IBERIABANK Corporation Reports Third Quarter Results

LAFAYETTE, La., Oct. 21, 2015 /PRNewswire/ -- IBERIABANK Corporation (NASDAQ: IBKC), holding company of the 128-year-old IBERIABANK (www.iberiabank.com), reported operating results for the third quarter ended September 30, 2015.  For the quarter, the Company reported income available to common shareholders of $42.5 million, or $1.03 fully diluted earnings per common share ("EPS").  In the third quarter of 2015, the Company incurred non-operating expenses net of non-operating revenue equal to $2.3 million on a pre-tax basis, or $0.04 per share on an after-tax basis.  Excluding non-operating items, EPS in the third quarter of 2015 was $1.07 per common share on a non-GAAP operating basis (refer to press release supplemental table.) The $1.07 operating EPS results in the third quarter of 2015 was a record for the Company.

Daryl G. Byrd, President and Chief Executive Officer, commented, "We continue to work diligently to improve our operating results while maintaining the favorable level of high-quality growth that we delivered consistently over the last 16 years.  Our results in the third quarter of 2015 continued to show progress in that regard.  We achieved 15% annualized loan growth, our operating EPS improved on a linked-quarter basis, our reported margin met our guidance and the cash margin gained two basis points, our asset quality ratios improved, and we strengthened our capital position. Year-to-date, we have aggressively engaged in a 'risk-off' trade by reducing energy, indirect automobile, and certain market credit exposure by $361 million which suppressed near-term earnings but will benefit our profitability in 2016 and thereafter.  We continue to work assertively to add to our expense savings and revenue enhancement initiatives as we strive to achieve our goals for this year and next year."

Byrd continued, "Based on the sustained low interest rate environment and our current expectations and assumptions, our guidance range for operating EPS for the fourth quarter of 2015 is in the range of $1.10 to $1.15 per share, which would equate to a 12% to 13% increase in full-year 2015 operating EPS compared to the prior year.  We estimate that each 25-basis point increase in the Federal Funds rate would positively influence our quarterly after-tax EPS by six cents per common share."

Highlights for the third quarter of 2015 and at September 30, 2015:

• In addition to record operating EPS, the Company achieved record levels of commercial loan pipeline, mortgage origination volume, title income, and retail brokerage revenues in the third quarter of 2015.
• On a linked quarter basis, operating revenues increased $4.5 million, or 2%, while operating expenses increased $4.0 million, or 3%.  Operating expenses were impacted by the timing of the Georgia Commerce acquisition. Georgia Commerce had three months of operating expenses in the third quarter of 2015, compared to one month of operating expenses in the second quarter of 2015.
• The net interest margin decreased two basis points on a linked quarter basis to 3.50%, which was consistent with management's expectations.  The Company's cash margin improved two basis points on a linked quarter basis.
• Energy-related loans declined $68 million, or 9%, between June 30, 2015 and September 30, 2015, and equated to 5.1% of total loans at September 30, 2015.  At September 30, 2015, the Company had accrued approximately $19 million in aggregate reserves for energy-related loans and unfunded commitments.  The Company continues to forecast little or no losses on the exploration and production or midstream energy loans outstanding (which constituted 64% of energy loans outstanding at September 30, 2015) and manageable losses in the service company portfolio.
• Total loan growth was $166 million, or 1%, between June 30, 2015 and September 30, 2015.  Despite a $109 million decline in energy-related and indirect automobile loans between quarter-ends, legacy loan growth, which excludes all assets covered under FDIC loss share agreements and other non-covered acquired assets (collectively, "Acquired Assets"), increased $384 million, or 4% (15% annualized rate).
• Total deposits increased $184 million, or 1%, between quarter-ends, which included non-interest-bearing deposit growth of $226 million, or 5% (22% annualized basis).
• On August 5, 2015, the Company further strengthened its capital position through the sale of perpetual preferred stock with gross proceeds equal to approximately $80 million.

Operating Results

On a linked quarter basis, average loan volume (including the FDIC loss share receivable) increased $703 million, or 5%, and the associated yield declined two basis points.  Over that period, average legacy loans increased $424 million, or 4%, with an increase in yield of two basis points, and acquired loans (including the FDIC loss share receivable) increased $279 million, or 9%, and the yield declined 23 basis points due to the mix of lower yielding loans recently acquired.  All other average earning assets, including investment securities, mortgage loans held for sale, and interest-bearing deposits in other institutions, increased a total of $320 million, or 10%.

