Please note this event is being recorded. I would now like to turn the conference over to Donna Townsville. Please go ahead.
Hello.
I am Donna Townsville, Director of Investor Relations, and we are happy that you are here. We are joining you live today from sunny Amarillo, Texas, Home to Happy State Bank. Today, Home shares the exciting news to partner with Happy State Bank. To talk about the transaction today is Home's Chairman, John Allison Centennial Bank President, Tracy Finch and Chief Operating Officer, Stephen Pritchard. Alongside of us today, we also have Chairman of Happy Bancshares, Pat Hickman and President of Happy Bancshares, Michael Williamson.
We have a slide deck on our Home Bancshares website with transaction details. And I would now like to turn the call over to John Allison.
Thank you, John, and welcome. Pretty exciting day for HomeBancshares. We have been in acquisition mode as you know for a period of time and we've looked around at several institutions. And we've always talked about going back to Texas. You remember, I used to be in Texas.
We have about $600,000,000 with loans in Texas now. But I think an opportunity like this can come along once in a lifetime. I really like this trade. It is accretive, accretive, accretive to our shareholders. That includes $55,000,000 worth of deal costs and also a $27,000,000 CECL adjustment.
So, in today's market, you get a deal done with CECL and the cost of putting one together has come out accretive, accretive, accretive, I think is a great trade for our partners as well as
for us and it appears that the market has liked it.
I want you to know that we look we've looked at lots of banks in our tenure as you well know. This is the cleanest one we've ever looked at. I'm talking about from compliance perspective, from enterprise risk management, from CRA, from the loan files. The loan files are immaculate. You don't have to look somewhere for the loan files.
All the information is in the file. I read every classified loan that the bank had, spent my time looking at the worst case scenario and really enjoyed how it's laid out. I mean, you can read it and you can understand it. So not only is it a great opportunity for us to partner with the Agnes Bank out of Camarillo, Texas, but it's also a good financial institution, a really good financial institution. So of all the transactions I've looked at in my career, I'm going to have to put this one in the top five of those transactions.
So, this is a real deal. There will be naysayers, but I don't know how or why other than they just have a bad attitude. But overall, this is a great trade. With us today, if you want to ask some questions about the market and what goes on, we have the 2 top executives from Happy Bank with us today. Pat will be joining us on the Home Bancshares Board and Michael will be joining Tracy and his team on executive management of Centennial Bank and we're looking forward to that.
They're a lot like us and lots of respect. They have an amazing culture called Happy Bank and it is really a culture. It is an amazing culture. They've done an outstanding job. They have 1300 individual shareholders, privately owned individual shareholders.
They've never paid a dividend. We spent this morning having an opportunity to visit with their employees on the phone, all their employees. We did 3 of the calls and we talked about dividend. I've explained to Pat what a dividend was, not really dividend. She said, what is that?
What is the dividend? So, that will be good for their shareholders. Everybody seems to be excited on both sides of the fence and this truly is a great opportunity to get into Texas, to get into these good markets and have an opportunity to get in and fair trade back and forth. I can see one of the stocks up because it makes lots of sense. That's our 1st base year we'll be playing off of this foundation.
Michael will be helping us as we go forward in the state of Texas for other opportunities. But right now, the most important thing is to get this transaction under our belt and go forward with it from there. I'm going to hush at this point in time. Tracy, I'm going to turn it to Tracy and see if you've got any comments or Steven, I want to make a comment and then we'll turn it to our new partners and see if they have something they'd like to say. Well, Bert, again, I'd like to say congratulations to Happy, making us happy today and being around the groups the last few months that Michael and Mr.
Fad has taken me around to and then meeting them over the last several weeks is going to be a good team to put together and we look forward to building Texas. We look forward to continue adding to the value of home bank shares and the Centennial Bank that we have. It's really just a compliment to the happy group that you've done, Pat. It's been phenomenal to be congratulated. And we're anxious and looking forward to the future of where we can take your company since you started here and going forward.
We know it's Texas. We know it's West Texas. I can remember when we went to the Panhandle, everybody kind of thought, where are you going to the Panhandle for? But John, I love the headline, Donna, that you came up with Panhandle, the Panhandle, because I promise the Panhandle of this market is kicking to as well as the Panhandle in Florida did for us. We're going to kick and tail and do extremely well.
We also have the DFW markets and we also have the Austin markets. We have the San Antonio markets. We've met with several directors down in those areas throughout this process and look forward to earning their support through this process and growing the expansion down in those areas. But it's also nice, I've been a farm boy my whole life. It's pretty nice to go around with Mr.
Hickman for a few days and meet some of the banks that we've seen over the past few months. And I guess, Johnny, when you're far boy, you're a farm boy. I know you're a big farmer now. You have your guts are calling them ranches, though, is what I understand. They're ranches.
We're We're as excited as we've been in some time and look forward to we've always when we would go places, they'd always ask us, are you from Texas? So Mr. Hickman, I hope that after this deal, I can partly say, yes, I'm from Texas, because I'm proud that we'd have to meet you and your staff and Michael look forward to what they can do. And then the updated Ruth was able to meet with Robert and his group down there and look forward to the expansion opportunities there. Steve might have more details on the numbers, John.
