10-K

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, 2006

Commission File Number 0-25756

IBERIABANK Corporation

(Exact name of Registrant as specified in its charter)

Louisiana	72-1280718
(State of incorporation or organization)	(I.R.S. Employer Identification Number)

200 West Congress Street, Lafayette, Louisiana	70501
(Address of principal executive office)	(Zip Code)

Registrant’s telephone number, including area code: (337) 521-4003

Securities registered pursuant to Section 12(g) of the Act: Not Applicable

Securities registered pursuant to Section 12(b) of the Act

Common Stock (par value $1.00 per share)

(Title of Class)

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Exchange Act of 1934.    Yes  ¨    No  x

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    Yes  ¨    No  x

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 to 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 to this Form 10-K.  x

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer (as defined in Securities Exchange Act Rule 12b-2).

Large Accelerated Filer  ¨    Accelerated Filer  x    Non-accelerated Filer  ¨

Indicate by check mark whether the Registrant is a shell company, as defined in Rule 12b-2 of the Securities Exchange Act of 1934.    Yes  ¨    No  x

As of January 31, 2007, the aggregate market value of the voting shares of common stock held by non-affiliates of the Registrant was approximately $593.4 million. This figure is based on the closing sale price of $57.65 per share of the Registrant’s common stock on January 31, 2007. For purposes of this calculation, the term “affiliate” refers to all executive officers and directors of the Registrant and all shareholders beneficially owning more than 10% of the Registrant’s common stock.

Number of shares of common stock outstanding as of February 28, 2007: 12,797,344

DOCUMENTS INCORPORATED BY REFERENCE

(1) Portions of the Annual Report to Shareholders for the fiscal year ended December 31, 2006 are incorporated into Part II, Items 5 through 9B of this Form 10-K; (2) portions of the definitive proxy statement for the 2007 Annual Meeting of Shareholders to be filed within 120 days of Registrant’s fiscal year end (the “Proxy Statement”) are incorporated into Part III, Items 10 through 14 of this Form 10-K.

PART 1.

Item 1. Business.

General

IBERIABANK Corporation (the “Company”), a Louisiana corporation, is a bank holding company that has elected to become a financial holding company. A bank holding company that qualifies as a financial holding company may engage in a broader range of financial activities. As of December 31, 2006, the Company had consolidated assets of $3.2 billion, total deposits of $2.4 billion and stockholders’ equity of $319.6 million.

The Company’s principal executive office is located at 200 West Congress Street, Lafayette, Louisiana, and its telephone number at that office is (337) 521-4003. The Company’s website is located at www.iberiabank.com.

The Company is the holding company for IBERIABANK, a Louisiana banking corporation headquartered in Lafayette, Louisiana. The Company recently acquired two additional financial institution subsidiaries: Pulaski Bank and Trust Company, an Arkansas banking corporation headquartered in Little Rock, Arkansas, and First Community Bank, a federal savings association headquartered in Jonesboro, Arkansas.

On January 31, 2007, the Company acquired Pulaski Investment Corporation, the bank holding company for Pulaski Bank and Trust Company. As a result of this transaction, IBERIABANK Corporation is now the holding company for Pulaski Bank and Trust Company. The Company issued 1,133,064 shares of its common stock and paid cash in the amount of $65 million in exchange for the outstanding shares of capital stock of Pulaski Investment Corporation.

On February 1, 2007, the Company acquired Pocahontas Bancorp, Inc., the savings and loan holding company for First Community Bank. As a result of this transaction, IBERIABANK Corporation is now the holding company for First Community Bank. A total of 1,287,793 shares of the Company’s common stock were issued in the acquisition.

The Company expects to merge Pulaski Bank and Trust Company with First Community Bank within the next few months.

For additional information regarding these acquisitions, see the Company’s Current Report on Form 8-K dated January 31, 2007. This report includes tables showing information as of September 30, 2006, regarding the financial condition and operations of IBERIABANK Corporation after giving effect to the acquisition of Pulaski Investment Corporation and Pocahontas Bancorp, Inc., a $30 million private placement of IBERIABANK Corporation common stock, a $15 million trust preferred securities offering and a $20 million long-term borrowing to fund the cash portion of the Pulaski Investment Corporation acquisition.

Subsidiaries

IBERIABANK has two active, wholly-owned non-bank subsidiaries, Iberia Financial Services, LLC and Acadiana Holdings, LLC. Iberia Financial Services manages the brokerage services offered by the Bank. At December 31, 2006, IBERIABANK’s equity investment in Iberia Financial Services was $3.8 million, and Iberia Financial Services had total assets of $4.4 million. Acadiana Holdings owns and operates a commercial office building that also serves as the Company’s headquarters and the IBERIABANK’s main office. At December 31, 2006, IBERIABANK’s equity investment in Acadiana Holdings was $9.2 million, and Acadiana Holdings had total assets of $10.2 million.

Pulaski Bank and Trust Company has four active, wholly-owned non-bank subsidiaries: Pulaski Mortgage Company, Lenders Title Company, Asset Exchange, Inc. and Pulaski Insurance Agency, Inc. Pulaski Mortgage Company offers one-to-four family residential mortgage loans in Arkansas, Tennessee, Mississippi, Oklahoma, and Texas, and as Bankers Home Lending (a division of Pulaski Mortgage) in Missouri and Illinois. Lenders Title Company provides a full line of title insurance and loan closing services for both residential and commercial customers in 20 branches throughout Arkansas. Asset Exchange, Inc., wholly-owned by Lenders Title Company, provides qualified intermediary services to facilitate Internal Revenue Code Section 1031 tax deferred exchanges for customers of Lenders Title. Pulaski Insurance Agency, Inc. is a licensed insurance agency and facilitates the receipt of insurance commissions from the sale of variable annuities, life, health, dental and accident insurance products.

First Community Bank has three active, wholly-owned non-bank subsidiaries: Sun Realty, Inc. (d/b/a FCB Insurance Agency), P.F. Services, Inc., and Southern Mortgage Corporation. Sun Realty, Inc. acts as an agent in the sale of health, automobile, home and other insurance products. P.F. Services, Inc. owns an office building which the Company plans to divest. Southern Mortgage Corporation, headquartered in Tulsa, Oklahoma, originates conforming single family loans.

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 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.

Employees

The Company had 692 full-time employees and 62 part-time employees as of December 31, 2006. None of these employees is represented by a collective bargaining agreement. The Company believes that it enjoys an excellent relationship with its personnel.

As a result of the acquisitions of Pulaski Investment Corporation and Pocahontas Bancorp, Inc., the Company has added an additional 671 full-time employees and 19 part-time employees.

Business Combinations

The Company continually evaluates business combination opportunities and sometimes conducts due diligence activities in connection with them. As a result, business combination discussions and, in some cases, negotiations take place, and transactions involving cash, debt or equity securities can be expected. Any future business combinations or series of business combinations that the Company might undertake may be material in terms of assets acquired or liabilities assumed.

Available Information

The Company’s filings with the Securities and Exchange Commission (“SEC”), including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments thereto, are available on the Company’s website as soon as reasonably practicable after the reports are filed with or furnished to the SEC. Copies can be obtained free of charge in the “Investor Relations” section of the Company’s website at www.iberiabank.com. The Company’s SEC filings are also available through the SEC’s website at www.sec.gov. Copies of these filings are also available by writing the Company at the following address:

Investor Relations

P.O. Box 52747

Lafayette, Louisiana 70505-2747

Supervision and Regulation

The banking industry is extensively regulated under both federal and applicable state laws. The following discussion is a summary of certain statues and regulations applicable to bank holding companies and their subsidiaries and provides specific information relevant to the Company and its subsidiaries. Regulation of financial institutions is intended primarily for the protection of depositors, deposit insurance funds and the banking system, and generally is not intended for the protection of shareholders.

Proposals are frequently introduced to change federal and state laws and regulations applicable to the Company and its subsidiaries. The likelihood and timing of any such changes and the impact such changes might have on the Company and its subsidiaries are impossible to determine with any certainty.

General. As a bank holding company and a financial holding company under federal law, the Company is subject to regulation under the Bank Holding Company Act of 1956, as amended (the “BHCA”), and the examination and reporting requirements of the Board of Governors of the Federal Reserve System (the “FRB”). As a Louisiana-chartered commercial bank and a member of the Federal Reserve System, IBERIABANK is subject to regulation, supervision and examination by the Office of Financial Institutions of the State of Louisiana, IBERIABANK’s chartering authority, and the FRB, IBERIABANK’s primary regulator. As an Arkansas-chartered commercial bank and a member of the Federal Reserve System, Pulaski Bank and Trust Company is subject to regulation, supervision and examination by the Arkansas State Bank Department, Pulaski Bank and Trust Company’s chartering authority, and the FRB, its primary regulator. As a federal savings association, First Community Bank is subject to regulation, supervision and examination by the Office of Thrift Supervision (the “OTS”). IBERIABANK, Pulaski Bank and Trust Company and First Community Bank are collectively referred to herein as the “Banks.” Each of the Banks is also subject to regulation, supervision and examination by the Federal Deposit Insurance Corporation (the “FDIC”). The FDIC insures the deposits of the Banks to the maximum extent permitted by law.

State and federal law govern the activities in which the Banks may engage, the investments they may make and the aggregate amount of loans that may be granted to one borrower. Various consumer and compliance laws and regulations also affect the Banks’ operations.

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.

In addition to federal and state banking laws and regulations, the Company and certain of its subsidiaries and affiliates, including those that engage in securities brokerage and insurance activities, are subject to other federal and state laws and regulations, and supervision and examination by other state and federal regulatory agencies, including the Securities and Exchange Commission (the “SEC), the National Association of Securities Dealers, Inc. (the “NASD”), and various state insurance and securities regulators.

Financial Holding Company Regulation. Under current federal law, as amended by the Gramm-Leach-Bliley Act of 1999 (the “GLB Act”), a bank holding company, such as the Company, may elect to become a financial holding company. Such an election allows a holding company to offer customers virtually any type of service that is financial in nature or incidental thereto, including banking and activities closely related thereto, securities underwriting, insurance (both underwriting and agency) and merchant banking. In order to become and maintain its status as a financial holding company, a financial holding company and all of its affiliated depository institutions must be well-capitalized, well-managed, and have at least a satisfactory Community Reinvestment Act of 1977 (“CRA”) rating. If the FRB determines that a financial holding company is not well-capitalized or well-managed, the company has a period of time to come into compliance. During the period of noncompliance, the FRB can place any limitation on the financial holding company that it believes to be appropriate. Furthermore, if the FRB determines that a financial holding company has not maintained a satisfactory CRA rating, the company will not be able to commence any new financial activities or acquire a company that engages in such activities, although the company will still be allowed to engage in activities closely related to banking and make investments in the ordinary course of conducting merchant banking activities. The Company became a financial holding company in connection with its acquisitions of Pulaski Investment Corporation and Pocahontas Bancorp, Inc., and currently satisfies the requirements to maintain its status as a financial holding company.

Most of the financial activities that are permissible for financial holding companies are also permissible for a “financial subsidiary” of one or more of the Banks, except for insurance underwriting, insurance company portfolio investments, real estate investments and development, and merchant banking, which must be conducted in a financial holding company. Subsidiary banks of a financial holding company with financial subsidiaries must continue to be well-capitalized and well-managed in order to continue to engage in activities that are financial in nature without regulatory actions or restrictions, which could include divestiture of the financial subsidiary or subsidiaries.

Current federal law also establishes a system of functional regulation under which the FRB is the umbrella regulator for bank holding companies, but bank holding company affiliates are to be principally regulated by functional regulators, such as the SEC for securities affiliates and state insurance regulators for insurance affiliates. Certain specific activities, including traditional bank trust and fiduciary activities, may be conducted in the bank without the bank being deemed a “broker” or a “dealer” in securities for purposes of functional regulation. Although the states generally must regulate bank insurance activities in a nondiscriminatory manner, the states may continue to adopt and enforce rules that specifically regulate bank insurance activities in certain identifiable areas.

Acquisitions. The Company complies with numerous laws relating to its acquisition activity. Under the BHCA, a bank holding company may not directly or indirectly acquire ownership or control of more than 5% of the voting shares or substantially all of the assets of any bank holding company or bank or merge or consolidate with another bank holding company without the prior approval of the FRB. Current Federal law authorizes interstate acquisitions of banks and bank holding companies without geographic limitation. Furthermore, a bank headquartered in one state is authorized to merge with a bank headquartered in another state, as long as neither of the states have opted out of such interstate merger authority prior to such date, and subject to any state requirement that the target bank shall have been in existence and operating for a minimum period of time, not to exceed five years; and subject to certain deposit market-share limitations. After a bank has established branches in a state through an interstate merger transaction, the bank may establish and acquire additional branches at any location in the state where a bank headquartered in that state could have established or acquired branches under applicable federal or state law.

Other Safety and Soundness Regulations. The FRB has enforcement powers over bank holding companies and their non-banking subsidiaries. The FRB has authority to prohibit activities that represent unsafe or unsound practices or constitute violations of law, rule, regulation, administrative order or written agreement with a federal regulator. These powers may be exercised through the issuance of cease and desist orders, civil money penalties or other actions.

There also are a number of obligations and restrictions imposed on bank holding companies and their depository institution subsidiaries by federal law and regulatory policy that are designed to reduce potential loss exposure to the depositors of such depository institutions and to the FDIC insurance funds in the event the depository institution is insolvent or is in danger of becoming insolvent. For example, under requirements of the FRB with respect to bank holding company operations, a bank holding company is required to serve as a source of financial strength to its subsidiary depository institutions and to commit financial resources to support such institutions in circumstances where it might not do so otherwise. In addition, the “cross-guarantee” provisions of federal law require insured depository institutions under common control to reimburse the FDIC for any loss suffered or reasonably anticipated by the Deposit Insurance Fund (“DIF”) as a result of the insolvency of commonly controlled insured depository institutions or for any assistance provided by the FDIC to commonly controlled insured depository institutions in danger of failure. The FDIC may decline to enforce the cross-guarantee provision if it determines that a waiver is in the best interests of the DIF. The FDIC’s claim for reimbursement under the cross guarantee provisions is superior to claims of shareholders of the insured depository institution or its holding company, but is subordinate to claims of depositors, secured creditors and nonaffiliated holders of subordinated debt of the commonly controlled insured depository institution.

Banking regulators also have broad enforcement powers over the Banks, including the power to impose fines and other civil and criminal penalties, and to appoint a conservator in order to conserve the assets of any such institution for the benefit of depositors and other creditors.

Dividends. The Company is a legal entity separate and distinct from its subsidiaries. The majority of the Company’s revenue is from dividends paid to the Company by the Banks. The Banks are subject to laws and regulations that limit the amount of dividends they can pay. In addition, the Company and the Banks are subject to various regulatory restrictions relating to the payment of dividends, including requirements to maintain capital at or above regulatory minimums, and to remain “well-capitalized” under the prompt corrective action. The FRB has indicated generally that it may be an unsafe or unsound practice for a bank holding

company to pay dividends unless the bank holding company’s net income over the preceding year is sufficient to fund the dividends and the expected rate of earnings retention is consistent with the organization’s capital needs, asset quality and overall financial condition.

In addition to the limitations placed on the payment of dividends at the holding company level, there are various legal and regulatory limits on the extent to which the Banks may pay dividends or otherwise supply funds to the Company. The Banks are subject to laws and regulations of Louisiana, Arkansas and the OTS, as applicable, which place certain restrictions on the payment of dividends. Additionally, as members of the Federal Reserve System, IBERIABANK and Pulaski Bank and Trust Company are subject to regulations of the FRB.

The Company does not expect that these laws, regulations or policies will materially affect the ability of the Banks to pay dividends. Additional information is provided in Note 20 to the Consolidated Financial Statements incorporated herein by reference.

Regulatory Capital Requirements. The Company is required to comply with the capital adequacy standards established by the FRB, and the Banks must comply with similar capital adequacy standards established by the FRB, OTS and FDIC, as applicable. Failure to meet capital adequacy standards could subject the Company or the Banks to a variety of enforcement remedies, including the issuance of a capital directive, the termination of deposit insurance by the FDIC and certain other restrictions on their business. The federal banking agencies have broad powers under current federal law to take prompt corrective action to resolve problems of insured depository institutions. The extent of these powers depends upon whether the institutions in question are “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized,” as such terms are defined under regulations issued by each of the federal banking agencies. In general, the agencies measure capital adequacy within a framework that makes capital requirements sensitive to the risk profiles of individual banking companies. The guidelines define capital as either Tier 1 (primarily common shareholders’ equity) or Tier 2 (certain debt instruments and a portion of the allowance for loan losses). The Company and the Banks are subject to a minimum Tier 1 capital ratio (Tier 1 capital to risk-weighted assets) of 4%, a total capital ratio (Tier 1 plus Tier 2 to risk-weighted assets) of 8% and a Tier 1 leverage ratio (Tier 1 to average quarterly assets) of 4%. To be considered a “well capitalized” institution, the Tier 1 capital ratio, the total capital ratio and the Tier 1 leverage ratio must equal or exceed 6%, 10% and 5%, respectively.

The FRB has adopted rules to incorporate market and interest rate risk components into its risk-based capital standards. Under these market risk requirements, capital is allocated to support the amount of market risk related to a financial institution’s ongoing trading activities.

Additional information is provided in Note 14 to the Consolidated Financial Statements and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Capital Resources” in Exhibit 13 to this Form 10-K incorporated herein by reference.

Affiliate Transactions. The Banks are subject to Regulation W, which comprehensively implemented statutory restrictions on transactions between a bank and its affiliates. Regulation W combines the FRB’s interpretations and exemptions relating to Sections 23A and 23B of the Federal Reserve Act. Regulation W and Section 23A of the Federal Reserve Act place limits on the amount of loans or extensions of credit to, investments in, or certain other transactions with affiliates, and on the amount of advances to third parties collateralized by the securities or obligations of affiliates. In general, the Banks’ “affiliates” are the Company and the Company’s non-bank subsidiaries.

Regulation W and Section 23B of the Federal Reserve Act prohibit, among other things, a bank from engaging in certain transactions with affiliates unless the transactions are on terms substantially the same, or at least as favorable to the bank, as those prevailing at the time for comparable transactions with non-affiliated companies.

The Banks are also subject to certain restrictions on extensions of credit to executive officers, directors, certain principal shareholders and their related interests. Such extensions of credit must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with third parties and must not involve more than the normal risk of repayment or present other unfavorable features.

Deposit Insurance. The Banks’ deposits are insured to applicable limits by DIF of the FDIC. The DIF is the successor to the Bank Insurance Fund and the Savings Association Insurance Fund, which were merged in 2006 by the Federal Deposit Insurance Reform Act of 2005 (the “Reform Act”). In addition to merging the insurance funds, the Reform Act made the following major changes to the federal deposit insurance system:

· the current $100,000 deposit insurance coverage will be indexed for inflation (with adjustments every five years, commencing January 1, 2011);

· deposit insurance coverage for retirement accounts was increased to $250,000 per participant subject to adjustment for inflation; and

· the FDIC was given the authority to adjust the DIF’s reserve ratio annually at between 1.15% and 1.5% of insured deposits, in contrast to the prior statutory ratio of 1.25%.

The FDIC has set the DIF’s reserve ratio for 2007 at 1.25%.

The FDIC maintains a risk-based deposit insurance assessment system, under which the amount of each bank’s insurance assessment is based on the balance of insured deposits and the degree of risk the institution poses to the DIF. Under the revised assessment system adopted by the FDIC following enactment of the Reform Act, insured institutions are assigned to one of four risk categories based on supervisory evaluations, capital levels and certain other factors. Deposit insurance assessment rates, which are set semiannually by the FDIC, currently range from 0.05% to 0.07% of insured deposits for Risk Category I institutions (i.e., well-capitalized and with one of the two highest safety and soundness examination ratings) to 0.43% for Risk Category IV institutions (i.e., undercapitalized and with substantial supervisory concerns).

The Reform Act also provides for a one-time credit for eligible institutions based on their level of insured deposits as of December 31, 1996. Subject to certain limitations applicable to institutions that are exhibiting weakness, such credit can be used to offset insurance assessments until exhausted. IBERIABANK’s one-time credit is expected to approximate $1.4 million.

In addition, all insured institutions are required to pay assessments to the FDIC to fund interest payments on bonds issued by the Financing Corporation, an agency of the federal government established to recapitalize the predecessor to the Savings Association Insurance Fund. This payment is established quarterly, and during the calendar year ending December 31, 2006, averaged 1.28 basis points of assessable deposits.

Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley Act of 2002 (the “SOX Act”) implements a broad range of corporate governance, accounting and disclosure requirements for public companies, and also for their directors and officers. SEC rules adopted to implement SOX Act requirements require a reporting company’s chief executive and chief financial officers to certify certain financial and other information included in the Company’s quarterly and annual reports. The rules also require these officers to certify that they are responsible for establishing, maintaining and regularly evaluating the effectiveness of the Company’s financial reporting and disclosure controls and procedures; that they have made certain disclosures to the auditors and to the audit committee of the board of directors about the Company’s controls and procedures; and that they have included information in their quarterly and annual filings about their evaluation and whether there have been significant changes to the controls and procedures or other factors which would significantly impact these controls subsequent to their evaluation. Section 404 of the SOX Act requires management to undertake an assessment of the adequacy and effectiveness of the Company’s internal controls over financial reporting and requires the Company’s auditors to attest to, and report on, management’s assessment and the effectiveness of these controls. See Item 9A.—“Controls and Procedures” hereof for the Company’s evaluation of disclosure controls and procedures. The certifications required by Sections 302 and 906 of the SOX Act also accompany this Form 10-K.

Consumer Protection Laws. In connection with their lending and leasing activities, each of the Banks is subject to a number of federal and state laws designed to protect borrowers and promote lending to various sectors of the economy and population. These laws include the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Truth in Lending Act, the Home Mortgage Disclosure Act, the Real Estate Settlement Procedures Act, and their respective state law counterparts.

Federal law currently contains extensive customer privacy protection provisions. Under these provisions, a financial institution must provide to its customers, at the inception of the customer relationship and annually thereafter, the institution’s policies and procedures regarding the handling of customers’ nonpublic personal financial information. These provisions also provide that,

except for certain limited exceptions, an institution may not provide such personal information to unaffiliated third parties unless the institution discloses to the customer that such information may be so provided and the customer is given the opportunity to opt out of such disclosure. Federal law makes it a criminal offense, except in limited circumstances, to obtain or attempt to obtain customer information of a financial nature by fraudulent or deceptive means.

The CRA requires the Banks’ primary federal bank regulatory agencies to assess the Banks’ records in meeting the credit needs of the communities they serve, including low- and moderate-income neighborhoods and persons. Institutions are assigned one of four ratings: “Outstanding,” “Satisfactory,” “Needs to Improve” or “Substantial Noncompliance.” This assessment is reviewed for any bank that applies to merge or consolidate with or acquire the assets or assume the liabilities of an insured depository institution, or to open or relocate a branch office. The CRA record of each subsidiary bank of a financial holding company, such as the Company, also is assessed by the FRB in connection with any acquisition or merger application.

USA Patriot Act. The USA Patriot Act of 2001 (the “Patriot Act”) contains anti-money laundering measures affecting insured depository institutions, broker-dealers and certain other financial institutions. The Patriot Act requires such financial institutions to implement policies and procedures to combat money laundering and the financing of terrorism, and grants the Secretary of the Treasury broad authority to establish regulations and to impose requirements and restrictions on financial institutions’ operations. In addition, the Patriot Act requires the federal bank regulatory agencies to consider the effectiveness of a financial institution’s anti-money laundering activities when reviewing bank mergers and bank holding company acquisitions.

Other Regulatory Matters. The Company and its subsidiaries and affiliates are subject to numerous examinations by federal and state banking regulators, as well as the SEC, the NASD, and various state insurance and securities regulators.