On a linked quarter basis, average earning assets increased $1.0 billion, or 6%, and the average earning asset yield decreased one basis point. Average interest-bearing liabilities increased $602 million, or 5%, and the cost of interest-bearing liabilities increased one basis point.  As a result, the net interest spread and net interest margin each decreased two basis points.  On a linked quarter basis, tax-equivalent net interest income increased $10 million, or 7%, as average earning assets increased significantly and the net interest margin decreased slightly.

In the third quarter of 2015, non-interest income decreased $4.0 million, or 7%, compared to the second quarter of 2015.  Non-operating income totaled $2.2 million in the third quarter of 2015, primarily due to a $1.9 million gain on the sale/leaseback of a building.  Operating non-interest income decreased $5.0 million, or 8%, on a linked quarter basis.  The primary changes in operating non-interest income on a linked quarter basis were:

• Decreased mortgage income of $4.5 million, or 18%; and
• Decreased energy capital markets income of $2.4 million, or 77%; partially offset by
• Increased service charge income of $1.2 million, or 12%;
• Increased retail brokerage commissions of $0.7 million, or 31%;
• Increased title revenues of $0.5 million, or 8%; and
• Increased credit card fee income of $0.4 million, or 19%.

In the third quarter of 2015, the Company originated $720 million in residential mortgage loans, up $20 million, or 3%, on a linked quarter basis.  Client loan refinancing opportunities accounted for approximately 19% of mortgage loan applications in the third quarter of 2015, down compared to 22% in the second quarter of 2015.  The Company sold $726 million in mortgage loans during the third quarter of 2015, up $63 million, or 10%, on a linked quarter basis.  Loans held for sale declined from $221 million at June 30, 2015, to $202 million at September 30, 2015.  The mortgage origination locked pipeline decreased $46 million, or 14%, between June 30, 2015, and September 30, 2015, to $283 million at quarter-end.  At October 16, 2015, the locked pipeline was $289 million, up $6 million, or 2%, compared to September 30, 2015.  The mortgage loan origination business primarily focuses on retail mortgage loans originated by the Company.

Assets under management at IBERIA Wealth Advisors ("IWA") were $1.4 billion at September 30, 2015, down 1% compared to June 30, 2015.  Revenues for IWA decreased 2% on a linked quarter basis, and were up 19% compared to the third quarter of 2014.  IBERIA Financial Services revenues increased 31% on a linked quarter basis, and were up 21% compared to the third quarter of 2014.  IBERIA Capital Partners ("ICP") revenues decreased 77% on a linked quarter basis, and were down 74% compared to the third quarter of 2014.

Non-interest expense decreased $8.2 million, or 5%, on a linked quarter basis, while operating expense increased $4.0 million, or 3%.  Operating expense changes included the following on a linked-quarter basis:

• Increased compensation and benefit costs of $2.0 million, or 3%, primarily due to:
  • Increased personnel expenses of $1.2 million attributable to Georgia Commerce associates for two additional months in the third quarter of 2015; and
  • Increased medical/hospitalization expenses of $0.8 million;
• Increased occupancy and equipment expense of $0.7 million, or 4%;
• Increased professional services of $0.7 million, or 17%; and
• Increased provision for unfunded commitment of $0.9 million.

The Company's tangible efficiency ratio in the third quarter of 2015 was 64.8%, stable on a linked quarter basis due primarily to seasonal factors.  The Company continues to work expense savings and revenue enhancement initiatives intended to achieve the targeted tangible efficiency ratio of 60% by the fourth quarter of 2016.

Loans 

Total loans increased $166 million, or 1%, between June 30, 2015, and September 30, 2015.  Over that period, the acquired loan portfolio decreased $217 million, or 6%, and legacy loans increased $384 million, or 4% (15% annualized rate), including a decline in energy-related loans of $68 million, or 9%, and a decline in indirect automobile loans of $41 million, or 13%. During the third quarter, legacy commercial loans increased $276 million, or 4% (which included $67 million in small business loan growth, up 7%, or 28% annualized rate), legacy consumer loans increased $63 million, or 3% (11% annualized rate), and legacy mortgage loans increased $44 million, or 7% (28% annualized rate).  Period-end legacy loan growth during the third quarter of 2015 was strongest in the Orlando, Atlanta, Tampa, New Orleans, and Sarasota markets.  Funded loan origination and renewal mix in the third quarter of 2015 was 52% fixed rate and 48% floating rate, and total loans outstanding (excluding non-accruals) were 47% fixed and 53% floating.  Loans and commitments originated and/or renewed during the third quarter of 2015 totaled $1.3 billion (down 8% on a linked quarter basis).

