-
Other banks say small acquisitions take too much work, but Sterling Financial says a good, small deal is better than a risky, big one.
May 6 -
Comerica is generating enough loan growth in its key markets that it is under no pressure to expand through acquisitions, Chairman and Chief Executive Ralph Babb says.
April 16 -
Shares of Independent Bank Group (IBTX) in McKinney, Texas, rose nearly 13% during their first day of trading.
April 3 -
Texas Capital Bancshares (TCBI) in Dallas is planning to raise $150 million by selling preferred stock.
March 21 -
CommunityBank of Texas has agreed to buy Vista Bank Texas. "These are two independent powerhouses coming together to fill a hole in the Houston banking market," said J. Pat Parsons, CommunityBank's CEO.
March 7 -
Cullen/Frost Bankers in San Antonio plans to raise $150 million by selling preferred stock.
February 13 -
Prosperity Bancshares in Houston sees Oklahoma as a nearby, familiar market with ample growth room and pledges more acquisitions after its $194 million deal for Coppermark Bancshares in Oklahoma City.
December 11
Independent Bank Group (IBTX) has hit the turbo switch while others are coasting.
The $1.8 billion-asset bank
David R. Brooks, the chief executive of the McKinney, Texas, company, in an interview Tuesday talked about courting banks with assets of $100 million to $1 billion in Austin, Dallas-Fort Worth, Houston and San Antonio. The bank is aiming for $5 billion in assets in the next five years.
Here is an edited version of the conversation.
Other deal-minded banks have gone public in recent years but are trading at a discount, making stock deals tough. How do you avoid that predicament?
We wanted a currency so that we could go out and do acquisitions, and acquisitions of larger companies as well. Obviously, we didn't want to go public below a certain price level because having a stock trading below book value wouldn't be helpful to our goals. We are currently trading at 190% of tangible book value, and the other Texas companies have significant premiums to where stocks are trading across the country. The market will be looking for us to continue to grow the way we've been growing and to deliver on the earnings growth we've had the last few years.
Texas has been a leader in M&A, but this year has been slow. What's your prediction for M&A this year?
We clearly believe that there is going to be a pick up, and we are aware of a number of discussions going on, so we believe that the number of announcements in these final three quarters of the year to show an upward trend.
Will you be surprised if we are talking a year from now and you have not done a deal?
Yes. I have been surprised in my life before, so it could happen. We told the market that we are both an organic-growth story and a strategic-acquisition-growth story. We are going to look for the right partners. If that avenue is not available to us this year then we will continue to grow well organically. We aren't sitting here reliant only upon finding acquisitions. We think we will find them this year, next year and the year after that, but if we can't find one that we think enhances our shareholder value, we will continue to grow organically at 15% to 20% a year. We think roughly half of our growth would come organically and half would come from acquisitions for the next couple of years.
Your loan-to-deposit ratio is 99.1%. That is a rare problem these days. How does that shape your M&A lens?
We've typically been in the 80% to 90% ratio but allowed it to go up closer to 100% in the downturn because of the great opportunity to pair inexpensive funding with strong loan demand.
We are paying close attention to the deposit mix of the companies we are talking to. Not that we wouldn't buy a bank with a high loan-to-deposit ratio, but it is equally attractive to buy a bank that has a low one because it picks up available deposits we can lend out.
You are one of the smaller banks doing acquisitions in Texas compared to other acquirers like Prosperity Bancshares (PB). Does that give you a leg up in your asset class?
We've been the second-largest acquirer in terms of the number of transactions for the last three years in Texas behind Prosperity. We've done four deals in the last two-and-a-half years. If you look at Prosperity's size now, as they approach $15 billion in assets,
Brad Milsaps with Sandler O'Neill wrote in a research note last week that he sees you pairing with a larger regional when you hit $5 billion. How do you see your future?
Well, I was thinking I would buy a larger regional when we are that size. Maybe that is what Brad meant [laughs].
We always have believed in building a company that we are going to be happy with in the long run, so we would never set a time frame out there that in five to seven years we would do some other kind of transaction.
Having said that, there aren't a good number of large regional banks in Texas given the size of our state compared to other parts of the country. We are very fragmented. You have
Maybe we are a part of that strategy later down the road once we are in the $5 billion to $10 billion range. We have a lot of options and alternatives. But we've told our shareholders — we are building for the long haul, but we are investors, too, and want to make the best returns for our shareholders.