| Text of article: | Analysis
Mergers and acquisitions
alter bank picture here
By LAN SLUDER
Three significant developments in the local financial industry surfaced last week, and each could have an important impact on business in metro New Orleans and on the issue of multi-parish banking.
The first was the announcement that Jefferson Bank and Guaranty Bank had reached an "agree-
MERGERS
ment in principle" to merge the two institutions. If the merger is consummated, the combined institution—to be called Jefferson Guaranty Bank—would have assets of $531 million and be the largest bank in Jefferson Parish.
The ironic aspect of this development is that Lucian Gunter, senior vice president of Guaranty
Continued on page 2
MERGERS
Continued from page 1
Bank, was elected in April 1982 as president of the Louisiana Independent Association of Banks, a group of mostly small community banks that has opposed multi-parish banking in part because, as an LIAB brochure says, "bigger ain't better."
The second event was the indication that Shreveport multi-millionaire Herman K. Beebe was returning some of his attention to New Orleans by reaquiring Colonial Bank. Ed Michael Reggie, formerly president of fast-growing Ponchartrain State Bank in Metairie (also a Beebe bank), was named president of Colonial Bank on Feb. 3.
This development occurred after the anticipated purchase of Colonial Bank by a group of individuals (several associated with Jefferson Bank) fell through.
Beebe is a major stockholder in several Lousiana banks with total assets of about $750 million. Reportedly, the Beebe interests recently gained control of a Mississippi bank and are shopping for banks in Texas. Beebe banks have the reputation of being more aggressive than the average Louisiana bank, and they support the multi-bank holding company concept.
The third development, announced over the weekend, was that Pelican Homestead—considered by the local financial community as one of the S&Ls to watch—continued its statewide growth through plans to acquire Leader Savings in Monroe, a $230 million thrift with six offices.
The Federal Savings and Loan Insurance
Corporation reportedly will provide assistance in the merger.
Events are latest part of major new trends
Local financial industry watchers have differing views of what these developments portend, but most agree that these events are part of historically significant new trends that will change the face of the Loui-
siana banking.
Here's what these developments may mean, in part:
— The sale of Guaranty, at a price that several local observers called "very attractive for Guaranty stockholders," may encourage more of the major stockholders of independent banks to entertain purchase offers. Independent bankers like being bankers, and they like the job security they have, but big bucks may weaken their re, solve, and that of LIAB. "We'll have multi-, parish banking when Edwin Edwards gets back in office," said one banker.
— More bank mergers are ahead, even for the area's larger banks. Banks with assets under $1 billion will have a tough time competing in a dynamic metro market the size of New Orleans. The pressure to merge will be felt especially by those banks with assets between $200 million and $1 billion. They've outgrown the neighborhood bank concept yet they're too small to enjoy real economies of scale, according to some analysts.
National Bank of Commerce in Jefferson has $362 million in assets; First National Bank of Jefferson is at about $475 million; American Bank of New Orleans had yearend assets of $410 million; and a merged Jefferson Guaranty Bank would be at about $531 million.
— It's time to stop talking about how traditional and provincial New Orleans area bankers are. Hibernia Bank has gained both local and national applause for its responsiveness to business needs. Jefferson Parish banks are not sitting on their hands, and Jefferson Bank for one has turned very aggressive. And the Whitney, though hardly a textbook example of a marketing-driven organization, has a reputation of helping local businesses when other banks won't.
— It's also time to stop talking about how S&Ls can't really compete on equal footing with banks. Four of the ten largest financial institutions based in New Orleans now are S&Ls—First Homestead, Dixie Federal, Security Homestead and Pelican Homestead—and if the larger S&Ls continue their rapid pace of growth, they soon will be bigger than the largest local banks.
— Deregulation and the influx of Texas, New York (and Shreveport, Alexandria and Lafayette) money and people are lighting fires under local thrifts and banks, and you ain't seen nothing yet, local industry watchers are predicting.
The Jefferson/Guaranty merger
Rumors of the Jefferson/Guaranty merger had been swirling through the banking community here for several weeks, and Jefferson Business reported two weeks ago that a merger announcement seemed likely.
Indications are that Guaranty at first did not want to be acquired by Jefferson, at least not at the initial offering price, which was significantly lower than the 2.076 times book value of the final deal.
Reportedly, phone calls were made to other banks known to be looking to buy, and one source said that an offer of 1.25 times book by the right bank would have been looked upon favorably.
