Simmons First National in Pine Bluff, Arkansas, has announced its third — and biggest — bank deal of 2021.
Coming off a pair of acquisitions in Tennessee, Simmons said Friday it would acquire Spirit of Texas Bancshares for $581 million. The deal, expected to close in the second quarter, would expand the $23.2 billion-asset Simmons’ toehold in the Dallas-Fort Worth area and provide an entrance into Austin, San Antonio and Houston.
The $3.3 billion-asset Spirit, in Conroe, has 37 branches primarily in the Texas Triangle — a region that encompasses those four major metropolitan areas — with additional locations in the Bryan-College Station, Corpus Christi and Tyler markets. Spirit has $2.3 billion of loans and $2.7 billion of deposits.
With the addition of Spirit, Simmons would have more than $28 billion of assets, $14.6 billion of loans and $22.3 billion of deposits. The estimates include anticipated organic growth between now and closing.
Simmons Chairman and CEO George Makris Jr. had said repeatedly this year that the company was intent on expanding throughout the biggest markets in the south-central swath of the country. Simmons is flush with deposits and eager to put them to work in growing markets that are ripe for consumer and commercial lending. He said local estimates show that the Texas Triangle has been adding roughly 5,000 residents a day this year.
“This pretty much completes our footprint — from Nashville to Houston — covering the areas that are really, really growing,” Makris said in an interview. “We think we can now capture most of the population growth in the central United States for at least the next 10 years for sure.”
Simmons operates more than 200 branches in Arkansas, Missouri, Tennessee, Texas, Oklahoma and Kansas. Makris said Simmons has long had a robust deposit base in rural and small markets that pepper many of those states. In recent years, it has made a string of deals in an effort to bolster its presence in big cities with diverse economies that fuel steady loan demand, from Kansas City, Missouri, to Oklahoma City.
Most recently, in October,
The deals are an ambitious return to M&A for Simmons after a two-year hiatus stemming
Simmons’ latest deals are part of a spate of merger-and-acquisition activity across the industry this year. More than 180 deals have been announced so far this year — up from 111 in all of 2020 — according to S&P Global data. U.S. banks have announced nearly $60 billion in deals to date in 2021, putting bank
Charles Wendel, president of Financial Institutions Consulting, said banks of all sizes are pursuing scale to invest in technology and expand into new markets and business lines. The smallest banks are being sold and larger banks’ buying appetites are increasing, he said.
“This consolidation is going to last for years,” Wendel said.
Makris said Simmons, eager to further its long-term growth path, would consider more acquisitions and continue to hire lending teams within its existing states.
“We’ll be focused now on our share across the metros that we are in, certainly including the new markets in Texas” and potentially new business lines, Makris said.
Simmons, for example, recently
In the Texas markets, Makris sees opportunity across a range of lending lines, from residential mortgages to industrial credits to technology lending. He said Simmons is not interested in building out an oil-and-gas lending operation — Texas is the nation’s leading energy state — but the bank is eager to expand in renewable energy sectors such as wind and solar given a broader global push toward climate-friendly energy sources and away from fossil fuels.
While still prominent, “oil and gas only make up about 8% of the Texas economy,” he said. The state’s biggest cities “are very diverse economically.”
Stephens analyst Matt Olney complimented the deal and said it should help Simmons generate stronger overall growth following a pandemic-related lag. Simmons’ loans totaled $10.8 billion for the third quarter, down from $11.4 billion the prior quarter and $14 billion a year earlier. The company said its new loan production totaled $1.5 billion in the third quarter, but it was offset by elevated levels of paydowns and payoffs.
Olney said he is “optimistic” the deal will help Simmons reverse the recent organic loan trend, “which has been disappointing” to date in 2021.
Simmons expects cost savings of 35% of Spirit’s noninterest expense base, with roughly 50% realized in 2022 and 100% thereafter.
Simmons estimated the acquisition would be accretive to earnings per share by 22 cents, or 9.8%, in 2023. The banks said it would earn back 3% dilution to tangible book value within three years.
Spirit Chairman and CEO Dean Bass will retire from management when the deal closes. He will, however, join the Simmons board. Spirit’s president and chief lending officer, David McGuire, will have an executive role, though his title has yet to be determined.
