UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
Commission File Number 0-25756
IBERIABANK Corporation (formerly ISB Financial Corporation)
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Louisiana 72-1280718
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(State or other jurisdiction of incorporation or (I.R.S. Employer
organization) Identification Number)
1101 East Admiral Doyle Drive
New Iberia, Louisiana 70560
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(Address of principal executive office) (Zip Code)
(337) 365-2361
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
The Registrant had 6,496,237 shares of common stock, $1.00 par value, which were
issued and outstanding as of August 3, 2000.
1
IBERIABANK CORPORATION AND SUBSIDIARY
TABLE OF CONTENTS
PART 1. FINANCIAL INFORMATION PAGE
- ------- --------------------- ----
Item 1. Financial Statements
Consolidated Balance Sheets 3
(As of June 30, 2000 and December 31, 1999)
Consolidated Statements of Income (For the three and six 4
months ended June 30, 2000 and 1999)
Consolidated Statements of Shareholders' Equity (For the 5
six months ended June 30, 2000 and 1999)
Consolidated Statements of Cash Flows (For the six 6
months ended June 30, 2000 and 1999)
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures about Market Risk 16
PART 2. OTHER INFORMATION
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Item 1. Legal Proceedings 17
Item 2. Changes in Securities 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 19
2
IBERIABANK CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands, except share data)
ASSETS
------
June 30, December 31,
2000 1999
---- ----
Cash and due from banks $ 32,151 $ 39,443
Interest-bearing deposits in banks 3,863 8,270
----------- -----------
Total cash and cash equivalents 36,014 47,713
Investment securities:
Available for sale, at fair value 275,425 299,388
Held to maturity (fair value of $77,976 and $82,884, respectively) 81,041 85,493
Federal home loan bank stock, at cost 7,741 6,821
Loans held for sale 278 4,771
Loans, net of unearned income, less allowance for loan
losses of $9,238 and $8,749, respectively 929,542 834,333
Accrued interest receivable 8,310 8,017
Premises and equipment, net 23,398 25,957
Goodwill and acquisition intangibles 40,415 42,063
Other assets 8,910 9,022
----------- -----------
TOTAL ASSETS $ 1,411,074 $ 1,363,578
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
LIABILITIES:
Deposits:
Noninterest-bearing $ 124,254 $ 116,493
Interest-bearing 1,004,590 983,521
----------- -----------
Total deposits 1,128,844 1,100,014
Short-term borrowings 94,975 83,000
Accrued interest payable 3,262 5,385
Long-term debt 57,371 52,053
Other liabilities 7,553 5,937
----------- -----------
TOTAL LIABILITIES 1,292,005 1,246,389
----------- -----------
SHAREHOLDERS' EQUITY:
Preferred stock of $1 par value; 5,000,000
shares authorized; -0- shares issued 0 0
Common stock of $1 par value; 25,000,000
shares authorized; 7,380,671 shares issued 7,381 7,381
Additional paid-in capital 69,049 68,749
Retained earnings 73,132 69,065
Unearned common stock held by ESOP (2,353) (2,649)
Unearned common stock held by RRP trust (2,878) (3,024)
Accumulated other comprehensive income (9,174) (7,124)
Treasury stock, at cost, 884,434 and 821,934 shares (16,088) (15,209)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 119,069 117,189
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,411,074 $ 1,363,578
=========== ===========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
IBERIABANK CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(Dollars in thousands, except per share data)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
------------------------------- ------------------------------
2000 1999 2000 1999
------------- ---------------- ------------- ---------------
INTEREST AND DIVIDEND INCOME:
Loans, including fees $ 19,608 $ 16,986 $ 37,966 $ 33,552
Investment securities:
Taxable interest and dividends 6,138 6,702 12,358 12,692
Tax-exempt interest 21 26 43 61
Interest-bearing demand deposits 76 136 131 979
------------- ---------------- ------------ ---------------
Total interest and dividend income 25,843 23,850 50,498 47,284
------------- ---------------- ------------ ---------------
INTEREST EXPENSE:
Deposits 10,853 10,161 21,481 20,431
Short-term borrowings 1,228 0 2,042 0
Long-term debt 802 926 1,644 1,661
------------- ---------------- ------------ ---------------
Total interest expense 12,883 11,087 25,167 22,092
------------- ---------------- ------------ ---------------
Net interest income 12,960 12,763 25,331 25,192
Provision for loan losses 604 265 1,085 635
------------- ---------------- ------------ ---------------
Net interest income after provision for loan losses 12,356 12,498 24,246 24,557
------------- ---------------- ------------ ---------------
NONINTEREST INCOME:
Service charges on deposit accounts 1,982 1,846 3,956 3,726
ATM fee income 329 290 630 497
Gain on sale of loans, net 49 181 58 483
Gain on sale of fixed assets 24 26 67 64
Other income 720 749 1,552 1,422
------------- ---------------- ------------ ---------------
Total noninterest income 3,104 3,092 6,263 6,192
------------- ---------------- ------------ ---------------
NONINTEREST EXPENSE:
Salaries and employee benefits 4,873 5,205 9,900 10,339
Occupancy and equipment 1,385 1,311 2,749 2,686
Amortization of acquisition intangibles 820 855 1,648 1,708
Franchise and shares tax 407 348 754 611
Communication and delivery 625 659 1,331 1,321
Marketing and business development 341 315 665 585
Data processing 312 246 628 451
Printing, stationery and supplies 217 227 384 447
Other expenses 1,502 1,802 2,765 3,365
------------- ---------------- ------------ ---------------
Total noninterest expense 10,482 10,968 20,824 21,513
------------- ---------------- ------------ ---------------
Income before income tax expense 4,978 4,622 9,685 9,236
Income tax expense 1,858 1,794 3,610 3,549
