10-Q 1 d10q.txt FORM 10-Q 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, 2001 Commission File Number 0-25756 IBERIABANK Corporation -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Louisiana 72-1280718 --------------------------------------- ---------------------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification Number) 1101 East Admiral Doyle Drive New Iberia, Louisiana 70560 --------------------------------------- ---------------------- (Address of principal executive office) (Zip Code) (337) 267-4458 ---------------------------------------------------- (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 6,276,974 shares of common stock, $1.00 par value, which were issued and outstanding as of August 6, 2001. IBERIABANK CORPORATION AND SUBSIDIARY TABLE OF CONTENTS
Part I. Financial Information Page ------- --------------------- ---- Item 1. Financial Statements Consolidated Balance Sheets 3 (As of June 30, 2001 and December 31, 2000) Consolidated Statements of Income 4 (For the three and six months ended June 30, 2001 and 2000) Consolidated Statements of Shareholders' Equity 5 (For the six months ended June 30, 2001 and 2000) Consolidated Statements of Cash Flows 6 (For the six months ended June 30, 2001 and 2000) 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 17 Part II. Other Information -------- ----------------- Item 1. Legal Proceedings 18 Item 2. Changes in Securities and Use of Proceeds 18 Item 3. Defaults Upon Senior Securities 18 Item 4. Submission of Matters to a Vote of Security Holders 18 Item 5. Other Information 19 Item 6. Exhibits and Reports on Form 8-K 19 Signatures 20
2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements IBERIABANK CORPORATION AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (unaudited) (Dollars in thousands)
June 30, December 31, 2001 2000 ------------- ------------ Assets Cash and due from banks $ 31,535 $ 32,000 Interest-bearing deposits in banks 92,653 2,541 ------------- ------------ Total cash and cash equivalents 124,188 34,541 Investment securities: Available for sale, at fair value 200,081 268,223 Held to maturity (fair value of $73,995 and $75,940, respectively) 73,837 76,322 Federal Home Loan Bank stock, at cost 5,508 7,997 Loans held for sale 18,070 3,347 Loans, net of unearned income 945,089 940,525 Allowance for loan losses (9,906) (10,239) ------------- ------------ Loans, net 935,183 930,286 Accrued interest receivable 8,029 9,142 Premises and equipment, net 20,619 21,465 Goodwill and acquisition intangibles 37,206 38,796 Other assets 12,190 6,043 ------------- ------------ Total Assets $ 1,434,911 $ 1,396,162 ============= ============ Liabilities and Shareholders' Equity Liabilities: Deposits: Noninterest-bearing $ 146,866 $ 129,468 Interest-bearing 1,090,839 1,013,719 ------------- ------------ Total deposits 1,237,705 1,143,187 Short-term borrowings - 54,000 Securities sold under agreements to repurchase 5,692 - Accrued interest payable 3,674 5,480 Long-term debt 46,926 60,843 Other liabilities 5,644 5,610 ------------- ------------ Total Liabilities 1,299,641 1,269,120 ------------- ------------ Shareholders' Equity: Preferred stock of $1 par value; 5,000,000 shares authorized; -0- shares issued - - Common stock of $1 par value; 25,000,000 shares authorized; 7,380,671 shares issued 7,381 7,381 Additional paid-in capital 69,715 69,231 Retained earnings 82,982 77,963 Unearned common stock held by ESOP (1,790) (2,067) Unearned common stock held by RRP trust (2,373) (2,587) Accumulated other comprehensive income 65 (2,293) Treasury stock, at cost, 1,114,187 and 1,121,934 shares (20,710) (20,586) ------------- ------------ Total Shareholders' Equity 135,270 127,042 ------------- ------------ Total Liabilities and Shareholders' Equity $ 1,434,911 $ 1,396,162 ============= ============
3 See Notes to Consolidated Financial Statements 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, ----------------------------------- ---------------------------------- 2001 2000 2001 2000 --------------- ---------------- --------------- --------------- Interest and Dividend Income: Loans, including fees $ 20,361 $ 19,595 $ 40,566 $ 37,899 Loans held for sale, including fees 198 13 261 67 Investment securities: Taxable interest and dividends 4,361 6,138 9,468 12,358 Tax-exempt interest 75 21 115 43 Interest-bearing demand deposits 856 76 1,228 131 --------------- ---------------- --------------- --------------- Total interest and dividend income 25,851 25,843 51,638 50,498 --------------- ---------------- --------------- --------------- Interest Expense: Deposits 11,437 10,853 23,180 21,481 Short-term borrowings 20 1,228 461 2,042 Securities sold under agreements to repurchase 53 - 80 - Long-term debt 804 802 1,623 1,644 --------------- ---------------- --------------- --------------- Total interest expense 12,314 12,883 25,344 25,167 --------------- ---------------- --------------- --------------- Net interest income 13,537 12,960 26,294 25,331 Provision for loan losses 896 604 1,610 1,085 --------------- ---------------- --------------- --------------- Net interest income after provision for loan losses 12,641 12,356 24,684 24,246 --------------- ---------------- --------------- --------------- Noninterest Income: Service charges on deposit accounts 2,055 1,982 4,024 3,956 ATM fee income 373 329 723 630 Gain on sale of loans, net 623 49 890 58 Gain on sale of property - 24 - 67 Gain on sale of investments, net 123 - 115 - Other income 543 720 1,188 1,552 --------------- ---------------- --------------- --------------- Total noninterest income 3,717 3,104 6,940 6,263 --------------- ---------------- --------------- --------------- Noninterest Expense: Salaries and employee benefits 5,426 4,873 10,256 9,900 Occupancy and equipment 1,401 1,385 2,777 2,749 Amortization of acquisition intangibles 792 820 1,590 1,648 Franchise and shares tax 367 407 645 754 Communication and delivery 625 625 1,241 1,331 Marketing and business development 276 341 504 665 Data processing 310 312 615 628 Printing, stationery and supplies 187 217 392 384 Other expenses 1,271 1,502 2,354 2,765 --------------- ---------------- --------------- --------------- Total noninterest expense 10,655 10,482 20,374 20,824 --------------- ---------------- --------------- --------------- Income before income tax expense 5,703 4,978 11,250 9,685 Income tax expense 2,116 1,858 4,172 3,610 --------------- ---------------- --------------- --------------- Net Income $ 3,587 $ 3,120 $ 7,078 $ 6,075 =============== ================ =============== =============== Earnings per share - basic $ 0.61 $ 0.51 $ 1.20 $ 1.00 =============== ================ =============== =============== Earnings per share - diluted $ 0.58 $ 0.51 $ 1.15 $ 1.00 =============== ================ =============== ===============