However, now Guaranty execs seem pleased with the deal. One reason may be that all officers of Guaranty Bank will be retained and the president of Guaranty, Russell Haas, will be be given a three-year management contract.
The agreement, which still must pass regulatory and Justice Department (for anti-trust reasons) hurdles, calls for shareholders of Guaranty to receive $163 a share
for each of the 200,000 shares of common oustanding, half in cash and half in debentures of Jefferson Bank. The debentures will pay 11 percent interest and will be due in five years from issuance. Stockholders of Guaranty owning fewer than 50 shares would be entitled to receive the entire $163 in cash.
Before merger plans were announced, Guaranty's stock, thinly traded in the local over the counter market, was at about $34 a share.
Nat B. Knight Jr. is chairman of Guaranty. Knight, an attorney, also is chairman of Jefferson Savings and Loan. His daughter, Karen Knight, also a lawyer, is president of Jefferson Savings.
Jefferson Bank, whose officers affect the . tie-less, shirtsleeve look in the office, is considered an aggressive, sales-oriented bank. When several weeks ago, this writer called Jefferson President Joseph Brocato to ask about the merger rumors, Brocato said he could not comment at all, but "I appreciate your aggressiveness," he said characterically.
Jefferson has heavily recruited personnel from other local banks in recent months (one banker called it "raiding"), and ex-basketball star Robert Pettit, Jefferson Bancshares chairman, reportedly pays up to 30 percent higher salaries than many other area banks.
On the whole, local financial industry analysts seem to think the merger could be a good one. "Geographically, it's a good merger," said Nick 0. Sagona, a partner at the CPA firm of JKByrne & Co. Jefferson's strength is on the East Bank, although three of its seven offices are on the West Bank. By contrast, all five Guaranty offices are on the West Bank of Jefferson Parish.
Guaranty is considered a well managed, conservatively run institution, although not
all analysts like its heavy emphasis on Harvey Canal lending. Jefferson has positioned itself squarely as a "businessman's bank."
When merger occurs, both financial and human resources are pooled, and that should benefit both institutions in the new financial marketplace. "Banking used to be easy, but deregulation is going to put a premium on the expertise of managers," said Dr. William L. Burns, associate professor of finance at the Unversity of New Orleans. In Burns' view, twice book value for Guaranty stock is not unreasonable, and if merger mania heats up, three and four times book may not be out of the question, he said.
Even at more than a half billion in assets, the combined bank may still be too small to compete effectively in the metro area, according to some analysts.
"In a real metro area, you need to be up around a billion dollars," said Sagona. He noted, however, that at around $531 million, the institution can compete in Jefferson Parish.
Change at Colonial Bank
Colonial Bank ended 1982 with just $47 million in assets, but if its new president, Ed Michael Reggie, has his way, it will not be a small bank for long.
There is some reason to think Colonial will shift into a growth mode now. For one thing, Colonial has five well-placed branches, on Canal, Crowder, Robert E. Lee and Gen. DeGaulle, and in the CBD on Baronne.
Colonial, called "directionless" in recent years by one source, faced a variety of recent internal situations that have affected growth. Deposits at Colonial declined about $1 million since 1980.
More importantly, Colonial Bank is again controlled by Herman K. Beebe interests. Beebe is a major force in Louisiana banking, being a major stockholder in Bossier Bank and Trust, Bossier City, which is the "mother bank" for several other banks across the state, including Ponchartrain State Bank in Metairie, First National Bank of Ruston, City Savings Bank of DeRidder and others. Total assets of banks of which the Shreveport-based Beebe is a major stockholder are around $750 million, according to Reggie. Beebe manages 65 nursing homes, owns interests in Holiday Inns and is associated with a major life insurance company in Shreveport, said Reggie.
Colonial is the third bank of which Reggie, only 28, has been president. Until Feb. 3, he was president of Pontchartrain State Bank. Pontchartrain's assets grew by more than 40 percent in 1982, which was a higher percentage than at any other bank in Jefferson Parish, according to the bank. However, Pontchartrain's growth comes from a relatively small asset base. It ended 1982 with $50.7 million in assets. Dawson Womack, formerly a top exec at both Ponchartrain and Colonial, has returned as president of Pontchartrain, according to Reggie.
As at Pontchartrain, Reggie said he expects to be more aggressive, especially in the lending area. "We'll have full-time people on the streets. We don't expect people to come to us. We'll go to them," he said.
