Simmons First National Corp. will pay $278 million to purchase two Tennessee community banks, bolstering its presence in the state's two largest cities: Memphis and Nashville.
The Pine Bluff bank announced Monday that it will pay $146.3 million for Landmark Community Bank and $131.6 million for Triumph Bancshares Inc. Both Tennessee banks are privately owned.
The transactions include stock and cash and are scheduled to close in the fourth quarter, pending regulatory approval, and would be immediately accretive, with Simmons officials estimating earnings per share would rise about 7.5%. The bank reported earnings of $2.31 per share in 2020.
Landmark, based in Collierville, has $1 billion in assets and Memphis-based Triumph has $900 million in assets. When complete, the deal will vault Simmons from the 35th-largest bank in Memphis to the sixth-largest. Simmons will be the ninth-largest bank in Tennessee and the 15th-largest in Nashville.
With the acquisitions, Simmons will have assets of $25.2 billion.
"The opportunity to combine forces with these two institutions also highly complements our existing footprint in Tennessee and enhances our scale in two of our key growth markets -- Memphis and Nashville," Simmons Chairman and Chief Executive Officer George Makris said in a news release.
"In addition to cultural and geographic synergies, the financial metrics of these mergers are compelling and consistent with our M&A [mergers and acquisitions] strategy of partnering with high-quality banks within our current footprint that represent an efficient use of our capital and delivers on our commitment of building long-term value for our shareholders," he said.
Simmons has an ambitious plan to convert both banks on the same weekend in the fourth quarter.
"We have in-market support in both Memphis and Nashville, so we believe the conversion for us will go relatively smoothly," Makris told financial analysts on a call Monday morning. "We are very confident in our ability to integrate these acquisitions."
Makris said the bank will remain active in the acquisitions market. "That integration should nor prevent us from continuing down the path of M&A, assuming we find the right partners," he added.
Monday's announcement "sends a message the bank remains committed to both Memphis and Nashville," Stephens Inc. analyst Matt Olney wrote in a review of the deals.
Olney noted that both Tennessee banks "have reported mediocre profitability at the bank levels in recent years." Landmark reported a 1.13% return on assets in the first quarter ended March 31 and Triumph reported 0.96% return for the same period. Simmons reported a 1.2% return on assets in the quarter.
Olney also wrote that the "financial aspects of the transactions appear solid," with Simmons estimating it can squeeze 40% in cost savings from consolidation and grow earnings immediately.
Simmons President and Chief Operating Officer Bob Fehlman said Monday the purchases will not dilute tangible book value.
"These are relatively small pick-ups, but we'll be able to increase our earnings per share by about 7.5%," Fehlman said in an interview. "These are nice add-ins for us."
The deals add punch to Simmons' deposits in Tennessee and expand its presence in the state while also easing consolidation efforts that will grow earnings.
The bank will expand from $100 million in deposits to more than $1.4 billion in Tennessee, Fehlman said. "It's a really critical deposit share pick-up in the market in the state of Tennessee," he added.
"Both banks have strong core deposit bases and excellent asset quality," Makris said on Monday's call. "The opportunity to expand our physical presence in both markets is outstanding."
Executives with Landmark and Triumph noted the deals will allow them to grow market share. Small community banks with assets of $1 billion have difficulty investing in digital and other services that allow them to grow. Simmons will provide a strong foundation for the Tennessee banks to expand in their markets.
"We believe the opportunity to join the Simmons team is very positive for Landmark's stakeholders," said Jake Farrell, Landmark's chairman, president and chief executive officer. "With access to Simmons' broader array of consumer and commercial products, combined with their leading-edge digital capabilities, we will be able to provide greater benefits to our customers and the communities we serve."
Simmons provides Triumph with more products and services for customers, agreed William J. Chase Jr., Triumph's president and chief executive officer.
"In addition to being able to offer our clients a wider breadth of banking products and services, we will have a greater capacity to lend while continuing to deliver the same excellent customer service and active community involvement," Chase said in the news release.
Simmons will have 49 locations in Tennessee after the closing, though that number will shrink with consolidation, officials said Monday. However, Simmons plans to expand its hub in Nashville and add a strong presence in the Memphis market.
"We do expect to expand our presence in both Memphis and Nashville, especially in low- and moderate-income areas," Makris told analysts.
Simmons Bank operates 198 offices -- 68 in Arkansas, 48 in Missouri, 33 in Tennessee, 23 in Texas, 20 in Oklahoma and six in Kansas.
The bank's shares rose 27 cents Monday, or less than 1%, to close at $31.23.