First Banks Inc., St. Louis, has struck a deal to invest $30 million in $370 million-asset BaneTexas Group Inc.

If completed, the transaction will catapult BancTexas into the vanguard of community banks wishing to take advantage of the merger wave sweeping Texas. A $30 million war chest and a New York Stock Exchange listing is a package few Texas community banks can match.

The deal, reached last week, shows also that they can look for out-of-state partners in their drive for market share.

"Time and again," said Nathan C. Collins, chairman and chief executive officer of BaneTexas, "the inability to offer cash has made it very difficult for us to participate in the competitive process of acquiring financial institutions in Texas."

BancTexas Group owns BancTexas NA, based in Houston, with three branches each in Houston and Dallas. Mr. Collins said he plans to purchase banks in both markets.

The deal with First Banks marks the St. Louis company's first foray into Texas. First Banks has been buying banks in the Midwest in the last year, growing to $2.2 billion in assets.

"First Banks has been very acquisitive-minded," Mr. Collins said. "They liked our idea about acquiring other community banks."

Under the terms of the deal, BancTexas will issue new Class B common stock representing 60% ownership and voting power, though it won't be traded for five years.

The $30 million investment breaks down to about 80 cents a share, a premium over book value, Mr. Collins said, and the deal will not be dilutive to the 14,000 current stockholders. BancTexas stock was helped by the agreement, moving up 25 cents to $1.50.

Roller Coaster Ride

BancTexas was rounded in 1983 and proceeded to buy banks all over the state. It went heavily into energy and real estate lending and almost failed in the late 1980s. One of its banks, BancTexas Dallas NA, was declared insolvent in 1990.

Mr. Collins, hired to save the bank, emphasized car loan paper bought from dealersand the bank became operationally profitable in 1992.

Late last year, however, competition for car loans increased and BancTexas began to lose money in the margin squeeze.

"They've been limping along for years," said one Houston analyst, who's followed BancTexas only peripherally for years. In fact, there are no analysts following the stock.

For First Banks, the deal represents what Chairman James F. Dierberg called the bank's enthusiasm for what "Texas presents in the 1990s. The management strengths of BancTexas and its record of survival in the face of overwhelming odds have impressed us."

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