J. Thomas May Talks Acquisitions, Student Loans, Illness (Executive Q&A)

This Week: J. Thomas May
Chairman and CEO of Simmons First National Corp. and Simmons First National Bank of Pine Bluff

J. Thomas May has headed Simmons First National Corp., parent company of Simmons First National Bank and several smaller banks, since 1994. He has announced plans to retire at the end of 2013.

Bio: J. Thomas May
Background: May graduated from El Dorado High School, served in the U.S. Marine Corps and earned bachelor's and master's degrees in business administration from the University of Arkansas at Fayetteville. He is also a graduate of the National Commercial Lending School and the Stonier Graduate School of Banking. He has served on the board of directors of the Federal Reserve Bank of St. Louis and as chairman of the Arkansas Bankers Association and the UA Board of Trustees. May was inducted into the University of Arkansas Business Hall of Fame in 2010.

Q: Simmons First National Corp. made a couple of FDIC-assisted acquisitions. How have those worked out? Do you anticipate doing any more deals with the FDIC?

A: We are very pleased with our acquisitions in Missouri and Kansas. Acquiring a failed bank and restructuring it to take advantage of the market opportunities is not easy because you have lost many of your good core customers and some associates by the time we take control of the bank.

A lot of our success is determined by the early decision of buying into the right market, buying at the right price, and being able to keep some good talent in the associates of the new bank as they are the ones who are able to identify and retain the good customers.

This takes planning. We have broken down the process into four teams: Acquiring, Integrating and Accounting, Loss Share and Go Forward. It takes a strong management team to liquidate the bad assets and meet the enormous requirements of the FDIC. We have a lot of experience in integrating acquired banks into our culture and system. We have allocated some of our most talented executive management to this process. David Bartlett, our president and chief operating officer, leads a group of talented executives in making all this happen. 

Our focus in doing an FDIC deal is not just buying a troubled bank at a deep discount, but it is buying a failed bank at the right price in a good market, which is exactly what we did in Springfield, Mo., and Olathe, Wichita and Salina, Kan. We are able to buy the banks using a minimal amount of front-end capital, we bid at a discount price that enables us to record a significant profit, we take minimal risk due to the FDIC guarantee feature in our bid, and it is an easy entry into a new market.

From a long-term perspective, we acquire these failed banks to rebuild them into strong community banks similar to the banks that are already part of the Simmons First community banking network. A part of this strategy ultimately will be to expand the acquired footprint through de novo branching, other FDIC-acquired markets or traditional acquisitions.

We are fortunate to have a large level of excess capital, and it is our plan to use that excess capital in additional FDIC acquisitions, which we believe will be accomplished during the next 24 months.

Q: What about conventional acquisitions? How far outside Arkansas would you be willing to go?

A: From 1995 through 2005, we completed 10 acquisitions to geographically diversify by expanding our footprint throughout Arkansas. The lack of acquisitions since 2006 has been related to seller price expectations being too high during 2006 and 2007, followed by very little activity due to the Great Recession. We believe traditional acquisitions will be a part of our strategy going forward, but we expect most of that activity will be after 2014.

The challenges and cost associated with regulatory reform, the new demands relative to capital requirements and the frustration of dealing with an overzealous administration and Congress will ultimately cause many very good community banks to find a larger merger partner, and we believe we are well positioned to be that partner. We will continue to look for the right partner in Arkansas if it is in a market where we have no or minimal market share, but much of our emphasis will be beyond the borders of Arkansas, such as complementing or expanding the footprint in Kansas and Missouri or entering new markets such as Oklahoma or Tennessee.

We have established an arbitrary limit of 325 miles from the center of Arkansas as our target market for acquisitions. Since our "go forward" growth strategy is so important to us, we think the closer to home we are the better we can support the growth of a market. 

Q: SFNC is almost unique these days in continuing to operate multiple charters, and even a mix of state and national charters. Do you have any plan to change that? Other banks have also seemed willing to move their headquarters. Why is Simmons so loyal to Pine Bluff, which is not a growing bank market? There are several institutions around the country that have chosen the same model.

A: This has been a strategic decision based on a plan of building a network of community banks. The reason we have been successful in making traditional acquisitions is not because we bid the highest price but because we provided a fair return, and our model of separate charters allowed those community banks some autonomy to continue to make local decisions for their local customers.

Further, during the last two years, we have centralized much of the back-office operations, which eliminated duplicative cost. Concerning our headquarters, we are not unique in having our corporate headquarters outside of Little Rock. Four of the five largest holding companies have their headquarters in cities outside of Little Rock.

All four of those banks have a corporate presence in Little Rock, including Simmons First. Simmons First National Bank, our lead bank, will soon be 109 years old, and our roots are in Pine Bluff. This market has been very good to our company.

Q: Talk about the impact on Simmons of the loss of the student loan business.

A: The loss of student loan business has been a frustrating thing to me as a banker and as a citizen. The impact to our bottom line was not that significant, but the loss of relationships with those students who ultimately become business and consumer customers is a big lost opportunity.

The bigger issue to me is the fact that the government decided it could run the student loan business better than the private sector, which is an intervention our forefathers never intended. The entire industry suffers a little from lost revenues, and, yes, bankers throughout Arkansas and the nation have lost jobs because of this decision.

Likewise, the individual student will lose because the government will not be successful in efficiently providing the service necessary for the student, the cost to the student will be more and the inefficiency to the universities will be significant.

Q: You have been quite open about your illness. Are you still at the office every day? Have you shifted responsibilities to other executives?

A: Considering the fact that I have a disease like ALS (Lou Gehrig disease), I am doing great. My progression has been slow, and thanks to God and my doctors at UAMS, I have been able to continue to work hard. It has caused me to do a better job of delegating some duties. While I have slowed a little, I still get up early, enjoy a cup of coffee and a devotional with my wife, Kathryn, then I put in a full day at the office. I also continue to travel and make presentations to our investors.

We have a great team that makes me look better than I deserve, and I learned a long time ago that the success of any good organization is not built around a single person; it is truly all about a team. I have planned my retirement for December 2013, so I will continue to be active and, hopefully, will be able to share some "best practices" with our younger executives.

I have been blessed to be in banking for more than 40 years and with Simmons First for 26 years on Feb. 1, 2012.