Wednesday, April 27, 2011

Three banks. Three months. Four acquisitions.  By Heather Miller

Since Whitney Bank announced in December its plans to merge with Mississippi-based Hancock Bank, Louisiana banks have had a bit of M&A fever — and Lafayette’s become the center of all things acquisition.

The string of recent acquisitions for three Lafayette-based banks — IberiaBank, MidSouth Bank and Home Bank — began in February when IberiaBank announced its plans to purchase Metairie-based Omni Bank. The announcement came weeks after IberiaBank lost its bid to acquire Whitney, and less than three weeks before IberiaBank bounced back with another press release stating its plans to buy Cameron State Bank of Lake Charles. Amid the two major in-state acquisitions, IberiaBank also revealed it is taking on “certain assets” of Florida Trust Co., a Bank of Florida subsidiary.

While IberiaBank was busy expanding its footprint in New Orleans and Lake Charles, Home Bank was doing its due diligence to acquire Guaranty Savings of New Orleans, a move announced March 31. And four days after Home Bank publicly stated its plans, MidSouth reported it will buy five branches of Jefferson Bank in the Dallas/Fort Worth area.
So why the sudden boom in acquisitions from Lafayette’s major banking players?

ABiz sat down with IberiaBank Lafayette Market President Jerry Vascocu, MidSouth President and CEO Rusty Cloutier and Home Bank President and CEO John Bordelon to get their take on why Lafayette banks have suddenly — and not so suddenly — emerged in the acquisition world.
For all three execs, the answer is pretty simple.

“The quality of our market has been built over the past couple of decades, with a lot of very sound banking practices built in,” Vascocu says. “A lot of them came on the heels of some tough lessons back in the ’80s. We’ve got conservatism built into our operation, what kind of loans we make, what type of customer we hope to get the chance to work with. We have folks in our company that were in Lafayette at that time, and stuck to their guns then and continue to stick to their guns now. We’ve created safe investments because fundamentally the banks in our market stuck to their guns and allowed the bank to hold on to its capital, so the new investors don’t feel they’re putting their money at risk.”

IberiaBank, MidSouth and Home Bank all vary in terms of size and market share. IberiaBank, which boasts branches in six states, is slated to become the largest bank in the state when the Whitney-Hancock deal closes, while MidSouth, which also has branches in East Texas, will be the largest federally chartered bank in the state. Home Bank is the smallest of the three, has no branches outside of Louisiana and became a publicly traded bank less than three years ago. (Ironically, Bordelon says the bank went public on Oct. 3, 2008, the same day Congress signed the “bank bailout” bill into law.)

But all three banks have common denominators, like discipline, sound banking practices and other critical factors that have played well into their success and their ability to raise the needed capital for expansion efforts.

“It stems from not changing the way you evaluate loans and credits,” Bordelon says. “We established our credit matrix 15-20 years ago, and although the economy really took off in those 15 years, a lot of banks changed the way they underwrite and loosened those standards. At the end of the day, it’s loosening your lending criteria for the sake of making loans. We just didn’t do that. We may have seen smaller growth than the banks that are having trouble, but we don’t have the problems they are [having]. The great thing about not having these problems is we can focus on our existing customers and potentially building new customers instead of worrying about the bad loans.”

Cloutier recalls a recent drive through New Iberia, where he observed, with nostalgia, the former IberiaBank tower that headquartered the bank until its move to Lafayette. The building, no longer used by IberiaBank, is symbolic of the growth and the shape the banking industry here has taken since the oil and gas industry collapse and the savings and loan crisis of the late ’80s.

“It was built it in the late ’70s, and everybody thought at the time IberiaBank would never grow into that facility. Now they’ve grossly outgrown it,” Cloutier says. “We were all so small on the radar back then [in the ’80s]. All three of us have been very disciplined. Without capital you can wish all you want, and we’ve spent the last few years raising the capital we need. There’s a lot of investment bankers whose planes stop in Lafayette. All of us have made a lot of people in Acadiana pretty wealthy. They’ve been pretty happy with their [investment] returns.”

Both Home Bank and IberiaBank took advantage of the “new type” of acquisition from failed banks that were shut down by the FDIC amid the economic downturn over the past three years. IberiaBank took part in five of those, and Home Bank outbid both Iberia and MidSouth last year when it purchased six Statewide Bank branches in St. Tammany Parish through an FDIC failed bank deal.

Meanwhile, MidSouth has spent the past few years focusing on its East Texas expansion. With the acquisition of Beaumont-based Lamar Bank in 2004, MidSouth’s name spread to College Station, Vidor and Conroe, and MidSouth later opened branches in Houston.

“People think there’s real competition between the three of us, but there are so many opportunities,” Cloutier says. “We compete, but we really don’t; we can go in so many different directions with the opportunities around us. It could be very difficult for a small bank to survive. The cost of operations has gone through the roof; regulations are running them out of business.”

For Iberia and MidSouth banks, the out-of-state expansion efforts likely aren’t going to stop. The two in-state expansions for IberiaBank “show our commitment to Louisiana,” but Vascocu and Cloutier say out-of-state opportunities are on the rise.

For Home Bank, the mission of a greater presence in South Louisiana tops any thoughts of opening new branches outside of Louisiana. The I-10 and I-12 corridors have been a great success for Home Bank, Bordelon says, and he doesn’t see that strategy changing anytime soon.

And though the strategies and end goals may differ, the three banks collectively credit Lafayette as a major part of each bank’s success.

“We reach out to the best and the brightest in all our markets, and there are a lot of bright people in this market,” Vascocu says. “It’s an unusually successful town. As a relatively new person to Lafayette, I hear people talk about the work ethic of these businesses, the employees that we have a chance to work with. In addition to the businesses themselves, it is top to bottom hard working people. As we’ve gone outside the state, people are interested in the story of this bank, this community. It’s a great story to tell. We’re very fortunate to be here at this time, for this to be our launching pad for other acquisitions over the past few years and for the future.”