IBERIABANK Corporation Reports First Quarter Results

LAFAYETTE, La., April 27, 2016 /PRNewswire/ -- IBERIABANK Corporation (NASDAQ: IBKC), holding company of the 129-year-old IBERIABANK (www.iberiabank.com), reported operating results for the first quarter ended March 31, 2016.  For the quarter, the Company reported income available to common shareholders of $40.2 million, or $0.97 fully diluted earnings per common share ("EPS").  In the first quarter of 2016, the Company incurred non-operating expenses net of non-operating revenue and income taxes equal to $1.6 million, or $0.04 per common share.   Excluding non-operating items, operating EPS in the first quarter of 2016 was $1.01 per common share on a non-GAAP operating basis (refer to press release supplemental table).  The $1.01 operating EPS results in the first quarter of 2016 were within management's guidance range and exceeded consensus analyst expectations.

Daryl G. Byrd, President and Chief Executive Officer, commented, "We are pleased at the progress we achieved this past quarter in improving our operating efficiency and profitability. We delivered unseasonably strong legacy loan growth and continued margin strength in the first quarter, both of which are favorable trends which we believe run counter to our peers. In addition, some of our fee income businesses, including mortgage, client derivatives, and treasury management, delivered strong revenue growth and our successful cost containment efforts were evident as our tangible operating efficiency ratio improved to 60.3%, placing us on the very cusp of our strategic efficiency goal of 60%."

Byrd continued, "These favorable financial results were achieved despite the headwinds associated with our continued pro-active 'risk-off trade' and vigilance in mitigating risks that sustained low energy prices are having on selected clients.We increased our energy-related loan loss reserves by 48% on a linked quarter basis, while our operating EPS on a pre-tax pre-provision basis reached $2.00 per share in the first quarter of 2016, a record for our Company, and an increase of 30% compared to the first quarter of 2015. We remain comfortable with the full year 2016 guidance we previously provided to the investment community regarding our growth expectations, continued margin strength, expense targets, and delivering solid operating earnings. We are keenly focused on delivering exceptional client service and continued progress in improved long-term shareholder returns."

Highlights for the first quarter of 2016 and at March 31, 2016:

• Energy-related loans ("energy loans") increased $51 million, or 7%, between December 31, 2015 and March 31, 2016, and at March 31, 2016, equated to 5.1% of total loans. At March 31, 2016, $46 million in energy loans were held on non-performing status (6.3% of total energy loans), up from $8 million at year-end 2015. At March 31, 2016, the Company had approximately $39 million in aggregate reserves for energy loans and unfunded commitments, an increase of $13 million, or 48%, since December 31, 2015. At quarter-end, energy-related reserves equated to 5.4% of energy loans outstanding. The Company had no energy loans past due at March 31, 2016, and incurred no energy-related charge-offs in the first quarter of 2016. Exclusive of energy loans, the Company's general asset quality improved on a linked quarter basis and on a year-over-year basis.
• The Company's net interest margin was stable on a linked quarter basis at 3.64%, which was above management's expectations. The Company's cash margin improved 10 basis points on a linked quarter basis.
• On a linked quarter basis, the Company's operating revenues increased $3.5 million, or 2%, while its operating expenses increased $0.7 million, or less than 1%. The tangible efficiency ratio improved from 61.1% to 60.3% on a linked quarter basis.
• During the first quarter of 2016, the Company closed or consolidated 19 branches, which is expected to result in projected annual net run-rate savings of at least $1 million per quarter starting in the second quarter of 2016. The Company incurred $2.1 million in pre-tax non-operating expenses in the first quarter of 2016 associated with branch closures and consolidations.
• Total loan growth was $124 million, or 1%, between December 31, 2015 and March 31, 2016. Legacy loan growth, which excludes all assets covered under FDIC loss share agreements and other non-covered acquired assets (collectively, "Acquired Assets"), increased $338 million, or 3% (12% annualized rate), on a period-end basis and $370 million, or 3% (14% annualized rate), on an average balance basis.
• Total deposits increased $82 million, or less than 1%, between quarter-ends, and decreased $348 million, or 2%, on an average balance basis.  Non-interest-bearing deposits increased $132 million, or 3%, between quarter-ends and decreased $72 million, or 2%, on an average balance basis.  The Company's loan-to-deposit ratio was 88.9% at March 31, 2016, up slightly from 88.6% at year-end 2015 and 87.8% one year prior.  