Reggie said his personal loan limit at Colonial will be $3.2 million, the legal limit. He noted that, through syndication, Colonial can handle much larger loans than a bank its size might ordinarily handle.
"We're more risk oriented than the average bank, but we charge for it," said Reggie. "We like construction loans, in and out. And we move fast," he said.
Colonial also will not ignore retail customers. Reggie said that consumer services would not be ignored and that there probably will be longer weekday and Saturday banking hours.
Five years from now, Reggie sees the New Orleans area as having "far fewer financial institutions." He also sees multi-parish bank holding companies, interstate banking ("lots of people think we already have it," he said), merger mania all over
Louisiana and brokerage services offered by local banks.
"My bank will be a supermarket of services," he said.
The new Colonial Bank board of directors includes David L. Bussell, said to be Beebe's representative on the board, Judge Edmond Reggie of Crowley (Ed Michael Reggie's father), John Dussouy Sr., Gary
Matheny, James A. Mounger, Suzanne Prevot, F. Pat Quinn Jr., David M. Resha, Edward B. Weaks and Jerome Weber.
Pelican's new merger
Traditionally, banking execs have not held S&L execs in particularly high regard. A case in point is an old joke some bankers still tell: "Question: What are three worst years in a savings and loan president's life? Answer: The second grade." But S&Ls are fast shedding this image, especially in Louisiana where banks have remained small by national standards, due to the single-parish limit, whereas S&Ls already have statewide branch networks. First Homestead, for instance, now is the fourth largest financial institution in the
New Orleans metropolitan area, with about $708 million in assets, and it stresses its "banking" services.
One of the country's fastest growing major thrifts, Pelican Homestead, added some $104 million in assets in 1982, about half that from mergers. And now, with the announced planned acquisition of Leader Savings in Monroe, Pelican will have assets of more than $670 million and 23 full-service branches around the state.
The state commissioner of financial institutions, Hunter Wagner, and the Federal Savings and Loan Insurance Corporation reportedly have already approved the merger. The FSLIC reportedly will provide assistance in the merger.
Despite operating losses at many S&Ls in the region in 1981 and 1982, analysts seem to agree that the worst probably is over and that declining interest rates, new powers and better economies of scale all will mean that S&Ls should be strong competitors for certain market segments throught the 1980s.
Through mergers and internal growth from 13 new deposit-collecting offices, Dixie Federal (now a stock association), grew by about 28 percent in 1982 to around $689 million. In a year marked by many problems for the thrift industry, Gulf Federal, Security and other S&Ls grew rapidly.
The end of the recession is working for the S&L industry, and unless New Orleans S&Ls fall back into the trap of putting all their loan eggs in one fixed-rate basket, they soon should become major—and sophisticated—components of Louisiana's financial industry, experts believe.
Lan Sluder is editor of Jefferson Business, the state's only business newsweekly.
Ed Michael Reggie, 28, has been named president of Colonial Bank.
Jefferson Guaranty Bank
Offices After Merger
Analysis
Mergers and acquisitions
alter bank picture here
By LAN SLUDER
Three significant developments in the local financial industry surfaced last week, and each could have an important impact on business in metro New Orleans and on the issue of multi-parish banking.
The first was the announcement that Jefferson Bank and Guaranty Bank had reached an "agree-
MERGERS
ment in principle" to merge the two institutions. If the merger is consummated, the combined institution—to be called Jefferson Guaranty Bank—would have assets of $531 million and be the largest bank in Jefferson Parish.
The ironic aspect of this development is that Lucian Gunter, senior vice president of Guaranty
Continued on page 2
MERGERS
Continued from page 1
Bank, was elected in April 1982 as president of the Louisiana Independent Association of Banks, a group of mostly small community banks that has opposed multi-parish banking in part because, as an LIAB brochure says, "bigger ain't better."
The second event was the indication that Shreveport multi-millionaire Herman K. Beebe was returning some of his attention to New Orleans by reaquiring Colonial Bank. Ed Michael Reggie, formerly president of fast-growing Ponchartrain State Bank in Metairie (also a Beebe bank), was named president of Colonial Bank on Feb. 3.
This development occurred after the anticipated purchase of Colonial Bank by a group of individuals (several associated with Jefferson Bank) fell through.
Beebe is a major stockholder in several Lousiana banks with total assets of about $750 million. Reportedly, the Beebe interests recently gained control of a Mississippi bank and are shopping for banks in Texas. Beebe banks have the reputation of being more aggressive than the average Louisiana bank, and they support the multi-bank holding company concept.