------------- ---------------- ------------ ---------------
NET INCOME $ 3,120 $ 2,828 $ 6,075 $ 5,687
============= ================ ============ ===============
EARNINGS PER SHARE - BASIC $ 0.51 $ 0.46 $ 1.00 $ 0.91
============= ================ ============ ===============
EARNINGS PER SHARE - DILUTED $ 0.51 $ 0.45 $ 1.00 $ 0.89
============= ================ ============ ===============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
IBERIABANK CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
(Dollars in thousands)
Unearned
Unearned Common Accumulated
Additional Common Stock Other Total
Common Paid In Retained Stock Held Held By Comprehensive Treasury Shareholders'
Stock Capital Earnings By ESOP RRP Trust Income Stock Equity
--------- ---------- --------- ----------- ---------- ----------- ------------ ------------
BALANCE, DECEMBER 31, 1998 $ 7,381 $ 68,021 $ 63,527 $ (3,267) $ (3,683) $ 349 $ (8,361) $ 123,967
Comprehensive income:
Net income 5,687 5,687
Change in unrealized gain
(loss) on securities
available for sale,
net of deferred taxes (3,248) (3,248)
----------
Total comprehensive income 2,439
Cash dividends declared (2,029) (2,029)
Common stock released by
ESOP trust 342 313 655
Common stock earned by
participants of recognition
and retention plan trust,
including tax benefit 26 212 238
Treasury stock acquired at
cost, 336,500 shares (7,045) (7,045)
Stock options exercised 1 15 16
--------- ---------- ---------- ----------- ---------- ----------- ------------ ------------
BALANCE, JUNE 30, 1999 $ 7,381 $ 68,390 $ 67,185 $ (2,954) $ (3,471) $ (2,899) $ (15,391) $ 118,241
========= ========== ========== =========== ========== =========== ============ ============
BALANCE, DECEMBER 31, 1999 $ 7,381 $ 68,749 $ 69,065 $ (2,649) $ (3,024) $ (7,124) $ (15,209) $ 117,189
Comprehensive income:
Net income 6,075 6,075
Change in unrealized
gain (loss) on securities
available for sale,
net of deferred taxes (2,050) (2,050)
------------
Total comprehensive income 4,025
Cash dividends declared (2,008) (2,008)
Common stock released by
ESOP trust 113 296 409
Common stock earned by
participants of recognition
and retention plan trust,
including tax benefit 26 274 300
Common stock acquired by
RRP trust 128 (128) 0
Compensation expense on
stock option plans 33 33
Treasury stock acquired at
cost, 62,500 shares (879) (879)
--------- ---------- ---------- ----------- ---------- ----------- ------------ ------------
BALANCE, JUNE 30, 2000 $ 7,381 $ 69,049 $ 73,132 $ (2,353) $ (2,878) $ (9,174) $ (16,088) $ 119,069
========= ========== ========== =========== ========== =========== ============ ============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
IBERIABANK CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(Dollars in thousands)
For the Six Months Ended
June 30,
------------------------
2000 1999
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 6,075 $ 5,687
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 3,370 3,295
Provision for loan losses 1,085 635
Compensation expense recognized on RRP and stock options 333 238
Gain on sales of assets (93) (50)
Amortization of premium/discount on investments 33 723
FHLB stock dividends (326) (275)
Net change in loans held for sale 4,493 10,616
ESOP compensation 312 655
Restructuring (115) 0
Other, net (460) 2,354
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NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 14,707 23,878
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Activity in available for sale securities:
Maturities, prepayments and calls 21,046 15,500
Purchases 0 (47,837)
Activity in held to maturity securities:
Maturities, prepayments and calls 4,374 32,852
Purchases 0 (52,161)
Increase in loans receivable, net (97,007) (24,411)
Proceeds from sale of premises and equipment 1,823 345
Purchases of premises and equipment (438) (1,714)
Purchases of FHLB Stock (594) 0
Proceeds from disposition of real estate owned & property 756 513
--------- ---------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (70,040) (76,913)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
(Decrease) increase in deposits 29,132 (77,013)
Net change in short term borrowings 4,400 35,429
Issuance of long term debt 15,000 4,500
Repayments of long term debt (2,107) 0
Dividends paid to shareholders (1,912) (1,985)
Proceeds from sale of treasury stock for stock options exercised 0 16
Payments to repurchase common stock (879) (7,045)
--------- ---------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES 43,634 (46,098)
--------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (11,699) (99,133)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 47,713 145,871
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 36,014 $ 46,738
========= =========
SUPPLEMENTAL SCHEDULE OF NONCASH ACTIVITIES:
Acquisition of real estate in settlement of loans $ 703 $ 525
========= =========
SUPPLEMENTAL DISCLOSURES:
Cash paid (received) for:
Interest on deposits and borrowings $ 27,290 $ 22,882
========= =========
Income taxes $ 3,680 $ 3,018
========= =========
Income tax refunds $ -- $ 9
========= =========
6
IBERIABANK CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying consolidated financial statements were prepared in accordance
with the instructions to Form 10-Q, and therefore, do not include information or
footnotes necessary for a complete presentation of financial position, results
of operations and cash flows in conformity with generally accepted accounting
principles. All normal, recurring adjustments, which, in the opinion of
management, are necessary for a fair presentation of the financial statements,
have been included. These interim financial statements should be read in
conjunction with the audited financial statements and note disclosures for
IBERIABANK Corporation (formerly ISB Financial Corporation), previously filed
with the Securities and Exchange Commission in the Company's Annual Report on
Form 10-K for the year ended December 31, 1999.