Hey, good afternoon. Yes, I think as
Tracy and Johnny both mentioned, we're extremely excited about the ability to work with 1300 private shareholders to gain their trust and their business, some additional business over a period of time. So to structure something here that's fair
to both sides that we hope that
they see the value and as Johnny mentioned, the cash dividend that we pay, we're just really excited about the opportunity in Hunter, Texas. Tracy mentioned and Johnny did too, we've worked with Texas relationships for probably 8 or 10 years now. We've got several of our senior lenders that have relationships there and we've already, I think, talked through last night at dinner some familiar names with the lenders that we've met with. So we're looking forward to pairing our folks up and moving down.
Well, I'm returning at this point to Pat Hickman, who is the founder, the backbone who started he bought the Bank of Happy 30 something years ago and total footings were 10,000,000. So his story is similar to mine and we prepared notes and mine was we started in Holly Grove with $25,000,000 Pat. Would you like to say something you can do about Happy Banking, Any comments you have?
Sure, Johnny. Thank you so much. This is Pat Hickman. And yes, this is Happy as a family member. I've got a daughter that's expecting her 3rd child.
She was born a week after I went to work at Happy Bank 32 years ago. So Happy has been a member of our family throughout this time. And it's been a great family.
We know that we're approaching
the $10,000,000,000 mark. We know that that can sometimes create a wall of regulatory intensity. We are privately owned. We've done private placement offerings each year. And quite honestly have asked ourselves how long can we maintain that model and decided that we needed to kick the tires and see if there was a suitable match out there.
And I first met Johnny Allison, he and I were both speakers at an investor meeting several years ago down in New Orleans and I met Johnny for the first time. And so I've kind of had an eye on Centennial Bank ever since that time and have always been amazed at their performance. And we were tickled when they expressed an interest in our company. And they are a we very much are a community bank and they are very much a community minded bank as well. They're in a lot of small markets with the strong core deposit base as we have.
They're also in the larger city markets where we have had some great success just in these last few years, in Fort Worth, Dallas and now just last year through acquisition moved into the Texas Hill Country, the Austin area. I ran a I think I ran
a pretty good
bank for 30 of those years. The one thing I never could seem to get my arms all the way around was the efficiency ratio. Michael Williamson took over as CEO couple of years ago, almost 2 years ago now. And Michael has been chiseling his way at the efficiency ratio. We're doing a lot of good things there and we just feel like this is a perfect match for us culturally, geographically.
We're excited. Right now, Florida is their best operating market, and we look forward to passing Florida with this company and making some things go bigger in Texas and we plan on getting it that way, keeping
it that way. Johnny, what I told him was 100 degrees in Arkansas last week, you know how hot it was here? Ironwood, you know it's a little bit bigger. I also brought the Texas Longhorn Arkansas ball. They can game up.
Michael? Yes, sir. I want to start off by just saying I'm happy. I am happy and I'm also all in. This is really 2 great banks that understand bread and butter banking, understand taking care of customers, understand core earnings and how to grow and understand efficiency and where we need to go in that phase here, all while growing.
And Texas is such a great growth market. And I know combined, we can put that to work and really grow in this state. And we'll take care of our shareholders as we move forward. Thank you for that. Interestingly, you know how there are strong margin home runs.
Home runs are very strong yield, loan loans, excuse me, yield and Happy's yield is better than ours. So, the revenue side here is strong. The expense side is a little high, needs to be trimmed some, but the revenue side is there. So, we don't have to work on the revenue side, but we always have to do, Always have to work on the revenue side, but they've covered that base for us and have a better yield on the loans than we have. So you don't see that very often.
And that's one thing that got me excited. The quality of the bank got me excited. Being in Texas got me excited. It was just a combination of factors that we looked at that we thought made lots of sense for us. So this is our platform.
Michael is the guy who's going to be running patches for us. It's about platform and we'll be going forward here with probably wouldn't be anything for a little while till we get on from what we're doing right now. So I think at that point, you guys, all of you, I'll ask them. I think I'll let them ask the question.
We will now begin the question and answer session. Our first question will come from Stephen Scouten of Piper Sandler. Please go ahead.
Hey, good afternoon, everyone. Hi. Hi, Stephen. How are you doing?
Congrats on the deal. Happy to see
you guys be able to get one across
the finish line. I know that's never an easy task, so congratulations there. And finally getting to see a stock actually move higher when a deal is announced, so that's a
welcome change from what's come to normal. So Let me tell you something. If this deal doesn't work, none of them work. I can tell you that. If this deal does not work, there is not a bank deal in the country that works.
Yes. I think you're probably right. I think you're right. So I guess my other question is just kind of how the deal maybe or one of my questions is how the deal came together. I mean, I would imagine a price that I think was really palatable to
people when they saw it at $166,000,000 is tangible and just would assume there were other kind of in state buyers that would have taken a look as well and maybe would have had more cost saves or others. So I'm just
kind of wondering how it came together and how you were able to get this across the
finish line and see kind of the winning bidder there?
