Simmons First Winning Bid For Metropolitan: $53.6 Million

In a court hearing Thursday morning, bank officials revealed that Pine Bluff-based Simmons First National Corporation’s winning bid for Metropolitan National Bank was $53.6 million.

Little Rock-based Metropolitan, whose parent company, Rogers Bancshares, has been embroiled in a bankruptcy proceeding, was the focus of three bidding entities – Simmons First, Bentonville-based Arvest Bank, and Ford Financial Fund II, a venture capital fund backed by Dallas banking billionaire Gerald J. Ford.

Simmons placed the winning bid for Metropolitan after initially disclosing a qualifying bid of $16.9 million for the bank. The three bidders went through 19 rounds of bidding before Simmons won the auction.

In Judge James Mixon’s bankruptcy court on Sept. 12, the $53.6 million winning bid was disclosed, and the judge approved the deal.

The $53.6 million is likely to result in a high percentage of repayment for Rogers Bancshares’ creditors. Those creditors are owed approximately $52.9 million, although it appears some of that money owed could be to the federal government which loaned Rogers Bancshares nearly $25 million in TARP funds during the 2008-9 recession.

In a conference call with analysts on Thursday afternoon, Simmons First CEO-elect George Makris said he expected the deal to close in December 2013.

Makris also said Simmons expected “some significant branch consolidations,” as a result of the deal. He later pegged the potential branch closures between 14 and 35. Simmons would have to provide a 90-day notice to customers of the branch starting as early as January 2014, so actual closures may not occur until April 2014.

Other savings expected would come from elimination or consolidation of FDIC insurance, legal fees, and IT operations. Makris said to expect seeing those savings in the company’s financials by the third quarter of 2014.

He also disclosed that he thought the deal would be accretive to Simmons First earnings in 2014, telling analysts it could boost earnings per share by as much as 25%.  By 2015, Makris said earnings per share could be boosted by 35%.

There was no part of Metropolitan’s retail business – which Makris said included nearly 90,000 customers – that the bank felt it would want to drop. He added that with only four days of review of Metropolitan’s loan portfolio, his group was “pleasantly surprised by what we found.”

On a final business note, Simmons said the transaction would result in the elimination of one of its eight bank charters in Arkansas. Corporate officials said they planned to fold the northwest Arkansas charter into its Pine Bluff charter.

Simmons First National Corp. stock (NASDAQ: SFNC) closed trading on Thursday down 64 cents to $26.87 per share. The company’s stock has traded between $22.36 and $28.45 during the last year.

BY THE NUMBERS
Kim Souza with our content partner, The City Wire, crunches more numbers in this report:

The win for Simmons is a major boost in deposit marketshare in the Little Rock and surrounding market. The pro forma bank will top $1.032 billion in deposits in the Little Rock metro area, some 7.4% of that marketshare. This will rank them fifth behind First Security Bank and one spot ahead of Arvest.

Statewide, the pro forma bank will have $3.457 billion in deposits with 6.49% of the marketshare. This ranks them fourth behind the pending Home Bancshare/Liberty consolidation, Regions and Arvest.

Together the banks will have $2.376 billion in loans producing a yield of 6.01%. Prior the merger, Simmons portfolio is yielding 6.27% against Metropolitan’s yield of 4.98%.

Simmons also will pick the management of $370 million in trust assets, according to the supplemental documents provided by Simmons on Thursday.

Makris the capital ratios for the pro forma bank is a Tier 1 leverage ratio of 8.03%. The risk-based capital ratio will be 13.38% with the total risk-based capital ratio at 14.45%.

He said stock buybacks are on hold at this time, as the holding company will focus on this merger.

Simmons projects a cost savings of $15 million when the merger is completed. He said FDIC insurance cost savings will be roughly $1.6 million, while reduced legal fees and IT expenses will save $2.4 million. Makris said those savings will be phased in at 60% this first year and 100% thereafter. He expects Simmons will see the full benefit in the third quarter of 2014.