-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KP9oNaQKNznQ8+XLB72bxaiJu2YJfZfEQiL5YMfPR+3uGVaZ5Pt/HrmiyHHjbvat zaHgKYhvKml8Fc2ZdYRi/g== 0001025537-01-500016.txt : 20010402 0001025537-01-500016.hdr.sgml : 20010402 ACCESSION NUMBER: 0001025537-01-500016 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IBERIABANK CORP CENTRAL INDEX KEY: 0000933141 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 721280718 STATE OF INCORPORATION: LA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-25756 FILM NUMBER: 1588193 BUSINESS ADDRESS: STREET 1: 1101 E ADMIRAL DOYLE DR CITY: NEW IBERIA STATE: LA ZIP: 70560 BUSINESS PHONE: 3183652361 MAIL ADDRESS: STREET 1: 1101 EAST ADMIRAL DOYLE DR CITY: NEW IBERIA STATE: LA ZIP: 70560 FORMER COMPANY: FORMER CONFORMED NAME: ISB FINANCIAL CORP/LA DATE OF NAME CHANGE: 19941123 10-K 1 iberia10k12312000.txt FORM 10K 12/31/2000 IBERIABANK UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2000 Commission File Number 0-25756 IBERIABANK Corporation (Exact name of registrant as specified in its charter) Louisiana 72-1280718 ------------ --------------- (State or other jurisdiction of incorporation or (I.R.S. Employer organization) Identification Number) 1101 East Admiral Doyle Drive New Iberia, Louisiana 70560 --------------------- -------- (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code: (337) 365-2361 Securities registered pursuant of Section 12(b) of the Act: Not Applicable Securities registered pursuant of Section 12(g) of the Act Common Stock (par value $1.00 per share) ---------------------------------------- (Title of Class) 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 by check mark if disclosure of delinquent filers pursuant of Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment of this Form 10-K. As of March 23, 2001, the aggregate market value of the 5,883,426 shares of Common Stock of the Registrant issued and outstanding on such date, which excludes 375,311 shares held by all directors and officers of the Registrant as a group, was approximately $135.3 million. This figure is based on the closing sale price of $23.000 per share of the Registrant's Common Stock on March 23, 2001. Number of shares of Common Stock outstanding as of December 31, 2000: 6,258,737 DOCUMENTS INCORPORATED BY REFERENCE List hereunder the following documents incorporated by reference and the Part of the Form 10-K into which the document is incorporated: (1) portions of the Annual Report to Stockholders for the fiscal year ended December 31, 2000 are incorporated into Part II, Items 5 through 8 of this Form 10-K; (2) portions of the definitive proxy statement for the 2000 Annual Meeting of Stockholders to be filed within 120 days of Registrant's fiscal year end are incorporated into Part III, Items 9 through 13 of this Form 10-K. PART 1. ITEM 1. BUSINESS. GENERAL IBERIABANK Corporation, formerly ISB Financial Corporation (the "Company"), is the bank holding company for IBERIABANK, a Louisiana chartered commercial bank (the "Bank"). The only significant assets of the Company are the capital stock of the Bank, the Company's loan to an employee stock ownership plan, and cash. To date, the business of the Company has consisted of the business of the Bank. The Company's common stock trades on the NASDAQ Stock Market under the symbol "IBKC." At December 31, 2000, the Company had total assets of $1.4 billion, total deposits of $1.1 billion and shareholders' equity of $127.0 million. The Bank conducts business from its main office located in New Iberia, Louisiana and 41 branch offices located in New Iberia, Lafayette, Jeanerette, Franklin, Morgan City, Crowley, Rayne, Kaplan, St. Martinville, Abbeville, Scott, Carencro, Ruston, Monroe, West Monroe, Gretna, Marrero, River Ridge, New Orleans, Metairie and Kenner, all of which are in Louisiana. The Bank's deposits are insured by the Federal Deposit Insurance Corporation ("FDIC"), within applicable limits. The Company is primarily engaged in attracting deposits from the general public and using those funds to originate loans. Previous to 1996, the Company's primary lending emphasis was loans secured by first and second liens on single-family (one-to-four units) residences located in the Company's primary market area. At December 31, 2000, such loans amounted to $279.2 million, or 29.7% of the Company's gross loan portfolio. The Company's emphasis is on the origination of consumer, commercial real estate and commercial business loans. Consumer loans consist of home equity loans, home equity lines of credit, automobile loans, indirect automobile loans, loans secured by deposit accounts and other consumer loans. At December 31, 2000, $378.4 million, or 40.2%, of the Company's gross loans were consumer loans. Of that amount $205.1 million, or 21.8% of gross loans, were indirect automobile loans. Commercial loans consist of commercial real estate loans and commercial business loans. At December 31, 2000, $196.5 million, or 20.9% of gross loans, were secured by commercial real estate and $79.0 million, or 8.4%, were commercial business loans. The Company also originates loans for the purpose of constructing residential 1-4 family units. At December 31, 2000, $7.5 million, or 0.8% of the Company's loans, were construction loans. The Bank offers discount brokerage services through its wholly owned subsidiary, Iberia Financial Services. The brokerage services are provided through Invest. On January 11, 2001 the Bank announced the formation of a joint venture, IBERIABANK Insurance Services, LLC, to provide insurance services to its clients. The new company is a joint effort of the Bank and Burch, Marcus, Pool, Krupp, Daniel and Babineaux, a local insurance agency and one of Louisiana's largest agent-owned independent insurance agencies. The Company, as a bank holding company, is subject to regulation and supervision by the Board of Governors of the Federal Reserve System ("FRB"). The Bank is subject to examination and comprehensive regulation by the Office of Financial Institutions of the State of Louisiana ("OFI"), 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. The Bank is a member of the Federal Home Loan Bank ("FHLB") of Dallas, which is one of the 12 regional banks comprising the FHLB System. In addition to its deposit gathering and lending activities, the Company invests in mortgage backed securities, substantially all of which are issued or guaranteed by U.S. Government agencies and government sponsored enterprises, as well as U.S. Treasury and federal government agency obligations and other investment securities. At December 31, 2000, the Company's investments totaled $344.5 million, or 2.5% of total assets. Mortgage backed securities amounted to $240.2 million, or 17.2% of total assets, and government and agency securities amounted to $104.4 million, or 7.5% of total assets. A total of $268.2, or 77.9% of total investment securities, were classified as available for sale at December 31, 2000. 2 LENDING ACTIVITIES Loan Portfolio Composition. The following table sets forth the composition of the Company's loans held in portfolio at the dates indicated. (1)
December 31, ------------------------------------------------------------------------------------------------ 2000 1999 1998 1997 1996 ----------------- ----------------- ------------------ ------------------ ---------------- Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent ------ ------- ------ ------- ------ ------- ------ ------- ------ ------- (Dollars in Thousands) Mortgage loans: Residential 1-4 family $279,193 29.68% $266,161 31.60% $299,987 39.06% $370,055 56.07% $384,007 66.70% Construction 7,482 0.80% 6,381 0.76% 7,402 0.96% 7,890 1.20% 7,957 1.38% -------- ------- -------- ------- -------- ------- -------- ------- -------- ------- Total mortgage loans 286,675 30.48% 272,542 32.36% 307,389 40.02% 377,945 57.27% 391,964 68.08% -------- ------- -------- ------- -------- ------- -------- ------- -------- ------- Commercial loans: Business 78,986 8.40% 82,485 9.78% 83,237 10.83% 57,620 8.73% 35,894 6.24% Real estate 196,479 20.89% 157,248 18.65% 117,768 15.33% 50,462 7.64% 25,239 4.38% -------- ------- -------- ------- -------- ------- -------- ------- -------- ------- Total commercial loans 275,465 29.29% 239,733 28.43% 201,005 26.16% 108,082 16.37% 61,133 10.62% -------- ------- -------- ------- -------- ------- -------- ------- -------- ------- Consumer loans: Home equity 108,070 11.49% 91,531 10.86% 73,185 9.52% 34,192 5.18% 21,637 3.76% Automobile 25,297 2.69% 23,432 2.78% 24,631 3.21% 9,434 1.43% 7,509 1.30% Indirect automobile 205,143 21.81% 179,350 21.27% 118,529 15.43% 94,282 14.28% 54,935 9.54% Credit card 9,559 1.02% 6,436 0.76% 4,584 0.60% 4,150 0.63% 4,017 0.70% Other 30,316 3.22% 29,854 3.54% 38,912 5.06% 31,978 4.84% 34,514 6.00% -------- ------- -------- ------- -------- ------- -------- ------- -------- ------- Total consumer loans 378,385 40.23% 330,603 39.21% 259,841 33.82% 174,036 26.36% 122,612 21.30% -------- ------- -------- ------- -------- ------- -------- ------- -------- ------- Total loans receivable $940,525 100.00% $842,878 100.00% $768,235 100.00% $660,063 100.00% $575,709 100.00% ======== ======= ======== ======= ======== ======= ======== ======= ======== =======
- ------------ (1) This schedule does not include loans held for sale of $3.3 million, $4.8 million, $18.4 million and $4.4 million at December 31, 2000, 1999, 1998 and 1997, respectively. There were no loans classified as held for sale prior to the year ended December 31, 1997. 3 CONTRACTUAL MATURITIES. The following table sets forth the scheduled contractual maturities of the Company's loans held to maturity at December 31, 2000. Demand loans, loans having no stated schedule of repayments and no stated maturity and overdraft loans are reported as due in one year or less. The amounts shown for each period do not take into account loan prepayments and normal amortization of the Company's loan portfolio held to maturity.
Commercial ------------------------------------ Construction Real Estate Business Total ------------ ----------- -------- ----- (Dollars in Thousands) Amounts due in: One year or less $ -- $ 45,842 $ 46,469 $ 92,311 After one year through five years -- 115,982 26,530 142,512 After five years 7,482 34,655 5,987 48,124 -------- -------- -------- -------- Total $ 7,482 $196,479 $ 78,986 $282,947 ======== ======== ======== ======== Interest rate terms on amounts Due after one year: Fixed rate $ 2,300 $104,318 $ 20,922 $127,540 Adjustable rate 5,182 46,319 11,595 63,096 -------- -------- -------- -------- Total $ 7,482 $150,637 $ 32,517 $190,636 ======== ======== ======== ========
Scheduled contractual amortization of loans does not reflect the expected term of the Company's loan portfolio. The average life of loans is substantially less than their contractual terms because of prepayments. The lending activities of the Company are subject to written underwriting standards and loan origination procedures established by the Board of Directors and management. The process of underwriting all residential mortgage, consumer and construction loans and obtaining appropriate documentation, such as credit reports, appraisals and other documentation is centralized. The credit analysis department is responsible for overseeing the underwriting of all commercial business and commercial real estate loans. The Company generally requires that a property appraisal be obtained in connection with all new mortgage loans. The Company requires that title insurance or a title opinion (other than with respect to home equity loans) and hazard insurance be maintained on all security properties and that flood insurance be maintained if the property is within a designated flood plain. RESIDENTIAL 1-4 FAMILY LOANS. Substantially all of the Company's residential 1-4 family mortgage loans consist of conventional loans. The vast majority of the Company's residential 1-4 family mortgage loans is secured by properties located in Southwestern Louisiana and the greater New Orleans area and are originated under terms and documentation which permit their sale in the secondary market. Since 1996, the Company has decided to sell, or hold for sale in the secondary market, the majority of all conforming fixed rate loan originations and retain adjustable rate loan originations in its portfolio. At December 31, 2000, $144.4 million, or 50.4%, of the Company's residential 1-4 family mortgage and construction loans were fixed rate loans and $142.3 million, or 49.6%, were adjustable rate loans. In order to assist low- to moderate- income families achieve home ownership, the Company will provide 100% financing to certain low-to moderate- income homebuyers in its market area. Such loans are structured as a 30-year ARM with respect to 90% of the value with the remaining necessary funds (including closing costs) being provided through a five-year fixed rate second mortgage loan. No PMI is required to be obtained with respect to loans originated under this program. The Company has developed its 100% financing loan product in an effort to address the home buying needs of lower income residents. Due to the absence, or limited amount, of equity with respect to such loans and the absence of PMI, this product may be deemed to involve greater risk than typical residential 1-4 family mortgage loans. However, the individual loans in this program generally are relatively small, with balances generally less than $50,000. At this time, it is anticipated that the aggregate balance of loans originated under this program will not exceed $10.0 million. As of December 31, 2000, such loans amounted to 4 $4.6 million, or 0.5%, of the total loan portfolio. To date, the Company has not experienced any significant delinquency problems with respect to loans originated under this program. In July 2000, the Company made the largest contribution to a not-for-profit rural community development corporation in Louisiana. The Company invested the lead gift to kick off a $33 million campaign to Southern Mutual Financial Services "Community Development Bank," which will be used to lend low interest rural housing loans over a nine-parish area of Southern Louisiana. COMMERCIAL REAL ESTATE LOANS. The Company has increased its investment in commercial real estate loans from $25.2 million, or 4.4% of the total loan portfolio at December 31, 1996, to $196.5 million, or 20.9% of the total loan portfolio, at December 31, 2000. The increase in commercial real estate loans reflects, in part, the Company's focused efforts to originate such loans in its market area. The Company intends to continue to expand its involvement in commercial real estate lending and to continue to moderately increase the amount of such loans in the Company's portfolio. The types of properties securing the Company's commercial real estate loans include strip shopping centers, professional office buildings, small retail establishments and warehouses, all of which are located in the Company's market area. As of December 31, 2000, the Company's largest commercial real estate loan had a balance of $12.6 million. Such loan is secured by real estate in the Company's market area and is performing in accordance with its terms. The Company's commercial real estate loans generally are adjustable rate loans indexed to the New York Prime Rate, as quoted in The Wall Street Journal, plus a margin. Generally, fees of 50 basis points to 2% of the principal loan balances are charged to the borrower upon closing. The Company's underwriting standards generally provide for terms of up to 10 years with amortization of principal over the term of the loan and loan-to-value ratios of not more than 75%. Generally, the Company obtains personal guarantees of the principals as additional security for any commercial real estate loans. COMMERCIAL BUSINESS LOANS. The Company originates commercial business loans on a secured and, to a lesser extent, unsecured basis. At December 31, 2000, the Company's commercial business loans amounted to $79.0 million or 8.4% of the Company's gross loan portfolio. The Company's commercial business loans may be structured as term loans or revolving lines of credit. Commercial business loans generally have a term of ten years or less and adjustable or variable rates of interest based upon the New York Prime Rate. The Company's commercial business loans generally are secured by equipment, machinery, real property or other corporate assets. In addition, the Company generally obtains personal guarantees from the principals of the borrower with respect to all commercial business loans. The Company also provides commercial loans structured as advances based upon perfected security interests in accounts receivable and inventory. As of December 31, 2000, the Company's largest commercial business loan had a principal balance of $6.6 million. Such loan is secured by deposit accounts, equipment, and general intangibles and has performed in accordance with its terms since origination. Commercial real estate and commercial business loans generally have higher yields and shorter repayment periods than residential 1-4 family loans. CONSUMER LOANS. The Company offers consumer loans in order to provide a full range of retail financial services to its customers. At December 31, 2000, $378.4 million, or 40.2% of the Company's total loan portfolio, was comprised of consumer loans. The Company originates substantially all of such loans in its primary market area. The largest component of the Company's consumer loan portfolio consists of indirect automobile loans. These loans are originated by the automobile dealerships and applications are facsimiled to Company personnel for approval or denial. The Company relies on the dealerships, in part, for loan qualifying information. To that extent, there is risk inherent in indirect automobile loans apart from the ability of the consumer to repay the loan, that being fraud perpetrated by the automobile dealership. To limit its exposure, the Company has deals only with automobile dealerships which have demonstrated reputable behavior. At December 31, 2000, $205.1 million, or 21.8% of the Company's total loan portfolio, were indirect automobile loans. At December 31, 2000, the Company's remaining consumer loan portfolio was comprised of home equity loans, educational loans, loans secured by deposits at the Company, mobile home loans, direct automobile loans, credit card loans and other consumer loans. At December 31, 2000, $108.1 million, or 11.5% of the Compnay's toal loan portfolio, were home equity loans. The Company has not emphasized originations of mobile home loans in recent years due to, among other things, management's perception that such loans generally are riskier than certain 5 other consumer loans, such as home equity loans and single-family mortgage loans. The Company also offers direct automobile loans, loans based on its VISA and MasterCard credit cards and other consumer loans. At December 31, 2000, the Company's direct automobile loans amounted to $25.3 million, or 2.7% of the Company's total loan portfolio. The Company's VISA and MasterCard credit card loans totaled $9.6 million, or 1.0% of the Company's total loan portfolio at such date. The Company's other personal consumer loans amounted to $30.3 million, or 3.2% of the Company's total loan portfolio at December 31, 2000. ASSET QUALITY GENERAL. As a part of the Company's efforts to improve asset quality, it has developed and implemented an asset classification system. All of the Company's assets are subject to review under the classification system. All assets of the Company are periodically reviewed, and the classifications are reviewed by the Loan Committee of the Board of Directors on at least a quarterly basis. When a borrower fails to make a required payment on a loan, the Company attempts to cure the deficiency by contacting the borrower and seeking payment. Contacts are generally made 30 days after a payment is due. In most cases, deficiencies are cured promptly. If a delinquency continues, late charges are assessed and additional efforts are made to collect the loan. While the Company generally prefers to work with borrowers to resolve such problems, when the account becomes 90 days delinquent, the Company may institute foreclosure or other proceedings, as necessary, to minimize any potential loss. Loans are placed on nonaccrual status when, in the judgment of management, the probability of collection of interest is deemed to be insufficient to warrant further accrual. When a loan is placed on nonaccrual status, previously accrued but unpaid interest is deducted from interest income. See Note 4 of the Notes to Consolidated Financial Statements. Real estate acquired by the Company as a result of foreclosure or by deed-in-lieu of foreclosure are classified as real estate owned until sold, and are carried at the balance of the loan at the time of acquisition or at estimated fair value less estimated costs to sell, whichever is less. Under Generally Accepted Accounting Principles, the Company is required to account for certain loan modifications or restructurings as "troubled debt restructurings." In general, the modification or restructuring of a debt constitutes a troubled debt restructuring if the Company for economic or legal reasons related to the borrower's financial difficulties grants a concession to the borrower that the Company would not otherwise consider under current market conditions. Debt restructurings or loan modifications for a borrower do not necessarily always constitute troubled debt restructurings, however, and troubled debt restructurings do not necessarily result in nonaccrual loans. The Company had no troubled debt restructuring as of December 31, 2000. See the table below under "Nonperforming Assets and Troubled Debt Restructurings." At December 31, 2000, impaired loans amounted to $5.9 million, an increase of 197.5% from December 31, 1999. The valuation allowance related to these loans was $1.0 million at December 31, 2000. 6 NONPERFORMING ASSETS AND TROUBLED DEBT RESTRUCTURINGS. The following table sets forth information relating to the Company's nonperforming assets and troubled debt restructurings at the dates indicated.
December 31, ---------------------------------------------------------------- 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- (Dollars in Thousands) Nonaccrual loans: Mortgage loans: Single-family $ 137 $ 208 $ 481 $1,698 $ 892 Construction -- -- -- -- -- Commercial Loans: Business 516 215 259 -- 407 Real estate 4,653 1,078 -- 30 190 Consumer loans: 161 429 439 419 1,002 ------ ------ ------ ------ ------ Total nonaccrual loans 5,467 1,930 1,179 2,147 2,491 ------ ------ ------ ------ ------ Accruing loans 90 days or more past due: Mortgage loans: 1-4 family 697 593 1,407 -- -- Construction -- -- -- -- -- Commercial Loans: Business 76 74 370 -- -- Real estate 38 22 1,898 -- -- Consumer loans 1,263 514 883 3 69 ------ ------ ------ ------ ------ Total past due 90 days or more 2,074 1,203 4,558 3 69 ------ ------ ------ ------ ------ Total nonperforming loans 7,541 3,133 5,737 2,150 2,560 Foreclosed property 421 185 384 473 978 ------ ------ ------ ------ ------ Total nonperforming assets $7,962 $3,318 $6,121 $2,623 $3,538 ------ ------ ------ ------ ------ Performing troubled debt restructurings $ -- $ -- $ -- $ -- $ 176 ------ ------ ------ ------ ------ Total nonperforming assets and troubled debt restructurings $7,962 $3,318 $6,121 $2,623 $3,714 ====== ====== ====== ====== ====== Nonperforming loans to total loans 0.80% 0.37% 0.75% 0.33% 0.44% Total nonperforming assets to total assets 0.57% 0.24% 0.44% 0.28% 0.38% Total nonperforming assets and troubled debt restructurings to total assets 0.57% 0.24% 0.44% 0.28% 0.40%
7 OTHER CLASSIFIED ASSETS. Federal regulations require that the Company classify its assets on a regular basis. In addition, in connection with examinations of insured institutions, federal examiners have authority to identify problem assets and, if appropriate, classify them. There are three classifications for problem assets: "substandard," "doubtful" and "loss." Substandard assets have one or more defined weaknesses and are characterized by the distinct possibility that the insured institution will sustain some loss if the deficiencies are not corrected. Doubtful assets have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values questionable, and there is a high possibility of loss. An asset classified loss is considered uncollectible and of such little value that continuance as an asset of the institution is not warranted. At December 31, 2000, the Company had $5.4 million of assets classified substandard, $454,000 of assets classified doubtful, and no assets classified loss. At such date, the aggregate of the Company's classified assets amounted to 0.42% of total assets. ALLOWANCE FOR LOAN LOSSES. The Company's policy is to establish reserves for estimated losses on delinquent loans when it determines that losses are expected to be incurred on such loans and leases. The allowance for losses on loans is maintained at a level believed adequate by management to absorb potential losses in the portfolio. Management's determination of the adequacy of the allowance is based on an evaluation of the portfolio, past loss experience, current economic conditions, volume, growth and composition of the portfolio, and other relevant factors. The allowance is increased by provisions for loan losses, which are charged against income. As shown in the table below, at December 31, 2000, the Company's allowance for loan losses amounted to 135.8% and 1.1% of the Company's nonperforming loans and gross loans receivable, respectively. 8 The following table sets forth the activity in the Company's allowance for loan losses during the periods indicated.
Year Ended December 31, ---------------------------------------------------------------------- 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- (Dollars in Thousands) Allowance at beginning of period $ 8,749 $ 7,135 $ 5,258 $ 4,615 $ 3,746 Allowance from acquisition -- -- 1,392 -- 1,114 Provisions 3,861 2,836 903 1,097 156 Charge offs: Mortgage loans: 1-4 family 37 71 2 50 46 Construction -- -- -- -- -- Commercial 1,174 140 43 191 61 Consumer loans 1,654 1,460 818 562 509 -------- -------- -------- -------- -------- Total charge offs 2,865 1,671 863 803 616 -------- -------- -------- -------- -------- Recoveries: Mortgage loans: Single-family 22 37 36 79 39 Construction -- -- -- -- -- Commercial 52 86 175 55 43 Consumer loans 420 326 234 215 133 -------- -------- -------- -------- -------- Total recoveries 494 449 445 349 215 -------- -------- -------- -------- -------- Net charge offs (2,371) (1,222) (418) (454) (401) -------- -------- -------- -------- -------- Allowance at end of period $ 10,239 $ 8,749 $ 7,135 $ 5,258 $ 4,615 ======== ======== ======== ======== ======== Allowance for loan losses to total nonperforming loans at end of period 135.78% 279.25% 124.39% 244.56% 185.27% Allowance for loan losses to total loans at end of period 1.09% 1.04% 0.93% 0.79% 0.80% Net charge offs to average loans 0.26% 0.15% 0.06% 0.07% 0.09%
9 The following table presents the allocation of the allowance for loan losses to the total amount of loans in each category listed at the dates indicated.
December 31, -------------------------------------------------------------------------------------------------------- 2000 1999 1998 1997 1996 ------------------- ------------------ ------------------ ------------------ ---------------- Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent ------ ------- ------ ------- ------ ------- ------ ------- ------ ------- (Dollars in Thousands) Residential 1-4 family $ 828 29.68% $ 834 31.60% $1,529 39.06% $1,448 56.07% $2,002 66.70% Construction 22 0.80% 20 0.76% 38 0.96% 84 1.20% 72 1.38% Commercial business 1,651 8.40% 1,475 9.78% 1,897 10.83% 1,356 8.73% 817 6.24% Commercial real estate 2,644 20.89% 2,095 18.65% 1,663 15.33% 660 7.64% 502 4.38% Consumer 5,094 40.23% 4,325 39.21% 2,008 33.82% 1,710 26.36% 1,222 21.30% ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- Total allowance for loan losses $10,239 100.00% $8,749 100.00% $7,135 100.00% $5,258 100.00% $4,615 100.00% ======= ======= ====== ======= ====== ======= ====== ======= ====== =======
10 Management of the Company presently believes that its allowance for loan losses is adequate to cover any potential losses in the Company's loan portfolio. However, future adjustments to this allowance may be necessary, and the Company's results of operations could be adversely affected if circumstances differ substantially from the assumptions used by management in making its determinations in this regard. INVESTMENT SECURITIES The Company's investment securities consist primarily of securities issued by the U.S. Government and federal agency obligations and mortgage backed securities. As of December 31, 2000, the Company's investment securities available for sale amounted to $268.2 million, net of gross unrealized losses of $3.5 million, and its investment securities held to maturity amounted to $76.3 million. Included in available for sale investment securities are mortgage backed securities totaling $165.3 million and included in held to maturity investment securities are mortgage backed securities totaling $74.9 million. The Company attempts to maintain a high degree of liquidity in its investment securities portfolio and generally does not invest in securities with terms exceeding five years. In September 2000, the Company restructured $45 million of illiquid and volatile mortgage backed securities at a loss of $1.8 million. Substantially all of the proceeds were reinvested in securities with a more suitable risk and liquidity profile. The following table sets forth information regarding the Company's investment securities at the dates indicated.
