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Simmons First National Ramps Up Growth Via Acquisition

5 min read

Simmons First National Corp. covered some serious ground among growth-minded Arkansas lenders on the acquisition trail. Tandem out-of-state, stock-swap purchases during the first quarter increased the size of the Pine Bluff bank holding company by a whopping 65 percent.

Buying the parent companies of First State Bank of Union City, Tennessee, and Liberty Bank of Springfield, Missouri, did more than balloon the balance sheet for Simmons and boost total assets to more than $7.6 billion.

The deals opened a two-way exchange of expanded business opportunities for Simmons, First State and Liberty.

The blending of services will broaden the menus in Arkansas as well as the new Simmons franchises in Missouri and Tennessee.

“Our direction is to become more of a generalist instead of a specialist,” said George Makris Jr., chairman and CEO of Simmons. “We’re really focusing on defining community banking.

“We want to have all these products and services for our customers. That’s going to take us a little time. It makes a whole lot of sense to pursue acquisitions that can add to the mix and deploy those services in our footprint.”

First State and Liberty both bring enhanced small-business lending to the party. The two banks were leaders of SBA lending in their respective states, Makris said.

“We picked up significant experience in SBA lending at both banks, but they both do it a little differently,” he said.

All of the SBA lending at Liberty, administered by a dozen staffers, was done in-market with an eye toward further development of customer relationships.

In round numbers, Liberty’s $900 million loan portfolio includes $200 million partially guaranteed by the Small Business Administration.

First State’s SBA lending developed out of its relationships with franchisors, which led to lending opportunities with franchisees.

While Liberty retained SBA loans, First State sold all of its SBA loans on the secondary market. The arrangement at First State, administered by three or four staffers, contributed to the income stream only.

“We picked up expertise on both sides of SBA lending that we expect to expand throughout our network,” Makris said.

Simmons First National Corp.

Total Assets: $7,614,358
Net Income:
(As of June 30)
  2014 2013 2012 2011 2010
Total assets $4,643,354 $4,383,100 $3,527,489 $3,320,129 $3,316,432
Net Income $35,688 $23,231 $27,684 $25,374 $37,117
Staff 1,338 1,343 1,068 1,083 1,075
Locations 109 131 92 84 85

First State Bank, Union City, Tennessee
Staff: 474
  2014 2013 2012 2011 2010
Total Assets $1,922,938 $1,914,298 $1,739,370 $1,646,228 $1,476,966
Net Income $22,348 $18,586 $17,732 12,765 $8,025
Staff 474 501 482 428 422

Liberty Bank, Springfield, Missouri
Staff: 268
  2014 2013 2012 2011 2010
Total Assets $1,079,877 $1,071,933 $1,063,852 $1,093,306 $973,204
Net Income $18,510 $15,696 $14,794 $14,319 $13,011
Staff 276 300 322 276 273

All dollars in thousands

Consumer Finance

First State Bank also operates a consumer finance subsidiary that came as a pleasant surprise to Simmons executives. The operation, staffed by about 28, is geared toward secured subprime lending with a $50 million portfolio on its books.

“As we roll that out, it could grow to $150 million or $200 million,” Makris said. “We will train our new folks in Tennessee because they do it extremely well. We will home grow it and train people to do it our way.

“We ought to be able to replicate the program throughout our network, and this service is particularly needed in Arkansas.”

The Simmons credit card operation, where the average credit score of customers tops 700, carries a 1.3 percent default rate. First State’s consumer finance program in Tennessee, which has gotten high marks from regulators, sports a 1.1 percent charge-off rate.

“You just can’t beat that combination,” Makris said. “We didn’t know anything about it until we were doing due diligence. We were very impressed with what we saw. It’s things like that that make an acquisition worth more than it appears to be on paper.”

First State’s consumer finance subsidiary can provide a funding alternative if a customer’s credit score isn’t high enough to qualify for a conventional loan through the bank.

“That person would have been relegated to payday lending or check-cashing services that are under so much scrutiny,” Makris said.

“One of the benefits [to consumers] of doing this through a regulated bank is we have disclosure statements. We have to comply with fair lending regulations. There are no hidden fees with a high interest rate on top of that.”

The average loan is about $2,000, which bears an effective interest rate of 10-12 percent when the setup fees and upfront costs are included. The typical loan term is 24-36 months.

“It is very people-oriented,” Makris said. “There is constant contact with the customer.”

He envisions forming separate consumer lending subsidiaries in Arkansas, Missouri and Kansas in deference to differences in state laws.

Simmons will roll its national credit card business into the First State and Liberty markets. The credit card portfolio totals $174 million.

“Our credit card is a strange animal that attracts attention,” Makris said. “We’ve gotten national recognition for the lowest interest rate card in the nation, and we’ve pretty much maintained that reputation.”

Agri Lending Opportunity

The company will also bring its agricultural lending experience to bear in the new markets, especially crop production loans. The Simmons agri loan portfolio totals $141 million.

“We know how to do that very well,” Makris said. “We have some great potential to leverage our agri lending in those markets.”

Simmons’ pending acquisition of Ozark Trust & Investment Corp. of Springfield, Missouri, will push the assets under management total to $4.5 billion. Its Trust Co. of the Ozarks subsidiary had $1.1 billion in assets under management with more than 1,300 accounts and clients as of March 31.

The company provides in-vestment management, trust services and custodial services. The $20.7 million cash-stock deal should close in the third quarter.

In addition to expanding the trust operations at Simmons, the deal will provide correspondent banking opportunities with 46 lenders that conducted their trust business through Trust Co.

First State hasn’t offered trust services. “That’s a whole new market for us in Tennessee,” Makris said.

As of June 30, Simmons still trailed Bank of the Ozarks ($8.7 billion in total assets) and Home BancShares (nearly $8.1 billion) for the top spot among the largest publicly traded banks based in Arkansas.

“We’re still talking with potential merger partners,” Makris said.

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