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Consolidation in Texas Regional Banks: the Initial Phase of Acquiring Small Names Has Passed, and Now Larger Banks are Being Targeted in the Lone Star State

67 WALL STREET, New York - March 6, 2013 - The Wall Street Transcript has just published its Pacific and Southwest Banks Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Heightened M&A Activity - Regulatory Obstacles and Fee Income Replacement - Interest Rates and Loan-Growth Strategies - Pockets of Growth in Western Banking - Regulatory Outlook Gains Clarity

Companies include: First Financial Bankshares Inc (FFIN), Viewpoint Financial Group (VPFG), Texas Capital BancShares Inc. (TCBI), Cullen/Frost Bankers, Inc. (CFR), Southside Bancshares Inc. (SBSI) and many more.

In the following excerpt from the Pacific and Southwest Banks Report, an expert analyst discusses the outlook for the sector for investors:

TWST: Other analysts I have spoken have said Texas is one market where folks want to be.

Mr. Gailey: Yes. It's different than the 1980s bubble, where we saw the oil and CRE issues that Texas and Oklahoma had; Texas was not the place you wanted to be back then. Now, on the flip side, it is a place you want to be, and the Texas stocks have held in a lot better than average. Most of them have been down, but they were down a lesser amount, and they have rebounded pretty quickly. It's really one of, if not the, strongest geography in the U.S. for community banks.

TWST: Do you expect significant M&A activity this year as a result?

Mr. Gailey: The lack of consolidation is one thing that has really surprised me. I thought we'd see more consolidation in 2012 than we did. We did see a couple of larger deals in Texas: Prosperity (PB) got a nice one, PlainsCapital in Dallas sold, and you also saw Encore Bank out of Houston sell. Encore got almost 2.5 times book, which is a very nice price for Encore.

Texas does have a lot of smaller community banks; I think the number is a little over 400 small community banks. Most of those banks are under $1 billion in assets, so it's hard for most of the buyers - which have a decent size to them - to really move the needle with the smaller community banks that are for sale. I think this year you will start to see a little increase in the consolidation activity in Texas. We've already seen one deal, First Financial (FFIN) in Abilene acquire a small bank in Orange, Texas, and there is chatter about a couple of decent-sized banks coming to market for sale.

You also have two banks in Dallas which are old mutuals that hit their three-year mark - one of them has already hit the three-year mark, that's OmniAmerican (OABC) in Fort Worth. And the other one hits the three-year mark in a couple of quarters, and that's ViewPoint (VPFG) - so you do have some opportunities for this year to be a pretty good consolidation year in Texas. I expect...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.