Operating Results

On a linked quarter basis, average loan volume (including the FDIC loss share receivable) increased $165 million, or 1%, and the associated yield increased one basis point.  Over that period, average legacy loans increased $370 million, or 3%, with an increase in yield of 10 basis points, and acquired loans (including the FDIC loss share receivable) decreased $205 million, or 6%, and the yield decreased 13 basis points.  All other average earning assets, including investment securities, mortgage loans held for sale, and interest-bearing deposits in other institutions, increased a total of $20 million, or less than 1%.

On a linked quarter basis, average earning assets increased $185 million, or 1%, and the average earning asset yield remained stable. Average interest-bearing liabilities increased $161 million, or 1%, and the cost of interest-bearing liabilities remained constant over the period.  As a result, the net interest spread and margin were each unchanged.  On a linked quarter basis, tax-equivalent net interest income increased $0.2 million, or less than 1%. One less business day in the first quarter of 2016 compared to the fourth quarter of 2015 suppressed net interest income in the first quarter of 2016 by approximately $1.5 million.

In the first quarter of 2016, non-interest income increased $3.3 million, or 6%, compared to the fourth quarter of 2015.  Non-operating non-interest income totaled $0.2 million in the first quarter of 2016, similar to the fourth quarter of 2015.  Operating non-interest income increased $3.3 million, or 6%, on a linked quarter basis.  The primary changes in operating non-interest income on a linked quarter basis included:

• Increased mortgage income of $3.2 million, or 19%; and
• Increased client derivative income of $1.9 million, or 175%; partially offset by
• Decreased title revenues of $0.7 million, or 13%; and
• Decreased service charge income of $0.5 million, or 4%.

In the first quarter of 2016, the Company originated $516 million in residential mortgage loans, down $42 million, or 8%, on a linked quarter basis.  Client loan refinancing opportunities accounted for approximately 23% of mortgage loan applications in the first quarter of 2016, which was stable on a linked quarter basis.  The Company sold $488 million in mortgage loans during the first quarter of 2016, down $109 million, or 18%, on a linked quarter basis.  Loans held for sale increased from $166 million at December 31, 2015, to $193 million at March 31, 2016.  The mortgage origination locked pipeline increased $118 million, or 52%, between December 31, 2015, and March 31, 2016, to $345 million at quarter-end, and up $66 million, or 24%, over the comparable period last year.  At April 22, 2016, the locked pipeline was $382 million, up $37 million, or 11%, compared to March 31, 2016.  The improvement mortgage income on a linked quarter basis was primarily the result of higher volumes of the mortgage origination locked pipeline and mortgage loans held for sale, and an improvement in the gain on sale margin.

Non-interest expense decreased $1.5 million, or 1%, on a linked quarter basis, while non-operating expense declined $2.3 million and operating expense increased $0.7 million, or less than 1%.  Operating expense changes included the following on a linked quarter basis:

• Increased marketing and business development expenses of $1.3 million, or 61%;
• Increased core deposit intangible amortization of $0.3 million, or 18%;
• Increased travel and entertainment expenses of $0.3 million, or 17%; and
• Increased OREO-related expense of $0.3 million; partially offset by
• Decreased salaries and employee benefit expenses of $1.3 million, or 2%.

The Company's operating tangible efficiency ratio in the first quarter of 2016 was 60.3%, down from 61.1% in the fourth quarter of 2015.  The Company continues to focus on expense savings and revenue enhancement strategies intended to achieve a targeted operating tangible efficiency ratio of less than 60% by the fourth quarter of 2016.  