The third development, announced over the weekend, was that Pelican Homestead—considered by the local financial community as one of the S&Ls to watch—continued its statewide growth through plans to acquire Leader Savings in Monroe, a $230 million thrift with six offices.
The Federal Savings and Loan Insurance
Corporation reportedly will provide assistance in the merger.
Events are latest part of major new trends
Local financial industry watchers have differing views of what these developments portend, but most agree that these events are part of historically significant new trends that will change the face of the Loui-
siana banking.
Here's what these developments may mean, in part:
— The sale of Guaranty, at a price that several local observers called "very attractive for Guaranty stockholders," may encourage more of the major stockholders of independent banks to entertain purchase offers. Independent bankers like being bankers, and they like the job security they have, but big bucks may weaken their re, solve, and that of LIAB. "We'll have multi-, parish banking when Edwin Edwards gets back in office," said one banker.
— More bank mergers are ahead, even for the area's larger banks. Banks with assets under $1 billion will have a tough time competing in a dynamic metro market the size of New Orleans. The pressure to merge will be felt especially by those banks with assets between $200 million and $1 billion. They've outgrown the neighborhood bank concept yet they're too small to enjoy real economies of scale, according to some analysts.
National Bank of Commerce in Jefferson has $362 million in assets; First National Bank of Jefferson is at about $475 million; American Bank of New Orleans had yearend assets of $410 million; and a merged Jefferson Guaranty Bank would be at about $531 million.
— It's time to stop talking about how traditional and provincial New Orleans area bankers are. Hibernia Bank has gained both local and national applause for its responsiveness to business needs. Jefferson Parish banks are not sitting on their hands, and Jefferson Bank for one has turned very aggressive. And the Whitney, though hardly a textbook example of a marketing-driven organization, has a reputation of helping local businesses when other banks won't.
— It's also time to stop talking about how S&Ls can't really compete on equal footing with banks. Four of the ten largest financial institutions based in New Orleans now are S&Ls—First Homestead, Dixie Federal, Security Homestead and Pelican Homestead—and if the larger S&Ls continue their rapid pace of growth, they soon will be bigger than the largest local banks.
— Deregulation and the influx of Texas, New York (and Shreveport, Alexandria and Lafayette) money and people are lighting fires under local thrifts and banks, and you ain't seen nothing yet, local industry watchers are predicting.
The Jefferson/Guaranty merger
Rumors of the Jefferson/Guaranty merger had been swirling through the banking community here for several weeks, and Jefferson Business reported two weeks ago that a merger announcement seemed likely.
Indications are that Guaranty at first did not want to be acquired by Jefferson, at least not at the initial offering price, which was significantly lower than the 2.076 times book value of the final deal.
Reportedly, phone calls were made to other banks known to be looking to buy, and one source said that an offer of 1.25 times book by the right bank would have been looked upon favorably.
However, now Guaranty execs seem pleased with the deal. One reason may be that all officers of Guaranty Bank will be retained and the president of Guaranty, Russell Haas, will be be given a three-year management contract.
The agreement, which still must pass regulatory and Justice Department (for anti-trust reasons) hurdles, calls for shareholders of Guaranty to receive $163 a share
for each of the 200,000 shares of common oustanding, half in cash and half in debentures of Jefferson Bank. The debentures will pay 11 percent interest and will be due in five years from issuance. Stockholders of Guaranty owning fewer than 50 shares would be entitled to receive the entire $163 in cash.
Before merger plans were announced, Guaranty's stock, thinly traded in the local over the counter market, was at about $34 a share.
Nat B. Knight Jr. is chairman of Guaranty. Knight, an attorney, also is chairman of Jefferson Savings and Loan. His daughter, Karen Knight, also a lawyer, is president of Jefferson Savings.
Jefferson Bank, whose officers affect the . tie-less, shirtsleeve look in the office, is considered an aggressive, sales-oriented bank. When several weeks ago, this writer called Jefferson President Joseph Brocato to ask about the merger rumors, Brocato said he could not comment at all, but "I appreciate your aggressiveness," he said characterically.
Jefferson has heavily recruited personnel from other local banks in recent months (one banker called it "raiding"), and ex-basketball star Robert Pettit, Jefferson Bancshares chairman, reportedly pays up to 30 percent higher salaries than many other area banks.
