Pressure is on Daryl Byrd to prove Iberiabank's value
Daryl Byrd took a roller-coaster ride in 2017.
Byrd, the president and CEO of Iberiabank in Lafayette, La., had his highs, including the $1 billion purchase of Sabadell United Bank in Miami — the fourth-biggest bank deal of the year — and a subsequent agreement to buy Gibraltar Private Bank & Trust.
Then there were the lows, such as lingering issues with energy-related exposures and the aftermath of the hurricanes that hit the $28 billion-asset Iberia’s operations in Florida and Texas.
Investors, skeptical about the recent deals, are eager for the company to improve profitability and wring out the benefits from Sabadell. Iberia’s stock price is down 6% in a year where the KBW Nasdaq bank stock index has gained about 16%.
The focus is squarely on Byrd to make the most of his acquisitions, improve Iberia’s stock performance and settle shareholders’ nerves. For those reasons, American Banker has selected Byrd as one of its Community Bankers to Watch in 2018.
“The stock has struggled,” said Chris Marinac, an analyst at FIG Partners. “The naysayers have grown in their numbers. But Iberia has huge opportunities and a lot going for it.”
Part of the disappointment stems from an inability to consistently meet earnings expectations. As of Dec. 22, Iberia’s stock traded at 184% of tangible book value, compared with 233% for a list of 23 peers with $4 billion to $10 billion in market capitalization, Marinac said.
Some investors were hopeful that the third quarter would allow Iberia to stand out. Instead, Iberia fell short of Wall Street expectations after recording a series of charges, including expenses tied to Hurricanes Irma and Harvey, a settlement with two former employees and chargeoffs related to problem energy credits.
The $223 million deal for Gibraltar, announced in late October, caught many industry observers by surprise, stoking fears that it will continue to add noise to the company’s financials.
“The timing of the Gibraltar deal surprised us,” said Matt Olney, an analyst at Stephens. “They announced that so quickly.”
The company’s earnings have fluctuated wildly in the last four years. Results have ranged from 73 cents a share in the first quarter of 2014 to $1.18 a share in the second quarter of 2016, excluding one-time charges, Marinac said.
“It’s muddy quarter to quarter,” Marinac said. “There are some things like the hurricane that you can’t control … but that constant noise acts as an irritant. Iberia needs to stop that noise and get its EPS numbers up.”
There has also been dissatisfaction with communication from management at times. For instance, management failed to clarify Iberia’s expense run rate after its purchase of Sabadell during an investor day in September, said Casey Haire, an analyst at Jefferies.
“That, plus the storms, have created a lot of noise in the third quarter and the expenses missed by a wide margin,” Haire said. “Then they announced another deal. I agree their communication has not been the best.”
Byrd did not comment for this story.
While highly unlikely that Iberia will announce another deal in 2018, industry observers said they believe Iberia will eventually return to dealmaking. Byrd has used more than 15 bank acquisitions to take the company from $2 billion in assets to nearly $30 billion in assets over almost two decades.
Byrd, for his part, seemed to de-emphasize acquisitions during Iberia’s third-quarter earnings call.
“In general going forward, we do like the in-market transactions and transactions that we can get good pricing,” Byrd said. “There're just not very many of them. So, while something could happen, just trying to think the combination of end-market versus price, I would expect to see the activity pretty limited for us.”
Iberia has some opportunities heading into 2018, industry observers said.
The company has strong capital levels and good market share in Louisiana, Marinac said. Tax reform should help, and Iberia could also see a boost to lending activity from post-hurricane rebuilding, Haire said.
Overall credit quality is solid because management avoided sectors such as construction that caused headaches for other institutions during the financial crisis. At the same time, Florida’s economy is generally more dynamic than some of Iberia’s other markets, Olney said.
“Moving more into Florida makes more sense as far as being growth-focused, although some … people believe it can result in a volatile credit history,” Olney said. “The state will go through the boom-and-bust cycles, and Iberia will be part of that going forward.”
Gibraltar, a bank that Byrd first pursued in early 2014, also gives Iberia a foothold in New York, which Byrd touted during the company’s last earnings call.
“We have sort of some unique knowledge of New York,” Byrd said. “I've had children who've gone to school up there. I've spent a lot of time in the New York area over the last 15 years, and I have a lot of friends up there. So I think it's an intriguing market for us and certainly an opportunity.”