A common strategy for banks in slow-growing southern states is to buy banks in Florida or Texas, but Iberiabank Corp. in Lafayette, La., prefers markets where there is less competition.
The $3.2 billion-asset Iberiabank is nearing completion of two deals in Arkansas, and president and chief executive officer Daryl G. Byrd said it is also considering expansion opportunities in Mississippi.
"You have banks from all over the country trying to get into Florida," Mr. Byrd said this week. "You've got five to 10 branches on every corner [there]. What competitive difference do you really bring to the table in that kind of environment?"
In Arkansas, however, "the competitive dynamics are nowhere near as severe or as difficult as Florida or Texas," Mr. Byrd said.
Arkansas, to be sure, has its growth markets, including Little Rock and the northwest region of the state, where industry giants Wal-Mart Stores Inc. and Tyson Foods Inc. are headquartered.
But out-of-state banks are not clamoring to get into Arkansas. Besides Iberiabank, only two other out-of-state banking companies have made deals for Arkansas banks in at least the last three years.
The 120-year-old Louisiana company announced in late July that it would buy $736 million-asset Pocahontas Bancorp Inc. in Jonesboro — its first-ever out-of-state acquisition. Two weeks later, it said it would buy the $502 million-asset Pulaski Investment Corp. in Little Rock. The Pocahontas deal is scheduled to close this week, and the Pulaski deal is expected to close within three months.
Mr. Byrd said he sees plenty of opportunities to steal market share in Arkansas, particularly from "large national banks that we see as a bit clumsy with relationships. We like competing in that kind of market."
The $143 billion-asset Regions Financial Corp. in Birmingham, Ala., which some analysts say could face runoff of staff and customers as it occupies itself with its recent purchase of a Birmingham rival, AmSouth Bancorp, has the No. 1 market share, with just under 10% of Arkansas' deposits, according to June 30 data from the Federal Deposit Insurance Corp. The $1.4 trillion-asset Bank of America Corp. is No. 3, with 5% of the state's deposits.
Regions and Bank of America "have consistently lost retail market share to the community banks, so in that respect, there's an opportunity" for Iberiabank, said Barry McCarver, an analyst at Stephens Inc. in Little Rock.
Regions declined to comment on Iberiabank's entry into Arkansas. A Bank of America spokeswoman said, "We welcome the competition."
Chris Marinac, an analyst at FIG Partners LLC in Atlanta, said that he expects Iberiabank to do well in Arkansas — as long as it can retain the management teams of the banks it is buying.
"They are wired differently than a lot of other banks," he said. "Being based in Louisiana, they've always dealt with, I would say, inferior demographics but superior market share and a lot fewer new competitors."
"My sense is that Iberia views Arkansas as another Louisiana, as a place where there is some big market share that could get unlocked," Mr. Marinac added.
Overall, Mr. McCarver said the demographics in Arkansas are "pretty darn good."
"In fact I'd tell you that Arkansas as a whole has probably got one of the best loan markets of anywhere in the South, for its size," he said. Wal-Mart and Tyson are major growth engines, he said, and a recent natural gas discovery in Arkansas could spur economic development.
Indeed, some Arkansas banks of similar size are thriving. The $2.5 billion-asset Bank of the Ozarks in Little Rock reported loan growth of 22.4%, to $1.7 billion, during 2006 — the bank's largest-ever annual increase. And the $2.2 billion-asset Home BancShares Inc. in Conway, Ark., reported 18% loan growth last year, to $1.4 billion.
Iberiabank's geographic proximity to Arkansas and its contacts in the state should help it succeed in the new market, Mr. Byrd said. "We have a franchise in north Louisiana, and we have individuals in north Louisiana who have banked in Arkansas for some time," he said.
The pending deals would also open the door to expansion into other states.
A Pocahontas subsidiary, First Community Bank, has a federal thrift charter that Iberiabank plans to retain and use to branch into other states. Pulaski has two branches in the Memphis area and has mortgage production offices in Missouri, Oklahoma, Texas, and Mississippi.
Mr. Byrd said that Iberiabank is interested in using Pulaski's northern Mississippi loan office as a platform for expansion in that state, particularly along the coast.
"It has a lot in common with New Orleans," he said.