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 Common Paid In Retained Stock Held Held By Comprehensive Treasury Stock Capital Earnings By ESOP RRP Trust Income Stock ----------- ---------- ---------- ----------- ---------- ------------- ------------ Balance, December 31, 1999 $ 7,381 $68,749 $69,065 $ (2,649) $ (3,024) $ (7,124) $ (15,209) Comprehensive income: Net income 6,075 Change in unrealized gain (loss) on securities available for sale, net of deferred taxes (2,050) Total comprehensive income Cash dividends declared (2,008) Common stock released by ESOP trust 113 296 Common stock earned by participants of recognition and retention plan trust, including tax benefit 26 274 Common stock purchased by RRP trust 128 (128) Compensation expense on stock option plans 33 Treasury stock acquired at cost, 62,500 shares (879) ----------- ---------- ---------- ----------- ---------- ------------- ------------ Balance, June 30, 2000 $ 7,381 $69,049 $73,132 $ (2,353) $ (2,878) $ (9,174) $ (16,088) =========== ========== ========== =========== ========== ============= ============ Balance, December 31, 2000 $ 7,381 $69,231 $77,963 $ (2,067) $ (2,587) $ (2,293) $ (20,586) Comprehensive income: Net income 7,078 Change in unrealized gain (loss) on securities available for sale, net of deferred taxes 2,358 Total comprehensive income Cash dividends declared (2,059) Common stock released by ESOP trust 414 277 Common stock earned by participants of recognition and retention plan trust, including tax benefit 22 214 Treasury stock acquired at cost, 23,372 shares (583) Stock options exercised 48 459 ----------- ---------- ---------- ----------- ---------- ------------- ------------ Balance, June 30, 2001 $ 7,381 $69,715 $82,982 $ (1,790) $ (2,373) $ 65 $ (20,710) =========== ========== ========== =========== ========== ============= ============ Total Shareholders' Equity -------------- Balance, December 31, 1999 $ 117,189 Comprehensive income: Net income 6,075 Change in unrealized gain (loss) on securities available for sale, net of deferred taxes (2,050) -------------- Total comprehensive income 4,025 Cash dividends declared (2,008) Common stock released by ESOP trust 409 Common stock earned by participants of recognition and retention plan trust, including tax benefit 300 Common stock purchased by RRP trust - Compensation expense on stock option plans 33 Treasury stock acquired at cost, 62,500 shares (879) -------------- Balance, June 30, 2000 $ 119,069 ============== Balance, December 31, 2000 $ 127,042 Comprehensive income: Net income 7,078 Change in unrealized gain (loss) on securities available for sale, net of deferred taxes 2,358 -------------- Total comprehensive income 9,436 Cash dividends declared (2,059) Common stock released by ESOP trust 691 Common stock earned by participants of recognition and retention plan trust, including tax benefit 236 Treasury stock acquired at cost, 23,372 shares (583) Stock options exercised 507 -------------- Balance, June 30, 2001 $ 135,270 ==============
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, ---------------------------------- 2001 2000 ------------- ------------ Cash Flows from Operating Activities: Net income $ 7,078 $ 6,075 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,251 3,370 Provision for loan losses 1,610 1,085 Noncash compensation expense 816 645 Loss (Gain) on sale of assets 28 (93) Gain on sale of investments (115) - Amortization of premium/discount on investments 86 33 Current provision for deferred income taxes 349 - FHLB stock dividends (184) (326) Net change in loans held for sale (22,968) 4,493 Restructuring - (115) Other, net (746) (460) -------------- -------------- Net Cash Provided by Operating Activities (10,795) 14,707 -------------- -------------- Cash Flows From Investing Activities: Activity in available for sale securities: Sales 80,851 - Maturities, prepayments and calls 19,725 21,046 Purchases (28,459) - Activity in held to maturity securities: Maturities, prepayments and calls 8,347 4,374 Purchases (5,980) - Increase in loans receivable, net (7,239) (97,007) Proceeds from sale of premises and equipment - 1,823 Purchases of premises and equipment (457) (438) Proceeds from FHLB stock redemption 2,673 - Purchases of FHLB Stock - (594) Proceeds from disposition of real estate owned 760 756 -------------- -------------- Net Cash (Used In) Provided By Investing Activities 70,221 (70,040) -------------- -------------- Cash Flows From Financing Activities: Increase in deposits 94,518 29,132 Increase in repurchase agreements 5,692 - Net change in short-term borrowings (54,000) 4,400 Issuance of long term debt - 15,000 Repayments of long-term debt (13,917) (2,107) Dividends paid to shareholders (1,996) (1,912) Proceeds from sale of treasury stock for stock options exercised 124 - Payments to repurchase common stock (200) (879) -------------- -------------- Net Cash Provided by Financing Activities 30,221 43,634 -------------- -------------- Net Increase (Decrease) In Cash and Cash Equivalents 89,647 (11,699) Cash and Cash Equivalents at Beginning of Period 34,541 47,713 -------------- -------------- Cash and Cash Equivalents at End of Period $ 124,188 $ 36,014 ============== ============== Supplemental Schedule of Noncash Activities: Acquisition of real estate in settlement of loans $ 732 $ 703 ============== ============== Exercise of stock options with payment in company stock $ 383 $ - ============== ============== Supplemental Disclosures: Cash paid (received) for: Interest on deposits and borrowings $ 27,417 $ 27,290 ============== ============== Income taxes $ 4,000 $ 3,680 ============== ============== Income tax refunds $ - $ - ============== ==============
