Oklahoma banks are attracting more interest from outsiders that are drawn to the state's energy and agricultural sectors.

Commerce Bancshares in Kansas City, Mo., agreed earlier this week to buy Summit Bancshares in Tulsa in a $41 million stock transaction. Summit has two branches and $261 million in assets.

The deal is the latest involving a seller in the Sooner State. Last month, CrossFirst Holding in Leawood, Kan., agreed to buy Tulsa National Bancshares and Prosperity Bancshares (PB) bought Coppermark Bancshares in Oklahoma City.

The state is finally getting serious looks after years of steady growth and relatively clean credit quality, says Steven Austin, president and chief executive of Yorktown Financial Holdings in Tulsa. Austin led an investor group that bought and rebranded CNBO Bancorp last fall.

"We didn't get the wild swings in our real estate values," Austin says, adding that high-end homes in Tulsa often sell for the same price as lots in Dallas. "There's some solidity to entering the market."

At 4.9%, Oklahoma had one of the nation's lowest unemployment rate last month, according to the U.S. Bureau of Labor Statistics. National unemployment was 7.6% in March.

Still, the state's biggest industries — energy and agriculture — are fickle commodities. Yorktown's Austin says governmental leaders want to diversify the economy. Tulsa and Oklahoma City, for instance, have targeted aviation and biotech companies.

For the $22 billion-asset Commerce, the Summit deal ended a lengthy courtship that involved loan participations between the banks, says Kevin Barth, Commerce's head of commercial banking. The lending relationship helped Commerce determine that Summit was the best Tulsa bank to buy.

Commerce has loan participation with banks in Dallas and Denver, and Barth says those relationships could eventually evolve into deals. He adds that having a prior relationship increases Commerce's comfort about targeting a bank.

Participations "help you understand how they do underwriting, structuring and documenting," Barth says. At Summit, "there were no loan quality surprises."

Commerce's last acquisition took place in July 2007 when it bought Commerce Bank of Aurora, Colo. Earlier that year, it entered Oklahoma by acquiring South Tulsa Financial.

The company could again rev up its acquisition machine, says Stephen Scinicariello, an analyst at UBS Securities. Summit shows that the company wants to expand in healthy markets like Oklahoma City and Tulsa. "It's a small acquisition but it's a smart acquisition," he says.

Commerce agreed to pay a premium equal to roughly 170% of Summit's tangible book value, says John Rodis, an analyst at FIG Partners.

Though it was a steep premium compared to recent deals, Summit's financial performance supported its valuation, says John Kemper, Commerce's president and chief operating officer. "With a quality, performing franchise like Summit - the kind of bank we're going to buy - we are much more interested in what their earnings value looks like," he says.

At Dec. 31, Summit had a return on assets of 1.45% and a return on equity of 15.7%. Nonperforming loans made up less than 1% of the company's total assets; 91% of its deposits were core deposits.

"You have to remember that Commerce is trading at 185% of tangible book," Rodis says. "I'm not going to be too critical of a deal when you're paying less than where you're currently trading."

Future acquisitions for Commerce would likely mimic the Summit deal, Rodis says. "Small, bite-sized deals make sense," he says, with targets likely ranging from $100 million to $500 million in assets.

Acquisitions could take place in markets that are adjacent to Commerce's existing operations, including cities such as Tulsa, Dallas, Denver, Indianapolis and Cincinnati, industry experts say.

Those cities are appealing because "they are growing faster than some of Commerce's home markets," Scinicariello says.

Roughly a fifth of Summit's $207 million loan portfolio is tied to the energy sector, though Barth says he expects Commerce will grow that business "cautiously and deliberately."

Oklahoma City offers an opportunity to make more commercial-and-industrial loans to middle-market companies, Barth says. Commerce already has corporate customers around Oklahoma City, but it does not have exposure to midsize clientele.

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