Duplicate branches to be closed, but details not released
IberiaBank Corp., of Lafayette, which has grown to be the largest bank with headquarters in Louisiana and a regional power through out-of-state acquisitions, reset its sights in-state Monday with a $161 million stock deal to buy Teche Federal Bank, of New Iberia.
The acquisition is expected to result in a significant consolidation of overlapping headquarters and branch operations.
The two banks’ headquarters are 30 miles apart. Eight of Teche’s 20 branches lie within a mile of an existing IberiaBank branch, an investor presentation filed with the U.S. Securities and Exchange Commission shows.
The overlap affects all four of Teche’s branches in Lafayette, all three in New Iberia and one of three in Baton Rouge.
The deal will generate pre-tax savings of $19 million a year, with $11.4 million coming from reduced employee compensation and benefits costs, said John Davis, IberiaBank’s senior executive vice president.
The total savings amounts to more than half of Teche’s total expenses, but some cuts will be made on the IberiaBank side.
Davis spoke during a conference call with stock analysts and investors.
“Usually that money is saved by the elimination of the front office at the acquired company and then the replication of those branches,” said Peter Ricchiuti, who heads Tulane University’s small cap research fund.
Teche had 256 full-time employees as of Sept. 30.
IberiaBank Chief Executive Officer Daryl Byrd said duplicate branches from either company could be shut down. It depends on which branch performs better, he said.
“I look at it as we’re one team today, and we want to pick the very best people.”
IberiaBank expects to end up with some large branches in Acadiana, which will increase efficiency and ultimately lower costs, he said.
Byrd steered clear of specifics on layoffs.
“I have an idea, but I really want to be careful in trying to put numbers around that until we get further in the process,” Byrd said.
IberiaBank plans to use attrition where possible, he said. “Tellers have a high turnover rate, 20 percent a year.”
“We tell people, try to have a great attitude. We’d love to find jobs for people with great attitudes.”
Ricchiuti said the message from IberiaBank is that the Acadiana economy, which is very good now, is going to remain strong.
In essence, IberiaBank is doubling down on its investment in south Louisiana, he said.
“You can argue whether IberiaBank has been good or lucky” in past deals, Ricchiuti said. “But you’ve got to look at the acquisitions and think, ‘They’ve been on the right side of a lot of deals.”
Byrd described the deal as “a win-win scenario” for both companies’ shareholders and the communities they serve. The deal is expected to boost IberiaBank per-share earnings by 6 percent in 2015.
Patrick Little, Teche chairman, president and chief executive officer, said the deal provides “tremendous” near- and long-term value to Teche shareholders.
Under the agreement, Teche shareholders will receive 1.162 shares of IberiaBank common stock for each share of Teche common stock.
Based on IberiaBank’s Friday closing price of $62.10, each Teche share would be worth $72.16, or 32 percent more than their Friday closing price.
IberiaBank’s shares closed Monday at $62.04, down 6 cents.
Teche shares closed at $70.17, up $15.67, or 28.8 percent.
Ricchiuti said Monday’s price jump for Teche is the latest milestone in a remarkable six-month run.
“Teche is up 30 percent today. It’s up 50 percent from what it was a month ago, and it’s doubled from what it was six months ago,” Ricchiuti said. “That’s really impressive.”
Teche has done something very smart for the past four or five years, he said. In addition to being a well-run company, the bank has been very aggressive at buying back its own shares, which many times were priced at less than the book value, or total value of the assets.
Davis said Teche drove the deal announced Monday. The details of that process will probably be included when Teche issues the proxy for the agreement, he added.
IberiaBank started in Louisiana and expanded to Texas.
When others were entering Florida, IberiaBank went to Arkansas and waited for Florida to collapse, Ricchiuti said.
Once it did, IberiaBank picked up a huge banking system in Florida, mainly by gobbling up failed institutions from the Federal Deposit Insurance Corp. at little or no cost.
IberiaBank has 264 locations, including 168 branches in Louisiana, Arkansas, Tennessee, Alabama, Texas and Florida; 21 title insurance offices, in Arkansas and Louisiana; and mortgage representatives at 62 locations in 12 states.
IberiaBank has $13.1 billion in assets. The company has more than 2,600 employees.
In addition to its branches in New Iberia, Lafayette and Baton Rouge, Teche Federal has three locations in Houma-Thibodaux, two in Franklin and one each in Bayou Vista, Breaux Bridge, Eunice, Morgan City and Opelousas. Teche has $857 million in assets.
Byrd said the two financial institutions have much in common.
They started life 30 miles apart as savings and loans, owned by members. Each converted to stock form and then to commercial bank charters, Byrd said.
Both became leading financial institutions in Acadiana. They formed holding companies less than two weeks apart and went public less than two weeks from each other.
According to an IberiaBank SEC filing, Teche will provide a federal WARN notice for any employee terminations or layoffs after the deal is completed — if IberiaBank makes a written request.
Under the Worker Adjustment and Retraining Notification Act, an employer must provide 60-day notice of a mass layoff, or one involving at least one-third of the company’s workers.