See Notes to Consolidated Financial Statements 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 previously filed with the Securities and Exchange Commission in the Company's Annual Report on Form 10-K for the year ended December 31, 2000. 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 41 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, commercial and mortgage loans. The Bank offers discount brokerage services through its wholly owned subsidiary, Iberia Financial Services, LLC. The Bank also provides insurance services to its clients through IBERIABANK Insurance Services, LLC, a joint venture between the Bank and Burch, Marcus, Pool, Krupp, Daniel & Babineaux, Inc. 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 Federal Deposit Insurance Corporation ("FDIC") and to certain reserve requirements established by the Federal Reserve Board ("FRB"). As a Louisiana chartered commercial bank, deposits are insured by the 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 and its wholly owned subsidiary, IBERIABANK, as well as all of the Bank's subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. 2. Recent Accounting Pronouncements In June 2001, The Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard ("SFAS") No. 141, Business Combinations. SFAS 141 requires that all business combinations be accounted for under the purchase method. The use of the pooling of interests method of accounting is no longer permissible. SFAS 141 also establishes criteria for the identification of acquired intangibles separate from goodwill and adds additional disclosure requirements. 7 In June 2001, the FASB also issued SFAS 142 Goodwill and Other Intangibles. SFAS 142 addresses the initial recognition and measurement of intangible assets acquired outside of a business combination and the accounting for goodwill and other intangible assets subsequent to their acquisition. SFAS 142 provides that intangible assets with definite lives will be amortized and that goodwill with indefinite lives will not be amortized, but rather will be tested at least annually for impairment. The Company will adopt SFAS 142 for its fiscal year beginning January 1, 2002. Upon the adoption of SFAS 142, the company will no longer amortize the goodwill that resulted from business combinations initiated prior to SFAS 141, Business Combinations. The Company currently has $37.2 million in acquisition intangibles, principally goodwill, which arose from three prior business combinations. Amortization of goodwill for the year 2002 was projected to be $2.8 million before tax and $2.1 million after tax. The increase on diluted earnings per share for 2002 as a result of the discontinuance of the amortization of goodwill is estimated at $0.32 per share. The Company will evaluate goodwill under the SFAS 142 transitional impairment test and determine whether or not there will be an impairment loss. Any transitional impairment loss will be recognized as a change in accounting principle. 3. Loans Receivable Loans receivable at June 30, 2001 and December 31, 2000 consisted of the following:
June 30, December 31, ($000) 2001 2000 ---------------------------------------------------------------------- Residential mortgage loans: Residential 1-4 family $236,051 $279,193 Construction 5,712 7,482 -------- -------- Total residential mortgage loans 241,763 286,675 -------- -------- Commercial loans: Real estate 206,589 196,479 Business 94,628 78,986 -------- -------- Total commercial loans 301,217 275,465 -------- -------- Consumer loans: Indirect automobile 221,088 205,143 Home equity 113,601 108,070 Automobile 27,035 25,297 Credit card loans 9,770 9,559 Other 30,615 30,316 -------- -------- Total consumer loans 402,109 378,385 -------- -------- Total loans receivable $945,089 $940,525 ======== ========
4. Earnings Per Share For the three months ended June 30, 2001, basic earnings per share were based on 5,900,691 weighted average shares outstanding and diluted earnings per share were based on 6,197,371 weighted average shares outstanding. For the same period, the calculations for both basic and diluted shares outstanding exclude: (a) the weighted average unreleased shares owned by the Employee Stock Ownership Plan ("ESOP") of 185,862; (b) the weighted average shares owned by the Management Recognition Plan and Trust ("MRP") of 177,968; and (c) the weighted average shares purchased in Treasury Stock of 1,116,151. For the six months ended June 30, 2001, basic earnings per share were based on 5,887,096 weighted average shares outstanding and diluted earnings per share were based on 6,161,918 weighted average shares outstanding. For the same period, the calculations for both basic and diluted shares outstanding exclude: (a) 8 the weighted average unreleased shares owned by the ESOP of 192,778; (b) the weighted average shares owned by the MRP of 181,883; and (c) the weighted average shares purchased in Treasury Stock of 1,118,914. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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. CHANGES IN FINANCIAL CONDITION ------------------------------ General -- At June 30, 2001, the consolidated assets of the Company totaled $1.4 billion, an increase of $38.7 million, or 2.8%, from December 31, 2000. The following discussion describes the major changes in the Company's financial condition during the first six months of the year. Cash and Cash Equivalents -- Interest-bearing deposits at other institutions increased $90.1 million to $92.7 million at June 30, 2001, compared to $2.5 million at December 31, 2000. Such increase was due to increased liquidity largely as a result of deposit growth and the sale of investment securities detailed below. Investment Securities Available for Sale -- The Company's investment securities available for sale decreased $68.1 million, or 25.4%, to $200.1 million at June 30, 2001, compared to $268.2 million at December 31, 2000. The decrease was due primarily to sales of investment securities of $80.9 million and prepayments and maturities totaling $19.7 million, which was partially offset by an increase of $3.6 million in the market