On the whole, local financial industry analysts seem to think the merger could be a good one. "Geographically, it's a good merger," said Nick 0. Sagona, a partner at the CPA firm of JKByrne & Co. Jefferson's strength is on the East Bank, although three of its seven offices are on the West Bank. By contrast, all five Guaranty offices are on the West Bank of Jefferson Parish.
Guaranty is considered a well managed, conservatively run institution, although not
all analysts like its heavy emphasis on Harvey Canal lending. Jefferson has positioned itself squarely as a "businessman's bank."
When merger occurs, both financial and human resources are pooled, and that should benefit both institutions in the new financial marketplace. "Banking used to be easy, but deregulation is going to put a premium on the expertise of managers," said Dr. William L. Burns, associate professor of finance at the Unversity of New Orleans. In Burns' view, twice book value for Guaranty stock is not unreasonable, and if merger mania heats up, three and four times book may not be out of the question, he said.
Even at more than a half billion in assets, the combined bank may still be too small to compete effectively in the metro area, according to some analysts.
"In a real metro area, you need to be up around a billion dollars," said Sagona. He noted, however, that at around $531 million, the institution can compete in Jefferson Parish.
Change at Colonial Bank
Colonial Bank ended 1982 with just $47 million in assets, but if its new president, Ed Michael Reggie, has his way, it will not be a small bank for long.
There is some reason to think Colonial will shift into a growth mode now. For one thing, Colonial has five well-placed branches, on Canal, Crowder, Robert E. Lee and Gen. DeGaulle, and in the CBD on Baronne.
Colonial, called "directionless" in recent years by one source, faced a variety of recent internal situations that have affected growth. Deposits at Colonial declined about $1 million since 1980.
More importantly, Colonial Bank is again controlled by Herman K. Beebe interests. Beebe is a major force in Louisiana banking, being a major stockholder in Bossier Bank and Trust, Bossier City, which is the "mother bank" for several other banks across the state, including Ponchartrain State Bank in Metairie, First National Bank of Ruston, City Savings Bank of DeRidder and others. Total assets of banks of which the Shreveport-based Beebe is a major stockholder are around $750 million, according to Reggie. Beebe manages 65 nursing homes, owns interests in Holiday Inns and is associated with a major life insurance company in Shreveport, said Reggie.
Colonial is the third bank of which Reggie, only 28, has been president. Until Feb. 3, he was president of Pontchartrain State Bank. Pontchartrain's assets grew by more than 40 percent in 1982, which was a higher percentage than at any other bank in Jefferson Parish, according to the bank. However, Pontchartrain's growth comes from a relatively small asset base. It ended 1982 with $50.7 million in assets. Dawson Womack, formerly a top exec at both Ponchartrain and Colonial, has returned as president of Pontchartrain, according to Reggie.
As at Pontchartrain, Reggie said he expects to be more aggressive, especially in the lending area. "We'll have full-time people on the streets. We don't expect people to come to us. We'll go to them," he said.
Reggie said his personal loan limit at Colonial will be $3.2 million, the legal limit. He noted that, through syndication, Colonial can handle much larger loans than a bank its size might ordinarily handle.
"We're more risk oriented than the average bank, but we charge for it," said Reggie. "We like construction loans, in and out. And we move fast," he said.
Colonial also will not ignore retail customers. Reggie said that consumer services would not be ignored and that there probably will be longer weekday and Saturday banking hours.
Five years from now, Reggie sees the New Orleans area as having "far fewer financial institutions." He also sees multi-parish bank holding companies, interstate banking ("lots of people think we already have it," he said), merger mania all over
Louisiana and brokerage services offered by local banks.
"My bank will be a supermarket of services," he said.
The new Colonial Bank board of directors includes David L. Bussell, said to be Beebe's representative on the board, Judge Edmond Reggie of Crowley (Ed Michael Reggie's father), John Dussouy Sr., Gary
Matheny, James A. Mounger, Suzanne Prevot, F. Pat Quinn Jr., David M. Resha, Edward B. Weaks and Jerome Weber.
Pelican's new merger
Traditionally, banking execs have not held S&L execs in particularly high regard. A case in point is an old joke some bankers still tell: "Question: What are three worst years in a savings and loan president's life? Answer: The second grade." But S&Ls are fast shedding this image, especially in Louisiana where banks have remained small by national standards, due to the single-parish limit, whereas S&Ls already have statewide branch networks. First Homestead, for instance, now is the fourth largest financial institution in the
New Orleans metropolitan area, with about $708 million in assets, and it stresses its "banking" services.
