Simmons First poised to become Arkansas largest bank following Spirit of Texas deal
November 29 - December 5, 2021
By Wesley Brown
On Oct. 29, the publicly trade Pine Bluff-based regional banking announced plans to acquire Spirit of Texas Bancshares Inc., in a cash-and-stock deal valued at $581 million. The deal would make Simmons First the largest bank by asset size in the Natural State and continue the Arkansas regional bank’s expansion into key Texas metropolitan markets amid a national slowdown in banking deals during the COVID-19 pandemic.
Under the terms of the deal, Simmons will acquire Conroe, Texas-based Spirit, and its wholly-owned subsidiary, Spirit of Texas Bank SSB, with a mixture of cash and Simmons’ common stock based on the Arkansas publicly traded bank’s closing stock price of $31.73 on Nov. 17.
The deal also calls for Simmons to issue approximately 18,325,000 shares of its common stock, subject to certain conditions and potential adjustments, including substituting cash for Simmons’ common stock to the extent necessary to cash out Spirit’s stock options and warrants. The transaction is estimated to be accretive to Simmons’ earnings per share by nearly 22 cents per share in 2023.
Simmons also said it expects to achieve cost savings of approximately 35% of Spirit’s noninterest expense base, with approximately 50% achieved in 2022 and 100% thereafter. The deal has already been approved by the boards of directors of Spirit and Simmons, but is still subject to approval by Spirit’s shareholders, regulatory approval and other customary closing conditions. Simmons expects to close the acquisition during the second quarter of 2022/.
“Spirit is a highly regarded, high performing bank with whom we share a common philosophy – providing outstanding customer service and developing deep and long-lasting relationships with the clients and communities that we serve and where we live,” said Simmons Chairman and CEO George Makris Jr. “Strengthening our Texas franchise has been a strategic priority and to partner with Spirit not only enhances our current footprint, but also establishes a platform for growth in Houston, Austin, San Antonio and College Station. These markets have been among the fastest growing in the nation in terms of population and economic activity and projections call for this trend to continue. We believe this merger places us in an advantageous position to capture future growth in the Lone Star State.”
“In addition to cultural and geographic synergies, the financial metrics of this merger are consistent with our stated M&A parameters and strategy of partnering with high-quality banks within our current footprint that represent an efficient use of our capital and deliver on our commitment of building long-term value for our shareholders,” continued Makris.
“The foundation of Spirit was built upon offering products and services that meet our customers financial needs and delivering an exceptional customer experience that is supported by a diverse and experienced team who are positioned in some of the most attractive markets in the Heart of Texas,” added Spirit Chairman and CEO Dean Bass. “By joining forces with Simmons, we recognize the opportunity to align with a partner that shares our passion for providing high-quality customer service, the increased capacity to lend by leveraging a larger balance sheet and access to a broader array of products and services, including leading-edge digital capabilities. We believe the opportunity to join the Simmons team is very positive for our organization and will provide greater benefits to our customers and the communities we serve.”
Spirit is a Houston area holding bank that operates 37 locations primarily in the Texas Triangle – the fastest growing megaregion in the U.S. consisting of the Dallas-Fort Worth, Houston, San Antonio and Austin metropolitan areas – with additional locations in the Bryan-College Station, Corpus Christi and Tyler metropolitan areas, along with offices in North Central and South Texas. As of Sept. 30, Spirit had total assets of $3.2 billion, total loans of $2.3 billion and total deposits of $2.7 billion.
Once the deal closes, Bass will join the 16-person Simmons board of directors as an independent director. David McGuire, Spirit’s current president and chief lending officer, will provide leadership as a key member of Simmons’ executive team in Texas, company officials.
Simmons officials said the Spirit deal culminates an eventful year for the Arkansas regional bank. In June, Simmons First National Corporation, the parent company of Simmons Bank, announced the acquisitions of Tennessee-based Landmark Community Bank and Triumph Bancshares, Inc., the parent company of Triumph Bank. After closing those deals in October, Simmons Bank is now the 8th largest bank in Tennessee and 7th largest bank in Memphis based on market share data recently released by the FDIC.
In a related deal, Simmons also announced a partnership with the City of Memphis to enter talks to be title sponsor of Liberty Bowl Memorial Stadium. Opened in 1965 by the City of Memphis as Memphis Memorial Stadium, the 58,000-seat stadium serves as a tribute to the veterans of World War I, World War II and the Korean War.
Located in the heart of Midtown, the soon to be Simmons Bank Memorial Stadium, which is subject to the execution of a definitive agreement, includes 40 skyboxes, seven executive suites and a 175-person stadium club. Home to the University of Memphis football team, the stadium and fairgrounds has seen numerous renovations and expansions, and now has a capacity of 58,325. The stadium also hosts the Southern Heritage Classic and AutoZone Liberty Bowl. In addition to football, the venue accommodates other events such as concerts, family shows, band competitions and corporate events. Spectra, which has managed the complex since 2011, is negotiating the naming rights on behalf of the City of Memphis.
Besides is growth in the Memphis, Tenn., Simmons in July also opened a new corporate banking office in downtown Nashville located in the city’s trend Gulch district. The company’s new Tennessee corporate offices is housed in the Demonbreun, a 20-story, LEED certified building with 330,000 square feet of office and retail space. In addition to occupying approximately 11,900 square feet in the eco-friendly building, Simmons Bank also relocated its West End branch to Nashville to the new facility.
This fall Simmons also announced the expansion of its presence in west Little Rock with the purchase of Class A office space located at 17901 Chenal Parkway, which is the former corporate headquarters of Arkansas competitor Bank OZK. Pending signage and branding replacement, certain renovations planned to the interior, and regulatory approval, Simmons said it intends to begin moving associates into the building later this year.
Simmons first entered the Texas market in the fall of 2017 following the close of acquisitions with Stillwater, Okla.-based Southwest Bancorp Inc. and privately held First Texas BHC Inc. in Fort Worth, known locally as Southwest Bank. Those banks have since been rebranded
The deal with Spirit would push Simmons total asset value to nearly $28.2 billion, which just ahead of its Arkansas rivals Bank OZK of Little Rock and Arvest Bank in Bentonville at $26.6 and $26.2 billion, respectively, based on the latest financial data through the first half of 2021. Today, the bank holding company’s Simmons First subsidiary in Little Rock operates more than 200 financial centers in Arkansas, Missouri, Tennessee, Texas, Oklahoma and Kansas.
In the latest deal, Keefe, Bruyette & Woods, A Stifel Company served as financial advisor to Simmons, and Covington & Burling LLP served as Simmons’ legal advisor. Stephens Inc. served as financial advisor to Spirit, and Hunton Andrews Kurth LLP served as Spirit’s legal advisor.
Simmons First National Corp. of Pine Bluff is expected to become the largest banking chain in Arkansas following its $581 million to purchase Spirit of Texas Bancshares, first announced on Nov. 19. The stock-and-cash transaction is expected to close in the second quarter of 2022.