- Key Insight: The deal marks the latest in a hot run of bank acquisition announcements in recent weeks.
- What's at Stake: Prosperity has been targeting density across Texas, one of the fastest-growing states in the country.
- Forward Look: The Houston bank still has capital capacity for more deals, analysts said Wednesday.
Prosperity Bancshares in Houston is making another play to strengthen its footprint in Central Texas, announcing its
The proposed $269 million, all-stock purchase of Southwest Bancshares in San Antonio is the latest in a spate of bank deals inked in recent weeks, further cementing 2025 as a revival year after the
Prosperity, which has $38 billion of assets, expects its acquisition of Southwest to
In July, David Zalman, Prosperity's senior chairman and CEO, told investors to "stay tuned," when asked about future transactions to bulk up in San Antonio.
"We have wanted to expand our presence in the fast-growing and desirable San Antonio and Hill Country areas, and Southwest's locations are an excellent fit," Zalman said Wednesday in a prepared statement.
The Southwest acquisition follows Prosperity's plan, announced in July, to buy American Bank Holding Corp. for $322 million. American Bank, a $2.5 billion-asset company based in Corpus Christi, has 20 offices in South and Central Texas, including in San Antonio and parts of the Hill Country.
Following the additions of both American Bank and Texas Partners, Prosperity will run 10 banking centers in the San Antonio area; bolster its presence in the Austin metropolitan area; and expand into Kerrville and Bandera, two towns northwest of San Antonio, Zalman said.
Stephen Scouten, an analyst at Piper Sandler, wrote in a Wednesday note that the deal, which he called unsurprising, is small, but nonetheless provides "forward momentum" for Prosperity. The bank could still pursue other acquisition opportunities this year, he added.
"We believe that given Prosperity's strong capital position and the use of stock in this deal, the company remains in strong position to consider additional M&A opportunities," wrote Jon Arfstrom, an analyst at RBC Capital Markets, in a Wednesday note.
Prosperity has been aiming to scale through M&A for years, even closing simultaneous bank transactions during the relatively slower dealmaking years of 2023 and 2024.
With its two latest purchases, Prosperity expects to rank in the top five in deposit share in San Antonio, and in the top three in Austin. The bank is paying a core deposit premium of 4.5% in its latest deal.
Scouten wrote that buying banks has been a "necessary path for Prosperity given the lack of organic growth trends," but that going forward, "some semblance of organic growth will be needed in tandem with this recent M&A to get the valuation back towards traditional levels over time."
"The kind of density and scale we are building with these" deals "really starts to create something special," Cullen Zalman, Prosperity's executive vice president of banking and corporate activities, told American Banker in 2022,
Prosperity currently operates 283 branches across Texas and Oklahoma.
Texas Partners Bank, originally founded in 2007, reached its current iteration through the merger of three banks — in San Antonio, Austin and the Hill Country — five years ago.
Its sale comes less than two months after the death of the bank's founder, J. Bruce Bugg, Jr., who also served as chairman, president and CEO of the holding company. He died on Aug. 6, at age 70, following complications from a back surgery,
"Bruce's vision of building a premier Central Texas banking franchise will continue with the same strength, clarity and purpose that define his leadership," said Brent Given, interim chairman, president and CEO of Texas Partners, said in a prepared statement at the time. "His memory will continue to inspire the bank's commitment to trust, integrity, and service."
Prosperity is expecting earnings-per-share accretion of 1% in 2026, with 25% of cost savings phased in, and 2.5% EPS accretion by 2027, with all cost savings phased in. The deal is 1.2% dilutive to tangible book value per share, and Prosperity is projecting an earnback period of less than three years.
"We don't love the math around the dilution/accretion on the deal, but given the small size of the transaction and the historical success that Prosperity has demonstrated around acquisitions, we will temper our hesitancy," Piper Sandler's Scouten wrote.
Texas Partners' loan portfolio is heavily concentrated in commercial real estate, but it also has more than one-fourth of its book tied to commercial and industrial borrowers. The exposure will increase the share of Prosperity's loans that are classified as C&I, which is currently a hot area for bank growth.
But the buyer's deposit portfolio has a far lower cost of funds than Texas Partner's, and the buying bank also has a slimmer loan-to-deposit ratio.
The deal is expected to come with one-time, pre-tax transaction expenses of $18 million.
The acquisition will also eliminate Southwest's pre-tax unrealized losses of $21.7 million. The selling company's loan book comes with a $28.3 million gross credit mark, or 1.5% of its total debt.
Gene Dawson, interim chairman, president and CEO of the selling parent company, Southwest, will join Prosperity's board. In addition, Texas Partners' Given will join Prosperity as San Antonio chairman. Other members of the acquired bank's management will also be appointed to leadership roles at Prosperity, including the chief operating officer, who will fill a senior management position.
Given said in a prepared statement Wednesday that the Prosperity deal will bring together "the strength and resources of a larger regional bank, while maintaining the local decision-making and personalized service our clients know and trust."
