AUSTIN — Three years after entering Texas, MidSouth Bancorp of Lafayette, La., plans to more than double its branch network with a big push in Houston.
In March its Texas subsidiary plans to open its first Houston branch, staffed with a team of four experienced bankers hired from the $12 billion-asset Banco Popular North America, a subsidiary of Popular Inc. of Puerto Rico.
The branch will be the first of about 40 that MidSouth plans to open in and around Texas' largest city over the next seven years. The $802 million-asset company currently has 30 branches, including six in Texas. Its network stretches from Baton Rouge to College Station, Tex.
C.R. "Rusty" Cloutier, MidSouth's chief executive and president, said the Houston market offers something his company's home state does not: a fast-growing, diversified economy.
MidSouth entered Texas in October 2004 by buying a small bank in Beaumont, but "Houston has always been the target," Mr. Cloutier said in an interview this week. "There were never any doubts about that."
Houston's appealing demographics — population growth, low-cost real estate, and a high average household income — have attracted plenty of rivals, including other out-of-state banking companies and start-ups. But Mr. Cloutier is undeterred.
"I've never been any place in the world where there isn't a lot of competition," he said. "Any other business has competition. You've just got to know how to work the person across the street."
MidSouth bought the $115 million-asset Lamar Bank of Beaumont for about $23 million and changed its name to MidSouth Bank late last year.
In addition to the branch scheduled to open in March, MidSouth has another in the works in Conroe, a northern suburb of Houston where it already has a branch, and it is looking for a site in another northern suburb, The Woodlands, Mr. Cloutier said.
One challenge, however, could be finding suitable sites.
"You can't find a vacant corner that isn't being competed for by banking institutions in Houston," said Don Wood, a managing partner with the law firm Sutherland Asbill & Brennan LLP in Houston. "Everybody wants those good corners."
Still, analysts who follow MidSouth say Houston offers better growth opportunities than the company's home state.
"It just makes since to penetrate that market further," said Andy Stapp, a vice president with Cohen & Co. in Philadelphia. "Their traditional Louisiana footprint has far less attractive demographics."
The population in many of its Louisiana markets is expected to grow less than 3% over the next five years, while Houston's is expected to grow more than 14%.
Though any expansion carries some risk, David Scharf, an analyst with First Horizon National Corp.'s FTN Midwest Securities Corp. in Nashville, said MidSouth has become profitable faster than analysts had predicted in the markets it has entered.
"The bottom line is Rusty is a good banker and a good leader, and he has done a great job growing this bank over a number of years, and I don't see any reason why that should change," Mr. Scharf said.
MidSouth also plans to continue building in its home state. It opened its first Baton Rouge branch in August 2005 and has another on the drawing board for that city, now the largest in Louisiana since Hurricane Katrina devastated much of New Orleans.
MidSouth is expected to announce its fourth-quarter earnings today and has said they will be below the third-quarter results, because of costs associated with upgrading technology and changing the name of the Texas bank.
Hiring the Popular veterans — three of whom have at least 20 years of lending experience — should give MidSouth a good head start, Mr. Stapp said.
The team is led by Jeffrey Vargo, senior vice president of commercial lending. Kay Moore is vice president of commercial lending and treasury management, Moises Brito is assistant vice president and commercial loan officer, and Nancy Williams is a commercial lending assistant.
Mr. Scharf said the experienced team will be a critical component of MidSouth's success.
"Bankers with years of local experience generally result in lower credit costs and lower nonperforming assets," he said. "When you hire these people, the reason you might pay more is they have years of experience and a big Rolodex."
