Simmons, Home BancShares Set To Vault Into $10B Club

George A. Makris Jr., chairman and CEO of Simmons First National Corp.
George A. Makris Jr., chairman and CEO of Simmons First National Corp. (Karen E. Segrave)
Johnny Allison, chairman, president and CEO of Home BancShare.
Johnny Allison, chairman, president and CEO of Home BancShare. (Karen E. Segrave)
“We knew it wouldn’t be in the cards until 2017,” George Makris, chairman and CEO of Simmons First National Corp. , said of topping $10 billion in total assets.
“We knew it wouldn’t be in the cards until 2017,” George Makris, chairman and CEO of Simmons First National Corp. , said of topping $10 billion in total assets. (Karen E. Segrave)

Arkansas membership in the $10 billion bank club should double by the end of September. Home BancShares Inc. of Conway is poised to surpass $10 billion in total assets by March. Simmons First National Corp. of Pine Bluff looks to cross the mark during the third quarter.

Both public companies have two pending acquisitions that will help take them beyond $10 billion to join Bentonville’s Arvest Bank Group Inc. and Little Rock’s Bank of the Ozarks Inc.

The $534 million deal for Southwest Bancorp Inc. marks the third stock swap-cash transaction for Simmons since returning to the acquisition trail after a hiatus of more than a year.

“When we got to $7 billion [in total assets during 2015], we knew we had some decisions to make,” said Simmons CEO George Makris. “Most of our inactive time was preparing for the new regulatory environment to be a $10 billion bank.

“We worked to upgrade our audit functions and staffing to meet the increased regulatory compliance. We didn’t want to cross $10 billion until we had shored up all those areas. We knew it wouldn’t be in the cards until 2017.”

Simmons expects to hit $11 billion in the third quarter when the momentous purchase of Southwest Bancorp closes. The acquisition of the $2.47 billion-asset public company in Stillwater, Oklahoma, is Simmons’ largest transaction.

The purchase of Southwest’s Bank SNB network of 31 branches opens the door to new markets in Oklahoma, Texas and Colorado while expanding the Simmons franchise in Kansas.

The new states were among the expansion territory identified by Makris at the Simmons annual shareholders banquet on April 19. At the Pine Bluff Convention Center gathering, he pointed to Louisiana, Mississippi, Alabama and Kentucky as other new markets the company might be calling on during the next few years.

“The pipeline of potential partners is pretty light right now,” Makris said in a recent interview with Arkansas Business. “The No. 1 thing is to prioritize the needs of our company, where we need to grow.”

Adding to the Simmons asset total is the $78 million purchase of Hardeman County Investment Co. of Jackson, Tennessee, which should close by March.

Hardeman’s $464 million-asset First South Bank will add 10 branches to the growing Simmons footprint in western Tennessee.

Each merger brings its own assimilation puzzle of systems, software, products and more.

“Integration is the biggest challenge,” Makris said. “It drives the speed of our acquisitions. How many can we manage in any period of time? It’s not how many deals can we make. It’s how many integrations can we manage.”

The 2015 purchase of Community First Bancshares Inc. of Union City, Tennessee, provided a door opener to the 2016 acquisition of Citizens National Bancorp Inc. of Athens, Tennessee.

John Clark, CEO of Community First, offered to make introductions to Paul Willson, chairman of Citizens National, if Simmons was interested.

“They were good friends for a long time and had talked about combining their two organizations,” Makris said.

That relationship facilitated a getting-to-know-you meeting between Simmons and Citizens National on June 15, 2015. After an 11-month courtship, the deal was announced and followed by its completion in September.

Crossing $10 Billion

(Ranked by when total assets topped or will top $10 billion)

  When Total Assets*
Arvest Bank, Fayetteville 4Q 2008 $17,047,149
Bank of the Ozarks, Little Rock 1Q 2016 $18,430,019
Centennial Bank, Conway 1Q 2017 $9,751,545
Simmons Bank, Pine Bluff 3Q 2017 $ 7,660,785

*As of Sept. 30. In thousands.

Simmons Bank and Home BancShares’ Centennial Bank join lenders with $10 billion in assets that face additional costs, fee restrictions and new layers of regulatory oversight.

The changes, wrought in response to the 2008 financial meltdown, flow from the Dodd-Frank Wall Street Reform & Consumer Protection Act of 2010 and its amendments.