BUSINESS
The principal business of IBERIABANK Corporation (the "Company") is conducted
through its wholly owned subsidiary, IBERIABANK (the "Bank"), headquartered in
New Iberia, Louisiana. The Bank operates 40 full service offices in its market
areas located in south central Louisiana, northeast Louisiana and the greater
New Orleans area. The Bank provides a variety of financial services to
individuals and businesses throughout its service area. Primary deposit products
are checking, savings and certificate of deposit accounts and primary lending
products are consumer, mortgage and commercial loans. The Bank also offers
discount brokerage services through it's wholly owned subsidiary, Iberia
Financial Services, LLC.
The Bank is subject to examination and regulation by the Office of Financial
Institutions of the State of Louisiana, which is the Bank's chartering authority
and primary regulator. The Bank is also subject to regulation by the FDIC and to
certain reserve requirements established by the Federal Reserve Board ("FRB").
As a Louisiana chartered commercial bank, deposits are insured by the Federal
Deposit Insurance Corporation ("FDIC") to the maximum extent permitted by law.
The Bank is a member of the Federal Home Loan Bank of Dallas ("FHLB").
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company, the
Bank and the Bank's wholly owned subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.
2. RECENT ACCOUNTING PRONOUNCEMENTS
In June 2000, the FASB issued FAS Statement No. 138, Accounting for Certain
Derivative Instruments and Certain Hedging Activities. The new statement
addresses a limited number of issues causing implementation difficulties for a
large number of entities getting ready to apply FAS Statement 133. There are no
conflicts with or modifications to the basic model of Statement 133, and there
is no delay in the effective date of Statement 133. FAS 138 is effective for
fiscal quarters of all fiscal years beginning after June 15, 2000.
Implementation of this standard is not expected to have a material impact on
financial position or results of operations.
7
3. LOANS RECEIVABLE
Loans receivable at June 30, 2000 and December 31, 1999 consisted of the
following:
June 30, December 31,
($000) 2000 1999
--------------------------------------------------------------------------
Residential mortgage loans:
Residential 1-4 family $ 286,906 $ 266,365
Construction 8,712 6,381
--------- ----------
Total residential mortgage loans 295,618 272,746
Commercial loans:
Business 80,407 82,485
Real estate 193,705 157,248
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Total commercial loans 274,112 239,733
Consumer loans:
Home equity 103,197 91,531
Automobile 24,757 23,432
Indirect automobile 203,512 179,350
Credit card loans 7,224 6,436
Other 30,360 29,854
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Total consumer loans 369,050 330,603
--------- ----------
Total loans receivable 938,780 843,082
Allowance for loan losses (9,238) (8,749)
--------- ----------
Loans receivable, net $ 929,542 $ 834,333
========= ==========
4. EARNINGS PER SHARE
Basic earnings per share were based on 6,071,461 weighted average shares
outstanding during the three month period ended June 30, 2000. Diluted earnings
per share were based on 6,082,244 weighted average shares outstanding during the
three month period ended June 30, 2000. For the three months ended June 30,
2000, the weighted average number of common shares outstanding excludes (a) the
weighted average unreleased shares owned by the Employee Stock Ownership Plan
("ESOP") of 242,660; (b) the weighted average shares owned by the Management
Recognition Plan and Trust of 206,595 and (c) the weighted average shares
purchased in Treasury Stock of 859,956.
For the six months ended June 30, 2000, basic earnings per share were based on
6,083,468 weighted average shares outstanding and diluted earnings per share
were based on 6,091,021 weighted average shares outstanding. For the six months
ended June 30, 2000, the weighted average number of common shares outstanding
excludes (a) the weighted average unreleased shares owned by the ESOP of
250,035; (b) the weighted average shares owned by the Management Recognition
Plan and Trust of 201,342 and (c) the weighted average shares purchased in
Treasury Stock of 848,859.
