IBERIABANK Corporation Reports First Quarter Results

LAFAYETTE, La., April 25, 2019 /PRNewswire/ -- IBERIABANK Corporation (NASDAQ: IBKC), holding company of the 132-year-old IBERIABANK (www.iberiabank.com), reported financial results for the first quarter ended March 31, 2019. For the quarter, the Company reported net income available to common shareholders of $96.5 million, or $1.75 diluted earnings per common share ("EPS"). On a non-GAAP basis, EPS excluding non-core revenues and non-core expenses ("Core EPS") in the first quarter of 2019 was $1.72 per common share, compared to $1.37 in the year-ago period, an increase of 26% (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 are pleased to report another quarter of solid earnings and a very good start to 2019. Our results for the quarter reflect outstanding growth in loans, improvement in fee income, and continued reduction of non-interest expense. We had a lower net interest margin than we anticipated, which I expect to improve in future quarters. We believe the foundation laid in 2018 and in the first quarter sets us up well to deliver strong results in 2019."

Highlights for the first quarter of 2019 and at March 31, 2019:

 

• Strong 1Q19 for both GAAP and Core EPS, improving 59% and 26%, respectively on a year-over-year basis, as a result of excellent loan growth, non-interest income, and continued expense management.
• Total loan growth of $448.5 million, or 8% annualized. Loan growth was driven by strong originations and loan prepayments slowing.
• The Company's reported and cash net interest margins decreased 22 and 10 basis points on a linked quarter basis, to 3.59% and 3.42%, respectively. The decline in margin was primarily driven by lower recoveries as expected and higher cost of funding. Funding costs increased as the Company realized seasonal declines in lower cost deposits and strong loan growth primarily funded with wholesale funding sources.
• Strong growth in non-interest income influenced by the current yield curve.
• Mortgage income increased $1.5 million, or 14% on a linked quarter basis and 23% as compared to 1Q18.
• The Company realized record swap income of $4.2 million, up 124% on a linked quarter basis.
• The linked quarter increase of $51.5 million was primarily driven by $49.8 million in losses on sales of available securities that occurred during 4Q18.
• Continued focus on non-interest expense which decreased $10.2 million, or 6% on a linked quarter basis. Core non-interest expense declined $5.1 million, or 3%, from 4Q18.
• Year-over-year reduced FTEs by 342, or almost 10%, including employees from the Gibraltar acquisition.
• Produced the lowest quarterly level of non-interest expense to average assets over the past 15 years.
• Continued improvement in operating leverage.
• Credit metrics remained strong and stable. The provision expense rose slightly from the prior quarter to provide adequate reserve coverage of strong loan growth. We see no signs of deterioration in the portfolio.
• During 1Q19, the Company repurchased 387,921 common shares at a weighted average price of $77.19 per common share.
• On March 19, 2019, the Company announced a first quarter cash dividend equal to $0.43 per common share, payable on April 26, 2019. This equated to a 5% increase to the 4Q18 dividend.

Special Items

• On April 4, 2019, the Company issued and sold 4.0 million depositary shares, each representing 1/400th interest in a share of non-cumulative perpetual preferred stock. The Series D preferred stock has an initial coupon equal to 6.100% for a period of five years, and thereafter floats at a rate of LIBOR plus 385.9 basis points. The Company raised approximately $100.0 million in gross proceeds from the transaction. Proceeds from the transaction are currently expected to be used for repurchases of common stock. This re-stacking of capital is expected to provide a few incremental pennies of EPS and enhance the Company's ROTCE by approximately 50 basis points in 2020, based on IBKC's current stock price. The impact of this offering will be immaterial on 2019 earnings.

 

Operating Results

Net interest income decreased $14.5 million, or 5%, on a linked quarter basis. Average loans increased $235.5 million, or 4% annualized, while the associated taxable-equivalent yield decreased 15 basis points. The yield on total earning assets was 6 basis points lower at 4.68% compared to 4.74% in the prior quarter. The decline in loan yield was primarily driven by lower recoveries in the acquired loan portfolio.