Corporate Governance. Information with respect to the Company’s corporate governance is available on the Company’s web site, www.iberiabank.com, and includes:

· Corporate Governance Guidelines

· Nominating and Corporate Governance Committee Charter

· Codes of Ethics

· Chief Executive Officer and Chief Financial Officer Certifications

The Company intends to disclose any waiver or substantial amendment of the Codes of Ethics applicable to directors and executive officers on its web site at www.iberiabank.com.

Federal Taxation

The Company and the Banks are subject to the generally applicable corporate tax provisions of the Internal Revenue Code (the “Code”), and the Banks are subject to certain additional provisions of the Code which apply to financial institutions. The Company, the Banks and all subsidiaries file a consolidated federal income tax return on the basis of a fiscal year ending on December 31.

Retained earnings at December 31, 2006 and 2005 included approximately $21.9 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, 2006 includes $41.5 million of future deductible temporary differences. Included is $28.5 million 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 tax. IBERIABANK is not subject to the Louisiana income or franchise taxes. However, IBERIABANK 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 shareholders’ 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 expense.

Arkansas generally imposes income tax on financial institutions computed at a rate of 6.5% of net earnings. For the purpose of the 6.5% income tax, net earnings are defined as the net income of the financial institution computed in the manner prescribed for computing the net taxable income for federal corporate income tax purposes, less (i) interest income from obligations of the United States, of any county, municipal or public corporation authority, special district or political subdivision, plus (ii) any deduction for state income taxes.

Item 1A. Risk Factors.

(references to “our,” “we” or similar terms under this subheading refer to IBERIABANK Corporation)

There are risks, many beyond the Company’s control, which could cause the Company’s results to differ significantly from management’s expectations. Some of these risk factors are described below. Any factor described in this report could, by itself or together with one or more other factors, adversely affect the Company’s business, results of operations and/or financial condition.

Our recent growth and financial performance will be negatively impacted if we are unable to execute our growth strategy.

Our stated growth strategy is to grow through organic growth and supplement that growth with select acquisitions. Over the last few years, we have continued to fill out our Louisiana franchise by adding de novo branches in attractive markets where we believe we have a competitive advantage and will continue to do so. Most recently, in the wake of Hurricanes Katrina and Rita, we have implemented a branch expansion initiative whereby we have opened banking offices in various southern Louisiana communities. Our success depends primarily on generating loans and deposits of acceptable risk and expense. There can be no assurances that we will be successful in continuing our organic, or internal, growth strategy, however, since it depends upon economic conditions, our ability to identify appropriate markets for expansion, our ability to recruit and retain qualified personnel, our ability to fund growth at reasonable cost, sufficient capital, competitive factors, banking laws, and other factors.

Supplementing our internal growth through acquisitions is an important part of our strategic focus. Since 1995, approximately half of our asset growth has been through acquisitions, or external growth. Our acquisition efforts focus on select markets and targeted entities in Louisiana and most recently in selected markets we consider to be contiguous, or natural extensions, to our current markets including Arkansas where we recently completed acquisitions of Pocahontas Bancorp, Inc. and Pulaski Investment Corporation. As consolidation of the banking industry continues, the competition for suitable acquisition candidates may increase. We compete with other banking companies for acquisition opportunities, and many of these competitors have greater financial resources than we do and may be able to pay more for an acquisition than we are able or willing to pay. We also may need additional debt or equity financing in the future to fund acquisitions. We may not be able to obtain additional financing or, if available, it may not be in amounts and on terms acceptable to us. Our issuance of additional securities will dilute existing shareholders’ equity interest in us and may have a dilutive effect on our earnings per share. If we are unable to locate suitable acquisition candidates willing to sell on terms acceptable to us, or we are otherwise unable to obtain additional debt or equity financing necessary for us to continue making acquisitions, we would be required to find other methods to grow our business and we may not grow at the same rate we have in the past, or at all.

We cannot be certain as to our ability to manage increased levels of assets and liabilities without increased expenses and higher levels of non-performing assets. We may be required to make additional investments in equipment and personnel to manage higher asset levels and loan balances, which may adversely affect earnings, shareholder returns, and our efficiency ratio. Increases in operating expenses or nonperforming assets may decrease our earnings and the value of our common stock.

Like most banking organizations, our business is highly susceptible to credit risk.

As a lender, we are exposed to the risk that our customers will be unable to repay their loans according to their terms and that the collateral securing the payment of their loans (if any) may not be sufficient to assure repayment. Credit losses could have a material adverse effect on our operating results.

As of December 31, 2006, our total loan portfolio was approximately $2.2 billion or 70% of our total assets. The major components of our loan portfolio include 55% of commercial loans, both real estate and business, 21% of mortgage loans comprised primarily of residential 1-4 family mortgage loans, and 24% consumer loans. Our credit risk with respect to our consumer installment loan portfolio and commercial loan portfolio relates principally to the general creditworthiness of individuals and businesses within our local market area. Our credit risk with respect to our residential and commercial real estate mortgage and construction loan portfolios relates principally to the general creditworthiness of individuals and businesses and the value of real estate serving as security for the repayment of the loans. A related risk in connection with loans secured by commercial real estate is the effect of unknown or unexpected environmental contamination, which could make the real estate effectively unmarketable or otherwise significantly reduce its value as security.

Our allowance for loan losses may not be sufficient to cover actual loan losses, which could adversely affect our earnings.

We maintain an allowance for loan losses in an attempt to cover loan losses inherent in our loan portfolio. Additional loan losses will likely occur in the future and may occur at a rate greater than we have experienced to date.

The determination of the allowance for loan losses, which represents management’s estimate of probable losses inherent in our credit portfolio, involves a high degree of judgment and complexity. Our policy is to establish reserves for estimated losses on delinquent and other problem loans when it is determined that losses are expected to be incurred on such loans. Management’s determination of the adequacy of the allowance is based on various factors, including an evaluation of the portfolio, past loss experience, current economic conditions, the volume and type of lending conducted by us, composition of the portfolio, the amount of our classified assets, seasoning of the loan portfolio, the status of past due principal and interest payments and other relevant factors. Changes in such estimates may have a significant impact on our financial statements. If our assumptions and judgments prove to be incorrect, our current allowance may not be sufficient and adjustments may be necessary to allow for different economic conditions or adverse developments in our loan portfolio. Federal and state regulators also periodically review our allowance for loan losses and may require us to increase our provision for loan losses or recognize further loan charge-offs, based on judgments different than those of our management. Any increase in our allowance for loan losses could have an adverse effect on our operating results and financial condition.

Our loan portfolio is representative of a commercial bank. Commercial and commercial real estate loans generally are viewed as having more risk of default than residential real estate loans or other loans or investments. These types of loans also typically are larger than residential real estate loans and other consumer loans. Because the loan portfolio contains a significant number of commercial and commercial real estate loans with relatively large balances, the deterioration of a material amount of these loans may cause a significant increase in nonperforming assets. An increase in nonperforming loans could result in: a loss of earnings from these loans, an increase in the provision for loan losses or an increase in loan charge-offs, which could have an adverse impact on our results of operations and financial condition.

Changes in interest rates and other factors beyond our control may adversely affect our earnings and financial condition.

Our net income depends to a great extent upon the level of our net interest income. Changes in interest rates can increase or decrease net interest income and net income. Net interest income is the difference between the interest income we earn on loans, investments and other interest-earning assets, and the interest we pay on interest-bearing liabilities, such as deposits and borrowings. Net interest income is affected by changes in market interest rates, because different types of assets and liabilities may react differently, and at different times, to market interest rate changes. When interest-bearing liabilities mature or reprice more quickly than interest-earning assets in a period, an increase in market rates of interest could reduce net interest income. Similarly, when interest-earning assets mature or reprice more quickly than interest-bearing liabilities, falling interest rates could reduce net interest income.

Changes in market interest rates are affected by many factors beyond our control, including inflation, unemployment, the money supply, international events, and events in world financial markets. We attempt to manage our risk from changes in market interest rates by adjusting the rates, maturity, repricing, and balances of the different types of interest-earning assets and interest-bearing

liabilities, but interest rate risk management techniques are not exact. As a result, a rapid increase or decrease in interest rates could have an adverse effect on our net interest margin and results of operations. Changes in the market interest rates for types of products and services in our markets also may vary significantly from location to location and over time based upon competition and local or regional economic factors.

We face risk related to our operational, technological and organizational infrastructure.

Our ability to grow and compete is dependent on our ability to build or acquire the necessary operational and technological infrastructure and to manage the cost of that infrastructure while we expand. Similar to other large corporations, in our case, operational risk can manifest itself in many ways, such as errors related to failed or inadequate processes, faulty or disabled computer systems, fraud by employees or persons outside of the company and exposure to external events. We are dependent on our operational infrastructure to help manage these risks. In addition, we are heavily dependent on the strength and capability of our technology systems which we use both to interface with our customers and to manage our internal financial and other systems. Our ability to develop and deliver new products that meet the needs of our existing customers and attract new ones depends on the functionality of our technology systems. Additionally, our ability to run our business in compliance with applicable laws and regulations is dependent on these infrastructures.

We continuously monitor our operational and technological capabilities and make modifications and improvements when we believe it will be cost effective to do so. In some instances, we may build and maintain these capabilities ourselves. We also outsource some of these functions to third parties. These third parties may experience errors or disruptions that could adversely impact us and over which we may have limited control. We also face risk from the integration of new infrastructure platforms and/or new third party providers of such platforms into our existing businesses.

Acquisitions or mergers entail risks which could negatively affect our operations.

Acquisitions and mergers, particularly the integration of companies that have previously been operated separately, involves a number of risks, including, but not limited to:

· the time and costs associated with identifying and evaluating potential acquisition or merger partners;

· difficulties in assimilating operations of the acquired institution and implementing uniform standards, controls, procedures and policies;

· exposure to asset quality problems of the acquired institution;

· our ability to finance an acquisition and maintain adequate regulatory capital;

· diversion of management’s attention from the management of daily operations;

· risks and expenses of entering new geographic markets;

· potential significant loss of depositors or loan customers from the acquired institution;

· loss of key employees of the acquired institution; and

· exposure to undisclosed or unknown liabilities of an acquired institution.

Any of these acquisition risks could result in unexpected losses or expenses and thereby reduce the expected benefits of the acquisition. Also, we may issue equity securities, including common stock and securities convertible into common stock in connection with future acquisitions, which could cause ownership and economic dilution to our current shareholders. Our failure to successfully integrate current and future acquisitions and manage our growth could adversely affect our business, results of operations, financial condition and future prospects.

We rely heavily on our management and other key personnel, and the loss of key members may adversely affect our operations.

We are and will continue to be dependent upon the services of our executive management team. The unexpected loss of key senior managers, or the inability to recruit and retain qualified personnel in the future, could have an adverse effect on our business and financial condition.

Competition may decrease our growth or profits.

We compete for loans, deposits, and investment dollars with other banks and other financial institutions and enterprises, such as securities firms, insurance companies, savings associations, credit unions, mortgage brokers, and private lenders, many of which

have substantially greater resources than ours. Credit unions have federal tax exemptions, which may allow them to offer lower rates on loans and higher rates on deposits than taxpaying financial institutions such as commercial banks. In addition, non-depository institution competitors are generally not subject to the extensive regulation applicable to institutions that offer federally insured deposits. Other institutions may have other competitive advantages in particular markets or may be willing to accept lower profit margins on certain products. These differences in resources, regulation, competitive advantages, and business strategy may decrease our net interest margin, may increase our operating costs, and may make it harder for us to compete profitably.

Reputational risk and social factors may impact our results.

Our ability to originate and maintain accounts is highly dependent upon consumer and other external perceptions of our business practices and/or our financial health. Adverse perceptions regarding our business practices and/or our financial health could damage our reputation in both the customer and funding markets, leading to difficulties in generating and maintaining accounts as well as in financing them. Adverse developments with respect to the consumer or other external perceptions regarding the practices of our competitors, or our industry as a whole, may also adversely impact our reputation. In addition, adverse reputational impacts on third parties with whom we have important relationships, such as our independent auditors, may also adversely impact our reputation. Adverse impacts on our reputation, or the reputation of our industry, may also result in greater regulatory and/or legislative scrutiny, which may lead to laws or regulations that may change or constrain the manner in which we engage with our customers and the products we offer. Adverse reputational impacts or events may also increase our litigation risk. We carefully monitor internal and external developments for areas of potential reputational risk and have established governance structures to assist in evaluating such risks in our business practices and decisions.

Changes in government regulations and legislation could limit our future performance and growth.

The banking industry is heavily regulated. We are subject to examinations, supervision and comprehensive regulation by various federal and state agencies. Our compliance with these regulations is costly and restricts certain of our activities. Banking regulations are primarily intended to protect the federal deposit insurance fund and depositors, not shareholders. The burden imposed by federal and state regulations puts banks at a competitive disadvantage compared to less regulated competitors such as finance companies, mortgage banking companies and leasing companies. Changes in the laws, regulations, and regulatory practices affecting the banking industry may increase our costs of doing business or otherwise adversely affect us and create competitive advantages for others. Regulations affecting banks and financial services companies undergo continuous change, and we cannot predict the ultimate effect of these changes, which could have a material adverse effect on our profitability or financial condition. Federal economic and monetary policies may also affect our ability to attract deposits and other funding sources, make loans and investments, and achieve satisfactory interest spreads.

The geographic concentration of our markets makes our business highly susceptible to local economic conditions.

Unlike larger banking organizations that are more geographically diversified, IBERIABANK branch offices have historically been concentrated in 15 parishes in Louisiana. As a result of this geographic concentration, our financial results have depended largely upon economic conditions in these market areas. Through our acquisitions of Pulaski Investment Corporation and Pocahontas Bancorp, Inc., we now also operate bank branches in 11 counties in Arkansas, one county in Tennessee and one county in Oklahoma. Through Pulaski Investment Corporation’s subsidiary, Pulaski Mortgage Company, we also operate mortgage offices in Texas, Illinois, Missouri, and Mississippi. Deterioration in economic conditions in these markets could result in one or more of the following:

• an increase in loan delinquencies;

• an increase in problem assets and foreclosures;

• a decrease in the demand for our products and services; and

• a decrease in the value of collateral for loans, especially real estate, in turn reducing customers’ borrowing power, the value of assets associated with problem loans and collateral coverage.

If we do not adjust to rapid changes in the financial services industry, our financial performance may suffer.

We face substantial competition for deposit, credit and trust relationships, as well as other sources of funding in the communities we serve. Competing providers include other banks, thrifts and trust companies, insurance companies, mortgage banking operations, credit unions, finance companies, money market funds and other financial and nonfinancial companies which may offer products functionally equivalent to those offered by us. Competing providers may have greater financial resources than we do and offer

services within and outside the market areas we serve. In addition to this challenge of attracting and retaining customers for traditional banking services, our competitors now include securities dealers, brokers, mortgage bankers, investment advisors and finance and insurance companies who seek to offer one-stop financial services to their customers that may include services that financial institutions have not been able or allowed to offer to their customers in the past. The increasingly competitive environment is primarily a result of changes in regulation, changes in technology and product delivery systems and the accelerating pace of consolidation among financial service providers. If we are unable to adjust both to increased competition for traditional banking services and changing customer needs and preferences, our financial performance and your investment in our common stock could be adversely affected.

Hurricanes or other adverse weather events could negatively affect our local economies or disrupt our operations, which would have an adverse effect on our business or results of operations.

Like other coastal areas, some of our markets in Louisiana are susceptible to hurricanes and tropical storms. Such weather events can disrupt our operations, result in damage to our properties and negatively affect the local economies in which we operate. In August and September 2005, Hurricanes Katrina and Rita struck the Gulf Coast of Louisiana, Mississippi, Alabama and Texas and caused substantial damage to residential and commercial properties in our market areas. We cannot predict whether or to what extent damage that may be caused by future hurricanes will affect our operations or the economies in our market areas, but such weather events could result in a decline in loan originations, a decline in the value or destruction of properties securing our loans and an increase in the delinquencies, foreclosures and loan losses. Our business or results of operations may be adversely affected by these and other negative effects of hurricanes or tropical storms.

We cannot guarantee that we will pay dividends to stockholders in the future.

Cash available to pay dividends to our stockholders is derived primarily, if not entirely, from dividends paid to us from the Banks. The ability of our subsidiary banks to pay dividends to us as well as our ability to pay dividends to our shareholders is limited by regulatory and legal restrictions and the need to maintain sufficient consolidated capital. We may also decide to limit the payment of dividends even when we have the legal ability to pay them in order to retain earnings for use in our business. Further, any lenders making loans to us may impose financial covenants that may be more restrictive than regulatory requirements with respect to the payment of dividends. For instance, we are prohibited from paying dividends on our common stock if the required payments on our subordinated debentures have not been made. There can be no assurance of whether or when we may pay dividends in the future.

The trading history of our common stock is characterized by low trading volume. The value of your investment may be subject to sudden decreases due to the volatility of the price of our common stock.

Our common stock trades on Nasdaq Global Market. During 2006, the average daily trading volume of our common stock was approximately 23,800 shares. We cannot predict the extent to which investor interest in us will lead to a more active trading market in our common stock or how much more liquid that market might become. A public trading market having the desired characteristics of depth, liquidity and orderliness depends upon the presence in the marketplace of willing buyers and sellers of our common stock at any given time, which presence is dependent upon the individual decisions of investors, over which we have no control.

The market price of our common stock may be highly volatile and subject to wide fluctuations in response to numerous factors, including, but not limited to, the factors discussed in other risk factors and the following:

· actual or anticipated fluctuations in our operating results;

· changes in interest rates;

· changes in the legal or regulatory environment in which we operate;

· press releases, announcements or publicity relating to us or our competitors or relating to trends in our industry;

· changes in expectations as to our future financial performance, including financial estimates or recommendations by securities analysts and investors;

· future sales of our common stock;

· changes in economic conditions in our marketplace, general conditions in the U.S. economy, financial markets or the banking industry; and

· other developments affecting our competitors or us.

These factors may adversely affect the trading price of our common stock, regardless of our actual operating performance, and could prevent our shareholders from selling common stock at or above the public offering price. In addition, the stock markets, from time to time, experience extreme price and volume fluctuations that may be unrelated or disproportionate to the operating performance of companies. These broad fluctuations may adversely affect the market price of our common stock, regardless of our trading performance.

In the past, stockholders often have brought securities class action litigation against a company following periods of volatility in the market price of their securities. We may be the target of similar litigation in the future, which could result in substantial costs and divert management’s attention and resources.

We may issue additional securities, which could dilute your ownership percentage.

In many situations, our board of directors has the authority, without any vote of our stockholders, to issue shares of our authorized but unissued stock, including shares authorized and unissued under our stock option plans. In the future, we may issue additional securities, through public or private offerings, to raise additional capital or finance acquisitions. Moreover, to the extent that we issue restricted stock units, stock appreciation rights, options or warrants to purchase our common stock in the future and those stock appreciation rights, options or warrants are exercised or as the restricted stock units vest, our stockholders may experience further dilution. Any such issuance would dilute the ownership of current holders of our common stock.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

As of December 31, 2006, the Company, through IBERIABANK, operates 49 branch offices in seven areas of Louisiana. IBERIABANK also operates six loan production offices (“LPOs”) in Mandeville, Morgan City, Metairie, Baton Rouge, and Shreveport. During 2006, IBERIABANK opened eight full service branch locations in Baton Rouge, Houma, Metairie, Laplace, Slidell, Prairieville, and Monroe, Louisiana. The Company’s headquarters is located in Lafayette, Louisiana. The Company’s primary operations center is located in New Iberia, Louisiana. A total of 34 offices are owned and 21 are leased. The following table summarizes the Company’s locations by geographic market.

Market	No. of Branches	No. of LPOs
Acadiana	21	—
Baton Rouge Metro	4	3
New Orleans Metro	13	2
Northeast Louisiana	10	—
Shreveport	1	1
Totals	49	6

Item 3. Legal Proceedings.

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.

Item 4. Submission of Matters to a Vote of Security Holders.

Not applicable.

Executive Officers of the Registrant

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 52, has served as President of the Company since 1999 and as Chief Executive Officer since 2000. He also serves as President and Chief Executive Officer of each of the Banks.

ANTHONY J. RESTEL, age 37, has served as Senior Executive Vice President and Chief Financial Officer of the Company since February 2005 and as Chief Credit Officer since December 2006. He also serves as Senior Executive Vice President, Chief Financial Officer and Chief Credit Officer of each of the Banks. Mr. Restel was hired as Vice President and Treasurer of the Company and IBERIABANK in 2001.

MICHAEL J. BROWN, age 43, has served as Senior Executive Vice President of the Company since 2001. Mr. Brown is responsible for management of all of the Company’s banking markets, including Louisiana, Arkansas, Tennessee and Oklahoma. He also is responsible for wealth management, including trust activities.

JOHN R. DAVIS, age 46, has served as Senior Executive Vice President – Mergers and Acquisitions/Finance and Investor Relations of the Company since 2001. He also serves as Senior Executive Vice President of each of the Banks, responsible for mortgage lending and title insurance.

MICHAEL A. NAQUIN, age 46, has served as Senior Executive Vice President of the Company since March 2004. He also serves as Senior Executive Vice President of each of the Banks. Mr. Naquin is responsible for the retail banking segment, treasury management and corporate facilities. Prior to joining the Company, he served in several senior roles with Bank One, including Commercial Banking Manager for Arizona and California from 2002 to 2004.

GEORGE J. BECKER III, age 66, has served as Executive Vice President, Director of Organizational Development and Corporate Secretary of the Company since February 2005. Prior to that, he served as Director of Corporate Operations of the Company and IBERIABANK. Mr. Becker, a Certified Public Accountant, also serves as Executive Vice President, Director of Organizational Development and Corporate Secretary of each of the Banks.

MARILYN W. BURCH, age 56, has served as Executive Vice President and Director of Corporate Operations of the Company since February 2005. Prior to that, she served as Executive Vice President and Chief Financial Officer of the Company and IBERIABANK. Ms. Burch, a Certified Public Accountant, also serves as Executive Vice President and Director of Corporate Operations of each of the Banks.

PART II.

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Stock Performance Graph

The following graph and table, which were prepared by SNL Financial LC (“SNL”), compares the cumulative total return on the Company’s Common Stock over a measurement period beginning December 31, 2001 with (i) the cumulative total return on the stocks included in the National Association of Securities Dealers, Inc. Automated Quotation (“NASDAQ”) Composite Index and (ii) the cumulative total return on the stocks included in the SNL $1 Billion-$5 Billion Bank Index. All of these cumulative returns are computed assuming the quarterly reinvestment of dividends paid during the applicable period. The Company’s stock value has been adjusted for a 5 for 4 stock split in August 2005.

	Period Ending
Index	12/31/01	12/31/02	12/31/03	12/31/04	12/30/05	12/31/06
IBERIABANK Corporation	100.00	148.48	222.16	254.33	249.31	294.62
NASDAQ Composite	100.00	68.76	103.67	113.16	115.57	127.58
SNL $1B-$5B Bank Index	100.00	115.44	156.98	193.74	190.43	220.36

The stock performance graph assumes $100.00 was invested December 31, 2001. The stock price performance included in this graph is not necessarily indicative of future stock price performance.

Additional information required herein is incorporated by reference to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Corporate Information Data” in Exhibit 13 hereto.

Item 6. Selected Financial Data.

The information required herein is incorporated by reference to “Selected Consolidated Financial and Other Data” in Exhibit 13 hereto.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation.

The information required herein is incorporated by reference to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Exhibit 13 hereto.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

The information required herein is incorporated by reference to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Exhibit 13 hereto.

Item 8. Financial Statements and Supplementary Data.

The information required herein is incorporated by reference to “IBERIABANK Corporation and Subsidiary Consolidated Financial Statements” in Exhibit 13 hereto.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

On March 13, 2007, Castaing, Hussey, & Lolan, LLC (“CHL”), the Company’s Independent Auditor, informed the Audit Committee of the Board of Directors that it would decline to stand for re-election as Independent Auditor upon the filing of the Annual Report on Form 10-K for the fiscal year ended December 31, 2006.

