There’s soon to be a new king in Louisiana’s banking castle.
Should Mississippi-based Hancock Bank complete its acquisition of Whitney National Bank—possibly by the end of April—Lafayette-based IberiaBank will emerge as the largest financial institution headquartered in Louisiana.
It’s the third bank to wear the crown in less than a decade. Hibernia held the distinction until Capital One Financial Corp. purchased it in 2005. The title then went to Whitney, until it got into trouble in the Florida loan debacle and began courting buyers.
So how did IberiaBank achieve this newfound status, and what does it mean for Louisiana?
What began in New Iberia in 1887 as the Iberia Building Association changed its name in 1956 to Iberia Savings & Loan. When the S&L crisis hit in the 1980s, it amended that part of its name in favor of Iberia Savings Bank.
The growth took off a year later, when it began acquiring other banks almost annually. Its initial stock offering occurred in 1995, and a year later it became IberiaBank. Since then, the institution has spread its reach beyond Louisiana to Alabama, Arkansas, Florida and Texas.
IberiaBank arrived in the Baton Rouge market in 2004, when it merged with Alliance Bank. Today, it has four branches: Essen Lane at Interstate 12, Coursey Boulevard at Market Street, Highland Road near Kenilworth Parkway and Perkins Road across from Perkins Rowe. A fifth location is planned on Airline Highway near Pecue Lane, across from the new Woman’s Hospital campus.
In 2008, IberiaBank planned to take advantage of the U.S. Treasury Department’s Troubled Asset Relief Program. That was until the regulations for healthy banks became unfavorable, and IberiaBank became the first in the country to change its mind.
Instead, the institution raised $282 million in capital, and in late 2009 bought two failing Florida banks: Naples-based Orion Bank and Sarasota-based Century Bank. The move increased IberiaBank’s assets to $10 billion, jolting it virtually overnight into national megabank status.
Rajesh Narayanan, the Charles Cameron Professor of Finance at LSU’s E.J. Ourso College of Business, says those acquisitions were critical for two reasons: First, they were deposit-rich markets. And second, Florida is widely predicted to be a growth market in the coming years.
“That’s why everybody is interested in Florida,” he says. “Florida has historically been deposit-rich, and Orion and Century were serving customers in Boca Raton, Palm Beach and other traditionally wealthy, affluent communities with large deposit bases. The demographics are also trending in such a way that Florida is going to see a lot more people move in there.”
Adds Jonathan Briggs, managing director of the New Orleans investment firm Chaffe & Associates: “Because they got in at such a low price, they’ll be able to recognize high returns when the growth does come.”
More recently, IberiaBank is widely believed to have been the initial suitor to buy Whitney Bank, until Hancock came in and struck a deal.
The merger is being legally challenged by Realistic Partners, which claims Whitney Chairman/Chief Executive Officer John Hope “sought to protect and advance his own interests at the expense of Whitney’s public shareholders,” and that Whitney directors breached their fiduciary duty to shareholders because the process they used to vet potential suitors was flawed.
“It doesn’t appear that the decision was in the best interests of the shareholders. The shareholders would have done better, it appears, with the Iberia offer,” Randy Smith, an attorney for Realistic Partners, told The Times-Picayune. “It raises the question of to what extent it was based on preference for Hancock, or animus toward Iberia, and to what extent it was based on individual benefits to executives and directors, as opposed to what’s best for the shareholders. I don’t think we know the full story at this point.”
A shareholder vote was planned for the end of March, so the deal could close April 30.
Ben Marmande, president of IberiaBank’s Baton Rouge market, declined to comment on whether IberiaBank had any interest in buying Whitney.
Shopping spree
In a time when banking industry reports read like pages ripped from a John Steinbeck novel, IberiaBank finds itself in a position to shop for new opportunities. What helped, Briggs says, was that when the economy started declining, IberiaBank’s basic footprint was in Louisiana, a state that wasn’t hit hard by the housing crisis. Last year, Louisiana ranked 38th nationally for foreclosures.
The bank didn’t chase after subprimes and derivatives. It also didn’t hurt that Louisiana’s economy is very much energy- and agriculture-based, and prices for commodities and oil and gas held up well.
“They were just careful and conservative,” Narayanan says. “In Louisiana, we haven’t had the same kinds of problems other states have experienced. We are in a growth cycle, and we avoided much of the misery that was visited on others.”
The bank also has a calculated strategy of sticking to the markets that it knows well; basically, the Southeast. IberiaBank President/CEO Daryl Byrd points to a footprint that runs from Virginia through Florida to Texas.
“We’ve really honed in on the people and the markets that we know,” Marmande says. “Our leadership team has lived across the Southeast, and we continue to look for opportunities that are complementary to our existing market and team. We’re growing in what is our legacy market. We have not gotten out of our area of familiarity.”
Market analysts say the banking ownership shuffle is far from over.
In 2010, 157 FDIC-insured banks failed; as of press time, 18 have failed so far this year. On top of that, increased regulatory requirements and costs of doing business—particularly when it comes to technology—are convincing smaller banks in Louisiana and across the country to seek consolidation.
Briggs predicts IberiaBank likely is only at the beginning of its shopping spree for banks inside, as well as outside, Louisiana.
IberiaBank has an important factor in its favor: Confidence from the FDIC and shareholders. The institution has adequate capital and the experience of having completed such transactions before.
“I suspect we’re only at the beginning of the consolidation wave, and we’re going to see more and more of these mergers,” Narayanan says. “IberiaBank is one that has been successful at it, which plays well in the bidding, and they are also well capitalized. They are the kind of suitor that the FDIC looks for in trying to auction off an asset. And the market is willing to absorb the equity so they can fund a lot of their acquisitions. The market apparently believes they are making careful and good acquisitions, in the sense that it benefits IberiaBank shareholders.”
But Marmande says IberiaBank’s mission isn’t about size.
“We are very thorough in our due diligence, and we’re very methodical and strategic about each acquisition,” he says. “With our footprint today, we have a very good ability to grow organically, so there’s no pressure to buy.”
Having what is viewed as one of the financially soundest banks in the Southeast headquartered in Louisiana doesn’t hurt. Analysts say it boosts the state as a major player and center of influence in the banking industry.
Maintaining this publicly owned megabank’s headquarters in Louisiana is synonymous with having any major corporation headquartered in the state; it means high-paying jobs and economic resources.
“We’re very bullish on Louisiana, and that won’t change,” Marmande says. “We’ve earned a reputation for being a good steward of capital, and a good steward within the market that we serve, and we intend to maintain that.”
