Captex Bancshares Inc. is breaking into Texas as a bank holding company with a deal that uses capital from prominent institutional investors.
On Sept. 28, the Bryan, Texas-based company completed its acquisition of state peer, Trenton-based Trenton Bankshares Inc. and unit First National Bank of Trenton. The deal was first announced in September 2016.
Chairman and CEO George Lea said deal investors are a "nice mix of individuals, family offices and institutional investors." Most notably, investment groups Clover Partners LP and Bay Boston are listed as investors in the deal.
First National Bank of Trenton, founded in 1901, has five locations throughout North Texas. Lea said the company will open another location by early 2018, and has plans to expand in other cities.
"We want to take the great platform and create something that serves a greater number of Texans and many different geographies throughout Texas," Lea said in an interview. "There's a great, solid deposit base and customer base associated with the bank, and we want to expand that and grow into many other parts of the state."
Since the financial crisis, the number of U.S. banking startups remains scarce. In May, Bank of Austin secured a charter from the Texas Department of Banking, making it the state's first de novo since 2009.
Lea said the company considered starting a bank from scratch, but then ultimately, the company decided a deal was the "best platform" to enter the market.
Dallas-based Clover Partners has a 24.9% stake in the deal, according to Managing Director and Portfolio Manager Johnny Guerry, who said he will join Captex Bancshares' board. In an interview, Guerry said vibrant Texas bank valuations, coupled with the company's business strategy, made for an "extremely compelling" deal.
"From a multiple of earnings or from a multiple of capital, we fully plan on bridging the gap of where we've entered to getting the more peer-like multiples," Guerry said.
But the path for Texas M&A has become crowded, Guerry said, with "only so many private banks of size" left in Texas.
"It's definitely challenging to find the right one," he said. "I think we found a great one here, and we're very excited about that."
Higher U.S. bank stock multiples following the 2016 presidential election has encouraged many buyers to capitalize on the strength of their shares in stock-driven deals.
"There are others that are out there that are around the size of Bank of Trenton that could make sense for other parties," he added. "But for the larger guys, it's probably easier to acquire publicly traded institutions."
Some have said that Hurricane Harvey's destruction in Houston could lead acquisitive banks to look more closely at deal opportunities.
Lea said there are "a lot of banks, but not enough bankers" in Texas. Lea, cognizant of the M&A environment and high level of branch consolidation, said the company's focus will be "more technology driven."
"We're going to have what we hope is robust growth, but we're going to do it using technology to bridge that gap," he said. "There's certainly value in the economies of scale of a bigger organization, but our focus is profitability more than just growth."
Lea said the company's main lines of lending will be commercial real estate and commercial and industrial oriented.
Deal metrics have not been disclosed. Trenton Bankshares had total consolidated assets of $191.8 million as of June 30.