One of the country's fastest growing major thrifts, Pelican Homestead, added some $104 million in assets in 1982, about half that from mergers. And now, with the announced planned acquisition of Leader Savings in Monroe, Pelican will have assets of more than $670 million and 23 full-service branches around the state.
The state commissioner of financial institutions, Hunter Wagner, and the Federal Savings and Loan Insurance Corporation reportedly have already approved the merger. The FSLIC reportedly will provide assistance in the merger.
Despite operating losses at many S&Ls in the region in 1981 and 1982, analysts seem to agree that the worst probably is over and that declining interest rates, new powers and better economies of scale all will mean that S&Ls should be strong competitors for certain market segments throught the 1980s.
Through mergers and internal growth from 13 new deposit-collecting offices, Dixie Federal (now a stock association), grew by about 28 percent in 1982 to around $689 million. In a year marked by many problems for the thrift industry, Gulf Federal, Security and other S&Ls grew rapidly.
The end of the recession is working for the S&L industry, and unless New Orleans S&Ls fall back into the trap of putting all their loan eggs in one fixed-rate basket, they soon should become major—and sophisticated—components of Louisiana's financial industry, experts believe.
Lan Sluder is editor of Jefferson Business, the state's only business newsweekly.
Ed Michael Reggie, 28, has been named president of Colonial Bank.
Jefferson Guaranty Bank
Offices After Merger
Analysis
Mergers and acquisitions
alter bank picture here
By LAN SLUDER
Three significant developments in the local financial industry surfaced last week, and each could have an important impact on business in metro New Orleans and on the issue of multi-parish banking.
The first was the announcement that Jefferson Bank and Guaranty Bank had reached an "agree-
MERGERS
ment in principle" to merge the two institutions. If the merger is consummated, the combined institution—to be called Jefferson Guaranty Bank—would have assets of $531 million and be the largest bank in Jefferson Parish.
The ironic aspect of this development is that Lucian Gunter, senior vice president of Guaranty
Continued on page 2
MERGERS
Continued from page 1
Bank, was elected in April 1982 as president of the Louisiana Independent Association of Banks, a group of mostly small community banks that has opposed multi-parish banking in part because, as an LIAB brochure says, "bigger ain't better."
The second event was the indication that Shreveport multi-millionaire Herman K. Beebe was returning some of his attention to New Orleans by reaquiring Colonial Bank. Ed Michael Reggie, formerly president of fast-growing Ponchartrain State Bank in Metairie (also a Beebe bank), was named president of Colonial Bank on Feb. 3.
This development occurred after the anticipated purchase of Colonial Bank by a group of individuals (several associated with Jefferson Bank) fell through.
Beebe is a major stockholder in several Lousiana banks with total assets of about $750 million. Reportedly, the Beebe interests recently gained control of a Mississippi bank and are shopping for banks in Texas. Beebe banks have the reputation of being more aggressive than the average Louisiana bank, and they support the multi-bank holding company concept.
The third development, announced over the weekend, was that Pelican Homestead—considered by the local financial community as one of the S&Ls to watch—continued its statewide growth through plans to acquire Leader Savings in Monroe, a $230 million thrift with six offices.
The Federal Savings and Loan Insurance
Corporation reportedly will provide assistance in the merger.
Events are latest part of major new trends
Local financial industry watchers have differing views of what these developments portend, but most agree that these events are part of historically significant new trends that will change the face of the Loui-
siana banking.
Here's what these developments may mean, in part:
— The sale of Guaranty, at a price that several local observers called "very attractive for Guaranty stockholders," may encourage more of the major stockholders of independent banks to entertain purchase offers. Independent bankers like being bankers, and they like the job security they have, but big bucks may weaken their re, solve, and that of LIAB. "We'll have multi-, parish banking when Edwin Edwards gets back in office," said one banker.
— More bank mergers are ahead, even for the area's larger banks. Banks with assets under $1 billion will have a tough time competing in a dynamic metro market the size of New Orleans. The pressure to merge will be felt especially by those banks with assets between $200 million and $1 billion. They've outgrown the neighborhood bank concept yet they're too small to enjoy real economies of scale, according to some analysts.
National Bank of Commerce in Jefferson has $362 million in assets; First National Bank of Jefferson is at about $475 million; American Bank of New Orleans had yearend assets of $410 million; and a merged Jefferson Guaranty Bank would be at about $531 million.
