IBERIABANK Corporation Reports Fourth Quarter Results

LAFAYETTE, La., Jan. 24, 2020 /PRNewswire/ -- IBERIABANK Corporation (NASDAQ: IBKC), holding company of the 132-year-old IBERIABANK (www.iberiabank.com), reported financial results for the fourth quarter ended December 31, 2019. For the quarter, the Company reported net income available to common shareholders of $78.1 million, or $1.48 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 2019 was $1.59 per common share, compared to $1.86 in the same quarter of 2018 (refer to press release supplemental tables for a reconciliation of GAAP to non-GAAP metrics).

Daryl G. Byrd, President and Chief Executive Officer, commented, "We delivered a solid fourth quarter and a very successful 2019, continuing to execute on our strategic initiatives, grow our business and deliver a superior client experience throughout our franchise. During the fourth quarter, we incurred several items, both core and non-core that were merger-related expenses. Excluding these items, and assuming we had continued share repurchases as guided, Core EPS would have been in line with consensus analyst estimates. As we begin 2020, our Company continues to generate new opportunities in our markets, growing our loan and deposit base and increasing our fee revenues.  We are seeing great business momentum with attractive client growth, new relationship managers joining the Company, and a strong lending pipeline."

Byrd continued, "We are extremely pleased with the teamwork and tangible progress made in the initial months of our merger planning process.  Both institutions have similar cultures, bring significant experience to the transaction, and we have full confidence in our abilities to achieve targeted synergies. Our employees remain fully engaged and committed to creating a top tier regional banking institution. We are excited about the opportunities for clients and associates while increasing shareholder value, and look forward to all we can accomplish together as a combined franchise."

Fourth Quarter and Full Year 2019 Highlights

• Total loan growth of $345.0 million on a linked quarter basis, or 6% annualized. Total loan growth on a year-to-date basis was $1.5 billion, or 7%. The Company continues to see good loan growth throughout its footprint.
  
  
• Total deposits increased $242.1 million compared to the prior quarter, or 4% annualized. Total deposit growth on a year-to-date basis was $1.5 billion, or 6%. In the fourth quarter, the Company paid off short-term borrowings of $275.0 million and reduced its balance of brokered deposits by $362.2 million.
  
  
• The investment portfolio decreased $306.8 million to $4.1 billion as a result of normal cash flow activity. At December 31, 2019, investment securities were 13% of total assets, down from 16% at December 31, 2018.
  
  
• Non-interest income decreased $4.3 million, or 7%, on a linked quarter basis. The decrease was primarily driven by a $2.1 million decrease in mortgage income and the third quarter $3.2 million gain on sale of non-mortgage loans. In the fourth quarter of 2019, the Company recorded $4.3 million in swap income, a record quarter.
  
  
• On a year-to-date basis, non-interest income was up $81.8 million, or 54%, primarily from lower losses on sales of securities during the year and a $16.6 million increase in mortgage income.
• The locked mortgage pipeline at January 21, 2020 was $214.4 million, up 53% from the similar period a year ago. The Company continues to see strength in its mortgage originations.
  
  
• Non-interest expense increased $9.1 million, or 5%, on a linked quarter basis, primarily as a result of a $9.9 million increase in professional services and a $3.7 million increase in salaries and employee benefits expense, partially offset by a $1.6 million decrease in credit and other loan-related expense.
• Non-interest expense included $16.5 million in merger-related expense, of which $11.3 million was considered non-core and $5.2 million core. Core merger-related expense included $2.5 million in benefits, $2.4 million in compensation, and $0.3 million in marketing. Total core non-interest expense decreased $2.3 million, or 1%, on a linked quarter basis.
  
  
• For the full-year 2019, non-interest expense decreased $40.1 million, or 6%, primarily as a result of branch closure and merger-related expense in 2018. On a core basis, non-interest expense was down $5.5 million, or 1%.
  
  
• The Company's reported and cash net interest margins were down 23 and 16 basis points from the prior quarter at 3.21% and 3.08%, respectively. For the full-year 2019, net interest margin was 3.45% on a reported basis, and 3.28% on a cash basis.
  
  
• Provision for credit losses totaled $8.2 million, compared to $9.0 million in the prior quarter. Asset quality measures remain strong and continue to improve.
  
  
• Net charge-offs to average loans on an annualized basis decreased three basis points to 0.11% compared to the prior quarter. Non-performing assets to total assets were 0.54% compared to 0.58% in the prior quarter.
  
