IBERIABANK Corporation Reports Third Quarter Results

LAFAYETTE, La., Oct. 26, 2011 /PRNewswire/ -- IBERIABANK Corporation (NASDAQ: IBKC), holding company of the 124-year-old IBERIABANK (www.iberiabank.com), reported operating results for the third quarter ended September 30, 2011.  For the quarter, the Company reported income available to common shareholders of $17 million and fully diluted earnings per share ("EPS") of $0.58.  The Company completed the acquisitions of OMNI BANCSHARES, Inc. ("OMNI") and Cameron Bancshares, Inc. ("Cameron") on May 31, 2011.  Financial statements reflect the impact of those acquisitions beginning on that date.  The conversions of branch and operating systems of OMNI and Cameron were successfully completed over the weekends of June 18-19 and July 9-10, respectively.  The Company incurred pre-tax acquisition and conversion costs equal to $6 million, or $0.12 per share on an after-tax basis. Excluding the acquisition and conversion costs, EPS in the third quarter of 2011 was $0.70 per share.

Daryl G. Byrd, President and Chief Executive Officer of the Company commented, "We are pleased with the progress exhibited in our financial results for the third quarter of 2011.  We continue to benefit from strong organic loan and core deposit growth and expanded client market share.  Our net interest margin improved significantly during the third quarter, asset quality and capital levels remain very favorable compared to peers, and we are on target to achieve projected synergies associated with our recent acquisitions."  Byrd continued, "We remain very well positioned for this very challenging operating environment."

Highlights for the Third Quarter of 2011 and September 30, 2011:

• EPS of $0.70 per share excluding acquisition and conversion costs.  The average analyst estimate for EPS for the third quarter of 2011 as reported in First Call was $0.58 per share.
• Loan growth of $110 million, or 2%, between quarter-ends (8% annualized rate), excluding loans, OREO and other assets covered under FDIC loss share agreements ("Covered Assets").
• Core deposit growth (excluding time deposits) of $217 million, or 3% (14% annualized growth), compared to June 30, 2011.
• Tax-equivalent net interest margin improved 34 basis points between the second and third quarters of 2011 ("linked quarter basis") to 3.62%.  The yield on FDIC covered loans (net of FDIC indemnification asset yield) was 4.93%, up 85 basis points compared to the second quarter of 2011 and up three basis points compared to management's initial estimate of 4.90% for the third quarter.
• Continued asset quality strength; Nonperforming assets ("NPAs"), excluding Covered Assets and impaired loans marked to fair value that were acquired in the OMNI and Cameron acquisitions, equated to 0.95% of total assets at September 30, 2011, compared to 0.84% at June 30, 2011.
• The Company completed the share repurchase program announced on August 2, 2011.  Under that program, 900,000 shares of the Company's common stock were purchased during the third quarter of 2011 at a weighted average price of $45.98 per share.  The closing price for the Company's common stock was $51.30 per share on October 26, 2011.
• The Company announced today the Board of Directors has authorized a new share repurchase program totaling an additional 900,000 shares of common stock to be completed over a one-year period.
• Capital ratios remain strong; At September 30, 2011, the Company's tangible common equity ratio was 9.77%, tier 1 leverage ratio was 10.55%, and total risk based capital ratio was 16.75%.

Balance Sheet Summary

Total assets increased $76 million, or 1%, since June 30, 2011, to $11.5 billion at September 30, 2011.  Over this period, total loans increased $26 million, or less than 1%; investment securities decreased $158 million, or 7%; and total deposits increased $117 million, or 1%.  Total shareholders' equity decreased $35 million, or 2%, since June 30, 2011, to $1.5 billion at September 30, 2011.  The decrease in shareholders' equity was primarily due to the recently completed share repurchase program.

