Texas Capital Bancshares has agreed to divest its insurance premium finance subsidiary BankDirect Capital Finance to Truist Financial in an all-cash deal valued at around $3.4bn.

Upon completion of the transaction, BankDirect Capital will operate as a division of Truist’s insurance premium finance business AFCO Credit Corporation (AFCO).

Founded in 2005, BankDirect Capital Finance offers property and casualty as well as life insurance products.

The sale forms part of Texas Capital’s efforts to re-focus on its core businesses and manage expenses to create the flagship full-service financial services firm in Texas.

The purchase price represents an 8.5% asset premium compared to the value of the purchased loan portfolio as of 30 June 2022.

Texas Capital president and CEO Rob C Holmes said: “The sale follows a deliberate process designed to maximize shareholder value, strengthen our balance sheet, simplify our business model and free up incremental resources to be redeployed to our core businesses.

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“BankDirect operates a nationwide business and generates desirable, granular commercial loans with superior credit quality.”

The transaction covers entire business unit including the BankDirect’s equity interests and the associated loan balances held by Texas Capital Bank.

The deal, however, excludes transfer of parent funding, deposits or capital.

Texas Capital said in statement: “The divestiture will improve Texas Capital’s liquidity position as the Loan to Deposit ratio is expected to decline and the Liquidity Assets to Assets ratio is expected to rise, before giving effect for future redeployment actions.”

Subject to several customary closing conditions, the transaction is scheduled to close in the fourth quarter of this year.