After 119 years in business, Iberiabank of Lafayette, La., is taking its first steps outside its home state by acquiring the $736 million-asset Pocahontas Bancorp Inc., in Jonesboro, Ark.
The $3 billion asset Iberiabank Corp. said Thursday that it has a deal to acquire the struggling thrift in a stock swap valued at about $76 million, or 1.48 times book value. The deal is expected to close this year.
“This is our first expansion outside of Louisiana,” Daryl G. Byrd, the president and chief executive officer of Iberiabank, said on a conference call with analysts. “We believe this transaction is not only fairly priced but also allows us to enter an attractive market.”
Iberiabank executives touted the profit potential of Jonesboro, the largest city in northeast Arkansas and the fifth-largest city in the state, as a regional hub for agriculture, manufacturing, medicine, trade, and education.
The 25-branch First Community Bank, the sole banking subsidiary of Pocahontas, is the fourth-largest bank headquartered in Jonesboro. It had a 9% deposit share there as of June 30, 2005.
“I wouldn’t characterize” Jonesboro “as a dynamic growth market,” said Adam Barkstrom, an analyst at Stifel Nicolaus & Co. Inc. in St. Louis. However, the market presents Iberibank with “some competitive opportunities.”
Perhaps more importantly, Jonesboro is within striking distance of higher-growth markets in the region, such as Little Rock, Memphis, and Tulsa.
Mr. Byrd would not detail plans for further expansion, except to say, “Those are the three markets we like a lot and probably where you’d see our focus.” Iberiabank is “always out there talking to folks.”
It plans to retain Pocahontas’ thrift charter, which would allow Iberiabank to branch into any state.
First Community has struggled with asset quality; as of June 30 of this year it had $2.4 million of nonperforming assets on its books, or 0.33% of its total assets. Its efficiency ratio of 85% was far worse than the 66% average for thrifts of its size, and its net interest margin of 2.32% was significantly lower than the 3.24% average for thrifts of its size.
Michael J. Brown, Iberiabank’s chief credit officer, said on the conference call its management would be able to resolve the asset quality issues.
“It’s really just a question of bringing” First Community’s underwriting systems “in line with our credit procedures,” he said.
Mr. Barkstrom expressed confidence in Iberiabank’s senior management team. Even though First Community’s asset quality issues will not be resolved overnight, “over time I feel very confident that they’ll be able to deal with that,” he said.