  
• Capital ratios remain strong and grew during the quarter. There were no share repurchases in the fourth quarter of 2019 due to the pending merger with First Horizon National Corporation.
  
  
• The Company will adopt CECL as of January 1, 2020 and expects to have an allowance for expected credit losses to loans of 0.90% to 1.05%. The final CECL allowance coverage ratio will depend on finalization of the methods and assumptions (including economic forecasts) used to derive the estimate of expected credit losses.

2019 Guidance Results

Guidance Notes

• Deposit Growth: Consolidated deposit growth was slightly under guidance due to a reduction in brokered deposit balances of $362.2 million during the fourth quarter of 2019. Excluding this reduction, deposit growth would have been above the 2019 guidance range.
• Core Non-Interest Expense: Slightly above the guidance range. However, excluding the $5.2 million of certain merger-related core expense, total core non-interest expense would have been at the bottom end of the guidance range.
• Share Repurchases: There were no share repurchases in the fourth quarter of 2019 due to the pending merger with First Horizon National Corporation.

Operating Results

Net interest income decreased $14.8 million, or 6%, on a linked quarter basis. The decrease in net interest income reflects a 23 basis point decline in the net interest margin to 3.21% compared to 3.44% in the prior quarter. The lower net interest margin was primarily the result of a 30 basis point decrease in loan yield somewhat offset by an 8 basis point decline in the cost of interest-bearing liabilities. The decrease in loan yield was primarily attributable to the repricing of variable rate loans, as well as origination rates below portfolio rates, as a result of recent cuts to the targeted federal funds rate and the corresponding impact to LIBOR. Additionally, the loan yield was impacted by lower pay-offs and related recoveries in the acquired loan portfolio during the fourth quarter. The decline in the cost of interest-bearing liabilities was primarily attributable to recent interest rate cuts.

The provision for credit losses totaled $8.2 million compared to $9.0 million in the prior quarter. Net charge-offs to average loans on an annualized basis decreased 3 basis points to 0.11% compared to the prior quarter. At December 31, 2019, the allowance for loan and lease losses to total loans and leases was 0.61% compared to 0.62% in the prior quarter and covered 103% of non-performing loans.

Non-interest income decreased $4.3 million, or 7%, on a linked quarter basis, primarily the result of a $2.1 million decrease in mortgage income in the current quarter and a $3.2 million gain on non-mortgage loan sales that occurred in the third quarter. These decreases were partially offset by a $0.7 million increase in swap income.

Non-interest expense increased $9.1 million, or 5%, compared to the linked quarter, primarily as a result of a $9.9 million increase in professional services expense and a $3.7 million increase in salaries and employee benefits expense. These increases were partially offset by a $1.6 million decrease in credit and other loan-related expense. Non-interest expense included $16.5 million in merger-related expense, of which $11.3 million was considered non-core and $5.2 million core. Core merger-related expense included $2.5 million in benefits, $2.4 million in compensation, and $0.3 million in marketing. Total core non-interest expense decreased $2.3 million, or 1%, on a linked quarter basis.

On a linked quarter basis, the efficiency ratio increased to 61.8% from 55.2%, primarily due to the decrease in net interest income and the impact of merger-related expense, while the non-GAAP core tangible efficiency ratio increased to 56.2% compared to 53.4%. Refer to Table A for a summary of financial results on both a GAAP and non-GAAP basis.

Loans and Leases

On a linked quarter basis, total loans and leases increased $345.0 million, or 6% annualized, to $24.0 billion at December 31, 2019. Growth during the fourth quarter of 2019 was strongest in the Birmingham, Houston, Atlanta, and New York markets. The Company believes it is well-positioned for diversified loan growth based on our strategic presence in significant MSAs in the Southeastern United States.

Investment Securities

On a linked quarter basis, the investment portfolio decreased $306.8 million, or 28% annualized, to $4.1 billion, as a result of normal cash flow activity. At December 31, 2019, approximately 96% of the investment portfolio was in available-for-sale securities, which experience unrealized gains as interest rates fall. The investment portfolio had an effective duration of 2.7 years at December 31, 2019, up from 2.5 years at September 30, 2019, and a $57.8 million unrealized gain at December 31, 2019, down from $70.1 million at September 30, 2019. The average yield on investment securities decreased 20 basis points to 2.51% in the fourth quarter of 2019. The investment portfolio primarily consists of government agency securities. Municipal securities comprised 8% of total investments at December 31, 2019.

