Who says you can't find a bargain in Texas bank M&A?

Bank of the Ozarks (OZRK) in Little Rock, Ark., agreed to pay 75% of tangible book value for a Houston bank this week. That price is an outlier in the ultracompetitive Lone Star State, where sellers can still fetch more than two times tangible book.

Part of the explanation for the discount is that the seller in this case, the $300 million-asset Omnibank, still has a high level of nonperforming assets and regulatory issues. Those are exceptions in Texas, where many banks fared better in recent years than peers in other states, and for M&A overall, which has come to favor healthy sellers.

The Texas consolidators, like Prosperity Bancshares (PB) and Independent Bank Group (IBTX), have adopted a "you get what you pay for" attitude and are not interested in cleanups.

Such acquirers "do not want work-out situations," says Daniel Bass, a managing director at Performance Trust Capital Partners.

In that regard, the $23 million deal makes perfect sense for Bank of the Ozarks, observers say. With seven failed banks acquisitions in 2010 and 2011, the $4.71 billion-asset Bank of the Ozarks is skilled in the art in fixing broken banks. Omnibank is one, with roughly $20 million of nonperforming assets, according to Sept. 30 data from the Federal Deposit Insurance Corp.

"I'd be interested to know how they were able to get this transaction — I bet it has something to do with their expertise; they dealt with banks in a lot worse shape than this," Joseph Fenech, an analyst at Sandler O'Neill , said Tuesday.

Bank of the Ozarks did not disclose important details about the transaction, such as projected cost savings or its expected credit mark. It said the deal would be immediately accretive to earnings, but did not project by how much. Brian Zabora, an analyst at Keefe, Bruyette & Woods, says he expects the deal to boost earnings 3% to 4% in 2014.

Brian Martin, an analyst at FIG Partners, estimates a credit markdown of 7%. Taking that estimate into account, the deal value would be closer to 130% of tangible book value, he said. The average deal value in Texas since 2010 is 141% of tangible book value, Michael Rose, an analyst at Raymond James, said in a note.

Although it is not a major deal for Bank of the Ozarks, analysts say it appears to be a good fit and is cheaper than de novo expansion into area that is important to the bank's future growth.

Nearly half of the loans originated by Bank of the Ozarks were written in its Texas offices, George Gleason, the chief executive of Bank of the Ozarks, said in a press release. It already has nearly a dozen branches in the Dallas-Fort Worth area, a loan production office tied to its real estate specialties group in Austin and another real-estate-related office slated to open in the first quarter in Houston. Omnibank has three offices in Houston, four offices in the greater Austin area and one in San Antonio.

"For ten years we have recognized the growing importance of our Texas offices, and Omnibank's substantial presence in the Houston and Austin markets should continue that trend," Gleason said in the release.

Another reason the deal is a bit of an outlier is because of Bank of the Ozarks' stock performance. With shares trading at nearly 350% of its tangible book value, the company has a rich currency making it essentially an acquirer of choice. Other banks with that type of buying power, such as its Arkansas rival Home BancShares (HOMB) and Prosperity, have translated their trading premiums into major acquisitions.

Gleason said during a third-quarter conference call that he is more concerned with performance than size.

"We would do small transactions, we will do medium-size transactions, we will do large transactions — whatever fits our business plan and will generate a high teens to low 20s [return on equity] assuming an 8% capital allocation," Gleason says. "That transaction is in the strike zone for us regardless of size."

Still, some analysts were skeptical that Bank of the Ozarks would actually do a larger deal.

"We've seen some moving up on pricing, and they are very cognizant of tangible book value dilution," says Zabora of KBW. "The smaller ones are lower-priced."

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