Public stock offerings of two Texas community banks are receiving warm receptions -- further evidence of a banking revival in the Lone Star State.
Houston-based Sterling Bancshares Inc. completed an initial public offering of one million shares last week. Among the buyers were some giants of the institutional investor community, including J.P. Morgan Securities Inc. and Fidelity Investments, according to Sterling president and chief executive George Martinez.
Meanwhile, First Amarillo Bancorp. filed a registration statement with the Securities and Exchange Commission to sell one million shares in a secondary offering being managed by Keefe, Bruyette & Woods Inc.
Bank, Investor Confidence in Texas Grows
The capital-raising efforts of these community banking companies reflect their growing confidence in the Texas economy and in their ability to compete with branches of big bank holding companies.
"We're not raising capital just to stay where we are," said Joe Horn, chief financial officer of First Amarillo.
This confidence apparently is shared outside Texas. Mr. Martinez said institutional investors bought 40% of his company's offering.
Roughly $7.9 million of the net proceeds went to Sterling, but $2.1 million went to Sunwestern Investment Fund II, a Texas limited partnership that sold some of its Sterling shares. Underwriters are seeking to sell an additional 135,000 shares.
Strong First-Half Results at Sterling
Sterling's offering was co-managed by Legg Mason Wood Walker Inc., Baltimore, and Principal/Eppler, Guerin & Turner Inc., Dallas.
Controlling $248.3 million of assets at midyear, Sterling racked up first-half net income of $1.41 million, for hefty annualized returns of 1.2% on average assets and 20.89% on average equity.
The six-office banking company has nearly doubled in size in the past five years. Mr. Martinez said the growth came while Sterling wooed away officers and customers of rival holding companies' banks as the units were converted to centrally controlled branches.
Sterling wants to pursue a so-called supercommunity-bank strategy, Mr. Martinez said, acquiring independent banks whose back-office functions can be automated but whose lending functions will remain in the hands of local officers.
First Amarillo controlled $750.6 million of assets at Sept. 30 and recorded nine months' income, before extraordinary items, of $5.9 million, for an annualized 1.11% ROA and 18.66% ROE. Tax shields boosted earnings to $9.4 million, for a 1.77% ROA and 29.64% ROE.
The company's stock has been trading at $11.75 per share, or roughly 118% of book value.