IBERIABANK Corporation Reports Fourth Quarter Results

LAFAYETTE, La., Jan. 26, 2017 /PRNewswire/ -- IBERIABANK Corporation (NASDAQ: IBKC), holding company of the 129-year-old IBERIABANK (www.iberiabank.com), reported financial results for the fourth quarter ended December 31, 2016.  For the quarter, the Company reported income available to common shareholders of $44.2 million, or $1.04 fully diluted earnings per common share ("EPS").  On a non-GAAP basis, EPS excluding non-core revenues and non-core expenses ("Core EPS") in the fourth quarter of 2016 was $1.16 per common share (refer to press release supplemental tables for a reconciliation of GAAP to non-GAAP metrics).

For the year ended December 31, 2016, the Company reported income available to common shareholders of $178.8 million, an increase of $36.0 million, or 25%, compared to the year ended December 31, 2015. On that basis, EPS for the year of 2016 was $4.30 per common share, up 17% compared to 2015. Core earnings for the year of 2016 was $184.1 million, up $22.0 million, or 14%, compared to 2015. Core EPS for the year of 2016 was $4.43 per common share, up 6% compared to 2015. The levels of annual Core earnings and Core EPS in 2016 were record results for the Company.

Daryl G. Byrd, President and Chief Executive Officer, commented, "We were active on many fronts during the fourth quarter of 2016, and we delivered solid quarterly financial results which capped off an outstanding and record year for our Company. Despite typical seasonal softness in our mortgage and title businesses, we delivered our second highest level of quarterly Core EPS in our Company's history, and we demonstrated our sustained focus on efficiency. We experienced an abundance of liquidity driven by record organic deposit growth, the byproduct of which will be temporary compression of our net interest margin until the excess liquidity is fully deployed. Our capital position was further strengthened with the successful execution of a common stock offering that was well-oversubscribed by investors. Near the latter part of the fourth quarter we began to see the benefits of our asset-sensitive balance sheet position in a rising interest rate environment. Finally, we successfully completed the early termination of our FDIC loss share agreements after seven years of participation in that program. We are pleased with our continued financial progress and our unique position within the banking industry during this period of significant economic, political, and technological change."

Highlights for the fourth quarter of 2016 and at December 31, 2016:

• The Company achieved quarterly organic deposit growth of $886 million on a period-end basis and $817 million on an average balance basis, each of which were quarterly record results for the Company.
• The reported and cash net interest margins declined on a linked quarter basis as a result of additional balance sheet liquidity from the strong deposit inflows.
• Energy-related loans ("energy loans") declined to 3.7% of total loans, classified energy loans declined 7%, and energy-related non-performing assets decreased during the fourth quarter of 2016. 
• Overall improvement in consolidated credit quality resulted in a $7 million decline in the provision for loan losses on a  linked quarter basis. 
• Total revenues declined 4% on a linked quarter basis primarily due to a decline in the Company's seasonal fee income businesses and slower loan growth. The Company's core efficiency remained generally stable on a linked quarter basis.
• IBERIABANK successfully terminated loss share agreements associated with FDIC-assisted acquisitions. As a result of this action, the Company recorded a non-core $17.8 million pre-tax charge during the fourth quarter of 2016 and will no longer incur expenses associated with these agreements. IBERIABANK will recognize all future recoveries, losses, and expenses related to the assets previously subject to these agreements.
• The Company experienced a $6.8 million reduction in income tax expense associated with the filing of its 2015 tax return. This non-core tax benefit equated to $0.16 per common share.
• The Company issued and sold approximately 3.6 million shares of common stock, resulting in net proceeds of $280 million and further strengthened the Company's capital position.

Operating Results

On a linked quarter basis, average loan volume (including the FDIC loss share receivable) increased $103 million, or 1%, and the associated tax-equivalent yield decreased nine basis points.  Over that period, average legacy loans increased $298 million, or 2%, with a decrease in yield of two basis points, and average acquired loans (including the FDIC loss share receivable) decreased $195 million, or 7%, and the yield decreased 17 basis points.  All other average earning assets, including investment securities, mortgage loans held for sale, and interest-bearing deposits in other institutions, increased a net of $724 million, or 20%.

Primarily as a result of additional balance sheet liquidity, the Company's reported and cash net interest margins declined 19 and 15 basis points, respectively, on a linked quarter basis.  The excess liquidity compressed the net interest margin by approximately eight basis points on a linked quarter basis.

On a linked quarter basis, average earning assets increased $827 million, or 4%, and the average earning asset yield decreased 16 basis points.  Average interest-bearing liabilities increased $406 million, or 3%, and the cost of interest-bearing liabilities increased four basis points. On a linked quarter basis, tax-equivalent net interest income decreased $1.7 million, or 1%.