Loans

Total loans increased $124 million, or 1%, between December 31, 2015, and March 31, 2016.  Over that period, the acquired loan portfolio decreased $214 million, or 7%, and legacy loans increased $338 million, or 3% (12% annualized rate), including an increase in total energy loans of $51 million, or 7%, and a decline in indirect automobile loans of $33 million, or 13%.  During the first quarter of 2016, legacy commercial loans increased $294 million, or 4% (which included $52 million in small business loan growth, up 5%, or 19% annualized rate), legacy consumer loans increased $8 million, or less than 1%, and legacy mortgage loans increased $37 million, or 5% (21% annualized rate).  Excluding the impact of energy fundings, period-end loan growth during the first quarter of 2016 was strongest in the Southeast Florida, Naples, Birmingham, Tampa, and Dallas  markets.  Funded loan origination and renewal mix in the first quarter of 2016 was 34% fixed rate and 66% floating rate, and total loans outstanding (excluding non-accruals) were 45% fixed and 55% floating.  Loans and commitments originated and/or renewed during the first quarter of 2016 totaled $1.3 billion (down 13% on a linked quarter basis).  At March 31, 2016, the Company's commercial loan pipeline was approximately $900 million.  

Energy loans outstanding totaled $732 million at March 31, 2016, up $51 million, or 7%, compared to December 31, 2015, and equated to approximately 5.1% of total loans.  The increase in energy loans was the result of select exploration and production companies drawing on commitment lines (up $56 million) and normal draws on existing working capital lines at select midstream companies (up $14 million), partially offset by a decrease in oil field service loans outstanding (down $19 million.) Energy-related commitments totaled $1.2 billion at March 31, 2016, down $78 million, or 6%, compared to year-end 2015. Loans to exploration and production companies accounted for 51% of energy loans outstanding and 56% of energy loan commitments at March 31, 2016.  Midstream companies accounted for 18% of energy loans and 17% of energy loan commitments, and service companies accounted for 31% of energy loans and 27% of energy loan commitments.  At March 31, 2016, $46 million in energy loans were on non-accrual status (compared to $8 million at December 31, 2015), and no energy loans were past due greater than 30 days at quarter-end.  At March 31, 2016,  approximately 39% of energy loans were classified, and 49% were criticized.  To date, the Company has experienced no energy-related charge-offs.  Additional information regarding the Company's energy loan and commitment exposure is provided in the supplemental investor presentation.

At March 31, 2016, the Company's indirect automobile lending business had approximately $213 million in loans outstanding, down $33 million, or 13%, compared to December 31, 2015 (1.5% of total loans outstanding compared to 1.7% at December 31, 2015).

Deposits

Total deposits increased $82 million, or less than 1%, between December 31, 2015 and March 31, 2016.  Non-interest-bearing deposits increased $132 million, or 3%, and equated to 28% of total deposits at March 31, 2016.  NOW accounts decreased $14 million, or less than 1%, while money market accounts decreased $47 million, or less than 1%, and time deposits decreased $45 million, or 2%, between December 31, 2015 and March 31, 2016.  Savings deposits increased $55 million, or 8%, between quarter-ends.  Deposit growth during the first quarter of 2016 was strongest in the Lake Charles, Houston, Orlando, Birmingham, and Naples markets.  

On an average balance and linked quarter basis, non-interest-bearing deposits decreased $72 million, or 2%, and interest-bearing deposits decreased $276 million, or 2%.  The rate on average interest-bearing deposits in the first quarter of 2016 was 0.42%, down one basis point on a linked quarter basis.

Other Assets And Funding

On an average balance and linked quarter basis, the investment portfolio decreased $34 million, or 1%, to $2.9 billion in the first quarter of 2016.  On a period-end basis, the investment portfolio equated to $2.9 billion, or 14% of total assets at March 31, 2016, compared to 15% at December 31, 2015.  The investment portfolio had an effective duration of 2.8 years at March 31, 2016, compared to 3.3 years at December 31, 2015.  The investment portfolio had a $39 million unrealized gain at March 31, 2016.  The average yield on investment securities increased four basis points on a linked quarter basis, to 2.25% in the first quarter of 2016.  The Company holds in its investment portfolio primarily government agency securities.  Municipal securities comprised only 8% of total investments at March 31, 2016.  The Company holds for investment no sovereign debt, equity securities, trust preferred securities, or derivative exposure to foreign counterparties.

