IBERIABANK Corporation Reports First Quarter Results

LAFAYETTE, La., April 25, 2013 /PRNewswire/ -- IBERIABANK Corporation (NASDAQ: IBKC), holding company of the 126-year-old IBERIABANK (www.iberiabank.com), reported operating results for the first quarter ended March 31, 2013.  For the quarter, the Company reported income available to common shareholders of $717,000, or $0.02 fully diluted earnings per share.  As announced on April 15, 2013, the results for the first quarter of 2013 were materially affected by increased costs related to the adoption of a new accounting standard ($0.12 per share after-tax) and an impairment charge and other factors related to and impacting loans acquired in failed bank acquisitions and the related FDIC loss share protection ($0.70 per share after-tax).  In addition, the Company incurred conversion and process improvement costs equal to $0.02 per share on an after-tax basis.  The negative impact of these items on the first quarter of 2013 totaled $38 million on a pre-tax basis, or $0.84 per share on an after-tax basis.  Excluding those items, EPS in the first quarter of 2013 was $0.86 per share on a non-GAAP operating basis excluding the adoption of the new accounting standard (refer to press release supplemental table).

Daryl G. Byrd, President and Chief Executive Officer, commented, "Adoption of the new accounting standard and seasonal influences masked a quarter of favorable progress in further strengthening our franchise.  We are very pleased with the solid core client growth and exceptional asset quality improvements we achieved in the first quarter.  Our balance sheet liquidity remains stout, as evidenced by our holding, on average, nearly $3 billion in cash equivalents and liquid, marketable investment securities during the first quarter.  We believe our strong capital position and recently completed investments in infrastructure provide us a competitive advantage to capitalize on future revenue enhancements and acquisition opportunities.  We are also well along the way in executing on our earnings improvement initiatives that we detailed today, and we believe will significantly benefit our operating efficiencies and profitability."

Byrd continued, "Seasonal influences weighed on our noninterest income and partially masked good core loan growth in the first quarter.  As we continue to diversify and expand our lending base, these seasonal influences are expected to have a diminishing impact, as other markets continue to experience strong consistent growth.  For example, during the first quarter, our Houston market crossed the $1 billion mark in loans outstanding and the $500 million deposit threshold.  We are very pleased with the continued client growth in our markets.  As evidenced by our phenomenal asset quality statistics, this growth has been achieved with very prudent underwriting standards."

Highlights for the First Quarter of 2013 and March 31, 2013:

• On April 15, 2013, the Company disclosed an impairment charge associated with its indemnification assets from prior FDIC-assisted acquisitions that would be taken as of March 31, 2013, and accelerated indemnification asset ("IA") amortization in each of the eight quarters beginning with the first quarter of 2013.  Accordingly, results for the first quarter of 2013 include a pre-tax $32 million impairment charge shown in "Other Noninterest Expense."  In addition, the financial statements for the first quarter of 2013 reflect $5.5 million in accelerated IA amortization that is shown as a reduction in net interest income and reduced the net interest margin by 19 basis points during the first quarter of 2013.
• Today the Company issued a separate press release providing details on ongoing operating improvement initiatives that commenced in the second quarter of 2012.  These Company initiatives are currently expected to achieve aggregate annual run-rate benefits of approximately $21 million, of which 92% are targeted expense reductions. In 2013, implementation costs are projected to total nearly $4 million, with approximately $11 million in aggregate pre-tax earnings improvements.  Full run-rate benefits are expected to be achieved by the first quarter of 2014, resulting in approximately $21 million of annual pre-tax earnings improvements in 2014 and beyond.  Additional details regarding the projected results of the initiatives are provided in the supplemental presentation available on the Company's website. The Company will report on a quarterly basis regarding its progress in achieving the targeted earnings enhancements.
• Loan growth of $185 million, or 2%, between quarter-ends (10% annualized rate), excluding loans and other assets covered under FDIC loss share agreements ("Covered Assets").
• Total deposits decreased $62 million, or 1%, between quarter ends. Seasonal deposits declined approximately $115 million during the first quarter. Excluding the decline in those temporary deposits, total deposits increased $53 million, or less than 1%, since year-end 2012.
• The net interest margin declined 32 basis points on a linked quarter basis. The accelerated IA amortization accounted for 19 basis points of the margin decline, 8 basis points due to changes in covered loan yield, 2 basis points associated with the additional liquidity added during the first quarter, and 3 basis points due to all other factors.
• Legacy asset quality improved considerably during the first quarter of 2013.  Nonperforming assets ("NPAs"), excluding Covered Assets and impaired loans acquired in acquisitions, equated to 0.83% of total assets at March 31, 2013, compared to 0.85% at December 31, 2012.  On that basis, loans past due 30 days or more declined $8 million, or 9%, to 1.13% of total loans at March 31, 2013, compared to 1.27% at year-end 2012.  Classified assets excluding Covered Assets decreased $18 million, or 8%, during the first quarter, and decreased from 1.99% of total assets at December 31, 2012, to 1.84% at March 31, 2013.
• The Company recorded a negative loan loss provision in the first quarter of 2013 totaling $3 million, compared to a $5 million loan loss provision in the fourth quarter of 2012.  The provision improvement was driven by improved asset quality, slower loan growth, and favorable net charge-off levels.  Net charge-offs totaled $1.2 million in the first quarter of 2013, or an annualized 0.06% of average loans.  Over the last five quarters, net charge-offs averaged 0.07% of average loans.
• Capital ratios remained strong. At March 31, 2013, the Company's tangible common equity ratio was 8.75%, tier 1 common ratio was 11.39%, and total risk based capital ratio was 13.80%.

