Simmons First National and Spirit of Texas Bancshares executed a definitive merger agreement pursuant to which Simmons will acquire Spirit and its wholly-owned subsidiary, Spirit of Texas Bank, in a transaction consisting of a mixture of cash and Simmons’ common stock with an aggregate value of approximately $581 million based on Simmons’ closing stock price of $31.73 on Nov. 17.

Under the terms and subject to the conditions of the merger agreement, shares of Spirit’s common stock and Spirit’s restricted stock units will be converted into the right to receive shares of Simmons’ common stock, and Spirit’s stock options and warrants will be cashed out.

Spirit is a Texas-based bank holding company that operates 37 locations, primarily in the Texas Triangle, which consists of the Dallas-Fort Worth, Houston, San Antonio and Austin metropolitan areas in Texas, with additional locations in the Bryan-College Station, TX; Corpus Christi, TX; and Tyler, TX, 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.

“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,” George Makris Jr., chairman and CEO of Simmons First National, said. “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. We’re very pleased to welcome our newest partners to the Simmons organization, including Dean Bass, who will join our board shortly after closing as an independent director, and David M. McGuire, who will provide leadership as a key member of our executive team in Texas.”

“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,” Bass, who is the chairman and CEO of Spirit, said. “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.”

In October, Simmons completed the acquisitions and conversions of Tennessee-based Landmark Community Bank and Triumph Bancshares, the parent company of Triumph Bank. Based on FDIC deposit market share data as of June 30, prior to the Landmark and Triumph acquisitions, Simmons Bank ranked as the 11th largest bank in Tennessee. On a pro forma basis (including Landmark and Triumph Bank deposits at June 30), Simmons Bank now ranks as the eighth largest bank in Tennessee, the seventh largest bank in the Memphis, TN, metropolitan area and the 14th largest bank in the Nashville, TN, metropolitan area based on FDIC deposit market share data as of June 30.

Under the terms of the merger agreement with Spirit, Simmons will issue approximately 18.325 million 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 proposed transaction is estimated to be accretive to Simmons’ earnings per share by approximately $0.22 per share (9.8%) in 2023. The estimated transaction returns are consistent with Simmons’ stated acquisition criteria pertaining to tangible book value and targeted internal rates of return. Simmons expects to achieve cost savings of approximately 35% of Spirit’s noninterest expense base, with approximately 50% achieved in 2022 and 100% thereafter. While revenue synergies have been identified, they have not been included in any estimates or projections.

The proposed transaction, which was approved by the boards of directors of Spirit and Simmons, is subject to approval by Spirit’s shareholders, regulatory approval and other customary closing conditions. Pending the satisfaction of these approvals and other conditions, Simmons expects to close the proposed transaction during Q2/22.

Keefe, Bruyette & Woods served as financial advisor to Simmons, and Covington & Burling served as Simmons’ legal advisor. Stephens served as financial advisor to Spirit, and Hunton Andrews Kurth served as Spirit’s legal advisor.