On March 13, 2007, the Audit Committee, subject to shareholder ratification, appointed Ernst & Young, LLP (“E&Y”), to serve as the Company’s Independent Auditor for the fiscal year ending December 31, 2007. This determination followed the Audit Committee’s decision to seek proposals from independent accountants to audit the Company’s financial statements for the fiscal year ending December 31, 2007.

The Reports of the Independent Auditors for the fiscal years ended December 31, 2006 and 2005 did not contain an adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles.

During the Company’s fiscal years ended December 31, 2006 and 2005, and through the date hereof, there were no disagreements between the Company and CHL on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to CHL’s satisfaction, would have caused CHL to make a reference to the matter in its reports on the Company’s financial statements for such years.

During the Company’s fiscal years ended December 31, 2006 and 2005, and through the date hereof, there were no “reportable events” (as defined by Item 304(a)(1)(v) of Regulation S-K).

During the Company’s two most recent fiscal years ended December 31, 2006, and the subsequent interim period through March 13, 2007, the Company did not consult with E&Y regarding any of the matters or events set forth in Item 304(a)(2)(i) and (ii) of Regulation S-K.

Item 9A. Controls and Procedures.

As required by Rule 13a-15 under the Securities Exchange Act of 1934 (the “Exchange Act’), the Company performed an evaluation of the effectiveness of the Company’s disclosure controls and procedures as of December 31, 2006. The evaluation was carried out under the supervision, and with the participation of, the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”). Based on that evaluation, the CEO and CFO have concluded that the Company’s disclosure controls and procedures are effective in alerting them in a timely manner to material information required to be disclosed by the Company in reports that it files or submits under the Exchange Act.

In addition, the Company reviewed its financial reporting internal controls. There was no significant change in the Company’s internal controls over financial reporting during the last fiscal quarter that has materially affected, or is reasonable likely

to materially affect, the Company’s internal control over financial reporting. Management’s Annual Report on Internal Control over Financial Reporting, and the attestation report of the registered public accounting firm are included in Exhibit 13 and is incorporated by reference herein.

Item 9B. Other Information.

Effective February 26, 2007, the Compensation Committee of the Board of Directors approved a common stock option award of 50,000 shares of the Company’s common stock to Daryl G. Byrd, President and Chief Executive Officer of the Company. The exercise price of the shares was $57.31 per share on the date of the award. The term of the options is 10 years and will vest over a seven-year period commencing with the first anniversary of the date of the award and grant. Effective February 26, 2007, Mr. Byrd’s annual base salary was increased to $467,010.

The Compensation Committee also approved a one-time bonus of $250,000 to Michael J. Brown, Senior Executive Vice President, in connection with his relocation from Louisiana to Arkansas and assumption of additional job responsibilities. In addition, on January 26, 2007, the Compensation Committee approved the issuance of 7,700 common stock options and a restricted common stock grant to Mr. Brown of 6,700 shares. The value of the shares on the date of the restricted stock awards and the exercise price of the options was $56.42 per share.

Effective February 26, 2007, the Compensation Committee also approved restricted stock awards and option grants to the following senior executive officers:

	Restricted Stock Award	Common Stock Underlying Options
Award Recipient	February 26, 2007	February 26, 2007
Michael J. Brown	7,145	6,252
John R. Davis	7,145	6,252
Michael A. Naquin	4,929	4,313
Anthony J. Restel	4,179	3,656

The value of the shares on the dates of the restricted stock awards and the exercise price of the options was $57.31 per share. The term of the options is 10 years. The restricted stock awards and the options will vest over a seven-year period commencing with the first anniversary of the date of the awards and grants.

The restricted stock awards and the options are subject to other terms and conditions of the Restricted Stock Award Agreement and Incentive Stock Option Agreement filed as Exhibit 10.18 and Exhibit 10.19, respectively, hereto and incorporated herein by reference.

PART III.

Item 10. Directors and Executive Officers of the Registrant.

Information concerning the Registrant’s executive officers is contained in Part I of this Form 10-K. Other information required herein is incorporated by reference to the Proxy Statement.

Item 11. Executive Compensation.

The information required herein is incorporated by reference to the Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required herein is incorporated by reference to the Proxy Statement.

Item 13. Certain Relationships and Related Transactions.

The information required herein is incorporated by reference to the Proxy Statement.

Item 14. Principal Accountant Fees and Services.

The information required herein is incorporated by reference to the Proxy Statement.

PART IV.

Item 15. Exhibits and Financial Statement Schedules.

(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, 2006 and 2005.

Consolidated Statements of Income for the Years Ended December 31, 2006, 2005 and 2004.

Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2006, 2005 and 2004.

Consolidated Statements of Cash Flows for the Years Ended December 31, 2006, 2005 and 2004.

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. 2.1	Agreement and Plan of Merger, dated September 22, 2002, between the Registrant and Acadiana Bancshares, Inc. – incorporated herein by reference to Exhibit 2.1 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2002.
Exhibit No. 2.2	Agreement and Plan of Merger, dated November 17, 2003, by and among Alliance Bank of Baton Rouge, the Registrant, and IBERIABANK – incorporated herein by reference to Exhibit 2.1 to the Registrant’s Registration Statement on Form S-4 (File No. 333-111308).
Exhibit No. 2.3	Agreement and Plan of Merger, dated September 29, 2004, between the Registrant and American Horizons Bancorp, Inc. – incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated September 29, 2004.
Exhibit No. 2.4	Agreement and Plan of Merger, dated July 26, 2006, between the Registrant and Pocahontas Bancorp, Inc. – incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated July 26, 2006, as amended.
Exhibit No. 2.5	Agreement and Plan of Merger, dated August 9, 2006, between the Registrant and Pulaski Investment Corporation – incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated August 9, 2006.
Exhibit No. 3.1	Articles of Incorporation, as amended – incorporated herein by reference to Exhibit 3.1 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001.
Exhibit No. 3.2	Bylaws of the Company, as amended – incorporated herein by reference to Exhibit 3.1 to Registrant’s Current Report of Form 8-K dated January 31, 2007.
Exhibit No. 4.1	Stock Certificate – incorporated herein by reference to Registration Statement on Form S-8 (File No. 33-93210).
Exhibit No. 4.2	Junior Subordinated Indenture between the Registrant and Wilmington Trust Company, dated September 20, 2004 – incorporated herein by reference to Exhibit 4 to Registrant’s Current Report on Form 8-K dated September 20, 2004.
Exhibit No. 4.3	Junior Subordinated Indenture between the Registrant and Wilmington Trust Company, dated October 31, 2006 – incorporated herein by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K dated October 31, 2006.

Exhibit No. 10.1	Retirement Savings Plan – incorporated herein by reference to Exhibit 10.1 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005.
Exhibit No. 10.2	Employment Agreement with Daryl G. Byrd, as amended and restated – incorporated herein by reference to Exhibit 10.4 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001.
Exhibit No. 10.3	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, 1999.
Exhibit No. 10.4	Severance Agreements with Michael J. Brown and John R. Davis – incorporated herein by reference to Exhibit 10.6 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2000.
Exhibit No. 10.5	Severance Agreements with Marilyn W. Burch and George J. Becker III – incorporated herein by reference to Exhibit 10.7 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2000.
Exhibit No. 10.6	Severance Agreements with Anthony J. Restel – incorporated herein by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 13, 2005.
Exhibit No. 10.7	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. 10.8	1999 Stock Option Plan – incorporated herein by reference to the Registrant’s definitive proxy statement dated March 19, 1999.
Exhibit No. 10.9	Recognition and Retention Plan – incorporated herein by reference to the Registrant’s definitive proxy statement dated April 16, 1996.
Exhibit No. 10.10	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. 10.11	2001 Incentive Compensation Plan, as amended – incorporated herein by reference to the Registrant’s definitive proxy statement dated April 2, 2003.
Exhibit No. 10.12	2005 Stock Incentive Plan – incorporated herein by reference to the Registrant’s definitive proxy statement dated April 11, 2005.
Exhibit No. 10.13	Purchase Agreement, dated as of June 17, 2003, among IBERIABANK Corporation, IBERIABANK Statutory Trust II and Trapeza CDO III, LLC – incorporated herein by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2003.
Exhibit No. 10.14	Placement Agreement among the Registrant, IBERIABANK Statutory Trust III and SunTrust Capital Markets, Inc., dated as of September 20, 2004 – incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report of Form 8-K dated September 20, 2004.
Exhibit No. 10.15	Guarantee Agreement between the Registrant and Wilmington Trust Company, dated as of September 20, 2004 – incorporated herein by reference to Exhibit 10.7 to the Registrant’s Current Report of Form 8-K dated September 20, 2004.
Exhibit No. 10.16	Change in Control Severance Agreement with Michael A. Naquin, dated August 25, 2004 – incorporated herein by reference to Exhibit 10.15 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004.
Exhibit No. 10.17	Indemnification Agreement with Michael A. Naquin, dated March 3, 2004 – incorporated herein by reference to Exhibit 10.15 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004.
Exhibit No. 10.18	Form of Restricted Stock Award Agreement under the ISB Supplemental Stock Option Plan – incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated August 15, 2005.
Exhibit No. 10.19	Form of Acknowledgement regarding acceleration of unvested stock options granted by the Registrant – incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated December 30, 2005.
Exhibit No. 10.20	Form of Restricted Stock Agreement under the IBERIABANK Corporation 2001 Incentive Compensation Plan – incorporated herein by reference to Exhibit 10.18 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005.
Exhibit No. 10.21	Form of Incentive Stock Option Agreement under the IBERIABANK Corporation 2001 Incentive Compensation Plan – incorporated herein by reference to Exhibit 10.19 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005.
Exhibit No. 10.22	Form of Restricted Stock Agreement under the IBERIABANK Corporation 2005 Stock Incentive Plan – incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated May 17, 2006.

Exhibit No. 10.23	Form of Stock Option Agreement under the IBERIABANK Corporation 2005 Stock Incentive Plan – incorporated herein by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated May 17, 2006.
Exhibit No. 10.24	Amended and Restated Trust Agreement, dated as of October 31, 2006, among the Registrant, as depositor, Wilmington Trust Company, as Delaware trustee, Wilmington Trust Company, as property trustee, and the administrators named therein – incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated October 31, 2006.
Exhibit No. 10.25	Guarantee Agreement, dated as of October 31, 2006, between the Registrant and Wilmington Trust Company – incorporated herein by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated October 31, 2006.
Exhibit No. 10.26	Purchase Agreement, dated November 10, 2006, by and among the Registrant and the Purchasers thereto – incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated November 10. 2006.
Exhibit No. 10.27	Lock-Up Agreement between officers and directors of the Registrant and Stifel, Nicolaus & Company, Incorporated – incorporated herein by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated November 16, 2006.
Exhibit No. 12	Statements: Computations of Ratios.
Exhibit No. 13	Annual Report to Shareholders – Portions of Annual Report to Shareholders for the year ended December 31, 2006, which are expressly incorporated herein by reference.
Exhibit No. 21	Subsidiaries of the Registrant.
Exhibit No. 23	Consent of Castaing, Hussey & Lolan, LLC.
Exhibit No. 31.1	Certification of principal executive officer pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a).
Exhibit No. 31.2	Certification of principal financial officer pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a).
Exhibit No. 32.1	Certification of principal executive officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit No. 32.2	Certification of principal financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit No. 99	Audit Committee Charter, as amended.

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 16, 2007	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 dates indicated.

Name	Title	Date
/s/ Daryl G. Byrd	President, Chief Executive Officer and Director	March 16, 2007
Daryl G. Byrd
/s/ John R. Davis	Senior Executive Vice President of Finance and Investor Relations	March 16, 2007
John R. Davis
/s/ Anthony J. Restel	Senior Executive Vice President and Chief Financial Office	March 16, 2007
Anthony J. Restel
/s/ Joseph B. Zanco	Executive Vice President and Controller and Principal Accounting Officer	March 16, 2007
Joseph B. Zanco
/s/ Elaine D. Abell	Director	March 16, 2007
Elaine D. Abell
/s/ Harry V. Barton, Jr.	Director and Audit Committee Chairman	March 16, 2007
Harry V. Barton, Jr.
/s/ Ernest P. Breaux, Jr.	Director	March 16, 2007
Ernest P. Breaux, Jr.
/s/ John N. Casbon	Director	March 16, 2007
John N. Casbon
/s/ James C. East	Director	March 16, 2007
James C. East
/s/ William H. Fenstermaker	Director	March 16, 2007
William H. Fenstermaker
/s/ Larrey G. Mouton	Director	March 16, 2007
Larrey G. Mouton
/s/ Jefferson G. Parker	Director and Audit Committee Member	March 16, 2007
Jefferson G. Parker
/s/ O. Miles Pollard, Jr.	Director and Audit Committee Member	March 16, 2007
O. Miles Pollard, Jr.
/s/ E. Stewart Shea III	Director	March 16, 2007
E. Stewart Shea III
/s/ David H. Welch	Director and Audit Committee Member	March 16, 2007
David H. Welch

EX-12

EXHIBIT 12

STATEMENTS: COMPUTATION OF RATIOS

The following is a computation of Non-GAAP financial ratios:

(dollars in thousands)	Years Ended December 31,
	2006			2005			2004			2003			2002
Net Interest Income	$	91,522		$	84,798		$	74,628		$	67,633		$	59,594
Effect of Tax Benefit on Interest Income		3,544			3,284			2,861			2,603			1,469
Net Interest Income (TE) (1)		95,066			88,082			77,489			70,236			61,063
Noninterest Income		23,450			26,141			23,221			23,064			17,866
Effect of Tax Benefit on Noninterest Income		1,123			1,066			897			820			652
Noninterest Income (TE) (1)		24,573			27,208			24,117			23,884			18,518
Total Revenues (TE) (1)	$	119,639		$	115,290		$	101,607		$	94,120		$	79,581
Total Noninterest Expense	$	73,127		$	64,438		$	54,898		$	50,629		$	44,032
Less Intangible Amortization Expense		(1,118	)		(1,207	)		(885	)		(781	)		(243	)
Tangible Operating Expense (2)	$	72,009		$	63,231		$	54,014		$	49,848		$	43,789
Return on Average Equity		12.86	%		8.41	%		12.98	%		13.05	%		13.12	%
Effect of Intangibles (2)		7.66			5.55			6.55			6.52			4.66
Return on Average Tangible Equity (2)		20.52	%		13.96	%		19.53	%		19.57	%		17.78	%
Efficiency Ratio		63.6	%		58.1	%		56.1	%		55.8	%		56.8	%
Effect of Tax Benefit Related to Tax Exempt Income		(2.5	)		(2.2	)		(2.1	)		(2.0	)		(1.5	)
Efficiency Ratio (TE) (1)		61.1	%		55.9	%		54.0	%		53.8	%		55.3	%
Effect of Amortization of Intangibles		(1.0	)		(0.9	)		(0.9	)		(0.8	)		(0.3	)
Tangible Efficiency Ratio (TE) (1) (2)		60.2	%		54.8	%		53.2	%		53.0	%		55.0	%

⁽¹⁾ Fully taxable equivalent (TE) calculations include the tax benefit associated with related income sources that are tax-exempt using a marginal tax rate of 35%.

⁽²⁾ Tangible calculations eliminate the effect of goodwill and acquisition related intangible assets and the corresponding amortization expense on a tax-effected basis where applicable.

EX-13

Exhibit 13

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 consolidated financial condition and results of operations of IBERIABANK Corporation (the “Company”) and its wholly owned subsidiary, IBERIABANK (the “Bank”), as well as all of the Bank’s subsidiaries, Iberia Financial Services LLC, Acadiana Holdings LLC, Jefferson Insurance Corporation, Finesco LLC and IBERIABANK Insurance Services LLC as of December 31, 2005 and 2006 and for the years ended December 31, 2004 through 2006. This discussion should be read in conjunction with the audited consolidated financial statements, accompanying footnotes and supplemental financial data included herein.

Through the Bank, the Company offers commercial and retail products and services to customers throughout the state of Louisiana, including New Orleans, Baton Rouge, Shreveport, Northeast Louisiana, LaPlace, Houma, and the Acadiana and Northshore regions of Louisiana.

OVERVIEW

The Company’s net income for 2006 totaled $35.7 million, or $3.57 per share on a diluted basis. This is a 59.3% increase compared to the $2.24 per share, or $22.0 million earned for 2005. 2005 net income was significantly decreased by the impact of Hurricanes Katrina and Rita.

· Total assets at December 31, 2006 were $3.2 billion, up $350.5 million, or 12.3%, from $2.9 billion at December 31, 2005. Strong commercial loan growth accounted for the majority of the increase. Shareholders’ equity increased $56.0 million, or 21.2%, from $263.6 million at December 31, 2005 to $319.6 million at December 31, 2006.

· Total loans at December 31, 2006 were $2.2 billion, an increase of $315.5 million, or 16.4%, from $1.9 billion at December 31, 2005. Commercial loans continue to be the primary driver of loan growth, climbing $288.3 million in 2006.

· Total customer deposits increased $179.6 million, or 8.0%, from $2.2 billion at December 31, 2005 to $2.4 billion at December 31, 2006. This growth was split between certificates of deposit, NOW accounts and savings and money market accounts.

· Net interest income for the year increased $6.7 million, or 7.9%, in 2006 versus 2005. This increase is largely attributable to a $60.0 million increase in average net earning assets. The corresponding net interest margin ratio on a tax-equivalent basis declined 12 basis points to 3.42% from 3.54% for the years ended December 31, 2006 and 2005, respectively, due to the re-pricing of the Company’s assets and liabilities and rate competition across markets.

· Noninterest income decreased $2.7 million, or 10.3%, for 2006 as compared to 2005. The decrease was primarily driven by losses taken during the year on the sale of a portion of the Company’s investment and mortgage loan portfolios. These losses were partially offset by increases in broker commissions, ATM/debit card fees and net cash settlements on swaps.

· Noninterest expense increased by $8.7 million, or 13.5%, for 2006 as compared to 2005. The largest components of the increase were higher compensation expense as a result of additional staff related to the Company’s branch expansion initiative and strategic hires, higher occupancy and equipment costs due to the Company’s expansion, and merger-related expenses associated with the Company’s announced acquisitions of two Arkansas franchises. Noninterest expense in 2006 also includes a $1.0 million loss recorded on the early retirement of a portion of the Company’s long-term Federal Home Loan Bank (FHLB) advances.

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· The Company experienced exceptional credit quality in 2006. Net charge-offs for 2006 were $357,000, or 0.02%, of average loans on an annualized basis, compared to $3.6 million, or 0.20%, a year earlier. The Company incurred $1.1 million in net charge-offs associated with Hurricane Katrina in 2005. As a result of improvements in Hurricanes Katrina and Rita-related credits and improving credit quality statistics, the Company recorded a negative provision for possible loan losses of $7.8 million during 2006, compared to a provision of $17.1 million in 2005. Of the $17.1 million provision in 2005, $14.4 million related to credits impacted by Hurricanes Katrina and Rita. As of December 31, 2006, the allowance for loan losses as a percent of total loans was 1.34%, compared to 1.98% at December 31, 2005. The coverage of nonperforming assets by the allowance for loan losses was 5.96 times at the end of 2006, as compared to 6.31 times at December 31, 2005.

· In September 2005, the Company announced a significant branch expansion initiative in response to client needs and opportunities presented by Hurricanes Katrina and Rita. Based on the expansion initiative, the Company planned to open twelve new banking facilities in existing markets and other Louisiana locations not previously served by the Company. Since announcing the initiative, the Company has opened ten new branches. Two branches were opened in the fourth quarter of 2005 and eight were opened during 2006. The estimated net after-tax cost of the branch expansion on diluted EPS was $0.19 for 2006 and $0.01 in 2005. The remaining two branches were opened in the first quarter of 2007.

· In July and August 2006, the Company announced merger agreements with Pocahontas Bancorp, Inc. and Pulaski Investment Corporation, respectively. These mergers were completed in the first quarter of 2007.

· During 2006, the Company paid cash dividends totaling $1.18 per common share, a 25% increase compared to 2005.

· In July 2005, the Company’s Board of Directors declared a five-for-four stock split in the form of a 25% stock dividend. The dividend was paid on August 15, 2005 to shareholders of record as of August 1, 2005. As a result of the stock split, shareholders received one additional share for every four shares held. All share and per share amounts have been restated to reflect the stock split.

The Company’s focus is that of a high performing institution. Management believes that improvement in core earnings drives shareholder value and has adopted a mission statement that is designed to provide guidance for management, our associates and Board of Directors regarding the sense of purpose and direction of the Company. We are very shareholder and client focused, expect high performance from our associates, believe in a strong sense of community and strive to make the Company a great place to work. Earnings guidance, based on expectations of the Company, is provided during the year through press releases, which are available on our website at www.iberiabank.com. Such releases are also disclosed through Form 8-K current event filings with the Securities and Exchange Commission (“SEC”) at www.sec.gov.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

In preparing financial reports, management is required to apply significant judgment to various accounting, reporting and disclosure matters. Management must use assumptions and estimates to apply these principles where actual measurement is not possible or practical. The accounting principles and methods used by the Company conform with accounting principles generally accepted in the United States and general banking practices. Estimates and assumptions most significant to the Company relate primarily to the allowance for loan losses, valuation of goodwill, intangible assets and other purchase accounting adjustments and share based compensation. These significant estimates and assumptions are summarized in the following discussion and are further analyzed in the footnotes to the consolidated financial statements.

Allowance for Loan Losses

The determination of the allowance for loan losses, which represents management’s estimate of probable losses inherent in the Company’s credit portfolio, involves a high degree of judgment and complexity. The Company’s policy is to establish reserves for

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estimated losses on delinquent and other problem loans when it is determined that losses are expected to be incurred on such loans. Management’s determination of the adequacy of the allowance is based on various factors, including an evaluation of the portfolio, past loss experience, current economic conditions, the volume and type of lending conducted by the Company, composition of the portfolio, the amount of the Company’s classified assets, seasoning of the loan portfolio, the status of past due principal and interest payments, and other relevant factors. Changes in such estimates may have a significant impact on the financial statements. For further discussion of the allowance for loan losses, see the Asset Quality and Allowance for Loan Losses section of this analysis and Note 1 to the Consolidated Financial Statements.

Valuation of Goodwill, Intangible Assets and Other Purchase Accounting Adjustments

The Company accounts for acquisitions in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations,” which requires the use of the purchase method of accounting. For purchase acquisitions, the Company is required to record the assets acquired, including identified intangible assets and liabilities assumed, at their fair value, which in many instances involves estimates based on third party valuations, such as appraisals, or internal valuations based on discounted cash flow analyses or other valuation techniques. The determination of the useful lives of intangible assets is subjective as is the appropriate amortization period for such intangible assets. In addition, purchase acquisitions typically result in recording goodwill. The Company performs a goodwill valuation at least annually. Impairment testing of goodwill is a two step process that first compares the fair value of goodwill with its carrying amount, and second measures impairment loss by comparing the implied fair value of goodwill with the carrying amount of that goodwill. Based on management’s goodwill impairment tests, there was no impairment of goodwill at December 31, 2005 or 2006. For additional information on goodwill and intangible assets, see Note 7 to the Consolidated Financial Statements.

Share-based Compensation

Prior to January 1, 2006, the Company accounted for its stock option plans under the intrinsic value method of Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees. In accordance with APB Opinion No. 25, compensation expense relating to stock options had not been reflected in net income as the exercise price of the stock options granted equaled or exceeded the market value of the underlying common stock at the date of grant. SFAS No. 123 required management to provide proforma disclosures of net income and earnings per share and other disclosures, as if the fair value based method of accounting had been applied.

In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123(R), Share-Based Payment. SFAS No. 123(R) revises SFAS No. 123 and calls for companies to expense the fair value of employee stock options and other forms of share-based compensation. The Company adopted SFAS No. 123(R) as of January 1, 2006.