The Company's provision for loan losses decreased $7.3 million, or 59%, on a linked quarter basis to $5.2 million. The provision for loan losses covered net charge-offs in the fourth quarter of 2016 by 68% compared to 122% in the third quarter of 2016.

In the fourth quarter of 2016, non-interest income on a GAAP and non-core basis decreased $6.6 million, or 11%, compared to the third quarter of 2016.  The primary changes in core non-interest income on a linked quarter basis included:

• Decreased mortgage income of $5.7 million, or 26%;
• Decreased brokerage commission and swap income of $0.9 million; and
• Decreased title revenues of $0.7 million, or 11%; partially offset by
• Increased capital markets income of $0.6 million.

In the fourth quarter of 2016, the Company originated $538 million in residential mortgage loans, down $161 million, or 23%, on a linked quarter basis.  Client loan refinancing opportunities accounted for approximately 30% of mortgage loan applications in the fourth quarter of 2016, compared to 26% on a linked quarter basis.  The Company sold $583 million in mortgage loans during the fourth quarter of 2016, down $123 million, or 17%, on a linked quarter basis.  Loans held for sale decreased from $211 million at September 30, 2016, to $157 million at December 31, 2016.  The mortgage origination locked pipeline was $166 million at December 31, 2016, down $116 million, or 41%, between quarter-ends, and was down 27% compared to one year ago.  At January 20, 2017, the locked pipeline was $182 million, up 10% compared to December 31, 2016.

Non-interest expense increased $13.4 million, or 10%, on a linked quarter basis, the increase of which was the result of the Company's termination of FDIC loss share agreements. On December 20, 2016, IBERIABANK terminated 12 loss share agreements associated with FDIC-assisted acquisitions. IBERIABANK received a net cash payment from the FDIC of $6.5 million as consideration for the termination of those agreements, and recorded a non-core pre-tax $17.8 million expense, or $0.28 per common share, associated with the termination. IBERIABANK will recognize all future recoveries, losses, and expenses related to the assets previously subject to these agreements.

Excluding non-core expenses, core non-interest expense decreased $4.6 million, or 3%, and was comprised of the the following items on a linked-quarter basis:

• Decreased health care costs of $2.7 million;
• Decreased mortgage commission expenses of $1.7 million;
• Decreased occupancy expense of $1.0 million;
• Decreased FDIC insurance premiums of $1.0 million;
• Decreased legal and professional expense of $0.8 million;
• Decreased marketing expense of $0.7 million; and
• Decreased compensation costs of $0.6 million; partially offset by
• Increased credit and loan-related expenses of $1.5 million;
• Increased phantom stock incentives expense of $1.5 million; and
• Increased computer services expense of $0.9 million.

The Company's provision for unfunded commitments, which is included in credit and loan related expense in non-interest expense, increased $1.1 million during the fourth quarter of 2016. The reserve for unfunded commitments was $11.2 million at December 31, 2016 ($1.0 million of which were energy-related).

On a linked quarter basis, the Company's revenues and  non-GAAP core revenues decreased $8.3 million, or 4%. Over the same period, GAAP expenses increased $13.4 million, or 10%, and non-GAAP core expenses decreased $4.6 million, or 3%. The efficiency ratio increased from 61.9% to 70.5%, while the non-GAAP core tangible efficiency ratio edged up slightly from 60.1% to 60.3% on a linked quarter basis. The Company continues to focus on expense containment and revenue enhancement strategies intended to further improve its targeted core tangible efficiency ratio.

Loans

Total loans increased $140 million, or 1%, between September 30, 2016, and December 31, 2016.  Over that period, acquired loans decreased $141 million, or 6%, and legacy loans increased $282 million, or 2% (9% annualized rate), including a decrease in total energy loans of $38 million, or 6%, and a decline in indirect automobile loans of $23 million, or 15%.  During the fourth quarter of 2016, legacy commercial loans increased $258 million, or 3% (which included $38 million in small business loan growth, up 3%, or 12% annualized rate), legacy consumer loans increased $9 million, or less than 1%, and legacy mortgage loans increased $14 million, or 2%.  Period-end loan growth during the fourth quarter of 2016 was strongest in the Atlanta, Tampa, Dallas, and Baton Rouge markets.  Funded loan origination and renewal mix in the fourth quarter of 2016 was 36% fixed rate and 64% floating rate, and total loans outstanding (excluding non-accruals) were 44% fixed and 56% floating.   Commitments originated and/or renewed during the fourth quarter of 2016 were $1.4 billion (down 3% on a linked quarter basis).  Loans originated and/or renewed during the fourth quarter of 2016 totaled $936 million (down 4% on a linked quarter basis).  At December 31, 2016, the Company's commercial loan pipeline was approximately $811 million.