Securities Available for Sale Securities Held to Maturity --------------------------------------------------------------------- Weighted Average Amortized Fair Amortized Fair Yield Cost Value Cost Value ----- ---- ----- ---- ----- (Dollars in Thousands) Within one year or less 5.66% $ -- $ -- $ 190 $ 190 One through five years 5.95% 30,008 29,927 485 485 After five through ten years 6.14% 67,993 66,332 715 715 Over ten years 4.75% -- -- 45 45 ---------- ------------ ------------ ------------ Subtotal 98,001 96,259 1,435 1,435 Mortgage backed 6.65% 167,021 165,289 74,887 74,505 Marketable equity security 6.66% 6,728 6,675 -- -- ---------- ------------ ------------ ------------ Totals $ 271,750 $ 268,223 $ 76,322 $ 75,940 ========== ============ ============ ============
SOURCES OF FUNDS GENERAL. The Company's principal source of funds for use in lending and for other general business purposes has traditionally come from deposits obtained through the Company's branch offices. The Company also derives funds from short-term and long-term borrowings, amortization and prepayments of outstanding loans and mortgage-related securities, and from maturing investment securities. Loan repayments are a relatively stable source of funds, while deposit inflows and outflows are significantly influenced by general interest rates and money market conditions. DEPOSITS. The Company's current deposit products include savings accounts, NOW accounts, MMDA, certificates of deposit ranging in terms from 30 days to seven years and noninterest-bearing personal and business checking accounts. 11 The Company's deposit products also include certificates for Individual Retirement Accounts ("IRA") and qualified retirement plans. Deposits are obtained primarily from residents in its primary market area. The Company attracts local deposit accounts by offering a wide variety of accounts, competitive interest rates, and convenient branch office locations and service hours. The acquisition of Bank of Lafayette in 1996 helped Iberia double its market share in the greater Lafayette market. The acquisition of Jefferson Federal Saving Bank in 1996 established the Company in a new market, the greater New Orleans area. The purchase of the 17 branches from First Commerce Corp. subsidiaries in September of 1998 helped the Company gain the number two market share in the greater Lafayette market and establish the Company, with a number two market share, in a new market, the greater Monroe area. The Company utilizes traditional marketing methods to attract new customers and savings deposits, including print and broadcast advertising and increased calling efforts. However, the Company does not solicit funds through deposit brokers nor does it pay any brokerage fees if it accepts such deposits. The Company participates in the regional ATM network known as CIRRUS. The Company has been competitive in the types of accounts and in interest rates it has offered on its deposit products but does not necessarily seek to match the highest rates paid by competing institutions. With the significant decline in interest rates paid on deposit products, the Company in prior years has experienced disintermediation of deposits into competing investment products. Also, the Company has experienced runoff of some of the higher priced deposits assumed in the acquisitions as it has been unwilling to pay up to retain the deposits. In the year 2000, the Company's deposits grew by $43.2 million, or 3.9%. The growth was attributable primarily to an increase in savings account balances as a result of promotional pricing and the Company's increased calling efforts. See generally Note 7 of the Notes to Consolidated Financial Statements. 12 The following table sets forth certain information relating to the Company's deposits at the dates indicated.
December 31, -------------------------------------------------------------------- 2000 1999 1998 -------------------- ---------------------- ---------------------- Average Average Average Average Rate Average Rate Average Rate Balance Paid Balance Paid Balance Paid ------- ---- ------- ---- ------- ---- (Dollars In Thousands) Interest bearing demand deposits $ 249,650 2.35% $ 279,328 2.26% $ 196,254 2.45% Savings deposits 181,930 3.61% 131,824 2.03% 114,934 2.21% Time deposits 575,828 5.58% 618,582 5.10% 517,952 5.35% ---------- ---------- ---------- Total interest bearing deposits 1,007,408 4.42% 1,029,734 3.93% 829,140 4.23% Noninterest-bearing demand deposits 121,494 0.00% 116,097 0.00% 69,670 0.00% ---------- ---------- ---------- Total deposits $1,128,902 3.95% $1,145,831 3.53% $ 898,810 3.90% ========== ========== ==========
The following table shows large-denomination ($100,000 and over) certificates of deposit by remaining maturities. December 31, --------------------------------------------- 2000 1999 1998 -------- -------- --------- (Dollars In Thousands) Certificates of deposit: 3 months or less $ 18,431 $ 23,963 $ 1,909 Over 3-12 months 88,419 69,885 21,006 Over 12-36 months 31,120 28,982 82,493 More than 36 months 3,120 1,708 25,223 -------- -------- --------- Total $141,090 $124,538 $ 130,631 ======== ======== ========= 13 BORROWINGS. The Company may obtain advances from the FHLB of Dallas upon the security of the common stock it owns in that bank and certain of its residential mortgage loans and securities held to maturity, provided certain standards related to creditworthiness have been met. Such advances are made pursuant to several credit programs, each of which has its own interest rate and range of maturities. The Company's short-term borrowings are comprised of advances from the FHLB of Dallas. At December 31, 2000, total short-term borrowings were $54.0 million. This consisted of two advances, one of a 14 day term and one of a seven day term. These advances were used to fund loan growth. The weighted average rate on short-term borrowings was 6.4% at December 31, 2000. The average amount of short-term borrowings in 2000 was $65.9 million. See Note 8 of the Notes of Consolidated Financial Statements. At December 31, 2000, the Company's long-term borrowings were comprised of fixed rate advances from the FHLB of Dallas and a long-term note outstanding with Union Planters Bank. Long-term borrowings increased $8.8 million, or 16.9%, to $60.8 million at December 31, 2000, compared to $52.1 million at December 31, 1999, which was partially offset by normal amortization payments. See Note 9 of the Notes of Consolidated Financial Statements. SUBSIDIARIES The Bank has only one active, wholly owned subsidiary, Iberia Financial Services, LLC. ("lberia Services"). At December 31, 2000, the Bank's equity investment in Iberia Services was $1.8 million, and Iberia Services had total assets of $1.8 million. For the years ended December 31, 2000 and 1999, Iberia Services had total revenues of $1.0 million and $859,000, respectively and net income of $294,000 and $280,000, respectively. See Note 1 of the Notes to Consolidated Financial Statements. The business of Iberia Services consists of acting as a broker for the sale of annuities and certain other securities to the general public. Iberia Services has one wholly owned subsidiary, Finesco, LLC., which the Bank acquired in January 1995 and which business consists of insurance premium financing. In January 2001, the Bank announced the formation of IBERIABANK Insurance Services, LLC, to provide insurance services to the Bank's customers. The new company is a joint venture with Burch, Marcus, Pool, Krupp, Daniel and Babineaux, Inc., one of Louisiana's largest agent-owned independent insurance agencies. COMPETITION The Company faces strong competition both in attracting deposits and originating loans. Its most direct competition for deposits has historically come from other commercial banks, savings institutions and credit unions located in its market areas, including many large financial institutions that have greater financial and marketing resources available to them. In addition, during times of high interest rates, the Company has faced additional significant competition for investors' funds from short-term money market securities, mutual funds and other corporate and government securities. The ability of the Company to attract and retain savings deposits depends on its ability to generally provide a rate of return, liquidity and risk comparable to that offered by competing investment opportunities. The Company experiences strong competition for loan originations principally from other commercial banks, savings institutions and mortgage banking companies. The Company competes for loans principally through the interest rates and loan fees it charges, the efficiency and quality of services it provides borrowers and the convenient locations of its branch office network. Competition may increase as a result of the continuing reduction of restrictions on the interstate operations of financial institutions. EMPLOYEES The Company had 419 full-time employees and 57 part-time employees as of December 31, 2000. None of these employees is represented by a collective bargaining agreement. The Company believes that it enjoys excellent relations with its personnel. 14 SUPERVISION AND REGULATION GENERAL. The banking industry is extensively regulated under both federal and state law. The Company is subject to regulation under the Bank Holding Company Act of 1956 ("BHCA") and to supervision by the FRB. The BHCA requires the Company to obtain the prior approval of the FRB for bank and non-bank acquisitions and prescribes certain limitations in connection with acquisitions and the non-banking activities of the Company. The Company is subject to regulation and examination by the OFI and by the FDIC and also subject to certain requirements established by the FRB. The banking industry is affected by the monetary and fiscal policies of the FRB. An important function of the FRB is to regulate the national supply of bank credit to moderate recessions and to curb inflation. Among the instruments of monetary policy used by the FRB to implement its objectives are: open-market operations in U.S. Government securities, changes in the discount rate and the federal funds rate (which is the rate banks charge each other for overnight borrowings) and changes in reserve requirements on bank deposits. FINANCIAL MODERNIZATION LEGISLATION. The Gramm-Leach-Bliley Act of 1999 (the "GLB Act") includes a number of provisions intended to modernize and to increase competition in the American financial services industry, including authority for bank holding companies to engage in a wider range of nonbanking activities. Under the GLB Act, a bank holding company that elects to become a financial holding company may engage in any activity that the FRB, in consultation with the Secretary of the Treasury, determines by regulation or order is (i) financial in nature, (ii) incidental to any such financial activity, or (iii) complementary to any such financial activity and does not pose a substantial risk to the safety or soundness of depository institutions or the financial system generally. The GLB Act specifies certain activities that are deemed to be financial in nature, including lending, exchanging, transferring, investing for others, or safeguarding money or securities; underwriting and selling insurance; providing financial, investment, or economic advisory services; underwriting, dealing in or making a market in, securities; and any activity currently permitted for bank holding companies by the FRB. A bank holding company may elect to be treated as a financial holding company only if all depository institution subsidiaries of the holding company are and continue to be well-capitalized and well-managed and have at least a satisfactory rating under the Community Reinvestment Act. National banks and state banks with requisite investment authority under applicable state law are also authorized by the GLB Act to engage, through "financial subsidiaries," in any activity that is permissible for a financial holding company (as described above) and any activity that the Secretary of the Treasury, in consultation with the FRB, determines is financial in nature or incidental to any such financial activity, except (i) insurance underwriting, (ii) real estate development or real estate investment activities (unless otherwise permitted by law), (iii) insurance company portfolio investments and (iv) merchant banking. The authority of a bank to invest in a financial subsidiary is subject to a number of conditions, including, among other things, requirements that the bank must be well-managed and well-capitalized (after deducting from capital the bank's outstanding investments in financial subsidiaries). The GLB Act also adopts a number of consumer protections, including provisions intended to protect privacy of bank customers' financial information and provisions requiring disclosure of ATM fees imposed by banks on customers of other banks. At this time, the Company has not determined whether it will become a financial holding company in order to utilize the expanded powers offered by the GLB Act, and the Bank is unable to predict the impact of the GLB Act's financial subsidiary provisions and consumer protections on its operations. FEDERAL AND STATE TAXATION The Company and the Bank are subject to the generally applicable corporate tax provisions of the Code, and the Bank is subject to certain additional provisions of the Code which apply to financial institutions. The Company, the Bank and all subsidiaries file a consolidated federal income tax return on the basis of a fiscal year ending on December 31. 15 Retained earnings at December 31, 2000 and 1999 included approximately $14.8 million accumulated prior to January 1, 1987 for which no provision for federal income taxes has been made. If this portion of retained earnings is used in the future for any purpose other than to absorb bad debts, it will be added to future taxable income. The net deferred tax asset at December 31, 2000 includes $14,677,000 of future deductible temporary differences. Included is $3,529,000 related to the unrealized loss in available for sale securities and $8,626,000 related to book deductions for the bad debt reserve that have not been deducted for tax purposes. STATE TAXATION Louisiana does not permit the filing of consolidated income tax returns. The Company is subject to the Louisiana Corporation Income Tax based on its separate Louisiana taxable income, as well as a corporate franchise. The Bank is not subject to the Louisiana income or franchise taxes. However, the Bank is subject to the Louisiana Shares Tax which is imposed on the assessed value of its stock. The formula for deriving the assessed value is to calculate 15% of the sum of (a) 20% of the company's capitalized earnings, plus (b) 80% of the company's taxable stockholders' equity, and to subtract from that figure 50% of the company's real and personal property assessment. Various items may also be subtracted in calculating a company's capitalized earnings. The Louisiana shares tax expense is included in noninterest expenses. ITEM 2. PROPERTIES. The Company, through IBERIABANK, operates 41 offices in 3 areas of Louisiana. A total of 28 offices are owned, and 13 are leased. During 2000, two facilities, one in Lafayette and one in Monroe, were sold. Both facilities contained a large amount of rented space, and the portion of the buildings occupied by the Bank was significantly smaller. The Company felt it was in its best interest to dispose of the excess facilities and to lease back the portion necessary for the Bank. A gain of $1.9 million was realized on the sale of the Lafayette facility. The Company and the Bank consider all facilities, both owned and leased, to be suitable and adequate for their intended purposes. ITEM 3. LEGAL PROCEEDINGS. The Company and the Bank are not involved in any pending legal proceedings other than nonmaterial legal proceedings occurring in the ordinary course of business. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. EXECUTIVE OFFICERS Set forth below is information with respect to the executive officers of the Company and principal occupations and positions held for periods including the last five years. DARYL G. BYRD, age 46, serves as President and Chief Executive Officer of the Company and the Bank. He has served in this capacity since July 1999, with the exception of Chief Executive Officer of the Company to which position he was promoted in July 2000. Prior to joining the Company, Mr. Byrd was President and Chief Executive Officer of Bank One New Orleans Region from 1998 to 1999. Mr. Byrd was Executive Vice President of First Commerce Corporation in charge of the commercial bank and mortgage banking groups from 1992 to 1998. MICHAEL J. BROWN, age 37, serves as Senior Executive Vice President and Chief Credit Officer of the Company and the Bank, positions he has held since January 2001. Mr. Brown also serves as New Orleans Market 16 President and Commercial Segment Leader for the Bank. Mr. Brown was hired as Executive Vice President in December 1999. Prior to joining the Company, Mr. Brown served in several senior roles with Bank One Louisiana, including Chief Credit Officer from 1998 to 1999. From 1996 to 1998, Mr. Brown served as Senior Vice President, Manager of Credit and Client Services of First Commerce Corporation. Mr. Brown is also a Chartered Financial Analyst. JOHN R. DAVIS, age 40, serves as Senior Executive Vice President of Finance and Retail Strategy of the Company and the Bank, positions he has held since January 2001. Mr. Davis was hired as Executive Vice President and Chief Strategic Officer in December 1999. Prior to joining the Company, Mr. Davis served as Corporate Senior Vice President of Crestar Financial Corporation of Virginia from 1997 to June 1999. From 1993 to 1997, Mr. Davis served as Senior Vice President of First Commerce Corporation. Mr. Davis is also a Chartered Financial Analyst. MARILYN W. BURCH, age 50, serves as Executive Vice President and Chief Financial Officer of the Company and the Bank, positions she has held since January 2001. Ms. Burch was hired as Sr. Vice President and Controller in October 1999. Prior to joining the Company, Ms. Burch served as Sr. Vice President and Controller of First National Bank of Lafayette, a subsidiary of First Commerce Corporation, from 1985 to 1997. Ms. Burch is also a Certified Public Accountant. DONALD P. LEE, age 41, serves as Executive Vice President, Legal Counsel and Secretary of the Company and the Bank. Mr. Lee also serves as Manager of IBERIABANK Insurance Services, LLC, a subsidiary of the Bank. Prior to joining the Company in 1998, Mr. Lee served as Executive Vice President and Legal Counsel at Royal Card Bank from 1996 to 1997. PART II. ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The information required herein, to the extent applicable, is incorporated by reference on the inside front cover page of the Registrant's 2000 Annual Report to Stockholders (the "Annual Report"). ITEM 6. SELECTED FINANCIAL DATA. The information required herein is incorporated by reference from pages 9 and 10 of the Annual Report. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The information required herein is incorporated by reference from pages 11 through 21 of the Annual Report. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK. The information required hereon is incorporated by reference from pages 19 through 21 of the Annual Report. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The information required herein is incorporated by reference from pages 22 through 51 of the Annual Report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not applicable. 17 PART III. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The information required herein is incorporated by reference from the Registrant's definitive proxy statement for the 2001 Annual Meeting of Stockholders (the "Proxy Statement"). ITEM 11. EXECUTIVE COMPENSATION. The information required herein is incorporated by reference from the Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information required herein is incorporated by reference from the Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information required herein is incorporated by reference from the Proxy Statement. PART IV. ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) Documents Filed as Part of this Report. (1) The following financial statements are incorporated by reference from Item 8 hereof (see Exhibit No. 13): Report of Independent Auditors Consolidated Balance Sheets as of December 31, 2000 and 1999. Consolidated Statements of Income for the Years Ended December 31, 2000, 1999 and 1998. Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 2000, 1999 and 1998. Consolidated Statements of Cash Flows for the Years Ended December 31, 2000, 1999 and 1998. Notes to Consolidated Financial Statements. (2) All schedules for which provision is made in the applicable accounting regulation of the SEC are omitted because of the absence of conditions under which they are required or because the required information is included in the consolidated financial statements and related notes thereto. (3) The following exhibits are filed as part of this Form 10-K, and this list includes the Exhibit Index.
Exhibit Index ------------- Exhibit No. 3.1. Articles of Incorporation - incorporated herein by reference to Registration Statement on Form S-1 (File No. 33-96598). Exhibit No. 3.2. Bylaws - incorporated herein by reference to Registration Statement on Form S-1 (File No. 33-96598). Exhibit No. 4.1. Stock Certificate - incorporated herein by reference to Registration Statement on Form S-8 (File No. 33-93210). Exhibit No. 10.1. Employee Stock Ownership Plan - incorporated herein by reference to Registration Statement on Form S-1 (File No. 33-96598). Exhibit No. 10.2. Profit Sharing Plan and Trust - incorporated herein by reference to Registration Statement on Form S-8 (File No. 33-93210). Exhibit No. 10.3 Employment Agreement with Larrey G. Mouton 18 Exhibit No. 10.4 Employment Agreement with Daryl G. Byrd - incorporated herein by reference to Exhibit 10.4 to Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1999. Exhibit No. 10.5 Indemnification Agreements with Daryl G. Byrd and Michael J. Brown - incorporated herein by reference to Exhibit 10.5 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2000. Exhibit No. 10.6 Severance Agreement with Michael J. Brown and John R. Davis Exhibit No. 10.7 Severance Agreement with Marilyn W. Burch and Donald P. Lee Exhibit No. 10.8 1996 Stock Option Plan - incorporated herein by reference to Exhibit 10.1 to Registration Statement on Form S-8 (File No. 333-28859). Exhibit No. 10.9 1999 Stock Option Plan - incorporated herein by reference to Registrant's definitive proxy statement dated March 19, 1999. Exhibit No. 10.10 Recognition and Retention Plan - incorporated herein by reference to Registrant's definitive proxy statement dated April 16, 1996. Exhibit No. 10.11 Supplemental Stock Option Plan - incorporated herein by reference to Exhibit 10.10 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1999. Exhibit No. 13 2000 Annual Report to Stockholders - Except for those portions of the Annual Report to Stockholders for the year ended December 31, 2000, which are expressly incorporated herein by reference, such Annual Report is furnished for the information of the Commission and is not to be deemed "filed" as part of this Report. Exhibit No. 21 Subsidiaries of the Registrant - reference is made to "Item 1. Business" for the required information. Exhibit No. 23 Consent of Castaing, Hussey & Lolan, LLC.
19 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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: March 30, 2001 By: /s/ Daryl G. Byrd ---------------------------- President/CEO and Director Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dated indicated.
