First Banks Inc. of St. Louis has found another buyer for its Texas branches.
Prosperity Bancshares Inc. in Houston announced Monday that it would acquire the 19 branches, including deposits of $500 million and assets of $100 million, from First Banks for a 5.5% deposit premium, or $27.5 million.
The $10.4 billion-asset First Banks had agreed in August to sell the branches to Sterling Bancshares Inc. in Houston for a 6% deposit premium. But in late December the two companies dissolved the deal, citing delays in obtaining regulatory approval.
Terry McCarthy, First Banks' president and chief executive, said the Prosperity deal is expected to close in the second quarter.
"Prosperity is an excellent buyer and very good to work with," he said in an interview. "We think they will be able to get regulatory approval, which was the ultimate delay in the first sale."
Dan Rollins, Prosperity's president and chief operating officer, said he did not believe his company would have a problem with regulators this time around.
"We have a good reputation and relationship with our regulators," Rollins said in an interview. "From our side this is a straight-up transaction, just like the 20-something others we have done, and I don't see any reason for regulators to have a problem with this."
Analysts said the dissolution was favorable for the $4.9 billion-asset Sterling, because the price would have dropped before the other deal closed. And Sterling may have needed to dilute shareholders' value by adding capital to support the acquisition.
Rollins said Prosperity is paying the same price it offered when it bid on the branches last year. At that time, Prosperity was outbid by Sterling. The branches are in the Dallas and Houston areas — key markets for Prosperity's expansion, Rollins said.
"This is a great opportunity to further expand," he said. "Those are our core markets and that is $500 million in core deposits. We liked this last spring when we saw it, and we were disappointed then when we didn't get it. We were excited to have another opportunity."
First Banks, which is privately held, has been selling off pieces of itself after losing more than $737 million in the last two years. The branch deal is expected to generate a $40 million to $50 million capital benefit for First Banks.
In November, First Banks announced a deal to sell its 24 Chicago branches, along with $1.2 billion of deposits and $315 million of loans, to FirstMerit Corp. in Akron. The deal, which is expected to improve First Banks' risk-based capital levels by $75 million, is set to close this quarter. In September, First Banks sold its insurance unit for $14.8 million.
The company's First Bank subsidiary is operating under a regulatory agreement requiring it to have a Tier 1 risk-based ratio of 7%. At the end of the third quarter the subsidiary was in compliance with the agreement, with a ratio of 8.91%. Total risk-based capital stood at 10.19%.
After consolidating new locations near existing branches, Prosperity would have a total of 31 Dallas-area branches, adding seven with the Prosperity deal, and 57 Houston-area branches, adding five.
The First Banks deal is Prosperity's second branch deal this year. On Jan. 19 it announced it was acquiring three branches, including deposits of $420 million, from U.S. Bank. That deal is expected to close this quarter.