Updated: Winner, Loser in Simmons Charters Consolidation

by Arkansas Business Staff  on Monday, Mar. 10, 2014 12:00 am  

Last week’s news that Simmons First National Corp. will be collapsing its six smaller charters into its flagship Pine Bluff bank was surprising only in that it took so long.

Publicly traded Simmons hasn’t estimated just how much money will be saved through the rollup. Simmons' new CEO, George A. Makris Jr., says the decision to consolidate charters wasn't driven entirely by the bottom line any more than had been the decision to keep multiple charters years longer than most other holding companies.

In fact, he said, the real savings from the move won't come for two or three years, after the cost of conversion and some expected reduction in staffing through attrition.

Simmons had long maintained multiple charters — the national charter at Pine Bluff and, ultimately, six charters scattered around the state — mainly in order to keep local boards of directors and loan approval committees engaged in the effort to maintain asset quality.

And that's still a concern, Makris said, so Simmons has asked those local directors and loan committees to remain in place in advisory rather than fiduciary roles.

"If that group collectively prevents us from making one bad loan a year, they've paid for themselves," he said.

Meanwhile, bank privacy laws and online banking have combined to create expensive inconveniences for Simmons customers that only a charter consolidation can correct. Makris gave this example: Parents who bank with Simmons First National Bank can't do online transfers to a child with an account at one of the Simmons state banks, including the one that until recently served Fayetteville.

What's more, Makris said, software vendors have lost interest in making upgrades to multibank platforms because that market is small and getting smaller. 

State Bank Department Takes a Hit

So we don't know the total savings Simmons is expecting. But we do know that it will cost the Arkansas State Bank Department almost $320,000 a year, something under 4 percent of anticipated annual revenue.

That’s how much the six Simmons state charters have been paying in annual regulatory assessment fees, which is the entire funding mechanism for the State Bank Department.



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