IberiaBank Deal Draws Mixed Reviews
(NEW ORLEANS) – Yesterday’s news that IberiaBank is combining with First Horizon — a bank of similar size based in Memphis, Tenn. — is generating mixed reactions among south Louisiana banking experts.
Guy T. Williams, the president and CEO of Gulf Coast Bank, said the merger is obviously good for stockholders but bad for employees and for the state overall.
“From an investor’s perspective it’s a good deal because it creates a regional bank of scale that will be more competitive with the giant banks,” said Williams. “The unfortunate reality is that banking today is a game of scale so we’re seeing a lot of consolidation to keep up with the four biggest banks [Chase, Citibank, Wells Fargo and Bank of America].”
IberiaBank, based in Lafayette, is currently Louisiana’s largest bank and has been one of the state’s biggest success stories in recent decades as it grew and expanded from south Louisiana into Texas, Arkansas and other neighboring states. The news that the bank is joining forces with First Horizon is being greeted as inevitable by some observers even while other offer concern about the effects of moving the combined bank’s headquarters out of state.
While the move is being touted in the bank’s press release as a “merger of equals,” the fact remains that the combined bank will take First Horizon’s name and the headquarters will be stationed in Memphis. First Horizon’s shareholders will own a majority of the bank.
Williams said this new combined venture, which will rank in the top 25 in deposits in the country, will be more competitive with the banking behemoths — but it “doesn’t really get IberiaBank anywhere because it’ll be gone. It’s been sold and the headquarters are moving to Tennessee.
“If you look at the history of mergers — even of equals — somebody always ends up in charge. That’s where the power and prestige jobs and corporate philanthropy are so you want to be in the headquarters city.”
Peter Ricchiuti, a Tulane University business professor and host of the “Out to Lunch” radio show, said that many industry watchers were expecting a deal like this to happen. In large part, the IberiaBank merger is due to the tremendous success it’s experienced over the last few decades.
“The history of IberiaBank is that Daryl Byrd [and some other former First National Bank of Commerce] execs bought IberiaBank in Lafayette … and turned it into one of the most amazing successes in the last few decades in this area,” said Ricchiuti. “They did all the right things.
“They went to Texas and did very well and then when a lot of Louisiana banks went into Florida around 2005 — just in time for the meltdown of 2008 – these guys went into Arkansas instead. They avoided disaster.
“The thing is we always thought somebody would want to buy them out and this new group in Memphis is a perfect match. All the locations are in the south and there’s very little duplication of branches – the only overlap is Florida.”
Ricchiuti hopes any negative local impact of the deal will be minimal.
“Yes there’ll be some cutbacks,” he said. “You never want to see another Louisiana company disappear – they’re kind of dropping like flies.”
Kenneth Pickering, the senior partner at law firm Pickering and Cotogno and a former state banking commissioner, agrees that the deal was essentially inevitable because of the industry’s move toward consolidation. He said the number of banks in the country has shrunk from more than 14,000 in the late 1970s to about 4,000 today.
“Regional banks are combining and as this is a merger of equals I think that’s going to continue to happen,” he said. “My firm is involved in two different mergers that will be announced soon. One is combining two Louisiana banks and the other involves a Louisiana bank buying an out-of-state bank.”
Pickering also said that, because of the mergers, there’s actually an opportunity for someone to come into the market and create new banks.
Meanwhile, after the announcement that IberiaBank will join with First Horizon, Williams said the biggest bank in the state now is … Origin Bank in Ruston?
Said Richiutti: “You’d win a drink in a bar if you bet people that the biggest bank in Louisiana is based in Ruston.”