Well, I'd say from our perspective and then we can let Happy talk from their perspective because everybody is in the room today. But anyway, we came out, a banker brought it to us, Steven's banker brought it to us and said you need to look at this bank. And we said we'd be glad to look at it. And one thing led to another and Tracy and I flew out and met Michael and Seth. We spent about 4 or 5 hours together and tell them about home and talk to them about what the future could yield for both of us.
And the next thing I know, the bidding process started. I don't know if we were the highest or we were in the middle. I don't I told Pat that we may not be your highest price. It would be your best deal in the transaction. And that led to an opportunity to do Blue Jilgens.
And the further we got into it, the better we liked it. I mean, we've done Bluejay's and so as you know, Stephen will walk the bank, this one was the best. All across the board, quality of the loan book, the underwriting, it was the best. So it really got us excited about the opportunity. And I think Pat liked us.
I think Michael liked us. When you run one of the best banks in the country, your home has. I saw what somebody said today, they said, well, some people come and some people go and some Arkansas bike bought a Texas bank. I didn't think that was very respectful for us coming into town. But who that bank is, is one of the best banks in America that runs from the top tier performance of all banks in the country.
So, if you don't know who we are, then you might want to look us up and see who we are because we run a great financial institution as you know. So I think it's one thing led to another and I'll let I'll turn the back over to Pat right now and see if he wants to comment on why he chose us. I said
it really a while ago. We really did feel like they that we matched up well with them. Any time that we've done several small acquisitions ourselves over the years and anytime that happened there were you have personnel changes, personnel losses, system changes. But it also works well those employee losses and things, those intangible kind of things that are tangible to your heart, especially when you're community banks, they matter, Knowing that this is going to be their first foray into Texas gave us some peace of mind that they were our staff a little better. So that kind of helped us some.
No promises made. We like our brand. We like our name. The fact that they said we could keep that name meant a lot to us. No promises again.
They may change that next week. They may change it in 10 years, but that still matter to us now. And they're a good bank. I mean, and we we like each other. That matters.
I am an old country boy. I was raised on a small farm, small dairy, and I like to do people, people a lot. I think they might have paid just a tad more than they wanted to pay. And I think we may have accepted a little less than we wanted to accept. And I think a lot of times when that happens, when both sides give in a little bit here and there, that turns out to be a pretty dang good deal for everybody around.
And so
we feel good.
I've been telling for 5 days, 6 days, I've been telling folks that the only emotion I've ever gotten close to before that matches this one was when I walked my 2 daughters down the aisle. You didn't like that heartstring of it, so hairy legged boy come in and take in my daughter. But then when I got to know that hairy legged boy and especially after they give you a couple of grandbabies, you find out they're really good folks and you like that match up. So you've got the bittersweet of watching your daughter go to another house, but going to and getting a whole in family. So that's exactly how this has felt and we feel very good about it.
Yes, that's extremely helpful. Thank you. And then I guess maybe following on to that, just maybe this could be for Pat to start and then maybe the home team after that. Just give us some insights into how the Lubbock, how those markets have been growing for you all? And maybe the potential for your footprint from an
organic loan growth potential perspective.
I know you had like
an 11.5% loan growth CAGR over the last 7 years, but obviously some deals in there as well. So just kind of curious what you think the growth potential is of the Texas footprint and for the home side, what you think that can do for organic growth potential for the franchise as a whole?
Sure. If you look back, we bought Happy in 1990. We didn't do another acquisition until 2,004. If you go back and look at all of our acquisitive growth and our organic growth since 2004, 62% of our deposit growth has been organic. And I'll pretty much put that up against anybody anyway that you want to do it.
And the vast majority of that came here in San Hanlan, South Plains and Lubbock. These are growing areas. Amarillo has the highest unemployment rate in the state. Last time I checked I'm sorry, the lowest unemployment rate in the state lowest. And last time I checked, Texas still has one of the lowest, if not the lowest unemployment rates in the nation.
But the economy is good here. We have a few very strong businesses still very accented, 25% of the world's great of the world's beef comes out of this market. And Amarillo and the surrounding small towns have provided us a very strong low cost deposit base and a very stable loan growth. Lubbock has done the same thing. They with Texas Tech University now up to around 50,000 students, 25% of the world's cotton comes out of Lubbock, Texas.
So they have a very strong base. And so we love Grand Handel. They're straight shooting people like we are. They take good care of
the business and it's been
a wonderful place to be.
Thank you for that. Steven, should we answer your question? Yes. I mean, I guess, just obviously, Johnny, I
think loan growth has been hard for you guys on an organic basis. I guess the opportunity has been that attractive to
put the money to work. So I'm just kind
of wondering,
do you think you'll have more opportunities in these new footprints? And can we start
to see, once these deals close, some more more upside to the organic loan growth front? And I guess, depending
on what that, are the
loan yields sustainable in your month?
Let me let Michael talk to that, and then I'll wrap up when we finish. We look at our footprint and say it's right now it's got a good balance. But we definitely can experience more loan growth in metropolitan areas. We have been very selective in our loan growth because like Johnny said, we're not going to give the money away. We're going to get the yield.
We're going to do the right loans to the right customers at the right time. We're going to get paid for doing that. We've also had constraints as a privately owned company that you guys making our home actually gets to open us up a little bit, up in some of those constraints and we can go out and we can lend on a much larger scale in those metropolitan areas. Our growth in the Fort Worth and Dallas area over the last 5 years has been tremendous. We're seeing that same growth in Round Rock and in Austin.
