AUSTIN — The third quarter was a trying one for Texas community banks that have grown used to outperforming their counterparts in the rest of the country.

Hurricane Ike, which devastated Galveston and knocked out power in Houston for weeks, stunted growth at banks doing business in the state's largest city. And banks are reporting slackening loan growth and rising delinquencies as weakness in the national economy starts to affect Texas.

The $4.7 billion-asset Texas Capital Bancshares Inc. in Dallas said after the market closed Wednesday that third-quarter earnings fell 14%, to $7.6 million, from a year earlier, largely because it doubled its provision for loan losses, to $4 million.

George Jones, Texas Capital's president and chief executive, said 95% of its nonaccruing loans are in its real estate portfolio. The nonaccruals include a $9 million loan to a Houston-area home builder that Mr. Jones said is struggling to sell homes it built outside Texas.

"While Texas really has remained their best market, their projects in Arizona and other areas have drained cash from the company,"” Mr. Jones said in a conference call with investors. "They are really unable to meet their obligations."”

The $1.6 billion-asset MetroCorp Bancshares Inc. in Houston said Thursday that earnings fell 34%, to $2.1 million, after it increased its loss provision by 50% from a year earlier.

Though chargeoffs for the quarter were low, at just 0.08% of total loans, its ratio of nonperforming assets to total assets rose 118 basis points from a year earlier, to 1.72%, mostly due to the bankruptcy of a borrower, a Texas health-care firm.

In a press release, MetroCorp CEO George M. Lee said the company has made a strategic decision to scale back loan growth this quarter "to an annualized rate of 9.3%, compared with our original double-digit budgeted growth rate" to minimize exposure to residential construction and land development.

Texas banks are still doing better than banks elsewhere in the country. Nonperforming loans and chargeoffs remain well below industry averages and are expected to stay that way, said Brian Klock, a vice president of equity research at KBW Inc.'s Keefe, Bruyette & Woods Inc. Job and population growth have been strong, thanks to the booming oil and natural gas sectors, and the real estate market never overheated, as it has in many other areas of the country, he said.

Still, there are lingering concerns, analysts said.

Mr. Klock said the recent drop in oil prices could prompt energy firms to "pull back," which could decrease their need for financing. A decline in their profits could also lead to lower deposit balances in Texas banks.

Matt Olney, an analyst at Stephens Inc., said he is concerned about a potential glut of condominiums in the Dallas and Austin markets.

"I don't see how those could be filled over the next few months when they come online," he said.

Texas banks, particularly those doing business in Houston, are also feeling the effects of Hurricane Ike.

Though banks are likely to capitalize on the rebuilding opportunities, profits could suffer in the short term.

The $6.8 billion-asset Prosperity Bancshares Inc. in Houston said loan production dropped 37% in September from August. "Our assumption is that's primarily related to the fact that certainly in the Houston area, which accounts for 40% or 45% of our business," H.E. Timanus Jr., the president of its Prosperity Bank, said in a conference call last week.

The $14.1 billion-asset Cullen/Frost Bankers Inc. of San Antonio tripled its loan-loss provision from the second quarter, to $19 million, because it expects companies in the Houston and Galveston areas to have trouble repaying loans until they get back on their feet. Dick Evans, Cullen/Frost's chairman and CEO, said he also expects job growth in Houston to taper off this quarter.

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