To boost its presence in Houston, Cullen/Frost Bankers Inc. said Thursday it would acquire Harrisburg Bank in a deal analysts valued at $50 million.
Cullen/Frost, San Antonio's largest banking company, is to pay Harrisburg stockholders about $258 per share for the bank-or 2.2 times book value.
The deal is Cullen/Frost's 10th bank acquisition since 1993 and its third purchase in Houston. Cullen/Frost bought National Commerce Bank in 1995 and Park National Bank of Houston in 1996.
The Harrisburg deal, expected to close in early 1998, will increase Cullen/Frost's deposits in the Houston area by 32.7%, to $816 million. It will control 16 branches in that market.
Cullen/Frost's stock jumped 81.25 cents on the news, to $50.4375 in late trading on the New York Stock Exchange. Overall, its stock is up 51% since January. Harrisburg is privately held.
While the $258 per share price sounds high, Christopher T. Kelley, an analyst at Morgan Keegan & Co. in Memphis, said the deal's book value is below that of other recent bank mergers.
Besides, as he put it, it's worth it to be in Houston, where two banks- Prime Bank and Southwest Bank of Texas-have recently gone public.
"The message out there is that there is a lot of banking opportunity in Houston," said Mr. Kelley.
Now 129 years old, Cullen/Frost is one of the few Texas-based banking companies that survived the oil and real estate crashes of the 1980s. The company operates 55 branches throughout southern and central Texas under the names Frost Bank and United States National Bank.
Harrisburg Bank, founded in 1925, is also a survivor.
James W. Allen 3d, its president and chief executive officer, said Cullen/Frost's commitment to community banking made the decision to merge an easy one for shareholders.
At the same time, he said, the deal gives Harrisburg's customers a wider range of products and services, namely larger loan limits and access to Internet banking.
Still, other than the additional services and a name change-the three Harrisburg branches will be renamed Frost Bank-the deal should go largely unnoticed by customers, said Phillip D. Greene, Cullen/Frost's chief financial officer.
Mr. Greene said the bank would retain the bulk of Harrisburg's employees, including Mr. Allen, who will stay on as president of the three- branch subsidiary.
"It's our strategy to keep the decision-makers close to the customers," Mr. Greene said.
In a statement, Richard W. Evans Jr., chairman of $5.2 billion-asset Cullen/Frost, said Harrisburg is a good fit.
"With its focus on relationships and its strong community orientation, Harrisburg Bancshares very much parallels our way of doing business," he said.