Regional Banks See Challenges Ahead
NEW ORLEANS (AP) — Publicly traded regional banks participating in the recent Gulf South Bank Conference told investment analysts in New Orleans that they're focused on growth, dealing with regulatory changes, finding new revenue sources and building technology platforms.
Gulfport, Miss., based Hancock Holding Co. said its main focus is taking advantage of opportunities derived from uniting Hancock Bank and the former Whitney National Bank of New Orleans into one $20 billion company.
With the remaining rules taking effect from the Durbin Amendment — legislation that limited how much money banks can earn from debit card transactions — Hancock stands to lose about $2 million in fee income during the third quarter. The Times-Picayune reports (http://bit.ly/MifoQl) Carl Chaney, Hancock's chief executive, said his bank is looking for ways to make that up.
One opportunity cited by Hancock and other banks is that as certificate of deposit accounts mature and customers shun buying new ones because of the low yield rates, banks are eager to transition customers to lower-cost transaction accounts, such as checking, where banks have a better opportunity to earn money.
Banks are also looking at expanding their territories. Chaney said Hancock's biggest opportunity is expanding in the "bookends" of its territory in Texas and Florida. Hancock's presence in Houston through Whitney is "a drop in the bucket" with ample opportunity for expansion. In Florida, the company particularly likes Jacksonville. In both states, Chaney sees lots of merger and acquisition opportunities.
After Texas and Florida, Chaney said the goal would be to expand northward and inland from the bank's home turf in the Gulfport, Miss., and New Orleans area.
Chaney said there are many more merger opportunities that come across his desk than a year ago. Most queries are from banks with between $400 million and $1 billion in assets in various types of financial condition that want to merge with a bigger bank because the economic recovery has been so slow and because of all the new banking regulations that are taking effect. Chaney said Hancock will focus on "live" bank opportunities rather than failed bank options because the Federal Deposit Insurance Corp. has changed the process since Hancock bought Peoples First Community Bank from Florida in December 2009, and the more competitive process offers less coverage for bad loans.
"For banks that are less than $2 billion in size, I think they're realizing that their best move may well be to find a partner in the Gulf South," Chaney said of banks putting themselves up for sale.
IberiaBank Corp., a $12 billion bank based in Lafayette, sees many opportunities to grow.
John Davis, senior executive vice president of financial strategy and mortgage, said the slow economy and extended low interest-rate environment can be "painful" for banks. Broad consumer trends don't bode well for loan growth with consumers trying to de-leverage their lives and an aging population switching from taking out loans to focusing on deposits. And too many banks are still too heavy in real estate — a model that is no longer viable, Davis said.
For these reasons, Iberia expects another 2,000 banks to vanish in the next six years, creating acquisition opportunities. "There's more pressure for consolidation now than we've seen in the past," Davis said.
Chief executive Daryl Byrd noted that Iberia executives live as far away as Georgia, North Carolina and Maryland, giving them a good feel for different markets.
Michael Brown, vice chairman and chief operating officer, said New Orleans is now IberiaBank's largest market, and the cities that hold the biggest potential for growth are Houston, Birmingham, Mobile and Memphis.
Lafayette-based MidSouth Bancorp Inc. grew assets by 40 percent over the past year to $1.4 billion with several acquisitions. It bought portions of Jefferson Bank, a Texas holding company that was in bankruptcy, allowing MidSouth to expand into the Dallas-Fort Worth area. Separately, it bought bank branches in the Tyler, Texas, area. MidSouth also bought a St. Martin Parish bank, First Louisiana.
Because MidSouth sees more such opportunities, it has hired a senior vice president of mergers and acquisitions. "We are very serious about M&A," said chief financial officer Jim McLemore.
Chief Banking Officer Troy Cloutier said MidSouth plans to build its franchise in Louisiana and Texas.
Information from: The Times-Picayune, http://www.nola.com