A number of Midwestern banking companies are eyeing Sun Belt states for growth, but Integra Bank Corp. in Evansville, Ind., sees plenty of opportunity closer to home.
Late Thursday the $2.7 billion-asset Integra announced a deal to buy Prairie Financial Corp. in the Chicago suburb of Bridgeview, Ill., for $117 million in cash and stock.
Michael T. Vea, Integra's chairman, president, and chief executive officer, said that the Chicago area was tops on his company's list of markets where it wants to enter or expand, but that it also has its sights set on such cities as St. Louis, Cincinnati, and Indianapolis.
"We're focused on the Midwest," Mr. Vea said in an interview Friday. "Banks that are going to Florida, going to California - let them go."
The deal for Prairie is expected to close in the first quarter. The acquisition would be Integra's first in more than five years.
The company, then known as National City Bancshares, was an active acquirer in the 1990s - it bought 14 banks between 1997 and 1999 - but under Mr. Vea, who took the helm in late 1999, it turned its focus largely to improving efficiency.
Now that Integra is about as efficient as it can be, he said, it needs to focus on revenue growth to meet its profit goals, and that means expanding into new markets.
As acquisition targets go, the $575 million-asset Prairie met all the key requirements, Mr. Vea said, since it is in a good market, has a good management team that wants to stay, and is available for a reasonable price: 3.19 times its book value.
"It hit all the buttons for us," he said.
Still, many other Midwestern banking companies, large and small, are looking elsewhere for growth, acquiring banks or adding branches in states like Florida, Arizona, and Texas.
Though the Midwest as a whole is not growing nearly as fast as other regions of the country, Will County, where three of Prairie's five branches are located, is an exception, Mr. Vea said. Its population has increased about 28% since 2000, to nearly 643,000 last year.
Its other two branches are in Chicago and Bridgeview, a Cook County suburb.
The 15-year-old Prairie specializes in lending to small residential and commercial contractors. Mr. Vea said the purchase would help Integra diversify its portfolio by adding commercial real estate loans. Though Integra has been steadily shrinking its securities portfolio, it still made up nearly a quarter of its assets at June 30. Meanwhile, about one-third of its loan portfolio is in home mortgages.
"As a company right now, we still have a higher percentage than we'd like of securities and residential mortgages," he said.
Mr. Vea said he also believes buying Prairie would present opportunities for cross-selling. Many of the contractors who are Prairie's main customers live near its Chicago branch and could be prospects for Integra's investment products and services, he said.
"They don't have any of those products, and we do. We see that as an immediate opportunity," he said.
Bradley M. Stevens, Prairie's chairman, president, and CEO, would remain with Integra as its Chicago regional president.
Kenneth S. James, an analyst with First Horizon National Corp.'s FTN Midwest Research Securities Corp. in Nashville, said the deal is a good one, though it does have its risks.
Integra has not acquired a bank in a long time, so observers are likely to keep close tabs on the integration, he said, and Chicago is one of the most competitive banking markets in the country.
Still, "from a long-term perspective, I think there is a lot of revenue enhancements for them, given that ... [Prairie] is a niche-focused company," Mr. James said. "Integra can come in and lay the full platform of commercial, retail, and small business on top of that."
Integra's stock fell 2.8% Friday, to close at $25.71.