Energy loans outstanding totaled $561 million at December 31, 2016, down $38 million, or 6%, compared to September 30, 2016, and equated to approximately 3.7% of total loans (down from 4.0% at September 30, 2016).  Energy-related commitments totaled $970 million at December 31, 2016, down $36 million, or 4%, compared to September 30, 2016. Loans to exploration and production companies accounted for 52% of energy loans outstanding and 56% of energy loan commitments at December 31, 2016.  Midstream companies accounted for 16% of energy loans and 19% of energy loan commitments, and service companies accounted for 32% of energy loans and 25% of energy loan commitments.

At December 31, 2016, $150 million in energy loans were on non-accrual status (compared to $154 million at September 30, 2016), and $1.5 million in energy loans (excluding non-accruing loans) were past due greater than 30 days at quarter-end.  Classified energy loans declined $17 million, or 7%, and criticized energy loans decreased $2 million, or less than 1%, between quarter-ends. At December 31, 2016,  approximately 42% of energy loans were classified and 57% were criticized.  To date, the Company has experienced $16 million in energy-related charge-offs.  Additional information regarding the Company's energy loan and commitment exposure is provided in Table 8 of this press release and in the supplemental investor presentation.

At December 31, 2016, the Company's indirect automobile lending business had approximately $131 million in loans outstanding, down $23 million, or 15%, compared to September 30, 2016 (0.9% of total loans outstanding compared to 1.0% at September 30, 2016).

Deposits

Total deposits increased $886 million, or 5%, between September 30, 2016 and December 31, 2016.  Over that period, non-interest-bearing deposits increased $141 million, or 3%, and equated to 28% of total deposits at December 31, 2016.  NOW accounts increased $409 million, or 14%, money market accounts increased $372 million, or 6%, and savings deposits grew $16 million, or 2%. Between September 30, 2016 and December 31, 2016, time deposits decreased $52 million, or 2%. Deposit growth during the fourth quarter of 2016 was strongest in the New Orleans, Acadiana, Houston, and Florida Keys markets.

On an average balance and linked quarter basis, non-interest-bearing deposits increased $264 million, or 6%, and interest-bearing deposits increased $553 million, or 5%.  The rate on average interest-bearing deposits in the fourth quarter of 2016 was 0.50%, up six basis points on a linked quarter basis. The increase in deposit rates was primarily the result of a less favorable change in the mix of deposits during the fourth quarter.

Other Assets And Funding

On an average balance and linked quarter basis, the investment portfolio increased $365 million, or 13%, in the fourth quarter of 2016, to $3.3 billion.  On a period-end basis, the investment portfolio equated to $3.5 billion, or 16% of total assets at December 31, 2016, up $559 million, or 19%, compared to September 30, 2016.  The investment portfolio had an effective duration of 3.8 years at December 31, 2016, compared to 3.0 years at September 30, 2016.  The investment portfolio had a $39 million unrealized loss at December 31, 2016, down from a $42 million unrealized gain at September 30, 2016.  The average yield on investment securities remained stable on a linked quarter basis, at 2.09% in the fourth quarter of 2016. The Company holds in its investment portfolio primarily government agency securities.  Municipal securities comprised 9% of total investments at December 31, 2016.

On a linked quarter basis, average short-term borrowings (including repurchase agreements) decreased $129 million, or 18%, and the cost of short-term borrowings decreased four basis points.  At December 31, 2016, short-term borrowings (including repurchase agreements) decreased $204 million, or 29%, compared to September 30, 2016.  On a linked quarter basis, average long-term debt decreased $18 million, or 3%, and the cost of long-term debt increased five basis points to 2.11%.  The cost of average interest-bearing liabilities was 0.57% in the fourth quarter of 2016, up four basis points on a linked quarter basis.

Asset Quality

Non-performing assets ("NPAs") decreased $12 million, or 4%, to $251 million at December 31, 2016. Acquired NPAs were stable at $19 million, while legacy NPAs, which include energy and non-energy loans, decreased $12 million, or 5%, and equated to 1.20% of total assets. Energy-related NPAs (which are included in legacy loans) decreased by $3 million, or 2%, and accounted for 28% of the decrease in the Company's total NPAs during the fourth quarter of 2016.  At December 31, 2016, non-energy-related NPAs decreased $8 million, or 8%, and equated to 0.48% of total assets, down from 0.53% at September 30, 2016.

Aggregate loans past due 30 to 89 days decreased $16 million, or 36%, and equated to 0.19% of total loans at December 31, 2016, compared to 0.30% at September 30, 2016.