Investments

Total investment securities decreased $158 million during the third quarter of 2011, or 7%, to $2.1 billion at September 30, 2011.  As a percentage of total assets, the investment portfolio edged down from 19% at June 30, 2011, to 18% at September 30, 2011.  The investment portfolio had a modified duration of 2.6 years at September 30, 2011, compared to 2.9 years at June 30, 2011.  The unrealized gain in the investment portfolio increased $12 million, from $30 million at June 30, 2011 to $42 million at September 30, 2011.  Based on projected prepayment speeds and other assumptions, at September 30, 2011, the portfolio was expected to generate approximately $729 million in cash flows, or about 36% of the portfolio, over the next 15 months. The average yield on investment securities decreased two basis points on a linked quarter basis, to 2.72% in the third quarter of 2011.  The Company holds in its investment portfolio primarily government agency and municipal securities.  Municipal securities comprised only 10% of the total investment portfolio at September 30, 2011.  The Company holds no sovereign debt or foreign derivative exposure and has an immaterial exposure to accelerated bond premium amortization.

Loans

In the third quarter of 2011, total loans increased $26 million, or less than 1%.  The loan portfolio associated with the FDIC-assisted acquisitions declined $85 million, or 6%, compared to June 30, 2011.  Excluding loans associated with the FDIC-assisted transactions, total loans increased $110 million, or 2%, over that period (8% annualized rate).  On that basis, commercial and business banking loans climbed $113 million, or 3% (11% annualized rate), and consumer loans grew $22 million, or 2% (7% annualized rate), while mortgage loans declined $24 million, or 7%, over that period.  Between the times at which the acquisitions were completed and September 30, 2011, loans acquired in FDIC-assisted acquisitions decreased by approximately $515 million, or 27%.

Of the $7.2 billion total loan portfolio at September 30, 2011, $1.4 billion (net of discounts), or 19% of total loans, were Covered Assets, which provide considerable protection against credit risk.  Approximately $74 million of the impaired loans from Cameron and OMNI at the time of acquisitions were marked to an estimated fair value at the time of acquisition.  The remaining $5.8 billion in loans, or 81% of total loans, were associated with the Company's legacy franchise, or loans that were acquired but required no impairment at acquisition or have no FDIC loss share protection.  

On a linked quarter basis, the yield on average total loans (non-FDIC loans, and FDIC covered loans net of the FDIC indemnification asset) increased 37 basis points to 5.02%.  The increase in this yield was primarily driven by the improvement in the yields on each the FDIC covered loans and the FDIC indemnification asset.  The loan yield on FDIC covered loans net of the FDIC indemnification asset was 4.93%, an improvement of 85 basis points on a linked quarter basis.

The Company projects the prospective yield and average balance on the net covered loan portfolio in the fourth quarter of 2011 to approximate the level reported for the third quarter of 2011, based on current FDIC loss share accounting assumptions and estimates.

Commercial real estate loans totaled $3.3 billion at September 30, 2011, of which approximately $0.8 billion, or 23%, were Covered Assets.  In addition, these Covered Assets were purchased at substantial discounts.  

At September 30, 2011, approximately 17% of the Company's direct consumer loan portfolio (net of discounts) was Covered Assets or impaired loans marked to fair value.  The remaining legacy consumer portfolio maintained favorable asset quality.  The average credit score of the legacy consumer loan portfolio borrower was 723, and consumer loans past due 30 days or more were 0.55% of total consumer loans at September 30, 2011 (compared to 0.42% at June 30, 2011).  Legacy home equity loans totaled $487 million, with 0.21% past due 30 days or more (0.34% at June 30, 2011).  Legacy home equity lines of credit totaled $310 million, with 0.25% past due 30 days or more (0.17% at June 30, 2011).  Annualized net charge-offs in this portfolio were 0.38% of total consumer loans in the third quarter of 2011 (0.02% in the second quarter of 2011).  The weighted average loan-to-value at origination for this portfolio over the last three years was 67%.

