Origin Bancorp in Ruston, Louisiana, has agreed to acquire BT Holdings in Quitman, Texas, to accelerate its growth in East Texas and the Dallas-Fort Worth marketplace.
The all-stock, $313.5 million deal was announced Thursday and is expected to close late in the third quarter or early in the fourth, according to Drake Mills, the president and CEO of the $7.9 billion-asset Origin.
Origin, the parent 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 of loans and $3.1 billion of deposits statewide as of the end of 2021. Acquiring BT Holdings would add 13 branches, $1.25 billion in loans and $1.8 billion in deposits. As a result, it 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 would have assets of $9.9 billion, raising the specter of enhanced regulatory scrutiny and a reduction in interchange revenue that comes when an institution reaches $10 billion of assets. Origin created a working group to manage the issue last year and Mills said he is confident the bank can manage its size to delay crossing the $10 million threshold until 2024.
The combined franchise would have a top-30 deposit share in Texas, as well as a top-20 share in the Dallas-Fort Worth marketplace.
Mills called the deal’s financial metrics “compelling.” A tangible-book-value-dilution-per-share of 3.6% is expected to be earned back in just over two years, while Origin is projecting earnings-per-share accretion of nearly 13% in 2023, the combined company’s first full year of operation.
This is Origin’s first M&A deal since it
While BT, the holding company for BTH Bank, achieved a 28% combined annual growth rate in loans over the past decade, its portfolio actually shrank slightly the past two years, a situation Mills attributed to the company “plateauing with the capacity they had.”
This plateauing "has no influence at all on their ability to grow,” Mills said. “The way we focus on organic growth and the [results] they’ve shown in the past, we’ll get back on track and see some pretty strong growth.”
Lori Sirman, BT Holdings’ vice chairman and president, said her company will benefit from access to Origin’s wider array of products and services as well as its superior technology.
“Both our organizations share a focus on relationship-based community banking,” Sirman said in a press release. “We believe this alignment of interest will provide a pathway to further increase shareholder value and appreciation.”
Both Sirman and Jay Dyer, BT's executive vice president, are expected to join Origin’s management team.
At 151% of BT Holdings' tangible book value, the deal price is higher than the 144% average bank buyers have paid year-to-date in acquisitions, according to Compass Point Analyst Laurie Havener Hunsicker, who publishes a weekly report detailing bank M&A activity.
Mills said he had long eyed BT as a strategic target “just because of the geographic fit and the way it was managed.” 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 he get in contact.
“I walked out of that meeting just beside myself that this was exactly the fit and the type of people and the opportunity that we needed,” Mills said, noting Origin had turned down other potential deals. “We stayed disciplined. We had opportunities and we walked away because they weren’t cultural fits.”
Origin will remain an “opportunistic” buyer, but its bias will be toward organic growth, Mills said. “We are going to be disciplined. We are going to do the things that make sense for us, and outside of that we don’t have to have another M&A deal.”
