Fast-growing Prime Bancshares in the Houston area is going public.
Gobbling up seven failed Texas banks has boosted assets from $81 million to $948 million in 10 years. But the 19-branch banking company needs more capital for future acquisitions, says its president, E.J. Guzzo. "We'll be able to be competitive."
Prime, based in the blue-collar suburb of Channelview, wants to sell more than $45 million of common stock- 2.2 million shares at about $16.50 each- next month. Mr. Guzzo said the money will be used to retire six million shares of preferred stock and buy banks. Prime would also be able pay stock for banks.
Even after the acquisition, insiders will control about 51% of Prime's stock.
"A lot of these community banks that are privately owned will outgrow the private investment environment once they reach a certain size," said Hugh Barrett, managing director of Houston-based Strategic Alliance Group. "A billion dollars (of assets) is the right size" for a company to make the move, he said.
Prime made its first acquisition in 1988, buying the failed Port City Bank. Between 1988 and 1991, it bought assets and deposits from six other failed banks. Prime has also bought cast-off branches of larger banks in the area.
"Prime Bank survived the Depression we had in Texas and they've become one of the winners," said Bill Strunk of Strunk & Associates in Houston. "I expect them to continue to win."
Mr. Strunk said Prime never got into risky real estate lending, which sunk scores of Texas banks and thrifts, or gas and oil lending, which devastated banks when the oil boom went bust.
He attributed Prime's survival to its roots as a blue-collar bank. The 40-year-old bank stayed strong by making loans to the working class, he said.
Prime's chairman and CEO, Frederic M. Saunders, who owns most of its stock, was smart to stick with what he knew best, Mr. Strunk said.
"When things were nasty down here" Prime was one of the few banks in Texas with access to capital, Mr. Strunk said.
But now Texas is enjoying a strong economy. Unemployment is low, personal income is growing moderately, and the Bureau of Labor Statistics predicts that will continue through the decade.
"I think the tough times have been over with for some time," Mr. Guzzo said. "The economy is great in Houston."
In fact, the company is moving its headquarters there.