On a linked quarter basis, average short-term borrowings (including repurchase agreements) increased $254 million, or 106%, and the cost of short-term borrowings increased 23 basis points.  At March 31, 2016, short-term borrowings (including repurchase agreements) increased $172 million, or 53%, compared to year-end 2015.  On a linked quarter basis, average long-term debt increased $182 million, or 54%, and the cost of long-term debt decreased 67 basis points to 2.35%.  The cost of average interest-bearing liabilities was 0.49% in the first quarter of 2016, unchanged on a linked quarter basis.

Asset Quality

Between December 31, 2015 and March 31, 2016, legacy non-performing assets ("NPAs") increased $43 million, or 63%.  At March 31, 2016, NPAs included $11 million in former bank branches and related real estate, an increase of 36% compared to December 31, 2015.  At March 31, 2016, legacy NPAs equated to 0.65% of total assets, up from 0.42% at December 31, 2015, and 0.59% of total assets excluding bank-related properties, up from 0.37% at December 31, 2015.

Legacy loans past due 30 days or more (excluding non-accruing loans) increased $22 million, or 105%, and represented 0.37% of total legacy loans at March 31, 2016, compared to 0.19% at December 31, 2015.  Of the $22 million increase in loans past due, $20 million was related to three loans that were past due at quarter-end due to the fact that those loans had matured. Since the end of the first quarter of 2016, the largest of the three loans (totaling $9 million past due), was renewed and is current.

Net charge-offs totaled $4.0 million in the first quarter of 2016, up $1.1 million, or 37%, compared to the fourth quarter of 2015.  Annualized net charge-offs equated to 0.11% of average loans in the first quarter of 2016, up three basis points on a linked quarter basis.  The Company's provision for loan losses increased $3.2 million, or 27%, on a linked quarter basis to $14.9 million.

Capital Position

At March 31, 2016, the Company reported a tangible common equity ratio of 8.83%, down three basis points compared to December 31, 2015, and the preliminary Tier 1 leverage ratio was 9.41%, down 11 basis points compared to December 31, 2015. The Company's preliminary calculation of its total risk-based capital ratio at March 31, 2016, was 12.21%, up seven basis points compared to December 31, 2015.  During the first quarter of 2016, the remaining 25% of trust preferred securities included in the Company's Tier 1 capital ratio at year-end 2015 was phased into Tier 2 capital.  As a result, the negative impact on Tier 1 capital ratios was approximately 18 basis points. No impact on the Company's total risk-based capital ratio was associated with this change.

At March 31, 2016, book value per common share was $59.93, up $1.06 per share, or 2%, compared to December 31, 2015. Tangible book value per common share was $41.38, up $1.03 per share, or 3%, compared to December 31, 2015.  Based on the closing stock price of the Company's common stock of $57.01 per share on April 27, 2016, this price equated to 0.95 times March 31, 2016 book value per common share and 1.38 times March 31, 2016 tangible book value per common share.

On March 14, 2016, the Company declared a quarterly cash dividend of $0.34 per common share. This common dividend level equated to an annualized dividend rate of $1.36 per common share.  Based on the Company's closing common stock price on April 27, 2016, the indicated dividend yield was 2.39% per common share. The payment of dividends is at the discretion of the Board of Directors.

On August 5, 2015, the Company sold 3.2 million depositary shares, each representing a 1/400th interest in a share of non-cumulative perpetual preferred stock. The preferred stock has an initial coupon equal to 6.625% for a period of 10 years, and thereafter floats at a rate of LIBOR plus 426.2 basis points. The Company raised approximately $80 million in gross proceeds ($77 million net proceeds) from the transaction.  On January 4, 2016, the Company declared a semi-annual cash dividend of $0.805 per depositary share that was paid on February 1, 2016.