SFAS No. 123(R) requires companies to (1) use fair value to measure share-based compensation awards and (2) cease using the “intrinsic value” method of accounting. Under SFAS No. 123(R), the fair value of a share-based compensation award is recognized over the employee’s service period.

Management utilizes the Black-Scholes option valuation model to estimate the fair value of stock options. The option valuation model requires the input of highly subjective assumptions, including the expected stock price volatility. These subjective input assumptions materially affect the fair value estimate.

On December 30, 2005, the Board of Directors approved the immediate acceleration of vesting of all outstanding stock options awarded to employees, officers and directors. As a result of the acceleration, the Company recorded $470,000 of compensation expense in 2005.

For additional discussion of the Company’s stock options plans, sees Notes 1 and 15 to the Consolidated Financial Statements.

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ACQUISITION ACTIVITIES

The Company has been an active acquirer over the past four years. From 2003 through 2006, the Company completed the following acquisitions:

Acadiana Bancshares, Inc.- February 28, 2003

The Company completed its acquisition of Acadiana Bancshares, Inc., in exchange for 1,227,276 shares of the Company’s common stock valued at $38.6 million and $9.8 million in cash. The transaction resulted in $24.1 million of goodwill, $4.0 million of core deposit intangibles and $313,000 of other intangibles. At acquisition, Acadiana Bancshares had total assets of $303 million, including loans of $189 million, and deposits were $207 million.

Alliance Bank of Baton Rouge - February 29, 2004

The Company completed its acquisition of Alliance Bank of Baton Rouge in exchange for 359,106 shares of the Company’s common stock valued at $15.5 million. The transaction resulted in $5.2 million of goodwill and $1.2 million of core deposit intangibles. At acquisition, Alliance had total assets of $72 million, including loans of $54 million, and deposits were $62 million.

American Horizons Bancorp, Inc. - January 31, 2005

The Company completed its acquisition of American Horizons Bancorp, Inc. in exchange for 990,435 shares of the Company’s common stock valued at $47,744,000 and $653,000 in cash. The transaction resulted in $28.5 million of goodwill and $5.0 million of core deposit intangibles. At acquisition, American Horizons had total assets of $252 million, including loans of $202 million, and deposits were $193 million.

Pending Acquisitions

On July 27, 2006, the Company announced the signing of a definitive merger agreement to acquire Pocahontas Bancorp, Inc. (“Pocahontas”), the holding company for First Community Bank of Jonesboro, Arkansas. The transaction was completed after the close of business on February 1, 2007. The acquisition extends the Company’s presence into Northeast Arkansas. Pocahontas shareholders received 1,287,793 shares of the Company’s common stock as a result of the transaction. The transaction had a total value of $75 million. At December 31, 2006, total assets of Pocahontas were approximately $723 million, including loans of $423 million and total deposits were $575 million.

On August 9, 2006, the Company announced the signing of a definitive merger agreement to acquire Pulaski Investment Corporation (“Pulaski”), the holding company for Pulaski Bank and Trust of Little Rock, Arkansas. The transaction was completed after the close of business on January 31, 2007. The acquisition extends the Company’s presence into central Arkansas and other states through its mortgage subsidiary, Pulaski Mortgage Company. Pulaski shareholders received 1,133,064 shares of the Company’s common stock and cash of $65.0 million as a result of the transaction. The transaction had a total value of approximately $131 million. At December 31, 2006, total assets of Pulaski were approximately $500 million, including loans of $355 million and total deposits were $423 million.

For more information on the Company’s acquisitions, see Note 2 to the Consolidated Financial Statements.

FINANCIAL CONDITION

Earning Assets

Earning assets are composed of interest or dividend-bearing assets, including loans, securities, short-term investments and loans held for sale. Interest income associated with earning assets is the Company’s primary source of income. Earning assets averaged $2.8 billion during 2006, a $278.8 million, or 11.3%, increase compared to $2.5 billion during 2005. The increase is primarily the result of strong commercial loan growth.

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The year-end mix of earning assets shown in the following chart reflects the mix between investment securities and the major loan groups.

Loans and Leases – The loan portfolio increased $315.5 million, or 16.4%, to $2.2 billion at December 31, 2006, compared to $1.9 billion at December 31, 2005. Commercial loan growth accounted for $288.3 million of the increase.

The Company’s loan to deposit ratio at December 31, 2006 and December 31, 2005 was 92.2% and 85.5%, respectively. The percentage of fixed rate loans to total loans increased from 70% at the end of 2005 to 72% as of December 31, 2006. The following table sets forth the composition of the Company’s loan portfolio as of December 31 for the years indicated.

TABLE 1 – LOAN PORTFOLIO COMPOSITION

	December 31,
(dollars in thousands)	2006				2005				2004				2003				2002
Commercial loans:
Real estate	$	750,051	34	%	$	545,868	29	%	$	419,427	25	%	$	352,031	25	%	$	254,688	25	%
Business		461,048	21			376,966	19			307,614	19			201,020	14			159,339	15
Total commercial loans		1,211,099	55			922,834	48			727,041	44			553,051	39			414,027	40
Mortgage loans:
Residential 1-4 family		431,585	19			430,111	22			387,079	23			338,965	24			207,130	20
Construction		45,285	2			30,611	2			33,031	2			50,295	4			16,470	1
Total mortgage loans		476,870	21			460,722	24			420,110	25			389,260	28			223,600	21
Loans to individuals:
Indirect automobile		228,301	10			229,646	12			222,480	14			229,636	16			219,280	21
Home equity		233,885	10			230,363	12			213,533	13			174,740	12			122,799	12
Other		83,847	4			74,951	4			67,462	4			65,662	5			64,786	6
Total consumer loans		546,033	24			534,960	28			503,475	31			470,038	33			406,865	39
Total loans receivable	$	2,234,002	100	%	$	1,918,516	100	%	$	1,650,626	100	%	$	1,412,349	100	%	$	1,044,492	100	%

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Commercial Loans. Commercial real estate and commercial business loans generally have shorter repayment periods and more frequent repricing opportunities than residential 1-4 family loans. Commercial loans increased $288.3 million, or 31.2% during 2006. As illustrated in the table above, the Company’s focus has been on growing its commercial loan portfolio. This focus continued in 2006 as commercial loans as a percentage of total loans increased from 48.1% as of December 31, 2005 to 54.2% as of December 31, 2006.

The Company has increased its investment in commercial real estate loans from $545.9 million, or 28.5% of the total loan portfolio, as of December 31, 2005, to $750.1 million, or 33.6% of the total loan portfolio, as of December 31, 2006. The vast majority of properties securing the Company’s commercial real estate loans are located in the Company’s market areas, and include owner-occupied, multi-family, strip shopping centers, professional office buildings, small retail establishments and warehouses. The Company’s underwriting standards generally provide for loan terms of three to five years, with amortization schedules of no more than twenty years. Low loan-to-value ratios are maintained and usually limited to no more than 80%. In addition, the Company obtains personal guarantees of the principals as additional security for most commercial real estate loans.

As of December 31, 2006, the Company’s commercial business loans amounted to $461.0 million, or 20.6% of the Company’s total loan portfolio. This represents an $84.1 million, or 22.3% increase from December 31, 2005. The Company originates commercial business loans on a secured and, to a lesser extent, unsecured basis. The Company’s commercial business loans may be structured as term loans or revolving lines of credit. Term loans are generally structured with terms of no more than three to five years, with amortization schedules of no more than seven years. The Company’s commercial business term loans are generally secured by equipment, machinery or other corporate assets. The Company also provides for revolving lines of credit generally structured as advances upon perfected security interests in accounts receivable and inventory. Revolving lines of credit generally have an annual maturity. The Company obtains personal guarantees of the principals as additional security for most commercial business loans.

Mortgage Loans. Residential 1-4 family loans comprise most of the Company’s mortgage loans. The vast majority of the Company’s residential 1-4 family mortgage loan portfolio is secured by properties located in its market areas and originated under terms and documentation which permit their sale in the secondary market. Larger mortgage loans of private banking clients and prospects are generally retained to enhance relationships, and also due to the expected shorter durations and relatively lower servicing costs associated with loans of this size. The Company does not originate or hold high loan to value, negative amortization, optional ARM, or other exotic mortgage loans in its portfolio.

The Company continues to sell the majority of conforming mortgage loan originations in the secondary market and recognize the associated fee income rather than assume the rate risk associated with these longer term assets. The Company also releases the servicing of these loans. Total residential mortgage loans increased $16.1 million compared to December 31, 2005. This growth is primarily related to credit extended to individuals in the Company’s new branches. Growth in this portfolio was tempered by the transfer of $30.4 million in lower rate loans to the mortgage loans held-for-sale portfolio during December 2006. At December 31, 2006, $393.8 million, or 82.6%, of the Company’s residential 1-4 family mortgage and construction loans were fixed rate loans and $83.1 million, or 17.4%, were adjustable rate loans.

Consumer Loans. The Company offers consumer loans in order to provide a full range of retail financial services to its customers. The Company originates substantially all of such loans in its primary market area. At December 31, 2006, $546.0 million, or 24.4% of the Company’s total loan portfolio, was comprised of consumer loans, compared to $535.0 million, or 27.9% at the end of 2005. Total consumer loans increased $11.1 million compared to December 31, 2005.

Home equity loans comprised the largest component of the Company’s consumer loan portfolio at December 31, 2006. The balance of home equity loans increased $3.5 million, or 1.5% from $230.4 million at December 31, 2005 to $233.9 million at December 31, 2006.

Indirect automobile loans comprised the second largest component of the Company’s consumer loan portfolio. Independent automobile dealerships originate these loans and forward applications to Company personnel for approval or denial. The Company

6

relies on the dealerships, in part, for loan qualifying information. To that extent, there is risk inherent in indirect automobile loans associated with fraud or negligence by the automobile dealership. To limit this risk, an emphasis is placed on established dealerships that have demonstrated reputable behavior, both within the communities we serve and through long-term relationships with the Company. The balance of indirect automobile loans decreased slightly, from $229.6 million, or 12.0% of the Company’s total loan portfolio to $228.3 million, or 10.2% at December 31, 2005 and 2006, respectively, as the Company retained its focus on prime, or low risk, paper.

The remainder of the consumer loan portfolio at December 31, 2006 was composed of direct automobile loans, credit card loans and other consumer loans. The Company’s direct automobile loans amounted to $24.2 million, or 1.1% of the Company’s total loan portfolio. The Company’s VISA and MasterCard credit card loans totaled $8.8 million, or 0.4% of the Company’s total loan portfolio at such date. The Company’s other personal consumer loans amounted to $50.8 million, or 2.3% of the Company’s total loan portfolio, at December 31, 2006.

Loan Maturities. The following table sets forth the scheduled contractual maturities of the Company’s loan portfolio at December 31, 2006, unadjusted for scheduled principal reductions, prepayments or repricing opportunities. 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 average life of a loan may be substantially less than the contractual terms because of prepayments. As a result, scheduled contractual amortization of loans is not reflective of the expected term of the Company’s loan portfolio. Of the loans with maturities greater than one year, approximately 85% of the value of these loans bears a fixed rate of interest.

TABLE 2 – LOAN MATURITIES BY TYPE

(dollars in thousands)	One Year Or Less		One Through Five Years		After Five Years		Total
Commercial real estate	$	179,876	$	420,394	$	149,781	$	750,051
Commercial business		224,074		137,482		99,492		461,048
Mortgage		15,668		28,651		432,551		476,870
Consumer		117,737		244,554		183,742		546,033
Total	$	537,355	$	831,081	$	865,566	$	2,234,002

Asset Quality. Over time, the loan portfolio has transitioned to be more representative of a commercial bank. Accordingly, there is the potential for a higher level of return for investors, but also of the potential for higher charge-off and nonperforming levels. In recognition of this, management has tightened underwriting guidelines and procedures, adopted more conservative loan charge-off and nonaccrual guidelines, rewritten the loan policy and developed an internal loan review function. As a result of management’s enhancements to underwriting risk/return dynamics within the loan portfolio over time, the credit quality of the Company’s assets has remained strong. Management believes that historically it has recognized and disclosed significant problem loans quickly and taken prompt action in addressing material weaknesses in those credits. The Company will continue to monitor the risk adjusted level of return within the loan portfolio.

Written underwriting standards established by the Board of Directors and management govern the lending activities of the Company. The commercial credit department, in conjunction with senior lending personnel, underwrites all commercial business and commercial real estate loans. The Company provides centralized underwriting of all residential mortgage, construction and consumer loans. Established loan origination procedures require appropriate documentation including financial data and credit reports. For loans secured by real property, the Company generally requires property appraisals, title insurance or a title opinion, hazard insurance and flood insurance, where appropriate.

Loan payment performance is monitored and late charges are assessed on past due accounts. A centralized department collects delinquent loans. Every effort is made to minimize any potential loss, including instituting legal proceedings, as necessary. Commercial loans of the Company are periodically reviewed through a loan review process. All other loans are also subject to loan review through a periodic sampling process.

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The Company utilizes an asset risk classification system in compliance with guidelines established by the Federal Reserve Board as part of its efforts to improve commercial asset quality. In connection with examinations of insured institutions, both federal and state examiners also have the 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 questionable and there is a high probability of loss based on currently existing facts, conditions and values. An asset classified as loss is not considered collectable and of such little value that continuance as an asset of the Company is not warranted. Commercial loans with adverse classifications are reviewed by the Loan Committee of the Board of Directors at least monthly. 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 for the current year is deducted from interest income. Prior year interest is charged-off to the allowance for loan losses.

At December 31, 2006, the Company had $10.7 million of assets classified as substandard, $921,000 of assets classified as doubtful, and no assets classified as loss. At such date, the aggregate of the Company’s classified assets amounted to 0.36% of total assets. At December 31, 2005, the aggregate of the Company’s classified assets amounted to 0.87% of total assets

Real estate acquired by the Company as a result of foreclosure or by deed-in-lieu of foreclosure is classified as other real estate owned (“OREO”) until sold, and is 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 restructurings as of December 31, 2006.

Nonperforming loans, defined for these purposes as nonaccrual loans plus accruing loans past due 90 days or more, totaled $3.0 million and $5.8 million at December 31, 2006 and 2005, respectively. The Company’s OREO, which includes foreclosed property, amounted to $2.0 million and $257,000 at December 31, 2006 and 2005, respectively. OREO increased $1.7 million as a result of the transfer of idle Company property previously included in bank premises into OREO. Nonperforming assets, which consist of nonperforming loans plus foreclosed property, were $5.0 million, or 0.16% of total assets at December 31, 2006, compared to $6.0 million, or 0.21% of total assets at December 31, 2005.

The Company has shown continuing improvement in asset quality despite significant loan growth over the past five years. The following table sets forth the composition of the Company’s nonperforming assets, including accruing loans past due 90 or more days, as of the dates indicated.

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TABLE 3 – NONPERFORMING ASSETS AND TROUBLED DEBT RESTRUCTURINGS

	December 31,
(dollars in thousands)	2006			2005			2004			2003			2002
Nonaccrual loans:
Commercial, financial and agricultural	$	745		$	2,377		$	1,936		$	1,838		$	1,693
Mortgage		353			384			735			552			334
Loans to individuals		1,603			2,012			1,784			1,512			1,230
Total nonaccrual loans		2,701			4,773			4,455			3,902			3,257
Accruing loans 90 days or more past due		310			1,003			1,209			1,220			1,086
Total nonperforming loans (1)		3,011			5,776			5,664			5,122			4,343
Foreclosed property		2,008			257			492			2,134			2,267
Total nonperforming assets (1)		5,019			6,033			6,156			7,256			6,610
Performing troubled debt restructurings		—			—			—			—			—
Total nonperforming assets and troubled debt restructurings (1)	$	5,019		$	6,033		$	6,156		$	7,256		$	6,610
Nonperforming loans to total loans (1)		0.13	%		0.30	%		0.34	%		0.36	%		0.42	%
Nonperforming assets to total assets (1)		0.16	%		0.21	%		0.25	%		0.34	%		0.42	%
Nonperforming assets and troubled debt restructurings to total assets (1)		0.16	%		0.21	%		0.25	%		0.34	%		0.42	%

⁽¹⁾ Nonperforming loans and assets include accruing loans 90 days or more past due

Allowance For Loan Losses. Based on facts and circumstances available, management of the Company believes that the allowance for loan losses was adequate at December 31, 2006 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 determining the allowance for loan losses. Losses in the loan portfolio, net of recoveries, are charged-off against the allowance and reduce the balance. Provisions for loan losses, which are charged against income, increase the allowance.

Given the significant commercial loan growth experienced by the Company over the past five years, the Company refined its loan loss methodology during 2006 to further reflect the transition in the loan portfolio from a savings bank (i.e., mortgage/consumer loan focus) to a commercial bank (i.e., commercial loan focus). This refinement resulted in more reserves being assigned to the commercial segment of the loan portfolio and previously unallocated reserves being assigned to the portfolio segments.

The allowance consists of the general reserve, qualitative economic factors and specific market risk components.

The foundation of the allowance for the Company’s commercial segment is the credit risk rating of each relationship within the portfolio. The credit risk of each borrower is assessed, and a risk grade is assigned to each. The portfolios are further segmented by facility or collateral ratings. The dual risk grade for each loan is determined by the relationship manager and other approving officers and changed from time to time to reflect an ongoing assessment of the risk. Grades are reviewed on specific loans by senior management and as part of the Company’s internal loan review process. The commercial loan loss allowance is determined for all pass-rated borrowers based upon the borrower risk rating, the expected default probabilities of each rating category, and the outstanding loan balances by risk grade. For borrowers rated special mention or below, the higher of the migration analysis and Company established minimum reserve percentages apply. In addition, consideration is given to historical loss experience by internal risk rating, current economic conditions, industry performance trends, geographic or borrower concentrations within each portfolio segment, the current business strategy and credit process, loan underwriting criteria, loan workout procedures, and other pertinent information.

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Specific reserves are determined for impaired commercial loans individually based on management’s evaluation of the borrower’s overall financial condition, resources, and payment record; the prospects for support from any financially responsible guarantors; and the realizable value of any collateral. Reserves are established for these loans based upon an estimate of probable losses for the individual loans deemed to be impaired. This estimate may consider all available evidence including the present value of the expected future cash flows and the fair value of collateral less disposal costs. Loans for which specific reserves are provided are excluded from the general reserve calculations described above to prevent duplicate reserves.

The foundation for the general consumer allowance is a detailed review of the loan portfolios and the performance of those portfolios. This review is accomplished by first segmenting the portfolio into homogenous pools. Residential mortgage loans, direct consumer loans, consumer home equity, indirect consumer loans, credit card, and the business banking portfolio each are considered separately. The historical performance of each of these pools is analyzed by examining the level of charge-offs over a specific period of time. The historical average charge-off level for each pool is updated annually and modified by a multiplier that represents the best judgment of management as to the length of time between an event of default and the associated loss.

In addition to this base analysis, the consumer portfolios are also analyzed for specific risks within each segment. The risk analysis considers the Company’s current strategy for each segment, the maturity of each segment, expansion into new markets, the deployment of newly developed products and any other significant factors impacting that segment. Current regional and national economic factors are an important dimension of the assessment and impact each portfolio segment. The general economic factors are evaluated and adjusted quarterly.

Loan portfolios tied to acquisitions made during the year are incorporated into the Company’s allowance process. If the acquisition has an impact on the level of exposure to a particular segment, industry or geographic market, this increase in exposure is factored into the allowance determination process. Generally, acquisitions have higher levels of risk of loss based on differences in credit culture and portfolio management practices. During 2005, the Company added $4.9 million to the allowance for loan losses as a result of the application of the Company’s allowance methodology on the American Horizons’ loan portfolio.

Atypical events may result in the development of a specific allowance methodology designed to capture the default and potential loss parameters caused by that event. Due to the unprecedented devastation caused by Hurricanes Katrina and Rita in August and September 2005, respectively, the Company performed an extensive review of the loan portfolios impacted by these storms. Immediately after each of these storms passed, the Company’s credit team began intense analysis of affected portfolios, client flood and property and casualty insurance coverage, impacts on sources of repayment and underlying collateral, and client payment probability. As a result of this analysis, the Company recorded hurricane-related loan loss provisions of $12.8 million and $1.6 million in 2005 for Hurricanes Katrina and Rita, respectively.

As a result of strong asset quality of the loan portfolio and improvements in outstanding credits in the hurricane-affected areas, the Company recorded a negative loan loss provision of $7.8 million for the year ended December 31, 2006. All of the reserves established in 2005 for loans impacted by Hurricane Rita were reversed in 2006. Of the initial reserve for credits potentially impacted by Hurricane Katrina, approximately $6.2 million remained and was folded into the Company’s general loan loss reserves to account for the increased risk associated with the New Orleans market. The New Orleans market concerns relate specifically to the rebuild effort, particularly the reduced availability and increased costs of property insurance, as well as the decline in population within the New Orleans metropolitan area.

The following table presents the allocation of the allowance for loan losses and the percentage of the total amount of loans in each loan category listed as of the dates indicated.

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TABLE 4 – ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES

	December 31,
	2006				2005				2004				2003				2002
	Reserve %		% of Loans		Reserve %		% of Loans		Reserve %		% of Loans		Reserve %		% of Loans		Reserve %		% of Loans
Commercial, financial and agricultural	71	%	55	%	50	%	48	%	55	%	44	%	51	%	39	%	48	%	40	%
Real estate – mortgage	4		19		14		22		5		23		5		24		4		20
Real estate – construction	—		2		1		2		—		2		1		4		—		1
Loans to individuals	25		24		28		28		30		31		31		33		38		39
Unallocated	—		—		7		—		10		—		12		—		10		—
Total allowance for loan losses	100	%	100	%	100	%	100	%	100	%	100	%	100	%	100	%	100	%	100	%

The allowance for loan losses amounted to $29.9 million, or 1.34% and 993.7% of total loans and total nonperforming loans, respectively, at December 31, 2006 compared to 1.98% and 659.3%, respectively, at December 31, 2005.

Additional information on the allowance process is provided in Note 1 to the Consolidated Financial Statements.

Net charge-offs for 2006 were $357,000, or 0.02% of total average loans, down from $3.6 million, or 0.20% in 2005. The decrease in net charge-offs is a result of increased recoveries throughout the year. In addition, the Company recorded $1.1 million in charge-offs in 2005 as a result of Hurricane Katrina. The following table sets forth the activity in the Company’s allowance for loan losses during the periods indicated.

TABLE 5 – SUMMARY OF ACTIVITY IN THE ALLOWANCE FOR LOAN LOSSES

	Year Ended December 31,
(dollars in thousands)	2006			2005			2004			2003			2002
Allowance at beginning of period	$	38,082		$	20,116		$	18,230		$	13,101		$	11,117
Addition due to purchase transaction		—			4,893			587			2,439			—
Adjustment for loans transferred to held for sale		—			(350	)		—			—			—
Provision charged (reversed) to operations		(7,803	)		17,069			4,041			6,300			6,197
Charge-offs:
Commercial, financial and agricultural		336			1,432			986			1,617			1,331
Mortgage		97			471			91			37			60
Loans to individuals		2,188			3,638			3,035			3,128			3,391
Total charge-offs		2,621			5,541			4,112			4,782			4,782
Recoveries:
Commercial, financial and agricultural		539			539			272			504			68
Mortgage		36			3			1			21			35
Loans to individuals		1,689			1,353			1,097			647			466
Total recoveries		2,264			1,895			1,370			1,172			569
Net charge-offs		357			3,646			2,742			3,610			4,213
Allowance at end of period	$	29,922		$	38,082		$	20,116		$	18,230		$	13,101
Allowance for loan losses to nonperforming assets (1)		596.2	%		631.2	%		326.8	%		251.2	%		198.2	%
Allowance for loan losses to total loans at end of period		1.34	%		1.98	%		1.22	%		1.29	%		1.25	%
Net charge-offs to average loans		0.02	%		0.20	%		0.18	%		0.28	%		0.43	%

⁽¹⁾ Nonperforming assets include accruing loans 90 days or more past due

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Investment Securities – The following table shows the carrying values of securities by category as of the dates indicated.

