The wave of Texas mergers and acquisitions in recent months could accelerate dealmaking among small banking companies and spawn a new generation of publicly traded ones, industry observers say.
Three of the state’s most active community bank acquirers since 2002 are themselves being acquired, and a fourth, the $7.6 billion-asset Amegy Bancorp Inc. in Houston, sold itself in December to the $45 billion-asset Zions Bancorp. of Salt Lake City.
John Blaylock, associate director of Alex Sheshunoff & Co. Investment Banking LP in Austin, said that with those companies out of the picture, he expects others with $1 billion to $5 billion of assets to start acquiring banks with less than $500 million. He also predicted more mergers of equals among small banks, as they aim to bulk up to better compete with larger ones.
“A lot is possible — that is what the market is telling us now,” Mr. Blaylock said. “It’s an ever-changing landscape at this point.”
Industry watchers say prospective buyers include the $1.2 billion-asset MetroCorp Bancshares Inc. of Houston, whose chief executive has expressed interest in the Austin and San Antonio markets in the past couple of months; the $2.6 million-asset PlainsCapital Bank of Lubbock, which would not comment for this story; Green Bank in Houston, which plans to open this year and grow primarily by acquisition; and the $1.3 billion-asset Encore Bank of Houston.
Of those four, only MetroCorp is publicly traded, and investment bankers say that banks looking to become active acquirers likely will need to go public.
They will need the capital to fund growth, and many sellers prefer that at least a portion of the sale be paid in stock, so buyers will have a better chance of making deals done if they can offer stock, said Dan Bass, the managing director of Carson Medlin Co. in Houston.
Since 2002, Amegy, State National Bancshares Inc. of Fort Worth, Texas Regional Bancshares Inc. of McAllen, and Texas United Bancshares Inc. of LaGrange have made almost 25% of the acquisitions of Texas banks with less than $1 billion of assets, according to Sheshunoff data.
In June the Spanish banking giant Banco Bilbao Vizcaya Argentaria SA announced deals to buy the $1.6 billion-asset State National and the $6.6 billion-asset Texas Regional. Last month Prosperity Bancshares Inc. in Houston announced a $357 million deal to buy the $1.8 billion-asset Texas United.
After those deals close, and the $11.7 billion-asset Cullen/Frost Bankers in San Antonio closes its deal to buy the $1.1 billion-asset Summit Bancshares Inc. of Fort Worth, the number of publicly traded banking companies in the state would drop to nine.
Mr. Bass said that because there are so few publicly traded ones in the state, banking companies that stage public offerings are likely to generate significant interest from outside investors. Those that started up in the late 1990s and early 2000s are reaching the point where they either need to go public and start acquiring or sell themselves, he said.
“Banks in the state have about a six-to-eight-year window when their investors start to get antsy looking for liquidity, because up until then they haven’t gotten anything back for their money,” Mr. Bass said. “To grow, you need some type of capital infusion, and your equity determines how fast you can grow.”
Roy Salley, the CEO of the $420 million-asset Sovereign Bancshares Inc. in Dallas, said that a banking company’s growth tends to slow once it hits $1 billion, and at that point it has a decision to make.
“We’ve got it pretty much staged that we can get to about a billion or $1.2 billion without having to raise more equity,” Mr. Salley said. “At $1 billion or $1.2 billion we’ll have to grow at a more modest pace or go public.”
Sovereign, which opened two years ago, would hit $600 billion when it closes an acquisition this year, and it expects to reach $1 billion in two years.
Encore Bank does not need more capital for acquisitions, because it is focusing on internal growth, but it has hit the point where liquidity for investors is an issue, said Jim D’Agostino, the CEO who started it in 2000.
The thrift, which is in the process of getting a national banking charter, operates in Houston and Florida.
“We always said in a period of five to seven years we’d look at the possibility of a liquidity event” — an initial public offering or a sale — “and we are periodically studying … the IPO,” he said in an interview last week. “When the time is right, we might very well do that.”