Table A - Summary Financial Results

Refer to press release supplemental table for a reconciliation of GAAP and non-GAAP measures.

Operating Results

On a linked quarter basis, average earning assets increased $437 million, or 4%.  Also on a linked quarter basis, the average earning asset yield declined 36 basis points, approximately half of which was due to accelerated IA amortization and the other half due to a reduction in average earning asset yields. The cost of interest bearing liabilities decreased seven basis points, and the tax-equivalent net interest margin declined 32 basis points.  The accelerated IA amortization accounted for approximately 19 basis points of the margin decline.  Tax-equivalent net interest income decreased $7.1 million, or 7%, of which $5.5 million of the decline was associated with the accelerated IA amortization.  The decline in the margin more than offset the benefit of strong growth in average earning assets in the first quarter of 2013.

Table B - Quarterly Average Yields/Cost ⁽¹⁾

The 17 basis point decline in average investment yield was the result of cash flows reinvested at lower interest rates and additional investment purchases with relatively short durations.  During the first quarter of 2013, the Company purchased approximately $225 million in securities with a weighted average duration of less than one month and a yield of less than 10 basis points. The covered loan yield (net of loss share receivable) decreased 233 basis points due primarily to the previously mentioned accelerated IA amortization.  The non-covered loan yield declined eight basis points primarily due to a 10 basis point decline in the commercial loan portfolio yield.

For the second quarter of 2013, the Company projects the prospective yield on the covered loan portfolio net of the FDIC IA to approximate 5.40% and projects the average balance of the net covered loan portfolio to decline approximately $135 million, based on current FDIC loss share accounting assumptions and estimates.  The IA amortization is projected to decline from approximately $28 million in the first quarter of 2013 to approximately $15 million in the second quarter of 2013, and decline thereafter at a rate of approximately $2 million per quarter.

The Company recorded a $3.4 million negative loan loss provision in the first quarter of 2013, as a result of significantly improved asset quality conditions in the legacy loan portfolio and acquired performing portfolio.  The Company reported net charge-offs of $1.2 million in the first quarter of 2013, or 0.06% of average loans on an annualized basis.

Aggregate noninterest income decreased $6 million, or 12%, on a linked quarter basis.  The primary changes in noninterest income on a linked quarter basis were:

• Increased gains on the sale of investment securities equal to $2.4 million; offset by
• Decreased mortgage income of $4.0 million, or 17%;
• Decreased deposit service charge income of $0.5 million, or 7%;
• Decreased title revenue of $0.5 million, or 9%; and
• Decreased capital markets revenues of $0.3 million, or 17%.

In addition, the Company recorded a $2.2 million gain associated with the redemption of a business investment acquired in the acquisition of OMNI Bancshares, Inc. in the fourth quarter of 2012 and no similar gains were recorded in 2013.   The $4 million decline in mortgage income was the result of a lower net valuation of derivatives and mortgage loans held for sale due primarily to the changing interest rate environment and lower origination volumes.  Title revenue was lower on a linked quarter basis due to seasonality influences. Assets under management at IBERIA Wealth Advisors were $1.1 billion at March 31, 2013. 