TABLE 6 – CARRYING VALUE OF SECURITIES

(dollars in thousands)	December 31,
	2006				2005				2004				2003				2002
Securities available for sale:
U.S. Government-sponsored enterprise obligations	$	169,805	29	%	$	97,443	17	%	$	53,236	9	%	$	26,952	6	%	$	5,157	2	%
Obligations of state and political subdivisions		40,654	7			39,731	7			48,379	9			48,250	10			25,907	7
Mortgage backed securities		348,373	60			406,321	71			425,318	75			350,871	73			255,640	69
Other securities		—	—			—	—			—	—			57	—			22,932	6
Total securities available for sale		558,832	96			543,495	95			526,933	93			426,130	89			309,636	84
Securities held to maturity:
U.S. Government-sponsored enterprise obligations		8,063	1			8,075	2			13,088	2			13,101	3			10,000	3
Obligations of state and political subdivisions		9,038	2			13,285	2			14,053	3			17,134	3			17,285	5
Mortgage backed securities		5,419	1			7,727	1			12,881	2			23,257	5			31,201	8
Total securities held to maturity		22,520	4			29,087	5			40,022	7			53,492	11			58,486	16
Total securities	$	581,352	100	%		572,582	100	%	$	566,955	100	%	$	479,622	100	%	$	368,122	100	%

Investment securities increased by an aggregate of $8.8 million, or 1.5%, from $572.6 million at December 31, 2005 to $581.4 million at December 31, 2006. This increase was due to purchases of investment securities amounting to $353.4 million, which was partially offset by $239.4 million from maturities, prepayments and calls, $109.3 million from sales of investment securities, $272,000 from the amortization of premiums and accretion of discounts, and an increase of $4.4 million in the market value of investment securities available for sale.

Funds generated as a result of sales and prepayments are used to fund loan growth and purchase other securities. During 2006, the Company sold $109.3 million of investment securities and recorded a $4.1 million loss on these sales. The securities sold had a weighted-average yield of 4.0% and were replaced with securities with a weighted-average yield of 5.1%.

The Company continues to monitor market conditions and take advantage of market opportunities with appropriate rate and risk return elements. Note 3 of the Consolidated Financial Statements provides further information on the Company’s investment securities.

Short-term Investments – Short-term investments result from excess funds that fluctuate daily depending on the funding needs of the Company and are currently invested overnight in an interest-bearing deposit account at the Federal Home Loan Bank (“FHLB”) of Dallas, the total balance of which earns interest at the current FHLB discount rate. The balance in interest-bearing deposits at other institutions decreased $26.3 million, or 43.7%, from $60.1 million at December 31, 2005 to $33.9 million at December 31, 2006. The average rate on these funds during 2006 was 4.59%, compared to 3.20% during 2005.

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Mortgage Loans Held for Sale – Loans held for sale increased $43.8 million, or 416.2%, to $54.3 million at December 31, 2006 compared to $10.5 million at December 31, 2005. The increase in held for sale loans is primarily a result of the movement of $30.4 million in lower yielding adjustable rate loans from the mortgage portfolio in December 2006 as part of an agreement to sell those loans.

Loans held for sale have primarily been fixed rate single-family residential mortgage loans under contract to be sold in the secondary market. In most cases, loans in this category are sold within thirty days. Buyers generally have recourse to return a purchased loan to the Company under limited circumstances. Recourse conditions may include early payment default, breach of representations or warranties, and documentation deficiencies. During 2006, approximately 71% of total single-family mortgage originations of the Company were sold in the secondary market as compared to 81% in 2005.

Other Assets – The following table details the changes in other asset balances at the dates indicated.

TABLE 7 – OTHER ASSETS COMPOSITION

(dollars in thousands)	December 31,
	2006		2005		2004		2003		2002
Cash and due from banks	$	51,078	$	66,697	$	33,940	$	49,273	$	37,022
Premises and equipment		71,007		55,010		39,557		31,992		18,161
Goodwill		92,779		93,167		64,732		59,523		35,401
Bank-owned life insurance		46,705		44,620		37,640		29,623		21,540
Other		67,945		69,464		47,834		45,350		23,693
Total	$	329,514	$	328,958	$	223,703	$	215,761	$	135,817

The $15.6 million decrease in cash and due from banks is the result of loan fundings. Loan growth exceeded deposit growth by $135.9 million in 2006.

The $16.0 million increase in premises and equipment was primarily the result of the land and building purchases associated with the Company’s branch expansion initiative. The Company opened eight full service branches and two loan production offices during 2006.

The $388,000 decrease in goodwill related to purchase accounting adjustments recorded on deferred tax assets associated with the American Horizons acquisition.

The $2.1 million increase in bank-owned life insurance is a result of the increase in earnings on the policies owned.

Funding Sources

Deposits obtained from clients in its primary market areas are the Company’s principal source of funds for use in lending and other business purposes. The Company attracts local deposit accounts by offering a wide variety of accounts, competitive interest rates and convenient branch office locations and service hours. Increasing core deposits through the development of client relationships is a continuing focus of the Company. Borrowings have become an increasingly important funding source as the Company has grown. Other funding sources include short-term and long-term borrowings, subordinated debt and shareholders’ equity. The following discussion highlights the major changes in the mix of deposits and other funding sources during 2006.

Deposits – The Company has been successful in raising deposits in the markets in which it has a presence and believes the increase to be the result of several factors including increased economic activity in the region due to the recovery from Hurricanes Katrina and Rita, higher deposit rates and new branch locations. The following table sets forth the composition of the Company’s deposits at the dates indicated.

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TABLE 8 – DEPOSIT COMPOSITION

(dollars in thousands)	December 31,
	2006				2005				2004				2003				2002
Noninterest-bearing DDA	$	354,961	15	%	$	350,065	15	%	$	218,859	12	%	$	189,786	12	%	$	159,005	13	%
NOW accounts		628,541	26			575,379	26			532,584	30			449,938	28			281,825	23
Savings and money market		588,202	24			554,731	25			393,772	22			350,295	22			319,495	25
Certificates of deposit		850,878	35			762,781	34			628,274	36			599,087	38			481,907	39
Total deposits	$	2,422,582	100	%	$	2,242,956	100	%	$	1,773,489	100	%	$	1,589,106	100	%	$	1,242,232	100	%

Deposits at December 31, 2006 reflected an increase of $179.6 million, or 8.0%, to $2.4 billion as compared to $2.2 billion at December 31, 2005. Since the end of 2005, noninterest-bearing checking accounts increased $4.9 million, or 1.4%, interest-bearing checking accounts increased $53.2 million, or 9.2%, savings and money market accounts increased $33.5 million, or 6.0%, and certificate of deposit accounts increased $88.1 million, or 11.5%. At December 31, 2006, $355.0 million, or 14.7%, of the Company’s total deposits were noninterest-bearing, compared to $350.1 million, or 15.6%, at December 31, 2005.

Certificates of deposit $100,000 and over increased $63.3 million, or 20.3%, from $311.5 million at December 31, 2005 to $374.8 million at December 31, 2006. The following table shows large-denomination certificates of deposit by remaining maturities. Additional information regarding deposits is provided in Note 8 of the Consolidated Financial Statements.

TABLE 9 – REMAINING MATURITY OF CDS $100,000 AND OVER

(dollars in thousands)	December 31,
	2006		2005		2004
3 months or less	$	103,205	$	87,411	$	53,355
Over 3 - 12 months		204,131		120,966		81,908
Over 12 - 36 months		56,069		90,681		72,126
More than 36 months		11,370		12,412		28,335
Total	$	374,775	$	311,470	$	235,724

Borrowings and Debt – Advances from the FHLB of Dallas may be obtained by the Company upon the security of the common stock it owns in that bank and certain of its real estate loans and investment securities, 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 level of short-term borrowings can fluctuate significantly on a daily basis depending on funding needs and the source of funds chosen to satisfy those needs. Total short-term borrowings increased $133.8 million, or 194.3%, to $202.6 million at December 31, 2006 compared to $68.8 million at December 31, 2005. The additional borrowings were needed to help fund loan growth. The Company’s short-term borrowings at December 31, 2006 were comprised of $100.0 million of advances from the FHLB of Dallas and $102.6 million of securities sold under agreements to repurchase.

The average amount of short-term borrowings in 2006 was $116.2 million, compared to $143.1 million in 2005. The weighted average rate on short-term borrowings was 4.25% at December 31, 2006, compared to 1.83% at December 31, 2005. For additional information regarding short-term borrowings, see Note 9 of the Consolidated Financial Statements.

The Company’s long-term borrowings decreased $13.2 million, or 5.3%, to $237.0 million at December 31, 2006, compared to $250.2 million at December 31, 2005. Late in the fourth quarter of 2006, the Company prepaid FHLB debt totaling $11.4 million and recorded a loss of $1.0 million as a result of prepayment penalties on the debt.

The majority of the Company’s long-term borrowings, $129.3 million, were comprised of fixed-rate advances from the FHLB of Dallas which cannot be paid off without incurring substantial prepayment penalties. Remaining FHLB advances of $55.0 million consist of variable rate advances based on three-month LIBOR.

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The Company’s remaining debt of $52.7 million consists of junior subordinated deferrable interest debentures of the Company issued to statutory trusts that were funded by the issuance of floating rate capital securities of the trusts. The debentures qualify as Tier 1 Capital for regulatory purposes. Interest is payable quarterly and may be deferred at any time at the election of the Company for up to 20 consecutive quarterly periods. During any deferral period the Company is subject to certain restrictions, including being prohibited from declaring dividends to its common shareholders.

During the fourth quarter, the Company issued an additional $15 million in trust preferred securities in order to provide funding to complete the announced acquisition of Pulaski Investment Corporation. The following table summarizes each outstanding issue of junior subordinated debt. For additional information, see Note 10 of the Consolidated Financial Statements.

TABLE 10 – JUNIOR SUBORDINATED DEBT COMPOSITION

(dollars in thousands)
Date Issued	Term	Callable After(2)	Interest Rate(3)	Amount
November 2002	30 years	5 years	LIBOR plus 3.25%	$10,310
June 2003	30 years	5 years	LIBOR plus 3.15%	10,310
March 2003 (1)	30 years	5 years	LIBOR plus 3.15%	6,278
September 2004	30 years	5 years	LIBOR plus 2.00%	10,310
October 2006	30 years	5 years	LIBOR plus 1.60%	15,464
Balance, December 31, 2006				$52,672

⁽¹⁾ Obtained via the American Horizons acquisition.

⁽²⁾ Subject to regulatory requirements.

⁽³⁾ The interest rate on the Company’s junior subordinated debt is based on the 3-month LIBOR rate. At December 31, 2006, the 3-month LIBOR rate was 5.36%.

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, 2006, shareholders’ equity totaled $319.6 million, an increase of $56.0 million, or 21.2%, compared to $263.6 million at December 31, 2005. The following table details the changes in shareholders’ equity during 2006.

TABLE 11 – CHANGES IN SHAREHOLDERS’ EQUITY

(dollars in thousands)	Amount
Balance, December 31, 2005	$	263,569
Common stock issued		28,460
Net income		35,695
Common stock earned from restricted stock vesting		2,913
Sale of treasury stock for stock options exercised		5,538
Cash dividends declared		(11,152	)
Repurchases of common stock placed into treasury		(8,032	)
Increase in other comprehensive income		2,323
Share based compensation cost		237
Balance, December 31, 2006	$	319,551

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On April 20, 2005, the Company announced a new stock repurchase program authorizing the repurchase of up to 375,000 common shares. During the year ended December 31, 2006, the Company repurchased a total of 138,253 shares of its Common Stock under publicly announced stock repurchase programs leaving 17,050 shares remaining for purchase under the plan announced on April 20, 2005. The following table details these purchases during 2006.

TABLE 12 – STOCK REPURCHASES

Period	Number of Shares Purchased	Average Price Paid per Share		Number of Shares Purchased as Part of Publicly Announced Repurchase Plans	Maximum Number of Shares that May Yet Be Purchased Under Repurchase Plans
January	9,700	$	54.89	9,700	145,603
February	8,719	$	54.92	8,719	136,884
March	20,000	$	55.47	20,000	116,884
May	69,834	$	59.51	69,834	47,050
June	30,000	$	58.54	30,000	17,050
Total	138,253	$	58.10	138,253

No shares were repurchased during the months not presented in the table. No shares were repurchased during the year ended December 31, 2006, other than through publicly announced plans.

RESULTS OF OPERATIONS

The Company reported net income of $35.7 million, $22.0 million and $27.3 million for the years ended December 31, 2006, 2005 and 2004, respectively. Earnings per share (“EPS”) on a diluted basis were $3.57 for 2006, $2.24 for 2005 and $3.01 for 2004. During 2006, interest income increased $30.0 million, interest expense increased $23.3 million, the provision for loan losses decreased $24.9 million, noninterest income decreased $2.7 million, noninterest expense increased $8.7 million and income tax expense increased $6.5 million. Cash earnings, defined as net income before the net of tax amortization of acquisition intangibles, amounted to $36.4 million, $22.8 million and $27.9 million for the years ended December 31, 2006, 2005 and 2004, respectively. Included in operating results are the results of operations of American Horizons from the acquisition date of January 31, 2005 and Alliance from the acquisition date of February 28, 2004.

Net Interest Income – Net interest income is the difference between interest realized on earning assets and interest paid on interest-bearing liabilities and is also the driver of core earnings. As such, it is subject to constant scrutiny by management. The rate of return and relative risk associated with earning assets are weighed to determine the appropriateness and mix of earning assets. Additionally, the need for lower cost funding sources is weighed against relationships with clients and future growth requirements. 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 2.99%, 3.23% and 3.40% during the years ended December 31, 2006, 2005 and 2004, respectively. The Company’s net interest margin on a taxable equivalent (TE) basis, which is net interest income (TE) as a percentage of average earning assets, was 3.42%, 3.54% and 3.60% during the years ended December 31, 2006, 2005 and 2004, respectively.

Net interest income increased $6.7 million, or 7.9%, in 2006 to $91.5 million compared to $84.8 million in 2005. This increase was due to a $30.0 million, or 22.2%, increase in interest income, which was partially offset by a $23.3 million, or 46.2%, increase in interest expense. The improvement in net interest income was the result of increased volumes and an improved mix of earning assets and deposits. In addition, interest income was affected in the third quarter of 2006 when the Company recorded a pre-tax $1.4 million increase in commercial loan interest income associated with the accelerated loan discount accretion of a formerly impaired credit originated by American Horizons. Although earnings improved through increased net interest income, the related net interest spread and margin ratios compressed, driven in part by the rise in short-term interest rates and the associated repricing of the Company’s assets and liabilities.

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In 2005, net interest income increased $10.2 million, or 13.6%, to $84.8 million compared to $74.6 million in 2004. This increase was due to a $26.7 million, or 24.6%, increase in interest income, which was partially offset by a $16.5 million, or 48.7%, increase in interest expense.

The Company will continue to monitor investment opportunities and weigh the associated risk/return. Volume increases in earning assets and improvements in the mix of earning assets and interest-bearing liabilities are expected to improve net interest income, but may negatively impact the net interest margin ratio. The Company has engaged in interest rate swap transactions, which are a form of derivative financial instrument, to modify the net interest sensitivity to levels deemed to be appropriate. Through this instrument, interest rate risk is managed by hedging with an interest rate swap contract designed to pay fixed and receive floating interest. The interest rate swaps of the Company were executed to modify net interest sensitivity to levels deemed appropriate.

Average loans made up 74.5% of average earning assets as of December 31, 2006 as compared to 74.3% at December 31, 2005. Overall, average loans increased 11.7% in 2006. The increase in average loans was funded by increased customer deposits and short-term borrowings. Average investment securities made up 23.0% of average earning assets at December 31, 2006 compared to 23.2% at December 31, 2005. Average interest-bearing deposits made up 84.9% of average interest-bearing liabilities at December 31, 2006 compared to 82.0% at December 31, 2005. Average borrowings made up 15.1% of average interest-bearing liabilities at December 31, 2006 compared to 18.0% at December 31, 2005. Tables 13 and 14 further display the changes in net interest income.

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. Investment security market value adjustments and trade-date accounting adjustments are not considered to be earning assets and, as such, the net effect is included in nonearning assets. Tax equivalent (TE) yields are calculated using a marginal tax rate of 35%.

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TABLE 13 – AVERAGE BALANCES, NET INTEREST INCOME AND INTEREST YIELDS / RATES

	Years Ended December 31,
(dollars in thousands)	2006							2005							2004
	Average Balance			Interest		Average Yield/ Rate		Average Balance			Interest		Average Yield/ Rate		Average Balance			Interest		Average Yield/ Rate
Earning assets:
Loans receivable:
Mortgage loans	$	485,642		$	27,011	5.56	%	$	438,515		$	23,536	5.37	%	$	399,695		$	21,861	5.47	%
Commercial loans (TE)		1,034,492			67,347	6.65			862,799			48,287	5.74			636,359			29,882	4.85
Consumer and other loans		534,475			38,413	7.19			538,761			36,669	6.81			494,334			32,488	6.57
Total loans		2,054,609			132,771	6.53			1,840,075			108,492	5.96			1,530,388			84,231	5.57
Loans held for sale		15,246			992	6.51			12,866			709	5.51			10,391			520	5.00
Investment securities (TE)		633,270			28,954	4.75			574,832			24,192	4.44			563,271			22,974	4.32
Other earning assets		53,268			2,575	4.83			49,773			1,855	3.73			39,986			885	2.21
Total earning assets		2,756,393			165,292	6.09			2,477,546			135,248	5.56			2,144,036			108,610	5.18
Allowance for loan losses		(36,570	)						(27,908	)						(19,488	)
Nonearning assets		288,651							267,425							213,897
Total assets	$	3,008,474						$	2,717,063						$	2,338,445
Interest-bearing liabilities:
Deposits:
NOW accounts	$	623,211		$	15,427	2.48	%	$	558,705		$	9,239	1.65	%	$	510,187		$	5,613	1.10	%
Savings and money market accounts		589,137			12,075	2.05			480,836			6,171	1.28			403,331			3,116	0.77
Certificates of deposit		803,154			30,614	3.81			727,666			21,187	2.91			624,959			15,108	2.42
Total interest-bearing deposits		2,015,502			58,116	2.88			1,767,207			36,597	2.07			1,538,477			23,837	1.55
Short-term borrowings		116,165			3,911	3.32			143,100			3,395	2.34			188,589			2,644	1.38
Long-term debt		243,058			11,743	4.77			245,561			10,458	4.20			173,386			7,501	4.26
Total interest-bearing liabilities		2,374,725			73,770	3.10			2,155,868			50,450	2.33			1,900,452			33,982	1.78
Noninterest-bearing demand deposits		336,190							283,396							208,887
Noninterest-bearing liabilities		20,049							16,170							18,420
Total liabilities		2,730,964							2,455,434							2,127,759
Shareholders’ equity		277,510							261,629							210,686
Total liabilities and shareholders’ equity	$	3,008,474						$	2,717,063						$	2,338,445
Net earning assets	$	381,668						$	321,678						$	243,584
Net interest spread				$	91,522	2.99	%				$	84,798	3.23	%				$	74,628	3.40	%
Net interest income (TE) / Net interest margin (TE)				$	95,066	3.42	%				$	88,082	3.54	%				$	77,489	3.60	%

The following table displays 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 volume (changes in average volume between periods times the average yield/rate for the two periods), (ii) changes attributable to rate (changes in average rate between periods times the average volume for the two periods), and (iii) total increase (decrease).

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TABLE 14 – SUMMARY OF CHANGES IN NET INTEREST INCOME

	2006 / 2005								2005 / 2004
	Change Attributable To								Change Attributable To
(dollars in thousands)	Volume			Rate			Total Increase (Decrease)		Volume		Rate			Total Increase (Decrease)
Earning assets:
Loans receivable:
Mortgage loans	$	2,575		$	901		$	3,476	$	2,104	$	(429	)	$	1,675
Commercial loans (TE)		10,360			8,700			19,060		11,553		6,852			18,405
Consumer and other loans		(386	)		2,130			1,744		3,038		1,143			4,181
Loans held for sale		143			140			283		130		59			189
Investment securities (TE)		2,614			2,148			4,762		445		773			1,218
Other earning assets		106			614			720		281		689			970
Total net change in income on earning assets		15,412			14,633			30,045		17,551		9,087			26,638
Interest-bearing liabilities:
Deposits:
NOW accounts		1,332			4,856			6,188		645		2,981			3,626
Savings and money market accounts		2,791			3,113			5,904		1,425		1,630			3,055
Certificates of deposit		2,538			6,889			9,427		2,686		3,393			6,079
Borrowings		(1,916	)		3,718			1,802		1,968		1,740			3,708
Total net change in expense on interest-bearing liabilities		4,745			18,576			23,321		6,724		9,744			16,468
Change in net interest income (TE)	$	10,667		$	(3,943	)	$	6,724	$	10,827	$	(657	)	$	10,170

Interest income includes interest income earned on earning assets as well as applicable loan fees earned. Interest income that would have been earned on nonaccrual loans had they been on accrual status is not included in the data reported above.

Provision for Loan Losses – Management of the Company assesses the allowance for loan losses quarterly and will make provisions for loan losses as deemed appropriate in order to maintain the adequacy of the allowance for loan losses. Increases to the allowance for loan losses are achieved through provisions for loan losses that are charged against income. Adjustments to the allowance may also result from purchase accounting adjustments associated with loans acquired in mergers.

As a result of strong asset quality of the loan portfolio and improvements in outstanding credits in the hurricane-affected areas, the Company recorded a negative loan loss provision of $7.8 million for the year ended December 31, 2006. This compares to a $17.1 million provision in 2005. The 2005 provision included a loan loss provision of $14.4 million during the third quarter for Hurricanes Katrina and Rita. The provision for loan losses was $4.0 million in 2004. Net loan charge-offs were $357,000 for 2006 compared to $3.6 million for 2005. The allowance for loan losses as a percentage of outstanding loans, net of unearned income, was 1.34% at December 31, 2006, compared to 1.98% at year-end 2005. A discussion of credit quality can be found in the section on “Asset Quality and Allowance for Loan Losses” in this analysis.

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Noninterest Income – The Company reported noninterest income of $23.5 million in 2006 compared to $26.1 million for 2005. The following table illustrates the primary components of noninterest income for the years indicated.

TABLE 15 – NONINTEREST INCOME

(dollars in thousands)	2006			2005			Percent Increase (Decrease)		2004		Percent Increase (Decrease)
Service charges on deposit accounts	$	13,167		$	13,427		(1.9	)%	$	12,317	9.0	%
ATM/debit card fee income		3,429			2,709		26.6			2,012	34.6
Income from bank owned life insurance		2,085			1,979		5.3			1,663	19.0
Gain on sale of loans, net		745			2,497		(70.2	)		2,794	(10.6	)
Gain on sale of assets		99			826		(88.0	)		220	275.5
Gain (loss) on sale of investments, net		(4,083	)		(39	)	(10,369.2	)		698	—
Broker commission income		4,054			2,410		68.2			1,833	31.5
Other income		3,954			2,332		69.6			1,680	38.8
Total noninterest income	$	23,450		$	26,141		(10.3	)%	$	23,217	12.6	%

Service charges on deposit accounts decreased $260,000 in 2006 primarily due to customer migration to deposit products with lower fees. Customers also incurred fewer account analysis fees in 2006.

ATM/debit card fee income increased $720,000 in 2006 due to increased usage and an expanding cardholder base.