Average interest-bearing deposits increased $568.6 million, or 14% annualized, and the cost of interest-bearing deposits rose 17 basis points to 1.40% on a linked quarter basis. Total average interest-bearing liabilities increased by $766.3 million, or 16% annualized, and the cost of interest-bearing liabilities rose 19 basis points to 1.53%. The total cost of funding in the first quarter of 2019 was 1.17%, compared to 1.00% in the prior quarter. The increase in cost of funds was primarily due to an unfavorable funding balance mix shift from lower cost deposits to wholesale borrowings, an upward repricing of remaining deposits, promotional activity in customer time deposits, and brokered wholesale CD issuances. The lower loan yields, along with the increase in cost of funds, resulted in a decrease in the reported and cash net interest margins of 22 and 10 basis points to 3.59% and 3.42%, respectively.

The provision for credit losses totaled $13.8 million compared to $13.1 million in the prior quarter. Asset quality measures remained strong and stable. Net charge-offs to average loans on an annualized basis were 0.13% compared to 0.14% in the prior quarter.  Non-performing assets to total assets were 0.58% compared to 0.55% in the prior quarter. The allowance for loan and lease losses to total loans and leases remained unchanged at 0.62% and covered 94% of non-performing loans.

Non-interest income increased $51.5 million, primarily driven by $49.8 million in losses realized on sales of available-for-sale securities during the prior quarter. On a core basis, non-interest income increased $1.3 million, or 2%, driven by higher customer swap commissions of $2.3 million and higher mortgage income of $1.0 million. These increases were partially offset primarily by decreases of $0.8 million in title revenue and $0.6 million in service charges on deposit accounts.

Non-interest expense decreased $10.2 million, or 6%, compared to the linked quarter, primarily driven by a $4.2 million decrease in professional service expenses, a $3.3 million decrease in salaries and employee benefits expenses, and a $1.9 million decrease in credit and other loan related expenses. Non-core expense items resulted in a $2.5 million reduction in GAAP non-interest expense, primarily from interest related to tax refunds received. Refer to Tables 7 and 8 for GAAP to Non-GAAP reconciliations.

Income tax expense increased $76.5 million to  $30.3 million when compared to the prior quarter. This increase was primarily attributable to the $65.3 million, non-core, permanent net tax benefit that was recorded in the fourth quarter of 2018 which resulted in a $46.1 million income tax benefit.

On a linked quarter basis, the efficiency ratio improved to 52.4% from 63.5%, primarily due to a decrease in non-interest expense, while the non-GAAP core tangible efficiency ratio was relatively unchanged at 51.3% compared to 50.7%. First quarter operating results reflect a continued focus on expense discipline and revenue enhancement efforts. Refer to Table A for a summary of financial results on both a GAAP and non-GAAP basis.

Loans and Other Assets

Total loans increased $448.5 million, or 8% annualized, to $23.0 billion at March 31, 2019. Period-end loan growth during the first quarter of 2019 was strongest in the Energy Group (primarily reserve-based lending), the Corporate Asset Finance Group (equipment financing business), and the Atlanta, South Florida Commercial, and Dallas 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.

On an average balance and linked quarter basis, the investment portfolio increased $240.6 million, or 20% annualized, to $5.0 billion, mainly due to purchases of available-for-sale securities and favorable fair value adjustments. On a period-end basis, investment securities were $5.1 billion, or 16% of total assets. Approximately 96% of the investment portfolio is in available-for-sale securities, which experience unrealized losses as interest rates rise. The investment portfolio had an effective duration of 3.0 years at March 31, 2019, down from 3.4 years at December 31, 2018, and a $6.0 million unrealized loss at March 31, 2019, down from a $62.9 million loss at December 31, 2018. The average yield on investment securities increased 29 basis points to 2.90% in the first quarter of 2019. The investment portfolio primarily consists of government agency securities. Municipal securities comprised 7% of total investments at March 31, 2019.

Deposits and Funding

Total deposits increased $328.6 million, or 6% annualized, to $24.1 billion at March 31, 2019. First quarter deposit growth included a $270 million increase in brokered and reciprocal deposits. Deposit growth during the first quarter of 2019 was strongest in the Miami-Dade, Southwest Louisiana, and Palm Beach/Broward markets.