In the first quarter of 2013, the Company originated $546 million in residential mortgage loans, down $131 million, or 19%, on a linked quarter basis (up $92 million compared to the same quarter last year).  The decline in origination volume was consistent with historical seasonal trends.  Client loan refinancing opportunities accounted for approximately 40% of mortgage loan applications in the first quarter of 2013, compared to 47% in the fourth quarter of 2012 and approximately 36% between March 31, 2013, and April 12, 2013.  The Company sold $616 million in mortgage loans during the first quarter of 2013, up $5 million, or less than 1%, on a linked quarter basis.  Margins on the sale of mortgage loans were fairly stable on a linked quarter basis.  The mortgage origination pipeline was approximately $281 million at March 31, 2013, compared to $241 million at December 31, 2012, and approximately $322 million at April 21, 2013.  Mortgage loan repurchases and make-whole payments were approximately $0.1 million in the first quarter of 2013, unchanged compared to the fourth quarter of 2012. 

Noninterest expense increased $31.5 million, or 28%, on a linked quarter basis.  The increase in expense is attributable to the previously disclosed $31.8 million IA impairment charge.  One-time acquisition and conversion costs associated with the Florida Gulf transaction in the first quarter of 2013 were $0.2 million, or less than $0.01 per share.  Excluding the aforementioned non-operating expenses, other changes in noninterest expense on a linked quarter basis were:

• FHLB debt extinguishment costs of $2.3 million; 
• Increased payroll tax expense of $1.9 million, or 72%; and
• Increased franchise and share taxes of $1.1 million; offset by
• Decreased mortgage commissions of $1.4 million, or 25%;
• Decreased marketing and business development expense of $1.5 million, or 33%;
• Decreased legal and professional expenses of $1.0 million, or 19%;
• Decreased OREO expense of $0.9 million, or 49%;
• Decreased credit and loan-related expense of $0.6 million, or 15%; and
• Decreased FDIC insurance premium expense of $0.5 million, or 20%.

Loans

In the first quarter of 2013, total loans increased $96 million, or 1%.  The loan portfolio associated with FDIC-assisted acquisitions decreased $89 million, or 8%, compared to December 31, 2012.  Excluding loans associated with FDIC-assisted transactions, total loans increased $185 million, or 2%, over that period (10% annualized rate). The Company experienced several large commercial loan pay-downs during the first quarter of 2013.  In addition, in the first quarter of each year the Company has historically experienced slower loan growth than other quarters of the year.  Legacy commercial loans increased $113 million, or 2% (which includes $44 million in business banking loan growth, up 7%), legacy consumer loans increased $61 million, or 4%, and legacy mortgage loans increased $11 million, or 4%, during the quarter.  Loan origination growth during the first quarter of 2013 was strongest in the Houston, Lafayette, New Orleans, Baton Rouge, and Mobile markets.  Loans and commitments originated during the first quarter of 2013 totaled $873 million, with 57% fixed rate and 43% floating rate.  Energy-related loans outstanding totaled $632 million at March 31, 2013, equal to approximately 7% of total loans.  The Company had no student loans outstanding at March 31, 2013.

Table C - Period-End Loans ($ in Millions)

Deposits

Total deposits decreased $62 million, or 1%, from December 31, 2012 to March 31, 2013.  Noninterest bearing deposits increased $4 million, or less than 1%, and equated to 19% of total deposits at March 31, 2013.  NOW accounts decreased $43 million, or 2%, and money market and savings account volume increased $53 million, or 1%, at March 31, 2013.  Deposit growth in the first quarter was driven by commercial and retail client growth, partially offset by reduced levels of seasonal deposits.  By year-end 2012, the Company received an influx of approximately $140 million in seasonal client deposits (primarily NOW accounts).  Seasonal deposits decreased $115 million during the first quarter of 2013.  Excluding the estimated seasonal decline in deposits, deposits increased $53 million, or less than 1%, during the first quarter of 2013.  Period-end deposit growth during the first quarter of 2013 was strongest in the Little Rock, Birmingham, Naples, Lake Charles, and Fort Myers markets.

Table D - Period-End Deposits ($ in Millions)

On an average balance and linked quarter basis, noninterest-bearing deposits increased $10 million, or less than 1%, and interest-bearing deposits increased $378 million, or 5%.  The rate on average interest-bearing deposits in the first quarter of 2013 was 0.47%, a decrease of six basis points on a linked quarter basis.  Approximately $1.5 billion in time deposits are scheduled to re-price over the next 12 months at a weighted average cost of 0.75%.  An additional $0.2 billion in time deposits are scheduled to re-price the following 12 months at a weighted average cost of 1.17%.  During the first quarter of 2013, new and re-priced time deposits were booked at an average cost of 0.45%.  The Company experienced a time deposit retention rate of 93% in the first quarter of 2013 with an average 22 basis point reduction in rate.