5. SUBSEQUENT EVENTS
On July 27, 2000, the Company announced the completion of the sale of an office
building in Lafayette, Louisiana. The proceeds of the sale of the property were
approximately $3.0 million dollars, which resulted in a pre-tax gain of $1.9
million, or approximately $0.20 per diluted share on an after-tax basis. The
effect of the sale will be reflected in the third quarter of 2000. IBERIABANK
will continue to operate a full service branch at this location and the sale of
the property will not impact customers of IBERIABANK.
8
The Company also announced the restructuring of a significant portion of its
long-term investment portfolio. Approximately $45.5 million of fixed rate debt
securities were sold at a pre-tax loss of $1.8 million, or approximately $0.19
per diluted share on an after-tax basis. The effect of the sale will also be
reflected in the third quarter of 2000. The proceeds of the sale, or
approximately $43.7 million, were reinvested in higher yielding, more liquid,
fixed-rate debt securities with an average maturity comparable to those
securities that were sold.
This Form 10-Q may contain certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Examples of
forward-looking statements include, but are not limited to, estimates with
respect to the financial condition, results of operations and business of the
Company that are subject to various factors which would cause actual results to
differ materially from the estimates. These factors include, but are not limited
to, general economic conditions, changes in interest rates, deposit flows, loan
demand, real estate values, and competition; changes in accounting principles,
policies, or guidelines; changes in legislation or regulation; and other
economic, competitive, governmental, regulatory, and technological factors
affecting the Company's operations, pricing, products and services.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CHANGES IN FINANCIAL CONDITION
- ------------------------------
At June 30, 2000, the consolidated assets of the Company totaled $1.41 billion,
an increase of $47.5 million, or 3.5%, from December 31, 1999.
Loans, net of unearned income, less allowance for loan losses, increased by
$95.2 million, or 11.4%, to $929.5 million at June 30, 2000 compared to $834.3
million at December 31, 1999. Such increase was primarily the result of a $38.4
million, or 11.6%, increase in consumer loans, reflecting growth of $24.2
million in indirect automobile loans, $11.7 million in home equity loans, and an
increase in remaining consumer loans of $2.5 million. Other loan increases
consisted of growth in commercial loans of $34.4 million, or 14.3%, and mortgage
loans of $22.9 million, or 8.4%. The Company's loan to deposit ratio at June 30,
2000 was 82.3% compared to 75.8% at December 31, 1999. For additional
information on loans, see Note 3 to the Consolidated Financial Statements.
Loans held for sale decreased $4.5 million, or 94.2%, to $278,000 compared to
$4.8 million at December 31, 1999. This group of loans has normally been fixed
rate single-family residential mortgages held for sale in the secondary market.
The decrease was largely attributable to the reduced demand by consumers for
fixed rate loans in a rising rate environment.
Interest-bearing deposits at other institutions decreased $4.4 million, or
53.3%, to $3.9 million at June 30, 2000, compared to $8.3 million at December
31, 1999.
The Company's investment securities available for sale decreased $24.0 million,
or 8.0%, to $275.4 million at June 30, 2000, compared to $299.4 million at
December 31, 1999. Such decrease was primarily the result of prepayments and
maturities totaling $20.8 million and an additional decrease of $3.2 million in
the market value of such securities.
The Company's investment securities held to maturity decreased $4.5 million, or
5.2%, to $81.0 million at June 30, 2000, compared to $85.5 million at December
31, 1999. This decrease was the result of prepayments and maturities.
Deposits increased $28.8 million, or 2.6%, to $1,128.8 million at June 30, 2000,
compared to $1,100.0 million at December 31, 1999. The increase in deposits was
primarily the result of a $44.8 million increase in savings account balances as
a result of promotional pricing. This was partially offset by a $10.0 million
decrease in time deposits due primarily to lower pricing of non-relationship
accounts and a $11.6 million decrease in interest-bearing checking accounts
cyclically down from year-end balances.
9
Federal Home Loan Bank short-term borrowings increased $5.5 million, or 6.6%, to
$88.5 million at June 30, 2000, compared to $83.0 million at December 31, 1999.
The net increase in advances was in short term advances with a duration of one
month or less. The increase in advances was primarily the result of funding
requirements for loan growth, offset by investment security reductions and
deposit growth.
Long-term debt increased $5.3 million, or 10.2%, to $57.4 million at June 30,
2000, compared to $52.1 million at December 31, 1999. The increase in long-term
debt was due to duration match funding on larger commercial loans.
Total shareholders' equity increased $1.9 million, or 1.6%, to $119.1 million at
June 30, 2000. The increase was the result of the Company's net income of $6.1
million, $409,000 of common stock released by the ESOP, $300,000 of common stock
earned by participants in the Recognition and Retention Plan and $33,000 of
compensation expense recognized on stock option plans. This was offset by
treasury stock acquisitions of $879,000, cash dividends of $2.0 million declared
on common stock and a decrease in accumulated other comprehensive income of $2.1
million, after taxes.
RESULTS OF OPERATIONS
The Company reported net income of $3.1 million for the three months ended June
30, 2000, compared to $2.8 million earned during the three months ended June 30,
1999, or an increase of 10.3%. The Company's net interest income increased
$197,000 and noninterest income increased $12,000 for the same period. The
provision for loan losses increased by $339,000, noninterest expense decreased
$486,000 and income tax expense increased $64,000 during the three months ended
June 30, 2000 compared to the second quarter of 1999.
