Cornerstone Capital to acquire another Texas bank

Cornerstone Capital Bancorp, a one-time independent mortgage banker that acquired a depository, has agreed to purchase another bank, Peoples Bancorp of Lubbock, Texas.

Terms of the transaction were not disclosed.

"With one of the strongest capital positions in our markets and a deep base of low-cost core funding, we are well positioned for meaningful organic growth," Scott Almy, president and CEO of Cornerstone, said in a press release.

In a deal announced in June 2021 and closed in October of the following year, Cornerstone Home Lending, headquartered in Houston, acquired Roscoe (Texas) State Bank. After the deal closed, Cornerstone Capital Bank SSB was formed.

After it acquired Roscoe, Cornerstone noted several changes to its status, including that its loan officers no longer needed to be licensed.

The Secure and Fair Enforcement for Mortgage Licensing Act of 2008, also known as the SAFE Act, created dual standards for working loan officers based on who their employer is. Only those who work for independent mortgage bankers and mortgage brokers need to have state licenses while also being registered in the Nationwide Multi-State Licensing System.

Those MLOs working at depositories only need NMLS registration.

Cornerstone viewed Peoples Bank as a way to lower funding costs, increase earnings and expand portfolio lending, moves it said would enhance its mortgage and servicing divisions and help it offer more value-added services to clients.

Cornerstone had brought its servicing function in-house in April 2022, after the Roscoe deal was announced but before it closed.

Banks are able to use deposits to fund mortgages and because of their balance sheet, have the option to retain loans in their portfolio.

Another listed rationale for the deal is it would put Cornerstone in the top 20 among all Texas banks with less than $10 billion in assets, while reducing cost of deposits by approximately 68 basis points.

The combination would have $3.1 billion of assets.

The deal is expected to close in the first quarter of next year, at which time the acquired institution will be part of a new Community Banking Division under the name Peoples Bank, a division of Cornerstone Capital Bank.

"For many years, Peoples has focused on building strong relationships and supporting the communities we serve," said Larry Allen, its chairman and CEO, in a press release. "This merger is a natural extension of that mission."

Once the deal is completed, besides joining the boards of the holding company and Cornerstone Capital Bank, Allen will become area chairman, Peoples Bank.

Cornerstone was advised by Piper Sandler as financial advisor and Otteson Shapiro as legal counsel, while Peoples' financial advisor was Hillworth Bank Partners and Fenimore Kay Harrison LLP as its legal counsel.