IBERIABANK Corporation Reports Fourth Quarter Results

LAFAYETTE, La., Jan. 25, 2018 /PRNewswire/ -- IBERIABANK Corporation (NASDAQ: IBKC), holding company of the 130-year-old IBERIABANK (www.iberiabank.com), reported financial results for the fourth quarter ended December 31, 2017. For the quarter, the Company reported income available to common shareholders of $9.3 million, or $0.17 diluted earnings per common share ("EPS"). On a non-GAAP basis, EPS excluding non-core revenues and non-core expenses ("Core EPS") in the fourth quarter of 2017 was $1.33 per common share vs. $1.16 per common share in the year-ago period, an increase of 15% (refer to press release supplemental tables for a reconciliation of GAAP to non-GAAP metrics).

Daryl G. Byrd, President and Chief Executive Officer, commented, "We delivered solid core earnings during the fourth quarter of 2017, achieving our Company's highest quarterly Core EPS result and providing a glimpse into the strong underlying earnings power of the franchise.  Our team's focus and strategic positioning drove significant improvement over the prior quarter as we continue to reap the benefits of our asset sensitive balance sheet and start to realize the synergies from the Sabadell acquisition following the conversion in mid-October.  Similar to many other banks, our GAAP metrics were materially impacted by one-time charges - the most significant of which was a write-down of deferred tax assets resulting from the enactment of the Tax Cuts and Jobs Act on December 22, 2017. Despite the one-time DTA adjustment in the quarter, we expect this tax change will significantly benefit our net income in future periods."

Byrd continued, "We are proud of the results we have achieved in the fourth quarter of 2017 and recognize the opportunity to build on current momentum in delivering improved financial results.  In December, we provided financial guidance for our 2018 earnings and we continue to work towards achieving those goals to provide outstanding returns for our shareholders.  During the first quarter of 2018, we will be providing our three-year goals, which we will refer to as our 2020 Goals."

Highlights for the fourth quarter of 2017 and at December 31, 2017:

While GAAP EPS and returns were negatively impacted by one-time items, the Company reported solid improvement in Core EPS driven by a strong core operating leverage multiple of 4.7, GAAP and cash margin expansion, cost containment and balance sheet growth during the quarter.

• The Company's reported and cash net interest margins increased 5 and 4 basis points on a linked quarter basis, to 3.69% and 3.33%, respectively, primarily as a result of increases in average earning assets and higher loan yields, offset by smaller increases in average interest-bearing liabilities and costs of deposits.
• 4Q17 results include a $51.0 million estimated net impact of the Tax Cuts and Jobs Act enacted on December 22, 2017 ($0.94 per share decrease in earnings), subject to refinement in future periods as further information becomes available.
• The effective tax rate in 2018 is expected to be 21% - 22%, which revises our previous guidance of 32.5% - 33.5% disclosed prior to the passing of tax reform.
• Total loan growth was $0.3 billion, or 1.4% (5.6% annualized rate), in 4Q17, driven by originations in New Orleans, Atlanta and Tampa.
• Total deposits increased $0.1 billion, or 0.6% (2.4% annualized rate), in 4Q17, driven by growth in the Houston, Acadiana, New Orleans and Baton Rouge markets.
• Net charge-offs decreased $18.7 million on a linked quarter basis, and equated to an annualized 0.20% of average loans. The provision for loan losses decreased $4.1 million, or 22%.
• The Company successfully completed the conversion of branch and operating systems associated with the Sabadell  acquisition over the weekend of October 13 - 15, 2017. The Company incurred $11.4 million of pre-tax merger-related expense in 4Q17 ($0.16 per share decrease in earnings).
• On October 19, 2017, the Company entered into a Merger Agreement with Gibraltar Private Bank & Trust Company ("Gibraltar"). The Merger Agreement has been approved by the boards of directors of each company and is expected to close in the first quarter of 2018, subject to the required approval of Gibraltar's shareholders, the receipt of required regulatory approvals, and other customary closing conditions.

Operating Results

Net interest income increased 9% on a linked quarter basis.  Average loans increased $1.6 billion, or 9%, and the associated taxable-equivalent yield increased 4 basis points. All other average earning assets increased a net of $113.7 million, or 2%, versus the prior quarter.  The yield on interest earning assets was 8 basis points higher at 4.22% compared to 4.14% in the prior quarter. The average cost of interest-bearing deposits rose 4 basis points to 65 basis points compared to 61 basis points in the prior quarter.

