David Zalman is back in the M&A game with two acquisitions.
Prosperity Bancshares in Houston has agreed to buy Lone Star State Bancshares in Lubbock, Texas, and First Bancshares of Texas in Midland, marking Prosperity’s first bank deals since it bought LegacyTexas Financial Group in 2019.
The $37.4 billion-asset Prosperity will pay $228.7 million in cash and stock for the $1.3 billion-asset Lone Star. The deal, which is expected to close in the first quarter, priced Lone Star at 189% of its tangible book value.
Lone Star has five branches, $934 million of loans and $1.2 billion of deposits.
Alan Lackey, Lone Star’s CEO, will join Prosperity as its west Texas area president. Melisa Roberts, Lone Star’s chief lending officer, will become west Texas area vice president.
“We continue to look for opportunities to enhance our presence in the west Texas area,” Zalman, Prosperity’s senior chairman and CEO, said in a press release. Lone Star’s “locations in Lubbock, Midland/Odessa, Big Spring and surrounding areas are an excellent fit for us.”
Separately, Prosperity will pay $341.6 million for the $2.1 billion-asset First Bancshares. The deal, which is expected to close in the first quarter, priced First Bancshares at 162% of its tangible book value. First Bancshares has 16 branches, $1.6 billion of loans and $1.8 billion of deposits.
Ken Burgess, First Bancshares’ CEO, along with Brad Burgess, Greg Burgess and Jeremy Bishop, will join Prosperity as regional presidents overseeing specific geographic markets in west Texas and central Texas.
The acquisition “enables us to enter the desirable Wichita Falls and Amarillo markets and the Horseshoe Bay, Marble Falls and Fredericksburg markets in the high-growth central Texas area,” Zalman said in a separate release.
Prosperity said it will cut about a quarter of each seller’s annual noninterest expenses. It expects to incur about $27.1 million of merger-related expenses tied to both acquisitions.
About $1.5 million of aggregate annual interchange revenue from the selling banks will be lost due to the Durbin Amendment.
The deals should be about 5.9% accretive to Prosperity’s 2023 earnings per share, and 8.9% the following year. It should take less than three years for Prosperity to earn back an expected 4.3% dilution to its tangible book value.
Lone Star and First Bancshares were advised by Stephens and Fenimore Kay Harrison. Bracewell advised Prosperity.