NAME TITLE DATE ---- ----- ---- /s/ Daryl G. Byrd President, Chief Executive Officer March 30, 2001 - ------------------------------------ and Director Daryl G. Byrd (Principal Executive Officer) /s/ Marilyn W. Burch Executive Vice President and Chief March 30, 2001 - ------------------------------------ Financial Officer Marilyn W. Burch (Principal Financial and Accounting Officer) /s/ Elaine D. Abell Director March 30, 2001 - ------------------------------------ Elaine D. Abell /s/ Harry V. Barton, Jr. Director March 30, 2001 - ------------------------------------ Harry V. Barton, Jr. /s/ Ernest P. Breaux, Jr. Director March 30, 2001 - ------------------------------------ Ernest P. Breaux, Jr. /s/ Cecil C. Broussard Director March 30, 2001 - ------------------------------------ Cecil C. Broussard /s/ William H. Fenstermaker Director March 30, 2001 - ------------------------------------ William H. Fenstermaker /s/ Richard F. Hebert Director March 30, 2001 - ------------------------------------ Richard F. Hebert /s/ Larrey G. Mouton Director March 30, 2001 - ------------------------------------ Larrey G. Mouton /s/ E. Stewart Shea III Director March 30, 2001 - ------------------------------------ E. Stewart Shea III
20 EX-10 2 iberia10k12312000ex103.txt EXHIBIT 10.3 EMP AGMT MOUTON EXHIBIT 10.3 EMPLOYMENT AGREEMENT This EMPLOYMENT AGREEMENT ("Agreement") is entered into by IBERIABANK Corporation (the "Corporation"), a Louisiana-chartered corporation, IBERIABANK (the "Bank"), a Louisiana-chartered bank and a wholly owned subsidiary of the Corporation, and Larrey G. Mouton ("Mr. Mouton"). WITNESSETH WHEREAS, Mr. Mouton is presently a director of the Corporation and the Bank, and an employee of the Bank (together the "Employers"); and WHEREAS, the Employers desire to be ensured of Mr. Mouton's continued active participation in the business of the Employers; and WHEREAS, in order to induce Mr. Mouton to remain in the employ of the Employers and in consideration of Mr. Mouton's agreeing to remain in the employ of the Employers, the parties desire to specify the compensation that shall be due Mr. Mouton for such continued service; NOW THEREFORE, in consideration of the premises and the mutual agreements herein contained, the parties hereby agree as follows: 1. TERM OF EMPLOYMENT. The term of employment under this Agreement shall commence on the date of this Agreement (the "Commencement Date") and extend through May 24, 2003, subject to termination for Cause, Disability, or the death of Mr. Mouton. Termination of Mr. Mouton's employment for "Cause" shall mean termination, as reasonably determined by the Board of Directors of the Corporation and the Bank, for personal dishonesty, misconduct, breach of a fiduciary duty, failure to perform assigned duties as Community Relations Officer, violation of any state or federal law, or material breach of any provision of this Agreement. Termination by the Employers of Mr. Mouton's employment based on "Disability" shall mean termination because of any physical or mental impairment which qualifies Mr. Mouton for disability benefits under the applicable long-term disability plan maintained by the Employers or any subsidiary or, if no such plan applies, which would qualify Mr. Mouton for disability benefits under the Federal Social Security System. 2. EMPLOYMENT DUTIES. During the period from the Commencement Date through May 24, 2003, the Employers hereby employ Mr. Mouton as Community Relations Officer of the Corporation and Mr. Mouton hereby accepts said employment and agrees to render such services to the Corporation on the terms and conditions set forth in this Agreement. During the term of this Agreement, Mr. Mouton shall perform such services for the Employers as may be consistent with his title and from time to time assigned to him by the Employers' Chief Executive Officer. Such services shall include, without limitation, promoting a positive company image with the business community and the community at large. 1 EXHIBIT 10.3 3. COMPENSATION AND BENEFITS. (a) From October 1, 2000, through July 31, 2001, the Employers shall pay Mr. Mouton the gross amount of the $178,800.00, less standard withholdings, to compensate him for his services rendered during that period. Similarly, the Employers shall pay Mr. Mouton the gross amount of $12,100.00, less standard withholdings, from August 1, 2001, through May 24, 2003. In addition to the outlined compensation Mr. Mouton shall be allowed to retain the following items currently in his use (1) the Dell Desktop Pentium 266 computer, (2) the U.S. Robotics External Modem, and (3) Compaq Laptop Pentium 150 computer (valued at $835.00). Mr. Mouton shall not receive any other compensation in the form of bonuses, reimbursements or otherwise. (b) During the term of the Agreement, Mr. Mouton and his eligible dependents shall be entitled to participate in and receive the benefits of the Employers' medical and dental insurance, with Mr. Mouton paying the employee's portion of the premium. Mr. Mouton shall also be entitled to participate in the Employers' life, accidental death and dismemberment, and long term disability insurance, with Mr. Mouton paying the employee's portion of the premium. Mr. Mouton shall be eligible to participate in the employee stock ownership plan (ESOP) allocations for the year 2000 through 2002. With regard to the vesting of stock options and restricted shares, the vesting and terms specified in paragraph 2(a) and 4 of the agreements between Mr. Mouton and ISB Financial Corporation (now IBERIABANK Corporation) dated May 24, 1996 remains unchanged and in full force and effect. (c) During the term of this Agreement, Mr. Mouton shall be entitled to paid annual vacation in accordance with the policies as established from time to time by the Board of Directors of the Employers, which shall in no event be less than three weeks per annum. Mr. Mouton shall not be entitled to receive any additional compensation from the Employers for failure to take a vacation, nor shall Mr. Mouton be able to accumulate unused vacation time from one year to the next. 4. TERMINATION OF EMPLOYMENT. (a) In the event that the Employers terminate Mr. Mouton's employment for Cause or Disability, as defined above, or if Mr. Mouton terminates his employment before the expiration of its term as set forth in paragraph 2, then Mr. Mouton and his heirs shall have no rights pursuant to this Agreement to compensation or other benefits, including, without limitation, salary, severance, and the vesting of stock options and restricted shares (except as outlined in Section 8.04 (b) of the ISB Financial Corporation 1996 Stock Option Plan and Section 7.01 (b) of the ISB Financial Corporation Recognition and Retention Plan), for any period after the applicable date of termination. (b) In the event of Mr. Mouton's death during the term of this Agreement, his spouse, estate, legal representative or named beneficiaries (as directed by Mr. Mouton in writing) shall be paid on a monthly basis the remaining balance owed under this Agreement. (c) If Mr. Mouton becomes liable, in any taxable year, for the payment of an excise tax under Section 4999 of the Internal Revenue Code of 1986, as amended (hereinafter "the Code") on 2 EXHIBIT 10.3 account of any payments to Mr. Mouton pursuant to this Section 4, and the Employers choose not to contest the liability or have exhausted all administrative and judicial appeals contesting the liability, the Employers shall pay Mr. Mouton (i) an amount equal to the excise tax for which Mr. Mouton is liable under Section 4999 of the Code, (ii) the federal, state, and local income taxes, and interest if any, for which Mr. Mouton is liable on account of the payments pursuant to item (i), and (ii) any additional excise tax under Section 4999 of the Code and any federal, state and local income taxes for which Mr. Mouton is liable on account of payments made pursuant to items (i) and (ii). (d) This subsection 4(c) applies if the amount of payments to Mr. Mouton under subsection 4(b) has not been determined with finality by the exhaustion of administrative and judicial appeals. In such circumstances, the Employers and Mr. Mouton shall, as soon as practicable after the event or series of events has occurred giving rise to the imposition of the excise tax, cooperate in determining the amount of Mr. Mouton's excise tax liability for purposes of paying the estimated tax. Mr. Mouton shall thereafter furnish to the Employers or their successors a copy of each tax return which reflects a liability for an excise tax under Section 4999 of the Code at least 20 days before the date on which such return is required to be filed with the Internal Revenue Service. The liability reflected on such return shall be dispositive for the purposes hereof unless, within 15 days after such notice is given, the Employers furnish Mr. Mouton with a letter of the auditors or tax advisor selected by the Employers indicating a different liability or that the matter is not free from doubt under the applicable laws and regulations and that Mr. Mouton may, in such auditor's or advisor's opinion, cogently take a different position, which shall be set forth in the letter with respect to the payments in question. Such letter shall be addressed to Mr. Mouton and state that he is entitled to rely thereon. If the Employers furnish such a letter to Mr. Mouton, the position reflected in such letter shall be dispositive for purposes of this Agreement, except as provided in subsection 4(d) below. (e) Notwithstanding anything in this Agreement to the contrary, if Mr. Mouton's liability for the excise tax under Section 4999 of the Code for a taxable year is subsequently determined to be less than the amount paid by the Employers pursuant to subsection 4(c), Mr. Mouton shall repay the Employers at the time that the amount of such excise tax liability is finally determined, the portion of such income and excise tax payments attributable to the reduction (plus interest on the amount of such repayment at the rate provided on Section 1274(b)(2)(B) of the Code and if Mr. Mouton's liability for the excise tax under Section 4999 of the Code for a taxable year is subsequently determined to exceed the amount paid by the Employers pursuant to Section 4, the Employers shall make an additional payment of income and excise taxes in the amount of such excess, as well as the amount of any penalty and interest assessed with respect thereto at the time that the amount of such excess and any penalty and interest is finally determined. 5. WITHHOLDING. All payments required to be made by the Employers hereunder to Mr. Mouton shall be subject to the withholding of such amounts, if any, relating to tax and other payroll deductions as the Employers may reasonably determine should be withheld pursuant to any applicable law or regulation. 6. CHANGE IN CONTROL. The Employers may assign this Agreement and its rights and obligations hereunder in whole, but not in part, to any corporation, bank or other entity with or into 3 EXHIBIT 10.3 which the Employers may hereafter merge or consolidate or to which the Employers may transfer all or substantially all of its assets, if in any such case said corporation, bank or other entity shall by operation of law or expressly in writing assume all obligations of the Employers hereunder as fully as if it had been originally made a party hereto, but may not otherwise assign this Agreement or its rights and obligations hereunder. In the event of a Change in Control, Mr. Mouton may elect to continue to receive his compensation in the manner outlined or elect to accelerate his compensation schedule to obtain immediate payment of all monies owed. "Change in Control" shall mean (i) change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended ("Exchange Act") or any successor thereto, whether or not any security of the Corporation is registered under Exchange Act; provided that, without limitation, such a Change in Control shall be deemed to have occurred if any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule l3d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 25% or more of the combined voting power of the Corporation's then outstanding securities; (ii) during any period of two consecutive years, individuals (the "Continuing Directors") who at the beginning of such period constitute the Board of Directors of the Corporation (the "Existing Board") cease for any reason to constitute at least two-thirds thereof, provided that any individual whose election or nomination for election as a member of the Existing Board was approved by a vote of at least two-thirds of the Continuing Directors then in office shall be considered a Continuing Director; or (iii) the acquisition of ownership, holding or power to vote more than 25% of the voting stock of the Bank by any person other than the Corporation. If Mr. Mouton makes such election, he must notify the Employers in writing. 7. SEVERANCE PAY PLAN SUPERSEDED. In no event shall Mr. Mouton be entitled to severance pay under the Bank's Severance Pay Plan. 8. NO ASSIGNMENT. Mr. Mouton may not assign or transfer this Agreement or any rights or obligations hereunder. 9. NOTICE. For the purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below: To the Employers: IBERIABANK Corporation 1101 East Admiral Doyle Drive New Iberia, Louisiana 70560 To Mr. Mouton: Larrey G. Mouton 3922 Bayou Boulevard New Iberia, Louisiana 70563 10. AMENDMENT; WAIVER. No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by Mr. 4 EXHIBIT 10.3 Mouton and such officer or officers as may be specifically designated by the Board of Directors of the Employers to sign on its behalf. No waiver by any party hereto at any time of any breach by any other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. 11. GOVERNING LAW. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Louisiana. 12. NATURE OF OBLIGATIONS. Nothing contained herein shall create or require the Employers to create a trust of any kind to fund any benefits which may be payable hereunder, and to the extent that Mr. Mouton acquires a right to receive benefits from the Employers hereunder, such right shall be no greater than the right of any unsecured general creditor of the Employers. 13. HEADINGS. The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 14. VALIDITY. This agreement supersedes all other agreements between the Employers and Mr. Mouton. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, which shall remain in full force and effect. 15. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 16. REGULATORY PROHIBITION. Notwithstanding any other provision of this Agreement to the contrary, any payments made to Mr. Mouton pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance with Section 18(k) of the FDIA (12 U.S.C.ss.1828(k)) and any regulations promulgated thereunder. 17. ARBITRATION. Mr. Mouton acknowledges that he has previously entered into the "IBERIABANK Arbitration Agreement." Any and all payments and benefits provided for under the terms of this Agreement, as well as any and all claims that this Agreement has been breached, shall be subject to the terms of such Arbitration Agreement. 5 EXHIBIT 10.3 IN WITNESS WHEREOF, this Agreement has been executed as of the ___ day of ________________, 2000. Attest: IBERIABANK CORPORATION ______________________________ By:______________________________ Chairman of the Board Attest: IBERIABANK ______________________________ By:______________________________ President and Chief Executive Officer Witness: LARREY G. MOUTON _____________________________ By:_______________________________ 6 EX-10 3 iberia10k12312000ex106.txt EXHIBIT 10.6 SEVERANCE AGMTS BROWN AND DAVIS EXHIBIT 10.6 IBERIABANK CORPORATION IBERIABANK ----------------------------------- CHANGE IN CONTROL SEVERANCE AGREEMENT ----------------------------------- THIS AGREEMENT entered into this day of , 2000 (the "Effective Date"), by and between ________________ (the "Employee"), IBERIABANK (the "Company"), and IBERIABANK Corporation (the "Holding Company"). WHEREAS, the Employee has heretofore been employed by the Company as an executive officer, and the Company and the Holding Company deem it to be in their respective best interests to enter into this Agreement as an additional incentive to the Employee to continue as an executive employee of the Company and to provide as-needed services benefiting the Holding Company; and WHEREAS, the parties desire by this writing to set forth their understanding as to their respective rights and obligations in the event a change of control occurs with respect to the Company or the Holding Company. NOW, THEREFORE, the undersigned parties AGREE as follows: 1. Defined Terms When used anywhere in this Agreement, the following terms shall have the meaning set forth herein. (a) "Change in Control" shall mean (i) a change in control of the Holding Company, of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended ("Exchange Act") or any successor thereto, whether or not any security of the Holding Company is registered under Exchange Act; provided that, without limitation, such a Change in Control shall be deemed to have occurred if any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, or securities of the Holding Company representing 25% or more of the combined voting power of the Holding Company then outstanding securities; (ii) during any period of two consecutive years, individuals (the "Continuing Directors") who at the beginning of such period constitute the Board of Directors (the "Existing Board") of the Holding Company cease for any reason to constitute at least two-thirds thereof, provided that any individual whose election or nomination for election as a member of the Existing Board was approved by a vote of at least two-thirds of the Continuing Directors then in office shall be considered a Continuing Director unless his or her initial assumption of office occurs as a result of an actual or threatened contest with respect to the election or removal of directors or other 1 actual or threatened solicitation of proxies by or on behalf of someone other than a Continuing Director; or (iii) the acquisition of ownership, holding or power to vote more than 25% of the voting stock of the Company by any person other than the Holding Company. (b) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, and as interpreted through applicable rulings and regulations in effect from time to time. (c) "Code ss.280G Maximum" shall mean the product of 2.99 and the Employee's "base amount" within the meaning of Code ss.280G(b)(3). (d) "Disability" shall mean termination by the Company of the Employee's employment because of any physical or mental impairment which qualifies the Employee for disability benefits under the applicable long-term disability plan maintained by the Employers or, if no such plan applies, which would qualify the Employee for disability benefits under the Federal Social Security System. (e) "Good Reason" shall mean (i) without the Employee's express written consent: the assignment to the Employee, by the Company or the Holding Company, of any duties which are materially inconsistent with the Employee's positions, duties, responsibilities and status with the Company or the Holding Company immediately prior to a Change in Control of the Corporation, or a material change or diminution in the Employee's reporting responsibilities, titles or offices as an employee and as in effect immediately prior to such a Change in Control, or any removal of the Employee from or any failure to re-elect the Employee to any of such responsibilities, titles or offices, except in connection with the termination of the Employee's employment for Just Cause or Disability or as a result of the Employee's death or by the Employee other than for Good Reason; (ii) without the Employee's express written consent, a reduction by the Company or the Holding Company in the Employee's base salary as in effect on the date of the Change in Control of the Corporation or as the same may be increased from time to time thereafter or a reduction in the package of fringe benefits provided to the Employee; (iii) any purported termination of the Employee's employment for Just Cause or Disability which is not effected pursuant to a Notice of Termination satisfying the requirements hereof ;(iv) the failure by the Company or the Holding Company to obtain the assumption of and agreement to perform this Agreement by any successor as contemplated in Section 6 hereto; (v) requirement that the Employee principally perform all services at location more than 30 miles from such location on the Effective date. For purposes of this Section 1(e), any good faith determination of "Good Reason" made by the Employee shall create a rebuttable presumption that "Good Reason" exists. Anything in this Agreement to the contrary notwithstanding, a termination by the Employee for any reason during the 30-day period immediately following the first anniversary of the Effective Date shall be deemed to be a termination for Good Reason for all purposes of this Agreement. (f) "Just Cause" shall mean, in the good faith determination of the Board, the Employee's personal dishonesty, incompetence in the performance of duties, willful violation of 2 any law, rule, regulation (other than traffic violations or similar offenses) or final cease-and-desist order, or material breach of this Agreement. No act or failure to act, on the Employee's part shall be considered "willful" unless it is done, or omitted to be done, by him in bad faith or without reasonable belief that his action or omission was in the Company's best interests. Any act, or failure to act, based upon authority given pursuant to a resolution of the Board or instructions of the Chief Executive Officer or a senior officer of the Company or the advice of counsel for the Company shall be conclusively presumed to be in good faith and in the Company's best interests. The cessation of Employee's employment shall not be deemed to be for Just Cause unless and until there shall have been delivered to him a copy of a resolution duly adopted by the vote of not less than three-quarters of the entire membership of the Board at a meeting called and held for such purpose (after reasonable notice is provided to the Employee and he is given an opportunity, together with counsel, to be heard before the Board), finding that, in the Board's good faith opinion, the Employee is guilty of the conduct described in the preceding paragraph, and specifying the particulars thereof in detail. (g) "Notice of Termination" shall mean any purported termination by the Company for Just Cause or Disability or by the Employee for Good Reason shall be communicated by written "Notice of Termination" to the other party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Employee's employment under the provision so indicated, (iii) specifies a date of termination, which shall be not less than thirty (30) nor more than ninety (90) days after such Notice of Termination is given, except in the case of the Company's termination of Employee's employment for Just Cause, and (iv) is given in the manner specified in this Agreement. (h) "Protected Period" shall mean the period that begins on the date three months before a Change in Control and ends on the later of the third annual anniversary of the Change in Control or the expiration date of this Agreement; except that if the Employee's employment with the Company is terminated prior to the first day of this period at the request of a third party who has taken steps reasonably calculated to effect a Change of Control or otherwise in connection with or anticipation of a Change in Control, then the Protected Period shall commence on the date immediately prior to the date of such termination. 3 2. Trigger Events The Employee shall be entitled to collect the severance benefits set forth in Section 3 of this Agreement in the event that (i) the Employee voluntarily terminates employment within 90 days of an event that both occurs during the Protected Period and constitutes Good Reason, (ii) the Company or its successor(s) in interest terminate the Employee's employment for any reason other than Just Cause during the Protected Period, or (iii) the employee voluntarily terminates employment for any reason other than Just Cause within 30 days after a Change in Control. 3. Amount of Severance Benefit (a) If the Employee becomes entitled to collect severance benefits pursuant to Section 2 hereof, the Employee shall receive from the Company a severance benefit equal to 100% of the Code ss.280G Maximum. (b) The amount payable under this Section 3(a) shall be paid either (i) in one lump sum within ten days of the later of the date of the Change in Control and the Employee's last date of employment with the Company, or (ii) according to the schedule elected in duly executed irrevocable written form by the Board on the date of approval of this Agreement, but only if filed with the Company prior to the date which is 90 days before the date on which a Change in Control occurs. Deferred amounts shall bear interest from the date on which they would otherwise be payable until the date paid at a rate equal to 120% of the applicable federal rate. (c) In addition, for 39 months following termination, the Company will maintain in full force and effect for the continued benefit of the Employee and his dependents each employee's medical and life benefit plan (as such term is defined in the Employee Retirement Income Security Act of 1974, as amended) in which the Employee was entitled to participate immediately prior to the date of his termination, unless an essentially equivalent benefit is provided by another source. If the terms of any employee medical and life benefit plan of the Company or applicable laws do not permit continued participation by the Employee, the Company will arrange to provide to the Employee a benefit substantially similar to, and no less favorable than, the benefit he was entitled to receive under such plan at the end of the period of coverage. The right of Employee to continued coverage under the health and medical insurance plans of the Company pursuant to Section 4980B of the Code shall commence upon the expiration of such period. (d) If the Employee becomes liable, in any taxable year, for the payment of an excise tax under Section 4999 of the Code on account of any payments to the Employee pursuant to this Section 3, and the Company chooses not to contest the liability or have exhausted all administrative and judicial appeals contesting the liability, the Company shall pay the Employee (i) an amount equal to the excise tax for which the Employee is liable under Section 4999 of the Code, (ii) the federal, state, and local income taxes, and interest if any, for which the Employee is liable on account of the payments pursuant to item (i), and (iii) any additional excise tax under 4 Section 4999 of the Code and any federal, state and local income taxes for which the Employee is liable on account of payments made pursuant to items (i) and (ii). (e) This subsection 5(e) applies if the amount of payments to the Employee under subsection 5(d) has not been determined with finality by the exhaustion of administrative and judicial appeals. In such circumstances, the Company and the Employee shall, as soon as practicable after the event or series of events has occurred giving rise to the imposition of the excise tax, cooperate in determining the amount of the Employee's excise tax liability for purposes of paying the estimated tax. The Employee shall thereafter furnish to the Company or their successors a copy of each tax return which reflects a liability for an excise tax under Section 4999 of the Code at least 20 days before the date on which such return is required to be filed with the IRS. The liability reflected on such return shall be dispositive for the purposes hereof unless, within 15 days after such notice is given, the Company furnishes the Employee with a letter of the auditors or tax advisor selected by the Banks indicating a different liability or that the matter is not free from doubt under the applicable laws and regulations and that the Employee may, in such auditor's or advisor's opinion, cogently take a different position, which shall be set forth in the letter with respect to the payments in question. Such letter shall be addressed to the Employee and state that he is entitled to rely thereon. If the Company furnishes such a letter to the Employee, the position reflected in such letter shall be dispositive for purposes of this Agreement, except as provided in subsection 5(f) below. (f) Notwithstanding anything in this Agreement to the contrary, if the Employee's liability for the excise tax under Section 4999 of the Code for a taxable year is subsequently determined to be less than the amount paid by the Company pursuant to subsection 5(e), the Employee shall repay the Company at the time that the amount of such excise tax liability is finally determined, the portion of such income and excise tax payments attributable to the reduction (plus interest on the amount of such repayment at the rate provided on Section 1274(b)(2)(B) of the code) and if the Employee's liability for the excise tax under Section 4999 of the Code for a taxable year is subsequently determined to exceed the amount paid by the Banks pursuant to Section 5, the Company shall make an additional payment of income and excise taxes in the amount of such excess, as well as the amount of any penalty and interest assessed with respect thereto at the time that the amount of such excess and any penalty and interest is finally determined. 4. Funding of Grantor Trust upon Change in Control (a) Not later than ten business days after a Change in Control, the Company shall (i) establish a grantor trust (the "Trust") designed in accordance with Revenue Procedure 92-64 and having a trustee independent of the Company and the Company, (ii) deposit in said Trust an amount equal to the Code ss.280G Maximum, unless the Employee has previously provided a written release of any claims under this Agreement, and (iii) provide the trustee of the Trust with a written direction to hold said amount and any investment return thereon in a segregated account for the benefit of the Employee, and to follow the procedures set forth in the next paragraph as to the payment of such amounts from the Trust. 5 (b) During the 39-consecutive month period after a Change in Control, the Employee may provide the trustee of the Trust with a written notice requesting that the trustee pay to the Employee an amount designated in the notice as being payable pursuant to this Agreement. Within three business days after receiving said notice, the trustee of the Trust shall pay such amount to the Employee, and coincidentally shall provide the Company or its successor with notice of such payment. Upon the earlier of the Trust's final payment of all amounts due under the preceding paragraph or the date 39 months after the Change in Control, the trustee of the Trust shall pay to the Company the entire balance remaining in the segregated account maintained for the benefit of the Employee. The Employee shall thereafter have no further interest in the Trust. 5. Term of the Agreement. This Agreement shall remain in effect for the period commencing on the Effective Date and ending on the earlier of (i) the date thirty-six months after the Effective Date, and (ii) the date on which the Employee terminates employment with the Company; provided that the Employee's rights hereunder shall continue following the termination of this employment with the Company under any of the circumstances described in Section 2 hereof. Additionally, on each annual anniversary date from the Effective Date, the term of this Agreement shall be extended for an additional one-year period beyond the then effective expiration date, unless the Boards of Directors of the Company has notified the Employee in writing that this Agreement shall not be extended. 6. Termination or Suspension Under Federal Law. (a) If the Employee is removed and/or permanently prohibited from participating in the conduct of the Company's affairs by an order issued under Sections 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act ("FDIA") (12 U.S.C. 1818(e)(4) or (g)(1)), all obligations of the Company under this Agreement shall terminate, as of the effective date of the order, but the vested rights of the parties shall not be affected. (b) If the Company is in default (as defined in Section 3(x)(1) of FDIA), all obligations of the Company under this Agreement shall terminate as of the date of default; however, this Paragraph shall not affect the vested rights of the parties. (c) If a notice served under Section 8(e)(3) or (g)(1) of the FDIA (12 U.S.C. 1818(e)(3) and (g)(1)) suspends and/or temporarily prohibits the Employee from participating in the conduct of the Company's affairs, the Company's obligations under this Agreement shall be suspended as of the date of such service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Company shall (i) pay the Employee all or part of the compensation withheld while its contract obligations were suspended, and (ii) reinstate (in whole or in part) any of its obligations which were suspended. 6 7. Expense Reimbursement. In the event that any dispute arises between the Employee and the Company or the Holding Company as to the terms or interpretation of this Agreement, whether instituted by formal legal proceedings or otherwise, including any action that the Employee takes to enforce the terms of this Agreement or to defend against any action taken by the Company or the Holding Company, they shall reimburse the Employee for all costs and expenses, including reasonable attorneys' fees, arising from such dispute, proceedings or actions. Such reimbursement shall be paid within ten days of Employee's furnishing to the Company written evidence, which may be in the form, among other things, of a cancelled check or receipt, of any costs or expenses incurred by the Employee. 8. Successors and Assigns. (a) This Agreement shall not be assignable by the Company, provided that this Agreement shall inure to the benefit of and be binding upon any corporate or other successor of the Company which shall acquire, directly or indirectly, by merger, consolidation, purchase or otherwise, all or substantially all of the assets or stock of the Company. (b) Since the Company is contracting for the unique and personal skills of the Employee, the Employee shall be precluded from assigning or delegating his rights or duties hereunder without first obtaining the written consent of the Company; provided, however that nothing in this paragraph shall preclude (i) the Employee from designating a beneficiary to receive any benefit payable hereunder upon his death, or (ii) the executors, administrators, or other legal representatives of the Employee or his estate from assigning any rights hereunder to the person or person entitled thereunto. 