Other Assets And Funding

The Company maintained a strong liquidity position in the first quarter of 2013.  Total cash and equivalents averaged $850 million in the first quarter of 2013, up $205 million, or 32%, on a linked quarter basis.  The Company increased its investment portfolio by $139 million on a linked quarter basis.  The investment portfolio equated to $2.1 billion, or 17% of total assets at March 31, 2013, up compared to 15% at December 31, 2012.  The investment portfolio had a modified duration of 3.1 years at March 31, 2013, up slightly compared to 2.8 years at December 31, 2012.  The lengthening of the modified duration was the result of slowing prepayment speeds as interest rates increased during the first quarter of 2013.  The unrealized gain in the portfolio decreased from $44 million at December 31, 2012, to $40 million at March 31, 2013.  The average yield on investment securities declined 17 basis points on a linked quarter basis to 1.92% in the first quarter of 2012.  The Company holds in its investment portfolio primarily government agency and municipal securities.  Municipal securities comprised only 9% of total investments at March 31, 2013.  The Company holds no sovereign debt or derivative exposure to foreign counterparties.

As a result of strong deposit growth, the Company paid off $90 million in long-term FHLB borrowings near the end of the first quarter.  The debt was scheduled to mature in May 2014 and had an effective rate of 2.54%.  The Company incurred a prepayment penalty of $2.3 million on the extinguishment of the debt.  On a linked quarter basis, average long-term debt decreased $12 million, or 3%, and the cost of debt decreased one basis point to 3.16%.  The cost of average interest bearing liabilities was 0.58% in the first quarter of 2013, a decrease of seven basis points on a linked quarter basis. For the month of March 2013, the average cost of interest bearing liabilities was 0.56%.

Asset Quality

Excluding $505 million in NPAs which were Covered Assets or acquired impaired loans marked to fair value, NPAs at March 31, 2013 were $96 million, down $3 million, or 3%, compared to December 31, 2012.  The decrease in NPAs was primarily attributable to the resolution of problem credits.  NPAs equated to 0.83% of total assets at March 31, 2013, compared to 0.85% of total assets at December 31, 2012.  Loans past due 30 days or more (including nonaccruing loans) decreased $8 million, or 9%, and represented 1.13% of total loans at March 31, 2013, down compared to 1.27% at December 31, 2012.  Classified assets declined $18 million, or 8%, during the first quarter of 2013.

Table E - Asset Quality Summary

Excludes the impact of all FDIC-assisted acquisitions and impaired loans

Excluding Covered Assets and acquired impaired loans, troubled debt restructurings at March 31, 2013, totaled $19 million, or 0.25% of total loans (compared to 0.24% of total loans at December 31, 2012).  All but $2 million of the Company's troubled debt restructurings were included in NPAs at March 31, 2013.

Capital Position

The Company maintains favorable capital strength.  At March 31, 2013, the Company reported a tangible common equity ratio of 8.75%, up nine basis points compared to December 31, 2012.  At that date, the Company's preliminary Tier 1 leverage ratio was 9.37%, down 33 basis points compared to December 31, 2012.  The Company's preliminary total risk-based capital ratio at March 31, 2013 was 13.80%, down 39 basis points compared to December 31, 2012.  The declines in these capital ratios were primarily the result of the IA impairment charge and related costs.

On October 26, 2011, the Company announced a share repurchase program totaling 900,000 shares of common stock. No shares were repurchased under this program during the first quarter of 2013.  A total of 46,692 shares remain under the currently authorized share repurchase program.

At March 31, 2013, book value per share was $51.33, down $0.55 per share compared to December 31, 2012. Tangible book value per share was $36.93, down $0.41 per share compared to December 31, 2012.  Based on the closing stock price of the Company's common stock of $49.13 per share on April 25, 2013, this price equated to 0.96 times March 31, 2013 book value and 1.33 times March 31, 2013 tangible book value per share.

On March 19, 2013, the Company declared a quarterly cash dividend of $0.34 per share. This dividend level equated to an annualized dividend rate of $1.36 per share and an indicated dividend yield of 2.77%.