And we expect that not only to continue but to accelerate with those lenders that we have in place. Thank you for that. I take opposition to your statements. We're not going to sell the future of this company. People are getting loan growth and big loan growth in these markets.
Look at your rights. Just look at your rights. I mean, it doesn't take a moron to give it away. I mean, anybody can give it away. We all be getting accolades for being as disciplined as we are.
And I found another company that was disciplined as we are, it's called Happy Bunch and I'm excited about that. So, I mean, we believe me, we can fill up an 18 wheeler if we're going to give away the company. But I'm not going to do that. And you guys are pushing for loan growth and when you get loan growth, believe me, we've been doing these holdings on other banks and we're stealing from each other and then they're beating themselves on the chest. I mean, we see it.
We see it on the due diligence and they're giving the stuff away. So, when you lock yourself in for the next 4 or 5 years, I guess it's what do you anticipate? What do you believe is going to happen? If you believe we're going to continue threatening money and nothing is going to happen, I mean, inflation is 5.4% August over August. We understand $100 bill is worth $94.60 Somebody's getting whacked.
And they how they stopped it in the past by raising rates. They may not do it this time. It may be different this time. But usually when they say it's different, you need to run for the house. So I don't think it's different this time.
And I think they're going to slow down on tapering. When they do, I think you're going to see rates mean, hey, we've been sitting disciplined here for about 18, 20 months. Well, we're close to the end of this year. And I think they're talking about slowing down on tapering. I think we're right and we'll find out.
I'd much rather Steven, I'd much rather put we got about $4,000,000,000 in cash. I'd much rather put that $4,000,000,000 to work at 5% than I had at 2.75% and 3%. So, good math. No, that's good math. I think that was one of the most exciting things in human deals.
How many banks have higher loan yields than you guys, so that was
pretty exciting. So congrats again and thanks for the color.
You bet. Thank you.
The next question comes from Matt Olney of Stephens. Please go ahead.
Thanks and congratulations to everyone in the room. It's exciting day for the Home Bank and happy families. Thanks for the commentary so far. I want to ask about M and A in Texas from here. It seems like the Happy platform could be a launching point for Texas M and A for Home Bank shares.
Is that right? And I'm also curious how Texas M and A market at this point compares to what you've seen in the last few years in Florida and in Arkansas.
Well, you know I was in Texas before, Matt, and we're back today with a great night. So, I think that in front of us right now is getting these banks consolidated. And I think that's the most important thing we can do. You know that we're constantly looking for M and A. We've had 4 or 5 different banks in Conway, Arkansas wanting to do a trade, Texas banks wanting to do a trade.
The truth is that we had to make a decision on our part who that person was, who that company was. And I really this is a real trade. This is a real deal in a real market. So, I'm as happy I'm as happy as I can be with this opportunity right now and I see great savings. I mean, we're projected to make $68,000,000 of happy in 'twenty two.
They run a 65 percent efficiency ratio. Just think about that, home runs sub-forty most of the time. So if we can trim around the edges over a period of time, that could really be good for Home Bank shares and our shareholders are happy as well as happy shareholders as well as whole bunch of shareholders. They almost their earnings go up about 70%, 80% just going to a 45% efficiency ratio. So 50% is a marked improvement.
We'll probably look at 50 and see if we can get there over a period of time. We'll try to get there. But we're expecting much more out of happy than what we modeled. We modeled it at 33% because we modeled everything at 33%. So we should compare deal 1 with deal 12 with deal 20.
So how does it stack up and how does it shake out at the end of the day. So that's why we use the 33%. We have always beat 33% as you well know over the years. We have always done much better than that. But we will look at additional opportunities.
We had to pick the horse to ride on and they picked us to ride with us and we picked them to ride with us. So that's kind of what happened and we'll go from here. We'll look at opportunities, but right now we're going to be focused on consolidation. We're going to be focused on we've got a trust preferred I mean, a bond comes up when, April? April 1st.
And $300,000,000 bond coming up April 1st. We've got $5,000,000 a month on that. So we haven't raised a dividend in a while. We'll be focusing on those things right now rather than another M and A deal. So M and A right now is we're going to talk and we'll visit and we'll see if we can put something together that makes some sense.
But probably, we'll see another M and A deal for at least I don't think the regulators let us do another one right now. It's a pretty good size story, dollars 6,000,000 I'm not sure they will allow us to do another one right now. But it might give us that clearance, but we got enough work to do with each other right now to get it lined out the earnings for our shareholders.
Yes. Johnny, now that you've explained that new thing deal to me, I'd kind of like you to keep concentrating on that a little bit more. That's right.
We were talking to our employees, the tax people, not just people and I mentioned dividend, I had explained to him what that was. Anyway, I know he's 1300 shareholders. They have raised the money from 1300 shareholders over the over the over 30 plus years and never paid a dividend. So I know those shareholders will be happy people.
Thanks for the commentary on that, Johnny's add. I want to also ask about Home Bank's stock buyback program more in the near term.
