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TheStreet Open House

Texas Bank Growth Needs to be Wrangled

Stocks in this article: BACWFCCMACFRPBZION

Zions owes $1.4 billion in federal bailout funds received in 2008 through the Troubled Assets Relief Program, or TARP. Please click here for a discussion on the holding company's prospects for exiting TARP, as a catalyst for the shares.

Zions Bancorporation's shares closed at $19.22 Tuesday, returning 18% year-to-date, following a 33% drop in 2011. The shares trade just above tangible book value, and for 13 times he consensus 2012 EPS estimate of $1.43. The consensus 2013 EPS estimate is $1.80.

Interested in more on Zions Bancorporation? See TheStreet Ratings' report card for this stock.

Another strong performer among the largest Texas banks is Prosperity Bank of El Campo, which achieve ROA ranging from 1.47% and 1.57% during 2011. The bank is the main subsidiary of Prosperity Bancshares (PB).

The holding company's shares closed at $42.72 Tuesday, returning 6% year-to-date, following a 5% return last year.

Prosperity Bancshares on Monday announced a deal to acquire American State Financial Corp., which is the privately held parent of American State Bank of Lubbock, which had $3.1 billion in total assets as of Dec. 30, with 37 branches spread across West Texas.

Prosperity agreed to pay $178.5 million in cash, and "up to 8,525,000 shares of Prosperity common stock" to complete the deal, which could be valued as high as $529.2 million, based on Prosperity's closing price of $41.14 last Friday.

Prosperity's continued expansion through acquisitions and strong earnings performance is reflected in relatively high valuation in the current environment, with the shares trading for 3.2 times tangible book value and 14 times the consensus 2012 EPS estimate of $3.04. The consensus 2013 EPS estimate is $3.30.

Following the deal announcement, KBW analyst Jefferson Harralson on Monday reiterated his "Market Perform" rating for Prosperity, with a $45 price target, saying he was "excited about value-enhancing use of capital, and saw the deal as low risk, but significantly accretive" to earnings.

Interested in more on Prosperity Bancshares? See TheStreet Ratings' report card for this stock.

Strongest Texas Banks and Thrifts

Based on third-quarter financial reports, 117 Texas institutions were assigned "recommended" ratings of B-plus or above by Weiss Ratings:

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