Green Bancorp Inc. announced Monday that it will receive $115 million in fresh capital from a group of private-equity firms, positioning the Houston company to become a significant acquirer in Texas.
The $544.6 million-asset Green will focus largely on buying open and operating community banks looking to partner with another company.
Yet it was a recent missed opportunity to make a failed-bank deal that sent Green hunting for money.
Geoff Greenwade, the president and chief executive of Green's subsidiary bank, said in an interview Monday that Green has had plans for more than a year to add capital and make acquisitions.
It was after Green's attempt to bid on the failed Franklin Bank in Houston in late 2008 in a deal contingent on raising capital that Green began looking for a private-equity partner.
"That is what really took us down this path of having money ready," he said. "We would have been much more competitive in the bidding if we had money ready then, instead of the contingent bid."
Greenwade said raising capital will help Green move forward in acquisition talks with community banks. It is looking to acquire banks with assets of between $100 million and $1 billion.
When Green Bancorp was conceived the idea was to partner with a private-equity firm and buy Texas banks.
The group of veteran Texas bank consolidators, led by Manuel J. Mehos, partnered with Belvedere Capital Partners Inc. in 2006 and acquired the $168 million-asset Redstone Bank in Houston. But that was the last acquisition that was completed.
Mehos is well known in Texas banking for helping to found Coastal Bancorp in Houston in 1986.
After buying a dozen banks and building assets to about $3 billion, Coastal was sold to Hibernia Corp. of New Orleans for about $230 million in 2004.
Hibernia has since been sold to Capital One Financial Corp. in McLean, Va.
Green's growth plans are to become a $3 billion-to-$5 billion-asset company over the next five years.
Private-equity firms investing with Green have confirmed that they would be interested in making future investments as it grows into its capital, Greenwade said.
Those providing the $115 million investment include funds affiliated with Friedman Fleischer & Lowe LLC, Harvest Partners LP and Pine Brook Road Partners LLC.
No investor will own more than 24.9% of Green. The deal to add capital is expected to close in the second quarter.
Green also would be interested in making a failed-bank acquisition if an appropriate deal surfaces.
Yet such opportunities in Texas are expected to be rarer than in many other banking markets.
That is largely because the Texas economy has held up better than other parts of the country and housing prices did not collapse as they did elsewhere.
Still, with more regulatory pressure and more expenses associated with banking, small community banks increasingly are expected to seek partnerships with larger institutions.
For example, a group in North Carolina recently announced plans for a similar strategy of consolidating open banks.
Last week, a group of Wachovia Corp. veterans said it was partnering with Park Sterling Bank, a $475 million-asset company in Charlotte with plans to raise $400 million in an initial public offering and buy open banks in North Carolina, South Carolina and Virginia.
Dan Bass, the managing director in the Houston office of Carson Medlin Co., said Green is likely to find more opportunities in Texas with small banks looking to sell.
As Green grows, there is a better chance that it would go public and provide liquidity for those acquirers, which would be attractive to privately held community banks.
"I don't think there will be many failed-bank opportunities," Bass said. "But there will definitely be opportunities for banks who want to team up with Green, hoping their shares become public later."