9. Amendments No amendments or additions to this Agreement shall be binding unless made in writing and signed by all of the parties, except as herein otherwise specifically provided. 10. Applicable Law Except to the extent preempted by Federal law, the laws of the State of Louisiana shall govern this Agreement in all respects, whether as to its validity, construction, capacity, performance or otherwise. 7 11. Severability The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. 12. Entire Agreement This Agreement, together with any understanding or modifications thereof as agreed to in writing by the parties, shall constitute the entire agreement between the parties hereto. IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first hereinabove written. IBERIABANK _____________________ By _____________________ Witness Stewart Shea Chairman, Board Compensation Committee _____________________ By _____________________ Witness Daryl G. Byrd President and CEO - --------------------- ---------------------- Witness Employee IN CONSIDERATION of the Employee's provision of valuable services for the Company and the Employee's past, present, or future services for the Holding Company, IT IS AGREED by the Holding Company that it shall be jointly and severally liable for the Company's obligations under this Agreement (determined without regard for Section 6 of the Agreement). IBERIABANK CORPORATION By ______________________ Stewart Shea Chairman, Board Compensation Committee By ______________________ Daryl G. Byrd President and CEO 8 EX-10 4 iberia10k12312000ex107.txt EXHIBIT 10.7 SEVERANCE AGMTS BURCH AND LEE EXHIBIT 10.7 IBERIABANK CORPORATION IBERIABANK ----------------------------------- CHANGE IN CONTROL SEVERANCE AGREEMENT ----------------------------------- THIS AGREEMENT entered into this day of , 2000 (the "Effective Date"), by and between ________________ (the "Employee"), IBERIABANK (the "Company"), and IBERIABANK Corporation (the "Holding Company"). WHEREAS, the Employee has heretofore been employed by the Company as an executive officer, and the Company and the Holding Company deem it to be in their respective best interests to enter into this Agreement as an additional incentive to the Employee to continue as an executive employee of the Company and to provide as-needed services benefiting the Holding Company; and WHEREAS, the parties desire by this writing to set forth their understanding as to their respective rights and obligations in the event a change of control occurs with respect to the Company or the Holding Company. NOW, THEREFORE, the undersigned parties AGREE as follows: 1. Defined Terms When used anywhere in this Agreement, the following terms shall have the meaning set forth herein. (a) "Change in Control" shall mean (i) a change in control of the Holding Company, of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended ("Exchange Act") or any successor thereto, whether or not any security of the Holding Company is registered under Exchange Act; provided that, without limitation, such a Change in Control shall be deemed to have occurred if any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, or securities of the Holding Company representing 25% or more of the combined voting power of the Holding Company then outstanding securities; (ii) during any period of two consecutive years, individuals (the "Continuing Directors") who at the beginning of such period constitute the Board of Directors (the "Existing Board") of the Holding Company cease for any reason to constitute at least two-thirds thereof, provided that any individual whose election or nomination for election as a member of the Existing Board was approved by a vote of at least two-thirds of the Continuing Directors then in office shall be considered a Continuing Director unless his or her initial assumption of office occurs as a result of an actual or threatened contest with respect to the election or removal of directors or other 1 actual or threatened solicitation of proxies by or on behalf of someone other than a Continuing Director; or (iii) the acquisition of ownership, holding or power to vote more than 25% of the voting stock of the Company by any person other than the Holding Company. (b) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, and as interpreted through applicable rulings and regulations in effect from time to time. (c) "Code ss.280G Maximum" shall mean the product of 2.99 and the Employee's "base amount" within the meaning of Code ss.280G(b)(3). (d) "Disability" shall mean termination by the Company of the Employee's employment because of any physical or mental impairment which qualifies the Employee for disability benefits under the applicable long-term disability plan maintained by the Employers or, if no such plan applies, which would qualify the Employee for disability benefits under the Federal Social Security System. (e) "Good Reason" shall mean (i) without the Employee's express written consent: the assignment to the Employee, by the Company or the Holding Company, of any duties which are materially inconsistent with the Employee's positions, duties, responsibilities and status with the Company or the Holding Company immediately prior to a Change in Control of the Corporation, or a material change or diminution in the Employee's reporting responsibilities, titles or offices as an employee and as in effect immediately prior to such a Change in Control, or any removal of the Employee from or any failure to re-elect the Employee to any of such responsibilities, titles or offices, except in connection with the termination of the Employee's employment for Just Cause or Disability or as a result of the Employee's death or by the Employee other than for Good Reason; (ii) without the Employee's express written consent, a reduction by the Company or the Holding Company in the Employee's base salary as in effect on the date of the Change in Control of the Corporation or as the same may be increased from time to time thereafter or a reduction in the package of fringe benefits provided to the Employee; (iii) any purported termination of the Employee's employment for Just Cause or Disability which is not effected pursuant to a Notice of Termination satisfying the requirements hereof ;(iv) the failure by the Company or the Holding Company to obtain the assumption of and agreement to perform this Agreement by any successor as contemplated in Section 6 hereto; (v) requirement that the Employee principally perform all services at location more than 30 miles from such location on the Effective date. For purposes of this Section 1(e), any good faith determination of "Good Reason" made by the Employee shall create a rebuttable presumption that "Good Reason" exists. Anything in this Agreement to the contrary notwithstanding, a termination by the Employee for any reason during the 30-day period immediately following the first anniversary of the Effective Date shall be deemed to be a termination for Good Reason for all purposes of this Agreement. (f) "Just Cause" shall mean, in the good faith determination of the Board, the Employee's personal dishonesty, incompetence in the performance of duties, willful violation of 2 any law, rule, regulation (other than traffic violations or similar offenses) or final cease-and-desist order, or material breach of this Agreement. No act or failure to act, on the Employee's part shall be considered "willful" unless it is done, or omitted to be done, by him in bad faith or without reasonable belief that his action or omission was in the Company's best interests. Any act, or failure to act, based upon authority given pursuant to a resolution of the Board or instructions of the Chief Executive Officer or a senior officer of the Company or the advice of counsel for the Company shall be conclusively presumed to be in good faith and in the Company's best interests. The cessation of Employee's employment shall not be deemed to be for Just Cause unless and until there shall have been delivered to him a copy of a resolution duly adopted by the vote of not less than three-quarters of the entire membership of the Board at a meeting called and held for such purpose (after reasonable notice is provided to the Employee and he is given an opportunity, together with counsel, to be heard before the Board), finding that, in the Board's good faith opinion, the Employee is guilty of the conduct described in the preceding paragraph, and specifying the particulars thereof in detail. (g) "Notice of Termination" shall mean any purported termination by the Company for Just Cause or Disability or by the Employee for Good Reason shall be communicated by written "Notice of Termination" to the other party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Employee's employment under the provision so indicated, (iii) specifies a date of termination, which shall be not less than thirty (30) nor more than ninety (90) days after such Notice of Termination is given, except in the case of the Company's termination of Employee's employment for Just Cause, and (iv) is given in the manner specified in this Agreement. (h) "Protected Period" shall mean the period that begins on the date three months before a Change in Control and ends on the later of the third annual anniversary of the Change in Control or the expiration date of this Agreement; except that if the Employee's employment with the Company is terminated prior to the first day of this period at the request of a third party who has taken steps reasonably calculated to effect a Change of Control or otherwise in connection with or anticipation of a Change in Control, then the Protected Period shall commence on the date immediately prior to the date of such termination. 3 2. Trigger Events The Employee shall be entitled to collect the severance benefits set forth in Section 3 of this Agreement in the event that (i) the Employee voluntarily terminates employment within 90 days of an event that both occurs during the Protected Period and constitutes Good Reason, (ii) the Company or its successor(s) in interest terminate the Employee's employment for any reason other than Just Cause during the Protected Period, or (iii) the employee voluntarily terminates employment for any reason other than Just Cause within 30 days after a Change in Control. 3. Amount of Severance Benefit (a) If the Employee becomes entitled to collect severance benefits pursuant to Section 2 hereof, the Employee shall receive from the Company a severance benefit equal to 70% of the Code ss.280G Maximum. (b) The amount payable under this Section 3(a) shall be paid either (i) in one lump sum within ten days of the later of the date of the Change in Control and the Employee's last date of employment with the Company, or (ii) according to the schedule elected in duly executed irrevocable written form by the Board on the date of approval of this Agreement, but only if filed with the Company prior to the date which is 90 days before the date on which a Change in Control occurs. Deferred amounts shall bear interest from the date on which they would otherwise be payable until the date paid at a rate equal to 120% of the applicable federal rate. (c) In addition, for 39 months following termination, the Company will maintain in full force and effect for the continued benefit of the Employee and his dependents each employee's medical and life benefit plan (as such term is defined in the Employee Retirement Income Security Act of 1974, as amended) in which the Employee was entitled to participate immediately prior to the date of his termination, unless an essentially equivalent benefit is provided by another source. If the terms of any employee medical and life benefit plan of the Company or applicable laws do not permit continued participation by the Employee, the Company will arrange to provide to the Employee a benefit substantially similar to, and no less favorable than, the benefit he was entitled to receive under such plan at the end of the period of coverage. The right of Employee to continued coverage under the health and medical insurance plans of the Company pursuant to Section 4980B of the Code shall commence upon the expiration of such period. (d) If the Employee becomes liable, in any taxable year, for the payment of an excise tax under Section 4999 of the Code on account of any payments to the Employee pursuant to this Section 3, and the Company chooses not to contest the liability or have exhausted all administrative and judicial appeals contesting the liability, the Company shall pay the Employee (i) an amount equal to the excise tax for which the Employee is liable under Section 4999 of the Code, (ii) the federal, state, and local income taxes, and interest if any, for which the Employee is liable on account of the payments pursuant to item (i), and (iii) any additional excise tax under 4 Section 4999 of the Code and any federal, state and local income taxes for which the Employee is liable on account of payments made pursuant to items (i) and (ii). (e) This subsection 5(e) applies if the amount of payments to the Employee under subsection 5(d) has not been determined with finality by the exhaustion of administrative and judicial appeals. In such circumstances, the Company and the Employee shall, as soon as practicable after the event or series of events has occurred giving rise to the imposition of the excise tax, cooperate in determining the amount of the Employee's excise tax liability for purposes of paying the estimated tax. The Employee shall thereafter furnish to the Company or their successors a copy of each tax return which reflects a liability for an excise tax under Section 4999 of the Code at least 20 days before the date on which such return is required to be filed with the IRS. The liability reflected on such return shall be dispositive for the purposes hereof unless, within 15 days after such notice is given, the Company furnishes the Employee with a letter of the auditors or tax advisor selected by the Banks indicating a different liability or that the matter is not free from doubt under the applicable laws and regulations and that the Employee may, in such auditor's or advisor's opinion, cogently take a different position, which shall be set forth in the letter with respect to the payments in question. Such letter shall be addressed to the Employee and state that he is entitled to rely thereon. If the Company furnishes such a letter to the Employee, the position reflected in such letter shall be dispositive for purposes of this Agreement, except as provided in subsection 5(f) below. (f) Notwithstanding anything in this Agreement to the contrary, if the Employee's liability for the excise tax under Section 4999 of the Code for a taxable year is subsequently determined to be less than the amount paid by the Company pursuant to subsection 5(e), the Employee shall repay the Company at the time that the amount of such excise tax liability is finally determined, the portion of such income and excise tax payments attributable to the reduction (plus interest on the amount of such repayment at the rate provided on Section 1274(b)(2)(B) of the code) and if the Employee's liability for the excise tax under Section 4999 of the Code for a taxable year is subsequently determined to exceed the amount paid by the Banks pursuant to Section 5, the Company shall make an additional payment of income and excise taxes in the amount of such excess, as well as the amount of any penalty and interest assessed with respect thereto at the time that the amount of such excess and any penalty and interest is finally determined. 4. Funding of Grantor Trust upon Change in Control (a) Not later than ten business days after a Change in Control, the Company shall (i) establish a grantor trust (the "Trust") designed in accordance with Revenue Procedure 92-64 and having a trustee independent of the Company and the Company, (ii) deposit in said Trust an amount equal to the Code ss.280G Maximum, unless the Employee has previously provided a written release of any claims under this Agreement, and (iii) provide the trustee of the Trust with a written direction to hold said amount and any investment return thereon in a segregated account for the benefit of the Employee, and to follow the procedures set forth in the next paragraph as to the payment of such amounts from the Trust. 5 (b) During the 39-consecutive month period after a Change in Control, the Employee may provide the trustee of the Trust with a written notice requesting that the trustee pay to the Employee an amount designated in the notice as being payable pursuant to this Agreement. Within three business days after receiving said notice, the trustee of the Trust shall pay such amount to the Employee, and coincidentally shall provide the Company or its successor with notice of such payment. Upon the earlier of the Trust's final payment of all amounts due under the preceding paragraph or the date 39 months after the Change in Control, the trustee of the Trust shall pay to the Company the entire balance remaining in the segregated account maintained for the benefit of the Employee. The Employee shall thereafter have no further interest in the Trust. 5. Term of the Agreement. This Agreement shall remain in effect for the period commencing on the Effective Date and ending on the earlier of (i) the date thirty-six months after the Effective Date, and (ii) the date on which the Employee terminates employment with the Company; provided that the Employee's rights hereunder shall continue following the termination of this employment with the Company under any of the circumstances described in Section 2 hereof. Additionally, on each annual anniversary date from the Effective Date, the term of this Agreement shall be extended for an additional one-year period beyond the then effective expiration date, unless the Boards of Directors of the Company has notified the Employee in writing that this Agreement shall not be extended. 6. Termination or Suspension Under Federal Law. (a) If the Employee is removed and/or permanently prohibited from participating in the conduct of the Company's affairs by an order issued under Sections 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act ("FDIA") (12 U.S.C. 1818(e)(4) or (g)(1)), all obligations of the Company under this Agreement shall terminate, as of the effective date of the order, but the vested rights of the parties shall not be affected. (b) If the Company is in default (as defined in Section 3(x)(1) of FDIA), all obligations of the Company under this Agreement shall terminate as of the date of default; however, this Paragraph shall not affect the vested rights of the parties. (c) If a notice served under Section 8(e)(3) or (g)(1) of the FDIA (12 U.S.C. 1818(e)(3) and (g)(1)) suspends and/or temporarily prohibits the Employee from participating in the conduct of the Company's affairs, the Company's obligations under this Agreement shall be suspended as of the date of such service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Company shall (i) pay the Employee all or part of the compensation withheld while its contract obligations were suspended, and (ii) reinstate (in whole or in part) any of its obligations which were suspended. 6 7. Expense Reimbursement. In the event that any dispute arises between the Employee and the Company or the Holding Company as to the terms or interpretation of this Agreement, whether instituted by formal legal proceedings or otherwise, including any action that the Employee takes to enforce the terms of this Agreement or to defend against any action taken by the Company or the Holding Company, they shall reimburse the Employee for all costs and expenses, including reasonable attorneys' fees, arising from such dispute, proceedings or actions. Such reimbursement shall be paid within ten days of Employee's furnishing to the Company written evidence, which may be in the form, among other things, of a cancelled check or receipt, of any costs or expenses incurred by the Employee. 8. Successors and Assigns. (a) This Agreement shall not be assignable by the Company, provided that this Agreement shall inure to the benefit of and be binding upon any corporate or other successor of the Company which shall acquire, directly or indirectly, by merger, consolidation, purchase or otherwise, all or substantially all of the assets or stock of the Company. (b) Since the Company is contracting for the unique and personal skills of the Employee, the Employee shall be precluded from assigning or delegating his rights or duties hereunder without first obtaining the written consent of the Company; provided, however that nothing in this paragraph shall preclude (i) the Employee from designating a beneficiary to receive any benefit payable hereunder upon his death, or (ii) the executors, administrators, or other legal representatives of the Employee or his estate from assigning any rights hereunder to the person or person entitled thereunto. 9. Amendments No amendments or additions to this Agreement shall be binding unless made in writing and signed by all of the parties, except as herein otherwise specifically provided. 10. Applicable Law Except to the extent preempted by Federal law, the laws of the State of Louisiana shall govern this Agreement in all respects, whether as to its validity, construction, capacity, performance or otherwise. 7 11. Severability The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. 12. Entire Agreement This Agreement, together with any understanding or modifications thereof as agreed to in writing by the parties, shall constitute the entire agreement between the parties hereto. IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first hereinabove written. IBERIABANK _____________________ By _____________________ Witness Stewart Shea Chairman, Board Compensation Committee _____________________ By _____________________ Witness Daryl G. Byrd President and CEO - --------------------- ---------------------- Witness Employee IN CONSIDERATION of the Employee's provision of valuable services for the Company and the Employee's past, present, or future services for the Holding Company, IT IS AGREED by the Holding Company that it shall be jointly and severally liable for the Company's obligations under this Agreement (determined without regard for Section 6 of the Agreement). IBERIABANK CORPORATION By ______________________ Stewart Shea Chairman, Board Compensation Committee By ______________________ Daryl G. Byrd President and CEO 8 EX-13 5 iberia10k12312000ex13.txt EXHIBIT 13 IBERIABANK ANNUAL REPORT [graphic-logo IBERIA BANK CORPORATION] IBERIABANK Corporation is a commercial bank holding company organized under the laws of the State of Louisiana with consolidated assets at December 31, 2000, of $1.4 billion. The lead bank for IBERIABANK Corporation is IBERIABANK. At the end of 2000, IBERIABANK had 41 offices serving 10 parishes in Louisiana. IBERIABANK and its predecessor organizations have served Louisiana customers for 114 years. IBERIABANK Corporation is the third largest Louisiana-based bank holding company. At December 31, 2000, IBERIABANK Corporation had approximately 1,112 shareholders of record. STOCK INFORMATION Market Price ---------------------------- Dividends 1999 High Low Declared - -------------------------------------------------------------------------------- First Quarter $ 23.500 $ 18.125 $ 0.15 Second Quarter $ 22.375 $ 19.000 $ 0.16 Third Quarter $ 22.000 $ 18.000 $ 0.16 Fourth Quarter $ 17.500 $ 13.250 $ 0.16 Market Price ---------------------------- Dividends 2000 High Low Declared - -------------------------------------------------------------------------------- First Quarter $ 14.000 $ 11.313 $ 0.16 Second Quarter $ 15.625 $ 12.750 $ 0.16 Third Quarter $ 18.313 $ 14.875 $ 0.17 Fourth Quarter $ 21.750 $ 17.375 $ 0.17 ANNUAL MEETING Monday, May 7, 2001, 5:30 p.m. Contemporary Arts Center 900 Camp Street New Orleans, LA SECURITIES LISTING IBERIABANK Corporation's common stock trades on the NASDAQ Stock Market under the symbol "IBKC". In local and national newspapers, the company is listed under "IBERIABANK". SHAREHOLDER ASSISTANCE Shareholders requesting a change of address, records or information about lost certificates should contact: Investor Relations Registrar and Transfer Company 10 Commerce Drive Cranford, NJ 07016 (800) 368-5948 www.invrelations@RTCO.com FOR INFORMATION News releases, 10-K and 10-Q reports, and other information regarding IBERIABANK Corporation and IBERIABANK may be accessed from our web site at www.iberiabank.com. In addition, shareholders and others may contact: Daryl G. Byrd John R. Davis, President and CEO Senior Executive (337) 267-4458 Vice President ext. 4708 (919) 676-7641 - -------------------------------------------------------------------------------- Table of Contents Letter to Shareholders................................................. 2 Strategic Direction and Focus.......................................... 4 Management's Discussion and Analysis................................... 11 Consolidated Financial Statements...................................... 22 Corporate Information.................................................. 52
FINANCIAL HIGHLIGHTS (Dollars in thousands, except per share data) Income Data 2000 1999 % Change --------------------------------------- Net Income $ 12,975 $ 9,529 36% Net Interest Income 51,316 49,705 3% Per Share Data Net Income - Basic $ 2.14 $ 1.55 38% Net Income - Diluted 2.12 1.53 39% Cash Earnings - Diluted 2.54 1.95 30% Book Value (End of Period) 20.99 18.62 13% Tangible Book Value (End of Period) 14.58 11.94 22% Cash Dividends 0.66 0.63 5% Average Balance Sheet Data Loans $ 912,468 $ 806,638 13% Earning Assets 1,295,588 1,251,829 3% Total Assets 1,383,488 1,356,851 2% Deposits 1,128,902 1,145,831 -1% Shareholders' Equity 120,686 121,490 -1% Key Ratios Return on Average Assets 0.94% 0.70% Return on Average Equity 10.75% 7.84% Net Interest Margin (Tax-equivalent Basis) 3.94% 3.97% Net Charge-Offs to Average Loans 0.26% 0.15% Tangible Efficiency Ratio 56.9% 65.4% Average Loans to Average Deposits 80.8% 70.4% Nonperforming Assets to Total Assets 0.57% 0.24% Allowance For Loan Losses to Loans 1.09% 1.04% Tier 1 Leverage Ratio 6.67% 6.26%
-1- LETTER TO SHAREHOLDERS Dear Shareholders: Approximately one year ago we announced a new strategic direction for your company, IBERIABANK Corporation. This new strategic direction included an emphasis on dramatically improving the core profitability of the company and becoming more shareholder-focused. Our firm belief is that over the long term, core earnings drives stock price. I am delighted to report to you that IBERIABANK has performed admirably in the year 2000 and we remain on the challenging trajectory which was set forth. Our goals and results were as follows: Goal: Return on Average Equity ("ROE") of 13% to 15% within 3 to 5 years. Results: ROE improved from 9.20% on an operating basis in 1999 to 10.75% in 2000, and 10.96% in the final quarter of 2000. Goal: Tangible Efficiency Ratio of less than 50% by the end of the 3 to 5 year period. Results: Tangible Efficiency Ratio improved from 65.4% in 1999 to 56.9% in 2000. Goal: Annual loan growth of 7% to 10%. Results: Loan growth of $98 million, or 12%, on a period-end basis. Goal: Annual deposit growth of 2% to 4%. Results: Deposit growth of $43 million, or 4%, on a period-end basis. Goal: Double-digit EPS growth. Results: Fully diluted EPS of $2.12, up 39% versus 1999. On an operating basis, EPS was up 18% versus 1999. Our approach to business is simple -- promises made, promises kept. IBERIABANK recognizes the importance of commitment and accomplishment. The improvements in our earnings were a direct result of the hard work and dedication of all of our associates. We consciously "raised the bar" for our management team, our Board of Directors, and all of our associates. Focus, discipline, and hard work were hallmarks of our efforts during the year. Significant strides were made in enhancing the quality of our products and services, improving our customer service levels, lowering the cost structure of the organization, and investing for future growth. IBERIABANK developed an entrepreneurial atmosphere within the organization. For individuals who are results oriented and entrepreneurial in nature, this environment can be very fulfilling. Clearly, this type of environment is not for everyone. We have developed a winning spirit, a talented team, and a "can-do" attitude. The company has received favorable press recently (such as in Barrons, Investors Business Daily, and analyst updates) based, in part, on our approach and success in achieving results. Most importantly, our clients have begun to recognize the factors that differentiate our organization from the competition. Our strategy is simple--stay close to your clients and prospects, and they will become close to you. This close contact with our clients, along with our speed in decision making, gives us a competitive advantage. The speed in which we make decisions does not, however, compromise our focus on being a conservatively managed organization. Many enhancements were made to the risk profile of our company while at the same time improving returns to our shareholders. During the year, our stock price increased 58% from -2- $13.75 per share at year-end 1999 to $21.75 per share at year-end 2000. When combined with a dividend yield of approximately 4%, our shareholders experienced a total return of 62% for the year 2000. We are very proud of this accomplishment. To quote Gary Player, the professional golfer, "the harder you work, the luckier you get." The success of our company is influenced by the progress that our markets experience. Fortunately, the markets in which we operate continue to experience favorable growth characteristics. The Acadiana region continues to prosper from improved oil and gas prices, in the New Orleans market tourism and trade continue to flourish, and Northeast Louisiana has improved upon its already low unemployment. During the year 2000, we made significant investments in the communities we serve. We will continue to build and develop our communities. IBERIABANK experienced many accomplishments during the year 2000. To become more efficient, we reduced our headcount by almost 17.5%. To improve client relations and decision making, we flattened our organizational structure. To become more shareholder-focused, we placed a significant portion of our compensation "at risk". On November 7, 2000, we placed a $4.5 million commercial real estate loan, made by the prior management team, on nonaccrual status. A significant portion of the credit was charged off and additional reserves were provided to address the credit exposure. Our senior management team decided to forego the team's annual bonuses that were accrued during the year in order to cover the costs associated with the write-downs. This action, while unique in the banking industry, is indicative of our commitment to our shareholders. Promises made, promises kept. The future of IBERIABANK Corporation is a very optimistic one. We have worked aggressively to improve the returns to our shareholders, while at the same time reducing the risk posture of the company. Though much work remains to be done, we are very pleased with our progress to date. We ask that you consider IBERIABANK for all your retail or commercial banking needs. You may visit us at one of our 41 branch locations in Louisiana or at our website, www.iberiabank.com. Thank you for your continued support and confidence in the Board of Directors, management team, and associates of IBERIABANK Corporation. /s/ Daryl G. Byrd - ----------------- Daryl G. Byrd President & CEO -3- STRATEGIC DIRECTION and FOCUS "The secret of success is constancy to purpose." - Benjamin Disraeli Prime Minister, Great Britain 1804 - 1881 Our Focus Approximately one year ago we, at IBERIABANK Corporation, presented our mission statement, objectives, and "comfort ranges" for core earnings. These three focal points are the basis upon which promises are made to our shareholders, our clients, the communities we serve, and our associates. We believe that our progress is dependent upon the fulfillment of these goals and beliefs. A detailed discussion of these key areas is as follows: A mission statement provides an overall roadmap for our associates to follow. In addition, a mission statement provides insight into our corporate values and strategic direction. Mission Statement Provide exceptional value-based client service o It is our belief that clients will pay for exceptional service o We must excel at delivering accurate, timely and friendly service o We are relationship oriented and recognize how valuable our clients are at each distribution point Great place to work o We will provide a work environment where associates are empowered and challenged to perform productively, be their best, and feel a sense of accomplishment o All associates recognize that they can share in the financial success over time if the Company realizes its potential o The Company's leadership team will strive to provide a clear strategic focus for all associates o The Company's total compensation and benefits package consistently exceeds the market and predictively addresses environmental changes for our associates Growth that is consistent with high performance o We must focus on growing profitable client segments, products and services o We will only pursue mergers and acquisitions that add shareholder value o Always ensure that growth is consistent with high standards for credit quality o Understand that growth not only creates shareholder value, but also creates professional and personal growth opportunities for our associates We are shareholder focused o Value creation for our shareholders is our first priority o Earnings performance is created by producing exceptional results for our clients, associates and communities Strong sense of community o The Company's performance is influenced by the quality of life and business atmosphere of the communities within which it operates o Investing in each of our communities through volunteerism, community development or financial contributions is -4- important to our business success in each market. o We can only be as good as the markets we serve To accomplish this mission, we are committed