value of such securities and purchases of investment securities of $28.5 million. During the first six months of 2001, a favorable rate environment provided the opportunity to reduce market risk by selling securities from the Company's portfolio. A portion of the funds generated through these sales was used to reduce borrowings and purchase other securities. Excess funds are invested overnight and will be used to fund future loan growth and additional purchases of securities. The Company will continue to monitor market conditions for additional opportunities. Investment Securities Held to Maturity -- The Company's investment securities held to maturity decreased $2.5 million, or 3.3%, to $73.8 million at June 30, 2001, compared to $76.3 million at December 31, 2000. This decrease was the result of prepayments and maturities of $8.3 million, which was partially offset by purchases of $6.0 million. Loans Held for Sale -- Loans held for sale increased $14.7 million, or 439.9%, to $18.1 million at June 30, 2001 compared to $3.3 million at December 31, 2000. This group of loans has normally been fixed rate single-family residential mortgage loans to be sold in the secondary market. The increase was largely attributable to increased demand by consumers for fixed rate loans in the current rate environment. In most cases, loans in this category are sold within thirty days. Loans Receivable -- Loans, net of unearned income, increased $4.6 million, or 0.5%, to $945.1 million at June 30, 2001, compared to $940.5 million at December 31, 2000. This increase was primarily due to a growth in commercial loans of $25.8 million, or 9.3%, and growth in consumer loans of $23.7 million, or 6.3%, which was offset by a reduction in mortgage loans of $44.9 million, or 15.7%. The Company's loan to deposit ratio at June 30, 2001 was 76.4% compared to 82.3% at December 31, 2000. The largest gains in commercial loan volume came from the New Orleans and South Central Louisiana markets. The growth was the result of the addition of a number of customers, with no customer representing 9 a disproportionate percentage of the increase. Consumer loan increases were driven by indirect automobile loan growth of $15.9 million, with a continued focus on prime paper. Additional increases in other consumer loans came from across the state. Mortgage loan decreases were mainly the result of normal mortgage paydowns and the sale of new fixed rate loans. There continues to be greater demand by customers for fixed rates on both new and refinanced mortgage loans in the current rate environment. Additionally, as a result of pricing opportunities available in the secondary market and the high likelihood of refinancing in the fixed rate portfolio, a select group of mortgage loans totaling $15.4 million, which were originated as construction loans and previously held in the portfolio, were sold during the second quarter of 2001. Other Assets -- The increase of $6.1 million, or 101.7%, in other assets at the end of June 2001 as compared to the end of last year, reflects the sale of mortgage loans on the last business day of the quarter amounting to $8.2 million for which the transfer of funds was delayed. Deposits -- Deposits increased $94.5 million, or 8.3%, to $1.2 billion at June 30, 2001, compared to $1.1 billion at December 31, 2000. The increase in deposits reflects relatively balanced growth across all markets and deposit categories. It is believed to be the result of several factors including the development of customer relationships, continued calling efforts, opportunities in the public fund arena and clients shifting out of equity markets. All deposit categories increased during the first six months of the year. Deposit growth consisted of the following: a $14.0 million increase in noninterest-bearing checking accounts, a $30.8 million increase in interest-bearing checking accounts, a $25.0 million increase in savings and money market accounts, a $21.3 million increase in time deposits, and an increase of $3.4 million in other deposit accounts. Short-term Borrowings -- Increased liquidity, primarily the result of funding from deposit growth and sales of investment securities, allowed the Company to pay off the $54.0 million balance in short-term borrowings outstanding as of December 31, 2000. This category was previously composed of FHLB short-term advances with a duration of one year or less. Securities Sold Under Agreements to Repurchase (REPO) -- This instrument is a commercial cash management product first offered by the Bank at the beginning of this year and provides an additional source of liquidity for the Company. Funds in this category are swept daily from deposit accounts and collateralized by specific securities owned by the Bank. At June 30, 2001, the REPO balance was $5.7 million. Long-term Borrowings -- Long-term debt decreased $13.9 million, or 22.9%, to $46.9 million at June 30, 2001, compared to $60.8 million at December 31, 2000. The Union Planters Bank line of credit debt, which amounted to $9.2 million at the end of the year 2000, was paid off during the first quarter of the year. Normal amortization payments on FHLB long-term advances accounted for the remaining decrease. Shareholders' Equity -- Total shareholders' equity increased $8.2 million, or 6.5%, to $135.3 million at June 30, 2001, compared to $127.0 million at December 31, 2000. The increase was the result of the Company's net income of $7.1 million, a $2.4 million increase in accumulated other comprehensive income after taxes, $691,000 of common stock released by the ESOP trust, $236,000 of common stock earned by participants in the MRP, and $507,000 from the sale of treasury stock for stock options exercised. Such increases were partially offset by cash dividends of $2.1 million declared on common stock and by purchases of treasury stock of $583,000. RESULTS OF OPERATIONS --------------------- General -- The Company reported net income of $3.6 million for the three months ended June 30, 2001, compared to $3.1 million earned during the three months ended June 30, 2000, an increase of $467,000, or 15.0%. The Company's net interest income increased $577,000 and noninterest income increased $613,000 for the same period. The provision for loan losses increased by $292,000, noninterest expense increased $173,000 and income tax expense increased $258,000 during the three months ended June 30, 2001 compared to the second quarter of 2000. 