Bank deal creates state’s 2nd largest

Home BancShares to buy Liberty

Wallace Fowler (left) of Liberty Bancshares and John Allison of Home BancShares unveil a map Tuesday at the Little Rock Regional Chamber of Commerce that shows the branch locations of the two banks (see graphic associated with article).
Wallace Fowler (left) of Liberty Bancshares and John Allison of Home BancShares unveil a map Tuesday at the Little Rock Regional Chamber of Commerce that shows the branch locations of the two banks (see graphic associated with article).

Home BancShares, owner of Centennial Bank, has agreed to buy Liberty Bancshares of Jonesboro for $250 million in stock and $30 million in cash, the Conway-based firm said Tuesday.

It will be the largest acquisition involving two Arkansas-based banks in the state’s history, John Allison, chairman of Home BancShares, said at a news conference at the Little Rock Regional Chamber of Commerce.

The purchase will make Home BancShares the second-largest financial institution in Arkansas with $7.1 billion in assets, still well behind Arvest Bank of Fayetteville, which is more than twice that size.

Centennial has about $4.2 billion in assets and Liberty Bank of Arkansas, which is owned by Liberty Bancshares, has about $2.9 billion in assets.

The resulting institution will have $4.5 billion in loans,$5.6 billion in deposits, 1,500 employees and 151 branches in Arkansas, Florida and Alabama.

Centennial doesn’t plan to make drastic jobs cuts in Jonesboro and will allow the staff there to shrink through attrition, Allison told analysts during a conference call Tuesday.

Home BancShares closed at $22.82 Tuesday, up $1.66 or 7.8 percent, in trading on the Nasdaq exchange. It hit a 52-week high of $22.94 during the day.

The deal is the culmination of a dream that Allison and Wallace Fowler, chairman and chief executive officer of Liberty Bank, have had for more than 10 years.

“The icing on the cake is that I’m going back to my hometown and doing this with a longtime friend of mine,” Allison said.

Fowler, 79, decided to sell the bank he started because, he said, “I’m worn out. I’m tired.”

“We’re doing well, the bank is growing, we’re making a profit, the stockholders are happy with their dividends and everything, but I’m tired,” Fowler said. “My wife and I are going to go back to traveling in the RV.”

Allison and Fowler were on the board of Little Rock based First Commercial Corp. before it sold to Regions Financial Corp. in 1998.

Fowler acknowledged in 2001 that he had been thinking of the possibility of merging his Jonesboro bank with Allison’s bank and also with Truman Arnold’s Century Bank to form a statewide bank similar to First Commercial. Arnold, who also served on First Commercial’s board, sold his Texarkana, Texas-based Century Bank to Wells Fargo & Co. in 2008.

With the purchase of Liberty Bancshares, Centennial Bank will have 92 branches in Arkansas.

Allison and Fowler became friends 48 years ago when Allison worked at a clothing store on Main Street in Jonesboro and Fowler and his wife ran a furniture store next door, Allison said.

“We’d go from time to time and drink coffee at Douglas Drugs, and we’d sweep off the porches together in the morning,” Allison said.

With that friendship, Fowler and Allison intentionally allowed each other to build their banking empires and did not try to infringe on the same markets.

Allison said he thought at times about moving into the Jonesboro market, where he grew up and attended college, but chose not to. Fowler said he had thoughts of getting into central Arkansas but didn’t.

Liberty Bank primarily has branches in northeast and Northwest Arkansas. Centennial is in central and north-central Arkansas. The only cities where the two compete are Morrilton and Searcy. Liberty had about $27 million in deposits in Morrilton last year, the most recent information available, and Centennial had almost $11 million. In Searcy, Centennial had about $80 million in deposits and Liberty had $54 million.

Allison told analysts he expects the purchase to be profitable to Centennial Bank within 18 months. In doing due diligence, Allison told analysts, there were only a few large pieces of foreclosed properties on Liberty’s books - two or three commercial tracts in Northwest Arkansas, a large residential subdivision near Olive Branch, Miss., in the Memphis area; and another large tract in the Dallas area.

Fowler will become a member of Home BancShares’ board, as will his son, Mark, who is vice chairman of Liberty Bank.

“I only requested one thing,” Fowler said. “If I leave [the board], you won’t get mad. [Allison] knows that I won’t come [to every meeting].”

Fowler said he called Allison four or five weeks ago.

“I said, ‘This is absolutely the best, perfect fit anybody could step into, with no duplication to speak of,’” Fowler said. “The market is good. We’ve got excellent people running our banks. Very seldom do you have something like this.”

Centennial is getting an “excellent institution,” said Randy Dennis, president of DD&F Consulting Group, a Little Rock bank consulting firm.

“Putting aside the friendships, the two institutions have complementary markets, strategic markets that are very, very strong,” Dennis said.

The acquisition was the best Centennial could have made, said Matt Olney, a banking analyst with Stephens Inc.

For months, Allison has talked about a possible purchase of a $3 billion asset bank that would be a “game changer.”

“This is the game-changer,” Olney said.

Allison said this isn’t the end of his acquisitions, however. He expects to sit out a year while integrating Liberty Bank into Centennial. Then he’d like to raise Centennial’s assets to about $8 billion, but remain below $10 billion to avoid a string of additional federal regulations at that level, Allison said.

Liberty Bank is the third bank Fowler has built and the best, Dennis said. Dennis also agreed that it was a better purchase for Centennial than any it might have made in Florida, where Centennial Bank has purchased seven failed banks from the government, as well as acquiring healthy banks.

“It would be hard to piece something this good together in Florida,” Dennis said.

Garland Binns, a Little Rock banking attorney, called the deal a “positive transaction.”

“Wallace and Johnny have been friends for years,” Binns said. “At the same time, they’ve been banking competitors. This will combine two strong institutions into a stronger organization and will benefit both of them.”

Front Section, Pages 1 on 06/26/2013

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