IBKC IBERIBANK Corporation

LAFAYETTE, La., April 17, 2020 /PRNewswire/ -- IBERIABANK Corporation (NASDAQ: IBKC), holding company of the 133-year-old IBERIABANK (www.iberiabank.com), reported financial results for the first quarter ended March 31, 2020. For the quarter, the Company reported net income available to common shareholders of $32.8 million, or $0.62 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 March 31, 2020 was $0.67 per common share, compared to $1.72 in the same quarter of 2019 (refer to press release supplemental tables for a reconciliation of GAAP to non-GAAP metrics).

Daryl G. Byrd, President and Chief Executive Officer, commented, "As we navigate the uncertain and unprecedented COVID-19 environment, the Company is highly focused on servicing the financial needs of our clients, ensuring the health and well-being of our associates, and supporting the communities in which we live and serve. Our teams have been working around the clock to assist clients with payment forbearance and other relief programs, including the SBA Paycheck Protection Program. At the same time, retail operations and branch facilities remain open and committed to serving our clients in a safe and responsible manner. This is truly a Herculean effort and our teams have made a tremendous amount of progress for our clients in a very short time period. I am very proud of the commitment of all our IBERIABANK associates."

"During the first quarter, our fundamental business model performed very well in the face of uncertain economic times. The Company was able to expand our client base, produce significant growth in our loan portfolio, increase core and non-interest bearing deposits, and grow tangible book value. The Company successfully delivered record non-interest income, held non-interest expense in check, and maintained already strong credit quality metrics. First quarter results included the adoption of CECL early in the quarter, and as a result we recorded an approximately $82 million increase in our allowance for expected credit losses and related book value write-down.  As we evaluated the economic uncertainties of the current pandemic, at the end of March we recorded an additional $69 million pre-tax increase in provision and other credit-related reserves that significantly impacted our financial results."

Byrd concluded, "We continue to diligently work on the merger planning process. Our employees remain engaged and committed to creating a top-tier regional banking institution and look forward to all we can accomplish for our clients and shareholders as a combined franchise."

First Quarter 2020 Highlights:

• Total loan growth was $520.1 million, or 9% annualized, on a linked quarter basis. Commercial and consumer line utilization was 52.4% and 64.0%, respectively, only slightly higher than at year-end 2019.
• Total deposits increased $306.9 million compared to the prior quarter, or 5% annualized. Non-interest bearing deposits increased $309.1 million, or 5%, in the quarter, to 26% of total deposits.
• Non-interest income increased $5.3 million, or 9%, on a linked quarter basis to $64.7 million, a record quarter on a core basis for the Company, primarily the result of a $7.9 million increase in mortgage income.
• • As of April 13, 2020, the Company's locked mortgage pipeline was $662.2 million, up 209% from $214.4 million at January 21, 2020.
• Non-interest expense decreased $4.3 million, or 2%, on a linked quarter basis, primarily as a result of decreases in salaries and benefits and professional services expense, partially offset by a $7.3 million increase in credit valuation adjustments on derivatives and a $2.4 million increase in impairment related to mortgage servicing rights.
• • Non-interest expense included $3.0 million in merger-related expense and other non-core items, a decrease of $8.3 million from the fourth quarter of 2019. Excluding these non-core items, core non-interest expense increased $4.0 million, or 2%, on a linked quarter basis.
• The Company's reported and cash net interest margins were down 4 and 2 basis points from the prior quarter at 3.17% and 3.06%, respectively. The lower net interest margin was primarily the result of a 20 basis point decrease in loan yield somewhat offset by a 13 basis point decline in the cost of interest-bearing liabilities.
• Effective January 1, 2020, the Company adopted the current expected credit loss (CECL) methodology for estimating its credit losses, which resulted in an $82.3 million increase in the allowance for expected credit losses, increasing the allowance coverage of total loans and leases from 0.68% to 1.02% upon adoption. As of March 31, 2020, the allowance for expected credit losses totaled $305.0 million, or 1.24% of total loans and leases, and covered 172% of non-performing loans.
• The provision for expected credit losses, using the baseline scenario published by a nationally recognized service dated March 27, 2020 (adjusted for alternative scenarios), totaled $69.0 million compared to $8.2 million in the prior quarter. The provision for expected credit losses was impacted by both the CECL methodology and the expected impact of the COVID-19 pandemic on future losses.
• Net charge-offs to average loans on an annualized basis increased 5 basis points to 0.16% compared to the prior quarter. Non-performing assets to total assets were 0.60% compared to 0.54% in the prior quarter.
• Capital ratios remain strong. There were no share repurchases in the first quarter of 2020 due to the pending merger with First Horizon National Corporation.

