The uber-capitalized Iberiabank Corp. may soon have a way to put its extra cash to work.
The $5.5 billion-asset company raised $143 million Tuesday, adding to the $110 million it raised in December. Analysts said the Lafayette, La., company would not have diluted shareholders again unless it had a plan in mind — either one big purchase or several smaller ones, probably adding in the neighborhood of $2.5 billion of assets.
"They have a pretty sizable war chest built, and now they have to deploy that capital" through acquisitions, said Mark Muth, an analyst at Howe Barnes Hoefer & Arnett Inc. "My gut reaction is: They raised a lot of money on the heels of raising money back in December. They have diluted shareholders pretty significantly here. If they didn't have something fairly imminent, they wouldn't have done so. They must see some pretty near-term opportunities to capitalize."
Opportunities in Southern states, where Iberiabank is expected to focus, should be plentiful, industry watchers said.
Jeff Davis, a senior analyst at First Horizon National Corp.'s FTN Equity Capital Markets Corp., said that Iberia may be keeping an eye on banks like Colonial Bancgroup Inc. in Montgomery, Ala.; Peoples First Community Bank in Panama City, Fla.; Central Progressive Bank in Lacombe, La., and Guaranty Bank in Austin, which are considered to be on the brink of failure.
The potential target banks either did not return calls seeking comment or declined to comment.
But Davis said some of the larger companies could be sold off in pieces if they failed, giving Iberia a chance to buy.
"You want to be ready," Davis said, adding that Iberia will have plenty of competition from other well-capitalized bidders.
"They have capital, and they don't have asset-quality issues … but they aren't the only ones," he said. "They eventually will make a lot of money at the expense of failed competitors."
Others likely to be interested in buying failures include Comerica Inc. in Dallas; Hancock Holding Co. in Gulfport, Miss.; Trustmark Corp. in Jackson, Miss.; BancorpSouth Inc. in Tupelo, Miss., and BB&T Corp. in Winston-Salem, N.C., Davis said.
Hancock acknowledged that it would be open to considering such deals. The others declined to comment or did not return calls.
Iberia's offering at $39 per share was well received by the market. The company increased the initial size by $10 million, to $150 million, with an option for underwriters to buy an additional 15%.
Iberia did not return calls, but said in a Securities and Exchange Commission filing that the capital it raised would be used for possible future acquisitions, general corporate purposes, working capital needs and investment in its subsidiaries to support their growth.
Iberia was among the first to return funds it got from the Treasury Department's Troubled Asset Relief Program; it repaid the government's $90 million investment in the first quarter.
When it initially took the money, Iberia had said it would look for acquisition opportunities.
Andy Stapp, an analyst at B. Riley & Co. Inc., said the fresh capital would come in handy for Iberia, because of the growth it is experiencing from recent hiring.
But deals for failed banks through the Federal Deposit Insurance Corp. are on its mind too, Stapp said.
"They believe that the credit cycle will be deeper and longer than most industry observers perceive," he said. "As a result they think that there will be an abundance of acquisition opportunities, especially FDIC-assisted deals."
Stapp said that even before Tuesday's capital raising, Iberia had better capital ratios and asset quality than many of its peers.
"I consider them a strong management team, and they must have some plan in the works to make it accretive to shareholders in a relatively prompt fashion," he said.
Stapp said the new capital would boost the company's tangible common equity ratio to about 10%, from an already healthy 7.5%. The median ratio for small-cap banks at March 31 was 6.4%.
Guidance from the company on second-quarter results said the ratio of net chargeoffs to average loans would be 0.32% to 0.37%. Nonperforming assets are expected to rise to $56 million to $60 million, compared with $52.7 million at March 31.
Christopher Marinac, an analyst at FIG Partners LLC, said the new capital puts Iberia in the "catbird seat."
"These folks think strategically," he said. "They are not just interested in being a Louisiana bank. Iberia may go in and add additional markets, contiguous markets that would make sense. Alabama and Tennessee would make sense. Who is to say they don't do a larger regional strategy? The executive team has ties to the Carolinas. In three or four years, Iberia could have a much larger map than Louisiana and Arkansas."