— It's time to stop talking about how traditional and provincial New Orleans area bankers are. Hibernia Bank has gained both local and national applause for its responsiveness to business needs. Jefferson Parish banks are not sitting on their hands, and Jefferson Bank for one has turned very aggressive. And the Whitney, though hardly a textbook example of a marketing-driven organization, has a reputation of helping local businesses when other banks won't.
— It's also time to stop talking about how S&Ls can't really compete on equal footing with banks. Four of the ten largest financial institutions based in New Orleans now are S&Ls—First Homestead, Dixie Federal, Security Homestead and Pelican Homestead—and if the larger S&Ls continue their rapid pace of growth, they soon will be bigger than the largest local banks.
— Deregulation and the influx of Texas, New York (and Shreveport, Alexandria and Lafayette) money and people are lighting fires under local thrifts and banks, and you ain't seen nothing yet, local industry watchers are predicting.
The Jefferson/Guaranty merger
Rumors of the Jefferson/Guaranty merger had been swirling through the banking community here for several weeks, and Jefferson Business reported two weeks ago that a merger announcement seemed likely.
Indications are that Guaranty at first did not want to be acquired by Jefferson, at least not at the initial offering price, which was significantly lower than the 2.076 times book value of the final deal.
Reportedly, phone calls were made to other banks known to be looking to buy, and one source said that an offer of 1.25 times book by the right bank would have been looked upon favorably.
However, now Guaranty execs seem pleased with the deal. One reason may be that all officers of Guaranty Bank will be retained and the president of Guaranty, Russell Haas, will be be given a three-year management contract.
The agreement, which still must pass regulatory and Justice Department (for anti-trust reasons) hurdles, calls for shareholders of Guaranty to receive $163 a share
for each of the 200,000 shares of common oustanding, half in cash and half in debentures of Jefferson Bank. The debentures will pay 11 percent interest and will be due in five years from issuance. Stockholders of Guaranty owning fewer than 50 shares would be entitled to receive the entire $163 in cash.
Before merger plans were announced, Guaranty's stock, thinly traded in the local over the counter market, was at about $34 a share.
Nat B. Knight Jr. is chairman of Guaranty. Knight, an attorney, also is chairman of Jefferson Savings and Loan. His daughter, Karen Knight, also a lawyer, is president of Jefferson Savings.
Jefferson Bank, whose officers affect the . tie-less, shirtsleeve look in the office, is considered an aggressive, sales-oriented bank. When several weeks ago, this writer called Jefferson President Joseph Brocato to ask about the merger rumors, Brocato said he could not comment at all, but "I appreciate your aggressiveness," he said characterically.
Jefferson has heavily recruited personnel from other local banks in recent months (one banker called it "raiding"), and ex-basketball star Robert Pettit, Jefferson Bancshares chairman, reportedly pays up to 30 percent higher salaries than many other area banks.
On the whole, local financial industry analysts seem to think the merger could be a good one. "Geographically, it's a good merger," said Nick 0. Sagona, a partner at the CPA firm of JKByrne & Co. Jefferson's strength is on the East Bank, although three of its seven offices are on the West Bank. By contrast, all five Guaranty offices are on the West Bank of Jefferson Parish.
Guaranty is considered a well managed, conservatively run institution, although not
all analysts like its heavy emphasis on Harvey Canal lending. Jefferson has positioned itself squarely as a "businessman's bank."
When merger occurs, both financial and human resources are pooled, and that should benefit both institutions in the new financial marketplace. "Banking used to be easy, but deregulation is going to put a premium on the expertise of managers," said Dr. William L. Burns, associate professor of finance at the Unversity of New Orleans. In Burns' view, twice book value for Guaranty stock is not unreasonable, and if merger mania heats up, three and four times book may not be out of the question, he said.
Even at more than a half billion in assets, the combined bank may still be too small to compete effectively in the metro area, according to some analysts.
"In a real metro area, you need to be up around a billion dollars," said Sagona. He noted, however, that at around $531 million, the institution can compete in Jefferson Parish.
Change at Colonial Bank
Colonial Bank ended 1982 with just $47 million in assets, but if its new president, Ed Michael Reggie, has his way, it will not be a small bank for long.
There is some reason to think Colonial will shift into a growth mode now. For one thing, Colonial has five well-placed branches, on Canal, Crowder, Robert E. Lee and Gen. DeGaulle, and in the CBD on Baronne.