The indirect automobile loan portfolio totaled $260 million at September 30, 2011, up $13 million, or 5%, compared to this portfolio at June 30, 2011.  At September 30, 2011, this portfolio equated to 3% of total loans and had 0.96% in loans past due 30 days or more (including nonaccruing loans), compared to 0.78% at June 30, 2011.  Annualized net charge-offs in the indirect loan portfolio equated to approximately 0.17% of average loans in the third quarter of 2011, compared to 0.09% in the second quarter of 2011.  Approximately 81% of the indirect automobile portfolio was loans to borrowers in the Acadiana region of Louisiana, which currently experiences a relatively favorable unemployment rate (5.6% in August 2011, the 25th lowest unemployment rate of 372 MSAs in the United States).

Asset Quality

The Company's credit quality statistics are significantly affected by the FDIC-assisted acquisitions.  However, the loss share arrangements with the FDIC and acquisition discounts are expected to provide substantial protection against losses on those Covered Assets.  Under loss share agreements in connection with the FDIC-assisted acquisitions, the FDIC will cover 80% of the losses on the disposition of loans and OREO up to $1.2 billion, or $965 million (the Company covered the remaining $241 million at acquisition).  In addition, the FDIC will cover 95% of losses that exceed a $970 million threshold level.  The Company received a discount of approximately $515 million on the purchase of assets in the transactions.

The majority of assets acquired in the four FDIC-assisted transactions completed in 2009 and 2010 are Covered Assets.  Total NPAs at September 30, 2011, were $953 million, up $21 million, or 2%, compared to June 30, 2011.  Excluding $864 million in NPAs which were Covered Assets or acquired impaired loans marked to fair value, NPAs at September 30, 2011 were $90 million, up $13 million, or 16%, compared to June 30, 2011.  On that basis, NPAs were 0.95% of total assets at September 30, 2011, compared to 0.84% of assets at June 30, 2011 and 0.81% one year ago.  The dollar increase in legacy NPAs and past dues is not indicative of deterioration in the overall legacy loan portfolio. The primary reason for the increase in NPAs and past dues was three loan relationships, each of which the Company does not expect to incur any material loss upon resolution.

Excluding the FDIC-assisted transactions and impaired loans acquired at fair value, loans past due 30 days or more (including nonaccruing loans) increased $18 million, or 22%, and represented 1.68% of total loans at September 30, 2011, compared to 1.40% of total loans at June 30, 2011.  On that basis, loans past due 30-89 days at September 30, 2011 totaled $26 million, or 0.44% of total loans (compared to 0.37% of total loans at June 30, 2011), and troubled debt restructurings at September 30, 2011, totaled $29 million, or 0.50% of total loans (compared to 0.40% of loans at June 30, 2011).  All but $1 million in troubled debt restructurings were included in the NPAs at September 30, 2011.  The Company reported classified assets excluding Covered Assets totaling $197 million at September 30, 2011, or 1.70% of total assets.

The Company reported net charge-offs of $1.9 million in the third quarter of 2011, compared to $1.7 million on a linked quarter basis.  The ratio of net charge-offs to average loans was 0.10% in the third quarter of 2011 (0.12% excluding Covered Assets and impaired loans acquired at fair value), unchanged compared to the second quarter of 2011.  The Company recorded a $6 million loan loss provision in the third quarter of 2011, down $4 million, or 39%, on a linked quarter basis. Approximately $1 million in the provision was related to organic loan growth.  

At September 30, 2011, the allowance for loan losses was 2.43% of total loans, compared to 2.36% at June 30, 2011.  In accordance with generally accepted accounting principles, the Covered Assets and OMNI and Cameron acquired loans were preliminarily marked to market at acquisition, including estimated loan impairments.  Excluding FDIC covered loans and impaired loans that were marked to fair value, the Company's ratio of loan loss reserves to loans increased from 1.28% at June 30, 2011, to 1.33% at September 30, 2011. Excluding the Covered Assets and all other acquired loans, the Company's ratio of loan loss reserve to loans increased from 1.47% at June 30, 2011 to 1.51% at September 30, 2011.  Management considers the loan loss reserve adequate to absorb credit losses inherent in the loan portfolio at September 30, 2011.

