After Merger News, Execs Talk Future as One Firm

Arkansas banking industry veteran Bunny Adcock is an avid golfer. He even coached the golf teams for a time at the University of Central Arkansas.

So only a momentous occasion would keep him grounded in Arkansas, rather than taking a buddy trip to one of the country’s renowned golf destinations in Wisconsin.

June 25 produced such an occasion.

“I was supposed to be playing golf at Whistling Straits that week,” Adcock joked. “A group of 15 of us were going, but you see where I am. I had that discussion with [Home BancShares Inc. chairman] Johnny [Allison], and he helped me with my decision.”

Adcock and Allison founded Home BancShares in Conway, the holding company for Centennial Bank, in 1998. In 15 years, it’s grown to become a multistate organization with a footprint that stretches to south Alabama and the Florida Keys.

Its $4.24 billion in total assets at the end of 2012 — an 18 percent increase from 2011 assets of $3.6 billion — made it the third-largest bank in Arkansas, just a tick behind Searcy-based First Security Bank ($4.34 billion).

Eyebrows certainly would have been raised had Adcock not been present for the most significant day in the organization’s history — and arguably, the state’s banking history.

On June 25, Allison announced a deal for his company to buy the fifth-largest bank in Arkansas, Jonesboro-based Liberty Bancshares Inc.

Wallace Fowler owns the parent company of Liberty Bank of Arkansas, and is a close friend of Allison’s.

The announcement was made at a news conference at the Little Rock Regional Chamber of Commerce that included Gov. Mike Beebe.

The purchase will work out to a $280 million price tag for a bank with 46 branches and $2.85 billion in assets.

The combination of the two Arkansas-based organizations will easily make Home BancShares the second-largest holding company in the state, with just more than $7 billion in assets.

When regulators approve the deal, it will go down as the largest in-state banking transaction in Arkansas history.

The significance of the news conference was also not lost on Home Bancshares executive Davy Carter, who, like Adcock, is an Arkansas native.

“For a guy that grew up on the farm in Marianna, to be involved with this and be in the room with Johnny Allison, Wallace Fowler, Gov. Beebe, others that were there, it was historical,” said Carter, an executive vice president with Home Bancshares. “I was over there like a tourist taking pictures.”

 

Business as Usual

Centennial’s concentration of its 46 branch locations is in the central and north-central part of Arkansas, while Liberty’s 46 offices are in the northeast, northwest and western areas.

Only two cities — Searcy and Morrilton — have a branch office for both.

When the deal is done, acquired Liberty Bank branches will operate as Centennial Bank, doubling the number of Centennial branches in Arkansas to 92, and pushing the bank’s total to 151 across Arkansas, Florida and south Alabama.

Until the transaction is given the seal of approval, both banks will continue to operate business as usual.

The goal is for that to be done by the end of the year.

“Now we wait on the regulatory people to do their magic,” Adcock said. “And the SEC [Securities & Exchange Commission] will do it, we heard, when they get good and ready to do it. There’s not one thing we can do to expedite that, other than to say ‘please’ a lot.”

And even after the deal goes through, there won’t be many significant changes that Liberty Bank customers will notice.

Since its entry into the Northwest Arkansas market in 2005, Liberty Bank has grown to include 10 branch locations in the two-county area — six in Benton County — with a combined $216.2 million in deposits, according to the most recent FDIC data.

About a third of those deposits, $69.1 million, are in three branches in Siloam Springs.

Although bank officials don’t anticipate an exodus of customers as a result of the merger, a recent study by the Deloitte Center for Banking Solutions found that 17 percent of bank customers who had been acquired switched at least one of their accounts to another institution.

And two-thirds of the survey respondents who did make a switch did so within the first month after the deal was announced.

Howard Hamilton, Liberty Bank’s longtime Northwest Arkansas market president, said customer attrition isn’t a problem he expects to deal with as a result of the merger, primarily because both institutions are Arkansas banks.

He said customers could expect to see the same face when they walk into a branch that they’ve seen for many years.

“Since our two organizations are so similar, the product mix and pricing and those kinds of things are probably not going to change much,” he said. “And that’s what we have talked to our customers about. That seems to be very calming to them, to know there won’t be new people and a change in the type of product to them.”

 

Unique Process

Home BancShares’ acquisition of Liberty Bank continues the company’s recent trend of gobbling up assets, but with a twist.

Beginning in 2010, Allison has led the acquisition of nine Florida banks, totaling $2.34 billion in assets.

What makes the purchase of Liberty Bank different is the size. It will make for a unique process, Adcock admitted.

“There is no playbook for us to go by with this,” he said. “So many times in a merger, it’s a giant bank taking a small bank. In this case, we have a $4 billion bank and a $3 billion bank coming together. How is it going to play out? Both companies are scratching their head and thinking.”

Carter said that operational choices would be made, of course, in the best interest of the customer, and not just what the big bank says.

“If the Liberty website is better, if their Internet banking is better, we’ll go with that,” he said.

Adcock offered a comparison of the two banks’ trust services department.

“We’re not that good; they are very good,” he explained. “Guess what we’re going to do? We’re going to use theirs.”

One transition that should be seamless involves the computer systems. Both banks have the same systems and vendors servicing them.

Regarding the configuration of a new bank board, Adcock said it was too soon to comment until regulators have finished their work, although Allison did reveal in a conference call with reporters that Wallace Fowler and his son, Mark Fowler, would join the Home BancShares board.

The issue of duplicate bank officers will also be sorted out when the deal is complete. For example, Randy Mayor and Lloyd McCracken hold the title of CFO for Home BancShares and Liberty Bancshares, respectively.

“Sure, we aren’t going to have two of everything,” Adcock said. “But maybe there is another position over here that a person could move to. Or that one of our people could move to.”