IBERIABANK Corporation

IBERIABANK Corporation is a financial holding company with 298 combined offices, including 199 bank branch offices and three loan production offices in Louisiana, Arkansas, Tennessee, Alabama, Texas, Florida, and Georgia, 22 title insurance offices in Arkansas and Louisiana, and mortgage representatives in 65 locations in 10 states.  The Company has eight locations with representatives of IBERIA Wealth Advisors in four states, and one IBERIA Capital Partners L.L.C. office in New Orleans.

The Company's common stock trades on the NASDAQ Global Select Market under the symbol "IBKC" and its Series B Preferred Stock trades on the NASDAQ Global Select Market under the symbol "IBKCP".  The Company's common stock market capitalization was approximately $2.4 billion, based on the NASDAQ Global Select Market closing stock price on April 27, 2016.

The following 12 investment firms currently provide equity research coverage on the Company:

• Bank of America Merrill Lynch
• FBR & Co.
• FIG Partners, LLC
• Hovde Group, LLC
• Jefferies & Co., Inc.
• Keefe, Bruyette & Woods, Inc.
• Piper Jaffray & Co.
• Raymond James & Associates, Inc.
• Robert W. Baird & Company
• Sandler O'Neill + Partners, L.P.
• Stephens, Inc.
• SunTrust Robinson-Humphrey

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 Thursday, April 28, 2016, beginning at 8:30 a.m. Central Time by dialing 1-888-317-6003. The confirmation code for the call is 5200632.  A replay of the call will be available until midnight Central Time on May 5, 2016 by dialing 1-877-344-7529. The confirmation code for the replay is 10083371.  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 "Financial Information" and "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 in management's opinion can distort period-to-period comparisons of the Company's performance. 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.

Caution About Forward-Looking Statements

This press release contains "forward-looking statements," which may include forecasts of our financial results and condition, expectations for our operations and businesses, and our assumptions for those forecasts and expectations. Do not place undue reliance on forward-looking statements. Due to various factors, actual results may differ materially from our forward-looking statements. Factors that could cause our actual results to differ materially from our forward-looking statements are described under "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Risk Factors" and "Regulation and Supervision" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2015, and in other documents subsequently filed by the Company with the Securities and Exchange Commission, available at the SEC's website, http://www.sec.gov, and the Company's website, http://www.iberiabank.com. To the extent that statements in this press release relate to future plans, objectives, financial results or performance by the Company, these statements are deemed to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are generally identified by use of words such as "may," "believe," "expect," "anticipate," "intend," "will," "should," "plan," "estimate," "predict," "continue" and "potential" or the negative of these terms or other comparable terminology.

Forward-looking statements represent management's beliefs, based upon information available at the time the statements are made, with regard to the matters addressed; they are not guarantees of future performance.  Forward-looking statements are subject to numerous assumptions, risks and uncertainties that change over time and could cause actual results or financial condition to differ materially from those expressed in or implied by such statements.  Factors that could cause or contribute to such differences include, but are not limited to: the level of market volatility, our ability to execute our growth strategy, including the availability of future bank acquisition opportunities, our ability to execute on our revenue and efficiency improvement initiatives, unanticipated losses related to the completion and integration of mergers and acquisitions, 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, resolution of assets subject to loss share agreements with the FDIC within the coverage periods, effects of the on-going correction in residential real estate prices and  levels of home sales, our ability to satisfy new capital and liquidity standards such as those imposed by the Dodd-Frank Wall Street Reform and Consumer Protection Act and those adopted by the Basel Committee on Banking Supervision and federal banking regulators, 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, competition from competitors with greater financial resources than the Company, reputational risk and social factors, changes in government regulations and legislation, increases in FDIC insurance assessments, geographic concentration of our markets, economic and business conditions in our markets or nationally, including the impact of volatility of oil and gas prices, rapid changes in the financial services industry, significant litigation, cyber-security risks including dependence on our operational, technological, and organizational systems and infrastructure and those of third party providers of those services, hurricanes and other adverse weather events, and valuation of intangible assets. All information in this discussion is as of the date of this press release. Except to the extent required by applicable law or regulation, the Company undertakes no obligation to revise or update publicly any forward-looking statement for any reason.  

SOURCE IBERIABANK Corporation