10 For the six months ended June 30, 2001, the Company earned net income of $7.1 million compared to $6.1 million earned for the same period of 2000, an increase of $1.0 million, or 16.5%. The Company's net interest income increased $963,000 and noninterest income increased $677,000 for the same period. The provision for loan losses increased by $525,000, noninterest expense decreased $450,000 and income tax expense increased $562,000 when comparing the first six months of 2001 to the same period of 2000. Net Interest Income -- Net interest income increased $577,000, or 4.5%, to $13.5 million for the three months ended June 30, 2001, compared to $13.0 million for the three months ended June 30, 2000. Interest income, which showed a small increase of $8,000, together with a $569,000, or 4.4%, decrease in interest expense, accounted for the change. The relatively flat interest income was the result of a $21.0 million, or 1.6%, increase in the average balance of earning assets, which was partially offset by a 13 basis point decrease in the yield earned on earning assets. The decrease in interest expense was the result of a $8.9 million, or 0.8% decrease in the average balance of interest-bearing liabilities, together with a 17 basis point decrease in the cost of interest- bearing liabilities. The Company's interest rate spread and net interest margin amounted to 3.44% and 4.09%, respectively, during the three months ended June 30, 2001, compared to 3.39% and 3.98%, respectively, for the comparable period in 2000. For the six months ended June 30, 2001, net interest income increased $963,000, or 3.8%, to $26.3 million, compared to $25.3 million for the first six months of 2000. The increase was due to a $1.1 million, or 2.3% increase in interest income, which was offset by a $177,000, or 0.7% increase in interest expense. The increase in interest income was the result of a $24.0 million, or 1.9%, increase in the average balance of earning assets, together with a 5 basis point increase in the yield earned on earning assets. The increase in interest expense was the result of a 7 basis point increase in the cost of interest-bearing liabilities, which was partially offset by a $4.7 million, or 0.4.%, decrease in the average balance of interest-bearing liabilities. The Company's interest rate spread and net interest margin amounted to 3.37% and 4.02%, respectively, during the six months ended June 30, 2001, compared to 3.39% and 3.94%, respectively, for the comparable period in 2000. Continued Federal Reserve rate reductions may exert downward pressure on net interest income due to the Company's current liquidity which has resulted in a moderately asset sensitive position in the near term. It is expected that loan volume and redeployment of a portion of these funds into investment securities with an expected duration from six months to one year will improve this sensitivity. In addition, a significant portion of the certificates of deposit portfolio will mature within the next six months and is expected to reprice at lower rates. Table 1 presents average balance sheets, net interest income and average interest rates for the quarterly and six-month periods ended June 30, 2001 and 2000. 11 TABLE 1: Average Balances, Net Interest Income and Interest Yields / Rates 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, ------------------------------------------------------------------------------- 2001 2000 ----------------------------------------- ------------------------------------ Average Average Average Yield/ Average Yield/ (Dollars in thousands) Balance Interest Rate(1) Balance Interest Rate(1) -------------------------------------------------------------------------------------------- ------------------------------------ Earning assets: Loans receivable: Mortgage loans $ 267,166 $ 5,323 7.97 % $ 285,435 $ 5,607 7.86 % Commercial loans 284,556 6,157 8.56 262,159 6,185 9.33 Consumer and other loans 392,765 8,881 9.07 358,466 7,803 8.75 -------------- ----------- ------------- ---------- Total Loans 944,487 20,361 8.60 906,060 19,595 8.64 -------------- ----------- ------------- ---------- Loans held for sale 9,695 198 8.17 633 13 8.21 Investment securities 283,294 4,436 6.26 385,147 6,159 6.40 Other earning assets 80,578 856 4.26 5,245 76 5.83 -------------- ----------- ------------- ---------- Total earning assets 1,318,054 25,851 7.83 1,297,085 25,843 7.96 ----------- ---------- Allowance for Loan Losses (10,238) (8,905) Nonearning assets 98,989 94,570 -------------- ------------- Total assets $ 1,406,805 $ 1,382,750 ============== ============= Interest-bearing liabilities: Deposits: Demand deposits $ 281,123 1,536 2.19 $ 251,205 1,455 2.33 Savings deposits 204,773 1,485 2.91 188,960 1,714 3.65 Certificates of deposits 583,948 8,416 5.78 568,118 7,684 5.44 -------------- ----------- ------------- ---------- Total deposits 1,069,844 11,437 4.29 1,008,283 10,853 4.33 Borrowings 48,007 824 6.79 123,305 2,030 6.51 Securities sold under agreements to repurchase 4,792 53 4.38 0 0 0.00 -------------- ----------- ------------- ---------- Total interest-bearing liabilities 1,122,643 12,314 4.40 1,131,588 12,883 4.57 ----------- ---------- Noninterest-bearing demand deposits 139,838 122,513 Noninterest-bearing liabilities 10,647 10,859 -------------- ------------- Total liabilities 1,273,128 1,264,960 Shareholders' Equity 133,677 117,790 -------------- ------------- Total liabilities and shareholders' equity $ 1,406,805 $ 1,382,750 ============== ============= Net earning assets $ 195,411 $ 165,497 ============== ============= Net interest spread $ 13,537 3.44 % $ 12,960 3.39 % =========== ========== ========== ======== Net interest margin 4.09 % 3.98 % ========== ======== Ratio of average earning assets to average interest-bearing liabilities 117.41 % 114.63 % ============== ============= Six Months Ended June 30, ------------------------------------------------------------------------------- 2001 2000 ----------------------------------------- ------------------------------------ Average Average Average Yield/ Average Yield/ (Dollars in thousands) Balance Interest Rate(1) Balance Interest Rate(1) -------------------------------------------------------------------------------------------- ------------------------------------ Earning assets: Loans receivable: Mortgage loans $ 275,057 $ 10,879 7.91 % $ 279,367 $ 10,992 7.87 % Commercial loans 279,845 12,268 8.72 253,364 11,823 9.23 Consumer and other loans 384,783 17,419 9.13 348,317 15,084 8.71 ------------- ----------- ------------- ---------- Total Loans 939,685 40,566 8.65 881,048 37,899 8.59 ------------- ----------- ------------- ---------- Loans held for sale 6,696 261 7.80 1,688 67 7.94 Investment securities 301,850 9,583 6.35 391,576 12,401 6.33 Other earning assets 55,021 1,228 4.50 4,954 131 5.32 ------------- ----------- ------------- ---------- Total earning assets 1,303,252 51,638 7.94 1,279,266 50,498 7.89 ----------- ---------- Allowance for Loan Losses (10,214) (8,792) Nonearning assets 99,421 98,203 ------------- ------------- Total assets $ 1,392,459 $ 1,368,677 ============= ============= Interest-bearing liabilities: Deposits: Demand deposits $272,973 3,156 2.33 $ 251,159 2,881 2.31 Savings deposits 199,087 3,188 3.23 183,500 3,305 3.62 Certificates of deposits 580,432 16,836 5.85 572,727 15,295 5.37 ------------- ----------- ------------- ---------- Total deposits 1,052,492 23,180 4.44 1,007,386 21,481 4.29 Borrowings 61,303 2,084 6.76 114,487 3,686 6.37 Securities sold under agreements to repurchase 3,386 80 4.70 0 0 0.00 ------------- ----------- ------------- ---------- Total interest-bearing liabilities 1,117,181 25,344 4.57 1,121,873 25,167 4.50 ----------- ---------- Noninterest-bearing demand deposits 132,980 119,267 Noninterest-bearing liabilities 10,352 10,702 ------------- ------------- Total liabilities 1,260,513 1,251,842 Shareholders' Equity 131,946 116,835 ------------- ------------- Total liabilities and shareholders' equity $ 1,392,459 $ 1,368,677 ============= ============= Net earning assets $ 186,071 $ 157,393 ============= ============= Net interest spread $ 26,294 3.37 % $ 25,331 3.39 % =========== ========= ========== ======== Net interest margin 4.02 % 3.94 % ========= ======== Ratio of average earning assets to average interest-bearing liabilities 116.66 % 114.03 % ============= =============
------------------------------------ (1) Annualized. 12 Interest Income -- The Company's total interest income was $25.9 million for the three months ended June 30, 2001, compared to $25.8 million for the three months ended June 30, 2000. The reason for the $8,000 increase in interest income was a $766,000, or 3.9%, increase in interest income from loans, a $780,000, or 1,026.3%, increase in interest on deposits held at other institutions, and a $185,000, or 1,423.1%, increase in interest on loans held for sale, which was partially offset by a $1.7 million, or 28.0%, decrease in interest and dividends on investment securities. The increase in interest income from loans was the result of a $38.4 million, or 4.2%, increase in the average balance of loans, which was partially offset by a 4 basis point decrease in the yield earned thereon, which included $199,000, or 8 basis points, attributable to interest recoveries. The increase in interest from deposits at other institutions was the result of a $75.3 million, or 1,436.3%, increase in the average balance of deposits at other institutions, which was partially offset by a 157 basis point decrease in the yield earned thereon. The increase in interest income from loans held for sale was the result of a $9.1 million, or 1,431.6%, increase in the average balance of loans held for sale, which was partially offset by a 4 basis point decrease in the yield earned thereon. The decrease in interest income from investment securities was the result of a $101.9 million, or 26.4%, decrease in the average balance of investment securities, together with a 14 basis point decrease in the yield earned thereon. For the six months ended June 30, 2001, the Company's total interest income was $51.6 million, compared to $50.5 million for the same period in 2000. The reason for the $1.1 million, or 2.3%, increase in interest income was a $2.7 million, or 7.0%, increase in interest income from loans, a $1.1 million, or 837.4%, increase in interest on deposits held at other institutions, and a $194,000, or 289.6%, increase in interest on loans held for sale, which was partially offset by a $2.8 million, or 22.7%, decrease in interest and dividends on investment securities. The increase in interest income from loans was the result of a $58.6 million, or 6.7%, increase in the average balance of loans, together with a 6 basis point increase in the yield earned thereon, which included $199,000, or 4 basis points, attributable to interest recoveries. The increase in interest from deposits at other institutions was the result of a $50.1 million, or 1,010.6%, increase in the average balance of deposits at other institutions, which was partially offset by a 82 basis point decrease in the yield earned thereon. The increase in interest income from loans held for sale was the result of a $5.0 million, or 296.7%, increase in the average balance of loans held for sale, which was partially offset by a 14 basis point decrease in the yield earned thereon. The decrease in interest income from investment securities was the result of a $89.7 million, or 22.9%, decrease in the average balance of investment securities, which was partially offset by a 2 basis point increase in the yield earned thereon. Interest Expense -- The Company's total interest expense was $12.3 million for the three months ended June 30, 2001, compared to $12.9 million for the three months ended June 30, 2000. The reason for the $569,000, or 4.4%, decrease in total interest expense was due to a $1.2 million, or 59.4%, decrease in interest expense on borrowings as a result of a $75.3 million, or 61.1%, decrease in the average balance on borrowings, which was partially offset by a 28 basis point increase in the cost of such borrowings. This decrease was partially offset by a $584,000, or 5.4%, increase in interest expense on