Brandon Steele knows how to process crude oil, sew duffle bags and raise cattle. But being chairman and majority owner of a community bank is a new one for this serial business owner.

The 33-year-old Texan recently formed Steele Holdings Inc. to buy out a community bank in Arp, Texas, on Friday, the $220 million-asset American State Bank.

That state and federal regulators approved a solo nonbanker who never attended college to own a bank is surprising considering the number applications from private equity and other startup groups sitting idle. But as a Texas regulator puts it, money has no value if the people behind it don't know how to grow a business.

"In the banking business, we need good businesspeople," Texas Department of Banking Commissioner Charles Cooper said in a phone interview Tuesday. "It's good to add new blood to the business. … If you don't do that, it becomes a dying industry."

Cooper said his department has not approved a change in control to a nonbanker since he took office more than two years ago, nor had it seen such an application for about a decade. However, as analysts noted, it is becoming more common nationwide as individuals look to invest in industries they believe are currently undervalued.

The financier Michael Carrazza is one example. Carrazza became chairman of Patriot National Bancorp Inc. in Stamford, Conn., in October. His firm, PNBK Holdings LLC, bought an 88% stake in the company, replaced the chief executive with a community banking veteran and appointed four other directors who had finance or real estate experience.

"Especially during the last couple of years, there have been a decent number" of bank buyouts by nonbankers with experienced management teams, said Mark Fitzgibbon, an analyst at Sandler O'Neill & Partners LP. "If there is a competent management team, I don't see why the regulators would object to it."

Cooper said the state approved the four partners behind Steele Holdings to buy out all 30 investors of the nearly century-old American State for two primary reasons: Steele's history of running businesses successfully and the decision to keep on board a management team that has done a good job of running the bank. As of Sept. 30 American State Bank was well capitalized, with a 13.09% total risk-based capital ratio and few nonperforming assets, representing 0.45% of total assets. The bank reported a 2009 loss of $319,000 but reported a profit of $1.6 million for the first nine months of this year.

Steele became a business owner during his senior year in high school, 1996, when he began sewing and selling athletic duffle bags. Five years later he bought a similar company, which he eventually expanded into a multibusiness holding company now called Ryno Texas Holdings Inc.

"In order to survive, I bought a competitor in 2001, and I fell in love with buying companies," Steele said in a phone interview Monday.

In 2003 he and his father, Ric, teamed with Koch Chemical Technology Group to start a petroleum refinery engineering company now known as KP Engineering LP, of which Steele is the chief financial officer.

Though Steele said he has always been fascinated by economics and monetary policy, it was not until last year that he began looking for banks to invest in after the real estate market collapsed, opening the door for this "opportunistic investor" — as he calls himself — to look for a community bank with hidden potential.

"I've always been borrowing money from institutions and investing it," he said. "My career is buying undervalued assets. From buying cheap sewing machines" to an undervalued bank.

It is because of this investor perspective that Fitzgibbon said he expects many more outside investors to look for similar bank buyouts. And it will likely be with the smaller community banks that are more "digestible" for an individual investor who can spend $30 million to $50 million to gain a controlling interest in institution, he said.

Fitzgibbon said the slight shift from mega investment firms or investor groups to individual investors as a good thing for community banking. "A chairman with a huge financial stake is going to be much more attuned" to how the organization is operated, he said.

American State Bank's president and chief executive, Steve Wiggs, said the bank's board also preferred a local investor who would preserve the bank's presence and name. "This will be a completely transparent change for the customers," he said.

Steele was adamant that he would not manage the bank, a pledge that helped put the regulators at ease with the buyout. "I will never be CEO of the bank, and I don't plan to be," he said.

Wiggs will remain as chief executive at the bank. And the bank's board added six new members while retaining four existing members, he said.

Steele said he plans to file a request for bank holding company status with regulators in the next month. But unlike many of the private-investor groups that have used a bank acquisition as a platform to aggressively go after failed and ailing banks, Steele said he has wants to play it "low key."

The black-cattle rancher and father of three said he will evaluate bank opportunities that come up but that he will be selective and stay behind the scenes.

American State Bank "has a great management team," he said. "I will offer assistance where I can … but my cows and my kids keep me busy."

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