Net charge-offs totaled $7.7 million in the fourth quarter of 2016, down $2.6 million, or 25%, compared to the third quarter of 2016.  Annualized net charge-offs equated to 0.21% of average loans in the fourth quarter of 2016, a seven basis point improvement on a linked quarter basis.  Energy loans accounted for approximately 19% of the net charge-offs incurred during the fourth quarter of 2016.

Capital Position

At December 31, 2016, the Company reported a non-GAAP tangible common equity ratio of 9.82%, up 95 basis points compared to September 30, 2016, and the preliminary Tier 1 leverage ratio was 10.86%, up 116 basis points compared to September 30, 2016. The Company's preliminary calculation of its total risk-based capital ratio at December 31, 2016, was 14.13%, up 164 basis points compared to September 30, 2016.

At December 31, 2016, book value per common share was $62.68, up $0.97 per share, or 2%, compared to September 30, 2016. Tangible book value per common share was $45.80, up $2.54 per share, or 6%, compared to September 30, 2016.  Based on the closing stock price of the Company's common stock of $83.25 per share on January 26, 2017, this price equated to 1.33 times December 31, 2016 book value per common share and 1.82 times December 31, 2016 tangible book value per common share.

Cash Dividends On Common Stock.  On December 13, 2016, the Company declared a quarterly cash dividend of $0.36 per common share, a 6% increase compared to the same quarter in the prior year. This common dividend level equated to an annualized dividend rate of $1.44 per common share.  Based on the Company's closing common stock price on January 26, 2017, the indicated dividend yield was 1.73% per common share. The payment of dividends on the common stock is at the discretion of the Board of Directors.

Common Stock Repurchase Program.  On May 4, 2016, the Board of Directors of the Company authorized the repurchase of up to 950,000 shares of the Company's common stock. The Company did not repurchase common shares under the authorized program during the fourth quarter of 2016. The Company has approximately 747,000 shares of common stock remaining that may be purchased under the currently authorized program.

Series B Preferred Stock.  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 Series B 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 from the transaction.  On January 5, 2017, the Company declared a semi-annual cash dividend of $0.8281 per depositary share that is payable on February 1, 2017.

Series C Preferred Stock.  On May 9, 2016, the Company sold 2.3 million depositary shares, each representing a 1/400th interest in a share of non-cumulative perpetual preferred stock. The Series C preferred stock has an initial coupon equal to 6.60% for a period of 10 years, and thereafter floats at a rate of LIBOR plus 492 basis points. The Company raised approximately $57.5 million in gross proceeds from the transaction.  On December 13, 2016, the Company declared a quarterly cash dividend of $0.4125 per depositary share that is payable on February 1, 2017.

Common Stock.  On December 7, 2016, the Company issued and sold 3,593,750 shares of common stock at a price of $81.50 per common share. After deducting underwriting discounts and commissions and other related expenses, net proceeds of the sale were approximately $280 million. The estimated dilutive impact of carrying the excess capital was approximately $0.03 per common share during the fourth quarter of 2016.

IBERIABANK Corporation

IBERIABANK Corporation is a financial holding company with 300 combined offices, including 200 bank branch offices and three loan production offices in Louisiana, Arkansas, Tennessee, Alabama, Texas, Florida, and Georgia, 24 title insurance offices in Arkansas and Louisiana, and mortgage representatives in 64 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". The Company's Series B Preferred Stock and Series C Preferred Stock trade on the NASDAQ Global Select Market under the symbols "IBKCP" and "IBKCO", respectively.  The Company's common stock market capitalization was approximately $3.7 billion, based on the NASDAQ Global Select Market closing stock price on January 26, 2017.

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 Friday, January 27, 2017, beginning at 8:30 a.m. Central Time by dialing 1-888-317-6003. The confirmation code for the call is 4035284.  A replay of the call will be available until midnight Central Time on February 3, 2017 by dialing 1-877-344-7529. The confirmation code for the replay is 10098616.  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.  Non-GAAP measures in this press release include, but are not limited to, descriptions such as core, tangible, and pre-tax pre-provision.  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. Transactions that are typically excluded from non-GAAP performance measures include realized and unrealized gains/losses on former bank owned real estate, realized gains/losses on securities, income tax gains/losses, merger-related charges and recoveries, litigation charges and recoveries, and debt repayment penalties. 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 presented in the supplemental tables at the end of this release.  Please refer to the supplemental tables for these reconciliations.

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, utilization of non-GAAP financial measures, credit risk of our customers, resolution of assets formerly subject to loss share agreements with the FDIC, 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, compliance with laws and regulations, 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 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