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Texas Banks Remain Profitable and Grow Loans Organically: A Wall Street Transcript Interview with Brad Gailey, Senior Vice President of Keefe, Bruyette & Woods, Inc.

67 WALL STREET, New York - March 4, 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 and Equity Analysts. 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: 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 a modest pickup, but nothing materially different than last year.

TWST: What have been the key topics or themes from the most recent quarterly earnings reports?

Mr. Gailey: In Texas, most of the banks have above-average bond portfolios; the size of the bond book relative to the balance...

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.