to being the best full-service, commercial bank in Louisiana. There are many characteristics that distinguish our organization from our competitors. These distinguishing characteristics include a clear sense of purpose and a focus on client relationships. We take pride in knowing our clients well, making decisions closer to our clients, and customizing products and services to meet client needs. We have the resources of a large commercial bank, but we also have the agility of a small commercial bank. IBERIABANK has successfully served Louisiana for 114 years. As a result, we understand the needs of our clients. We believe our clients recognize the clear difference of our value proposition versus our competitors'. Corporate Objectives Corporate objectives quantify the specific path the company intends to take to achieve the Corporate Mission. Corporate objectives must be challenging, attainable, focused, balanced, and easily understood by our associates. Our objectives were constructed with the intent to significantly improve shareholder value over the long term. By setting and attaining near term objectives, this long-term goal of significantly improving shareholder value is clearly defined. We have completed one year of the 3 to 5 year period initially set for targeted performance. Our near-term objectives, adjusting for the remaining period, are as follows: o Focus on improving core profitability over the next 2 to 4 year period o Return on Average Equity of 13% to 15% within 2 to 4 years o Substantially improve our operating efficiency, as measured by a Tangible Efficiency Ratio below 50% by the end of the period o Outstanding annual growth in key balances throughout the 2 to 4 year period: o Loans growing 7% to 10% annually o Deposits growing 2% to 4% annually o Double-digit growth in Earnings Per Share ("EPS") As discussed in the Letter to Shareholders, our performance in the year 2000 was excellent and consistent with the objectives stated above. We remain committed to the trajectory outlined in our corporate objectives. Earnings Per Share "Comfort Ranges" In February 2000, the Company provided guidance to IBERIABANK Corporation shareholders and the investment community regarding "comfort ranges" for fully diluted Earnings Per Share. We committed to delivering EPS in the range of $2.10 to $2.15 per share for the year 2000. This range equated to an improvement in operating EPS of 17% to 20%. Our reported results of $2.12 were well within this challenging range. In fact, our quarterly EPS results exceeded average analyst expectations in all four quarters during the year. Financial Performance Summary For 2000 At year-end 2000, total assets of the Company were $1.4 billion. At this level of resources, IBERIABANK Corporation was the third largest bank holding company headquartered in the State of Louisiana, and the largest bank holding company in the State -5- headquartered outside of the City of New Orleans. Compared to the prior year-end, total loans increased $98 million, or 12%. Likewise, total deposits grew $43 million, or 4%, led by a $13 million, or 11%, growth in noninterest bearing deposits. During this period, shareholders' equity climbed $10 million, or 8%. Book value per share increased 13% to $20.99 per share, while tangible book value per share jumped 22% to $14.58 per share. During the year 2000, net interest income grew $1.6 million, or 3.2%. Noninterest income, exclusive of asset sales, decreased $147,000, or 1.2%, during the year. On an operating basis, noninterest expense declined $4 million, or 9%. For the year 2000, reported earnings grew $3.4 million, or 36%, over 1999. The Company reported fully diluted EPS for 2000 of $2.12 per share, an increase of 38% over 1999 results of $1.53 per share. As a result of the increase in revenues and decline in expenses, the Company's efficiency measures improved significantly. The Tangible Efficiency Ratio dropped from 65.4% in 1999 to 56.9% in 2000. Return on Average Assets ("ROA") improved from 0.70% in 1999 to 0.94% in 2000, while Return on Average Equity ("ROE") climbed from 7.84% in 1999 to 10.75% in 2000. At December 31, 2000, shareholders' equity equated to 9.10% of total assets, up from 8.59% one year ago. Likewise, the Company's Tier 1 Leverage Capital ratio increased to 6.67%, compared to 6.26% at year-end 1999, and 5.81% at year-end 1998. On December 13, 2000, IBERIABANK Corporation announced the completion of the share repurchase program authorized on February 17, 2000. The Company repurchased 300,000 shares of common stock at an average cost of $17.93 per share. Simultaneous to the announced completion of the February 2000 program, a new share repurchase program, for 300,000 additional shares, was announced. Nonperforming assets amounted to $8.0 million, or 0.57% of total assets at December 31, 2000, compared to 0.24% at year-end 1999. The increase in nonperforming assets was primarily attributable to a $4.5 million commercial real estate loan that was placed on nonaccrual status in November 2000. The senior management of the Company decided to forego the team's accrued bonus for the year to offset the estimated costs associated with this problem credit. Accomplishments During The Year IBERIABANK Corporation experienced many accomplishments during the year 2000. The following is a brief listing of some notable accomplishments made during the year to improve shareholder returns, reduce the risk profile of the Company, and provide for future growth: o Flattened organizational structure to speed decision-making and improve efficiency o Reduced headcount by 96 full-time equivalent employees ("FTEs"), or almost 17.5% of the workforce. Approximately two-thirds of these FTEs were reduced via attrition o Closed three branches; converted one branch to a drive through facility o Sold a 3-story Lafayette building for a $1.9 million gain o Sold Central Center facility in Monroe o Began space compression project with the intent to lease out excess space o Reduced excess cash position and other nonearning assets -6- o Revised deposit rate setting process to ensure fair market-based pricing o Introduced a new cash management program o Revised and improved the commercial loan pricing model o Improved ATM uptime from 92% to 99% o Consolidated loan operations, deposit operations, and other production functions o Reviewed contracts outstanding for savings, improved contract terms and to limit exposures o Restructured $45 million of illiquid mortgage backed securities o Completed a successful transition through the critical "Y2K period" with no disruption of service o Increased sell side analyst coverage from 2 to 4 investment firms. At the end of the year, all four analysts held the equivalent of "strong buy" recommendations on the Company's stock o Completed multiple road shows and institutional money manager visits in both local Louisiana markets (New Orleans, Lafayette, New Iberia, Crowley, and Monroe) and major eastern US cities o Changed the name of the holding company from ISB Financial Corporation to IBERIABANK Corporation. In addition, changed the stock symbol from "ISBF" to "IBKC" o Produced record quarterly earnings and EPS in each quarter. In addition, the Company's reported EPS exceeded average analyst estimates in each quarter o Raised the quarterly dividend to $0.17 per share, which produced an indicated annual dividend of $0.68 per share, up 6% from the prior period o IBERIABANK Corporation common stock price increased 58% during the year 2000 o The Company's evolution and progress was recounted in a number of business, trade, and local publications during the year o Subsequent Event: On January 11, 2001, IBERIABANK announced the formation of a joint venture to provide insurance services to its clients. The new company is a joint effort by IBERIABANK and Burch, Marcus, Pool, Krupp, Daniel & Babineaux, Inc., one of Louisiana's largest agent-owned independent insurance agencies, with annual premiums in excess of $50 million. We are very proud of the progress and accomplishments made during the year 2000. The improvements in our earnings power, product improvements, risk reduction strategies, and management initiatives have produced outstanding results. We have a clear sense of direction and we are focused on results. These results are delivered in an efficient and effective manner. Our corporate momentum has been building during this past year. This momentum, for our clients, associates, and shareholders, validates the success of our operating formula. We have built a winning team with a winning formula. Most importantly, we are making a positive difference to our clients and our communities. The communities we serve continue to show great promise. The Acadiana market has demonstrated steady, cautious improvement, despite the dramatic surge in oil and gas prices. Lessons learned from prior cyclical swings and improved diversification within the region have combined to create a very favorable business climate in the area. As evidence of this favorable environment, retail sales in Lafayette hit record monthly -7- highs many times during the year. Further local economic benefits are expected as the fabrication business continues to improve. The New Orleans economy showed consistent progress during 2000. The City has developed as one of the premier convention cities in the country with strong growth in related business activities. At the same time, New Orleans has become one of the country's top vacation destinations, which has significantly increased basic tourism activity. Separately, the City's port continues to be one of the country's leaders in the shipping trade, and commercial business generally continues to grow. IBERIABANK's commercial activities in and around the City were well received in 2000, and the Bank is well positioned to continue to capture increased commercial market share in 2001. Northeast Louisiana includes the markets of Monroe, West Monroe, and Ruston. These three markets serve as commerce centers (such as shopping, health care, trade, etc.) for regional activity in this part of the State. This area is dependent upon manufacturing, the services trade, and education. Continued expansion of regional headquarters operations of a number of large service companies has helped fuel some of the lowest unemployment statistics in the State of Louisiana. Consistency and economic stability are hallmarks for this region of the State. We will continue to invest in the communities we serve. In July 2000, IBERIABANK made the largest contribution to a not-for-profit rural community development corporation in Louisiana. IBERIABANK invested the lead gift to kick off a $33 million campaign to capitalize Southern Mutual Financial Services, Incorporated. The Southern Mutual Financial Services "Community Development Bank" will lend approximately $33 million in low interest rural housing loans over a nine-parish area of Southern Louisiana. IBERIABANK has made significant contributions to United Way Agencies in IBERIABANK markets. In addition, our associates have contributed time and energy to many local causes. We understand the importance of participating as good corporate citizens and making positive contributions to the communities where we do business. We recognize that we, as a company, are only as good as the communities we serve. Overall, our Board of Directors and leadership team were very pleased at the progress the Company demonstrated during the year 2000. We remain committed, both now and in the future, to delivering outstanding results to our shareholders, professional and personal development opportunities to our associates, and exceptional service to our clients. We believe we are well situated to continue to execute on the strategic plan we began one year ago. As evidenced by our actions during this past year, we stand firm in our belief that promises made are promises kept. Forward-Looking Information Safe Harbor Statement Statements contained in this report which are not historical facts and which pertain to future operating results of IBERIABANK Corporation and its subsidiaries constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve significant risks and uncertainties. Actual results may differ materially from the results discussed in these forward-looking statements. A discussion of factors affecting IBERIABANK Corporation's business and prospects is contained in the Company's periodic filings with the Securities and Exchange Commission. -8-
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA (Dollars in thousands, except per share data) December 31, ------------------------------------------------------------------ Balance Sheet Data 2000 1999 1998 1997 1996 ---------- ---------- ---------- ---------- ---------- Total assets $1,396,162 $1,363,578 $1,401,630 $ 947,282 $ 929,264 Cash and cash equivalents 34,541 47,713 145,871 44,307 53,385 Loans receivable 940,525 842,878 768,235 660,063 575,709 Investment securities 344,545 384,881 377,556 192,442 254,029 Goodwill and acquisition intangibles 38,796 42,063 45,352 16,358 17,807 Deposit accounts 1,143,187 1,100,014 1,220,594 786,864 766,729 Borrowings 114,843 135,053 45,639 46,728 47,750 Shareholders' equity 127,042 117,189 123,967 115,564 114,006 Book value per share $ 20.99 $ 18.62 $ 18.91 $ 17.75 $ 17.30 Tangible book value per share 14.58 11.94 11.99 15.24 14.60 Year Ended December 31, ------------------------------------------------------------------ Income Statement Data 2000 1999 1998 1997 1996 ---------- ---------- ---------- ---------- ---------- Interest income $ 104,046 $ 95,085 $ 79,224 $ 69,607 $ 53,434 Interest expense 52,730 45,380 38,458 36,050 27,136 ---------- ---------- ---------- -------- ---------- Net interest income 51,316 49,705 40,766 33,557 26,298 Provision for loan losses 3,861 2,836 903 1,097 156 ---------- ---------- ---------- -------- ---------- Net interest income after provision for loan losses 47,455 46,869 39,863 32,460 26,142 Noninterest income 12,738 13,679 10,214 5,664 3,296 Noninterest expense 39,704 44,881 33,758 29,001 20,983 ---------- ---------- ---------- -------- ---------- Income before income taxes 20,489 15,667 16,319 9,123 8,455 Income taxes 7,514 6,138 6,182 3,780 3,177 ---------- ---------- ---------- -------- ---------- Net Income $ 12,975 $ 9,529 $ 10,137 $ 5,343 $ 5,278 ========== ========== ========== ======== ========== Earnings per share - basic $ 2.14 $ 1.55 $ 1.61 $ 0.86 $ 0.80 ========== ========== ========== ======== ========== Earnings per share - diluted $ 2.12 $ 1.53 $ 1.56 $ 0.83 $ 0.80 ========== ========== ========== ======== ========== Cash earnings per share - diluted $ 2.54 $ 1.95 $ 1.84 $ 1.07 $ 0.86 ========== ========== ========== ======== ========== Cash dividends per share $ 0.66 $ 0.63 $ 0.57 $ 0.45 $ 0.33 ========== ========== ========== ======== ==========
(continued) -9-
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA (continued) (Dollars in thousands, except per share data) At or For the Year Ended December 31, ------------------------------------------------------- Key Ratios (1) 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- Return on average assets 0.94% 0.70% 0.93% 0.57% 0.74% Return on average equity 10.75 7.84 8.47 4.66 4.49 Equity to assets at the end of period 9.10 8.59 8.84 12.20 12.27 Earning assets to interest- bearing liabilities 114.66 112.83 114.55 113.91 120.66 Interest rate spread (2) 3.38 3.51 3.48 3.09 2.93 Net interest margin (2) 3.94 3.97 4.03 3.63 3.75 Noninterest expense to average assets 2.87 3.31 3.11 3.07 2.94 Efficiency ratio (3) 61.99 70.81 66.22 73.94 70.90 Tangible efficiency ratio 56.88 65.44 62.17 70.00 69.55 Dividend payout ratio 31.42 41.88 36.56 54.41 41.72 Asset Quality Data Nonperforming assets to total assets at end of period (4) 0.57% 0.24% 0.44% 0.28% 0.38% Allowance for loan losses to nonperforming loans at end of period 135.78 279.25 124.39 244.56 185.27 Allowance for loan losses to total loans at end of period 1.09 1.04 0.93 0.79 0.80 Consolidated Capital Ratios Tier 1 leverage capital ratio 6.67% 6.26% 5.81% 10.54% 10.34% Tier 1 risk-based capital ratio 10.05 9.42 9.89 18.52 20.91 Total risk-based capital ratio 11.19 10.43 10.80 19.50 21.92
(1) With the exception of end-of-period ratios, all ratios are based on average daily balances during the respective periods and are annualized where appropriate. (2) Interest rate spread represents the difference between the weighted average yield on earning assets and the weighted average cost of interest-bearing liabilities. Net interest margin represents net interest income as a percentage of average earning assets. (3) The efficiency ratio represents noninterest expense, as a percentage of the sum of net interest income and noninterest income. (4) Nonperforming assets consist of nonaccruing loans, loans 90 days or more past due and reposessed assets. -10- Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis is intended to assist readers in understanding the financial condition and results of operations of IBERIABANK Corporation (the "Company") and its subsidiary for the years ended December 31, 1998 through 2000. This review should be read in conjunction with the audited consolidated financial statements, accompanying footnotes and supplemental financial data included herein. Financial Condition Assets General - Total assets of the Company remained relatively stable at $1.4 billion for December 31, 2000 and 1999. The increase in total assets was $32.6 million, or 2.4%. This increase was primarily due to the increase in loans receivable. The following discussion describes the major changes in the asset mix during 2000. Cash and Cash Equivalents - Cash and cash equivalents, which consist of interest-bearing and noninterest-bearing funds on deposits and cash on hand, decreased by $13.2 million, or 27.6%, to $34.5 million at December 31, 2000 compared to $47.7 million at December 31, 1999. The decrease in cash was due primarily to the elimination of the extra cash obtained for Y2K demands at December 1999 and a decrease in the cash held in the branch distribution network. Investment Securities - Investment securities decreased by an aggregate of $40.3 million, or 10.5%, to $344.5 million at December 31, 2000 compared to $384.9 million at December 31, 1999. Such decrease was the result of $10.5 million of investment securities which matured, $35.7 million of principal collections on mortgage backed securities, $43.7 million in sales of investment securities and $290,000 of amortization of premiums on investment securities, all of which was partially offset by the $7.4 million increase in market value of investment securities available for sale and the $43.7 million of investment securities purchased. At December 31, 2000, $268.2 million of the Company's investment securities were classified as available for sale with a pre-tax net unrealized loss of $3.5 million. At such date, $96.3 million of the Company's investment securities consisted of U.S. Government and Federal agency obligations and $165.3 million consisted of mortgage backed securities. At December 31, 2000, $76.3 million of the Company's investment securities were classified as held to maturity with a pre-tax Asset Mix [graphic-depicting the following] Other Assets 5.9% Investments 24.5% Cash 2.5% Mortgage Loans 20.6% Commercial Loans 19.6% Consumer Loans 26.9% -11- net unrealized loss of $382,000, consisting mostly of mortgage backed securities of $74.9 million. Note 3 to the Consolidated Financial Statements provides further information on the Company's investment securities. Loans Held for Sale - Loans held for sale decreased $1.4 million, or 29.8%, to $3.3 million at December 31, 2000 compared to $4.8 million at December 31, 1999. Loans held for sale represent single-family residential mortgage loans to be sold in the secondary market. In 2000, 40.4% of single-family mortgage originations were sold in the secondary market, compared to 83.1% in 1999. The decrease in the percentage of originations sold was attributable to an increase in variable rate loans originated in 2000, which are held in the portfolio. Loans Receivable - Loans receivable increased by $97.6 million, or 11.6%, to $940.5 million at December 31, 2000 compared to $842.9 million at December 31, 1999. During 2000, single-family mortgage loans increased $13.0 million, or 4.9%, construction loans increased $1.1 million, or 17.3%, commercial real estate loans increased $39.2 million, or 24.9%, home equity loans increased $16.5 million, or 18.1%, automobile loans increased $1.9 million, or 8.0%, indirect automobile loans increased $25.8 million, or 14.4%, credit card loans increased $3.1 million, or 48.5%, and other consumer loans increased $462,000, or 1.5%. During 2000, commercial business loans decreased $3.5 million, or 4.2%. The changes in the loan portfolio reflect management's continued emphasis on commercial and consumer lending. For additional information on loans, see Note 4 to the Consolidated Financial Statements. Premises and Equipment, Net - Premises and equipment, net, decreased by $4.5 million, or 17.3%, to $21.5 million at December 31, 2000 compared to $26.0 million at December 31, 1999. The decrease was the result of $2.7 million of depreciation of premises and equipment and $2.8 million of assets sold, which was partially offset by $1.1 million in purchases of other premises and equipment. Liabilities and Shareholders' Equity General - The Company's primary funding sources include deposits, short-term and long-term borrowings and shareholders' equity. The following discussion focuses on the major changes in the mix during 2000. Deposits - Deposits remained relatively stable at $1.1 billion for December 31, 2000 and 1999. The increase in total deposits was Liability and Equity Mix [graphic depicting the following] Regular Savings 13.4% Interest Bearing Demand Deposits 18.5% Equity 9.1% Noninterest Bearing Demand Deposits 9.3% Certificate of Deposits 40.8% Borrowings 8.2% Other Liabilities 0.8% -12- $43.2 million, or 3.9%. The increase in de-posits was primarily the result of an increase in savings account balances as a result of promotional pricing and the Company's increased calling efforts. Certificates of deposit $100,000 and over increased $16.6 million, or 13.3%, from $124.5 million at December 31, 1999 to $141.1 million at December 31, 2000. At December 31, 2000, $129.5 million, or 11.3%, of the Company's total deposits were noninterest bearing, compared to $116.5 million, or 10.6%, at December 31, 1999. Additional information regarding deposits is provided in Note 7 to the Consolidated Financial Statements. Short-term Borrowings - The Company's short-term borrowings are comprised of advances from the Federal Home Loan Bank ("FHLB") of Dallas. Total short-term borrowings decreased $29.0 million, or 34.9%, to $54.0 million at December 31, 2000 compared to $83.0 million at December 31, 1999. These advances were used to fund loan growth. The weighted average rate on short-term Federal Home Loan Bank advances was 6.4% at December 31, 2000. For additional information, regarding the Company's short-term borrowings, see Note 8 to the Consolidated Financial Statements. Long-term Borrowings - At December 31, 2000, the Company's long-term borrowings are comprised of fixed rate advances from the Federal Home Loan Bank and a long-term note payable from Union Planters. Long-term borrowings increased $8.8 million, or 16.9%, to $60.8 million at December 31, 2000 compared to $52.1 million at December 31, 1999, due to $16.7 million in new advances from the Federal Home Loan Bank to match-fund certain loans and an additional draw on Union Planters note, all of which was partially offset by normal amortization payments. For additional information, including maturities of the Company's long-term borrowings, see Note 9 to the Consolidated Financial Statements. Shareholders' Equity - Shareholders' equity provides a source of permanent funding, allows for future growth and provides the Company with a cushion to withstand unforeseen adverse developments. At December 31, 2000, shareholders' equity totaled $127.0 million, an increase of $9.9 million from the previous year end level. The increase in shareholders' equity in 2000 was the result of $13.0 million of net income, $922,000 of common stock released by the Company's Employee Stock Ownership Plan ("ESOP") trust, $612,000 of common stock earned by participants of the Company's Regulatory Capital [graphic-chart depicting the following] Total risk-based ratio Tier 1 risk-based ratio Tier 1 leverage ratio Required IBERIABANK Corporation IBERIABANK -13- [graphic-graphs depicting the following] Net Income Dollars in thousands Net Interest Margin Recognition and Retention Plan ("RRP") trust, and a $4.8 million increase in unrealized gain on securities available for sale, all of which were partially offset by $4.1 million of cash dividends declared on the Company's common stock, and $5.4 million of the Company's common stock repurchased and placed into treasury. Federal regulations impose minimum regulatory capital requirements on all institutions with deposits insured by the Federal Deposit Insurance Corporation ("FDIC"). The Board of Governors of the Federal Reserve System ("FRB") imposes similar capital regulations on bank holding companies. At December 31, 2000, the Company exceeded all regulatory capital ratio requirements with a Tier 1 leverage capital ratio of 6.67%, a Tier 1 risk-based capital ratio of 10.05% and a total risk-based capital ratio of 11.19%. At December 31, 2000, IBERIABANK exceeded all regulatory capital ratio requirements with a Tier 1 leverage capital ratio of 7.22%, a Tier 1 risk-based capital ratio of 10.86% and a total risk-based capital ratio of 11.99%. Results of Operations General - The Company reported net income of $13.0 million, $9.5 million and $10.1 million for the years ended December 31, 2000, 1999 and 1998, respectively. Earnings in 2000 include a $1.1 million, after taxes, loss on sale of investment securities as a result of the restructuring of a significant portion of the long-term investment portfolio in late 1999 and a $1.2 million, after taxes, gain on sale of property. Earnings in 1999 include a $454,000, after taxes, gain on the sale of property and $766,000, after taxes, in restructuring charges. Earnings in 1998 include a $1.3 million, after taxes, gain on the sale of property. Without certain one-time or nonoperating items in 1999 and 1998, the Company would have reported net income of $13.0 million, $11.2 million and $8.8 million for the years ended December 31, 2000, 1999 and 1998, respectively. During 2000, interest income increased $9.0 million, interest expense increased $7.4 million, the provision for loan losses increased $1.0 million, noninterest income decreased $941,000, noninterest expense decreased $5.2 million and income tax expense increased $1.4 million. Cash earnings (net income before the amortization of acquisition intangibles) were $15.5 million, $12.2 million and $12.0 million for the years ended December 31, 2000, 1999 and 1998, respectively. Net Interest Income - Net interest income is the difference between interest realized on earning assets net of interest paid on interest-bearing liabilities. The Company's average interest rate spread, which is the difference between the yields earned on earning assets and the rates paid on interest-bearing liabilities, was 3.38%, 3.51%, and 3.48% during the years ended December 31, 2000, 1999, and 1998, respectively. The Company's net interest margin, which is net interest income as a percentage of average earning assets, was 3.94%, 3.97% and 4.03% during the years ended December 31, 2000, 1999 and 1998, respectively. Net interest income increased $1.6 million, or 3.2%, in 2000 to $51.3 million compared to $49.7 million in 1999. Such increase was due to a $9.0 million, or 9.4%, increase in interest income, which was partially offset by a $7.4 million, or 16.2%, increase in interest expense. Net interest income increased $8.9 million, or 21.9%, in 1999 to $49.7 million compared to $40.8 million in 1998. The reason for such increase was a $15.9 million, or 20.0%, -14- increase in interest income, which was partially offset by a $6.9 million, or 18.0%, increase in interest expense. The increase in net interest income was caused by the increase in earning assets resulting from the September 1998 acquisition of 17 branches. Average loans made up 70.4% of average earning assets as of December 31, 2000 as compared to 64.4% at December 31, 1999. This was an increase of 13.1%. The increase in average loans was funded mainly by increased borrowings and the decrease in investments. Average investment securities made up 29.2% of average earning assets at December 31, 2000 compared to 33.6% at December 31, 1999. Average borrowings made up 10.8% of average interest bearing liabilities at December 31, 2000 compared to 7.2% at December 31, 1999. The Average Balances, Net Interest Income and Interest Yields/ Rates table and the Rate/Volume Analysis table further explain the changes in net interest income. Provision for Loan Losses - Provisions for loan losses are charged to earnings to bring the total allowance for loan losses to a level considered appropriate by management based on 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. Management of the Company assesses the allowance for loan losses on a quarterly basis and will make provisions for loan losses as deemed appropriate in order to maintain the adequacy of the allowance for loan losses. The Company made a provision for loan losses of $3.9 million in 2000, compared to $2.8 million and $903,000 for 1999 and 1998, respectively. Net loan charge offs for 2000 totaled $2.4 million, compared to $1.2 million for 1999. The increase in the provision for 2000 was mainly due to a large commercial credit that was placed on nonaccrual status. The allowance for loan losses amounted to $10.2, million or 1.1% and 135.8% of total loans and total nonperforming loans, respectively, at December 31, 2000 compared to 1.0% and 279.3%, respectively, at December 31, 1999. The allowance for loan losses increased $1.5 million, or 17.0%, from the $8.7 million at December 31, 1999. The increase included a $3.9 million provision for loan losses. The decrease in the allowance for loan losses as a percentage of nonperforming loans was attributable to the increase in nonperforming loans. Nonperforming loans (nonaccrual loans and accruing loans 90 days or more past due) were $7.5 million and $3.1 million at December 31, 2000 and 1999, respectively. The increase in nonperforming loans was primarily attributable to a $4.5 million commercial real estate loan, which was placed on nonaccrual status. The Company's foreclosed property amounted to $421,000 and $185,000 at December 31, 2000 and 1999, respectively. As a percentage of total assets, the Company's total nonperforming assets, which consists of nonperforming loans plus foreclosed property, amounted to $8.0 million, or 0.6% at December 31, 2000 compared to $3.3 million, or 0.2%, at December 31, 1999. Although management of the Company believes that the Company's allowance for loan losses was adequate at December 31, -15- 2000, based on facts and circumstances available, there can be no assurances that additions to such allowance will not be necessary in future periods, which would adversely affect the Company's results of operations. Noninterest Income - For 2000, the Company reported noninterest income of $12.7 million compared to $13.7 million for 1999. The primary reasons for the $941,000, or 6.9%, decrease in noninterest income was a $1.8 million loss on sale of investments compared to no gain or loss in 1999, a $658,000, or 61.9%, decrease in gain on the sale of loans and a $204,000, or 7.1% decrease in other income. These decreases were partially offset by a $256,000, or 3.3% increase in service charges on deposit accounts, a $229,000, or 21.2%, increase in ATM fee income, and a $1.2 million, or 140.3%, increase in gain on sale of assets. Total noninterest income amounted to $13.7 million and $10.2 million for the years ended December 31, 1999 and 1998, respectively. The primary reasons for the $3.5 million, or 33.9%, increase in noninterest income during 1999 compared to 1998 was a $2.9 million, or 60.7%, increase in service charges on deposit accounts, and a $1.3 million, or 86.2%, increase in other income. Noninterest Expense - Noninterest expense includes salaries and employee benefits, occupancy and equipment expense, communication and delivery expense, marketing and business development expense, amortization of acquisition intangibles and other items. Noninterest expense amounted to $39.7 million, $44.9 million and $33.8 million for the three years ended December 31, 2000, 1999 and 1998, respectively. The primary reason for the $5.2 million, or 11.5%, decrease in noninterest expense for 2000 compared to 1999 was a result of the 1999 restructuring and the continued efforts by management to control discretionary expenses. Salaries and employee benefits decreased $2.3 million, or 10.9%, occupancy and equipment expense decreased $66,000, or 1.2%, communication and delivery expense decreased $150,000, or 5.6%, the amortization of acquisition intangibles decreased $133,000, or 3.9%, printing, stationary and supplies expense decreased $215,000, or 22.7%, restructuring expenses decreased $1.2 million (for more information regarding restructuring expenses see Note 2 to the Consolidated Financial Statements), other expenses decreased $1.4 million, or 19.7%, marketing and business development expense decreased $229,000, or 20.9%, and data processing expense increased $453,000, or 49.5%. The primary reason for the $11.1 million, or 32.9%, increase in noninterest expense for 1999 compared to 1998 was the inclusion of one full year of expenses from the acquisition of 17 branches in September 1998. Income Taxes - For the years ended December 31, 2000, 1999 and 1998 the Company incurred income tax expense of $7.5 million, $6.1 million and $6.2 million, respectively. The Company's effective tax rate amounted to 36.7%, 39.2% and 37.9% during 2000, 1999 and 1998, respectively. The difference between the effective tax rate and the statutory tax rate primarily related to variances in the items that are either nontaxable or non-deductible, primarily the non-deductibility of part of the amortization of acquisition intangibles, the non-deductible portion of the ESOP compensation expense and the capital loss carryforward used during 1998 and 1999. For more information, see Note 10 to the Consolidated Financial Statements. -16- 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.