For the six months ended June 30, 2000, the Company earned $6.1 million compared
to $5.7 million for the same period of 1999, or an increase of 6.8%. The
Company's net interest income increased $139,000 and noninterest income
increased $71,000 during the six months ended June 30, 2000 compared to the
first six months of 1999. The provision for loan losses increased by $450,000,
noninterest expense decreased $689,000 and income tax expense increased $61,000
when comparing the first six months of 2000 to the same period of 1999.
NET INTEREST INCOME
Net interest income increased $197,000, or 1.5%, to $13.0 million for the three
months ended June 30, 2000, compared to $12.8 million for the three months ended
June 30, 1999. The increase was due to a $2.0 million, or 8.4% increase in
interest income, which was offset by a $1.8 million, or 16.2% increase in
interest expense. The increase in interest income was the result of a $52.8
million, or 4.3%, increase in the average balance of earning assets, together
with a 31 basis point increase in the yield earned on earning assets. Included
in interest income was a cash dividend of $112,000 reflecting a return of
capital payment on the Bank's FHLB stock holdings. The increase in interest
expense was the result of a $21.8 million, or 2.0%, increase in the average
balance of interest-bearing liabilities, together with a 57 basis point increase
in the cost thereof. The Company's interest rate spread and net interest margin
amounted to 3.46% and 4.01%, respectively, during the three months ended June
30, 2000, compared to 3.71% and 4.11%, respectively, for the comparable period
in 1999.
For the six months ended June 30, 2000, net interest income increased $139,000,
or 0.6%, to $25.3 million, compared to $25.2 million for the first six months of
1999. The increase was due to a $3.2 million, or 6.8% increase in interest
income, which was offset by a $3.1 million, or 13.9% increase in interest
expense. The increase in interest income was the result of a $31.1 million, or
2.5%, increase in the average balance of earning assets, together with a 32
basis point increase in the yield earned on earning assets. The increase in
interest expense was the result of a $11.4 million, or 1.0%, increase in the
average balance of interest-bearing liabilities, together with a 50 basis point
increase in the cost thereof. The Company's interest rate spread and net
interest margin amounted to 3.45% and 3.97%, respectively, during the six months
ended June 30, 2000, compared to 3.63% and 4.04%, respectively, for the
comparable period in 1999.
10
Table 1 presents average balance sheets, net interest income and interest rates
for the quarterly and six-month periods ended June 30, 2000 and 1999.
INTEREST INCOME
The Company's total interest income was $25.8 million for the three months ended
June 30, 2000, compared to $23.8 million for the three months ended June 30,
1999. The reason for the $2.0 million, or 8.4%, increase in interest income was
a $2.6 million, or 15.4%, increase in interest income from loans, which was
partially offset by a $569,000, or 8.5%, decrease in interest and dividends on
investment securities and a $60,000, or 44.1%, decrease in interest on deposits
held at other institutions. The increase in interest income from loans was the
result of a $114.2 million, or 14.6%, increase in the average balance of loans,
together with a 7 basis point increase in the yield earned thereon. The decrease
in interest income from investment securities was the result of a $54.8 million,
or 12.5%, decrease in the average balance of investment securities, which was
partially offset by a 28 basis point increase in the yield earned thereon. The
decrease in interest from deposits at other institutions was the result of a
$6.7 million, or 56.0%, decrease in the average balance of deposits at other
institutions, which was partially offset by a 126 basis point increase in the
yield earned thereon.
For the six months ended June 30, 2000, total interest income was $50.5 million,
compared to $47.3 million for the same period in 1999. The reason for the $3.2
million, or 6.8%, increase in interest income was a $4.4 million, or 13.2%,
increase in interest income from loans, which was partially offset by a
$352,000, or 2.8%, decrease in interest and dividends on investment securities
and a $848,000, or 86.6%, decrease in interest on deposits held at other
institutions. The increase in interest income from loans was the result of a
$94.0 million, or 12.0%, increase in the average balance of loans, together with
a 9 basis point increase in the yield on loans. The decrease in interest income
from investment securities was the result of a $22.3 million, or 5.4%, decrease
in the average balance of investment securities, which was partially offset by a
17 basis point increase in the yield on investment securities. The decrease in
interest from deposits at other institutions was the result of a $40.6 million,
or 89.1%, decrease in the average balance of deposits at other institutions,
which was partially offset by a 101 basis point increase in the yield on
deposits at other institutions.
INTEREST EXPENSE
The Company's total interest expense was $12.9 million during the three months
ended June 30, 2000, compared to $11.1 million for the three months ended June
30, 1999. The reasons for the $1.8 million, or 16.2%, increase in total interest
expense were a $1.1 million, or 119.2%, increase in interest expense on
borrowings due to a $60.0 million, or 94.9%, increase in the average balance of
borrowings, together with a 72 basis point increase in the cost of such
borrowings and a $692,000, or 6.8%, increase in interest expense on deposits due
to a $38.2 million, or 3.7%, decrease in the average balance of interest-bearing
deposits, which was partially offset by a 44 basis point increase in the cost of
such deposits.