I think we typically
see buyers pause their buyback program. But at the same time, it also looks like the pro form a cattle ratios remain pretty robust. So I was wondering if you can commentary about the buyback program more in the near term.
We are we buy back when they put home base shares on sale. And we work most of these trades don't work. Most of these acquisitions, I don't know of any of them that works since 2010. If any of them will ever work, this will work. So, we're prepared to step in the market.
We're prepared to buy and we will buy a lot. We're not if we need to buy, we'll buy. So that's kind of our attitude right now. We like better stock. It took us from $29 to $20 or $20.50 or $21 because we thought we're going back to M and A.
So we've done an M and A deal. We've done a damn good M and A deal. So we are always in the market. We're going to find out running to our lives. I think Steven's working on that with Brian Davis, how much we can buy back in the middle of this transaction.
Steve, do you comment on that? Yes. Matt, we're working through that now.
I mean, as Johnny mentioned, we'll kind of circling on the number, but I think we'll continue with
the opportunity to be active, I think all the way
up until the proxy of the next year.
Yes, because deals don't work, we were prepared to roll in fork to stock and buy a bunch of it that quick and continue that. And so, I mean, you know as well as that is many of these deals at work, but if there ever was 1, 2 work, there is nothing wrong with this deal. This deal is as good as they get. When you can put $55,000,000 worth of cost in the deal, when you can make those seasonal adjustments to the transaction and you come out accretive accretive accretive, my shareholders and happy shareholders don't have to wait 2.5 years to earn back the tangible book. And you know what I think about that?
I think that's BS. So putting together a transaction in this market that is accretive, accretive, accretive and swallowing a bit short of 1 $100,000,000 worth of transaction and seasonal cost is pretty difficult and it's done. And it's not smoking mirrors. It's really done. It's the real deal.
So I think that'll be and I think we've got more savings coming from the happy side and the home side. So I'm excited about what we can do together. I think you were pretty good on getting the efficiencies. Yes. That's right.
Good color
on that. All the points you made. Thanks for taking my questions. Congrats.
Thank you. Thank you. We appreciate your support.
The next question comes from Brandon Dailey of KBW. Please go ahead.
Thanks. Good afternoon, guys.
Hi, Brady. How are you, my friend? I'm doing well. We're happy. We're in Amarillo at the corporate office of Happy and it is it's really been it's been a someone said it wasn't a name as a cult.
I mean these people it's amazing. I have a happy university here where they train their new employees to come in. They do some really good things. We'll learn from them. That's great.
So Johnny, I know
you used the 30% cost rate just kind of the standard to compare deals to all your other deals. Have you gone back and looked at where cost saves generally run for you guys? I mean, 33% is conservative. So I know, Texas, this is going
to be a new market for
you all, so maybe you're not going to get the cost saves that you normally do. But what's the more, I guess, to ask differently, what's the average cost saves really realized overall M and A you've done over the years?
Well, it's been more than 50% Novav. So the fact that we don't have anything to lay off on here, we don't have any consolidations and make it good for their employees, it's good for Happy's employees because they're going to need their people. We met with a bunch of their executives last night and they I mean, they've got a guy that runs a bond book is outstanding. They've got a couple of D and R Trust Department that's outstanding. They've got some plans.
They can help us with some stuff. I think the combination of our trust department, Edwards Trust department. So there will be a lot of people to stay and employed at Happy Bank that might not have made it made the test if it's been a Texas bank buying it. So we'll play off of that. But we normally run 50 and we run as high as 70%, 80% to 90% on some of these deals.
So this is one that we won't get as deep. But If we get the 45% efficiency out of here, that takes some $110,000,000 in earnings versus 68 that pulls out based on the shares issued, I don't know what it is, dollars 2.42.50 a share roughly that they're earning they'll be earning for their shareholders and our shareholders. So that pulls the EPS up and that's better than 33. So I think Michael and Tracy have worked diligently. We didn't just pick it something out there.
Michael and Tracy worked diligently on the things they need to do. It won't be as good if I mean, the next transaction will be better than this one efficiency wise, But I think this one will be awfully good. This is a great bond. I'm telling you, this is a real deal and a good deal.
And Johnny, I know near term, you're really going to be focused on this transaction and not really announcing new M and A in near term. But after you get this one closed and integrated and somewhat settled, do you envision that Home's forward M and A strategy will really focus more on Texas? Like I know Florida is still an opportunity, but there's just honestly not many banks left in Florida that will really move the needle for you all anymore. So Texas has a better growth profile than Arkansas. So would you really say Texas is kind of the future path of M and A for home?
Well, we'll take what they give us. We'll take whatever they give us. We'll continue to look in Florida and we'll continue to look in Florida. Hey, Brady, what's the 2 best states in the nation? What are the 2 best states?
Florida and Texas. Where people move Florida and Texas. So, we get it. I mean, the Panhandle and Panhandle makes a good story. But the reality of it is that Texas and Florida, now this franchise has Texas in it and this franchise will continue to grow in Texas.
So I think that you have those 2 states. Where people move? Demographically, where are they going? They're going to Texas and Florida. They're leaving California.
We're leaving New York. We're leaving those markets and they're headed south. So to have the opportunity, I'm telling you it's the cleanest bank we've looked at. To have the opportunity to partner with great managers who run great businesses is a real plus. This is not a flaky deal.
