Prosperity Bancshares (PB) could easily buy another small bank and has the strength to buy a fairly big one despite a recent buying spree across Texas, executives of the Houston company said Friday.

Its $530 million-agreement in February for American State Financial in Lubbock — among the priciest and largest bank deals announced in years — could slow but not eliminate Prosperity's ability to do another sizable deal, David Zalman, Prosperity's chairman and chief executive, said in discussing earnings with analysts.

The $3 billion-asset American State — with 37 branches in West Texas — is large but should be fairly easy for Prosperity to integrate because it is in good shape and run by competent people, Zalman said.

"There is not a big cleanup. If there are more opportunities we can do them," Zalman said.

Prosperity reported that profits increased 1% from the previous quarter and 8% from year earlier, to $36.5 million.

Texas is the hottest bank merger market in the country. Wall Street and potential takeover targets continue to speculate about possible buyers there. Executives of BB&T (BBT) of Winston-Salem, N.C., pegged Texas as place where it could expand in discussing earnings last week.

The $11 billion-asset Prosperity is not too busy with its most recent deals to strike new ones, its two top executives said twice Friday.

"If there was some huge transaction, clearly it would need to wait until this one was finished to get integrated," said Dan Rollins, Prosperity's president and chief operating officer. "We've got the capacity to continue to talk to people."

The other three banks it agreed to buy since September are tiny and will not hinder its ability to keep striking deals for small banks, Zalman said.

"Those kinds of deals are not hard for us at all," he said.

The three small banks together have eight branches and slightly more than $300 million of assets. They are East Texas Financial Services of Tyler; Bank Arlington in Dallas; and Texas Bankers in Austin.

The East Texas deal is still pending, and the other two closed. American State is slated to close in the third quarter.

Prosperity's purchase agreement for American State is the fourth most expensive bank transaction announced since January 2010 as gauged by premium paid to tangible book.

The transaction came together fairly smoothly over the course of 2011, according to a deal proxy filed on Thursday with the Securities and Exchange Commission.

It began with an informal lunch in late 2010 between American State CEO W. R. Collier and Prosperity's top two executives. It was arranged by American State's financial advisor, Sandler O'Neill & Partners.

After eight months — and multiple phone calls — Prosperity submitted a nonbinding in July. The late-summer tumble in the stock market put the deal talks on hold until December.

Prosperity submitted another nonbinding offer that was higher than the first one. To move the cash-and-stock offer forward, Prosperity agreed to let American State pay its shareholders an extra dividend of up to $5 million before closing.

Increased regulatory burdens, inevitable consolidation in banking and Prosperity's ability to do a deal without having to raise money were among the reasons American State decided to sell, according to the proxy.

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