IBERIABANK Corporation

IBERIABANK Corporation is a financial holding company with 276 combined offices, including 181 bank branch offices and two LPOs in Louisiana, Arkansas, Tennessee, Alabama, Texas, and Florida, 21 title insurance offices in Arkansas and Louisiana, mortgage representatives in 62 locations in 12 states, nine locations with representatives of IBERIA Wealth Advisors in four states, and one IBERIA Capital Partners, LLC office in New Orleans.  During the first quarter of 2013, four bank branch offices were closed and no branch offices were opened.

The Company's common stock trades on the NASDAQ Global Select Market under the symbol "IBKC."  The Company's market capitalization was approximately $1.5 billion, based on the NASDAQ closing stock price on April 25, 2013.

The following 10 investment firms currently provide equity research coverage on IBERIABANK Corporation:

• FIG Partners, LLC
• Jefferies & Co., Inc.
• Keefe, Bruyette & Woods
• Oppenheimer & Co., Inc.
• Raymond James & Associates, Inc.
• Robert W. Baird & Company
• Stephens, Inc.
• Sterne, Agee & Leach
• SunTrust Robinson-Humphrey
• Wunderlich Securities

Conference Call

In association with this earnings release, the Company will host a live conference call to discuss the financial results for the quarter just completed. The telephone conference call will be held on Friday, April 26, 2013, beginning at 8:00 a.m. Central Time by dialing 1-800-288-8968. The confirmation code for the call is 290483.  A replay of the call will be available until midnight Central Time on May 3, 2013 by dialing 1-800-475-6701. The confirmation code for the replay is 290483.  The Company has prepared a PowerPoint presentation that supplements information contained in this press release.  The PowerPoint presentation may be accessed on the Company's web site, www.iberiabank.com, under "Investor Relations" and then "Presentations."

Non-GAAP Financial Measures

This press release contains financial information determined by methods other than in accordance with GAAP. The Company's management uses these non-GAAP financial measures in their analysis of the Company's performance. These measures typically adjust GAAP performance measures to exclude the effects of the amortization of intangibles and include the tax benefit associated with revenue items that are tax-exempt, as well as adjust income available to common shareholders for certain significant activities or transactions that are infrequent in nature. Since the presentation of these GAAP performance measures and their impact differ between companies, management believes presentations of these non-GAAP financial measures provide useful supplemental information that is essential to a proper understanding of the operating results of the Company's core businesses. These non-GAAP disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.  Reconciliations of GAAP to non-GAAP disclosures are included as tables at the end of this release.  Refer to press release supplemental table for this reconciliation.

Forward Looking Statements

To the extent that statements in this press release and the accompanying PowerPoint presentation relate to future plans, objectives, financial results or performance of IBERIABANK Corporation, these statements are deemed to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements, which are based on management's current information, estimates and assumptions and the current economic environment, are generally identified by the use of the words "plan", "believe", "expect", "intend", "anticipate", "estimate", "project" or similar expressions. IBERIABANK Corporation's actual strategies and results in future periods may differ materially from those currently expected due to various risks and uncertainties.

Actual results could differ materially because of factors such as the level of market volatility, our ability to execute our growth strategy, including the availability of future FDIC-assisted failed bank opportunities, unanticipated losses related to the integration of, and refinements to purchase accounting adjustments for, acquired businesses and assets and assumed liabilities in these transactions, adjustments of fair values of acquired assets and assumed liabilities and of deferred taxes in acquisitions,actual results deviating from the Company's current estimates and assumptions of timing and amounts of cash flows, credit risk of our customers, effects of the on-going correction in residential real estate prices and reduced levels of home sales, sufficiency of our allowance for loan losses, changes in interest rates, access to funding sources, reliance on the services of executive management, competition for loans, deposits and investment dollars, reputational risk and social factors, changes in government regulations and legislation, increases in FDIC insurance assessments, geographic concentration of our markets and economic conditions in these markets, rapid changes in the financial services industry, dependence on our operational, technological, and organizational systems or infrastructure and those of third-party providers of those services, hurricanes and other adverse weather events, the modest trading volume of our common stock, and valuation of intangible assets.  These and other factors that may cause actual results to differ materially from these forward-looking statements are discussed in the Company's Annual Report on Form 10-K and other filings with the Securities and Exchange Commission (the "SEC"), available at the SEC's website, http://www.sec.gov, and at the Company's website, http://www.iberiabank.com, under the heading "Investor Information."  All information in this release and the accompanying PowerPoint presentation is as of the date of this release.  The Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company's expectations. Certain tabular presentations may not reconcile because of rounding.