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Updated: Winner, Loser in Simmons Charters Consolidation

4 min read

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.

Assessments, either to state or federal regulators, are based on the bank’s total assets, which means Simmons First National Bank will be paying a higher assessment to its federal regulators but presumably less than the six separate charters were paying the state.

“As a regulator, I really hate it,” State Bank Commissioner Candace Franks told Whispers last week, praising mightily the quality of the Simmons banks and their management. But she also allowed that if she were the banker making the decision, she might do the same.

While the State Bank Department’s coffers will suffer from this particular bank rollup, Franks said she didn’t expect to have to reduce the size of her staff. That’s because other Arkansas state-chartered banks — she specifically mentioned Centennial, Arvest and Bank of the Ozarks — have been acquiring assets at a clip, increasing the asset base against which the department makes its assessment.

Expensive Luxury

A multibank holding company was once a status symbol, evidence that a banking concern had grown too large to be contained by provincial branching laws. But relaxed laws and tougher regulation have made multiple charters an expensive anachronism, something BOZ gave up in 1999, Arvest in 2002 and Centennial parent Home BancShares in 2009.

The number of multibank holding companies in Arkansas peaked at 33 back in 1993, and by 1997 First Commercial Corp. of Little Rock owned 28 separate bank charters in Arkansas and surrounding states.

Now there are only nine multibank companies in the state, and only Simmons and First Bank Corp of Fort Smith have more than two charters. (First Bank Corp has three — First National Bank of Fort Smith, Citizens Bank & Trust of Van Buren and National Bank of Sallisaw, Okla. — and, like Simmons’, they are a mix of state and national charters.)

Until last fall, in preparation for its acquisition of Metropolitan National Bank of Little Rock, Simmons was operating eight separate charters. Simmons First Bank of Northwest Arkansas, whose footprint had significant overlap with Metropolitan’s, was rolled into Simmons First National Bank on Nov. 2, and Metropolitan followed on Nov. 26.

The official conversion date of Metropolitan’s systems to Simmons First National’s is March 21.

Speaking of Metropolitan …

Whispers notes that Simmons’ CEO George Makris deployed one of the most familiar assets acquired along with Metropolitan in the announcement explaining the charter consolidation:

“Our local management and Community Boards of Directors are committed to maintaining our nearby and neighborly service and this change will allow them more opportunity to meet the needs of our customers and the communities we serve.”

We always liked that slogan and wonder if we might be hearing it again soon.

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