Energy-related loans outstanding totaled $719 million at September 30, 2015, down $68 million, or 9%, compared to June 30, 2015, and equated to approximately 5.1% of total loans.  Loans to exploration and production companies accounted for 47% of energy loans outstanding and 55% of energy commitments at September 30, 2015.  Midstream companies accounted for 17% of energy loans and 14% of energy commitments, and service companies accounted for 36% of energy loans and 31% of energy commitments.  At September 30, 2015, $4.9 million in energy loans were on non-accrual status and $477,000 was past due greater than 30 days at quarter-end.  The Company's outlook regarding the energy portfolio remains consistent with prior expectations.  Additional information regarding the Company's energy loan and commitment exposure is provided in the supplemental investor presentation.

In January 2015, the Company announced it was exiting the indirect automobile lending business, a service the Company has successfully provided to select automobile dealers in the Company's footprint for 20 years.  The Company concluded compliance risk associated with the indirect automobile lending business in general had become unbalanced relative to potential returns generated by the business on a risk-adjusted basis.  At September 30, 2015, the Company's indirect automobile lending business had approximately $282 million in loans outstanding, down $41 million, or 13%, compared to June 30, 2015 (2.0% of total loans outstanding compared to 2.3% at June 30, 2015).  Year-to-date, indirect loans declined $115 million, or 29%.

Deposits

Total deposits increased $184 million, or 1%, from June 30, 2015 to September 30, 2015.  Non-interest-bearing deposits increased $226 million, or 5% (22% annualized basis), and equated to 27% of total deposits at September 30, 2015.  NOW accounts increased $11 million, or less than 1%, while money market account volume increased $75 million, or 1% (5% annualized basis), between June 30, 2015 and September 30, 2015.  Time deposits decreased $129 million, or 5%, between quarter-ends.  Period-end deposit growth during the third quarter of 2015 was strongest in the Florida Keys, Baton Rouge, New Orleans, Atlanta, and Orlando markets.

On an average balance and linked quarter basis, non-interest-bearing deposits increased $332 million, or 8%, and interest-bearing deposits increased $905 million, or 8%.  The rate on average interest-bearing deposits in the third quarter of 2015 was 0.43%, an increase of one basis point on a linked quarter basis.

Other Assets And Funding

On a linked quarter basis, the investment portfolio increased $229 million, or 9%, to $2.7 billion on average in the third quarter of 2015.  On a period-end basis, the investment portfolio equated to $2.9 billion, or 15% of total assets at September 30, 2015, compared to 13% at June 30, 2015.  The investment portfolio had an effective duration of 3.1 years at September 30, 2015, compared to 3.2 years at June 30, 2015.  The investment portfolio had a $28 million unrealized gain at September 30, 2015.  The average yield on investment securities increased eight basis points on a linked quarter basis to 2.16% in the third quarter of 2015.  The Company holds in its investment portfolio primarily government agency securities.  Municipal securities comprised only 8.3% of total investments at September 30, 2015.  The Company holds for investment no sovereign debt, equity securities, trust preferred securities, or derivative exposure to foreign counterparties.

The Company continued to significantly reduce its short-term and long-term debt borrowings.  On a linked quarter basis, average short-term borrowings (including repurchase agreements) decreased $199 million, or 43%, and the cost of short-term borrowings declined two basis points.  At September 30, 2015, short-term borrowings (including repurchase agreements) declined $590 million, or 73%, compared to $813 million one year prior.  On a linked quarter basis, average long-term debt decreased $104 million, or 23%, and the cost of long-term debt increased 45 basis points to 2.99%.  The cost of average interest-bearing liabilities was 0.50% in the third quarter of 2015, up one basis point on a linked quarter basis.

Asset Quality

Between June 30, 2015 and September 30, 2015, legacy non-performing assets ("NPAs") decreased $16 million, or 19%.  At September 30, 2015, NPAs included $8 million in former bank branches and related real estate, a decrease of $4 million compared to June 30, 2015.  At September 30, 2015, legacy NPAs equated to 0.43% of total assets, down from 0.55% at June 30, 2015, and 0.38% of total assets excluding bank-related properties.  Legacy loans past due 30 days or more (excluding non-accruing loans) decreased $1.3 million, or 7%, and represented 0.16% of total legacy loans at September 30, 2015, compared to 0.18% at June 30, 2015.

Net charge-offs totaled $2.5 million in the third quarter of 2015, down $1.3 million, or 35%, compared to the second quarter of 2015.  Annualized net charge-offs equated to 0.07% of the average loans in the third quarter of 2015, down four basis points on a linked quarter basis.  The Company's provision for loan losses decreased $3.7 million, or 42%, on a linked quarter basis to $5.1 million.

Capital Position

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

At September 30, 2015, the Company reported a tangible common equity ratio of 8.75%, up seven basis points compared to June 30, 2015, and the preliminary Tier 1 leverage ratio was 9.33%, up nine basis points compared to June 30, 2015. The Company's preliminary total risk-based capital ratio at September 30, 2015, was 12.15%, up 66 basis points compared to June 30, 2015.

