If it seems like a lot of local banks are announcing mergers and acquisitions these days, they are—and you can expect more such activity on the horizon, says Investar Bank President and CEO John D’Angelo.
At the recent Acquire or Be Acquired 2020 conference in Phoenix, an annual event organized by the consulting firm Bank Director, D’Angelo served on a panel that discussed industry trends. His key takeaway:
“I think we’re going to see more and more of these mergers and acquisitions,” he says. “For a while, it was the small banks. Now, you’re seeing more MOEs—merger of equals.”
A recent example locally of the MOE trend is last fall’s acquisition of Lafayette-based IberiaBank by Memphis, Tennessee-based First Horizon. At the time the deal was announced in November, IberiaBank had $31.6 billion in assets and $25 billion in total deposits, while First Horizon had $43.5 billion in assets and $32.3 billion in total deposits.
Giving rise to the recent trend, D’Angelo says, is a less stringent regulatory environment.
“After the recession, in 2008, 2009, regulators made it difficult for big banks to do anything, so it slowed big banks from being able to do mergers,” he says. “But with the merger of Sun Trust and BB&T it signaled that market regulators would allow big banks to merge, so now you’re going to see all kinds of things.”
BB&T and Sun Trust Corp. announced a merger in Feb. 2019, which, when completed late last year, created the sixth-largest bank in the U.S.
Closer to home, Business First Bank recently announced its plans to acquire Pedestal Bancshares, which, when completed, will be the third-largest bank headquartered in Louisiana, with total assets of some $3.5 billion.
Investar also has been on an acquisition spree, though D’Angelo says rather than engaging in MOEs, his bank’s strategy has been more focused on acquiring smaller banks, or what Wall Street analysts call “small ball.”
“We have embarked on a roll-up strategy, rolling up all these little banks,” he says. “We see it as an opportunity to go into new markets. We also see it as a less-risky strategy. If something went wrong, it wouldn’t sink us.”
Investar will have total assets of some $2.6 billion once it completes pending acquisitions later this year, he says.
Other key takeaways from the conference:
• Credit unions are getting in on the act. Traditionally, they stayed in their own lane. Lately, they’ve become more aggressive about buying banks and “are growing by leaps and bounds,” D’Angelo says.
• Big data keeps getting bigger. Banks have been traditionally slow to take advantage of what’s out there. “Now, they are waking up, saying we have this wealth of customer knowledge and we’re not taking adequate advantage of it,” he says.
• The talent crisis exists in banking, too. What’s worse, banks don’t train employees like they used to, exacerbating the problem. “You don’t have the training mechanisms in place anymore,” D’Angelo says. “All the banks are dealing with that.”