IBERIABANK Corporation Reports Second Quarter Results

LAFAYETTE, La., July 27, 2016 /PRNewswire/ -- IBERIABANK Corporation (NASDAQ: IBKC), holding company of the 129-year-old IBERIABANK (www.iberiabank.com), reported financial results for the second quarter ended June 30, 2016.  For the quarter, the Company reported income available to common shareholders of $50.0 million, or $1.21 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 second quarter of 2016 was $1.18 per common share (refer to press release supplemental tables for a reconciliation of GAAP to non-GAAP metrics).  Both EPS and Core EPS in the second quarter of 2016 were within management's guidance range and exceeded consensus analyst expectations.

Daryl G. Byrd, President and Chief Executive Officer, commented, "We are very pleased to report solid bottom-line financial performance in the second quarter and continued progress toward achieving our strategic goals. During the second quarter, our energy exposure declined materially. In addition, stabilization of credit conditions resulted in a lower provision on a linked quarter basis. We experienced strong loan growth and seasonably strong fee income expansion.  Good revenue growth combined with continued cost containment efforts resulted in improved operating leverage. During this quarter, we also bolstered our capital position through the completion of our second preferred stock offering and bought back common shares in conjunction with our recently authorized buyback program. We believe it was a very active and dynamic quarter."

Byrd continued, "As a result of these actions we saw tremendous momentum on multiple strategic fronts. This progress included hitting the 1.00% mark on return on average assets on an annualized basis, growing tangible book value per share by 3%, bringing the dividend payout ratio to 28%, attaining our non-GAAP core tangible efficiency goal of 60%, progressing on our energy-related loans, and continuing to strengthen our balance sheet. We believe our unique business model creates long-term shareholder value by generating high-quality client growth, while maintaining strong diversification and favorable financial performance. We believe these efforts were evident in our financial and operating results this quarter."

Highlights for the Second Quarter of 2016 and at June 30, 2016:

• During the second quarter, the Company continued to reduce energy-related exposures as a result of reduced commitments, increased levels of loan pay-downs, and charge-offs of specific energy-related credits. Energy-related loans ("energy loans") decreased $70 million, or 10%, between March 31, 2016 and June 30, 2016, and at June 30, 2016, equated to 4.5% of total loans. At June 30, 2016, the Company had approximately $35 million in aggregate reserves for energy loans and unfunded commitments, a decrease of $4 million, or 10%, since March 31, 2016. At quarter-end, energy-related reserves equated to 5.3% of energy loans outstanding.
• The Company's net interest margin declined three basis points on a linked quarter basis to 3.61%, which approximated management's expectations. The Company's cash margin declined seven basis points on a linked quarter basis.
• On a linked quarter basis, the Company's revenues increased $10.4 million, or 5%, and non-GAAP core revenues increased $8.8 million, or 4%. Over the same period, expenses increased $2.1 million, or 1%, and non-GAAP core expenses increased $4.6 million, or 3%. The efficiency ratio improved from 63.3% to 61.3%, while non-GAAP core tangible efficiency ratio improved from 60.3% to 60.0% on a linked quarter basis.
• Total loan growth was $271 million, or 2%, between March 31, 2016 and June 30, 2016. Legacy loan growth, which excludes all assets covered under FDIC loss share agreements and other non-covered acquired assets (collectively, "Acquired Assets"), increased $456 million, or 4% (16% annualized rate), on a period-end basis and $418 million, or 4% (15% annualized rate), on an average balance basis.
• Total deposits decreased $399 million, or 2%, between quarter-ends, and increased $34 million, or less than 1%, on an average balance basis.  Non-interest-bearing deposits increased $55 million, or 1%, between quarter-ends and increased $76 million, or 2%, on an average balance basis.

Operating Results

On a linked quarter basis, average loan volume (including the FDIC loss share receivable) increased $211 million, or 1%, and the associated tax-equivalent yield decreased two basis points.  Over that period, average legacy loans increased $418 million, or 4%, with a decrease in yield of two basis points, and average Acquired Assets (including the FDIC loss share receivable) decreased $207 million, or 7%, and the yield increased 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 total of $70 million, or 2%.

On a linked quarter basis, average earning assets increased $282 million, or 2%, and the average earning asset yield decreased two basis points. Average interest-bearing liabilities increased $158 million, or 1%, and the cost of interest-bearing liabilities increased one basis point.  As a result, the net interest spread and margin each declined three basis points.  On a linked quarter basis, tax-equivalent net interest income increased $1.3 million, or 1%.

In the second quarter of 2016, non-interest income increased $9.1 million, or 16%, compared to the first quarter of 2016.  Non-core non-interest income totaled $1.8 million in the second quarter of 2016, as a result of gains on the sale of investment securities sold under favorable temporary market conditions.  Core non-interest income increased $7.5 million, or 13%, on a linked quarter basis.  The primary changes in core non-interest income on a linked quarter basis included:

• Increased mortgage income of $6.1 million, or 30%; and
• Increased title revenues of $1.4 million, or 29%.