At September 30, 2015, book value per common share was $58.49, up $0.96 per share, or 2%, compared to June 30, 2015. Tangible book value per common share was $39.95, up $0.95 per share, or 2%, compared to June 30, 2015.  Based on the closing stock price of the Company's common stock of $58.30 per share on October 21, 2015, this price equated to 1.00 times September 30, 2015 book value and 1.46 times September 30, 2015 tangible book value per common share.

On September 14, 2015, the Company declared a quarterly cash dividend of $0.34 per common share. This dividend level equated to an annualized dividend rate of $1.36 per common share.  Based on the Company's closing common stock price on October 21, 2015, the indicated dividend yield was 2.33% per common share.

IBERIABANK Corporation

IBERIABANK Corporation is a financial holding company with 326 combined offices, including 223 bank branch offices and three loan production offices in Louisiana, Arkansas, Tennessee, Alabama, Texas, Florida, and Georgia, 22 title insurance offices in Arkansas and Louisiana, and mortgage representatives in 69 locations in 10 states.  The Company has eight locations with representatives of IBERIA Wealth Advisors in five 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 market capitalization was approximately $2.4 billion, based on the NASDAQ Global Select Market closing stock price on October 21, 2015.

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.
• Raymond James & Associates, Inc.
• Robert W. Baird & Company
• Sandler O'Neill + Partners, L.P.
• Stephens, Inc.
• SunTrust Robinson-Humphrey

Conference Call

In association with this earnings release, the Company will host a live conference call to discuss the financial results for the quarter just completed. The telephone conference call will be held on Thursday, October 22, 2015, beginning at 8:30 a.m. Central Time by dialing 1-888-317-6003. The confirmation code for the call is 0317551.  A replay of the call will be available until midnight Central Time on October 30, 2015 by dialing 1-877-344-7529. The confirmation code for the replay is 10074233.  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 transactions that in management's opinion can distort period-to-period comparisons of the Company's performance. Since the presentation of these GAAP performance measures and their impact differ between companies, management believes presentations of these non-GAAP financial measures provide useful supplemental information that is essential to a proper understanding of the operating results of the Company's core businesses. These non-GAAP disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.  Reconciliations of GAAP to non-GAAP disclosures are included as tables at the end of this release.  Refer to press release supplemental table for this reconciliation.

Assumptions Regarding Projected Earnings in Future Periods

The Company's operating EPS guidance for the fourth quarter of 2015 was based on the following significant assumptions:

• Recent forward interest rate curve projections;
• Achievement of targeted synergies associated with recently completed acquisitions;
• No significant changes in credit quality;
• No significant changes to the preliminary purchase accounting marks assumed on the Company's most recently completed acquisitions;
• No significant cash flow or credit quality changes on acquired assets;
• Mortgage, title insurance, and capital markets projections continue to reflect the current environment and expectations; and
• The declaration of cash dividends on preferred stock commencing in the first quarter of 2016.

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, 2014, 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, unanticipated losses related to the completion and integration of mergers and acquisitions, refinements to purchase accounting adjustments for acquired businesses and assets and assumed liabilities in these transactions, adjustments of fair values of acquired assets and assumed liabilities and of deferred taxes in acquisitions, actual results deviating from the Company's current estimates and assumptions of timing and amounts of cash flows, credit risk of our customers, resolution of assets subject to loss share agreements with the FDIC within the coverage periods, effects of the on-going correction in residential real estate prices and  levels of home sales, our ability to satisfy new capital and liquidity standards such as those imposed by the Dodd-Frank Wall Street Reform and Consumer Protection Act and those adopted by the Basel Committee on Banking Supervision and federal banking regulators, sufficiency of our allowance for loan losses, changes in interest rates, access to funding sources, reliance on the services of executive management, competition for loans, deposits and investment dollars, competition from competitors with greater financial resources than the Company, reputational risk and social factors, changes in government regulations and legislation, increases in FDIC insurance assessments, geographic concentration of our markets, economic or business conditions in our markets or nationally, rapid changes in the financial services industry, significant litigation, cyber-security risks including dependence on our operational, technological, and organizational systems and infrastructure and those of third party providers of those services, hurricanes and other adverse weather events, and valuation of intangible assets. All information in this discussion is as of the date of this press release. Except to the extent required by applicable law or regulation, the Company undertakes no obligation to revise or update publicly any forward-looking statement for any reason.

 

 

 

 

 

 

 

 

 

 

 

 

 

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SOURCE IBERIABANK Corporation