Years Ended December 31, -------------------------------------------------------------------------------------------------- 2000 1999 1998 Average Average Average Average Yield/ Average Yield/ Average Yield/ (Dollars in thousands) Balance Interest Rate (1) Balance Interest Rate (1) Balance Interest Rate (1) ------- ------- --------- ------- -------- -------- ------- -------- -------- Earning assets: Loans receivable: (2) Mortgage loans $ 289,983 $ 22,821 7.87% $ 292,795 $ 23,163 7.91% $ 352,222 $ 28,157 7.99% Commercial loans 261,463 24,763 9.32 217,774 19,585 8.99 152,090 14,607 9.60 Consumer and other loans 361,022 32,043 8.88 296,069 25,685 8.68 211,747 18,600 8.78 ----------- --------- ---- ----------- -------- ---- ----------- --------- ---- Total Loans 912,468 79,627 8.68 806,638 68,433 8.48 716,059 61,364 8.57 ----------- --------- ---- ----------- -------- ---- ----------- --------- ---- Investment securities 378,188 24,128 6.38 421,063 25,608 6.08 240,188 15,292 6.37 Other earning assets 4,932 291 5.90 24,128 1,044 4.33 54,160 2,568 4.74 ----------- --------- ---- ----------- -------- ---- ----------- --------- ---- Total earning assets 1,295,588 104,046 8.03 1,251,829 95,085 7.60 1,010,407 79,224 7.84 --------- -------- --------- Allowance for Loan Losses (9,096) (7,792) (6,027) Nonearning assets 96,996 112,814 82,060 ----------- ----------- ----------- Total assets $ 1,383,488 $ 1,356,851 $ 1,086,440 =========== =========== =========== Interest-bearing liabilities: Deposits: Demand deposits $ 249,650 5,862 2.35 $ 279,328 6,301 2.26 $ 196,254 4,801 2.45 Savings deposits 181,930 6,571 3.61 131,824 2,681 2.03 114,934 2,541 2.21 Certificates of deposits 575,828 32,133 5.58 618,582 31,518 5.10 517,952 27,707 5.35 ----------- --------- ---- ----------- -------- ---- ----------- --------- ---- Total deposits 1,007,408 44,566 4.42 1,029,734 40,500 3.93 829,140 35,049 4.23 Borrowings 122,522 8,164 6.55 79,741 4,880 6.12 52,936 3,409 6.44 ----------- --------- ---- ----------- -------- ---- ----------- --------- ---- Total interest-bearing liabilities 1,129,930 52,730 4.65 1,109,475 45,380 4.09 882,076 38,458 4.36 --------- -------- --------- Noninterest-bearing demand deposits 121,494 116,097 69,670 Noninterest-bearing liabilities 11,378 9,789 14,982 ----------- ----------- ----------- Total liabilities 1,262,802 1,235,361 966,728 Shareholders' Equity 120,686 121,490 119,712 ----------- ----------- ----------- Total liabilities and shareholders' equity 1,383,488 $ 1,356,851 $ 1,086,440 =========== =========== =========== Net earning assets $ 165,658 $ 142,354 $ 128,331 ----------- ----------- ----------- Net interest spread $ 51,316 3.38% $ 49,705 3.51% $ 40,766 3.48% --------- ---- -------- ---- --------- ---- Net interest margin 3.94% 3.97% 4.03% ==== ==== ==== Ratio of average earning assets to average interest-bearing liabilities 114.66% 112.83% 114.55% ------ ------ ------
(1) Annualized. (2) Loans receivable includes loans held for sale. -17- Rate/Volume Analysis: The following table analyzes the dollar amount of changes in interest income and interest expense for major components of earning assets and interest-bearing liabilities. The table distinguishes between (i) changes attributable to rate (changes in rate multiplied by the prior period's volume), (ii) changes attributable to volume (changes in volume multiplied by the prior period's rate), (iii) mixed change (changes in rate multiplied by changes in volume), and (iv) total increase (decrease).
Years Ended December 31, --------------------------------------------------------------------------------------- 2000/1999 1999/1998 Change Attributable To Change Attributable To ------------------------------------------- ------------------------------------------ Total Total Rate/ Increase Rate/ Increase (Dollars in thousands) Volume Rate Volume (Decrease) Volume Rate Volume (Decrease) -------- -------- -------- -------- -------- -------- -------- -------- Earning assets: Loans: Mortgage loans $ (222) $ (121) $ 1 $ (342) $ (4,751) $ (293) $ 50 $ (4,994) Commercial business loans 3,929 1,040 209 5,178 6,308 (929) (401) 4,978 Consumer and other loans 5,635 593 130 6,358 7,407 (230) (92) 7,085 Investment securities (2,608) 1,255 (127) (1,480) 11,516 (684) (516) 10,316 Other earning assets (831) 380 (302) (753) (1,424) (225) 125 (1,524) -------- -------- -------- -------- -------- -------- -------- -------- Total net change in income on earning assets 5,903 3,147 (89) 8,961 19,056 (2,361) (834) 15,861 -------- -------- -------- -------- -------- -------- -------- -------- Interest-bearing liabilities: Deposits: Demand deposits (669) 258 (28) (439) 2,032 (374) (158) 1,500 Savings deposits 1,019 2,080 791 3,890 373 (204) (29) 140 Certificates of deposit (2,178) 3,001 (208) 615 5,383 (1,316) (256) 3,811 Borrowings 2,618 433 233 3,284 1,726 (169) (86) 1,471 -------- -------- -------- -------- -------- -------- -------- -------- Total net change in expense on interest-bearing liabilities 790 5,772 788 7,350 9,514 (2,063) (529) 6,922 -------- -------- -------- -------- -------- -------- -------- -------- Change in net interest income $ 5,113 $ (2,625) $ (877) $ 1,611 $ 9,542 $ (298) $ (305) $ 8,939 ======== ======== ======== ======== ======== ======== ======== ========
-18- Asset and Liability Management The principal objective of the Company's asset and liability management function is to evaluate the interest-rate risk included in certain balance sheet accounts, determine the level of risk appropriate given the Company's business focus, operating environment, capital and liquidity requirements and performance objectives, establish prudent asset concentration guidelines and manage the risk consistent with Board approved guidelines. Through such management, the Company seeks to reduce the vulnerability of its operations to changes in interest rates. The Company's actions in this regard are taken under the guidance of the Asset/Liability Committee ("ALCO"), which is chaired by the Chief Financial Officer and comprised of members of the Company's senior management. The ALCO generally meets on a monthly basis, to review, among other things, the sensitivity of the Company's assets and liabilities to interest rate changes, local and national market conditions and interest rates. In connection therewith, the ALCO generally reviews the Company's liquidity, cash flow needs, maturities of investments, deposits and borrowings, and capital position. The objective of interest rate risk management is to control the effects that interest rate fluctuations have on net interest income and on the net present value of the Company's earning assets and interest-bearing liabilities. Management and the Board are responsible for managing interest rate risk and employing risk management policies that monitor and limit exposure to interest rate risk. Interest rate risk is measured using net interest margin simulation and asset/liability net present value sensitivity analyses. These analyses provide a range of potential impacts on net interest income and portfolio equity caused by interest rate movements. The Company uses financial modeling to measure the impact of changes in interest rates on the net interest margin. As of December 31, 2000, the model indicated the impact of an immediate and sustained 200 basis point rise in rates over 12 months would approximate a 4.4% decrease in net interest income, while a 200 basis point decline in rates over the same period would approximate a 0.6% decrease in net interest income from an unchanged rate environment. The preceding sensitivity analysis does not represent a Company forecast and should not be relied upon as being indicative of expected operating results. These hypothetical estimates are based upon numerous assumptions including the nature and timing of interest rate levels including yield curve shape, prepayments on loans and securities, deposit decay rates, pricing decisions on loans and deposits, reinvestment/replacement of asset and liability cash flows, and others. While assumptions are developed based upon current economic and local market conditions, the Company cannot make any assurances as to the predictive nature of these assumptions including how customer preferences or competitor influences might change. Also, as market conditions vary from those assumed in the sensitivity analysis, actual results will also differ due to: prepayment/refinancing levels likely deviating from those assumed, the varying impact of interest rate changes on caps or floors on adjustable rate assets, the potential effect of changing debt service levels on customers with adjustable rate loans, depositor early withdrawals and product preference changes and other internal/external variables. Furthermore, the sensitivity analysis does not reflect actions -19- that the ALCO might take in responding to or anticipating changes in interest rates. As part of its asset/liability management strategy, the Company has emphasized the origination of consumer loans, commercial business loans and commercial real estate loans, all of which typically have shorter terms than residential mortgage loans and/or adjustable or variable rates of interest. The Company has also emphasized the origination of fixed-rate, long-term residential loans for sale in the secondary market. As of December 31, 2000, $277.8 million, or 29.5%, of the Company's total loan portfolio had adjustable interest rates. As part of the Company's asset/liability management strategies, the Company has limited its investments in investment securities other than mortgage backed securities to those with an estimated average life of seven years or less. The Company's strategy with respect to liabilities in recent periods has been to emphasize transaction accounts, particularly noninterest bearing transaction accounts, which are not as sensitive to changes in interest rates as time certificates of deposit. At December 31, 2000, 50.2% of the Company's deposits were in transaction accounts compared to 46.7% at December 31, 1999. Noninterest bearing transaction accounts total 11.3% of total deposits at December 31, 2000, compared to 10.6% of total deposits at December 31, 1999. 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, borrowings, loan and mortgage backed security amortizations, prepayments and maturities, maturities of investment securities and other short-term investments and funds provided from operations. While scheduled payments from the amortization of loans and mortgage backed securities and maturing investment securities and short-term investments are relatively predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions and competition. In addition, the Company invests excess funds in overnight deposits and other short-term earning assets, which provide liquidity to meet lending requirements. The Company has been able to generate sufficient cash through its deposits and borrowings. At December 31, 2000, the Company had $105.6 million of outstanding advances from the FHLB of Dallas. Additional advances available at December 31, 2000 from the FHLB of Dallas amounted to $421.1 million. The Company also has $9.2 million of long-term debt outstanding with Union Planters at December 31, 2000. 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, to pay maturing certificates of deposit and deposit withdrawals, to fund loan commitments and to maintain a portfolio of mortgage backed and investment securities. At December 31, 2000, the total approved loan commitments outstanding amounted to $22.0 million. At the same date, commitments under unused lines of credit, including credit card lines, amounted to $167.7 million. Certificates of deposit scheduled to -20- mature in one year or less at December 31, 2000 totaled $417.4 million. Management believes that a significant portion of maturing deposits will remain on deposit with the Company. The Company anticipates it will continue to have sufficient funds together with available borrowings to meet its current commitments. Impact of Inflation and Changing Prices The consolidated financial statements and related financial data presented herein have been prepared in accordance with generally accepted accounting principles, which generally require the measurement of financial position and operating results in terms of historical dollars, without considering changes in relative purchasing power over time due to inflation. Unlike most industrial companies, virtually all of the Company's assets and liabilities are monetary in nature. As a result, interest rates generally have a more significant impact on the Company's performance than does the effect of inflation. Interest rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services, since such prices are affected by inflation to a larger extent than interest rates. Recent Accounting Pronouncements The Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) 101 in December 1999. SAB 101 presented the SEC staff's views on and guidance in applying generally accepted accounting principles to revenue recognition in financial statements. Compliance with this guidance became mandatory as of December 31, 2000. The Company has determined that its existing revenue recognition practices comply in all material respects with the guidance in SAB 101. 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. In September 2000, the FASB issued FAS Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. The statement replaces FASB Statement No. 125 of the same name. It revises the standards for accounting for securitizations and other transfers of financial assets and collateral and requires certain disclosures, but it carries over most of Statement 125's provisions without reconsideration. The statement is effective generally for transactions occurring after March 31, 2001. Disclosures are effective for years ending after December 15, 2000. Implementation of this standard is not expected to have a material impact on financial position or results of operations. For additional information on these and other FASB statements see Note 1 to the Consolidated Financial Statements. -21- Independenet Auditors' Report [Graphic - logo] [graphic-letterhead Castaing Hussey & Lolan, LLC Samuel R. Lolan, CPA Lori D. Percle, CPA Debbie B. Taylor, CPA Katherine H. Armentor, CPA - -------------------------------------------------------------------------------- Robin G. Freyou, CPA Charles E. Castaing, CPA, Retired Dawn K. Gonsoulin, CPA Roger E. Hussey, CPA, Retired Shalee M. Landry, CPA To the Board of Directors IBERIABANK Corporation We have audited the accompanying consolidated balance sheets of IBERIABANK Corporation and Subsidiary as of December 31, 2000 and 1999, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2000. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of IBERIABANK Corporation and Subsidiary as of December 31, 2000 and 1999, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2000, in conformity with generally accepted accounting principles. /s/Castaing Hussey & Lolan, LLC - ------------------------------- Castaing Hussey & Lolan, LLC New Iberia, Louisiana February 7, 2001 525 Weeks Street x P.O. Box 14240 x New Iberia, Louisiana 70562-4240 Ph.: 337-364-7221 x Fax: 337-364-7235 x email: info@chlcpa.com Members of American Institute of Certified Public Accountants o Society of Louisiana Certified Public Accountants -22-
IBERIABANK CORPORATION AND SUBSIDIARY Consolidated Balance Sheets December 31, 2000 and 1999 (Dollars in thousands, except share data) 2000 1999 ----------- ----------- Assets Cash and due from banks $ 32,000 $ 39,443 Interest-bearing deposits in banks 2,541 8,270 ----------- ----------- Total cash and cash equivalents 34,541 47,713 Investment securities: Available for sale, at fair value 268,223 299,388 Held to maturity (fair value of $75,940 and $82,884, respectively) 76,322 85,493 Federal Home Loan Bank stock, at cost 7,997 6,821 Loans held for sale 3,347 4,771 Loans, net of unearned income 940,525 842,878 Allowance for loan losses (10,239) (8,749) ----------- ----------- Loans, net 930,286 834,129 Accrued interest receivable 9,142 8,017 Premises and equipment, net 21,465 25,957 Goodwill and acquisition intangibles 38,796 42,063 Other assets 6,043 9,226 ----------- ----------- Total Assets $ 1,396,162 $ 1,363,578 =========== =========== Liabilities and Shareholders' Equity Liabilities: Deposits: Noninterest-bearing $ 129,468 $ 116,493 Interest-bearing 1,013,719 983,521 ----------- ----------- Total deposits 1,143,187 1,100,014 Short-term borrowings 54,000 83,000 Accrued interest payable 5,480 5,385 Long-term debt 60,843 52,053 Other liabilities 5,610 5,937 ----------- ----------- Total Liabilities 1,269,120 1,246,389 ----------- ----------- Commitments and contingencies (note 15) 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 69,231 68,749 Retained earnings 77,963 69,065 Unearned common stock held by ESOP (2,067) (2,649) Unearned common stock held by RRP trust (2,587) (3,024) Accumulated other comprehensive income (2,293) (7,124) Treasury stock, at cost, 1,121,934 and 821,934 shares (20,586) (15,209) ----------- ----------- Total Shareholders' Equity 127,042 117,189 ----------- ----------- Total Liabilities and Shareholders' Equity $ 1,396,162 $ 1,363,578 =========== ===========
The accompanying Notes to Consolidated Financial Statements are an integral part of these Financial Statements. -23-
IBERIABANK CORPORATION AND SUBSIDIARY Consolidated Statements of Income Years Ended December 31, 2000, 1999 and 1998 (Dollars in thousands, except per share data) 2000 1999 1998 -------- ------- -------- Interest and Dividend Income: Loans, including fees $ 79,627 $ 68,433 $ 61,364 Investment securities: Taxable interest and dividends 24,044 25,495 15,219 Tax-exempt interest 84 113 73 Interest-bearing demand deposits 291 1,044 2,568 -------- ------- -------- Total interest and dividend income 104,046 95,085 79,224 -------- ------- -------- Interest Expense: Deposits 44,566 40,500 35,049 Short-term borrowings 4,243 1,665 384 Long-term debt 3,921 3,215 3,025 -------- ------- -------- Total interest expense 52,730 45,380 38,458 -------- ------- -------- Net interest income 51,316 49,705 40,766 Provision for loan losses 3,861 2,836 903 -------- ------- -------- Net interest income after provision for loan losses 47,455 46,869 39,863 Noninterest Income: Service charges on deposit accounts 8,050 7,794 4,850 ATM fee income 1,309 1,080 445 Gain on sale of loans, net 405 1,063 1,495 Gain on sale of assets 2,047 852 1,869 (Loss) gain on sale of investments, net (1,759) -- 3 Other income 2,686 2,890 1,552 -------- ------- -------- Total noninterest income 12,738 13,679 10,214 -------- ------- -------- Noninterest Expense: Salaries and employee benefits 18,510 20,776 16,125 Occupancy and equipment 5,589 5,655 3,907 Amortization of acquisition intangibles 3,267 3,400 2,064 Franchise and shares tax 1,382 1,374 1,037 Communication and delivery 2,510 2,660 1,896 Marketing and business development 867 1,096 1,380 Data processing 1,369 916 1,113 Printing, stationery and supplies 731 946 806 Restructuring (46) 1,178 -- Other expenses 5,525 6,880 5,430 -------- ------- -------- Total noninterest expense 39,704 44,881 33,758 -------- ------- -------- Income before income tax expense 20,489 15,667 16,319 Income tax expense 7,514 6,138 6,182 -------- ------- -------- Net Income $ 12,975 $ 9,529 $ 10,137 ======== ======= ======== Earnings per share - basic $ 2.14 $ 1.55 $ 1.61 ======== ======= ======== Earnings per share - diluted $ 2.12 $ 1.53 $ 1.56 ======== ======= ========
The accompanying Notes to Consolidated Financial Statements are an integral part of these Financial Statements. -24-
IBERIABANK CORPORATION AND SUBSIDIARY Consolidated Statements of Shareholders' Equity Years Ended December 31, 2000, 1999 and 1998 (Dollars in thousands, except share and per share data) Unearned Accumulated Unearned Common Other Total Additional Common Stock Compre- Share- Common Paid-In Retained Stock Held Held By hensive Treasury holders' Stock Capital Earnings By ESOP RRP Trust Income Stock Equity ---------------------------------------------------------------------------------- Balance, January 1, 1998 $ 7,381 $ 66,798 $ 57,096 $ (3,921) $ (4,082) $ 221 $ (7,929) $115,564 Comprehensive income: Net income for the year ended December 31, 1998 10,137 10,137 Change in unrealized gain on securities available for sale, net of deferred taxes 128 128 -------- Total comprehensive income 10,265 Cash dividends declared, $.57 per share (3,706) (3,706) Reissuance of treasury stock under stock option plan, 4,838 shares 24 71 95 Common stock released by ESOP trust 1,029 654 1,683 Common stock earned by participants of recognition and retention plan trust, including tax benefit 170 399 569 Treasury stock acquired at cost, 25,000 shares (503) (503) ----------------------------------------------------------------------------------- Balance, December 31, 1998 7,381 68,021 63,527 (3,267) (3,683) 349 (8,361) 123,967 Comprehensive income: Net income for the year ended December 31, 1999 9,529 9,529 Change in unrealized gain on securities available for sale, net of deferred taxes (7,473) (7,473) --------- Total comprehensive income 2,056 Cash dividends declared, $.63 per share (3,991) (3,991) Reissuance of treasury stock under stock option plan, 13,371 shares 15 197 212 Common stock released by ESOP trust 577 618 1,195 Common stock earned by participants of recognition and retention plan trust, including tax benefit 58 659 717 Compensation expense on stock option plans 78 78 Treasury stock acquired at cost, 336,500 shares (7,045) (7,045) ----------------------------------------------------------------------------------- Balance, December 31, 1999 7,381 68,749 69,065 (2,649) (3,024) (7,124) (15,209) 117,189 Comprehensive income: Net income for the year ended December 31, 2000 12,975 12,975 Change in unrealized loss on securities available for sale, net of deferred taxes 4,831 4,831 --------- Total comprehensive income 17,806 Cash dividends declared, $.66 per share (4,077) (4,077) Common stock released by ESOP trust 340 582 922 Common stock earned by recognition and retention plan trust 47 565 612 Common stock purchased by recognition and retention plan trust 128 (128) -- Compensation expense on stock option plans (33) (33) Treasury stock acquired at cost, 300,000 shares (5,377) (5,377) ----------------------------------------------------------------------------------- Balance, December 31, 2000 $ 7,381 $ 69,231 $ 77,963 $ (2,067) $ (2,587) $(2,293) $(20,586) $127,042 ==================================================================================
The accompanying Notes to Consolidated Financial Statements are an integral part of these Financial Statements. -25-
IBERIABANK CORPORATION AND SUBSIDIARY Consolidated Statements of Cash Flows Years Ended December 31, 2000, 1999 and 1998 (Dollars in thousands) 2000 1999 1998 --------- --------- --------- Cash Flows from Operating Activities: Net income $ 12,975 $ 9,529 $ 10,137 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 6,615 6,657 4,283 Provision for loan losses 3,861 2,836 903 Noncash compensation expense 1,320 1,826 2,019 Gain on sale of assets (2,047) (852) (1,869) Equipment donated -- 120 -- Loss (gain) on sale of investments 1,759 -- (3) Amortization of premium/discount on investments 290 872 117 Current provision for deferred income taxes (71) (1,143) (167) FHLB stock dividends (582) (447) (419) Net change in loans held for sale 1,424 13,636 (18,407) Proceeds from student loans sold -- 763 9,215 Other, net (1,601) 3,109 (1,627) --------- --------- --------- Net Cash Provided by Operating Activities 23,943 36,906 4,182 --------- --------- --------- Cash Flows From Investing Activities: Activity in available for sale securities: Sales 43,706 -- 4,498 Maturities, prepayments and calls 37,155 25,500 29,345 Purchases (43,744) (99,998) (54,981) Activity in held to maturity securities: Maturities, prepayments and calls 9,013 55,166 47,004 Purchases -- -- (210,575) (Increase) decrease in loans receivable, net (101,513) (77,653) 12,407 Proceeds from FHLB stock redemption -- 4,853 1,162 Purchases of FHLB stock (594) (982) (4,828) Proceeds from sale of premises and equipment 4,875 1,301 2,152 Purchases of premises and equipment (1,061) (2,332) (4,348) Proceeds from disposition of real estate owned 1,279 1,191 769 Cash received in excess of cash paid on branch acquisition -- -- 292,439 --------- --------- --------- Net Cash (Used In) Provided By Investing Activities (50,884) (92,954) 115,044 --------- --------- ---------
-26-
IBERIABANK CORPORATION AND SUBSIDIARY Consolidated Statements of Cash Flows (continued) Years Ended December 31, 2000, 1999 and 1998 (Dollars in thousands) 2000 1999 1998 --------- --------- --------- Cash Flows From Financing Activities: Increase (decrease) in deposits $ 43,173 $(120,881) $ (12,776) Net change in short-term borrowings (29,000) 83,000 -- Proceeds from issuance of long-term debt 16,650 7,575 -- Repayments of long-term debt (7,860) (1,161) (1,089) Dividends paid to shareholders (3,817) (3,810) (3,372) Proceeds from sale of treasury stock for stock options excercised -- 212 78 Payments to repurchase common stock (5,377) (7,045) (503) --------- --------- --------- Net Cash Provided by (Used In) Financing Activities 13,769 (42,110) (17,662) --------- --------- --------- Net (Decrease) Increase In Cash and Cash Equivalents (13,172) (98,158) 101,564 Cash and Cash Equivalents at Beginning of Period 47,713 145,871 44,307 --------- --------- --------- Cash and Cash Equivalents at End of Period $ 34,541 $ 47,713 $ 145,871 ========= ========= ========= Supplemental Schedule of Noncash Activities: Acquisition of real estate in settlement of loans $ 1,495 $ 1,035 $ 929 ========= ========= ========= Supplemental Disclosures: Cash paid (received) for: Interest on deposits and borrowings $ 52,634 $ 46,703 $ 35,745 ========= ========= ========= Income taxes $ 7,083 $ 7,723 $ 5,112 ========= ========= ========= Income tax refunds $ (2) $ (9) $ (495) ========= ========= =========
