Last month, Investar Holding Corp. CEO John D’Angelo stood in the Nasdaq studio in Times Square, surrounded by the bank’s vice presidents and board members as they counted down the final seconds until he rang the opening bell. Outside the studio’s glass wall, the 29-member Investar contingent could see the Investar logo splashed seven stories high on the Nasdaq video tower.
“I tell you it was one of the most amazing experiences of my life,” D’Angelo said. “The feeling was just breathtaking.”
Eight years earlier, a considerably more modest event marked the opening of Investar’s first branch, a rented single-wide trailer on Perkins Road in Baton Rouge. A photo of the event shows D’Angelo and all five members of the bank’s staff, smiling broadly.
The picture, and the temporary bank branch, say a lot about Investar, D’Angelo said.
“We’re humble. We’re very disciplined when it comes to expense control. You’ve heard the saying, ‘If you build it they will come?’ Well, we’re just the opposite. If you come, we’ll build it,” D’Angelo said.
The approach has carried Investar from that first single-wide trailer to 11 branches across south Louisiana, with two more to open in the next two years, and an initial public offering that moved 3.3 million shares and grossed $46 million.
“We’re the smallest bank IPO in the last two years. We were considered small, but investment bankers felt we had a good story,” D’Angelo said.
The company’s strategy calls for growing in its existing markets and through acquisitions of small banks, those with less than $500 million in assets, in south Louisiana. The smaller banks pose fewer regulatory obstacles and other risks than larger financial institutions.
“If you look at the banks in Louisiana, 63 percent are under $250 million in assets. Approximately 83 percent of the banks in Louisiana are under $500 million,” D’Angelo said. “I think there’s a wonderful opportunity to team up and partner up with other financial institutions.”
There are 116 financial institutions in Louisiana with less than $500 million in assets, according to the Federal Deposit Insurance Corp., and 87 with less than $250 million in assets.
Peter Ricchiuti, who heads Tulane University’s small-cap research team, said there are definitely good acquisition targets among the smaller Louisiana banks.
But recent acquisitions, such as IberiaBank’s purchase of Teche Federal, have increased the prices for those banks, he said. In addition, the south Louisiana economy, which is considerably stronger than the national economy, and major industrial expansions will probably attract more outside banks competing for the smaller Louisiana banks.
Still, it’s generally believed that acquisitions provide a faster, lower-cost way to gather deposits than a traditional build-out, Ricchiuti said.
Sterne Agee analyst Peyton Green has issued a “buy” rating on Investar. The bank is well-positioned for organic growth, or growth that doesn’t include acquisitions, takeovers or mergers, as well as consolidating smaller community banks.
Strong loan growth and earnings per share over the next few years are expected to boost Investar’s share price to $14 over the next 12 months, according to Green.
It’s all a long way from that first trailer, where one customer told D’Angelo he just wasn’t comfortable putting money in a bank someone could hook to a truck and drive away. But going public has always been Investar’s intention.
Winning over skeptical customers was a minor obstacle compared to others Investar had to overcome in its short existence, D’Angelo said.
Some of the challenges included:
- Hurricane Katrina. The bank opened just months after the storm struck. Everyone told D’Angelo he had picked a horrible time to start a business. But the huge population shift to Baton Rouge from New Orleans generated tremendous opportunities for Investar.
- The Great Recession. Two years after the bank opened, the financial markets melted down. Once again, people told D’Angelo his timing was awful. And once again, opportunities opened up for Investar as businesses and individuals moved to diversify, moving accounts to multiple institutions. A locally owned bank, backed by local investors, and local decision-makers proved attractive.
- The Dodd-Frank financial reform law of 2010. Many feared the regulations, intended to prevent a repeat of the financial crash, would crush banks, D’Angelo said. But Investar’s model — low on fees, a little better on deposit interest — meant the bank didn’t incur costs to adapt to the new rules.
There were many times along the way that things happened that just didn’t make a lot of sense, he said. But every time, within six months or so, it became apparent that there was a bigger plan.
For example, by 2007 Investar management had already grown uneasy about the economy and the size of its construction development loans, which amounted to 28 percent of the loan portfolio. The bank had already begun reducing this line of business when the recession hit. Most of those loans were for one year. As customers retired the debt, Investar didn’t seek to replace them with other construction loans. Instead Investar moved to make loans in other areas. Construction development is now 12 percent of Investar’s loan portfolio, and the number is only that high because of the 2013 acquisition of First Community Bank of Hammond.
The biggest percentage of the portfolio is consumer loans, at 25 percent. The smallest segment is commercial and industrial, basically lines of credit and equipment loans, at 6.4 percent.
“I’ll tell you the mindset here is, ‘We’re going to have bumps in the road. We’re going to have obstacles.’ We believe it’s how you handle those bumps in the road, how you handle those obstacles, and what you do with them,” D’Angelo said. Investar’s culture is not to get hung up on the bad things, but to learn from them and use that knowledge to move forward, he said.
Follow Ted Griggs on Twitter, @tedgriggsbr.