The consolidation of Houston banking took another small step forward Wednesday when Prosperity Bancshares announced plans to acquire Commercial Bancshares, a privately held competitor, for $53 million in stock.

The city’s fast-growing economy has made it a magnet for merger-and-acquisition activity. The merger deal was the 29th involving Houston banks announced since the beginning of 1998.

Prosperity, with $693 million of assets, owns First Prosperity Bank of Houston, which has 18 branches, most of them south and west of the city. Commercial is the $428 million-asset holding company for Heritage Bank, which has 11 branches, seven in Houston and four in its southeastern suburbs. An eighth Houston branch is scheduled to open early next year.

“This is a good business deal,” said Tracy Rudolph, Prosperity’s chairman and chief executive officer. “Commercial is an excellent geographic fit with our existing franchise. Of all of the opportunities we considered to increase our Houston presence, this was by far the best.’’

Buying Commercial would triple Prosperity’s assets in Houston. Ned Holmes, Commercial’s chairman, said his family, which owns a controlling stake in Commercial, would own 17% of Prosperity’s shares.

Mr. Rudolph, 60, who has been chairman and CEO since he helped found Prosperity in 1983, said he will retire early next year. Mr. Holmes would succeed him as Prosperity’s chairman.

Tim Timanus, Commercial’s president and CEO, would become Prosperity’s executive vice president and chief operating officer. David Zalman, Prosperity’s president, would also become its CEO.

Mr. Zalman had worked for Commercial from 1978 until 1986. “I had my first encounter with David more than 20 years ago,” Mr. Holmes said. “I’m very impressed with the track record he and Tracy have put together at Prosperity, and I’m excited to join it.”

Mr. Zalman said the merged company would have a loan-to-deposit ratio of 39%, giving it plenty of room to grow. “We’ll have 35 calling officers on the streets, soliciting new business every day,” he said.

The deal is expected to close by March 31 and would be accounted for as a tax-free pooling of interests. It is subject to the approval of federal regulators, as well the shareholders of both companies.

The merger would begin to augment earnings within a year of operational integration, which should be completed by the end of the second quarter, Mr. Zalman said.

Prosperity reported net earnings of $2 million for the third quarter and $6 million for the first nine months of the year.


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