Colonial, called "directionless" in recent years by one source, faced a variety of recent internal situations that have affected growth. Deposits at Colonial declined about $1 million since 1980.
More importantly, Colonial Bank is again controlled by Herman K. Beebe interests. Beebe is a major force in Louisiana banking, being a major stockholder in Bossier Bank and Trust, Bossier City, which is the "mother bank" for several other banks across the state, including Ponchartrain State Bank in Metairie, First National Bank of Ruston, City Savings Bank of DeRidder and others. Total assets of banks of which the Shreveport-based Beebe is a major stockholder are around $750 million, according to Reggie. Beebe manages 65 nursing homes, owns interests in Holiday Inns and is associated with a major life insurance company in Shreveport, said Reggie.
Colonial is the third bank of which Reggie, only 28, has been president. Until Feb. 3, he was president of Pontchartrain State Bank. Pontchartrain's assets grew by more than 40 percent in 1982, which was a higher percentage than at any other bank in Jefferson Parish, according to the bank. However, Pontchartrain's growth comes from a relatively small asset base. It ended 1982 with $50.7 million in assets. Dawson Womack, formerly a top exec at both Ponchartrain and Colonial, has returned as president of Pontchartrain, according to Reggie.
As at Pontchartrain, Reggie said he expects to be more aggressive, especially in the lending area. "We'll have full-time people on the streets. We don't expect people to come to us. We'll go to them," he said.
Reggie said his personal loan limit at Colonial will be $3.2 million, the legal limit. He noted that, through syndication, Colonial can handle much larger loans than a bank its size might ordinarily handle.
"We're more risk oriented than the average bank, but we charge for it," said Reggie. "We like construction loans, in and out. And we move fast," he said.
Colonial also will not ignore retail customers. Reggie said that consumer services would not be ignored and that there probably will be longer weekday and Saturday banking hours.
Five years from now, Reggie sees the New Orleans area as having "far fewer financial institutions." He also sees multi-parish bank holding companies, interstate banking ("lots of people think we already have it," he said), merger mania all over
Louisiana and brokerage services offered by local banks.
"My bank will be a supermarket of services," he said.
The new Colonial Bank board of directors includes David L. Bussell, said to be Beebe's representative on the board, Judge Edmond Reggie of Crowley (Ed Michael Reggie's father), John Dussouy Sr., Gary
Matheny, James A. Mounger, Suzanne Prevot, F. Pat Quinn Jr., David M. Resha, Edward B. Weaks and Jerome Weber.
Pelican's new merger
Traditionally, banking execs have not held S&L execs in particularly high regard. A case in point is an old joke some bankers still tell: "Question: What are three worst years in a savings and loan president's life? Answer: The second grade." But S&Ls are fast shedding this image, especially in Louisiana where banks have remained small by national standards, due to the single-parish limit, whereas S&Ls already have statewide branch networks. First Homestead, for instance, now is the fourth largest financial institution in the
New Orleans metropolitan area, with about $708 million in assets, and it stresses its "banking" services.
One of the country's fastest growing major thrifts, Pelican Homestead, added some $104 million in assets in 1982, about half that from mergers. And now, with the announced planned acquisition of Leader Savings in Monroe, Pelican will have assets of more than $670 million and 23 full-service branches around the state.
The state commissioner of financial institutions, Hunter Wagner, and the Federal Savings and Loan Insurance Corporation reportedly have already approved the merger. The FSLIC reportedly will provide assistance in the merger.
Despite operating losses at many S&Ls in the region in 1981 and 1982, analysts seem to agree that the worst probably is over and that declining interest rates, new powers and better economies of scale all will mean that S&Ls should be strong competitors for certain market segments throught the 1980s.
Through mergers and internal growth from 13 new deposit-collecting offices, Dixie Federal (now a stock association), grew by about 28 percent in 1982 to around $689 million. In a year marked by many problems for the thrift industry, Gulf Federal, Security and other S&Ls grew rapidly.
The end of the recession is working for the S&L industry, and unless New Orleans S&Ls fall back into the trap of putting all their loan eggs in one fixed-rate basket, they soon should become major—and sophisticated—components of Louisiana's financial industry, experts believe.
Lan Sluder is editor of Jefferson Business, the state's only business newsweekly.
Ed Michael Reggie, 28, has been named president of Colonial Bank.
Jefferson Guaranty Bank
Offices After Merger
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