Deposits

Total deposits increased $242.1 million, or 4% annualized, to $25.2 billion at December 31, 2019. Growth during the fourth quarter of 2019 was strongest in the New Orleans, Acadiana, and Miami-Dade markets. Deposit growth during the quarter was partially offset by a $362.2 million reduction in brokered time deposits.

Asset Quality

Credit quality remained strong and continued to improve. Classified assets decreased $17.4 million, or 6%, from September 30, 2019 and were 0.84% of total assets compared to 0.89% in the prior quarter and 0.98% in the prior year. Non-performing assets to total assets were 0.54% at December 31, 2019 compared to 0.58% in the prior quarter and 0.55% in the prior year. Loans 30-89 days past due and still accruing represented 0.28% of total loans and leases compared to 0.23% in the prior quarter and 0.25% one year ago. As a percentage of average loans and leases, annualized net charge-offs for the quarter decreased three basis points on a linked quarter basis to 0.11% and year-to-date net charge-offs decreased to 0.13%, down two basis points from the prior year.

The allowance for loan and lease losses was $146.6 million and represented 0.61% of total loans and leases compared to 0.62% as of September 30, 2019.

Refer to Table 5 - Loans and Asset Quality Data for further information.

Capital Position

At December 31, 2019, the non-GAAP tangible common equity ratio was 9.24%, up 19 basis points compared to September 30, 2019, and the preliminary Tier 1 leverage ratio was 9.90%, up 12 basis points compared to September 30, 2019. The preliminary calculation of the total risk-based capital ratio at December 31, 2019, was 12.43%, up 9 basis points compared to September 30, 2019.

At December 31, 2019, book value per common share was $78.37, up $0.79 per share, compared to September 30, 2019. Tangible book value per common share was $53.63, up $0.95 per share, compared to September 30, 2019. Based on the closing stock price of the Company's common stock of $77.05 per share on January 23, 2020, this price equated to 0.98 times December 31, 2019 book value per common share and 1.44 times December 31, 2019 tangible book value per common share.

Dividends On Capital Stock The declaration of dividends is at the discretion of the Board of Directors. Recent dividend declarations include the following:

Common Stock On December 19, 2019, the Company announced a quarterly cash dividend of $0.45 per common share, consistent with the common dividend declared in July. The dividend is payable on January 24, 2020 to shareholders of record as of December 31, 2019.

Preferred Stock On January 6, 2020, the Company announced a semi-annual cash dividend of $0.8281 per depositary share of Series B Preferred Stock that is payable on February 3, 2020 to shareholders of record as of January 17, 2020. On January 6, 2020 the Company also announced a quarterly cash dividend of $0.4125 per depositary share of Series C Preferred Stock that is payable on February 3, 2020 to shareholders of record as of January 17, 2020.

Common Stock Repurchase Program On July 17, 2019, the Board of Directors authorized the repurchase of up to 1,600,000 shares of the Company's common stock. This repurchase authorization equated to approximately 3% of total common shares outstanding. At December 31, 2019, the Company had approximately 1,165,000 remaining shares that may be repurchased under the current Board-approved plan. During the fourth quarter of 2019, the Company did not repurchase any common shares. No further stock repurchases are expected due to the pending merger with First Horizon National Corporation.

IBERIABANK Corporation

IBERIABANK Corporation is a financial holding company with locations in Louisiana, Arkansas, Tennessee, Alabama, Texas, Florida, Georgia, South Carolina, North Carolina, Mississippi, Missouri, and New York offering commercial, private banking, consumer, small business, wealth and trust management, retail brokerage, mortgage, commercial leasing and equipment financing, and title insurance services.

The Company's common stock trades on the NASDAQ Global Select Market under the symbol "IBKC". The Company's Series B Preferred Stock, Series C Preferred Stock, and Series D Preferred Stock also trade on the NASDAQ Global Select Market under the symbols "IBKCP", "IBKCO", and "IBKCN", respectively. The Company's common stock market capitalization was approximately $4.0 billion, based on the closing stock price on January 23, 2020.

The following 9 investment firms currently provide equity research coverage on the Company:

• Bank of America Merrill Lynch
• Janney Montgomery Scott, LLC
• Hovde Group, LLC
• Jefferies & Co., Inc.
• Keefe, Bruyette & Woods, Inc.
• Raymond James & Associates, Inc.
• Piper Sandler
• Stephens, Inc.
• SunTrust Robinson-Humphrey

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, debt repayment penalties, and gains, losses, and impairment charges on long-lived assets. 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, 2018, and in other documents subsequently filed by the Company with the Securities and Exchange Commission, available at the SEC's website, www.sec.gov, and the Company's website, 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. 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.