COVID-19 Operational Update

• The Company took early action by executing its proven business continuity plan to protect the health and welfare of its associates and to mitigate disruption.
• The Company is operating 181 branches today, with only seven closed. There are approximately 2,000 associates working remotely, which is almost 60% of our total workforce.
• We have modified our health care benefits plans to provide additional assistance during the COVID-19 pandemic. Additionally, we are offering pandemic benefits and bonus pay to eligible associates.
• The Bank has established client assistance programs, including a payment forbearance plan that is available to assist consumer and commercial clients impacted by COVID-19, upon request. The Company is also waiving and reversing certain fees for impacted clients.
• The Company is participating in the Coronavirus Aid, Relief and Economic Security Act ("CARES") Act. As of April 16, 2020, the Company had processed nearly 9,000 loan applications for the SBA Paycheck Protection Program, representing a total of $1.86 billion. The Company has secured funding for 92% of the funds applied for, funding payroll for more than 200,000 people. The Company remains ready to continue to fund eligible client requests if Congress appropriates additional funds.

Operating Results

Net interest income decreased $4.1 million, or 2%, on a linked quarter basis. The decrease in net interest income reflects a 4 basis point decrease in the net interest margin to 3.17% compared to 3.21% in the prior quarter. The lower net interest margin was primarily the result of a 20 basis point decline in loan yield somewhat offset by a 13 basis point decline in the cost of interest-bearing liabilities. The decrease in loan yield was primarily attributable to the repricing of variable rate loans as a result of recent cuts to the targeted federal funds rate and the corresponding impact to LIBOR. Additionally, the loan yield was impacted by lower acquired loan accretion, partially the result of CECL implementation, as well as lower pay-offs in the acquired loan portfolio during the first quarter. The decline in the cost of interest-bearing liabilities was primarily attributable to recent interest rate cuts.

The provision for expected credit losses under the CECL methodology totaled $69.0 million compared to $8.2 million in the prior quarter under the incurred loss methodology. The provision for expected credit losses was impacted by both the CECL methodology and the expected impact of the COVID-19 pandemic on future losses. Net charge-offs to average loans on an annualized basis increased 5 basis points to 0.16% when compared to the prior quarter.

Non-interest income increased $5.3 million, or 9%, on a linked quarter basis, primarily the result of a $7.9 million increase in mortgage income. This increase was partially offset by a $0.7 million decrease in title revenue, a $0.5 million decrease in ATM and debit card fee income, and a $0.4 million decrease in service charges on deposit accounts.

Non-interest expense decreased $4.3 million, or 2%, compared to the linked quarter. Professional services expense decreased $10.9 million and salaries and employee benefits expense decreased $4.4 million when comparing the quarters. These decreases were partially offset by a $7.3 million increase in credit valuation adjustments on derivatives, a $2.4 million increase in impairment on mortgage servicing rights, and a $0.7 million increase in credit and other loan-related expense. Non-interest expense included $3.0 million in merger-related expense and other non-core items, a decrease of $8.3 million from the fourth quarter of 2019. Excluding these non-core items, total core non-interest expense increased $4.0 million, or 2%, on a linked quarter basis.

On a linked quarter basis, the efficiency ratio improved to 60.1% from 61.8%, while the non-GAAP core tangible efficiency ratio increased to 57.4% compared to 56.2%. Refer to Table A for a summary of financial results on both a GAAP and non-GAAP basis.

Loans and Leases

On a linked quarter basis, total loans and leases increased $520.1 million, or 9% annualized, to $24.5 billion at March 31, 2020. Growth during the first quarter of 2020 was strongest in the Corporate Asset Finance (equipment financing and leasing business) and Energy groups (reserve-based and midstream lending), as well as in the Houston, New Orleans, and New York markets.

Energy loans were 5.4% of total loans outstanding as of March 31, 2020. The E&P (60%) and midstream (38%) space comprise 98% of the Company's energy portfolio. The Company has had no new loan commitments in the past five years to the offshore or the oilfield services space.

Investment Securities

On a linked quarter basis, the investment portfolio decreased $23.4 million, or 2.3% annualized, to $4.1 billion, as a result of net principal payments, offset by fair value adjustments on AFS securities. At March 31, 2020, approximately 96% of the investment portfolio was in available-for-sale securities, which experience unrealized gains as interest rates fall. The investment portfolio had an effective duration of 2.0 years at March 31, 2020, down from 2.7 years at December 31, 2019, and a $133.0 million unrealized gain at March 31, 2020, up from $57.8 million at December 31, 2019. The average yield on investment securities increased five basis points to 2.56% in the first quarter of 2020. The investment portfolio primarily consists of government agency securities. Municipal securities comprised 8% of total investments at March 31, 2020.