The accompanying Notes to Consolidated Financial Statements are an integral part of these Financial Statements. -27- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 - Significant Accounting Policies: Nature of Operations: IBERIABANK Corporation, formerly ISB Financial Corporation, (the "Company") is a Louisiana corporation organized in November 1994 for the purpose of becoming the bank holding company for Iberia Savings Bank. The Board of Directors of Iberia Savings Bank adopted the Plan of Conversion pursuant to which the bank converted from a Louisiana-chartered mutual savings bank to a Louisiana-chartered stock savings bank. The Company completed its subscription and community offering in April 1995 and, with a portion of the net proceeds, acquired the capital stock of the bank. In December of 1997, Iberia Savings Bank changed its charter from a state savings bank to a state commercial bank and changed its name to IBERIABANK (the "Bank"). The Bank operates 23 offices located in south central Louisiana, 11 offices located in northeast Louisiana and 7 offices located in the greater New Orleans area. The Bank provides a variety of financial services to individuals and businesses throughout its service area. Its primary deposit products are checking, savings and certificate of deposit accounts and its primary lending products are consumer, mortgage and commercial business loans. The Bank also offers discount brokerage services through a wholly owned subsidiary. Principles of Consolidation: The consolidated financial statements include the accounts of IBERIABANK Corporation and its wholly owned subsidiary, IBERIABANK, as well as all of the Bank's subsidiaries, Iberia Financial Services, LLC, Jefferson Insurance Corporation, Metro Service Corporation, Finesco, LLC and IBERIABANK Insurance Services, LLC. All significant intercompany balances and transactions have been eliminated in consolidation. Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses. Actual results could differ from those estimates. Concentration of Credit Risks: Most of the Company's business activity is with customers located within the State of Louisiana. The Company's lending activity in the past was concentrated in the southwestern part of Louisiana. That economy has historically been heavily dependent on the oil and gas industry. The Company in recent years has increased originations of commercial loans and indirect automobile loans, and through acquisitions has entered the New Orleans and Monroe, Louisiana markets. Repayment of loans is expected to come from cash flow of the borrower or, particularly with the residential mortgage portfolio, from the sale of the real estate. Losses are limited by the value of the collateral upon default of the borrowers. Cash and Cash Equivalents: For purposes of presentation in the consolidated statements of cash flows, cash and cash equivalents are defined as cash and interest-bearing and noninterest-bearing demand deposits at other financial institutions. -28- Investment Securities: Debt securities that management has the ability and intent to hold to maturity are classified as held to maturity and carried at cost, adjusted for amortization of premiums and accretion of discounts using methods approximating the interest method. Securities not classified as held to maturity or trading, including equity securities with readily determinable fair values, are classified as available for sale and recorded at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income. Declines in the value of individual held to maturity and available for sale securities below their cost that are other than temporary are included in earnings as realized losses. The cost of securities sold is recognized using the specific identification method. Stock in the Federal Home Loan Bank of Dallas ("FHLB") is carried at cost. Since the Bank is a member of the FHLB, it is required to maintain an amount of FHLB stock based on its total assets and level of borrowings. At December 31, 2000 and 1999, the institution held more than the required level of FHLB stock. Loans Held for Sale: Mortgage loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate. Net unrealized losses, if any, are recognized through a valuation allowance by charges to income. Loans: The Company grants residential mortgage, commercial and consumer loans to customers primarily throughout the state of Louisiana. The ability of the debtors to honor contracts is dependent upon the real estate and general economic conditions in this area. Loans receivable are stated at the unpaid principal balances, less the allowance for loan losses and net deferred loan origination fees and unearned discounts. Interest income on loans is accrued over the term of the loans based on the principal balance outstanding. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield, using the interest method. The accrual of interest on mortgage and commercial loans is discontinued at the time the loan is 90 days delinquent unless the credit is well-secured and in process of collection. Credit card loans and other personal loans are typically charged off no later than 180 days past due. In all cases, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful. In general, all interest accrued but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income. The interest on these loans is accounted for on the cash-basis method or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured. Allowance for Loan Losses: The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Allowances for impaired loans are generally determined based on collateral values or the present value of estimated cash -29- flows. Changes in the allowance related to impaired loans are charged or credited to the provision for loan losses. The allowance for loan losses is maintained at a level which, in management's judgement, is adequate to absorb credit losses inherent in the portfolio. The amount of the allowance is based on management's evaluation of various factors, including the collectibility of the loan portfolio, credit concentrations, trends in historical loss experience, specific impaired loans, and economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. The impairment loss is measured on a loan by loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's obtainable market price, or the fair value of the collateral if the loan is collateral dependent. Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual consumer and residential loans for impairment disclosures. Credit Related Financial Instruments: In the ordinary course of business, the Company has entered into commitments to extend credit, including commitments under credit card arrangements, commercial letters of credit, and standby letters of credit. Such financial instruments are recorded when they are funded. Loan Servicing: Mortgage servicing rights are recognized on loans sold where the institution retains the servicing rights. Capitalized mortgage servicing rights are reported in other assets and are amortized in proportion to, and over the period of, estimated net servicing revenues. Impairment of mortgage servicing rights is assessed based on the fair value of those rights. Fair values are estimated using discounted cash flows based on a current market interest rate. Foreclosed Property: Real estate and other assets acquired in settlement of loans are recorded at the balance of the loan or at estimated fair value minus estimated costs to sell, whichever is less, at the date acquired. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of cost or fair value minus estimated costs to sell. Revenue and expenses from operations, gain or loss on sale and changes in the valuation allowance are included in net expenses from foreclosed assets. There was no allowance for losses on foreclosed property at December 31, 2000 and 1999. Premises and Equipment: Land is carried at cost. Buildings and equipment are carried at cost, less accumulated depreciation computed on a straight line basis over the estimated useful lives of 15 to 40 years for buildings and 5 to 10 years for furniture, fixtures and equipment. -30- Goodwill and Other Intangible Assets: Goodwill, representing the purchase price in excess of fair value of identifiable net assets at acquisition, is amortized over periods not exceeding 25 years. Other acquired intangible assets, such as core deposit intangibles, are amortized over the periods benefited, not exceeding 8 years. As events or circumstances warrant, the Company evaluates the recoverability of the unamortized balance based on expected future profitability and undiscounted future cash flows of the acquisitions and their contribution to the overall operation of the company. Transfers of Financial Assets: Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity. Income Taxes: The Company and all subsidiaries file a consolidated federal income tax return on a calendar year basis. Deferred income tax assets and liabilities are determined using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is determined based on the tax effects of the temporary differences between the book and tax bases of the various balance sheet assets and liabilities and gives current recognition to changes in tax rates and laws. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realized. Stock Compensation Plans: Statement of Financial Accounting Standards ("SFAS") No. 123, Accounting for Stock-Based Compensation, encourages all entities to adopt a fair value based method of accounting for employee stock compensation plans, whereby compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. It also allows an entity to continue to measure compensation cost for those plans using the intrinsic value based method of accounting prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, whereby compensation cost is the excess, if any, of the quoted market price of the stock at the grant date (or other measurement date) over the amount an employee must pay to acquire the stock. Stock options issued under the Company's stock option plans generally have no intrinsic value at the grant date, and under Opinion No. 25 no compensation cost is recognized for them. The Company has elected to continue with the accounting methodology in Opinion No. 25 and, as a result, has provided proforma disclosures of net income and earnings per share and other disclosures, as if the fair value based method of accounting had been applied. Earnings Per Common Share: Basic earnings per share represents income available to common shareholders divided by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance. Potential common shares that may be issued by the Company relate to -31- outstanding stock options and unvested restricted stock, and are determined using the treasury stock method. Comprehensive Income: Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available for sale securities, are reported as a separate component of the equity section of the balance sheet, such items, along with net income, are components of comprehensive income. Effects of New Accounting Pronouncements: In June 1998, the Financial Accounting Standards Board issued SFAS 133, Accounting for Derivative Instruments and Hedging Activities. The statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments imbedded in other contracts. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. The accounting for changes in the fair value of derivatives (that is, gains and losses) depends on the intended use of the derivative and the resulting designation. The statement is effective for fiscal years beginning after June 15, 1999. The Company currently has no derivatives and does not have any hedging activities. The Company adopted the statement effective October 1, 1999. At the date of initial application, in accordance with the provisions of the statement, the Company transferred certain held to maturity securities into the available for sale category. The securities transferred consisted of $198,909,000 in mortgage backed securities, and the adjustment to fair value at the time of transfer was a decrease of $5,730,000. The Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) 101 in December 1999. SAB 101 presented the SEC staff's views on and guidance in applying generally accepted accounting principles to revenue recognition in financial statements. Compliance with this guidance became mandatory as of December 31, 2000. The Company has determined that its existing revenue recognition practices comply in all material respects with the guidance in SAB 101. In June 2000, the Financial Accounting Standards Board ("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. In September 2000, the FASB issued FAS Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. The statement replaces FASB Statement No. 125 of the same name. It revises the standards for accounting for securitizations and other transfers of financial assets and collateral and requires certain disclosures, but it carries over most of Statement 125's provisions without reconsideration. The statement is effective generally for transactions occurring after March 31, 2001. Disclosures are effective for years ending after December 15, 2000. Implementation of this standard is not expected to -32- have a material impact on financial position or results of operations. Reclassifications: Certain reclassifications have been made to the 1998 and 1999 consolidated financial statements in order to conform to the classifications adopted for reporting in 2000. Note 2 - Restructuring: On December 13, 1999 the Board of Directors approved a restructuring plan aimed at improving the operating efficiency and profitability of the Company. The plan involves consolidation of certain branches and elimination of thirty-three personnel positions primarily at corporate headquarters. The charges to 1999 earnings consisted of $451,000 of fixed asset impairments primarily consisting of leasehold improvements written down to book value for the remaining lease term, $198,000 of lease termination penalties and $35,000 of closure expenses all related to the branch consolidations and $244,000 of severance accruals for the personnel positions eliminated. As part of the plan, the four directors emeritus retired in December of 1999, resulting in compensation expense of $250,000 for immediate vesting in their recognition and retention plan shares. During 2000, branch consolidation resulted in the elimination of six branch employee positions, with severance packages totaling $43,000, which was charged against income. The bank was released from lease termination penalties on two branches in 2000, which resulted in a reversal of the 1999 liability in the amount of $89,000. At December 31, 2000 the balance in the restructuring liability was $117,000, which is comprised of $89,000 in lease termination penalties and $28,000 in branch consolidation expenses remaining to be paid. Note 3 - Investment Securities: The amortized cost and fair values of investment securities, with gross unrealized gains and losses, (in thousands) consists of the following:
Gross Gross Amortized Unrealized Unrealized Fair December 31, 2000 Cost Gains Losses Value -------------------------------------------------- Securities available for sale: U.S. Government and federal agency obligations $ 98,001 $ -- $ (1,742) $ 96,259 Mortgage backed 167,021 -- (1,732) 165,289 --------- ------- --------- --------- Total debt securities 265,022 -- (3,474) 261,548 Marketable equity security 6,728 -- (53) 6,675 --------- ------- --------- --------- Total securities available for sale $ 271,750 $ -- $ (3,527) $ 268,223 ========= ======= ========= ========= Securities held to maturity: Obligations of state and political subdivisions $ 1,435 $ -- $ -- $ 1,435 Mortgage backed 74,887 -- (382) 74,505 --------- ------- --------- --------- Total securities held to maturity $ 76,322 $ -- $ (382) $ 75,940 ========= ======= ========= =========
-33-
Gross Gross Amortized Unrealized Unrealized Fair December 31, 1999 Cost Gains Losses Value -------------------------------------------------- Securities available for sale: U.S. Government and federal agency obligations $ 112,864 $ -- $ (5,181) $ 107,683 Mortgage backed 191,167 -- (5,693) 185,474 --------- ------- --------- --------- Total debt securities 304,031 -- (10,874) 293,157 Marketable equity security 6,318 -- (87) 6,231 --------- ------- --------- --------- Total securities available for sale $ 310,349 $ -- $ (10,961) $ 299,388 ========= ======= ========= ========= Securities held to maturity: Obligations of state and political subdivisions $ 1,889 $ -- $ -- $ 1,889 Mortgage backed 83,604 -- (2,609) 80,995 --------- ------- --------- --------- Total securities held to maturity $ 85,493 $ -- $ (2,609) $ 82,884 ========= ======= ========= =========
Securities with carrying values of $56,827,000 and $28,596,000 at December 31, 2000 and 1999, respectively were pledged to secure public deposits and other borrowings. The amortized cost and estimated fair value of investment securities at December 31, 2000, by contractual maturity, are shown below (in thousands). Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.
Securities Available Securities Held for Sale to Maturity -------------------- -------------------- Amortized Fair Amortized Fair Cost Value Cost Value -------- -------- -------- -------- Within one year or less $ -- $ -- $ 190 $ 190 One through five years 30,008 29,927 485 485 After five through ten years 67,993 66,332 715 715 Over ten years -- -- 45 45 -------- -------- -------- -------- Subtotal 98,001 96,259 1,435 1,435 Mortgage backed 167,021 165,289 74,887 74,505 Marketable equity security 6,728 6,675 -- -- -------- -------- -------- -------- Totals $271,750 $268,223 $ 76,322 $ 75,940 ======== ======== ======== ========
-34- For the years ended December 31, 2000, 1999 and 1998, proceeds from sales of securities available for sale amounted to $43,706,000, $-0-, and $4,498,000, respectively. Gross realized losses amounted to $1,759,000, $-0- and $-0- in 2000, 1999 and 1998. Gross realized gains amounted to $-0-, $-0- and $3,000 in 2000, 1999 and 1998. The tax benefit (provision) applicable to these realized gains and losses amounted to $616,000, $-0-, and $(1,000), respectively. Note 4 - Loans Receivable: Loans receivable (in thousands) at December 31, 2000 and 1999 consists of the following:
2000 1999 -------- -------- Residential mortgage loans: Residential 1-4 family $279,193 $266,161 Construction 7,482 6,381 -------- -------- Total residential mortgage loans 286,675 272,542 -------- -------- Commercial Loans: Business 78,986 82,485 Real estate 196,479 157,248 -------- -------- Total commercial loans 275,465 239,733 -------- -------- Consumer Loans: Home equity 108,070 91,531 Automobile 25,297 23,432 Indirect automobile 205,143 179,350 Credit card loans 9,559 6,436 Other 30,316 29,854 -------- -------- Total consumer loans 378,385 330,603 -------- -------- Total loans receivable $940,525 $842,878 ======== ========
Loans receivable include approximately $277,847,000 and $250,537,000 of adjustable rate loans and $662,678,000 and $592,341,000 of fixed rate loans at December 31, 2000 and 1999, respectively. The amount of loans for which the accrual of interest has been discontinued totaled approximately $5,467,000 and $1,930,000 at December 31, 2000 and 1999, respectively. A summary of changes in the allowance for loan losses (in thousands) for the years ended December 31, 2000, 1999 and 1998 is as follows:
2000 1999 1998 -------- -------- -------- Balance, beginning of year $ 8,749 $ 7,135 $ 5,258 Allowance for loan losses from acquisitions -- -- 1,392 Provision charged to operations 3,861 2,836 903 Loans charged off (2,865) (1,671) (863) Recoveries 494 449 445 -------- -------- -------- Balance, end of year $ 10,239 $ 8,749 $ 7,135 ======== ======== ========
The following is a summary of information pertaining to impaired loans (in thousands): December 31, ------------------- 2000 1999 ------ ------ Impaired loans without a valuation allowance $ 48 $ -- Impaired loans with a valuation allowance 5,843 1,980 ------ ------ Total impaired loans $5,891 $1,980 ====== ====== Valuation allowance related to impaired loans $1,037 $ 198 ====== ====== -35- For The Years Ended December 31, -------------------------------- 2000 1999 1998 ------ ------ ------ Average investment in impaired loans $3,612 $ 911 $ 203 ====== ====== ====== Interest income recognized on impaired loans $ 397 $ 167 $ 115 ====== ====== ====== Interest income recognized on a cash basis on impaired loans $ 397 $ 167 $ 115 ====== ====== ====== No additional funds are committed to be advanced in connection with impaired loans. Note 5 - Loan Servicing: Mortgage loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid principal balances of mortgage loans serviced for others was $31,146,000 and $34,852,000 at December 31, 2000 and 1999, respectively. Custodial escrow balances maintained in connection with the foregoing portfolio of loans serviced for others, and included in demand deposits, were approximately $107,000 and $109,000 at December 31, 2000 and 1999, respectively. Mortgage loan servicing rights of $5,000 and $67,000 were capitalized in 2000 and 1999, respectively. Amortization of mortgage servicing rights was $30,000, $26,000 and $15,000 in 2000, 1999 and 1998, respectively. The balance of mortgage servicing rights was $179,000 and $204,000 at December 31, 2000 and 1999, respectively. Note 6 - Premises and Equipment: Premises and equipment (in thousands) at December 31, 2000 and 1999 is summarized as follows: 2000 1999 ------- ------- Land $ 3,737 $ 4,093 Buildings 16,391 18,982 Furniture, fixtures and equipment 15,184 14,602 ------- ------- 35,312 37,677 Less accumulated depreciation 13,847 11,720 ------- ------- Total premises and equipment $21,465 $25,957 ======= ======= Depreciation expense was $2,670,000, $2,615,000 and $1,919,000 for the years ended December 31, 2000, 1999 and 1998, respectively. The Company actively engages in leasing office space that it has available. Leases have different terms ranging from monthly rental to five year leases. At December 31, 2000, the monthly lease income was $19,000 per month. Total lease income for 2000, 1999 and 1998 was $394,000, $439,000 and $335,000, respectively. Income from leases was reported as a reduction in occupancy and equipment expense. The total allocated cost of the portion of the buildings held for lease at December 31, 2000 and 1999 was $1,570,000 and $2,920,000, respectively, with related accumulated depreciation of $471,000 and $922,000, respectively. The Company leases certain branch offices, land and ATM facilities through noncancellable operating leases with terms that range from one to twenty years, with renewal options thereafter. Total rent expense for the -36- years ended December 31, 2000, 1999, and 1998 amounted to $548,000, $570,000, and $439,000, respectively. Minimum future annual rent commitments (in thousands) under these agreements as of December 31, 2000 are: Year Ending December 31, Amount - ------------------------------------- 2001 $ 547 2002 431 2003 287 2004 195 2005 and thereafter 571 ------ Total $2,031 ====== Note 7 - Deposits: Certificates of deposit with a balance of $100,000 and over were $141,090,000 and $124,538,000 at December 31, 2000 and 1999, respectively. A schedule of maturities of certificates of deposit (in thousands) is as follows : Year Ending December 31, Amount - ------------------------------------- 2001 $417,373 2002 112,727 2003 25,645 2004 6,482 2005 and thereafter 6,838 -------- Total deposits $569,065 ======== Note 8 - Short-Term Borrowings: The short-term borrowings at December 31, 2000 consist of FHLB advances with terms ranging from 7 to 14 days, at fixed interest rates ranging from 6.39% to 6.42%. Note 9 - Long-Term Debt: Long-term debt at December 31, 2000 and 1999 (in thousands) is summarized as follows: 2000 1999 ------- ------- Federal Home Loan Bank fixed rate notes at: 5.0 to 5.99% $ 3,968 $ 4,367 6.0 to 6.99% 28,593 36,000 7.0 to 7.99% 19,057 4,111 Union Planters Bank, $15MM line of credit with variable rate equal to Wall Street prime minus .50%, currently @ 9.00% maturing 3/31/01. 9,225 7,575 ------- ------- Total long-term debt $60,843 $52,053 ======= ======= FHLB advance repayments are amortized over periods ranging from fifteen to thirty years, and have a balloon feature at maturity. Advances are collateralized by a blanket pledge of mortgage loans and a secondary pledge of FHLB stock and FHLB demand deposits. Total additional advances available from the FHLB at December 31, 2000 were $160,887,000 under the blanket floating lien and $260,180,000 with a pledge of investment securities. -37- Advances and long-term debt at December 31, 2000 (in thousands) have maturities in future years as follows: Year Ending December 31, Amount - ------------------------------------- 2001 $28,443 2002 8,059 2003 -- 2004 -- 2005 and thereafter 24,341 ------- Total $60,843 ======= Note 10 - Income Taxes: The provision for income tax expense (in thousands) consists of the following: For The Years Ended December 31, 2000 1999 1998 ------- ------- ------- Current expense: Federal $ 7,653 $ 7,080 $ 6,386 State (68) 201 (37) ------- ------- ------- Total current expense 7,585 7,281 6,349 Deferred federal expense (71) (1,143) (167) ------- ------- ------- Total income tax expense $ 7,514 $ 6,138 $ 6,182 ======= ======= ======= There was a balance due of federal income taxes of $453,000 at December 31, 2000 and an overpayment of federal income taxes of $242,000 at December 31, 1999. At December 31, 2000, the Company had a federal net operating loss carryover of $521,000 assumed in an acquisition, expiring in 2009 through 2010. The provision for federal income taxes differs from the amount computed by applying the federal income tax statutory rate of 35 percent on income from operations as indicated in the following analysis (in thousands):
For The Years Ended December 31, ---------------------------------- 2000 1999 1998 ------ ------- ------- Federal tax based on statutory rate $7,171 $ 5,483 $ 5,611 Increase (decrease) resulting from: Effect of tax-exempt income (113) (136) (94) Amortization of acquisition intangibles 416 457 483 Interest and other nondeductible expenses 38 40 37 Nondeductible ESOP expense 56 148 318 State income tax on non-bank entities (74) 201 (37) Other 20 64 42 Benefit from change in deferred tax valuation allowance -- (119) (178) ------ ------- ------- Income tax expense $ 7,514 $ 6,138 $ 6,182 ======= ======= ======= Effective rate 36.7% 39.2% 37.9% ======= ======= =======
-38- The net deferred tax liability (in thousands) at December 31, 2000 and 1999 is as follows:
2000 1999 ------- ------- Deferred tax asset: Allowance for loan losses $ 3,019 $ 2,063 Deferred directors' fees 108 109 Net operating loss carryover 182 365 ESOP and RRP 233 237 Unrealized loss on investments classified as available for sale 1,235 3,836 Other 360 397 ------- ------- Subtotal 5,137 7,007 ------- ------- Deferred tax liability: FHLB stock (1,202) (561) Premises and equipment (1,840) (1,829) Other (25) (17) ------- ------- Subtotal (3,067) (2,407) ------- ------- Deferred tax asset $ 2,070 $ 4,600 ======= =======
A summary of the changes in the net deferred tax asset (liability) for the years ended December 31, 2000 and 1999 is as follows (in thousands): 2000 1999 ------- ------- Balance, beginning $ 4,600 $ (559) Deferred tax expense, charged to operations 71 1,143 Unrealized gain (loss) on available for sale securities, charged to equity (2,601) 4,016 ------- ------- Balance, ending $ 2,070 $ 4,600 ======= ======= Retained earnings at December 31, 2000 and 1999 included approximately $14,791,000 accumulated prior to January 1, 1987 for which no provision for federal income taxes has been made. If this portion of retained earnings is used in the future for any purpose other than to absorb bad debts, it will be added to future taxable income. Note 11 - Earnings Per Share: Weighted average shares of common stock outstanding for basic EPS excludes the weighted average shares not released by the Employee Stock Ownership Plan ("ESOP") of 235,748, 295,517, and 359,164 shares at December 31, 2000, 1999 and 1998, respectively and the weighted average unvested shares in the Recognition and Retention Plan ("RRP") of 187,454, 231,282 and 257,171 shares at December 31, 2000, 1999 and 1998, respectively. Shares not included in the calculation of diluted EPS because they are anti-dilutive were stock options of 238,507, 151,865 and 28,000, and RRP grants of 73,500, 54,000 and 11,000 at December 31, 2000, 1999 and 1998, respectively. -39- The following sets forth the computation of basic net income per common share and diluted net income per common share.