Gain on sale of loans decreased $1.8 million in 2006 as a result of a loss of $1.1 million recorded in December on the transfer of a pool of lower-yielding mortgage loans into loans held for sale. The sale of these loans was completed in January 2007. Additionally, gains on the sale of mortgage loans were lower in 2006 as a result of reduced demand for mortgage refinancings and associated sales of these loans into the secondary market.

Gain on sale of assets decreased $727,000 in 2006. This decrease is primarily the result of gains on the sale of three excess properties during 2005. One of the properties was located in New Orleans, while the other two were located in Northeast Louisiana.

The Company’s loss on the sale of investments was $4.1 million in 2006, an increase from a minimal loss in 2005. The loss on the sale of investments was a result of the Company selling $109.3 million in investments during the year. The securities sold had a weighted-average yield of 4.0%. The proceeds from these sales were used to purchase investments with a weighted-average yield of 5.1%.

Broker commission income increased $1.6 million in 2006 as a result of Iberia Financial Services’ success in adding clients and increased transaction volume during the year.

Other noninterest income increased $1.6 million in 2006. Noninterest income benefited from the inclusion of $1.3 million in derivative gains on swaps and net cash settlements included in this line item. During the third quarter of 2006, the Company revised its method of accounting for interest rate swaps associated with its junior subordinated debt. The Company had previously accounted for these swaps using hedge accounting as prescribed by SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. Under hedge accounting, changes in the fair value of the swaps were recorded in Shareholders’ Equity. These fair value changes are now recorded in noninterest income. For additional information, see Notes 1 and 14 of the Consolidated Financial Statements. Other noninterest income also benefited from modest increases in other commission/fee categories.

Noninterest income increased $2.9 million from 2004 to 2005 primarily due to a $1.1 million increase in service charges due to increased volume related to the American Horizons acquisition and revenue enhancement initiatives, a $697,000 increase in ATM/debit card fees due to the expanded cardholder base attributable to the American Horizons acquisition and increased usage, a $316,000 increase in income from bank owned life insurance as the Company increased its average investment in bank owned life

20

insurance, $606,000 increase in gains on the sale of assets as the result of the sale of three excess properties, a $577,000 rise in broker commissions, a $259,000 payment received as a result of the conversion of the Company’s ownership interest in the PULSE EFT Association (“PULSE”) as a result of PULSE’s merger with Discover Financial Services and modest increases in several other noninterest income fee categories. Noninterest income was adversely impacted by a $297,000 decrease in gains on the sale of mortgage loans in the secondary market as refinance activity slowed and a $0.7 million decrease in gains on the sales of investments.

Noninterest Expense – The Company reported noninterest expense of $73.1 million in 2006 compared to $64.4 million for 2005. Ongoing attention to expense control is part of the Company’s corporate culture. However, the Company has embarked on a significant expansion initiative which includes new branches, acquisitions and product expansion. This expansion has caused increases in several components of noninterest expense. The following table illustrates the primary components of noninterest expense for the years indicated.

TABLE 16 – NONINTEREST EXPENSE

(dollars in thousands)	2006		2005		Percent Increase (Decrease)		2004		Percent Increase
Salaries and employee benefits	$	40,023	$	33,973	17.8	%	$	29,846	13.8	%
Occupancy and equipment		9,445		8,319	13.5			6,834	21.7
Franchise and shares tax		2,991		3,161	(5.4	)		2,607	21.2
Communication and delivery		3,118		3,107	0.4			2,814	10.4
Marketing and business development		2,124		1,766	20.3			1,582	11.7
Data processing		2,678		1,837	45.8			1,492	23.1
Printing, stationery and supplies		1,007		992	1.5			845	17.4
Amortization of acquisition intangibles		1,118		1,207	(7.4	)		885	36.3
Professional services		2,103		2,339	(10.1	)		1,802	29.8
Other expenses		8,520		7,737	10.1			6,190	25.0
Total noninterest expense	$	73,127	$	64,438	13.5	%	$	54,897	17.4	%

Salaries and employee benefits increased $6.1 million in 2006 due to increased staffing associated with the Company’s branch expansion initiative, as well as several strategic hires made during 2006.

Occupancy and equipment and data processing expenses increased $1.1 million and $841,000, respectively, in 2006 primarily due to branch expansion and infrastructure improvements.

Franchise and shares tax decreased $170,000 in 2006 due to lower assessments of the tax. Both capital and income levels are key components of the Louisiana shares tax calculation.

Marketing and business development expense increased $358,000 in 2006 as the Company expanded advertising and business development programs in selected markets.

Other noninterest expenses increased $783,000 in 2006. The largest component of the increase was a $1.0 million prepayment penalty incurred to pay off $11.4 million in FHLB advances. The Company also incurred merger-related expenses of $394,000 in 2006 associated with the pending acquisitions of the Arkansas franchises. These increases were offset partially by a $236,000 decrease in legal and professional expenses, $176,000 in ATM/ debit card expenses, and $401,000 of non-recurring expenses associated with the hurricanes recorded in 2005.

Noninterest expense increased $9.5 million from 2004 to 2005 primarily due to an increase of $4.1 million in salaries and employee benefits due to increased staffing associated with the American Horizons acquisition and the Company’s branch expansion initiative. The Company also recorded $470,000 of compensation expense due to the immediate vesting of all outstanding unvested stock options on December 30, 2005. Other non-interest expense increased $2.1 million primarily due to one-time expenses associated with the integration and conversion of American Horizons, $401,000 of one-time expenses associated with damages and other costs resulting from Hurricanes Katrina and Rita, a $537,000 increase in professional services, and a $389,000 increase in ATM/debit card expenses.

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Income Taxes – For the years ended December 31, 2006, 2005 and 2004, the Company incurred income tax expense of $14.0 million, $7.4 million and $11.6 million, respectively. The Company’s effective tax rate amounted to 28.1%, 25.3% and 29.7% during 2006, 2005 and 2004, respectively. The difference between the effective tax rate and the statutory tax rate primarily relates to variances in items that are non-taxable or non-deductible, primarily the effect of tax-exempt income, the non-deductibility of part of the amortization of acquisition intangibles, and various tax credits taken. The increase in the Company’s effective tax rates for 2006 is attributable to increased net income before taxes. The Company’s tax rate in 2005 included the effect of the third quarter net loss and the decrease in ESOP compensation expense, a large portion of which was not deductible for tax purposes. For more information, see Note 12 of the Consolidated Financial Statements.

CAPITAL RESOURCES

Federal regulations impose minimum regulatory capital requirements on all institutions with deposits insured by the Federal Deposit Insurance Corporation. The Federal Reserve Board (“FRB”) imposes similar capital regulations on bank holding companies. Compliance with bank and bank holding company regulatory capital requirements, which include leverage and risk-based capital guidelines, are monitored by the Company on an ongoing basis. Under the risk-based capital method, a risk weight is assigned to balance sheet and off-balance sheet items based on regulatory guidelines. At December 31, 2006, the Company exceeded all regulatory capital ratio requirements with a Tier 1 leverage capital ratio of 9.01%, a Tier 1 risk-based capital ratio of 11.81% and a total risk-based capital ratio of 13.06%. At December 31, 2006, the Bank also exceeded all regulatory capital ratio requirements with a Tier 1 leverage capital ratio of 7.02%, a Tier 1 risk-based capital ratio of 9.19% and a total risk-based capital ratio of 10.44`%.

In addition, the Company has junior subordinated debt totaling $52.7 million, which may be included in Tier 1 capital up to 25% of the total of the Company’s core capital elements, including the junior subordinated debt. For additional information, see Note 10 of the Consolidated Financial Statements.

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LIQUIDITY

The Company’s liquidity, represented by cash and cash equivalents, is a product of its operating, investing and financing activities. The Company manages its liquidity with the objective of maintaining sufficient funds to respond to the needs of depositors and borrowers and to take advantage of earnings enhancement opportunities. The primary sources of funds for the Company are deposits, borrowings, repayments and maturities of loans and investment securities, securities sold under agreements to repurchase, as well as funds provided from operations. Certificates of deposit scheduled to mature in one year or less at December 31, 2006 totaled $648.3 million. Based on past experience, management believes that a significant portion of maturing deposits will remain with the Company. Additionally, the majority of the investment security portfolio is classified by the Company as available-for-sale which provides the ability to liquidate securities as needed. Due to the relatively short planned duration of the investment security portfolio, the Company continues to experience significant cash flows on a normal basis.

While scheduled cash flows from the amortization and maturities of loans and securities are relatively predictable sources of funds, deposit flows and prepayments of loan and investment securities are greatly influenced by general interest rates, economic conditions and competition. The FHLB of Dallas provides an additional source of liquidity to make funds available for general requirements and also to assist with the variability of less predictable funding sources. At December 31, 2006, the Company had $281.3 million of outstanding advances from the FHLB of Dallas. Additional advances available at December 31, 2006 from the FHLB of Dallas amounted to $487.6 million. The Company and the Bank also have various funding arrangements with commercial banks providing up to $80 million in the form of federal funds and other lines of credit. At December 31, 2006, there was no balance outstanding on these lines and all of the funding was available to the Company.

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 and investment security products. The Company uses its sources of funds primarily to meet its ongoing commitments and fund loan commitments. The Company has been able to generate sufficient cash through its deposits as well as borrowings and anticipates it will continue to have sufficient funds to meet its liquidity requirements.

ASSET/ LIABILITY MANAGEMENT AND MARKET RISK

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 appropriate level of risk 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 Senior Management Planning Committee. The Senior Management Planning Committee normally meets monthly 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 Senior Management Planning Committee generally reviews the Company’s liquidity, cash flow needs, maturities of investments, deposits, 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 this exposure. Interest rate risk is measured using net interest income simulation and asset/liability net present value sensitivity analyses. The Company uses financial modeling to measure the impact of changes in interest rates on the net interest margin and predict market risk. 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. These analyses provide a range of potential impacts on net interest income and portfolio equity caused by interest rate movements.

23

Included in the modeling are instantaneous parallel rate shifts scenarios, which are utilized to establish exposure limits. These scenarios are known as “rate shocks” because all rates are modeled to change instantaneously by the indicated shock amount, rather than a gradual rate shift over a period of time that has traditionally been more realistic.

The Company’s interest rate risk model indicated that the Company remained essentially neutral in terms of interest rate sensitivity. However, management believes competitive deposit pricing pressures may make the Company slightly more liability sensitive than indicated by the model. Based on the Company’s interest rate risk model, the table below illustrates the impact of an immediate and sustained 100 and 200 basis point increase or decrease in interest rates on net interest income:

Shift in Interest Rates (in bps)	% Change in Projected Net Interest Income
+200	3.0%
+100	2.0
-100	2.2
-200	1.6

The impact of a flattening yield curve, as anticipated in the forward curve as of December 31, 2006, would approximate a 2.2% increase in net interest income. The computations of interest rate risk shown above do not necessarily include certain actions that management may undertake to manage this risk in response to anticipated changes in interest rates.

The rate environment is a function of the monetary policy of the FRB. The principal tools of the FRB for implementing monetary policy are open market operations, or the purchases and sales of U.S. Treasury and federal agency securities. The FRB’s objective for open market operations has varied over the years, but the focus has gradually shifted toward attaining a specified level of the federal funds rate to achieve the long-run goals of price stability and sustainable economic growth. The federal funds rate is the basis for overnight funding and drives the short end of the yield curve. Longer maturities are influenced by FRB purchases and sales and also expectations of monetary policy going forward. The FRB began to increase the targeted level for the federal funds rate in June 2004 after reaching an all-time low of 1.00% in mid-2003. The targeted fed funds rate has increased four times by 25 basis points in 2006 meetings and ended the year at 5.25%. Although each FRB rate increase becomes more challenging to offset, the ability to delay deposit rate increases and less aggressive repricing of the maturing certificate of deposit portfolio has allowed the Company to offset the negative impact of recent FRB rate movements. Although management believes that the Company is not significantly affected by changes in interest rates over an extended period of time, the continued flattening of the yield curve will exert downward pressure on the net interest margin and net interest income. Under traditional measures of interest rate gap positions, the Company is slightly liability sensitive in the short-term.

As part of its asset/liability management strategy, the Company has emphasized the origination of commercial and consumer loans, which typically have shorter terms than residential mortgage loans and/or adjustable or variable rates of interest. The majority of fixed-rate, long-term residential loans are sold in the secondary market to avoid assumption of the rate risk associated with longer duration assets in the current low rate environment. As of December 31, 2006, $634.0 million, or 28.4%, of the Company’s total loan portfolio had adjustable interest rates. The Bank has no significant concentration to any single loan component or industry segment.

The Company’s strategy with respect to liabilities in recent periods has been to emphasize transaction accounts, particularly noninterest or low interest-bearing transaction accounts, which are not sensitive to changes in interest rates. At December 31, 2006, 64.9% of the Company’s deposits were in transaction and limited-transaction accounts, compared to 66.0% at December 31, 2005. Noninterest bearing transaction accounts totaled 14.7% of total deposits at December 31, 2006, compared to 15.6% of total deposits at December 31, 2005.

24

As part of an overall interest rate risk management strategy, off-balance sheet derivatives may also be used as an efficient way to modify the repricing or maturity characteristics of on-balance sheet assets and liabilities. Management may from time to time engage in interest rate swaps to effectively manage interest rate risk. The interest rate swaps of the Company were executed to modify net interest sensitivity to levels deemed appropriate.

OTHER OFF-BALANCE SHEET ACTIVITIES

In the normal course of business, the Company is a party to a number of activities that contain credit, market and operational risk that are not reflected in whole or in part in the Company’s consolidated financial statements. Such activities include traditional off-balance sheet credit-related financial instruments, commitments under operating leases and long-term debt. The Company provides customers with off-balance sheet credit support through loan commitments, lines of credit and standby letters of credit. Many of the unused commitments are expected to expire unused or be only partially used; therefore, the total amount of unused commitments does not necessarily represent future cash requirements. The Company anticipates it will continue to have sufficient funds together with available borrowings to meet its current commitments. At December 31, 2006, the total approved loan commitments outstanding amounted to $31.9 million. At the same date, commitments under unused lines of credit, including credit card lines, amounted to $539.2 million. Included in these totals are commercial commitments amounting to $395.5 million as shown in the following table.

TABLE 17 – COMMERCIAL COMMITMENT EXPIRATION PER PERIOD

(dollars in thousands)	Less Than 1 Year		1 – 3 Years		4 – 5 Years		Over 5 Years		Total
Unused commercial lines of credit	$	283,831	$	31,185	$	18,112	$	14,590	$	347,718
Unused loan commitments		25,323		—		—		—		25,323
Standby letters of credit		17,482		4,982		—		—		22,464
Total	$	326,636	$	36,167	$	18,112	$	14,590	$	395,505

The Company has entered into a number of long-term leasing arrangements to support the ongoing activities of the Company. The required payments under such commitments and other debt commitments at December 31, 2006 are shown in the following table.

TABLE 18 – CONTRACTUAL OBLIGATIONS AND OTHER DEBT COMMITMENTS

(dollars in thousands)	2007		2008		2009		2010		2011		2012 and After		Total
Operating leases	$	1,252	$	1,136	$	1,095	$	1,014	$	787	$	3,039	$	8,323
Certificates of deposit		648,290		153,834		23,616		14,033		7,338		3,767		850,878
Short-term borrowings		202,605		—		—		—		—		—		202,605
Long-term debt		36,339		43,640		77,905		37,166		17,619		24,328		236,997
Total	$	888,486	$	198,610	$	102,616	$	52,213	$	25,744	$	31,134	$	1,298,803

25

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, the majority 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. Although fluctuations in interest rates are neither completely predictable nor controllable, the Company regularly monitors its interest rate position and oversees its financial risk management by establishing policies and operating limits. 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. Although not as critical to the banking industry as to other industries, inflationary factors may have some impact on the Company’s growth, earnings, total assets and capital levels. Management does not expect inflation to be a significant factor in 2007.

26

SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

(dollars in thousands, except per share data)	Years Ended December 31,
	2006			2005		2004		2003		2002
Balance Sheet Data
Total assets	$	3,203,046		$	2,852,592	$	2,448,602	$	2,115,811	$	1,570,588
Cash and cash equivalents		84,905			126,800		53,265		69,521		63,775
Loans receivable		2,234,002			1,918,516		1,650,626		1,412,349		1,044,492
Investment securities		581,352			572,582		566,955		479,622		368,122
Goodwill and acquisition intangibles		99,070			100,576		68,310		62,786		35,401
Deposit accounts		2,422,582			2,242,956		1,773,489		1,589,114		1,242,232
Borrowings		439,602			319,061		442,542		318,881		172,261
Shareholders’ equity		319,551			263,569		220,162		195,169		139,598
Book value per share (1)	$	31.07		$	27.60	$	25.62	$	23.43	$	19.90
Tangible book value per share (1) (3)		21.43			17.07		17.67		15.89		14.86
(dollars in thousands, except per share data)	Years Ended December 31,
	2006			2005		2004		2003		2002
Income Statement Data
Interest income	$	165,292		$	135,248	$	108,610	$	96,509	$	87,552
Interest expense		73,770			50,450		33,982		28,876		27,958
Net interest income		91,522			84,798		74,628		67,633		59,594
Provision for (reversal of) loan losses		(7,803	)		17,069		4,041		6,300		6,197
Net interest income after provision for (reversal of) loan losses		99,325			67,729		70,587		61,333		53,397
Noninterest income		23,450			26,141		23,217		23,064		17,866
Noninterest expense		73,127			64,438		54,897		50,629		44,032
Income before income taxes		49,648			29,432		38,907		33,768		27,231
Income taxes		13,953			7,432		11,568		10,216		8,778
Net income	$	35,695		$	22,000	$	27,339	$	23,552	$	18,453
Earnings per share – basic	$	3.80		$	2.40	$	3.26	$	2.97	$	2.61
Earnings per share – diluted		3.57			2.24		3.01		2.74		2.42
Cash earnings per share – diluted		3.64			2.32		3.07		2.79		2.45
Cash dividends per share		1.22			1.00		0.85		0.72		0.61

27

	At or For the Years Ended December 31,
	2006		2005		2004		2003		2002
Key Ratios (2)
Return on average assets	1.19	%	0.81	%	1.17	%	1.20	%	1.26	%
Return on average equity	12.86		8.41		12.98		13.05		13.12
Return on average tangible equity (3)	20.52		13.96		19.52		19.57		17.78
Equity to assets at end of period	9.98		9.24		8.99		9.22		8.89
Earning assets to interest-bearing liabilities	116.07		114.92		112.82		113.87		116.35
Interest rate spread (4)	2.99		3.23		3.40		3.67		4.19
Net interest margin (TE) (4) (5)	3.42		3.54		3.60		3.89		4.53
Noninterest expense to average assets	2.43		2.37		2.35		2.58		3.01
Efficiency ratio (6)	63.60		58.08		56.11		55.82		56.85
Tangible efficiency ratio (TE) (3) (4)	60.19		54.85		53.16		52.96		55.03
Dividend payout ratio	33.64		43.56		26.55		25.37		23.68
Asset Quality Data
Nonperforming assets to total assets at end of period (7)	0.16	%	0.21	%	0.25	%	0.34	%	0.42	%
Allowance for loan losses to nonperforming loans at end of period (7)	993.76		659.29		355.17		355.92		301.64
Allowance for loan losses to total loans at end of period	1.34		1.98		1.22		1.29		1.25
Consolidated Capital Ratios
Tier 1 leverage capital ratio	9.01	%	7.65	%	7.63	%	7.50	%	7.62	%
Tier 1 risk-based capital ratio	11.81		10.70		11.13		10.94		10.66
Total risk-based capital ratio	13.06		11.96		12.36		12.20		11.89

(1) Shares used for book value purposes exclude shares held in treasury and unreleased shares held by the Employee Stock Ownership Plan at the end of the period.

(2) With the exception of end-of-period ratios, all ratios are based on average daily balances during the respective periods.

(3) Tangible calculations eliminate the effect of goodwill and acquisition related intangible assets and the corresponding amortization expense on a tax-effected basis where applicable.

(4) 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.

(5) Fully taxable equivalent (TE) calculations include the tax benefit associated with related income sources that are tax-exempt using a marginal tax rate of 35%.

(6) The efficiency ratio represents noninterest expense as a percentage of total revenues. Total revenues is the sum of net interest income and noninterest income.

(7) Nonperforming loans consist of nonaccruing loans and loans 90 days or more past due. Nonperforming assets consist of nonperforming loans and repossessed assets.

28

MANAGEMENT REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

To the Board of Directors of

IBERIABANK Corporation

The management of IBERIABANK Corporation (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control system was designed to provide reasonable assurance to the Company’s management and board of directors regarding the preparation and fair presentation of published financial statements.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2006. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework. Based on our assessment, management believes that, as of December 31, 2006, the Company’s internal control over financial reporting is effective based on those criteria.

The Company’s independent auditors have issued an audit report on management’s assessment of the Company’s internal control over financial reporting.

/s/ Daryl G. Byrd	/s/ Anthony J. Restel
Daryl G. Byrd	Anthony J. Restel
President and Chief Executive Officer	Executive Vice President and Chief Financial Officer

29

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

IBERIABANK Corporation

We have audited management’s assessment, included in the accompanying Management Report on Internal Control over Financial Reporting, that IBERIABANK Corporation maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). IBERIABANK Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that IBERIABANK Corporation maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also in our opinion, IBERIABANK Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets and the related consolidated statements of income, shareholders’ equity and cash flows of IBERIABANK Corporation and Subsidiary, and our report dated February 16, 2007 expressed an unqualified opinion.

/s/ Castaing, Hussey & Lolan, LLC

New Iberia, Louisiana

February 16, 2007

30

REPORT OF CASTAING, HUSSEY & LOLAN, LLC

INDEPENDENT REGISTERED ACCOUNTING FIRM

To the Board of Directors and Shareholders of

IBERIABANK Corporation

We have audited the accompanying consolidated balance sheets of IBERIABANK Corporation and Subsidiary as of December 31, 2006 and 2005, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2006. 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 the standards of the Public Company Accounting Oversight Board (United States). 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, 2006 and 2005, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2006, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of IBERIABANK Corporation’s internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 16, 2007 expressed an unqualified opinion on management’s assessment of internal control over financial reporting and an unqualified opinion on the effectiveness of internal control over financial reporting.

/s/ Castaing, Hussey & Lolan, LLC

New Iberia, Louisiana

February 16, 2007

31

IBERIABANK CORPORATION AND SUBSIDIARY

Consolidated Balance Sheets

December 31, 2006 and 2005

(dollars in thousands, except share data)	2006			2005
Assets
Cash and due from banks	$	51,078		$	66,697
Interest-bearing deposits in banks		33,827			60,103
Total cash and cash equivalents		84,905			126,800
Securities available for sale, at fair value		558,832			543,495
Securities held to maturity, fair values of $22,677 and $29,337, respectively		22,520			29,087
Mortgage loans held for sale		54,273			10,515
Loans, net of unearned income		2,234,002			1,918,516
Allowance for loan losses		(29,922	)		(38,082	)
Loans, net		2,204,080			1,880,434
Premises and equipment, net		71,007			55,010
Goodwill		92,779			93,167
Other assets		114,650			114,084
Total Assets	$	3,203,046		$	2,852,592
Liabilities
Deposits:
Noninterest-bearing	$	354,961		$	350,065
Interest-bearing		2,067,621			1,892,891
Total deposits		2,422,582			2,242,956
Short-term borrowings		202,605			68,849
Long-term debt		236,997			250,212
Other liabilities		21,311			27,006
Total Liabilities		2,883,495			2,589,023
Shareholders’ Equity
Preferred stock, $1 par value - 5,000,000 shares authorized		—			—
Common stock, $1 par value - 25,000,000 shares authorized; 12,378,902 and 11,801,979 shares issued, respectively (1)		12,379			11,802
Additional paid-in capital		227,854			190,655
Retained earnings		173,794			150,107
Unearned compensation		(13,371	)		(9,594	)
Accumulated other comprehensive income		(3,306	)		(5,629	)
Treasury stock at cost - 2,092,471 and 2,253,167 shares, respectively (1)		(77,799	)		(73,772	)
Total Shareholders’ Equity		319,551			263,569
Total Liabilities and Shareholders’ Equity	$	3,203,046		$	2,852,592

The accompanying Notes are an integral part of these Consolidated Financial Statements.