Deposits

Total deposits increased $306.9 million, or 5% annualized, to $25.5 billion at March 31, 2020. Growth during the first quarter of 2020 was strongest in the Energy group (primarily reserve-based lending) and the Palm Beach/Broward, Southwest Louisiana, and Birmingham markets.

Asset Quality

Credit quality remained strong. Non-performing assets to total assets were 0.60% at March 31, 2020, compared to 0.54% in the prior quarter. Loans 30-89 days past due and still accruing represented 0.33% of total loans and leases compared to 0.28% in the prior quarter. The increase in non-performing assets and past due loans was partially driven by the implementation of CECL which requires purchased credit deteriorated loans to be classified as non-accrual or past due based on performance. As a percentage of average loans and leases, annualized net charge-offs for the quarter increased five basis points on a linked quarter basis to 0.16%.

The allowance for expected credit losses, which includes the reserve for unfunded commitments, was $163.2 million at December 31, 2019. Upon adoption of CECL on January 1, 2020, the Company recognized an increase in the allowance of $82.3 million, as a cumulative effect adjustment, with a corresponding after-tax decrease of $67.6 million in retained earnings. At March 31, 2020, the allowance for expected credit losses, totaled $305.0 million, or 1.24% of total loans and leases. The increase in the allowance reflects a higher provision for expected credit losses in the first quarter of 2020 in response to the expected impact of the COVID-19 pandemic on future losses. The allowance coverage of non-performing loans was 171.8% at March 31, 2020, compared to 114.8% at December 31, 2019.

Given the on-going and uncertain impact to the economy of the current COVID-19 pandemic, the Company continues to monitor its portfolio as the potential exists for adverse events to impact credit quality trends.

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

Capital Position

At March 31, 2020, the non-GAAP tangible common equity ratio was 9.13%, down 11 basis points compared to December 31, 2019, and the preliminary Tier 1 leverage ratio was 9.93%, up 3 basis points compared to December 31, 2019. The preliminary calculation of the total risk-based capital ratio at March 31, 2020, was 12.48%, up 5 basis points compared to December 31, 2019. As part of its response to the impact of COVID-19, on March 31, 2020, the regulatory agencies issued an interim final rule that provided the option to temporarily delay the effects of CECL on regulatory capital for two years, followed by a three-year transition period. The Company's preliminary regulatory capital ratios have been calculated in accordance with this interim final rule.

At March 31, 2020, book value per common share was $78.27, down $0.10 per share, compared to December 31, 2019. Tangible book value per common share was $53.70, up $0.07 per share, compared to the prior quarter. Based on the closing stock price of the Company's common stock of $32.28 per share on April 16, 2020, this price equated to 0.41 times March 31, 2020 book value per common share and 0.60 times March 31, 2020 tangible book value per common share.

Dividends On Capital Stock The declaration of dividends is at the discretion of the Board of Directors. Recent dividend declarations include the following:

Common Stock  On January 28, 2020, the Company announced a quarterly cash dividend of $0.47 per common share, an increase of approximately 4% compared to the common dividend paid on January 24, 2020. The dividend was paid on April 1, 2020 to shareholders of record as of March 13, 2020.

Preferred Stock  On April 3, 2020, the Company announced a quarterly cash dividend of $0.4125 per depositary share of Series C Preferred Stock that is payable on May 1, 2020 to shareholders of record as of April 16, 2020. On April 3, 2020, the Company also announced a quarterly cash dividend of $0.7625 per depositary share of Series D Preferred Stock that is payable on May 1, 2020 to shareholders of record as of April 16, 2020.

Common Stock Repurchase Program  On July 17, 2019, the Board of Directors authorized the repurchase of up to 1,600,000 shares of the Company's common stock. This repurchase authorization equated to approximately 3% of total common shares outstanding.  At March 31, 2020, the Company had approximately 1,165,000 remaining shares that could be repurchased under the current Board-approved plan. During the first quarter of 2020, the Company did not repurchase any common shares.  No further stock repurchases are expected due to the pending merger with First Horizon National Corporation.

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, commercial leasing and equipment financing, 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 $1.7 billion, based on the closing stock price on April 16, 2020.

The following 9 investment firms provide equity research coverage on the Company:

• Bank of America Merrill Lynch
• Janney Montgomery Scott, LLC
• Hovde Group, LLC
• Jefferies & Co., Inc.
• Keefe, Bruyette & Woods, Inc.
• Raymond James & Associates, Inc.
• Piper Sandler
• Stephens, Inc.
• SunTrust Robinson-Humphrey

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, 2019, and in other documents, including the Company's proxy statement in the S-4 Registration Statement filed by First Horizon in connection with our pending merger, 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.