Retired Simmons First CEO Sees Tough Road, More M&A for Small Banks

After orchestrating more than a dozen acquisitions, overseeing significant asset growth and surviving an economic crisis, J. Thomas May has stepped down from Simmons First National (SFNC).

May, 67, retired as the Pine Bluff, Ark., company's chairman and chief executive earlier this week. May, who was succeeded by George Makris, had held those posts since 1996. He joined Simmons First as president in 1987.

While at Simmons First, May helped build the company from less than $600 million of assets into a multistate bank with $4.4 billion of assets. Since 2010, he has completed five acquisitions, including the purchase of four failed banks as part of a push into Kansas and Missouri.

May accomplished this while battling amyotrophic lateral sclerosis, or Lou Gehrig's disease. Despite the 2005 diagnosis, May continued to rise early, put in a full day at the office and even travel to make investor presentations. He will serve as the first chairman of the newly formed Simmons First Foundation, which will offer a grant named for him.

In a wide-ranging interview, May, who has four children and six grandchildren, hopes he will be "remembered as a good banker" and as someone who "grew in his faith and allowed that faith to guide me" in personal and business decisions.

"My greatest hope and prayer is that our children and grandchildren will want to live by a lesson that I learned from my mentors," he says. "Let your life be guided by the Lou Holtz Do Right Rule, and remember we are only as good as those that helped us achieve our success. I would be very proud if this was my legacy."

The following is an edited excerpt.

What can community banks do to thrive?
MAY: In today's economy, with slow loan demand and historically low interest rates, thriving is probably not in the cards in the immediate future. I believe community banks must remain patient and wait for the economy to recover and for loan demand return to a normal level. They must protect their customer base, which might require some pricing concessions, but they must also stay true to the conservative lending culture.

Margins will remain a challenge, which community banks can manage as long as they keep good asset quality and place stronger emphasis on efficiency. Finally, community banks must not become complacent relative to customer relationships. Instead, now is the time to be proactive in managing relationships.

What does the future of community banking look like?
It is going to be a challenge until ... the economy returns to somewhat normal conditions, specifically loan demand and interest rates. However, community banks can survive. It is more a question of how they can thrive.

Generally speaking, I believe earnings will remain a challenge with low loan demand, historically low interest rates and increased expenses related to regulatory compliance. As a result, a bank's ability to accumulate significant capital could be problematic.

What are the biggest challenges for small banks?
I believe the greatest challenges are the expense associated with meeting required regulatory compliance, generating revenues sufficient to support growth in expenses and needed growth in capital, and meeting the needs to replace an aging management and aging board.

The banking industry's reputation has taken a hit since the financial crisis. How do banks regain the public's trust?
I believe the industry has had a setback relative to reputation but I don't think there is an issue of public trust relative to community banks. Most people understand that community banks are not a part of the problem, and most understand that those banks continue to serve their customers and communities.

As an industry, we do need to make time to communicate the things we do for our community. We need to be proactive in reminding the public of the strength of our industry and our commitment to providing the loans required to restore our economy to a level that will create jobs. While government intervention in monetary policy has been important, it is the banks that historically have been essential in providing the resources for a sustained recovery - that is when we will see our reputation return to historical levels.

What's the future of the bank branch?
It is clear that technology is redefining the answer as we speak. Obviously, internet and electronic banking has resulted in a significant reduction in the number of transactions at our banking locations. With expense efficiency becoming a bigger issue, I would expect to see a continuing focus on reducing 'brick and mortar' in favor of technology.

As surveys tell us, the younger generation wants 'their cake and eat it too.' They are big users of electronic banking and they want the biggest and best technology available. . . . My belief is that, while there will be fewer branches, the new locations will be bigger and better and more proficient with sales versus just transactions.

Arkansas has several expansion-minded community banks. What do you think the state's banking industry will look like?
I believe there will be consolidation ... in Arkansas similar to what we will see throughout the nation, primarily caused by regulatory burdens, aging management and challenges associated with achieving acceptable levels of earnings.

I believe most of the consolidation will take place between the very good community banks and the larger regional community banks in the state. I believe the four or five largest regional community banks will likely continue their acquisition strategies that include expanding ... beyond the borders of Arkansas.

What's the most important lesson you learned during your banking career?
There are so many lessons learned that the paper does not have enough space allocated for me to do justice. So I will just focus on a few of the most important.

I'm reminded that, while the industry has changed significantly, the basics of banking remain the same. It is all about the customers we serve, the associates the customers rely on that become relationships, and management's capacity to be proactive while maintaining its conservative culture.

Lastly, a major lesson learned is that 'patience is a virtue.' Generally speaking, being patient and working through issues and taking time to fully understand the decisions we make will most likely be rewarded versus relationships we lose by acting too fast.