32

IBERIABANK CORPORATION AND SUBSIDIARY

Consolidated Statements of Income

Years Ended December 31, 2006, 2005 and 2004

(dollars in thousands, except per share data)	2006			2005			2004
Interest and Dividend Income
Loans, including fees	$	132,771		$	108,492		$	84,231
Mortgage loans held for sale, including fees		992			709			520
Investment securities:
Taxable interest		26,920			21,698			20,425
Tax-exempt interest		2,034			2,494			2,549
Other		2,575			1,855			885
Total interest and dividend income		165,292			135,248			108,610
Interest Expense
Deposits		58,116			36,597			23,837
Short-term borrowings		3,911			3,395			2,644
Long-term debt		11,743			10,458			7,501
Total interest expense		73,770			50,450			33,982
Net interest income		91,522			84,798			74,628
Provision for (reversal of) loan losses		(7,803	)		17,069			4,041
Net interest income after provision for (reversal of) loan losses		99,325			67,729			70,587
Noninterest Income
Service charges on deposit accounts		13,167			13,427			12,317
ATM/debit card fee income		3,429			2,709			2,012
Income from bank owned life insurance		2,085			1,979			1,663
Gain on sale of loans, net		745			2,497			2,794
Gain on sale of assets		99			826			220
Gain (loss) on sale of investments, net		(4,083	)		(39	)		698
Trading gains and settlements on swaps		1,330			—			—
Broker commissions		4,054			2,410			1,833
Other income		2,624			2,332			1,680
Total noninterest income		23,450			26,141			23,217
Noninterest Expense
Salaries and employee benefits		40,023			33,973			29,846
Occupancy and equipment		9,445			8,319			6,834
Franchise and shares tax		2,991			3,161			2,607
Communication and delivery		3,118			3,107			2,814
Marketing and business development		2,124			1,766			1,582
Data processing		2,678			1,837			1,492
Printing, stationery and supplies		1,007			992			845
Amortization of acquisition intangibles		1,118			1,207			885
Professional services		2,103			2,339			1,802
Other expenses		8,520			7,737			6,190
Total noninterest expense		73,127			64,438			54,897
Income before income tax expense		49,648			29,432			38,907
Income tax expense		13,953			7,432			11,568
Net Income	$	35,695		$	22,000		$	27,339
Earnings per share - basic (1)	$	3.80		$	2.40		$	3.26
Earnings per share - diluted (1)	$	3.57		$	2.24		$	3.01

The accompanying Notes are an integral part of these Consolidated Financial Statements.

33

IBERIABANK CORPORATION AND SUBSIDIARY

Consolidated Statements of Shareholders’ Equity

Years Ended December 31, 2006, 2005 and 2004

(dollars in thousands, except share and per share data)	Common Stock		Additional Paid-In Capital		Retained Earnings			Unearned Compensation			Accumulated Other Comprehensive Income			Treasury Stock			Total
Balance, December 31, 2003 (1)		10,453		114,674		117,876			(2,668	)		183			(45,349	)		195,169
Comprehensive income:
Net income						27,339												27,339
Change in unrealized gain on securities available for sale, net of deferred taxes												(214	)					(214	)
Change in fair value of derivatives used for cash flow hedges, net of tax effect												421						421
Total comprehensive income																		27,546
Cash dividends declared, $0.85 per share						(7,257	)											(7,257	)
Reissuance of treasury stock under stock option plan, net of shares surrendered in payment, including tax benefit, 170,619 shares				1,114											3,005			4,119
Common stock released by ESOP trust				2,135					435									2,570
Common stock earned by participants of recognition and retention plan trust, including tax benefit				745					636									1,381
Common stock issued for recognition and retention plan				2,965					(3,984	)					1,019			—
Common stock issued for acquisition		359		15,208		(71	)											15,496
Treasury stock acquired at cost, 408,334 shares															(18,862	)		(18,862	)
Balance, December 31, 2004		10,812		136,841		137,887			(5,581	)		390			(60,187	)		220,162
Comprehensive income:
Net income						22,000												22,000
Change in unrealized gain on securities available for sale, net of deferred taxes												(7,030	)					(7,030	)
Change in fair value of derivatives used for cash flow hedges, net of tax effect												1,011						1,011
Total comprehensive income																		15,981
Cash dividends declared, $1.00 per share						(9,582	)											(9,582	)
Reissuance of treasury stock under stock option plan, net of shares surrendered in payment, including tax benefit, 203,813 shares				1,539											2,026			3,565
Common stock released by ESOP trust				519					103									622
Common stock earned by participants of recognition and retention plan trust, including tax benefit				564					1,554									2,118
Common stock issued for recognition and retention plan				3,777					(5,670	)					1,893			—
Common stock issued for acquisition		990		46,945		(198	)											47,737
Share based compensation cost				470														470
Treasury stock acquired at cost, 365,488 shares															(17,504	)		(17,504	)
Balance, December 31, 2005		11,802		190,655		150,107			(9,594	)		(5,629	)		(73,772	)		263,569
Comprehensive income:
Net income						35,695												35,695
Change in unrealized gain on securities available for sale, net of deferred taxes												2,858						2,858
Change in fair value of derivatives used for cash flow hedges, net of tax effect												(535	)					(535	)
Total comprehensive income																		38,018
Cash dividends declared, $1.22 per share				856		(12,008	)											(11,152	)
Reissuance of treasury stock under stock option plan, net of shares surrendered in payment, including tax benefit, 188,394 shares				3,090											2,448			5,538
Common stock earned by participants of recognition and retention plan trust, including tax benefit				264					2,649									2,913
Common stock issued for recognition and retention plan				4,869					(6,426	)					1,557			—
Common stock issued		577		27,883														28,460
Share based compensation cost				237														237
Treasury stock acquired at cost, 138,253 shares															(8,032	)		(8,032	)
Balance, December 31, 2006	$	12,379	$	227,854	$	173,794		$	(13,371	)	$	(3,306	)	$	(77,799	)	$	319,551

The accompanying Notes are an integral part of these Consolidated Financial Statements.

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IBERIABANK CORPORATION AND SUBSIDIARY

Consolidated Statements of Cash Flows

Years Ended December 31, 2006, 2005 and 2004

(dollars in thousands)	2006			2005			2004
Cash Flows from Operating Activities
Net income	$	35,695		$	22,000		$	27,339
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		5,478			5,245			4,326
Provision for (reversal of) loan losses		(7,803	)		17,069			4,041
Noncash compensation expense		3,150			2,824			3,334
Gain on sale of assets		(64	)		(1,081	)		(221	)
Loss (gain) on sale of investments		4,087			39			(698	)
Loss on abandonment of fixed assets		187			129			—
Amortization of premium/discount on investments		272			1,909			2,807
Derivative gains on swaps		(803	)		—			—
Current provision (benefit) for deferred income taxes		4,381			(3,236	)		1,816
Net change in loans held for sale		(13,435	)		(2,406	)		(2,328	)
Cash retained from tax benefit associated with share-based payment arrangements		(3,112	)		—			—
Other operating activities, net		(4,277	)		(627	)		(7,034	)
Net Cash Provided by Operating Activities		23,756			41,865			33,382
Cash Flows from Investing Activities
Proceeds from sales of securities available for sale		112,003			23,737			42,762
Proceeds from maturities, prepayments and calls of securities available for sale		232,873			96,071			134,582
Purchases of securities available for sale		(363,225	)		(137,529	)		(269,134	)
Proceeds from maturities, prepayments and calls of securities held to maturity		6,515			10,836			13,237
Proceeds from sale of loans		—			3,172			—
Increase in loans receivable, net		(348,506	)		(78,414	)		(190,959	)
Proceeds from sale of premises and equipment		810			3,296			76
Purchases of premises and equipment		(21,930	)		(14,686	)		(9,430	)
Proceeds from disposition of real estate owned		1,010			2,038			3,533
Purchases of other real estate owned		(794	)		—			—
Cash received in excess of cash paid in acquisition		—			20,736			4,320
Other investing activities, net		(1,491	)		6,277			(3,510	)
Net Cash Used in Investing Activities		(382,735	)		(64,466	)		(274,523	)
Cash Flows from Financing Activities
Increase in deposits		180,303			277,461			123,303
Net change in short-term borrowings		133,756			(167,604	)		73,863
Proceeds from long-term debt		25,000			34,255			51,100
Repayments of long-term debt		(37,407	)		(23,037	)		(462	)
Dividends paid to shareholders		(11,390	)		(8,836	)		(6,606	)
Proceeds from sale of treasury stock for stock options exercised		3,282			1,407			2,549
Costs of issuance of common stock		(1,540	)		(6	)		—
Payments to repurchase common stock		(8,032	)		(17,504	)		(18,862	)
Common stock issued		30,000			—			—
Cash retained from tax benefit associated with share-based payment arrangements		3,112			—			—
Net Cash Provided by Financing Activities		317,084			96,136			224,885
Net (Decrease) Increase In Cash and Cash Equivalents		(41,895	)		73,535			(16,256	)
Cash and Cash Equivalents at Beginning of Period		126,800			53,265			69,521
Cash and Cash Equivalents at End of Period	$	84,905		$	126,800		$	53,265
Supplemental Schedule of Noncash Activities
Acquisition of real estate in settlement of loans	$	1,121		$	1,553		$	1,792
Common stock issued in acquisition	$	—		$	47,744		$	15,496
Transfer of property into Other Real Estate	$	760		$	—		$	—
Exercise of stock options with payment in company stock	$	384		$	2,075		$	134
2,359,854 shares issued in stock split, par value of shares issued	$	—		$	2,360		$	—
Supplemental Disclosures
Cash paid for:
Interest on deposits and borrowings	$	71,690		$	49,687		$	33,420
Income taxes, net	$	11,400		$	5,029		$	5,478

The accompanying Notes are an integral part of these Consolidated Financial Statements.

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NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the accounts of IBERIABANK Corporation (the “Company”) and its wholly owned subsidiary, IBERIABANK (the “Bank”), as well as all of the Bank’s subsidiaries, Iberia Financial Services LLC, Acadiana Holdings LLC, Jefferson Insurance Corporation, Finesco LLC and IBERIABANK Insurance Services LLC. All significant intercompany balances and transactions have been eliminated in consolidation.

NATURE OF OPERATIONS: The Company is a Louisiana corporation that has historically served as the bank holding company for the Bank, a Louisiana chartered state commercial bank. Through the Bank, the Company offers commercial and retail products and services to customers throughout the state of Louisiana, including New Orleans, Baton Rouge, Shreveport, Northeast Louisiana, LaPlace, Houma, and the Acadiana and Northshore regions of Louisiana. Management of the Company monitors the revenue streams of the various products, services and markets; however, operations are managed and financial performance is evaluated on a company-wide basis. Accordingly, all of the Company’s banking operations are considered by management to be aggregated in one reportable operating segment. Because the overall banking operations comprise substantially all of the consolidated operations, no separate segment disclosures are presented.

USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Material estimates that are susceptible to significant change in the near term are the allowance for loan losses, valuation of goodwill, intangible assets and other purchase accounting adjustments and share based compensation.

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 is concentrated in the Company’s five primary market areas in Louisiana. The Company in recent years has emphasized originations of commercial loans and private banking loans. Repayment of loans is expected to come from cash flows of the borrower. Losses are limited by the value of the collateral upon default of the borrowers. The Company does not have any significant concentrations to any one industry or customer.

CASH AND CASH EQUIVALENTS: For purposes of presentation in the consolidated statements of cash flows, cash and cash equivalents are defined as cash, interest-bearing deposits and noninterest-bearing demand deposits at other financial institutions with maturities less than one year. The Bank may be required to maintain average balances on hand or with the Federal Reserve Bank. At December 31, 2006 and 2005, the Bank had no required reserve balance.

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. In estimating other than temporary impairment losses, management considers 1) the length of time and the extent to which the fair value has been less than cost, 2) the financial condition and near-term prospects of the issuer, and 3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. Gains/losses on securities sold are recorded on the trade date, using the specific identification method.

MORTGAGE 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 held for sale have primarily been fixed rate single-family residential mortgage loans under contract to be sold in the secondary market. In most cases, loans in this category are sold within thirty days. These loans are generally sold with the mortgage servicing rights released.

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Buyers generally have recourse to return a purchased loan to the Company under limited circumstances. Recourse conditions may include early payment default, breach of representations or warranties, and documentation deficiencies.

LOANS: The Company grants mortgage, commercial and consumer loans to customers. Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at the unpaid principal balances, less the allowance for loan losses and net deferred loan origination fees and unearned discounts. Deferred loan origination fees were $2,612,000 and $1,941,000 and deferred loan expenses totaled $4,090,000 and $3,534,000 at December 31, 2006 and 2005, respectively. In addition to loans issued in the normal course of business, the Company considers overdrafts on customer deposit accounts to be loans and reclassifies these overdrafts as loans in its Consolidated Balance Sheets. At December 31, 2006 and 2005, $1,111,000 and $1,362,000, respectively, have been reclassified to loans receivable.

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 commercial loans is discontinued at the time the loan is 90 days delinquent unless the credit is well-secured and in process of collection. Mortgage, credit card and other personal loans are typically charged off to net collateral value, less cost to sell, no later than 180 days past due. Past due status is based on the contractual terms of loans. In all cases, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful.

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.

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 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 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 opinion, is adequate to absorb credit losses inherent in the portfolio. The Company utilizes both peer group analysis, as well as an historical analysis of the Company’s portfolio to validate the overall adequacy of the allowance for loan losses. In addition to these objective criteria, the Company subjectively assesses the adequacy of the allowance for loan losses with consideration given to current economic conditions, changes to loan policies, the volume and type of lending, composition of the portfolio, the level of classified and criticized credits, seasoning of the loan portfolio, payment status and other factors.

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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 into noninterest income. 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.

OFF-BALANCE SHEET 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.

DERIVATIVE FINANCIAL INSTRUMENTS: Statement of Financial Accounting Standards (“SFAS”) No. 133, Accounting for Derivative Instruments and Hedging Activities, requires that all derivatives be recognized as assets or liabilities in the balance sheet at fair value.

The Company may enter into derivative contracts to manage exposure to interest rate risk or to meet the financing needs of its customers.

Interest Rate Swap Agreements

The Company utilizes interest rate swap agreements to convert a portion of its variable-rate debt to a fixed rate (cash flow hedge). Interest rate swaps are contracts in which a series of interest rate flows are exchanged over a prescribed period. The notional amount on which the interest payments are based is not exchanged.

For derivatives designated as hedging the exposure to changes in the fair value of an asset or liability (fair value hedge), the gain or loss is recognized in earnings in the period of change together with the offsetting gain or loss to the hedged item attributable to the risk being hedged. Earnings will be affected to the extent to which the hedge is not effective in achieving offsetting changes in fair value. For derivatives designated as hedging exposure to variable cash flows of a forecasted transaction (cash flow hedge), the effective portion of the derivative’s gain or loss is initially reported as a component of other comprehensive income and subsequently reclassified into earnings when the forecasted transaction affects earnings or when the hedge is terminated. The ineffective portion of the gain or loss is reported in earnings immediately. For derivatives that are not designated as hedging instruments, changes in the fair value of the derivatives are recognized in earnings immediately.

In applying hedge accounting for derivatives, the Company establishes a method for assessing the effectiveness of the hedging derivative and a measurement approach for determining the ineffective aspect of the hedge upon the inception of the hedge. These methods are consistent with the Company’s approach to managing risk.

During the third quarter of 2006, the Company revised its method of accounting for interest rate swaps associated with junior subordinated debt. At the time the Company entered into the interest rate swaps, it conducted a detailed analysis of the appropriate accounting method. The Company determined that based upon SFAS No. 133 guidance available at the time, the “short-cut” method was an appropriate accounting method because the terms of the interest rate swaps and the corresponding debt matched and, as a result, the Company assumed no ineffectiveness in the hedging relationships. In light of recent technical interpretations of SFAS No. 133, the Company has determined that the swaps do not qualify for hedge accounting under the short-cut method. Accordingly, the Company revised its method of accounting for the swaps, and changes in the fair value of these swaps are now recorded as noninterest income. The Company evaluated the impact of applying the change in fair value of these swaps compared to the short-cut method used under hedge accounting and concluded that the impact was not material to prior annual or quarterly periods. Accordingly, the Company recorded a cumulative adjustment for derivative gains on swaps totaling $1.3 million during the third quarter of 2006, which is included in Trading gains and settlements on swaps in the Consolidated Statements of Income. Of this cumulative adjustment, $271,000 ($176,000 after tax), relates to the first and second quarters of 2006 and $1,021,000 ($663,000 after tax) relates to periods prior to 2006. In addition, $0.4 million in net cash swap settlements since the beginning of 2006, which were previously reported in interest expense, were reported in noninterest income in the third quarter of 2006, which is included in Trading gains and settlements on swaps in the Consolidated Statements of Income. Earnings include the increase or decrease in fair value of these derivative instruments.

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Rate Lock Commitments

The Company enters into commitments to originate loans whereby the interest rate on the prospective loan is determined prior to funding (“rate lock commitments”). Rate lock commitments on mortgage loans that are intended to be sold are considered to be derivatives. Accordingly, such commitments, along with any related fees received from potential borrowers, are recorded at fair value as derivative assets or liabilities, with changes in fair value recorded in net gain or loss on sale of mortgage loans. The fair value of rate lock commitments was immaterial in 2006 and 2005.

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 10 to 40 years for buildings and 5 to 15 years for furniture, fixtures and equipment.

OTHER REAL ESTATE: Other real estate includes all real estate, other than bank premises, owned or controlled by the bank, including real estate acquired in settlement of loans. Properties are recorded at the balance of the loan or at estimated fair value less estimated selling costs, whichever is less, at the date acquired. Subsequent to foreclosure, management periodically performs valuations and the assets are carried at the lower of cost or fair value less estimated selling costs. Revenue and expenses from operations, gain or loss on sale and changes in the valuation allowance are included in net expenses from foreclosed assets. Real estate owned and foreclosed property totaled $2,008,000 and $257,000 at December 31, 2006 and 2005, respectively. There was no allowance for losses on foreclosed property at December 31, 2006 and 2005.

GOODWILL: Goodwill is accounted for in accordance with SFAS No. 142, Goodwill and Other Intangible Assets, and accordingly is not amortized but is evaluated at least annually for impairment.

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: The Company issues stock options under various plans to directors, officers and other key employees. Effective January 1, 2006, the Company accounts for its options under SFAS No. 123(R), Share-Based Payments (see Note 15). Under the provisions of SFAS No. 123(R), the Company has adopted 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. As a result, compensation expense relating to stock options is reflected in net income as part of “Salaries and employee benefits” on the Consolidated Statement of Income. The Company’s practice has been to grant options at no less than the fair market value of the stock at the grant date.

Prior to January 1, 2006, the Company had accounted for stock options in accordance with Accounting Principles Board Opinion (“APB”) No. 25, Accounting for Stock Issued to Employees, whereby no compensation cost is recognized for stock options with no intrinsic value, defined as the difference between the Company’s market price of its stock at the option grant date and the amount an employee must pay to acquire the stock. No compensation cost was recognized for intrinsic value during the years ended December 31, 2005 and 2004. In 2005, $470,000 in compensation expense was incurred as a result of accelerated vesting of outstanding unvested option awards.

39

The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123(R) for stock options for the years ended December 31, 2005 and 2004.

(dollars in thousands, except per share data)	Years Ended December 31,
	2005		2004
Reported net income	$	22,000	$	27,339
Deduct: Stock option compensation expense under the fair value method, net of related tax effect		4,968		1,340
Pro forma net income	$	17,032	$	25,999
Reported net income per common share	$	2.40	$	3.26
Pro forma net income per common share		1.86		3.10
Reported net income per common share–assuming dilution		2.24		3.01
Pro forma net income per common share–assuming dilution		1.74		2.88

See Note 15 for additional information on the Company’s stock compensation plans.

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 outstanding stock options, warrants 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.

SEGMENT INFORMATION: SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, requires the reporting of 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 2006, 2005, or 2004.

EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS:

In February 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments-an amendment of FASB Statements No. 133 and 140, (“SFAS No. 155”). SFAS No. 155 resolves issues addressed in SFAS No. 133 Implementation Issue No. D1, “Application of Statement 133 to Beneficial Interests in Securitized Financial Assets.” SFAS No. 155 permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS No. 133, establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation, clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives, and amends SFAS No. 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS No. 155 is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006. The Company anticipates that the adoption of SFAS No. 155 will not have a material impact on the Company’s financial position or results of operations.

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In December 2005, the FASB issued FSP 94-6-1, Terms of Loan Products That May Give Rise to a Concentration of Credit Risk. FSP defines in what circumstances the terms of loan products give rise to a concentration of credit risk and provides disclosure guidance and accounting considerations for entities that originate, hold, guarantee, service, or invest in loan products whose terms may give rise to a concentration of credit risk. Adoption of FSP 94-6-1 had no impact on the Company’s financial position or results of operations.

In March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of Financial Assets, an amendment of SFAS No. 140. SFAS No. 156 requires an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract in selected situations; requires all separately recognized servicing assets and servicing liabilities to be initially measured at fair value, if practicable; permits an entity to choose either the amortization or fair value measurement method for each class of separately recognized servicing assets and servicing liabilities; at its initial adoption, permits a one-time reclassification of available-for-sale securities to trading securities by entities with recognized servicing rights, without calling into question the treatment of other available-for-sale securities under SFAS No. 115, provided that the available-for-sale securities are identified in some manner as offsetting the entity’s exposure to changes in fair value of servicing assets or servicing liabilities that a servicer elects to subsequently measure at fair value; and requires separate presentation of servicing assets and servicing liabilities subsequently measured at fair value in the statement of financial position and additional disclosures for all separately recognized servicing assets and servicing liabilities. This Statement is effective as of the beginning of an entity’s first fiscal year that begins after September 15, 2006. The Company anticipates that the adoption of SFAS No. 156 will not have a material impact on the Company’s financial position or results of operations.

In June 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in financial statements in accordance with SFAS No. 109, Accounting for Income Taxes. The Interpretation also prescribes a recognition threshold and measurement attribute for recognition in financial statements of the recognition and measurement of a tax position taken in a tax return. FIN 48 prescribes that a company should use a more-likely-than-not recognition threshold based on the technical merits of the tax position taken. Tax positions that meet the more-likely-than-not threshold should be measured in order to determine the tax benefit to be recognized in the financial statements. This Statement is effective as of the beginning of the first fiscal year that begins after December 15, 2006. The Company anticipates that the adoption of FIN 48 will not have a material impact on the Company’s financial position or results of operations.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurement. SFAS No. 157 provides enhanced guidance for using fair value to measure assets and liabilities. The standard also responds to investors’ requests for expanded information about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurements on earnings, and applies whenever other standards require or permit assets or liabilities to be measured at fair value. Under the standard, fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts. SFAS No. 157 clarifies the principle that fair value should be based on the assumptions market participants would use when pricing the asset or liability. In support of this principle, SFAS No. 157 establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. Under the standard, fair value measurements would be separately disclosed by level within the fair value hierarchy. The Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company is currently evaluating the effect the standard will have on its results of operations and financial condition.

In September 2006, the FASB issued SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans. The Statement requires an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income. The Company does not have a defined benefit pension plan or other plan subject to the Statement and thus the standard will have no effect on the result of operations and financial condition of the Company.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. SFAS No. 159 provides the Company with an option to report selected financial assets and liabilities at fair value and establishes presentation and disclosure requirements to facilitate reporting between companies. The fair value option established by this

41

Statement permits the Company to choose to measure eligible items at fair value at specified election dates. The Company shall then report unrealized gains and losses on items for which the fair value option has been elected in earnings at each reporting date subsequent to implementation. The Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company is currently evaluating the effect the standard will have on its results of operations and financial condition.

