Prosperity Bank to acquire two Texas community banks for $570M | Techy Kings

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Dive Brief:

  • Houston-based Prosperity Bank will acquire two small Texas community banks in separate transactions valued at about $570 million, the bank announced Tuesday.
  • The acquisitions of FirstCapital Bank of Texas, headquartered in Midland, and Lone Star State Bank of West Texas, headquartered in Lubbock, are both expected to close in the first quarter of 2023.
  • Prosperity Bank hit the headlines last month for being the first Payroll Protection Program (PPP) lender to settle a False Claims Act case with the Department of Justice. It agreed to pay more than $18,000 to settle allegations it knowingly processed loans for ineligible businesses.

Dive Insights:

Prosperity plans to pay approximately $341.6 million for FirstCapital and $228.7 million for Lone Star. Buying FirstCapital will give Prosperity 16 additional locations in north, central and west Texas, and strengthen the bank’s balance sheet with $2.1 billion in total assets, nearly $1.6 billion in loans and nearly $1.8 billion in deposits.

The Lone Star deal will give Prosperity six additional locations in west Texas, as well as approx Assets of $1.3 billion, loans of $933.5 million and deposits of nearly $1.2 billion. The amount will push Prosperity’s brick-and-mortar footprint to nearly 300 locations, and its total assets past $40 billion.

Management from both banks will join Prosperity. Lone Star CEO Alan Lackey will become Prosperity’s West Texas region president. FirstCapital Bank CEO Ken Burgess will also become regional president, the Houston-based bank said.

A representative for Prosperity did not return a Banking Dive request for comment.

Cullen Zalman, Prosperity ssenior vice president of banking and corporate activities, told American Banker that executing the two acquisitions simultaneously “really enhances[s] our presence in [West and Central Texas] and deepen[s] the strength of our bench there.”

Aacquiring FirstCapital brings Prosperity back to the “desirable markets of Wichita Falls and Amarillo” and other areas in “fast-growing Central Texas,” CEO David Zalman said in a prepared statement.

Lackey touted Prosperity’s “financial strength and regional footprint” in a statement about the partnership, while Burgess, of FirstCapital, described it as a perfect fit because “[t]its ability to remain a community-oriented bank serving our market with the same people is important to us.”

FirstCapital’s acquisition of Prosperity netted $93.4 million in cash and nearly 3.6 million shares of Prosperity stock to FirstCapital shareholders. For Lone Star, the split was $64.1 million in cash and more than 2.3 million shares.

Prosperity’s last acquisition — a $2.1 billion deal for LegacyTexas Financial Group — closed in 2019.

The recent PPP settlement by Prosperity may represent an honest step, in an enforcement sense, before announcing the offer this week.

“Banks tend to settle to clear the way,” Richard Horn, a former senior attorney in the Consumer Financial Protection Bureau, told Bloomberg Law last fall. “If they want to get approval from their banking regulator for a certain activity — a merger or something else — it’s not good to wait [allegations].”

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