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With few banks over $1 billion of assets willing to sell, larger buyers resort to picking off clusters of smaller banks. Pressure to grow outweighs the added costs, executives say.
February 23
Prosperity Bancshares Inc. in Houston has struck another deal in Texas, announcing Monday that it would buy American State Financial Corp. in Lubbock for about $528 million in cash and stock.
The privately held American State has $3.1 billion of assets, $1.2 billion of loans, $2.5 billion of deposits and 37 branches throughout west Texas.
The deal, expected to close in the third quarter, would be the fourth Prosperity has announced since September and its largest since it took over the failed Franklin Bank in late 2008.
In January, Prosperity said it would buy The Bank Arlington near Dallas and that it completed its acquisition of Texas Bankers Inc. in Austin. In December, it said it would
Once the deal is completed in the third quarter, the $10 billion-asset Prosperity would have 215 branches throughout Texas.
Prosperity said in a news release that American State shareholders would receive $178.5 million in case and roughly 8.5 million shares of its common stock. Based on Prosperity's closing price of $41.14 Friday, the stock portion of the deal would equal about $350 million.
In heavy trading Monday morning, Prosperity's shares were up 4.2%, to $42.88.
W.R. Collier, the chairman and chief executive of the unit American State, would become a director at Prosperity Bancshares and would serve as senior chairman of the West Texas area after the acquisition is completed. Michael F. Epps, American State's president, would become chairman of the west Texas area, responsible for the day-to-day operations and management of all west Texas branches.
Tony Whitehead, American State's Lubbock division president, would become president of the west Texas area, overseeing credit approval in that region. Several other division presidents would continue to oversee their geographic regions.
Additionally, four American State directors, Scott Collier, Mark Kirkpatrick, Van May and Don Pickering, would join the board of Prosperity's bank subsidiary.
American State earned more than $35 million through the first nine months of 2011, according to Federal Deposit Insurance Corp. data. Its return on equity in the third quarter was 15.40% and its return on assets was 1.51%, both well above industry averages.
"We are very excited to be able to become partners with American State Bank. Mr. Collier and his team have built a fantastic bank in west Texas and we believe our banks will fit together nicely," said David Zalman, Prosperity's chairman and chief executive said in a news release.
