Origin Bancorp of Rushton, Louisiana has agreed to acquire BH Holdings of Quitman, Texas to accelerate its growth in East Texas and the Dallas-Fort Worth market.
The $313.5 million all-stock deal was announced Thursday and is expected to close late in the third quarter or early in the fourth, according to Drake Mills, president and CEO of Origin, a $7.9 billion.
Origin, the parent company of Origin Bank, expanded to Texas in 2008. It has 10 branches in the Dallas-Fort Worth area and nine in Houston. Origin had $2.97 billion in loans and $3.1 billion in deposits statewide at the end of 2021. The acquisition of BH Holdings would add 13 branches, $1.25 billion in loans and 1 $.8 billion in deposits. As a result, this would shift Origin’s center of gravity decidedly westward, with Texas accounting for two-thirds of the combined company’s loans and nearly 60% of its deposits.
The combined company is said to have assets of $9.9 billion, raising the specter of heightened regulatory scrutiny and reduced interchange revenue that comes when an institution reaches $10 billion in assets. Origin set up a task force to handle the issue last year, and Mills said he was confident the bank could manage its size to delay crossing the $10 million threshold until 2024.
The combined franchise would have a share of the top 30 filings in Texas, as well as a share of the top 20 in the Dallas-Fort Worth market.
Mills called the deal’s financial measures “compelling.” A dilution of tangible book value per share of 3.6% is expected to be recovered in just over two years, while Origin forecasts an increase in earnings per share of almost 13% in 2023, the first full year of the combined company. Operating.
This is Origin’s first M&A deal since raised approximately $90 million in an IPO in 2018.
While BH, the holding company of BTH Bank, has achieved a combined annual growth rate of 28% in loans over the past decade, its portfolio has actually shrunk slightly over the past two years, a situation that Mills said. attributed to the company “capping with the capacity it had. ”
This plateau “has no bearing on their ability to grow,” Mills said. “The way we focus on organic growth and [results] they’ve shown in the past, we’ll get back on track and see pretty strong growth.
Lori Sirman, vice president and president of BH Holdings, said her company will benefit from access to Origin’s wider range of products and services as well as its superior technology.
“Our two organizations share a focus on relationship-based community banking,” Sirman said in a press release. “We believe this alignment of interests will pave the way for further increases in shareholder value and appreciation.”
Sirman and Jay Dyer, Executive Vice President of BH, are expected to join Origin’s leadership team.
At 151% of BH Holdings’ tangible book value, the deal’s price is higher than the 144% average bank buyers have paid year-to-date in acquisitions, according to Compass Point analyst Laurie Havener Hunsicker. , which publishes a weekly report detailing bank mergers and acquisitions. activity.
Mills said he had long considered BiH a strategic target “just because of the geographical fit and the way it was run”. He kicked off the negotiations between the two banks when he arranged a meeting in Dallas with Sirman and Dyer after a business associate in Texas recommended that he get in touch.
“I came out of that meeting right next to me that it was exactly the shape and the type of people and the opportunity that we needed,” Mills said, noting that Origin had turned down other potential deals. “We stayed disciplined. We had opportunities and walked away because they didn’t fit the culture.
Origin will remain an “opportunistic” buyer, but its bias will be toward organic growth, Mills said. “We will be disciplined. We’re going to do the things that make sense to us, and outside of that, we don’t need to have another M&A deal. »