For The Years Ended December 31, ---------------------------------------------- 2000 1999 1998 ----------- ----------- ----------- Numerator: Income applicable to common shares $12,975,000 $ 9,529,000 $10,137,000 =========== =========== =========== Denominator: Weighted average common shares outstanding 6,056,148 6,144,081 6,280,962 Effect of dilutive securities: Stock options outstanding 46,821 79,188 185,235 RRP grants 10,602 17,435 36,620 ----------- ----------- ----------- Weighted average common shares outstanding - assuming dilution 6,113,571 6,240,704 6,502,817 ----------- ----------- ----------- Earnings per common share $ 2.14 $ 1.55 $ 1.61 =========== =========== =========== Earnings per common share - assuming dilution $ 2.12 $ 1.53 $ 1.56 =========== =========== ===========
Note 12 - Capital Requirements and Other Regulatory Matters: The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by the federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Prompt corrective action provisions are not applicable to bank holding companies. Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios of total and Tier 1 capital to risk-weighted assets and of Tier 1 capital to average assets. Management believes, as of December 31, 2000 and 1999, that the Company and the Bank met all capital adequacy requirements to which they are subject. As of December 31, 2000, the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, an institution must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leveraged ratios as set forth in the following tables. There are no conditions or events since the notification that management believes have changed the Bank's category. The Company's and the Bank's actual capital amounts (dollars in thousands) and ratios as of December 31, 2000 and 1999 are also presented in the table. -40-
Minimum To Be Well Minimum Capitalized Under Capital Prompt Corrective Actual Requirement Action Provisions Amount Ratio Amount Ratio Amount Ratio ------ ----- ------ ----- ------ ----- December 31, 2000 Tier 1 leverage capital: IBERIABANK Corp. $ 90,487 6.67% $ 54,239 4.00% $ N/A N/A% IBERIABANK 97,649 7.22 54,109 4.00 67,636 5.00 Tier 1 risk-based capital: IBERIABANK Corp. 90,487 10.05 35,998 4.00 N/A N/A IBERIABANK 97,649 10.86 35,980 4.00 53,970 6.00 Total risk-based capital: IBERIABANK Corp. 100,726 11.19 71,996 8.00 N/A N/A IBERIABANK 107,888 11.99 71,960 8.00 89,950 10.00 December 31, 1999 Tier 1 leverage capital: IBERIABANK Corp. $ 82,193 6.26% $ 52,512 4.00% $ N/A N/A% IBERIABANK 89,746 6.80 52,817 4.00 66,021 5.00 Tier 1 risk-based capital: IBERIABANK Corp. 82,193 9.42 34,883 4.00 N/A N/A IBERIABANK 89,746 10.30 34,862 4.00 52,293 6.00 Total risk-based capital: IBERIABANK Corp. 91,195 10.43 69,767 8.00 N/A N/A IBERIABANK 98,748 11.30 69,725 8.00 87,156 10.00
-41- Note 13 - Benefit Plans: 401(k) Profit Sharing Plan The Company has a 401(k) profit sharing plan covering substantially all of its employees. Annual employer contributions to the plan are set by the Board of Directors. No contributions were made by the Company for the years ended December 31, 2000, 1999 and 1998. The plan provides, among other things, that participants in the plan be able to direct the investment of their account balances within the Profit Sharing Plan into alternative investment funds. Participant deferrals under the salary reduction election may be matched by the employer based on a percentage to be determined annually by the employer. Employee Stock Ownership Plan In connection with the conversion from mutual to stock form, the Company established an ESOP for the benefit of all eligible employees of the Bank. The leveraged ESOP is accounted for in accordance with American Institute of Certified Public Accountants ("AICPA") Statement of Procedures ("SOP") 93-6, Employers' Accounting for Employee Stock Ownership Plans. Full-time employees of the Bank who have been credited with at least 1,000 hours of service during a 12 month period and who have attained age 21 are eligible to participate in the ESOP. It is anticipated that contributions will be made to the plan in amounts necessary to amortize the debt to the Company over a period of 10 years. Under SOP 93-6, unearned ESOP shares are not considered outstanding and are shown as a reduction of shareholders' equity. Dividends on unallocated ESOP shares are considered to be compensation expense. The Company will recognize compensation cost equal to the fair value of the ESOP shares during the periods in which they become committed to be released. To the extent that the fair value of the Company's ESOP shares differ from the cost of such shares, this differential will be credited to equity. The Company will receive a tax deduction equal to the cost of the shares released. As the loan is internally leveraged, the loan receivable from the ESOP to the Company is not reported as an asset nor is the debt of the ESOP shown as a Company liability. Dividends on allocated shares have been used to pay the ESOP debt. Compensation cost related to the ESOP for the years ended December 31, 2000, 1999 and 1998 was $741,000, $1,031,000 and $1,576,000, respectively. The fair value of the unearned ESOP shares, using the closing quoted market price per share for that day was approximately $4,495,000 and $3,642,000 at December 31, 2000 and 1999, respectively. A summary of the ESOP share allocation is as follows: December 31, ----------------------------------- 2000 1999 1998 ------- ------- ------- Shares allocated beginning of year 304,067 246,995 197,952 Shares allocated during year 58,183 61,819 65,458 Shares distributed during the year (19,221) (4,747) (16,415) ------- ------- ------- Total allocated shares held by ESOP at year end 343,029 304,067 246,995 Unreleased shares 206,657 264,840 326,659 ------- ------- ------- Total ESOP shares 549,686 568,907 573,654 ======= ======= ======= -42- Stock Option Plans In 1996, the Company adopted a stock option plan for the benefit of directors, officers, and other key employees. The number of shares of common stock reserved for issuance under the stock option plan was equal to 738,067 shares or 10 percent of the total number of common shares sold in the Company's initial public offering of its common stock upon the mutual-to-stock conversion of Iberia Savings Bank. The option exercise price cannot be less than the fair value of the underlying common stock as of the date of the option grant and the maximum option term cannot exceed ten years. In 1999 the Company adopted a similar plan that authorized an additional 300,000 shares available for the granting of options. The Company also adopted a supplemental plan for 24,999 shares for grants of options or restricted stock to consultants and directors. The stock options granted are generally exercisable in seven equal annual installments. Compensation expense in 2000, 1999 and 1998 related to the stock option plans was not material. At December 31, 2000 future awards of 111,124 shares could be made under the stock option plans. The stock option plans also permit the granting of Stock Appreciation Rights ("SAR's"). SAR's entitle the holder to receive, in the form of cash or stock, the increase in the fair value of Company stock from the date of grant to the date of exercise. No SAR's have been issued under the plans. The following table summarizes the activity related to stock options :
Options Weighted Average Outstanding Exercise Price ----------- -------------- At January 1, 1998 707,444 $ 16.76 Granted 34,500 25.61 Canceled (49,972) 19.13 Exercised (4,838) 16.17 ------- At December 31, 1998 687,134 17.04 Granted 287,000 17.40 Canceled (91,416) 18.57 Exercised (13,371) 15.88 ------- At December 31, 1999 869,347 17.02 Granted 105,100 13.93 Canceled (50,632) 17.47 Exercised -- -- ------- At December 31, 2000 923,815 16.64 ======= ===== Exerciseable at December 31, 1998 178,354 $16.29 ======= ===== Exerciseable at December 31, 1999 299,748 $16.51 ======= ===== Exerciseable at December 31, 2000 381,258 $16.54 ======= =====
-43- The following table presents the weighted average remaining life as of December 31, 2000 for options outstanding within the stated exercise prices:
Outstanding Exerciseable -------------------- ------------------------------------ Weighted Weighted Weighted Exercise Number Average Average Number Average Price Range of Exercise Remaining of Exercise Per Share Options Price Life Options Price --------- ------- ----- ---- ------- ----- $13.38 to $15.06 216,900 $13.81 9.1 years 16,571 $13.70 $15.88 468,408 $15.88 5.4 years 310,803 15.88 $16.31 to $19.75 98,500 $17.73 8.3 years 20,143 17.81 $20.25 to $25.00 118,857 $22.19 7.9 years 25,962 22.39 $25.13 to $28.25 21,150 $26.36 7.0 years 7,779 26.21
In October 1995, the FASB issued SFAS 123. SFAS 123 requires disclosure of the compensation cost for stock-based incentives granted after January 1, 1995 based on the fair value at grant date for awards. Applying SFAS 123 would result in pro forma net income (in thousands) and earnings per share amounts as follows: 2000 1999 1998 -------- -------- ------- Net income As reported $ 12,975 $ 9,529 $10,137 Pro forma $ 12,530 $ 9,229 $ 9,736 Earnings per share As reported - basic $ 2.14 $ 1.55 $ 1.61 - diluted $ 2.12 $ 1.53 $ 1.56 Pro forma - basic $ 2.07 $ 1.50 $ 1.55 - diluted $ 2.05 $ 1.48 $ 1.50 The fair value of each option is estimated on the date of grant using an option-pricing model with the following weighted average assumptions used for 2000, 1999 and 1998 grants: dividend yields of 4.21, 3.31, and 2.23 percent; expected volatility of 25.53, 26.13 and 38.00 percent; risk-free interest rate of 6.35, 5.97 and 5.48 percent; and expected lives of 8.5 years for all options. The weighted average fair value per share at the date of grant for shares granted during 2000, 1999 and 1998 was $3.46, $4.60 and $10.66, respectively. Restricted Stock Plans The Company established the Recognition and Retention Plan (RRP) for certain officers and directors during the year ended December 31, 1996. The supplemental plan adopted in 1999 can also make grants of restricted stock. The cost of the shares of restricted stock awarded under these plans is recorded as unearned compensation, a contra equity account. The fair value of the shares on the date of award will be recognized as compensation expense over the vesting period, which is generally seven years. The holders of the restricted stock receive dividends and have the right to vote the shares. For the years ended December 31, 2000, 1999 and 1998 the amount included in compensation expense was $612,000, $717,000 and $442,000 respectively. At December 31, 2000, 62,261 shares were available in the RRP plan for future awards. The weighted average grant date fair value of the restricted stock granted during the years ended December 31, 2000, 1999 -44- and 1998 was $14.49, $18.14 and $26.19 respectively. A summary of the changes in awarded shares follows: 2000 1999 1998 ------- ------- ------- Balance, beginning of year 155,754 136,695 163,493 Granted 13,600 95,500 6,000 Forfeited (5,142) (32,060) (7,387) Earned and issued (31,932) (44,381) (25,411) ------- ------- ------- Balance, end of year 132,280 155,754 136,695 ======= ======= ======= Note 14 - Related Party Transactions: In the ordinary course of business, the Bank has granted loans to executive officers and directors and their affiliates amounting to $620,000 and $602,000 at December 31, 2000 and 1999, respectively. During the year ended December 31, 2000, total principal additions were $67,000 and total principal payments were $49,000. Note 15 - Financial Instruments With Off-Balance Sheet Risks, Commitments and Contingencies: The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets. The same credit policies are used in these commitments as for on-balance sheet instruments. The Company's exposure to credit loss in the event of nonperformance by the other parties is represented by the contractual amount of the financial instruments. At December 31, 2000 and 1999, the Company had the following financial instruments outstanding, whose contract amounts (in thousands) represent credit risk: Contract Amount ------------------------------- 2000 1999 -------- -------- Commitments to grant loans $ 21,971 $ 37,668 Unfunded commitments under lines of credit 167,659 109,347 Commercial and standby letters of credit 1,925 7,570 Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to be drawn upon, the total commitment amounts generally represent future cash requirements. The Company evaluates each customer's credit-worthiness on a case-by-case basis. The amount of collateral, if deemed necessary by the Company upon extension of credit, is based on management's credit evaluation of the counterparty. Unfunded commitments under commercial lines-of-credit, revolving credit lines and overdraft protection agreements are commitments for possible future extensions of credit to existing customers. These lines-of-credit usually do not contain a specified maturity date and may not be drawn upon to the total extent to which the Company is committed. The Company has no investments in financial instruments or agreements whose value is linked to or derived from changes in the value of some underlying assets or index. -45- Such instruments or agreements include futures, forward contracts, option contracts, interest-rate swap agreements and other financial arrangements with similar characteristics and are commonly referred to as derivatives. At December 31, 2000 and 1999, the Company had outstanding commitments to sell loans of $3,232,000 and $956,000, respectively. The Company is subject to certain claims and litigation arising in the ordinary course of business. In the opinion of management, after consultation with legal counsel, the ultimate disposition of these matters is not expected to have a material effect on the consolidated financial position of the Company. Note 16 - Fair Value of Financial Instruments: The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company's various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. SFAS 107 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company. The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value: Cash and Cash Equivalents: The carrying amounts of cash and short-term instruments approximate their fair value. The carrying amounts of interest-bearing deposits maturing within ninety days approximate their fair values. Investment Securities: Fair value equals quoted market prices and dealer quotes. The carrying value of Federal Home Loan Bank stock approximates fair value based on the redemption provisions of the Federal Home Loan Bank. Loans: The fair value of mortgage loans receivable was estimated based on present values using entry-value rates at December 31, 2000 and 1999, weighted for varying maturity dates. Other loans receivable were valued based on present values using entry-value interest rates at December 31, 2000 and 1999 applicable to each category of loans. Fair values of mortgage loans held for sale are based on commitments on hand from investors or prevailing market prices. Deposits: The fair value of NOW accounts, money market deposits and savings accounts was the amount payable on demand at the reporting date. Certificates of deposit were valued using a weighted average rate calculated based upon rates at December 31, 2000 and 1999 for deposits of similar remaining maturities. Short-term Borrowings: The carrying amounts of short-term borrowings maturing -46- within ninety days approximate their fair values. Long-term Borrowings: The fair values of the Company's long-term borrowings are estimated using discounted cash flow analyses based on the Company's current incremental borrowing rates for similar types of borrowing arrangements. Accrued Interest: The carrying amounts of accrued interest approximate fair value. Off-Balance Sheet Items: The Company has outstanding commitments to extend credit and standby letters of credit. These off-balance sheet financial instruments are generally exercisable at the market rate prevailing at the date the underlying transaction will be completed and, therefore, have no current fair value. The estimated fair values and carrying amounts of the Company's financial instruments (in thousands) are as follows:
December 31, 2000 December 31, 1999 ------------------------ ------------------------ Carrying Fair Carrying Fair Financial Assets Amount Value Amount Value ---------- ---------- ---------- ---------- Cash and cash equivalents $ 34,541 $ 34,541 $ 47,713 $ 47,713 Securities available for sale 268,223 268,223 299,388 299,388 Securities held to maturity 76,332 75,940 85,493 82,884 Federal Home Loan Bank stock 7,997 7,997 6,821 6,821 Loans and loans held for sale, net 933,633 928,967 838,900 835,864 Accrued interest receivable 9,142 9,142 8,017 8,017 Financial Liabilities Deposits $1,143,187 $1,133,385 $1,100,014 $1,100,814 Short-term borrowings 54,000 54,000 83,000 83,000 Long-term debt 60,843 62,008 52,053 51,369 Accrued interest payable 5,480 5,480 5,385 5,385
-47- The fair value estimates presented herein are based upon pertinent information available to management as of December 31, 2000 and 1999. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date and, therefore, current estimates of fair value may differ significantly from the amounts presented herein. Note 17 - Comprehensive Income: The following is a summary of the components of other comprehensive income (in thousands):
For The Years Ended December 31, -------------------------------------- 2000 1999 1998 -------- -------- -------- Unrealized gain (loss) on securities available for sale, net $ 5,674 $(11,489) $ 196 Reclassification adjustment for net losses (gains) realized in net income 1,759 -- (3) -------- -------- -------- Other comprehensive income 7,433 (11,489) 193 Income tax (expense) benefit related to other comprehensive income (2,602) 4,016 (65) -------- -------- -------- Other comprehensive income, net of income taxes $ 4,831 $ (7,473) $ 128 ======== ======== ========
Note 18 - Restrictions on Dividends, Loans and Advances: The Bank is restricted under applicable laws in the payment of dividends to an amount equal to current year earnings plus undistributed earnings for the immediately preceding year, unless prior permission is received from the Commissioner of Financial Institutions for the State of Louisiana. Dividends payable without permission by the Bank in 2001 will be limited to 2001 earnings plus an additional $4,345,000. Accordingly, at January 1, 2001 $129,878,000 of the Company's equity in the net assets of the Bank was restricted. Funds available for loans or advances by the Bank to the Company amounted to $10,789,000. Note 19 - Segment Information: SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information, was effective for 1998. This statement established standards for reporting information about a company's operating segments using a "management approach." The statement requires that reportable segments be identified based upon those revenue-producing components for which separate financial information is produced internally and are subject to evaluation by the chief operating decision maker in deciding how to allocate resources to segments. The Company has evaluated its potential operating segments against the criteria specified in the statement and has determined that no operating segment disclosures are required in 2000 or 1999. -48- Note 20 - Condensed Parent Company Only Financial Statements: Condensed financial statements of IBERIABANK Corporation (parent company only) are shown below. The parent company has no significant operating activities.
Condensed Balance Sheets December 31, 2000 and 1999 (Dollars in thousands) Assets 2000 1999 -------- -------- Cash in bank $ 711 $ 921 Investment in subsidiary 134,223 124,792 Other assets 3,123 348 -------- -------- Total assets $138,057 $126,061 ======== ======== Liabilities and Shareholders' Equity Liabilities 11,015 8,872 Shareholders' equity 127,042 117,189 -------- -------- Total liabilities and shareholders' equity $138,057 $126,061 ======== ======== Condensed Statements of Income Years Ended December 31, 2000, 1999 and 1998 (Dollars in thousands) 2000 1999 1998 -------- ------- ------- Operating income: Dividends from subsidiary $ 9,600 $ 4,550 $ 3,147 Interest income 45 27 303 Other income 0 0 2 -------- ------- ------- Total operating income 9,645 4,577 3,452 Operating expenses 1,635 2,752 1,761 -------- ------- ------- Income before income tax expense and increase in equity in undistributed earnings of subsidiary 8,010 1,825 1,691 Income tax (benefit) (620) (800) (510) -------- ------- ------- Income before increase in equity in undistributed earnings of subsidiary 8,630 2,625 2,201 Increase in equity in undistributed earnings of subsidiary 4,345 6,904 7,936 -------- ------- ------- Net income $ 12,975 $ 9,529 $10,137 ======== ======= =======
-49-
Condensed Statements of Cash Flows Years Ended December 31, 2000, 1999 and 1998 (Dollars in thousands) 2000 1999 1998 -------- -------- -------- Cash Flows from Operating Activities: Net income $ 12,975 $ 9,529 $ 10,137 Adjustments to reconcile net income to net cash provided by operating activities: Provision for deferred income taxes -- -- (1) Increase in equity in net income of subsidiary (4,345) (6,904) (7,936) (Increase) decrease in other assets (2,782) 663 3,239 Increase in other liabilities 427 238 7 Noncash compensation expense 579 795 443 -------- -------- -------- Net Cash Provided by Operating Activities 6,854 4,321 5,889 -------- -------- -------- Cash Flows from Investing Activities: Net Cash Provided by (Used In) Investing Activities -- -- -- -------- -------- -------- Cash Flows from Financing Activities: Dividends paid to shareholders (3,817) (3,810) (3,372) Capital contributed to subsidiary (175) (2,184) (9,222) Proceeds from issuance of long-term debt 1,650 7,575 0 Payments received from ESOP 655 738 848 Payments to repurchase common stock (5,377) (7,045) (503) Proceeds from sale of treasury stock -- 212 78 -------- -------- -------- Net Cash Used In Financing Activities (7,064) (4,514) (12,171) -------- -------- -------- Net Decrease in Cash and Cash Equivalents (210) (193) (6,282) Cash and Cash Equivalents, Beginning of Period 921 1,114 7,396 -------- -------- -------- Cash and Cash Equivalents, End of Period $ 711 $ 921 $ 1,114 ======== ======== ========
-50- Note 21 - Quarterly Results of Operations (unaudited): (Dollars in thousands, except per share data)
First Second Third Fourth Year Ended December 31, 2000 Quarter Quarter Quarter Quarter ------- ------- ------- ------- Total interest income $24,655 $25,843 $26,840 $26,708 Total interest expense 12,284 12,883 13,695 13,868 ------- ------- ------- ------- Net interest income 12,371 12,960 13,145 12,840 Provision for loan losses 481 604 811 1,965 ------- ------- ------- ------- Net interest income after provision for loan losses 11,890 12,356 12,334 10,875 Noninterest income 3,159 3,104 3,222 3,253 Noninterest expense 9,514 9,662 9,281 7,980 Goodwill amortization 828 820 813 806 ------- ------- ------- ------- Income before income taxes 4,707 4,978 5,462 5,342 Income tax expense 1,752 1,858 2,036 1,868 ------- ------- ------- ------- Net Income $ 2,955 $ 3,120 $ 3,426 $ 3,474 ======= ======= ======= ======= Earnings per share - basic $ $ 0.48 $ 0.51 $ 0.56 $ 0.58 ======= ======= ======= ======= Earnings per share - diluted $ 0.48 $ 0.51 $ 0.56 $ 0.57 ======= ======= ======= ======= Year Ended December 31, 1999 Total interest income $23,434 $23,850 $ 23,359 $24,442 Total interest expense 11,005 11,087 11,458 11,830 ------- ------- ------- ------- Net interest income 12,429 12,763 11,901 12,612 Provision for loan losses 370 265 288 1,913 ------- ------- ------- ------- Net interest income after provision for loan losses 12,059 12,498 11,613 10,699 Noninterest income 3,100 3,092 3,600 3,888 Noninterest expense 9,692 10,113 9,832 11,844 Goodwill amortization 853 855 843 850 ------- ------- ------- ------- Income before income taxes 4,614 4,622 4,538 1,893 Income tax expense 1,755 1,794 1,751 838 ------- ------- ------- ------- Net Income $ 2,859 $ 2,828 $ 2,787 $ 1,055 ======= ======= ======= ======= Earnings per share - basic $ $ 0.45 $ 0.46 $ 0.46 $ 0.17 ======= ======= ======= ======= Earnings per share - diluted $ 0.44 $ 0.45 $ 0.45 $ 0.17 ======= ======= ======= =======
-51- CORPORATE INFORMATION DIRECTORS OF IBERIABANK CORPORATION William H. Fenstermaker, Chairman of the Board of IBERIABANK Corporation; President and Chief Executive Officer of C. H. Fenstermaker and Associates, Inc., Lafayette, LA E. Stewart Shea III, Vice Chairman of the Board of IBERIABANK Corporation; Vice President of Bayou Management Services, President of Bayou Pipe Coating, LLC, affiliates of Bayou Management Services, New Iberia, LA Elaine D. Abell, Attorney in private practice, Lafayette, LA Harry V. Barton, Jr., Certified Public Accountant, Lafayette, LA Ernest P. Breaux, President, E. P. Breaux Electrical Co., New Iberia, LA Cecil C. Broussard, Commercial Real Estate Broker, Retired Automobile Dealer, New Iberia, LA Daryl G. Byrd, President and Chief Executive Officer of IBERIABANK Corporation Richard F. Hebert, Owner, President of Hebert's Home and Garden Showplace, New Iberia, LA Larrey G. Mouton, Community Relations Officer of IBERIABANK Corporation EXECUTIVE OFFICERS OF IBERIABANK CORPORATION AND IBERIABANK Daryl G. Byrd, President and Chief Executive Officer Michael J. Brown, Senior Executive Vice President, New Orleans President, Chief Credit Officer John R. Davis, Senior Executive Vice President, Finance and Retail Strategy Marilyn W. Burch, Executive Vice President, Chief Financial Officer Donald P. Lee, Executive Vice President, Legal Counsel, Corporate Secretary EXECUTIVE OFFICERS OF IBERIABANK Taylor F. Barras, New Iberia and Community Banks President George J. Becker, Northeast Louisiana President Patrick J. Trahan, Lafayette President Belinda J. Cavazos, Executive Vice President Jack J. Deano, Executive Vice President Deneen T. Gross, Executive Vice President Karl E. Hoefer, Executive Vice President J. Keith Short, Executive Vice President DIVIDEND REINVESTMENT PLAN IBERIABANK Corporation shareholders may take advantage of our Dividend Reinvestment Plan. This program provides a convenient, economical way for shareholders to increase their holdings of the Company's common stock. The shareholder pays no brokerage commissions or service charges while participating in the plan. A nominal fee is charged at the time that an individual terminates plan participation. This plan does not currently offer participants the ability to purchase additional shares with optional cash payments. To enroll in the IBERIABANK Corporation Dividend Reinvestment Plan, shareholders must have their stock certificate numbers and complete an enrollment form. A summary of the plan and enrollment forms are available from the Registrar and Transfer Company at the address provided below. Investor Relations Registrar and Transfer Company 10 Commerce Drive Cranford, NJ 07016 (800) 368-5948 www.invrelations@RTCO.com Special thanks to the following for use of Louisiana photos and graphics: C.H. Fenstermaker and Associates, New Orleans Center for Creative Arts, The Shadows, Louisiana Office of Tourism Imagebase, Southern Mutual Housing Authority, The News Star EX-23 6 iberia10k12312000ex23.txt EXHIBIT 23 CONSENT OF CASTAING, HUSSEY EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statements of IBERIABANK Corporation on Form S-8 (File No. 333-28859, 333-79811, 333-81315 and 333-41970) of our report dated February 7, 2001, on our audits of the consolidated financial statements of IBERIABANK Corporation as of December 31, 2000 and 1999, and for each of the three years in the period ended December 31, 2000, which report is incorporated by reference in this Annual Report on Form 10-K. /s/Castaing, Hussey & Lolan, LLC New Iberia, Louisiana March 28, 2001 -----END PRIVACY-ENHANCED MESSAGE-----