Simmons First National Corp.’s successful bid to buy Metropolitan National Bank of Little Rock will benefit the Pine Bluff bank in central and Northwest Arkansas, two banking experts said Tuesday.
But Simmons First will reap the biggest advantage in central Arkansas, said Tim Yeager, an associate professor of finance at the University of Arkansas at Fayetteville.
Simmons announced Monday that it had won an auction to purchase Metropolitan. Simmons was bidding against Arvest Bank of Fayetteville and private equity firm Ford Financial II of Dallas. The bid is still subject to the approval Thursday of the judge overseeing the bankruptcy of Rogers Bancshares, which owns Metropolitan.
Neither Metropolitan nor Simmons have disclosed the winning bid price.
“This was a good strategic move for Simmons,” Yeager said.
In the Little Rock metropolitan area, Simmons has 13 branches and about $230 million in deposits, according to a market analysis calculator by the Federal Reserve Bank of St. Louis. That is only about a 1.6 percent market share in the area,based on deposit data from June 2012, the most recent information available. Market share is the percentage of the total deposits in an area.
Metropolitan has 33 branches and more than $817 million in deposits in the market, about a 5.6 percent market share. With the purchase of Metropolitan, Simmons will have a market share of about 7.3 percent.
The main reason Simmons stands to benefit more in central Arkansas than in Northwest Arkansas is because Simmons is getting a big stake in the Little Rock area, Yeager said.
But Simmons also prevented an unknown, out-of-state competitor - Ford Financial - from entering the market, Yeager said.
“Arkansas is unique in that there are a lot of homegrown banks here,” Yeager said. “I think having another outside bank come in and buy a pretty good-sized bank was not too appealing [for Simmons]. [Ford Financial] would have been a new dynamic. They could have been very aggressive, could have tried to pick your best customers. When you’re dealing with [in-state banks], you know what to expect.”
In Northwest Arkansas, Simmons wouldn’t get as big a boost in market share because Simmons already has a larger deposit base than Metropolitan.
Metropolitan has 12branches in Northwest Arkansas with about $75 million in deposits, less than a 1 percent market share. Simmons has 10 branches with almost $202 million in deposits, a market share of 2.3 percent. With the purchase of Metropolitan, Simmons would have a market share of about 3.2 percent.
Simmons has a lot of excess capital that it needs to use, an important factor in Simmons buying Metropolitan, said Matt Olney, a banking analyst with Stephens Inc. in Little Rock.
“They need to deploy that capital by acquiring something,” Olney said. “They have the capital. It takes capital to acquire a bank like Metropolitan. The fit there strategically and financially is tremendous.”
Before the auction, Ford Financial had bid $16 million to buy Metropolitan and said it would put another $74 million into the troubled bank to bring up its capital levels. Simmons had bid $16.9 million before the auction. Arvest has not disclosed its initial bid.
Simmons won’t have to disclose any specific amount it will use to bring Metropolitan’s capital levels up, Olney said. Simmons will use its own capital to absorb Metropolitan’s assets, he said.
“I think the Simmons-Metropolitan deal is a perfect fit,” Olney said. “I think it’s going to be a great transaction when all is said and done.”
Simmons will hold a conference call Thursday afternoon to discuss the purchase with analysts.
Business, Pages 27 on 09/11/2013