deposits as a result of a $61.6 million, or 6.1%, increase in the average balance of interest-bearing deposits, which was partially offset by a 4 basis point decrease in the interest expense on deposits. There was also an increase of $53,000, or 438 basis points, in total interest expense as a result of a $4.8 million average balance in securities sold under agreements to repurchase. For the six months ended June 30, 2001, the Company's total interest expense was $25.3 million, compared to $25.2 million for the same period in 2000. The reason for the $177,000, or 0.7%, increase in total interest expense was due to a $1.7 million, or 7.9%, increase in interest expense on deposits as a result of a $45.1 million, or 4.5%, increase in the average balance of interest-bearing deposits, together with a 15 basis point increase in the cost of such deposits. There was also an increase of $80,000, or 470 basis points, in total interest expense as a result of a $3.4 million average balance in securities sold under agreements to repurchase. Such increases were partially offset by a $1.6 million, or 43.5%, decrease in interest expense on borrowings as a result of a $53.2 million, or 46.5%, decrease in the average balance of borrowings, which was partially offset by a 39 basis point increase in the cost of such borrowings. 13 Provision For Loan Losses -- The provision for loan losses represents a charge to current earnings necessary to maintain the allowance for loan losses at an appropriate level based on management's analysis of the potential risk in the loan portfolio. The amount of the provision is a function of various factors, including historical experience, the volume and type of lending conducted by the Company, the amount of the Company's classified assets, seasoning of the loan portfolio, the status of past due principal and interest payments, general economic conditions, particularly as they relate to the Company's market area and other factors related to the collectibility of the Company's loan portfolio. For the three months ended June 30, 2001, the provision for loan losses was $896,000 as compared to $604,000 for the same period in 2000. For the six months ended June 30, 2001, the provision for loan losses was $1.6 million as compared to $1.1 million for the first six months of 2000. The higher provision is primarily attributable to loan growth and changes in the mix of loans from period to period. Additionally, during the second quarter of 2001, the Company implemented a loan policy that is in line with Federal Financial Institutions Examination Council ("FFIEC") guidelines. This policy is more conservative from a charge-off recognition perspective and resulted in an initial acceleration of charge-offs, which partially attributed to the increased provision requirements for the second quarter of 2001 and will also impact the third quarter of this year to a lesser degree. The allowance for loan losses as a percentage of outstanding loans, net of unearned income, was 1.05% at June 30, 2001, compared to 0.98% at June 30, 2000. Nonperforming assets, consisting of nonaccruing loans, accruing loans more than 90 days past due and foreclosed property, amounted to $8.5 million, or 0.59% of total assets at June 30, 2001, compared to $8.0 million, or 0.57% of total assets at December 31, 2000. Foreclosure proceedings have begun on the motel property underlying the largest nonperforming loan and possession is expected to take place towards the end of the third quarter or the beginning of the fourth quarter. Also, the Company expects to be in a position to begin foreclosure proceedings during the third quarter on real estate in the New Orleans French Quarter, which was previously structured as debtor-in-possession financing to improve the Company's collateral position and allow the ability to pursue its sale directly. As of June 30, 2001, the ratio of the Company's allowance for loan losses to nonperforming loans was 122.5%, compared to 135.8% at December 31, 2000. Noninterest Income -- The Company's total noninterest income was $3.7 million for the three months ended June 30, 2001, compared to $3.1 million for the same period in 2000. Noninterest income increased $613,000, or 19.7%, for the three months ended June 30, 2001, compared to the same period in 2000. The increase was due primarily to a $574,000 increase in gains on the sale of mortgage loans in the secondary market, a $123,000 increase in gains on the sale of investment securities, a $44,000 increase in ATM fee income due to increased up time, and a $73,000 increase in services charges on deposit accounts. All of these increases were partially offset by a decrease in brokerage fees of $142,000 due to equity market conditions and $35,000 for all other noninterest income. Additionally, the second quarter of 2000 included a $24,000 gain on the sale of property. For the six months ended June 30, 2001, noninterest income was $6.9 million compared to $6.3 million for the same period of 2000, an increase of $677,000, or 10.8%. The increase was due primarily to a $832,000 increase in gains on the sale of mortgage loans in the secondary market, a $115,000 increase in gains on the sale of investment securities, a $93,000 increase in ATM fee income due to increased up time, and a $68,000 increase in services charges on deposit accounts. All of these increases were partially offset by a decrease in brokerage fees of $230,000 due to equity market conditions and $134,000 for all other noninterest income. Additionally, the first six months of 2000 included a $67,000 gain on the sale of property. Noninterest Expense -- Noninterest expense increased $173,000, or 1.7%, for the three months ended June 30, 2001, to $10.7 million, compared to $10.5 million for the three months ended June 30, 2000. Such increase was due in part to a $522,000 increase in salaries and employee benefits, a $151,000 increase in the ESOP retirement contribution expense caused by the increase in the average fair market value of the Company's common stock, and a $16,000 increase in occupancy and equipment expense. Such increases were partially offset by an increase of $120,000 in deferred expense associated with loan origination costs. Other expense decreases included $40,000 in the franchise and share tax assessment, $28,000 in the amortization of goodwill and acquisition intangibles, and $30,000 in printing, stationery and supplies. 