The serial acquirer Prosperity Bancshares Inc. of Houston has found another opportunity to bulk up in its hometown.
The $6.4 billion-asset Prosperity announced late Thursday that it had agreed to buy the $303 million-asset 1st Choice Bancorp Inc. for about $68 million in cash and stock.
In January, Prosperity closed on its purchase of Popular Inc.’s six Houston branches.
Prosperity has not always put an emphasis on acquiring in Houston; of the 20 banks it has bought since 2000, only five were in the Houston metropolitan statistical area.
That could be because it has been difficult to find deals at the right price, said Brett Rabatin, a senior research analyst at First Horizon National Corp.’s FTN Midwest Securities Corp.
“Acquisitions are partially a reflection of opportunities, and I don’t think they had a ton of opportunity to buy banks in Houston,” Mr. Rabatin said. “I think it is great that they are adding in the area. … They could certainly build a much larger presence there, given the population base and the size of the economy. I think they could double the size of the franchise in Houston if the opportunity presented itself.”
Dan Rollins, Prosperity’s president and chief operating officer, agreed that Houston’s economy would support more Prosperity branches, but he said the company has not set any branching goals for itself.
“We are really more opportunistic than that,” he said. “But I would say there is room for us to have more than 100 branches in Houston.”
1st Choice has two branches in Houston — one in South Houston and one in Heights. The plan is to merge Prosperity’s Heights branch with 1st Choice’s branch there, which would bring Prosperity’s branch count for the Houston metropolitan statistical area to 47.
Prosperity is No. 10 in deposits in the Houston market, according to Federal Deposit Insurance Corp. data. Buying 1st Choice would move it up to No. 8, with a 2.19% share.
This is the first Texas bank acquisition deal announced in 2008. The price is 2.55 times 1st Choice’ tangible book value. The deal is expected to close next quarter.
1st Choice, founded in 1999, earned $3.5 million through the first nine months of 2007, according to FDIC data, up 19% from the same period in 2006. Its had a return on assets of 1.54% and a return on equity of 18.25%.
In late trading Friday, Prosperity’s shares were down 2.6%, to $27.52. 1st Choice is privately held.