The increase in average earning assets and higher loan yields, offset by increases in average interest-bearing liabilities and costs of deposits, resulted in net increases on a linked quarter basis to the Company's reported and cash net interest margins of 5 and 4 basis points to 3.69% and 3.33%, respectively.

The Company's provision for loan losses decreased 22% to $14.4 million primarily due to a decline in net charge-offs. The provision for loan losses covered net charge-offs in 4Q17 by 142% compared to 64% in 3Q17.

In the fourth quarter of 2017, non-interest income increased $1.6 million compared to the third quarter of 2017. The primary changes in non-interest income on a linked quarter basis were increased treasury management and customer swap commission income of $1.2 million, or 18%, increased deferred COLI income of $1.0 million, or 351%, and decreased mortgage income of $2.4 million, or 15%, of which $1.5 million was volume/mix-related and $0.9 million was margin-related.

Non-interest expense decreased $18.6 million on a linked quarter basis primarily due to higher merger-related and professional services expenses incurred in 3Q17 related to the Sabadell acquisition and the Department of Housing and Urban Development ("HUD") lawsuit. The HUD lawsuit was settled on December 11, 2017, in the amount of $11.7 million, which was previously provided for in the second ($6.0 million) and third ($5.7 million) quarters of 2017.

Non-interest expense in 4Q17 included $11.4 million in merger and conversion-related expenses, $1.5 million in compensation-related expense, $3.2 million in branch closure and other impairment expense, and $0.5 million in tax penalties and interest and storm-related expenses. Excluding these items, core non-interest expense increased $4.2 million, or 3%, primarily related to a full quarter of Sabadell expenses.

The efficiency ratio improved to 63.5% from 75.2% on a linked quarter basis, while the non-GAAP core tangible efficiency ratio decreased to 55.6% from 58.2%, over the same period. 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 $283.1 million, or 1.4% (5.6% annualized rate), to $20.1 billion at December 31, 2017. Period-end loan growth during 4Q17 was strongest in the New Orleans, Atlanta and Tampa markets.

On an average balance and linked quarter basis, the investment portfolio increased $184.0 million in 4Q17, to $4.9 billion.  On a period-end basis, the investment portfolio equated to $4.8 billion, or 17% of total assets, at December 31, 2017, compared to $4.9 billion, or 18% of total assets, at September 30, 2017. The investment portfolio had an effective duration of 3.7 years at December 31, 2017, up from 3.5 years at September 30, 2017. The investment portfolio had a $57.2 million unrealized loss at December 31, 2017, up from an $18.4 million unrealized loss at September 30, 2017. The average yield on investment securities increased 5 basis points to 2.37% in 4Q17. The Company holds in its investment portfolio primarily government agency securities. Municipal securities comprised 9% of total investments at December 31, 2017.

Deposits and Funding

Total deposits increased $132.4 million, or 0.6% (2.4% annualized rate), to $21.5 billion at December 31, 2017. Deposit growth during 4Q17 was strongest in the Houston, Acadiana, New Orleans and Baton Rouge markets. Quarterly fluctuations in NOW and money market accounts were caused by conversion-related mapping changes.

On an average balance and linked quarter basis, both non-interest-bearing deposits and interest-bearing deposits increased. The rate on average interest-bearing deposits in 4Q17 was 0.65%, while the cost of total deposits (including non-interest bearing deposits) was 0.46%, increases of 4 basis points and 2 basis points, respectively, compared to 3Q17. The increase in the cost of interest-bearing deposits was primarily driven by interest-rate sensitive money market deposits. Cycle-to-date deposit beta is 22% through December 31, 2017.

On a linked quarter basis, average borrowings increased $282.1 million, or 12%, and the cost of average borrowings was unchanged between periods. The cost of average total interest-bearing liabilities was 0.76% in 4Q17, an increase of 4 basis points over the linked quarter, primarily driven by the costs of deposits. Total funding costs, inclusive of non-interest-bearing deposits was 57 basis points in 4Q17, compared to 54 basis points in 3Q17.

Asset Quality

Non-performing assets ("NPAs") to total assets remained relatively flat at 64 basis points at December 31, 2017 compared to 63 basis points at the linked quarter-end.  Accruing loans past due 30 to 89 days equated to 0.31% of total loans at December 31, 2017, compared to 0.30% at September 30, 2017.