14 Additional decreases of $65,000 in marketing and business development and $233,000 in all other miscellaneous noninterest expenses reflects management's continued emphasis on controlling discretionary expenses. For the six months ended June 30, 2001, noninterest expense decreased $450,000, or 2.2%, to $20.4 million, compared to $20.8 million for the same period in 2000. A $244,000 increase in deferred expense associated with loan origination costs contributed to the expense decrease. The reduced level of expenses was also due to decreases of $109,000 in the franchise and share tax assessment, $58,000 in the amortization of goodwill and acquisition intangibles, $13,000 in data processing expense, and $90,000 in communication and delivery. Additional decreases of $161,000 in marketing and business development and $411,000 in all other miscellaneous noninterest expenses reflects management's continued emphasis on controlling discretionary expenses. Such decreases were partially offset by increases of $332,000 in salaries and employee benefits, $268,000 in the ESOP retirement contribution expense caused by the increase in the average fair market value of the Company's common stock, $28,000 in occupancy and equipment and $8,000 in printing, stationery and supplies. Income Tax Expense -- Income tax expense increased $258,000, or 13.9%, for the three months ended June 30, 2001 to $2.1 million, compared to $1.9 million for the three months ended June 30, 2000. The increase in income tax expense was due primarily to the increase in income before income taxes. The effective tax rate for the three months ended June 30, 2001 and 2000 was 37.1% and 37.3%, respectively. For the six months ended June 30, 2001, income tax expense increased $562,000, or 15.6%, to $4.2 million, compared to $3.6 million for the same period in 2000. The increase in income tax expense was due primarily to the increase in income before income taxes. The effective tax rate for the six months ended June 30, 2001 and 2000 was 37.1% and 37.3%, 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, 2001, the Company had $46.9 million in outstanding advances from the Federal Home Loan Bank of Dallas. Liquidity management is both a daily and long-term function of business management. Excess liquidity is generally invested in short-term investments such as overnight 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, 2001, the total approved loan commitments outstanding amounted to $8.2 million. At the same time, commitments under unused lines of credit, including credit card lines, amounted to $128.3 million. Certificates of deposit scheduled to mature in twelve months or less at June 30, 2001 totaled $471.4 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, 2001, the Company and the Bank had regulatory capital which was in excess of regulatory requirements. The Company's actual levels and current requirements as of June 30, 2001 are detailed below (dollars in thousands):
Actual Capital Required Capital -------------- ---------------- Amount Percent Amount Percent ------ ------- ------ ------- Tier 1 Leverage $ 97,982 7.15% $54,784 4.00% Tier 1 Risk-Based $ 97,982 10.43% $37,563 4.00% Total Risk-Based $107,888 11.49% $75,126 8.00%
16 Item 3. Quantitative and Qualitative Disclosures About Market Risk Quantitative and qualitative disclosures about market risk are presented at December 31, 2000 in Item 7A of the Company's Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 31, 2001. Management believes there have been no material changes in the Company's market risk since December 31, 2000. 17 PART II. OTHER INFORMATION Item 1. Legal Proceedings ----------------- Not Applicable Item 2. Changes in Securities and Use of Proceeds ----------------------------------------- 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 7, 2001. 1. With respect to the election of three directors to serve three-year terms expiring in the year 2004 and until their successors are elected and qualified, the following are the number of shares voted for each nominee:
Broker Nominees For Withheld Abstain Non-vote ----------------------------------------------------------------------------------- Elaine D. Abell 4,771,767 114,179 None None William H. Fenstermaker 4,771,882 114,064 None None Larrey G. Mouton 4,664,660 221,286 None None Arthur Mixon None None None None
2. With respect to the proposal to adopt the IBERIABANK Corporation 2001 Incentive Plan, the following are the number of shares voted:
Broker For Against Abstain Non-vote -------------------------------------- 3,775,977 1,095,821 14,148 None
3. With respect to the shareholder proposal to amend Section 3.1 of the Bylaws of IBERIABANK Corporation to provide, "The number of directors may be not less than 13 nor more than 15", the following are the number of shares voted:
Broker For Against Abstain Non-vote -------------------------------------- 422,214 4,438,255 25,477 None
18 Item 5. Other Information ----------------- Not Applicable Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits Exhibit 3.1 Bylaws of the Company, as amended Exhibit 10.1 2001 Incentive Plan (b) Reports on Form 8-K Current Report on Form 8-K dated April 11, 2001, reporting (i) under Item 5, the issuance of a press release dated April 11, 2001, announcing earnings for the first quarter ended March 31, 2001 (the "Press Release"); (ii) under Item 7, a copy of the Press Release; and (iii) under Item 9, confirmation of comfort with the Company's previously stated range of $2.36 to $2.41 per share for 2001 fully diluted EPS, the sale of securities totaling $76 million at a loss of $6,000 and total nonperforming assets of $9.0 million at March 31, 2001. 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 13, 2001 By: /s/ Daryl G. Byrd --------------- ------------------------ Daryl G. Byrd President and Chief Executive Officer Date: August 13, 2001 By: /s/ Marilyn W. Burch --------------- -------------------------- Marilyn W. Burch Executive Vice President and Chief Financial Officer 20