The 2011 Durbin Amendment alone means a sizable revenue loss for $10 billion-plus banks. The amendment caps swipe fees — debit card interchange fees charged to merchants — at 21 cents plus 0.05 percent.

“The financial effect on us will be tremendous,” Makris said. “We will lose $5 million to $7 million on the artificial cap on debit card interchange fees alone.”

A new regulator comes into play after crossing the $10 billion-asset mark, too.

The Consumer Financial Protection Bureau is charged with monitoring how banks deal with customers and is empowered to levy financial penalties for practices or acts deemed unfair, deceptive or abusive.

“That made us really pay attention to how we do consumer lending,” Makris said. “We heard some stories that they have some very specific ways they look at things, metrics they use that we’re taking a look at regarding staffing levels. Some of their rulings have turned the industry upside down.”

Sunshine State
While Simmons turned to neighboring states for growth, Home BancShares returned to Florida as a popular destination for acquisitions to expand its Centennial Bank franchise and build its asset total.

“We’re always on something,” said Johnny Allison, chairman of Home BancShares. “We’re always working on deals. The next step is at $50 billion. We have a ways to go before we hit that.”

The $88 million purchase of Giant Holdings Inc., parent company of Land-mark Bank of Fort Lauderdale, should close in late February.

“We probably could’ve done this deal earlier, but we wanted to finish the year under $10 billion,” Allison said.

The addition of Landmark will position Centennial Bank among the 25 largest lenders in Florida based on deposits.

“It is a well-run bank, different than most deals we do, which typically involve distressed banks,” Allison said. “This is a straight M&A deal with good management and leadership.”

The pending Bank of Commerce purchase in Sarasota is a different story.

Home BancShares was the high bidder for the $196 million-asset bank in a bankruptcy auction in November.

The court-administered sale began with a stalking horse bid of $1.7 million by Byron DeFoor, a Chattanooga businessman looking to add to his bank holdings.

After 2-1/2 hours and three rounds of bidding, Home BancShares emerged the winner with an offer of $3.7 million and up to $400,000 more in expense reimbursement for approved administrative claims.

Opened in 2000, Bank of Commerce had operated under an order with regulators since 2010.

The deal for the troubled bank is the second bankruptcy auction transaction for Home BancShares. The $1.4 million purchase of Premier Bank of Tallahassee in 2012 was accomplished through the Chapter 11 of its corporate parent: Premier Bank Holding Co.

“We were the stalking horse, and there were no other bids,” Allison said. “We had to have another hearing to confirm the sale because there was a protest.

“Some creditors accused management of not marketing the property properly. But they did, and the judge upheld the sale.”

Recent Acquisition Activity By Simmons First National Corp.

Southwest Bancorp Inc.
Stillwater, Oklahoma
Expected completion in third quarter 2017

Assets $2.47 billion
Loans $1.87 billion
Deposits $1.95 billion
Branches 18 in Oklahoma, five in Texas, four in Kansas, and three in Colorado
Transaction $81 million in stock and $40.3 million in cash

Hardeman County Investment Co.
Jackson, Tennessee
Expected completion in first quarter 2017

Assets $464 million
Loans $260 million
Deposits $372 million
Branches 10 in western Tennessee
Transaction $48 million worth of stock and $30 million in cash

Citizens National Bancorp Inc.
Athens, Tennessee
Completed Sept. 9, 2016

Assets $552 million
Loans $352 million
Deposits $473 million
Branches Nine in eastern Tennessee
Transaction $81 million in stock and $40.3 million in cash

Recent Acquisition Activity By Home Bancshares Inc.

Giant Holdings Inc.
Fort Lauderdale, Florida
Expected completion in first quarter 2017

Assets $463 million
Loans $335 million
Deposits $368 million
Branches Six in the Fort Lauderdale area
Transaction $70 million in stock and $18.5 million in cash

Bank of Commerce
Sarasota, Florida
Expected completion in first quarter 2017

Assets $196 million
Loans $133 million
Deposits $166 million
Branches Three in Sarasota area
Transaction $4.1 million cash in bankruptcy auction

The addition of these locations will bring the Florida tally of Centennial Bank branches ever closer to its Arkansas total. As of Sept. 30, Centennial operated 80 locations in Arkansas and 60 in Florida. Centennial also has seven Alabama locations and one in New York.

At the end of the third quarter, Simmons Bank had 83 locations in Arkansas, 43 in Tennessee, 27 in Missouri and three in Kansas.