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Harvey Zinn knew he was making a bold banking move.
Looking to expand, the president and chief executive of SNB Bancshares Inc. decided to take his financial institution public -- the state's third bank IPO in nearly six years.
The Sugar Land company, which owns Southern National Bank of Texas, sold 4.7 million shares and raised $49.6 million in its initial public offering last Wednesday. Then priced at $10.50 a share, SNB stock closed Monday at $10.99 a share.
"I'm never going to worry about the stock price, whether it's up, down or flat," Mr. Zinn said. "The decision to go public was a business one. All we will continue worrying about is running the bank."
So far this year, SNB Bancshares' offering is Texas' lone bank IPO.
A couple of weeks ago, Texas United Bancshares Inc. in La Grange priced a secondary offering.
Next offering?
Woodforest Financial Group Inc., a holding company for Woodforest National Bank, which is based in The Woodlands, Texas, is expected to go public next month.
In 2003, Franklin Bank Corp. in Houston and Dallas-based Texas Capital Bancshares Inc. priced initial public offerings. Texas Capital's IPO marked the first time in five years that a bank went public in Texas, a state dominated by out-of-state financial institutions.
"It's not unusual, but in Texas it has been rare," said Craig McMahen, investment banking department managing director at Keefe, Bruyette & Woods Inc., a New York investment bank that served as the lead underwriter for the SNB offering. "I think you will continue to see a couple of IPOs coming out of Texas as long as the economy remains strong."
Before Texas Capital's IPO a year ago, the last bank to go public was Houston-based MetroCorp Bancshares Inc. in 1998.
Back then, banks were hot stocks. "Then the sexy tech stocks took over," Mr. McMahen said.
Investors' eyes turned to the technology sector, leaving financial institutions alone. Banks' performance remained strong, even through the economic reverberations of the Sept. 11, 2001, terrorist attacks, Mr. McMahen said.
"There was no need for banks to go out and raise money," he said. "Everyone was just focused on running their businesses."
Mr. McMahen's company also led the 1997 offerings of Houston-based companies Southwest Bancorporation of Texas Inc. and Prime Bancshares Inc., and Prosperity Bancshares Inc.'s offering in 1998.
By the second half of 2002, banks continued to perform well, and investment interest returned.
"During that time banks were growing and expanding," said Jim Gardner, senior managing partner of Samco Capital Markets, a Dallas-based financial services consulting firm. "We've finally reached a stage where some banks have gotten large enough to offer themselves to the public."
Banking experts say the decision to go public is primarily a strategic one.
As banks get bigger and look to expand, the two options they often have are to either be acquired by a larger financial institution or to go public.
Mergers and acquisitions also can force out key banking leaders, who in turn decide to start their own financial institutions.
"Once you get to a certain size you can only do things a certain way," said Scott MacDonald, president and chief executive of the Southwestern Graduate School of Banking Foundation. "Going public can be advantageous if you want to remain in control."
Mr. Zinn admits that the market isn't what it used to be.
"The timing was right when we made the decision to go public earlier in the year," Mr. Zinn said. "I cannot tell you that the market is right now. If I could do it all over, I would have waited."
New banks
According to the Federal Deposit Insurance Corp., the number of new-bank charters in 2003 grew 27 percent, after falling 36 percent and 35 percent in each of the last two years. In 2003, there were 10 new charters in Texas, up from six in 2002.
Nationally last year, there were three bank IPOs, according to IPO Monitor. So far this year there have been six.
But just because you open a new bank doesn't mean you have to offer your shares to the public.
"We don't have many that just open the doors to the universe and say, 'Come buy our stock,' " said Robert Bacon, bank and trust supervision director for the Texas Department of Banking. "They will try to sell stock within the community or the region they are going to serve."
Starting from scratch
One soon-to-be-formed Dallas bank expects to do just that.
Making an unusual entry into the market, T Bank, through holding company First Metroplex Capital Inc., proposes to offer 1.1 million to 1.4 million shares at $10 each in a public offering later this year.
The bank, which is awaiting a charter from the Federal Office of the Comptroller of the Currency, has no operational history, no branches and no lending capital.
What it does have is a core group of 16 organizers, and it has applied for a ticker symbol. But its stock volume would be so small that it expects to trade over the counter.
The biggest challenge T Bank faces is getting the community to buy into a bank with no history, analysts say.
"Our philosophy is, rather than open and go look for your customers, why don't you open with your customers," said Dan Hudson, chief executive of Bankmark, a California-based consulting company that is helping T Bank with the offering. "Rather than have a limited number of investors, you have 800 to 1,000 investors."
Mr. Hudson is helping another bank, Treaty Oak Bancorp Inc., organize its offering to the Austin market. He is also helping with three other IPO projects, including one in the McKinney/Frisco area.
"The secret's out -- any group that is viable from any place has a shot in Texas," said Mr. Hudson, who has worked with more than 100 community banks across the country.
"Bank stocks aren't sexy or trendy," he added, "but if you have patience, they are a good investment."
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