This is I'm telling you, this is a great trade for HomeVancier. And to get a bank that is accretive accretive accretive, as I said earlier, with almost $100,000,000 worth of CECL and deal costs is pretty amazing. It's hard to do one anymore. But let me explain to you the day we close this deal, the next day we start to create the tangible book. So I don't know how you could do one any better.
But the question is on M and A and we are focused on M and A with Michael's leadership and Pat's leadership in this state to help us. Pat's already been approached by 2 banks that want to do a deal. So, we're not ready to do a deal with another bank now.
But, we're little bitty. They wouldn't stretch it.
Well, we're well known in Michael's history was with Capital One, is it what you call it? Capital One. Capital One. And he helped build Texas for Capital One. So, I mean, he knows where some bodies are buried, where some people are to help us carry through with that.
And that's one of the reasons that we are so excited about doing a deal with Happy Bank. We're in the game all the time, but people get silly. You see some silly stuff being done out there. And how many deals you see every deal, how many deals have worked since 2010? How many deals have been accretive, accretive, accretive and moved into Texas?
I mean, this is a revolutionary deal for Homebuyer shares and for Happy Buying.
Yes. Well, it's also rare to see the prior stock price do so well. You guys are performing the KRX by 500 basis points. You're up almost 7%. I mean, that's a sort of trend here.
Thanks, M and A.
Well, let me tell you this. If this deal doesn't work, we need to all get out of the back spot as well. There is no deal that will work. I mean, there's none of them that will work. If this trade was happy at home doesn't work, then there are no deals at work.
And I think that's being recognized in the market place. This is a real transaction. That makes us feel good. It makes us really feel good to see the stock up the way the stock fell. That's great.
We worked hard on it. I'm telling you, the happy people, Stephen Tipton led this deal primarily. I got to give you accolades. He was tight on that. I mean, it was tight.
We were just right on the bubble. I said, it's got to be positive. So, we go to the streets, it's got to be positive. It's got to be positive. And we kept it positive all the way through.
Pat wanted it to be positive. And Michael wanted it to be positive. They didn't try to get the last nickel and dime out of us. They didn't try to milk the cow and get the last bit of milk. I understand and as a result, they can see what's happening for their shareholders as of today.
I mean, their shareholders get 2.17 times home bank share stock in the transaction. So their shareholders are having a good day. Good for them. They deserve it.
Yes, that's right. Awesome.
Thanks for the color and congrats on this one, Johnny.
The next question comes from Michael Rose of Raymond James.
Hey, good afternoon, everyone. Thanks for taking my questions.
Are you managing? Are you managing? Not at all. Not at all. Never managing, Johnny.
Never managing. You can see what we did and when we did it. You get it, right? Well, now you owe me, so. Okay.
I agree with that. I agree with that. I agree with that.
All good. So I just want to dig into some of the potential revenue synergies that you have, you got $3,000,000,000 in AUM and just with the larger balance sheet and growth perspective. Can you talk about where you guys could see some upsides in cross sell? Obviously, it's not built into the numbers, but just trying to get a flavor for what you guys see from the revenue side.
Michael, this is Tracy. We certainly see the opportunity there. I mean, we talked about the efficiency side, Michael and I for the last 3 months. And with the revenue side from some of the producers and what the opportunities are going to have, They have great mortgage group here that operates. They have, as Tony mentioned earlier, the trust opportunities and then the investment sides that they have.
We do see opportunities there. And speaking with the Central Florida, Texas over the last few days, I mean, having dinner last night with the group at the table and one was just already knowing the customers, he's going to reach out to expand his portfolio. So there certainly is the revenue side that we see that we can use in a lot of these markets that we are in today.
Okay. Tracey, just on the wealth management and trust aspects. We built that out at home over the last several years, but certainly it gives us scale in
a big way in Texas and I think we'll be able to expand on that.
Okay. And then I guess just as
a follow-up, if I look at
the deposit market share, at least it looks like 9% is in Dallas, but I assume that's where the good portion of the loan growth is. Can you just walk through some of the assumptions that build into kind of that 5% year over year net income growth for HAPI that's in the slide deck. What are the components of that growth? I assume some of loan growth though in some of those higher growth markets like Dallas. Thanks.
I'll let Michael speak to that. If they only get 5%, I'm going to really be disappointed. That's for publication, but I can assure you that I'm expecting more than 5%. And I think Tracy is and I think Michael is too. So Michael, I'll let you take that one and run with it.
I'll go back and talk a little bit about the revenue piece. And that is if you look at us in mortgage, what you've seen is over the last 5 years a tremendous amount of growth in not only revenue but net income out of that group. And it's not stopping, it's not slowing down, it's not like it's flat coated. You see the same thing from our trust and wealth department. You've seen good steady growth under management, you've seen good steady growth in revenue and net income and it's still growing.
Then you put on the low cost of funds that we have from our markets in which we are just entrenched and we are truly the community hometown bank. And you're able to put those to work not only in that community, but then also put them to work in the Dallas Fort Worth Metroplex, go into Austin and Round Rock, one is an acquisition and one is a de novo and we see an amazing amount of loan growth in the 1st year in those two markets, all of which meet our yield. We do not sacrifice quality or yield going into those markets and we're getting that growth already. So you combine that with some of the efficiency that we know we can get out of this and it's a home run. Okay.