In the second quarter of 2016, the Company originated $709 million in residential mortgage loans, up $193 million, or 37%, on a linked quarter basis.  Client loan refinancing opportunities accounted for approximately 16% of mortgage loan applications in the second quarter of 2016, compared to 23% on a linked quarter basis.  The Company sold $673 million in mortgage loans during the second quarter of 2016, up $185 million, or 38%, on a linked quarter basis.  Loans held for sale increased from $193 million at March 31, 2016, to $230 million at June 30, 2016.  The mortgage origination locked pipeline remained steady at $345 million between quarter-ends, and was up $16 million, or 5%, over the comparable period last year.  At July 22, 2016, the locked pipeline was $357 million, up slightly compared to June 30, 2016.  The improvement in mortgage income on a linked quarter basis was primarily the result of seasonal demand leading to higher volumes of mortgage loan originations and a stable mortgage locked pipeline.

Non-interest expense increased $2.1 million, or 1%, on a linked quarter basis, while non-core expense decreased $2.5 million and core expense increased $4.6 million, or 3%.  Core expense changes included the following on a linked-quarter basis:

• Increased mortgage commission expenses of $2.7 million as a result of higher mortgage loan origination volumes;
• Increased annual incentives expense of $1.7 million;
• Increased other salaries and benefits expense of $0.3 million; and
• Increased professional services expense of $0.6 million; partially offset by
• Decreased travel and entertainment expenses of $0.4 million.

The Company's core tangible efficiency ratio in the second quarter of 2016 was 60.0%, down from 60.3% in the first quarter of 2016.  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 $271 million, or 2%, between March 31, 2016, and June 30, 2016.  Over that period, Acquired Assets decreased $185 million, or 6%, and legacy loans increased $456 million, or 4% (16% annualized rate), including a decrease in total energy loans of $70 million, or 10%, and a decline in indirect automobile loans of $31 million, or 15%.  During the second quarter of 2016, legacy commercial loans increased $358 million, or 4% (which included $52 million in small business loan growth, up 5%, or 18% annualized rate), legacy consumer loans increased $34 million, or 1%, and legacy mortgage loans increased $64 million, or 9% (35% annualized rate).  Period-end loan growth during the second quarter of 2016 was strongest in the Memphis, New Orleans, Orlando, Southeast Florida, and Tampa markets.  Funded loan origination and renewal mix in the second 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 second quarter of 2016 were a record level of $1.6 billion (up 17% on a linked quarter basis).  Loans originated and/or renewed during the second quarter of 2016 totaled $1.0 billion (up 14% on a linked quarter basis).  At June 30, 2016, the Company's commercial loan pipeline was approximately $1.0 billion.

Energy loans outstanding totaled $662 million at June 30, 2016, down $70 million, or 10%, compared to March 31, 2016, and equated to approximately 4.5% of total loans (down from 5.1% at March 31, 2016).  Energy-related commitments totaled $1.1 billion at June 30, 2016, down $144 million, or 12%, compared to March 31, 2016. Loans to exploration and production companies accounted for 49% of energy loans outstanding and 53% of energy loan commitments at June 30, 2016.  Midstream companies accounted for 19% of each energy loans and energy loan commitments, and service companies accounted for 32% of energy loans and 28% of energy loan commitments.  At June 30, 2016, $61 million in energy loans were on non-accrual status (compared to $46 million at March 31, 2016), and $3 million in energy loans were past due greater than 30 days at quarter-end.  At June 30, 2016,  approximately 37% of energy loans were classified and 47% were criticized, compared to 39% and 49%, respectively at March 31, 2016.  To date, the Company has experienced $8 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 June 30, 2016, the Company's indirect automobile lending business had approximately $182 million in loans outstanding, down $31 million, or 15%, compared to March 31, 2016 (1.2% of total loans outstanding compared to 1.5% at March 31, 2016).

Deposits

Total deposits decreased $399 million, or 2%, between March 31, 2016 and June 30, 2016.  Over that period, non-interest-bearing deposits increased $55 million, or 1%, and equated to 29% of total deposits at June 30, 2016.  Similarly, NOW accounts increased $25 million, or  less than 1%, savings deposits increased $25 million, or 3%, and time deposits increased $69 million, or 3%. Between March 31, 2016 and June 30, 2016, money market accounts decreased $573 million, or 10%.  The decline in money market deposit balances was primarily the result of movement in a few large commercial client balances due to seasonal and specific deployment opportunities. Deposit growth during the second quarter of 2016 was strongest in the Tampa, Birmingham, and Baton Rouge markets.  

On an average balance and linked quarter basis, non-interest-bearing deposits increased $76 million, or 2%, and interest-bearing deposits decreased $41 million, or less than 1%.  The rate on average interest-bearing deposits in the second quarter of 2016 was 0.42%, unchanged on a linked quarter basis.