Deposits

During the third quarter of 2011, total deposits increased $117 million, or 1%.  Noninterest bearing deposits climbed $92 million, or 7% (28% annualized rate); NOW accounts increased $49 million, or 3%; savings and money market deposits expanded $76 million, or 2%; and time deposits decreased $101 million, or 4%.

Average noninterest bearing deposits increased $278 million, or 25%, and interest-bearing deposits increased $645 million, or 9%, on a linked quarter basis.  The growth in average balances was influenced by the acquisitions of OMNI and Cameron which were completed during the second quarter of 2011.  The rate on average interest bearing deposits in the third quarter of 2011 was 0.90%, a decrease of 12 basis points on a linked quarter basis.

Other Interest Bearing Liabilities

On a linked quarter basis, average long-term debt increased $42 million, or 10%, and the cost of the debt decreased eight basis points to 2.63% (due to the acquisitions).  The Company had no short-term borrowings at September 30, 2011.  The cost of average interest bearing liabilities was 0.98% in the third quarter of 2011, a decrease of 11 basis points on a linked quarter basis. For the month of September 2011, the average cost of interest bearing liabilities was 0.93%.

Capital Position

The Company maintains strong capital ratios.  The equity-to-assets ratio was 12.77% at September 30, 2011, compared to 13.16% at June 30, 2011, and 12.38% one year ago.  At September 30, 2011, the Company reported a tangible common equity ratio of 9.77%, a decrease of 38 basis points compared to 10.15% at June 30, 2011.  The Company's Tier 1 leverage ratio was 10.55%, down 146 basis points compared to 12.01% at June 30, 2011.  The Company's total risk-based capital ratio at September 30, 2011 was 16.75%, down 57 basis points compared to 17.32% at June 30, 2011.  The decline in the capital ratios was primarily due to the share repurchase program that was completed during the third quarter of 2011.

At September 30, 2011, book value per share was $50.19, up $0.31, or 1%, compared to June 30, 2011. Tangible book value per share decreased $0.05, or less than 1%, over that period, to $37.12 at September 30, 2011.

On September 13, 2011, 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 2.65%, based on the closing stock price of the Company's common stock of $51.30 per share on October 26, 2011.  This price equated to 1.02 times September 30, 2011 book value per share of $50.19 and 1.38 times September 30, 2011 tangible book value per share of $37.12.

Interest Rate Risk Position

The Company's interest rate risk modeling at September 30, 2011, indicated the Company is fairly balanced over a 12-month time frame.  A 100 basis point instantaneous and parallel upward shift in interest rates at September 30, 2011, was estimated to increase net interest income over 12 months by approximately 2.0%.  Similarly, a 100 basis point decrease in interest rates was expected to increase net interest income by approximately 0.3%.  At September 30, 2011, approximately 51% of the Company's total loan portfolio had fixed interest rates.  Eliminating fixed rate loans that mature within a one-year time frame reduces this percentage to 48%.  Approximately 77% of the Company's time deposit base will re-price within 12 months from September 30, 2011.  

Operating Results

On a linked quarter basis, the average earning asset yield increased 25 basis points, while the cost of interest bearing deposits and liabilities decreased 12 and 11 basis points, respectively. As a result, the tax-equivalent net interest spread and margin improved 35 and 34 basis points, respectively.  The improvement in the yield on average earning assets was driven by the increase in yields on non-covered loans and FDIC covered loans net of the FDIC indemnification asset (the yield on average investment securities decreased two basis points on a linked quarter basis).  Average non-covered total loan yield increased 14 basis points, and the yield on net FDIC covered loans increased by 85 basis points, resulting in an improvement in the total loan yield, net of the FDIC indemnification asset, of 37 basis points.   On a linked quarter basis, tax-equivalent net interest income grew $17 million, or 21%, as average earning assets climbed $880 million, or 9%, and the margin improved 34 basis points.  On a linked quarter basis, the Company's balance sheet expanded as a result of the Cameron and OMNI acquisitions and organic loan growth, partially offset by compression of the Covered Assets.