Asset Quality

Credit quality remained strong and stable. Non-performing assets to total assets were 0.58% at March 31, 2019, compared to 0.55% in the prior quarter. Loans 30-89 days past due and still accruing decreased $12.0 million, or 21%, compared to the prior quarter and represented 0.20% of total loans and leases, compared to 0.25% in the prior quarter. As a percentage of average loans and leases, annualized net charge-offs were 0.13%, down one basis point compared to the prior quarter.

The allowance for loan and lease losses was $143.0 million, up $2.4 million compared to the prior quarter. As of March 31, 2019, the allowance for loan and lease losses was 0.62% of total loans and leases, unchanged compared to December 31, 2018. The allowance for loan and lease losses covered non-performing loans by 94% compared to 101% in the prior quarter.

Refer to Table 4 - Loans and Asset Quality Data for further information.

Capital Position

At March 31, 2019, the non-GAAP tangible common equity ratio was 9.01%, up 17 basis points compared to December 31, 2018, and the preliminary Tier 1 leverage ratio was 9.67%, up 4 basis points compared to December 31, 2018. The preliminary calculation of the total risk-based capital ratio at March 31, 2019, was 12.33%, flat compared to December 31, 2018.

At March 31, 2019, book value per common share was $73.50, up $1.89 per share, compared to December 31, 2018. Tangible book value per common share was $49.48, up $1.87 per share, compared to December 31, 2018. Based on the closing stock price of the Company's common stock of $77.14 per share on April 24, 2019, this price equated to 1.05 times March 31, 2019 book value per common share and 1.56 times March 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. The following details the recent dividend declarations:

Common Stock. On March 19, 2019, the Company declared a quarterly cash dividend of $0.43 per common share, a 5% increase to the common dividend declared on January 25, 2019. This dividend is payable on April 26, 2019, to shareholders of record as of March 29, 2019.

Preferred Stock. On April 11, 2019, the Company declared a quarterly cash dividend of $0.4125 per depositary share of Series C Preferred Stock that is payable on May 1, 2019 to shareholders of record as of April 21, 2019.

On April 4, 2019, the Company sold 4.0 million depositary shares, each representing 1/400th interest in a share of non-cumulative perpetual preferred stock. The Series D preferred stock has an initial coupon equal to 6.100% for a period of five years, and thereafter floats at a rate of LIBOR plus 385.9 basis points. The Company raised approximately $100.0 million in gross proceeds from the transaction.

Common Stock Repurchase Program. On November 5, 2018, the Board of Directors authorized a new repurchase plan of up to 2,765,000 shares of the Company's common stock. This repurchase authorization equated to approximately 5% of total common shares outstanding. Stock repurchases under this program will be made from time to time, on the open market or in privately negotiated transactions at the discretion of the management of the Company. The timing of these repurchases will depend on market conditions and other requirements. The Company currently anticipates the share repurchase program will extend over a two-year time frame, or earlier if the shares have been repurchased. During the first quarter of 2019, the Company repurchased 387,921 common shares, at a weighted average price of $77.19 per common share.  At March 31, 2019, the Company had approximately 1,877,079 remaining shares that may be repurchased under the current Board-approved plan.

2019 Financial Guidance

 

• Updated guidance includes no interest rate increases in 2019 and interest rate curve as of March 31, 2019.
• Preferred Dividend range increases to reflect new Series D preferred dividends.
• We expect to buy common shares with the proceeds of our recent preferred stock offering, which is included in the guide.

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, 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 $4.2 billion, based on the NASDAQ Global Select Market closing stock price on April 24, 2019.

The following 10 investment firms currently provide equity research coverage on the Company:

• Bank of America Merrill Lynch
• FIG Partners, LLC
• Hovde Group, LLC
• Jefferies & Co., Inc.
• Keefe, Bruyette & Woods, Inc.
• Piper Jaffray & Co.
• Raymond James & Associates, Inc.
• 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 25, 2019, beginning at 8:30 a.m. Central Time by dialing 1-888-317-6003. The confirmation code for the call is 6428111. A replay of the call will be available until midnight Central Time on May 2, 2019, by dialing 1-877-344-7529. The confirmation code for the replay is 10128769. 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, 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.

 

 

 

 

 

 

 

 

 

 

 

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SOURCE IBERIABANK Corporation