor across our markets,” Allegiance CEO Steve Retzloff said in a statement Thursday. “After months of collaborative planning, we are dedicated to ensuring a successful integration of our two outstanding financial institutions.”

The Fed, according to its approval order, received 18 public comments on the Allegiance-CBTX deal, with just one objecting to the combination, alleging that both banks made fewer home loans in Texas to Black consumers than White ones. The commenter also cited a $1 million penalty the Office of the Comptroller of the Currency handed CBTX in 2021 over Bank Secrecy Act violations.

As part of the FDIC’s approval, Stellar must create an action plan to attract more mortgage loan applications from Black borrowers and boost the number of mortgage loans made to Black borrowers, American Banker reported.