For the six months ended June 30, 2000, the Company's total interest expense was
$25.2 million, compared to $22.1 million for the same period in 1999. The
reasons for the $3.1 million, or 13.9%, increase in total interest expense were
a $2.0 million, or 121.9%, increase in interest expense on borrowings due to a
$60.0 million, or 110.3%, increase in the average balance of borrowings,
together with a 34 basis point increase in the cost of such borrowings and a
$1.1 million, or 5.1%, increase in interest expense on deposits due to a $48.6
million, or 4.6%, decrease in the average balance of interest-bearing deposits,
which was partially offset by a 40 basis point increase in the cost of such
deposits.
11
AVERAGE BALANCES, NET INTEREST INCOME AND INTEREST YIELDS / RATES
TABLE 1
The following table sets forth, for the periods indicated, information
regarding (i) the total dollar amount of interest income of the Company from
earning assets and the resultant average yields; (ii) the total dollar amount of
interest expense on interest-bearing liabilities and the resultant average rate;
(iii) net interest income; (iv) net interest spread; and (v) net interest
margin. Information is based on average daily balances during the indicated
periods.
Three Months Ended June 30,
------------------------------------------------------------------
2000 1999
------------------------------- ----------------------------
Average Average
Average Yield/ Average Yield/
(Dollars in thousands) Balance Interest Rate(1) Balance Interest Rate(1)
- ----------------------------------------------------------------------- ----------------------------
Interest-earning assets:
Loans receivable:
Mortgage loans $284,732 $5,620 7.90 % $293,837 $6,096 8.30 %
Commercial loans 257,112 6,185 9.52 210,353 4,831 9.09
Consumer and other loans 355,944 7,803 8.82 279,364 6,059 8.70
-------- ------ -------- ------
Total Loans 897,788 19,608 8.72 783,554 16,986 8.65
-------- ------ -------- -------
Investment securities 385,147 6,159 6.40 439,927 6,728 6.12
Other earning assets 5,245 76 5.83 11,924 136 4.57
--------- ------ --------- ------
Total earning assets 1,288,180 25,843 8.02 1,235,405 23,850 7.71
------ ------
Nonearning assets 94,570 123,969
---------- ----------
Total assets $1,382,750 $1,359,374
========== ==========
Interest-bearing liabilities:
Deposits:
Demand deposits $251,205 1,455 2.32 $287,595 1,607 2.24
Savings deposits 188,960 1,714 3.65 127,181 579 1.83
Certificates of deposits 568,118 7,684 5.44 631,750 7,975 5.06
--------- ------ --------- ------
Total deposits 1,008,283 10,853 4.33 1,046,526 10,161 3.89
Borrowings 123,305 2,030 6.51 63,265 926 5.79
--------- ------ --------- ------
Total interest-bearing
liabilities 1,131,588 12,883 4.57 1,109,791 11,087 4.00
------ ------
Noninterest - bearing demand deposits 122,513 115,825
Noninterest - bearing liabilities 10,859 11,903
--------- ---------
Total liabilities 1,264,960 1,237,519
Shareholders' Equity 117,790 121,855
--------- ---------
Total liabilities and
shareholders' equity $1,382,750 $1,359,374
========== ==========
Net earning assets $156,592 $125,614
========== ==========
Net interest spread $12,960 3.46 % $12,763 3.71 %
======= ==== ======= ====
Net interest margin 4.01 % 4.11 %
==== ====
Ratio of average earning assets to
average interest-bearing
liabilities 113.84% 111.32%
======= =======
12
TABLE CONTINUED
Six Months Ended June 30,
---------------------------------------------------------------
2000 1999
---------------------------- -------------------------------
Average Average
Average Yield/ Average Yield/
(Dollars in thousands) Balance Interest Rate(1) Balance Interest Rate(1)
- ------------------------------------- ---------------------------- -------------------------------
Interest-earning assets:
Loans receivable:
Mortgage loans $279,722 $11,059 7.91 % $304,065 $12,524 8.24 %
Commercial loans 248,370 11,823 9.42 204,276 9,273 8.98
Consumer and other loans 345,852 15,084 8.77 271,623 11,755 8.68
-------- ------ -------- -------
Total Loans 873,944 37,966 8.68 779,964 33,552 8.59
-------- ------ -------- -------
Investment securities 391,576 12,401 6.33 413,845 12,753 6.16
Other earning assets 4,954 131 5.32 45,562 979 4.31
--------- ------- --------- ------
Total earning assets 1,270,474 50,498 7.95 1,239,371 47,284 7.63
------- ------
Nonearning assets 98,203 121,982
---------- ----------
Total assets $1,368,677 $1,361,353
========== ==========
Interest-bearing liabilities:
Deposits:
Demand deposits $251,159 2,881 2.30 $290,267 3,160 2.18
Savings deposits 183,500 3,305 3.62 128,410 1,160 1.81
Certificates of deposits 572,727 15,295 5.37 637,344 16,111 5.07
--------- ------ --------- -------
Total deposits 1,007,386 21,481 4.29 1,056,021 20,431 3.89
Borrowings 114,487 3,686 6.37 54,443 1,661 6.03
--------- ------ --------- ------
Total interest-bearing
liabilities 1,121,873 25,167 4.50 1,110,464 22,092 4.00
------ ------
Noninterest - bearing demand deposits 119,267 115,298
Noninterest - bearing liabilities 10,702 12,450
--------- ---------
Total liabilities 1,251,842 1,238,212
Shareholders' Equity 116,835 123,141
--------- ---------
Total liabilities and
shareholders' equity $1,368,677 $1,361,353
========== ==========
Net earning assets $148,601 $128,907
========== ==========
Net interest spread $25,331 3.45 % $25,192 3.63 %
======= ==== ======= ====
Net interest margin 3.97 % 4.04 %
==== ====
Ratio of average earning assets to
average interest-bearing
liabilities 113.25% 111.61%
======= =======
- -----------------------------------
(1) Annualized.