Net charge-offs totaled $10.1 million in 4Q17, down $18.7 million, or 65%, compared to 3Q17.  Annualized net charge-offs equated to 0.20% of average loans in 4Q17, a 42 basis point decrease on a linked quarter basis.

Capital Position

At December 31, 2017, the Company reported a non-GAAP tangible common equity ratio of 8.61%, down 7 basis points compared to September 30, 2017, and the preliminary Tier 1 leverage ratio was 9.36%, down 81 basis points compared to September 30, 2017. The Company's preliminary calculation of its total risk-based capital ratio at December 31, 2017, was 12.37%, down 40 basis points compared to September 30, 2017. The write-down of deferred tax assets in conjunction with the Tax Cuts and Jobs Act in December 2017 resulted in a 23 basis points decline in risk-based capital ratios.

At December 31, 2017, book value per common share was $66.17, down $0.57 per share, compared to September 30, 2017. Tangible book value per common share was $42.56, down $0.48 per share, compared to September 30, 2017.  The 4Q17 write-down of deferred tax assets negatively impacted both book value and tangible book value by $0.95 per common share compared to the linked quarter. Based on the closing stock price of the Company's common stock of $82.05 per share on January 25, 2018, this price equated to 1.24 times December 31, 2017 book value per common share and 1.93 times December 31, 2017 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 December 19, 2017, the Company declared a quarterly cash dividend of $0.37 per common share, consistent with the common dividend declared in September 2017. This common dividend level equated to an annualized dividend rate of $1.48 per common share.  Based on the Company's closing common stock price on December 18, 2017, of $79.25 per common share, the indicated dividend yield was 1.87% per common share. The dividend is payable on January 26, 2018, to shareholders of record as of December 29, 2017.

Preferred Stock. On December 19, 2017, the Company declared a quarterly cash dividend of $0.4125 per depositary share of Series C preferred stock that is payable on February 1, 2018. On January 5, 2018, the Company declared a semi-annual cash dividend of $0.8281 per depositary share of Series B preferred stock that is payable on February 1, 2018.

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. The Company did not repurchase common shares under the authorized program during the fourth quarter of 2017. The Company has approximately 747,000 shares of common stock remaining that may be purchased under the currently authorized program.

IBERIABANK Corporation

IBERIABANK Corporation is a regional financial holding company with offices in Louisiana, Arkansas, Tennessee, Alabama, Texas, Florida, Georgia, and South Carolina, 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 and Series C Preferred Stock also trade on the NASDAQ Global Select Market under the symbols "IBKCP" and "IBKCO", respectively.  The Company's common stock market capitalization was approximately $4.4 billion, based on the NASDAQ Global Select Market closing stock price on January 25, 2018.

The following 11 investment firms currently provide equity research coverage on the Company:

• Bank of America Merrill Lynch
• FIG Partners, LLC
• Hovde Group, LLC
• Jefferies & Co., Inc.
• JMP Securities LLC
• 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 Friday, January 26, 2018, beginning at 8:30 a.m. Central Time by dialing 1-888-317-6003. The confirmation code for the call is 6105557.  A replay of the call will be available until midnight Central Time on February 2, 2018 by dialing 1-877-344-7529. The confirmation code for the replay is 10115138.  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, 2016, 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. 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.

Important Additional Information and Where to Find It

This communication is being made in respect of the proposed merger transaction involving IBERIABANK Corporation ("IBKC"), IBERIABANK and Gibraltar Private Bank & Trust Company ("Gibraltar"). In connection with the proposed merger, IBKC filed a registration statement on Form S-4 (Registration No. 333-222200) with the Securities and Exchange Commission (the "SEC"), which included a preliminary proxy statement of Gibraltar and a preliminary prospectus of IBKC.  The Form S-4, as amended, was declared effective by the SEC on January 19, 2018 and the definitive Proxy Statement/Prospectus was first mailed to stockholders of Gibraltar on or about January 22, 2018.  This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval.  Before making any voting or investment decision, investors and securityholders of Gibraltar are urged to carefully read the entire registration statement and Proxy Statement/Prospectus regarding the merger and any other relevant documents filed with the SEC, as well as any amendments or supplements to these documents, because they do and will contain important information about the proposed transaction.

A copy of the definitive Proxy Statement/Prospectus is, and other filings containing information about IBKC and Gibraltar will be, available without charge at the SEC's website at http://www.sec.gov. Alternatively, these documents can be obtained without charge from IBKC's website at http://www.iberiabank.com.