Prosperity Bank acquires First Victoria's 34 offices
July 1, 2013 at 2:01 a.m.
Texas' oldest independent bank will soon be no more.
Prosperity Bancshares Inc. on Monday announced a $374.2 million acquisition of FVNB Corp., parent company of First Victoria National Bank.
The move is Prosperity's sixth such transaction in 18 months, according to a company news release.
Under the agreement, already approved by both companies' boards, First Victoria's 34 offices will merge into Prosperity Bank, according to the release.
First Victoria has called Victoria home for nearly a century and a half, getting its start in 1866.
The decision wasn't an easy one for First Victoria's board of directors, said M. Russell Marshall, FVNB Corp.'s CEO. In fact, he said, when the company first began looking at strategic alternatives in March, it turned down Prosperity's first two offers.
"Their third offer was very, very, very, very attractive," said Marshall, who will stay on as chairman of wealth managment/private banking with the combined company. "In fact, you know, it looks like right now it'll be the largest multiple pay for any bank in the last five years."
According to the release, as part of the deal Prosperity will issue about 5.6 million shares of Prosperity common stock, plus $91.25 million in cash for outstanding FVNB Corp. shares.
Those terms are subject to various conditions, according to the release.
Not all employees will remain on, Marshall said, noting that competitors will likely talk with First Victoria workers, leading some to leave before the close. For others, redundant jobs between the two organizations might eliminate some positions.
It has not yet been determined which companies those various cuts will come from.
Marshall said First Victoria's main office, 101 S. Main St., will remain on as a bank, but under the Prosperity flag. It is unclear now, however, how many Victoria locations will remain.
"It's very possible, the way things are looking right now, that we may keep all of those locations simply because of the number of staff that are in Victoria right now," he said.
In the news release, David Zalman, Prosperity's chairman and CEO, said he was excited to join forces with those at First Victoria.
"We have always had a great deal of respect for the bank and for the people who have contributed to its success," he said. "Both of our banks do business in many of the same communities, and we have knowledge of the specific needs of those communities in terms of financial products as well as community support."
Zalman said he believes the combination will strengthen the company's already strong management and operations teams and help Prosperity not only compete but also better serve its customers.
Randy Vivian, president and CEO of the Victoria Chamber of Commerce, called Monday's announcement "shocking," but said he could understand the reasoning.
Moving to a larger corporation often allows a company better resources to serve customers, he said. From that customer perspective, it also means more services are available.
"But it's also kind of like losing a friend," Vivian said of the longtime Victoria bank. "You've got a bank with headquarters in Victoria, and the management knows the town. To see them pulled into a major corporation is sad and happy at the same time."
He said the chamber has a strong relationship with both entities, and looks forward to working with them down the road.
Dale Fowler, president of the Victoria Economic Development Corp., said he did not expect the acquisition to affect the way his organization markets Victoria. He said both institutions have been good corporate citizens in the past, and he did not expect Monday's announcement to change that.
Consolidation and convergence have become something of a national trend in the banking world, said James Kolari, a banking professor with Texas A&M University who also serves as director of the Mays Business School's banking program.
Within the past five or six years, he said, the number of community banks nationwide has decreased by about 50 percent. Today, he estimated, about 4,000 such banks remain in the United States.
He said that cut comes for a number of reasons but said a large part of that is due to increasing regulations, which took hold following the financial crisis in 2008 and 2009.
It becomes difficult for small banks to comply, he said, explaining that changes require resources they simply don't have, such as hiring additional workers to make sure they're following the rules.
"It's a trend that's not favorable, in my opinion," Kolari said, noting that community banks often serve as major lenders to small businesses, the ag sector and so on. "We really need to have strong community banks."
That said, Kolari said Prosperity remains a community bank in spirit. It's a growing regional bank, he said, and the areas served will maintain the services they've grown accustomed to.
Kathryn Batalin, a Victoria stay-at-home mom who banks with First Victoria, said she views the change as a positive thing. It means more locations for customers to do business, she said, and probably more opportunities for the company.
Batalin's husband, Greg Batalin, agreed.
"That's the only thing First Victoria lacks now. Locations," the Victoria truck driver said. "I'll drive all around sometimes, just looking for something that says 'First Victoria.'"
Benefits aside, Kathryn Batalin said she hopes the bank doesn't fall into patterns that other larger companies do - namely, hassling customers to apply for credit cards and other services all the time.
"If they can hold on to the morals they have now, I think it will be a good thing," she said.
Edna resident Rachel Fuller experienced a similar merger firsthand in 2005, when she worked at Edna's FirstCapital Bank. After Prosperity acquired the company, she said, she was the only employee in her four-person branch who transitioned over to Prosperity.
Her branch closed because Prosperity already had another Edna location, she said, noting her coworkers found work with other companies.
Fuller described the move as a big change but said it really came down to learning a new system and working with new people. From a consumer point of view, Fuller, who still banks with Prosperity, said she's never had problems.
Still, she said she understood why existing employees might be concerned with the acquisition.
It's daunting not knowing whether the job is stable, whether the branch will close or what will happen down the road, she said.
"Change happens, and I know a lot of people don't like change," she said. "You sort of have to roll with the punches, so to speak."
Looking ahead, Marshall said it helps to know that First Victoria is merging with another independent Texas bank. Prosperity was founded in El Campo and, today, is headquartered in Houston.
"So this is the oldest independent bank in Texas, First Victoria, merging with the second largest independent bank in Texas, Prosperity Bancshares," he said. "When you look at it from that sense ... it makes both institutions that much more competitive going forward."
Prosperity also plans to continue its charitable efforts, he said, noting the employees are still very much a part of the community.
And those people, he said, are really what caught Prosperity's attention to begin with.
"That's the value of this franchise, is the people," he said. "And (Zalman) realized that."