First Banks Inc. of St. Louis is bulking up in Houston.
The $9.76 billion asset company announced Wednesday that it had agreed to buy Royal Oaks Bancshares Inc. of Houston for $38.6 million in cash. The deal is expected to close in the first quarter.
This is the third Texas banking company to be acquired by First Banks in less than a year, but the first in Houston.
"We remain very bullish on Texas," said David F. Weaver, President of First Bank's Texas region. "In addition to this transaction, we have future de novo expansion activity underway in the Houston market."
Royal Oaks is the $201 million-asset parent company of Royal Oaks Bank, a Texas savings bank.
At 3.22 times tangible book value, "It was an above-average price considering it was rumored to be for sale" two years ago, said Dan Bass, managing director of Carson Medlin Investment Bankers in Houston.
"Once you go through the sales process, and don't have a transaction, it is hard to go back and get the price you felt was fair," he said. "But that goes back to people want to get into the Houston market."
Mr. Weaver said Royal Oaks was worth the premium. "This one we are paying more on because it is a good strategic fit," he said.
Royal Oaks has four branches in Houston and is building two more, which are expected to open this quarter. It reported loans of $159.0 million and deposits of $174.5 million at the end of the third quarter.
Mr. Weaver said First Banks, which has four branches in the Houston area already, expects to open a branch in Katy in early 2007, two branches in Pearland in mid-to-late 2007, and a branch in Sugar Land in early 2008.
First Banks also has 11 branches in the Dallas area, where it bought two banks and acquired a branch from another bank this year.
"During the first six months of 2006, we concentrated on the Dallas area, with acquisitions of two banks in Sachse and Plano, and a branch office purchase in Richardson," Mr. Weaver said.
The company also announced deals this year to buy two banks in Illinois and one in California.
First Banks has 187 branches in California, Illinois, Missouri and Texas.