13
PROVISION FOR LOAN LOSSES
The provision for loan losses was $604,000 for the three months ended June 30,
2000 as compared to $265,000 for the same period in 1999. For the six months
ended June 30, 2000 the provision for loan losses was $1.1 million as compared
to $635,000 for the first six months of 1999. The increased provision reflects
growth in loans of $158.7 million, or 20.3%, over the last twelve months.
The Company had $3.5 million of nonperforming assets, or 0.25% of total assets,
at June 30, 2000, compared to $3.3 million, or 0.24% of total assets, at
December 31, 1999. As of June 30, 2000, the ratio of the Company's allowance for
loan losses to nonperforming loans was 273.6%, compared to 279.3% at December
31, 1999.
NONINTEREST INCOME
Noninterest income remained basically flat at $3.1 million for the quarters
ended June 30, 2000 and 1999. Growth of $12,000 was due primarily to a $136,000,
or 7.4%, increase in service charges on deposit accounts and a $39,000, or
13.4%, increase in ATM fee income, all of which were partially offset by a
$29,000, or 3.9%, decrease in other income, a $132,000, or 72.9%, decrease in
gains on the sale of mortgage loans in the secondary market and a $2,000, or
7.7%, decrease in gain on sale of fixed assets.
For the six months ended June 30, 2000, noninterest income increased $71,000, or
1.1%, to $6.3 million, compared to $6.2 million for the first six months of
1999. Such increase was due primarily to a $230,000, or 6.2%, increase in
service charges on deposits accounts, a $133,000, or 26.8%, increase in ATM fee
income, a $130,000, or 9.1%, increase in other income, a $3,000, or 4.7%,
increase in gain on sale of fixed assets, all of which were partially offset by
a $425,000, or 88.0%, decrease in gains on the sale of mortgage loans in the
secondary market.
The increase in other income is attributable to an increase in commission income
and other sources of income.
NONINTEREST EXPENSE
Noninterest expense decreased $486,000, or 4.4%, for the three months ended June
30, 2000, to $10.5 million, compared to $11.0 million for the three months ended
June 30, 1999. Such decrease was due in part to a $126,000 decrease in the ESOP
retirement contribution expense caused by the decrease in the average fair
market value of Company stock. Reclassification of deposits according to use for
reserve purposes later in 1999 resulted in quarterly savings of FDIC insurance
of $68,000. Additional decreases of $33,000 in employee development, $10,000 in
stationery and supplies, and $535,000 in miscellaneous other expenses reflects
Management's emphasis on controlling discretionary expenses. These decreases
were offset in part by increases of $29,000 in the cost associated with other
real estate owned, net of gains on sale of property, $132,000 in professional
fees, $66,000 in the cost of computer related expenses and $59,000 in the share
tax assessment.
For the six months ended June 30, 2000, noninterest expense decreased $689,000,
or 3.2%, to $20.8 million compared to $21.5 million for the same period in 1999.
This decrease was largely due to a $268,000 reduction in the ESOP retirement
contribution expense caused by the decrease in the average fair market value of
Company stock for the six-month period as compared to the same period last year.
Reclassification of deposits according to use for reserve purposes later in 1999
resulted in savings of FDIC insurance of $132,000. The carrying cost associated
with other real estate owned, net of gains on sale of property, declined by
$15,000. Additional decreases of $102,000 in employee development, $63,000 in
stationery and supplies, and $635,000 in miscellaneous other expenses reflects
Management's emphasis on controlling discretionary expenses. These decreases
were offset in part by increases of $206,000 in professional fees, $177,000 in
the cost of computer related expenses and $143,000 in the share tax assessment.
14
INCOME TAX EXPENSE
Income tax expense increased $64,000, or 3.6%, for the three months ended June
30, 2000 to $1.9 million, compared to $1.8 million for the three months ended
June 30, 1999. The increase in income tax expense was due primarily to the
increase in income before income taxes.
For the six months ended June 30, 2000, income tax expense increased $61,000, or
1.7%, to $3.6 million, compared to $3.5 million for the same period in 1999. The
increase in income tax expense was due primarily to the increase in income
before income taxes.
The effective tax rate for the quarters ended June 30, 2000 and 1999 was 37.3%
and 38.8%, respectively. The effective tax rate for the six-month periods as of
the same dates was 37.3 % and 38.4 %, respectively.