Aggregate noninterest income increased $6 million, or 20%, on a linked quarter basis.  Mortgage revenues increased $4 million, or 43%, service charges on deposit accounts increased $1 million, or 17%, title revenue increased $408,000 (an increase of 9%), FDIC reimbursements on Covered Assets increased $452,000, and trust income rose 74% on a linked quarter basis.

The Company originated $504 million in mortgage loans during the third quarter of 2011, up $151 million, or 43%, on a linked quarter basis.  Client loan refinancing opportunities accounted for approximately 37% of mortgage loan applications in the third quarter of 2011, compared to 19% in the second quarter of 2011, and approximately 50% between September 30, 2011, and October 21, 2011.  The Company sold $447 million in mortgage loans during the third quarter of 2011, up $112 million, or 34%, compared to the second quarter of 2011.  Sales margins remained fairly stable on a linked quarter basis.  Gains on the sale of mortgage loans increased $4 million, or 43%, on a linked quarter basis.  The mortgage origination pipeline was approximately $229 million at September 30, 2011, compared to $154 million at June 30, 2011, and approximately $225 million at October 21, 2011.  Mortgage loan repurchases and make-whole payments were less than $0.3 million in each of the three quarters of 2011.  

Noninterest expense increased $7 million, or 7%, on a linked quarter basis, excluding acquisition and conversion-related costs that totaled approximately $6 million in each the second and third quarters of 2011.  Excluding acquisition and conversion-related costs, compensation and benefit costs increased $6 million on a linked quarter basis (an increase of 13%) and occupancy and equipment expense increased $1 million, or 13%. Influencing those linked quarter comparisons was the impact of increased operating expenses associated with the Cameron and OMNI franchises, which were acquired in May 2011 and the related conversions completed in June and July of 2011.  In the second quarter of 2011, the Company incurred costs totaling approximately $3 million in association with a potential settlement on a class action lawsuit and a trust preferred securities prepayment premium; no similar costs were incurred in the third quarter of 2011.

The tangible efficiency ratio of IBERIABANK, excluding acquisition and conversion costs, was approximately 67% in the third quarter of 2011, compared to 75% in the second quarter of 2011.

IBERIABANK Corporation

IBERIABANK Corporation is a financial holding company with 262 combined offices, including 171 bank branch offices in Louisiana, Arkansas, Tennessee, Alabama, Texas, and Florida, 24 title insurance offices in Arkansas and Louisiana, mortgage representatives in 60 locations in 12 states, six locations with representatives of IBERIA Wealth Advisors in four states, and one IBERIA Capital Partners, LLC office in New Orleans.  The Company opened one new bank branch office since June 30, 2011, in Hoover, Alabama, and a new mortgage office in Slidell, Louisiana.

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 October 26, 2011.

The following 13 investment firms currently provide equity research coverage on IBERIABANK Corporation:

• B. Riley & Company
• FIG Partners, LLC
• Guggenheim Partners
• Keefe, Bruyette & Woods
• Morgan Keegan & Company, Inc.
• Oppenheimer & Co., Inc.
• Raymond James & Associates, Inc.
• Robert W. Baird & Company
• Stephens, Inc.
• Sterne, Agee & Leach
• Stifel Nicolaus & Company
• 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 Thursday, October 27, 2011, beginning at 9:00 a.m. Central Time by dialing 1-877-777-1967. The confirmation code for the call is 218719.  A replay of the call will be available until midnight Central Time on November 3, 2011 by dialing 1-800-475-6701. The confirmation code for the replay is 218719.  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 nonrecurring transactions. 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.

Forward Looking Statements

To the extent that statements in this press release 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 current level of market volatility and 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 accounting for, acquired businesses and assets and assumed liabilities in FDIC-assisted transactions, adjustments of fair values of acquired assets and assumed liabilities and of deferred taxes in FDIC-assisted acquisitions, 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 infrastructure, hurricanes and other adverse weather events, the volatility and low 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 the Company's website, http://www.iberiabank.com, under the heading "Investor Information."  All information in this release 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.

SOURCE IBERIABANK Corporation