Other Assets And Funding

On an average balance and linked quarter basis, the investment portfolio was stable at $2.9 billion in the second quarter of 2016.  On a period-end basis, the investment portfolio equated to $2.9 billion, or 14% of total assets at June 30, 2016, unchanged compared to March 31, 2016.  The investment portfolio had an effective duration of 2.7 years at June 30, 2016, compared to 2.8 years at March 31, 2016.  The investment portfolio had a $52 million unrealized gain at June 30, 2016, up from $39 million at March 31, 2016.  The average yield on investment securities decreased seven basis points on a linked quarter basis, to 2.18% in the second quarter of 2016.  The Company holds in its investment portfolio primarily government agency securities.  Municipal securities comprised 11% of total investments at June 30, 2016.  The Company holds for investment no sovereign debt, equity securities, trust preferred securities, or derivative exposure to foreign counterparties.

On a linked quarter basis, average short-term borrowings (including repurchase agreements) increased $130 million, or 26%, and the cost of short-term borrowings increased three basis points.  At June 30, 2016, short-term borrowings (including repurchase agreements) increased $267 million, or 54%, compared to March 31, 2016.  On a linked quarter basis, average long-term debt increased $70 million, or 13%, and the cost of long-term debt decreased 11 basis points to 2.24%.  The cost of average interest-bearing liabilities was 0.50% in the second quarter of 2016, up one basis point on a linked quarter basis.

Asset Quality

Between March 31, 2016 and June 30, 2016, legacy non-performing assets ("NPAs") decreased $1 million, or 1%.  At June 30, 2016, NPAs included $8 million in former bank branches and related real estate, a decrease of 28% compared to March 31, 2016.  At June 30, 2016, legacy NPAs equated to 0.63% of total assets, down from 0.65% at March 31, 2016, and 0.59% of total assets excluding bank-related properties, unchanged from March 31, 2016.

Legacy loans past due 30 days or more (excluding non-accruing loans) increased $4 million, or 9%, and represented 0.39% of total legacy loans at June 30, 2016, compared to 0.37% at March 31, 2016.

Net charge-offs totaled $11.9 million in the second quarter of 2016, up $7.9 million compared to the first quarter of 2016.  Annualized net charge-offs equated to 0.33% of average loans in the second quarter of 2016, up 22 basis points on a linked quarter basis.  Energy loans accounted for approximately 65% of the net charge-offs incurred during the second quarter of 2016.  The energy-related net charge-offs were covered through specific reserves accrued in prior quarters.  The Company's provision for loan losses decreased $3.0 million, or 20%, on a linked quarter basis to $11.9 million.

Capital Position

At June 30, 2016, the Company reported a non-GAAP tangible common equity ratio of 9.00%, up 17 basis points compared to March 31, 2016, and the preliminary Tier 1 leverage ratio was 9.70%, up 29 basis points compared to March 31, 2016. The Company's preliminary calculation of its total risk-based capital ratio at June 30, 2016, was 12.44%, up 23 basis points compared to March 31, 2016.

At June 30, 2016, book value per common share was $61.05, up $1.12 per share, or 2%, compared to March 31, 2016. Tangible book value per common share was $42.53, up $1.15 per share, or 3%, compared to March 31, 2016.  Based on the closing stock price of the Company's common stock of $63.38 per share on July 27, 2016, this price equated to 1.04 times June 30, 2016 book value per common share and 1.49 times June 30, 2016 tangible book value per common share.

Cash Dividends On Common Stock.  On June 20, 2016, the Company declared a quarterly cash dividend of $0.34 per common share. This common dividend level equated to an annualized dividend rate of $1.36 per common share.  Based on the Company's closing common stock price on July 27, 2016, the indicated dividend yield was 2.15% per common share. The payment of dividends is at the discretion of the Board of Directors.

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 July 5, 2016, the Company declared a semi-annual cash dividend of $0.828 per depositary share that is payable on August 1, 2016.

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 June 27, 2016, the Company declared a quarterly cash dividend of $0.37 per depositary share that is payable on August 1, 2016.

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. During the second quarter of 2016, the Company repurchased 202,506 common shares at a weighted average price of $57.61 per common share.

IBERIABANK Corporation

IBERIABANK Corporation is a financial holding company with 299 combined offices, including 199 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 $2.6 billion, based on the NASDAQ Global Select Market closing stock price on July 27, 2016.

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 Thursday, July 28, 2016, beginning at 8:30 a.m. Central Time by dialing 1-888-317-6003. The confirmation code for the call is 8824131.  A replay of the call will be available until midnight Central Time on August 4, 2016 by dialing 1-877-344-7529. The confirmation code for the replay is 10089124.  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 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, 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

Related Links

http://www.iberiabank.com