Coastal Founder's Second Act: Mehos' Green Bancorp Lands Redstone Deal

American

Friday, June 30, 2006

Banker By Marissa Fajt

Manuel J. Mehos knows a thing or two about building a company through acquisitions. He founded Coastal Bancorp in Houston in 1986 and built it to nearly $3 billion of assets through a dozen acquisitions before selling to Hibernia Corp. of New Orleans in 2004 for about $230 million.

Now Mr. Mehos, whose noncompete agreement expired last month, is aiming to repeat that strategy with a company he has formed for the purpose of buying other banks - and he has already unveiled his first deal.

He announced late Wednesday that his Green Bancorp, Inc. is merging with the $168 million-asset Redstone Bank in Houston. Though Green Bancorp has raised just $3 million of capital, it expects to have $50 million by the time the Redstone deal closes later this year, and Mr. Mehos said it would raise even more if necessary.

"We'll get pretty aggressive with acquisitions," he said in an interview. "We won't be limited to the capital we have." Texas has been among the nation's busiest merger and acquisition markets in recent years, and there are no signs of a slowdown. Buyers from Texas and elsewhere are drawn to Texas banks largely because of the state's robust economy, particularly in and around Dallas, Houston, San Antonio, and Austin.

Mr. Mehos said that though he is most interested in Houston-area banks, he would consider deals in other parts of Texas. Green Bancorp is eyeing banks and thrifts with assets in the $250 million range. He would have plenty to choose from - according to Federal Deposit Insurance Corp. data Texas has more than 60 banks and thrifts with assets of $200 million to $300 million.

Redstone Bank was founded in 1999 by Redstone Cos., a Houston investment firm with stakes in a variety of businesses, including the Houstonian Hotel, Club and Spa; golf courses; and real estate.

In a news release announcing the deal, Mr. Mehos said "this merger is a powerful combination. The Redstone Coso has a successful track record in a wide range of financial services and Green Bancorp has a proven management team who built a $3 billion-asset bank from the ground up."

Redstone Bank, which targets businesses, developers, and high-net-worth individuals, lost money in each of its first six years, according to the FDIC, but turned a small profit of $71,000 in 2005.

It is, however, flush with more than $20 million of capital, which Green Bancorp could use to help fund acquisitions. Mr. Mehos said that Redstone Bank would be folded into Green Bancorp and that a number of its top executives, including chairman and chief executive David Shindeldecker, would join Green Bancorp's board. He characterized the deal as a merger, not an acquisition, with Green Bancorp paying only a small amount of cash to certain Redstone shareholders.

Organized as a unitary thrift holding company, Green Bancorp intends to convert to a bank holding company as part of the deal. Redstone Bank, which has three branches, is to be renamed Green Bank once Green Bancorp completes construction of its own headquarters next year.

Mr. Shindeldecker, who is also RedstoneCos.' president and CEO,saidthat the bank his company formed could grow faster as part a larger banking organization.

"Weare very excited about it," he said. "I think the larger capital base that willbe the result of the merger willfurther distinguish the bank from its competitors, and Manny's skills and track record can only enhance the situation."

Mr.Mehos has been in the sidelines for two years. When Coastal was sold to Hibernia, which has since been sold to the $75 billion-asset Capital One FinancialCorp. of McLean,Va., he signed an agreement to stay out of banking in the Houston market for a year and not join a large bank for two years. But he said he had little interest in working for another banking company and looked forward to buildinganother one, a deal at a time.

"It is what I do best," he said. "It is what I have done for years."