Simmons First National Corp. of Pine Bluff, Ark., has tripled its assets and expanded statewide over the last decade largely through acquisitions, but it is taking some time off from dealmaking to focus on internal growth.
The $2.4 billion-asset multibank holding company has not made an acquisition in more than a year, and chief executive Thomas May said none are on the horizon.
Instead, Simmons plans to add branches, loans, and deposits in Arkansas' fastest-growing markets.
"We are concentrating on the communities that we are in and are looking to pick up a lot of new customer relationships, and de novo branching will play a large role in that," said Mr. May, who is also Simmons' chairman.
Founded in 1903, Simmons was Pine Bluff's first bank. It did not expand outside of southeast Arkansas until 1984, when it bought a small northeast Arkansas bank in its first acquisition.
In 1995, two years after it went public, Simmons First decided to expand into all of Arkansas' seven metropolitan markets. From 1995 to early 2004 it bought seven banks and 19 branches in four acquisitions.
In that time it tripled its branch count to 75 and steadily moved up in deposit share in Arkansas. It is now No. 4, with 5% of the state's deposits, according to the Federal Deposit Insurance Corp.
Simmons aims to double its assets and market share over the next five to 10 years.
It also hopes that its new strategy will lead to better performance ratios from spending less time and money integrating acquired banks.
A key to its strategy is picking up deposits and loans in metropolitan areas, specifically in northwest and central Arkansas.
Its largest subsidiary, the $1.1 billion-asset Simmons First National Bank, is in southeast Arkansas, where growth is slower. But four of its other seven subsidiaries (all their names begin with Simmons First Bank) are in the higher-growth markets, and the other three are in smaller metropolitan areas in other parts of the state.
Simmons First plans to build at least seven branches and move three in the next year, and all but one will be in central or northwest Arkansas.
Joseph Stieven, an analyst with Stifel Nicolaus & Co. in St. Louis, said that Simmons First has a "well-thought-out strategy" and is smart for emphasizing markets that are among the fastest-growing in the nation.
The population of Fayetteville metropolitan area in northwest Arkansas, home of Wal-Mart Stores Inc. and the poultry giant Tyson Foods Inc., rose nearly 9% from 2000 to 2003. The state's population grew 2% in that time and the U.S. population grew 3.3%.
"Wal-Mart, Tyson, and other great companies are headquartered there, and there is a groundswell of growth around them," Mr. Stieven said.
Of course, Simmons is not the only one trying to bulk up in the state's largest markets. Arvest Bank in Bentonville added nearly $2 billion of assets (it now has $7.2 billion) when it bought Superior Financial Corp. of Little Rock two years ago, and the $1.8 billion-asset Bank of the Ozarks in Little Rock, which has 52 branches in Arkansas, plans to add 31 there by 2009.
Mr. May said he believes Simmons First has a leg up on the competition by being the state's largest provider of student loans and the only Arkansas bank - and one of just a few community banks in the country - with a substantial credit card portfolio. Half of its 97,000 credit card accounts are in Arkansas, and it has about 30,000 active student loan accounts in the state.
Mr. May said these business lines boost his company's name recognition and provide it with different outlets to promote its statewide banking services.
"It's a tough, competitive market, and we have simply tried to differentiate ourselves," he said.
Both these businesses have also been solid income generators for Simmons First. In the first quarter they produced $2.3 million of noninterest income, nearly one-fourth of Simmons' noninterest income. Credit quality is sound as well. Simmons' chargeoff ratio was 2.6% last quarter; the average ratio for the larger credit card companies is around 6%.
Still, while these businesses have been consistently strong, Simmons' overall performance has lagged in recent years. In 2004 its return on equity was 15.2% and its return on assets was 1.05%; those figures averaged 17.8% and 1.17% at commercial banks with assets of $1 billion to $5 billion.
Simmons blamed the costs of integrating acquisitions. Now that it has the infrastructure in place and is putting more emphasis on gathering loans and deposits, analysts say Simmons can quickly catch up with or pass its peers in earnings.
David Sharf of First Horizon National Corp.'s FTN Midwest Research said, "Previously they were working on growing branch footprint, and now they are reaping the benefits and will see increased profitability."