Maybe just one technical question for me. Just to be
clear, the CECL double count and then the CECL reserve against the emphatic amendment, that will go through the provision line, correct?
Brian Davis? Brian Davis is on. Yes, I'm Brian. The CECL total count, the $28,000,000 it does go through the provision. And the $11,000,000 I believe it's going to go through goodwill because it's an unfunded commitment that is not properly evaluated at the CECL level.
Michael? Is that the way you understand it?
Michael Rose?
Yes, Michael Rose. Yes.
Yes. I just wanted to clarify. Thanks for taking my question.
You know what, when you look at that, you saw a $27,000,000 there $55,000,000 of deal costs and still getting accretive terms of actions. They're getting tougher to do. I guess you'd have to agree with that, would you not? Indeed, I would. Okay.
You ready? Okay. Thanks for your support. I'm glad sorry we missed your conference, but we'll be there next year at the end of this.
Of course, always. Thanks, guys.
All right. Thank you. I think I'm going to wrap up. Couple of our analysts were on the road, had other plans today and didn't like it. But thank you very much for your support.
The Street has rewarded us. It appears as of right now, is there anybody else up there? Brian Martin. Let's get Brian. Go ahead, operator, bring Brian Martin in.
Hey, Brian Martin, your line is open for questions.
Hey, guys. Thanks and congratulations to everyone in the room and delivering Exactly as you kind of noted, John. It's worked out perfect. I'm sure there's other deals you've looked at, a little disappointed seeing the great trade today. So I just wanted to ask you maybe just 2 things.
Just the growth outlook, and I know you missed Johnny about the pricing, but just as you look at the opportunities in Intactics, I guess, is it fair to assume that the largest or the greatest opportunities for growth at the right pricing is has come from the Dallas and Austin markets sort of leading the growth going forward? Michael, do you agree with that? I would say yes, the majority, but we're seeing good strong loan growth in Amarillo, Texas. We're seeing double digit loan growth in Lubbock, Texas. And we're able to capitalize on those markets and get the same yield that we've got up in some of the other areas.
So we don't expect any of our communities to lag behind. We land in all our communities and we do it really well. Now if you're talking about that supercharged nitro growth, yes, that's going to be in the DFW market and that's what we're seeing.
Yes, I might add there. I was fortunate enough 3 years ago, Governor Abbott appointed me to the Texas Economic Development Board. Anywhere in Texas is good. And Johnny and Tracy, you're telling us that they won't be everywhere in Texas long term and that's a good move. There's not a poor market in Texas.
It is quite impressive here. I haven't spent much time in Amarillo, but I mean, there's a new there's lots going on with Amarillo. I mean, a lot more than I ever thought about. And by the way, I'm going to get all you analysts together one of these days and you all don't eat for a week before you come out and I'm going to feed if you eat that 72 ounce steak or you get it free. So, I'm going to load you up in the jet and bring you all out here and feed you that steak.
So I don't want to I won't bring up money to pay for it if you all don't need it all, but I'm going to bring you out, Brian. Can you go hungry for 3, 4 days and eat the 72 ounce steak and feel free? I'll do it, John. You also play the crane outdoors and we we can check out the old 96 and see if you can finish it. I'm up with a challenge, I guess.
Maybe just one last one. Just on the Kevin, you guys talked about the great loan yields and the obviously, the really low cost deposits. Maybe just proceed on how we is there any change or how we think about the margin the combined margin here as you put 2 banks together? Yes. I mean, obviously, there'll be some purchase accounting adjustments that
we'll have to work through between now and close. I mean, I think the highlight is we talk about the loan yield is just the culture between the two companies. And we talked in the past, one of the hardest things to fix or deal with in an acquisition is how they're accustomed to loan the money and particularly around yield. So I think to come in here and find a company and work with a company here that has a similar approach and a similar culture just gives us such comfort that at closing, we're all off and running on the same page.
Got you. Okay. Well, perfect. That answers my questions. And again, congrats on your own nerves.
Well, there's our man. John was on the road with RBC Capital, and he just popped in. Hey, John.
The stakes got me excited.
That's all. That's it. I'll tell you what you like a big spike. That's what got you fired up. That's right.
Somewhat non GA related,
but maybe so, but the larger balance sheet, Johnny, can't open up some room for CFG or any of the other businesses and allow you to do anything different?
Well, of course, it does. We allow CFG to go to 15 will be about $24,000,000 So that gives CFG a big runway. But if you remember, we don't press them. We don't give them a go. We don't force.
They take what they get, right? They take what they get that they think is reasonable to to do. They're doing pretty good right now by the way. They got a lot in the pipeline. They got about a greater pipeline as I've ever seen them have and we improved some today for them big loans today at executive loan.
We had employee meeting and I had to break out just a few minutes ago because I knew the company that one of those companies that was in, there was $100,000,000 credit today for a large company that we're in Quarket Road pretty well. So we approved that credit today and excited about that. I think it does. But you know how conservative Chris Poulton is. You get it.