15
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity, represented by cash and cash equivalents, is a product
of its operating, investing and financing activities. The Company's primary
sources of funds are deposits, amortization, prepayments and maturities of
outstanding loans, investment securities and other short-term investments and
funds provided from operations. While scheduled payments from the amortization
of loans, maturing investment securities, and short-term investments are
relatively predictable sources of funds, deposit flows and loan and investment
security prepayments are greatly influenced by general interest rates, economic
conditions and competition. In addition, the Company obtains additional funds
through borrowings, which provide liquidity to meet lending requirements. The
Bank has been able to generate sufficient cash through its deposits as well as
borrowings. At June 30, 2000, the Company had $145.9 million in outstanding
advances from the FHLB of Dallas and $6.5 million in outstanding debt from Union
Planters Bank, N.A.
Liquidity management is both a daily and long-term function of business
management. Excess liquidity is generally invested in short-term investments
such as over night deposits. On a longer-term basis, the Company maintains a
strategy of investing in various lending products. The Company uses its sources
of funds primarily to meet its ongoing commitments and fund loan commitments. At
June 30, 2000, the total approved loan commitments outstanding amounted to $42.1
million. At the same time, commitments under unused lines of credit, including
credit card lines, amounted to $149.2 million. Certificates of deposit scheduled
to mature in twelve months or less at June 30, 2000 totaled $385.6 million.
Based on past experience management believes that a significant portion of
maturing deposits will remain with the Company. The Company anticipates it will
continue to have sufficient funds to meet its liquidity requirements.
At June 30, 2000, the Company and its subsidiary had regulatory capital, which
was in excess of regulatory requirements. The current requirements and the
Company's actual levels as of June 30, 2000 are detailed below (dollars in
thousands):
Required Capital Actual Capital
------------------ ------------------
Amount Percent Amount Percent
------ ------- ------ -------
Tier 1 Leverage $53,693 4.00% $87,744 6.54%
Tier 1 Risk-Based $36,261 4.00% $87,744 9.68%
Total Risk-Based $72,521 8.00% $96,982 10.70%
16
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Quantitative and qualitative disclosures about market risk are presented at
December 31, 1999 in Item 7A of the Company's Annual Report on Form 10-K, filed
with the Securities and Exchange Commission on March 31, 2000. Management
believes there have been no material changes in the Company's market risk since
December 31, 1999.
17
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
Not Applicable
Item 2. Changes in Securities
---------------------
Not Applicable
Item 3. Defaults Upon Senior Securities
-------------------------------
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The Company's Annual Meeting of Shareholders was held on May 5, 2000.
1. With respect to the election of three directors to serve
three-year terms expiring at the Annual Meeting of Shareholders
to be held in the year 2003 or until their respective successors
are elected and qualified, the following are the number of shares
voted for each nominee:
Nominee Elected Broker
As Director For Withheld Abstain Non-vote
----------------------------------------------------------------
Ernest P. Breaux, Jr. 5,829,364 158,383 None None
Cecil C. Broussard 5,826,942 160,805 None None
Richard F. Hebert 5,829,493 158,254 None None
2. With respect to the ratification of Castaing, Hussey, Lolan and
Dauterive, L.L.P. as the Company's independent auditors for the
fiscal year ending December 31, 2000, the following are the
number of shares voted:
Broker
For Against Abstain Non-vote
----------------------------------------------------------
5,964,628 17,800 5,319 None
3. With respect to the amendment to Article I of the Articles of
Incorporation to change the Company's name to "IBERIABANK
Corporation", the following are the number of shares voted:
Broker
For Against Abstain Non-vote
----------------------------------------------------------
5,806,768 176,564 4,415 None
18
Item 5. Other Information
-----------------
On July 27, 2000, the Company announced the completion of the sale of
an office building in Lafayette, Louisiana. The proceeds of the sale
of the property were approximately $3.0 million dollars, which
resulted in a pre-tax gain of $1.9 million, or approximately $0.20
per diluted share on an after-tax basis. The effect of the sale will
be reflected in the third quarter of 2000. IBERIABANK will continue
to operate a full service branch at this location and the sale of the
property will not impact customers of IBERIABANK.
The Company also announced the restructuring of a significant portion
of its long-term investment portfolio. Approximately $45.5 million of
fixed rate debt securities were sold at a pre-tax loss of $1.8
million, or approximately $0.19 per diluted share on an after-tax
basis. The effect of the sale will also be reflected in the third
quarter of 2000. The proceeds of the sale, or approximately $43.7
million, were reinvested in higher yielding, more liquid, fixed-rate
debt securities with an average maturity comparable to those
securities that were sold.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
Exhibit 27 - Financial Data Schedule (SEC Use Only)
19
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
IBERIABANK CORPORATION
Date: August 11, 2000 By: /s/ Daryl G. Byrd
----------------- -----------------------
Daryl G. Byrd
President
Date: August 11, 2000 By: /s/ Marilyn W. Burch
----------------- --------------------------
Marilyn W. Burch
Senior Vice President and Controller
20