And we're loaning money non recourse and Chris is not going to he still never had a past due. He still never had a loss and you know how conservative he is and I'm not going to push him because what if he say the year of the lender is followed by the year of the collector. So we don't want to get into that. I think they've got as big a pipeline in my life, Tracy, if they've ever had. I mean, we'll get them all and we'll close them all, but I think the pipeline is really positive.
If they can come on for us, that will be a big kick, but we're not going to force them to do that. But you know the kind of money they make and that would be that could change the world. Okay. John, this is Tracy. This is Officer.
But I just said you're thinking about an urgent voice. Remember you want to know when we went to Panhandle of Florida, you wanted to know about it. We came down and we drove across it and spent about 3 days. I want to invite you back to Texas. It's just going to take a hell of a lot longer than 3 days.
I drove across the Panhandle in November 2020. I get it. Yes, yes. Just one more and by the way, there weren't lots of money coming in there during COVID. They were moving.
The one other thing I
wanted to ask is, you always talk about how targets fix the margin in a bank, which makes it a little easier on expenses.
Why do you think the yields are higher? How do they do that? Did you learn
anything through that process? And that's all I have.
I'm really impressed with their lenders. Some lenders you say will give you a floor of 3.5 It wants to go below 3.5. Everything they write is at 3.5. From then on, everything they write is at 3.5. These are quality lenders here that they've developed over a period of time.
And they lend I mean, I was guessing with the Dallas guy. He's a horse. And I said, what I see you, Rachel. Rachel is really, really good. And he said, well, sometimes people need something in a hurry, Johnny.
And he said, I have to stop what I'm working on. Maybe they need to close it in 10 days. And he said, it's all hands on deck with our people and we get in there and say, he said, sometimes they don't ask, they just treat me fair. And he said, that's how they do it. And he's got a following, a relationship that is a following, besides that, he's a hunter.
So we're going to get him up duck hunting. And besides that, he's a hunter. So we're going to get him up duck hunting before too long. But I think I'll let Michael address that himself now with the rights, but I'm really impressed with the rights. So you think about the revenue side, we don't have to work on the revenue side.
We got it. Yes. The way we look at it is this has been a process, not an event. And we've moved to this position over several, several years. And underwriting, it's in the market and asset quality.
And I think we do both exceptionally well. We refuse to place ourselves as a commodity lender in any market. We're not competing on rate, we're competing on value, which is time and effort as a lender that's there. And we hire good long term lenders if they're new to us, or we grow them internally where they have the relationships with customers. But those customers keep coming back because they know the speed, service and the visibility of what we're doing.
And Johnny said something earlier that you just stuck with me and it's something we've said for a long time. We're not going to cheapen ourselves by making low cost loans. We know the value that we bring to the table. We demand asset quality and we want a relationship with our lender. And when that is the overall organizational view, you get lenders that thrive in that and that's what we've got.
If I may add, the leadership team within that loan group with Michael's full encouragement and backing, but the leadership team and working with those lenders hadn't compromised and that deals that throughout the lending step. It's so many times goes down to leadership.
You can't how refreshing is to my ears to hear that kind of talk and when this is one of their big lenders. He said, what do these other lenders do? He said, what do you think you do, Johnny? I said, I know what to do. He said, yes, they lead with rates, don't they?
I said, Exactly right. They don't act like they don't have anything else to offer. It's just right, right, right. And then they walk out the door with a 2.75 rate, beating their chest, like they did something, 5 year fixed or 10 year fixed with high leverage. They don't do it here.
We don't do it here. I'm going to say it one more time. This is real deal, John. This is a real transaction. It's going to turn out to be very good for their shareholders as well as our shareholders.
So I'm really excited about this transaction. The more I'm around the guys and the more I'm seeing what's happening, the more excited I get. So, it is so refreshing here. We've done some good stuff recently, a bunch of it. And you can see where we're just buying business.
We're just buying business at higher leverage and longer fixed terms. I mean, it's 10 year fixed and cheap rates and silly stuff. So we're just not going to do it. And when we find somebody who's refreshing it as this market at Happy Bank, it gives us some it can be what my point is, it can be done. That's my point.
It can be done for those people who know how to sell. What is it? Most people have never been to to what is it, 5 times, get asked 5 times before you make a sale sometimes. Anyway, this branch has done an outstanding tile active
Okay. All right. Thanks for taking
my questions, and I'm glad I made it to hear this. So I appreciate it.
Yes, well, the state got you. So we'll do that. We'll fly you. You'll get you in the Conway. We'll fly you out there.
You don't eat now for 2 or 3 days. All right. All right. All right. Look, no heaters.
You got to buy it. Yes.
You eat with me.
You get it. I'll do that. Okay. All right. Thanks I think it's wrap up time, and I don't have anything else anybody got anything else they'd like to say.
I think it's been a great day for Home Banc Shares and Happy Bank. I think we've been the deal has been received the way we thought. We wanted to see it's good to see a deal get received well in the market, but you got to really work your butts off to get a deal that works as well as this will work. And we got it done and it looks like it's been well received and we thank you for that. And hopefully the next one we'll burn will be as good or better.
And we're going to wrap up for the day. And again, thank you.
The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.