RECLASSIFICATIONS: Certain reclassifications have been made to the 2005 and 2004 consolidated financial statements in order to conform to the classifications adopted for reporting in 2006.

NOTE 2 – ACQUISITION ACTIVITY:

Alliance Bank of Baton Rouge

The Company completed the acquisition of 100% of the outstanding stock of Alliance Bank of Baton Rouge (“Alliance”) on February 29, 2004, in exchange for 359,106 shares of the Company’s common stock valued at $15,496,000. The shares were valued by using the average of the closing prices of the Company’s stock for the three trading days immediately prior to and after the date of the definitive agreement. This acquisition expanded the Company’s presence into Baton Rouge, Louisiana.

The Alliance transaction resulted in $5.2 million of goodwill and $1.2 million of core deposit intangibles. The goodwill acquired is not tax deductible. The amount allocated to the core deposit intangible was determined by an independent valuation and is being amortized over the estimated useful life of seven years using the straight line method.

In the acquisition, shareholders of Alliance received total consideration of $16.18 per outstanding share of Alliance common stock in exchange for the Company’s common stock. The combination was accounted for as a purchase with the purchase price allocated as follows:

(dollars in thousands)	Amount
Cash and due from banks	$	4,320
Investment securities		11,218
Loans, net		53,125
Premises and equipment, net		1,125
Goodwill		5,169
Core deposit and other intangibles		1,200
Other assets		1,970
Deposits		(61,772	)
Other liabilities		(859	)
Total purchase price	$	15,496

The results of operations of the acquired company subsequent to the acquisition date are included in the Company’s consolidated statements of income.

American Horizons Bancorp, Inc.

The Company completed the acquisition of 100% of the outstanding stock of American Horizons Bancorp, Inc. of Monroe (“American Horizons”) on January 31, 2005 in exchange for 990,435 shares of the Company’s common stock valued at $47,744,000 and $653,000 in cash. The shares were valued by using the average of the closing prices of the Company’s stock for the ten trading days five days prior to the definitive agreement. The acquisition expanded the Company’s presence in North Louisiana.

The American Horizons transaction resulted in $28.1 million of goodwill and $5.0 million of core deposit intangibles. The goodwill acquired is not tax deductible. The amount allocated to the core deposit intangible was determined by an independent valuation and is being amortized over the estimated useful life of ten years using the straight line method.

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In the acquisition, shareholders of American Horizons received total consideration of $22.35 per outstanding share of American Horizons common stock in exchange for a combination of the Company’s common stock and cash. The combination was accounted for as a purchase with the purchase price allocated as follows:

(dollars in thousands)	Amount
Cash and due from banks	$	21,389
Investment securities		11,504
Loans, net		194,698
Premises and equipment, net		7,238
Goodwill		28,087
Core deposit and other intangibles		5,039
Other assets		8,988
Deposits		(192,653	)
Borrowings		(34,207	)
Other liabilities		(1,686	)
Total purchase price	$	48,397

The results of operations of the acquired company subsequent to the acquisition date are included in the Company’s consolidated statements of income. The following pro forma information for the years ended December 31, 2005 and 2004 reflects the Company’s estimated consolidated results of operations as if the acquisition of American Horizons occurred at January 1 of the respective period, unadjusted for potential cost savings.

(dollars in thousands, except per share data)	2005		2004
Interest and noninterest income	$	163,054	$	150,893
Net Income		22,161		30,139
Earnings per share – basic	$	2.40	$	3.22
Earnings per share – diluted	$	2.24	$	2.99

Acquisitions completed subsequent to year-end

On January 31, 2007, the Company acquired all of the outstanding stock of Pulaski Investment Corporation (“Pulaski”), the holding company for Pulaski Bank and Trust of Little Rock, Arkansas, for 1,133,064 shares of the Company’s common stock and cash of $65.0 million. Based on the closing price of IBERIABANK Corporation’s common stock on January 31, 2007, the transaction had a total value of approximately $131 million. The acquisition extends the Company’s presence into central Arkansas and other states through its mortgage subsidiary, Pulaski Mortgage Company. The transaction will be accounted for under the purchase method of accounting. At December 31, 2006, total assets of Pulaski were approximately $500 million, including loans totaling $355 million, and total deposits were $423 million. Pulaski shareholders are projected to control approximately 9% of the pro forma combined company.

On February 1, 2007, the Company acquired all of the outstanding stock of Pocahontas Bancorp, Inc. (“Pocahontas”), the holding company for First Community Bank of Jonesboro, Arkansas, for 1,287,793 shares of the Company’s common stock. The transaction had a total value of $75 million. The acquisition extends the Company’s presence into Northeast Arkansas. The transaction will be accounted for under the purchase method of accounting. At December 31, 2006, total assets of Pocahontas were approximately $723 million, including loans of $423 million, and total deposits were $575 million. Pocahontas shareholders are projected to control approximately 10% of the pro forma combined company.

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NOTE 3 – INVESTMENT SECURITIES:

The amortized cost and fair values of investment securities, with gross unrealized gains and losses, consist of the following:

(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2006
Securities available for sale:
U.S. Government-sponsored enterprise obligations	$	169,684	$	355	$	(234	)	$	169,805
Obligations of state and political Subdivisions		40,204		645		(195	)		40,654
Mortgage backed securities		354,300		360		(6,287	)		348,373
Total securities available for sale	$	564,188	$	1,360	$	(6,716	)	$	558,832
Securities held to maturity:
U.S. Government-sponsored enterprise obligations	$	8,063	$	—	$	(171	)	$	7,892
Obligations of state and political Subdivisions		9,038		259		—			9,297
Mortgage backed securities		5,419		80		(11	)		5,488
Total securities held to maturity	$	22,520	$	339	$	(182	)	$	22,677
December 31, 2005
Securities available for sale:
U.S. Government-sponsored enterprise obligations	$	98,839	$	12	$	(1,408	)	$	97,443
Obligations of state and political Subdivisions		39,191		827		(287	)		39,731
Mortgage backed securities		415,219		49		(8,947	)		406,321
Total securities available for sale	$	553,249	$	888	$	(10,642	)	$	543,495
Securities held to maturity:
U.S. Government-sponsored enterprise obligations	$	8,075	$	—	$	(180	)	$	7,895
Obligations of state and political Subdivisions		13,285		271		(9	)		13,547
Mortgage backed securities		7,727		202		(34	)		7,895
Total securities held to maturity	$	29,087	$	473	$	(223	)	$	29,337

Securities with carrying values of $488,592,000 and $409,668,000 were pledged to secure public deposits and other borrowings at December 31, 2006 and 2005, respectively.

Management evaluates securities for other-than-temporary impairment at least quarterly, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to 1) the length of time and the extent to which the fair value has been less than cost, 2) the financial condition and near-term prospects of the issuer, and 3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and industry analysts’ reports. As of December 31, 2006, management’s assessment concluded that no declines are deemed to be other than temporary.

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Information pertaining to securities with gross unrealized losses at December 31, 2006, aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:

	Less Than Twelve Months					Over Twelve Months					Total
(dollars in thousands)	Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value
December 31, 2006
Securities available for sale:
U.S. Government-sponsored enterprise obligations	$	(122	)	$	69,943	$	(112	)	$	20,735	$	(234	)	$	90,678
Obligations of state and political subdivisions		(17	)		5,161		(178	)		15,947		(195	)		21,108
Mortgage backed securities		(318	)		46,304		(5,969	)		248,347		(6,287	)		294,651
Total securities available for sale	$	(457	)	$	121,408	$	(6,259	)	$	285,029	$	(6,716	)	$	406,437
Securities held to maturity:
U.S. Government and federal agency obligations	$	—		$	—	$	(171	)	$	7,892	$	(171	)	$	7,892
Obligations of state and political subdivisions		—			—		—			—		—
Mortgage backed securities		(2	)		922		(8	)		661		(10	)		1,583
Total securities held to maturity	$	(2	)	$	922	$	(179	)	$	8,553	$	(181	)	$	9,475
December 31, 2005
Securities available for sale:
U.S. Government and federal agency obligations	$	(226	)	$	35,656	$	(1,182	)	$	40,504	$	(1,408	)	$	76,160
Obligations of state and political subdivisions		(234	)		17,446		(53	)		2,525		(287	)		19,971
Mortgage backed securities		(3,294	)		226,571		(5,653	)		164,497		(8,947	)		391,068
Total securities available for sale	$	(3,754	)	$	279,673	$	(6,888	)	$	207,526	$	(10,642	)	$	487,199
Securities held to maturity:
U.S. Government and federal agency obligations	$	(92	)	$	4,998	$	(88	)	$	2,898	$	(180	)	$	7,896
Obligations of state and political subdivisions		(9	)		1,001		—			—		(9	)		1,001
Mortgage backed securities		—			—		(34	)		1,839		(34	)		1,839
Total securities held to maturity	$	(101	)	$	5,999	$	(122	)	$	4,737	$	(223	)	$	10,736

At December 31, 2006, 211 debt securities have unrealized losses of 1.6% of the securities’ amortized cost basis and 1.2% of the Company’s total amortized cost basis. The unrealized losses for each of the 211 securities relate principally to market interest rate changes. 168 of the 211 securities have been in a continuous loss position for over twelve months. The 168 securities were primarily issued by either Federal National Mortgage Association (Fannie Mae), Federal Home Loan Mortgage Corporation (Freddie Mac) or by state and political subdivisions (Municipals) and are rated AAA or Aaa by Standard and Poor’s or Moody’s, respectively. The securities have an aggregate amortized cost basis and unrealized loss of $300,019,000 and $6,438,000, respectively. As management has the ability to hold debt securities until maturity, or for the foreseeable future if classified as available for sale, no declines are deemed to be other than temporary.

At December 31, 2005, 198 securities have unrealized losses of 2.1% of the Company’s amortized cost basis. The unrealized losses for each of the 198 securities relate principally to market interest rate changes. 72 of the 198 securities have been in a continuous loss position for over twelve months. The 72 securities were primarily issued by either Federal National Mortgage Association (Fannie Mae), Federal Home Loan Mortgage Corporation (Freddie Mac) or Government National Mortgage Association (Ginnie Mae) and are rated AAA or Aaa by Standard and Poor’s or Moody’s, respectively. The 72 securities have an aggregate amortized cost basis and unrealized loss of $219,273,000 and $7,010,000, respectively. As management has the ability to hold debt securities until maturity, or for the foreseeable future if classified as available for sale, no declines are deemed to be other than temporary.

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The amortized cost and estimated fair value by maturity of investment securities at December 31, 2006 are shown in the following table. Securities are classified according to their contractual maturities without consideration of principal amortization, potential prepayments or call options. Accordingly, actual maturities may differ from contractual maturities.

(dollars in thousands)	Securities Available for Sale						Securities Held to Maturity
	Weighted Average Yield		Amortized Cost		Fair Value		Weighted Average Yield		Amortized Cost		Fair Value
Within one year or less	5.08	%	$	57,961	$	57,882	—		$	—	$	—
One through five years	4.93			139,950		139,390	3.90			8,732		8,553
After five through ten years	4.61			104,713		103,941	4.62			6,060		6,259
Over ten years	4.85			261,564		257,619	5.75			7,728		7,865
Totals	4.85	%	$	564,188	$	558,832	4.73	%	$	22,520	$	22,677

The following is a summary of realized gains and losses from the sale of securities classified as available for sale, the tax benefit (provision) of which is calculated at the federal income tax rate of 35%.

(dollars in thousands)	Years Ended December 31,
	2006			2005			2004
Realized gains	$	—		$	386		$	748
Realized losses		(4,087	)		(425	)		(50	)
Net realized gains (losses)	$	(4,087	)	$	(39	)	$	698

At December 31, 2006, the Company’s exposure to three investment security issuers individually exceeded 10% of shareholders’ equity:

(dollars in thousands)	Amortized Cost		Market Value
Federal National Mortgage Association (Fannie Mae)	$	271,854	$	268,483
Federal Home Loan Mortgage Corporation (Freddie Mac)		166,333		163,919
Federal Home Loan Bank (FHLB)		76,623		76,503
Balance, end of year	$	514,810	$	508,905

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NOTE 4 – LOANS RECEIVABLE:

Loans receivable at December 31, 2006 and 2005 consists of the following:

(dollars in thousands)	2006		2005
Residential mortgage loans:
Residential 1-4 family	$	431,585	$	430,111
Construction		45,285		30,611
Total residential mortgage loans		476,870		460,722
Commercial loans:
Real estate		750,051		545,868
Business		461,048		376,966
Total commercial loans		1,211,099		922,834
Consumer loans:
Indirect automobile		228,301		229,646
Home equity		233,885		230,363
Other		83,847		74,951
Total consumer loans		546,033		534,960
Total loans receivable	$	2,234,002	$	1,918,516

Loans receivable includes approximately $634,019,000 and $567,881,000 of adjustable rate loans and $1,599,983,000 and $1,350,635,000 of fixed rate loans at December 31, 2006 and 2005, respectively. The amount of loans for which the accrual of interest has been discontinued totaled approximately $2,701,000 and $4,773,000 at December 31, 2006 and 2005, respectively. The amount of interest income that would have been recorded in 2006, 2005 and 2004 if these loans had been current in accordance with their original terms was approximately $227,000, $289,000 and $322,000, respectively. Accruing loans past due 90 days or more total $310,000 and $1,003,000 as of December 31, 2006 and 2005, respectively.

A summary of changes in the allowance for loan losses for the years ended December 31, 2006, 2005 and 2004 is as follows:

(dollars in thousands)	2006			2005			2004
Balance, beginning of year	$	38,082		$	20,116		$	18,230
Addition due to purchase transaction		—			4,893			587
Adjustment for loans transferred to held for sale		—			(350	)		—
Provision charged (reversed) to operations		(7,803	)		17,069			4,041
Loans charged-off		(2,621	)		(5,541	)		(4,112	)
Recoveries		2,264			1,895			1,370
Balance, end of year	$	29,922		$	38,082		$	20,116

The following is a summary of information pertaining to impaired loans as of December 31:

(dollars in thousands)	2006		2005
Impaired loans without a valuation allowance	$	—	$	—
Impaired loans with a valuation allowance		5,617		5,484
Total impaired loans	$	5,617	$	5,484
Valuation allowance related to impaired loans	$	1,333	$	1,248

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(dollars in thousands)	2006		2005		2004
Average investment in impaired loans	$	5,182	$	6,581	$	4,128
Interest income recognized on impaired loans		419		344		149
Interest income recognized on a cash basis on impaired loans		454		324		175

As of December 31, 2006, the Company was not committed to lend additional funds to any customer whose loan was classified as impaired.

The Company acquires loans individually and in groups or portfolios. Under AICPA Statement of Position (SOP) 03-3, for certain acquired loans that have experienced deterioration of credit quality between origination and the Company’s acquisition of the loans, the amount paid for a loan reflects the Company’s determination that it is probable the Company will be unable to collect all amounts due according to the loan’s contractual terms. At acquisition, the Company reviews each loan to determine whether there is evidence of deterioration of credit quality since origination and if it is probable that the Company will be unable to collect all amounts due according to loan’s contractual terms. If both conditions exist, the Company determines whether each such loan is to be accounted for individually or whether such loans will be assembled into pools of loans based on common risk characteristics. The Company considers expected prepayments and estimates the amount and timing of undiscounted expected principal, interest and other cash flows for each loan and subsequently aggregated pool of loans. The Company determines the excess of the loan’s or pool’s scheduled contractual principal and contractual interest payments over all cash flows expected at acquisition as an amount that should not be accreted (nonaccretable difference). The remaining amount, representing the excess of the loan’s or pool’s cash flows expected to be collected over the amount paid, is accreted into interest income over the remaining life of the loan or pool (accretable yield).

Over the life of the loan or pool, the Company continues to estimate cash flows expected to be collected. The Company evaluates at the balance sheet date whether the present value of its loans determined using the effective interest rates has decreased and if so, recognizes a loss. For any remaining increases in cash flows expected to be collected, the Company adjusts the amount of accretable yield recognized on a prospective basis over the loan’s or pool’s remaining life.

During 2005, the Company acquired certain impaired loans through the American Horizons acquisition which are subject to SOP 03-3. The Company’s valuation allowances for all acquired loans subject to SOP 03-3 would reflect only those losses incurred after acquisition. As of December 31, 2006, there was no valuation allowance associated with the remaining loan subject to SOP 03-3. The carrying value of this loan is included in the balance sheet amounts of loans receivable as December 31. The carrying value of the loan was $49,000 at December 31, 2006.

The following is a summary of the loans acquired in the American Horizons acquisition during 2005, as well as the changes in the accretable yields of those loans during 2006 and 2005.

(dollars in thousands)
Contractually required principal and interest at acquisition	$	8,489
Nonaccretable difference (expected losses and foregone interest)		1,673
Cash flows expected to be collected at acquisition		6,816
Accretable yield		2,326
Basis in acquired loans at acquisition	$	4,490

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(dollars in thousands)	Accretable Yield
	2006			2005
Balance, beginning of year	$	1,529		$	—
Additions		—			2,326
Accretion		(1,407	)		(68	)
Transfers from nonaccretable difference to accretable yield		—			353
Disposals		—			(1,082	)
Balance, end of year	$	122		$	1,529

NOTE 5 – LOAN SERVICING:

Loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid principal balances of loans serviced for others were $33,909,000 and $36,007,000 at December 31, 2006 and 2005, respectively. Custodial escrow balances maintained in connection with the foregoing portfolio of loans serviced for others, and included in demand deposits, were approximately $26,000 and $60,000 at December 31, 2006 and 2005, respectively.

The balance of mortgage servicing rights was $42,000 and $96,000 at December 31, 2006 and 2005, respectively.

NOTE 6 – PREMISES AND EQUIPMENT:

Premises and equipment at December 31, 2006 and 2005 consists of the following:

(dollars in thousands)	2006		2005
Land	$	19,579	$	14,932
Buildings		47,062		35,292
Furniture, fixtures and equipment		30,929		27,298
Total premises and equipment		97,570		77,522
Less accumulated depreciation		26,563		22,512
Total premises and equipment, net	$	71,007	$	55,010

Depreciation expense was $4,201,000, $3,833,000 and $2,971,000 for the years ended December 31, 2006, 2005 and 2004, respectively.

The Company actively engages in leasing office space it has available. Leases have different terms ranging from monthly rental to five-year leases. At December 31, 2006, lease income was $96,000 per month. Total lease income for 2006, 2005 and 2004 was $1,101,000, 1,148,000, and $1,023,000, respectively. Income from leases is 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, 2006 and 2005 was $7,066,000 and $7,416,000, respectively, with related accumulated depreciation of $1,813,000 and $1,647,000, respectively.

The Company leases certain branch offices, land and ATM facilities through non-cancelable operating leases with terms that range from one to fifteen years, with renewal options thereafter. Certain of the leases have escalation clauses and renewal options ranging from three to ten years. Total rent expense for the years ended December 31, 2006, 2005 and 2004 amounted to $1,093,000, $1,017,000 and $963,000, respectively.

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Minimum future annual rent commitments under these agreements for the indicated periods follow:

(dollars in thousands)	Amount
Year Ending December 31,
2007	$	1,252
2008		1,136
2009		1,095
2010		1,014
2011		787
2012 and thereafter		3,039
Total	$	8,323

NOTE 7 – GOODWILL AND OTHER INTANGIBLE ASSETS:

Effective January 1, 2002, the Company adopted the requirements of SFAS No. 142, Goodwill and Other Intangible Assets. Under SFAS No. 142, goodwill and intangible assets deemed to have indefinite lives are no longer amortized but are subject to annual impairment tests in accordance with the provisions of SFAS No. 142. Other intangible assets continue to be amortized over their useful lives.

The Company performed the required annual impairment tests of goodwill as of October 1, 2006 and 2005. The results of these tests did not indicate impairment of the Company’s recorded goodwill. Changes to the carrying amount of goodwill not subject to amortization for the years ended December 31, 2006 and 2005 are provided in the following table. Other goodwill adjustments represent tax-related adjustments to finalize goodwill for recently-completed acquisitions.

(dollars in thousands)	Amount
Balance, December 31, 2004	$	64,732
Goodwill acquired during year		28,475
Other goodwill adjustments		(40	)
Balance, December 31, 2005	$	93,167
Other goodwill adjustments		(388	)
Balance, December 31, 2006	$	92,779

The Company’s purchase accounting intangible assets from prior acquisitions which are subject to amortization include core deposit intangibles, amortized on a straight line or accelerated basis over an 8.9 year average, and mortgage servicing rights, amortized over the remaining servicing life of the loans, with consideration given to prepayment assumptions. The definite-lived intangible assets had the following carrying values:

(dollars in thousands)	December 31, 2006						December 31, 2005
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Core deposit intangibles	$	10,282	$	3,991	$	6,291	$	10,282	$	2,873	$	7,409
Mortgage servicing rights		313		304		9		313		269		44
Total	$	10,595	$	4,295	$	6,300	$	10,595	$	3,142	$	7,453

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The related amortization expense of purchase accounting intangible assets from prior acquisitions follows:

(dollars in thousands)	Amount
Aggregate amortization expense:
For the year ended December 31, 2004	$	964
For the year ended December 31, 2005		1,265
For the year ended December 31, 2006		1,154
Estimated amortization expense:
For the year ended December 31, 2007	$	1,048
For the year ended December 31, 2008		1,035
For the year ended December 31, 2009		1,035
For the year ended December 31, 2010 For the year ended December 31, 2011 For the years ended December 31, 2012 and thereafter		1,035 592 1,555

NOTE 8 – DEPOSITS:

Certificates of deposit with a balance of $100,000 and over were $374,775,000 and $311,470,000 at December 31, 2006 and 2005, respectively. A schedule of maturities of all certificates of deposit as of December 31, 2006 is as follows:

(dollars in thousands)	Amount
Year Ending December 31,
2007	$	648,290
2008		153,834
2009		23,616
2010		14,033
2011		7,338
2012 and thereafter		3,767
Total	$	850,878

NOTE 9 – SHORT-TERM BORROWINGS:

Short-term borrowings at December 31, 2006 and 2005 are summarized as follows:

(dollars in thousands)	2006		2005
Securities sold under agreements to repurchase	$	102,605	$	68,104
Federal Home Loan Bank advances		100,000		745
Total short-term borrowings	$	202,605	$	68,849

Securities sold under agreements to repurchase, which are classified as secured borrowings, generally mature daily. Securities sold under agreements to repurchase are reflected at the amount of cash received in connection with the transaction. The Company may be required to provide additional collateral based on the fair value of the underlying securities.

The short-term borrowings at December 31, 2006 consist of FHLB advances with maturity terms of seven and ninety days, at fixed interest rates ranging from 5.19% to 5.35%. The short-term borrowings at December 31, 2005 consist of one FHLB advance with a maturity term of one year, at a fixed interest rate of 4.22%.

51

(dollars in thousands)	2006			2005			2004
Outstanding at December 31	$	202,605		$	68,849		$	236,453
Maximum month-end outstandings		203,274			199,574			246,354
Average daily outstandings		116,165			143,100			188,589
Average rate during the year		3.37	%		2.37	%		1.40	%
Average rate at year end		4.25	%		1.83	%		2.01	%

NOTE 10 – LONG-TERM DEBT:

Long-term debt at December 31, 2006 and 2005 is summarized as follows:

(dollars in thousands)	2006		2005
Federal Home Loan Bank notes at:
5.320 to 5.421% variable, 3 month LIBOR index	$	55,000	$	55,000
2.907 to 7.283% fixed		129,325		157,931
Junior subordinated debt:
Statutory Trust I, 3 month LIBOR(1) plus 3.25%		10,310		10,310
Statutory Trust II, 3 month LIBOR plus 3.15%		10,310		10,310
Statutory Trust III, 3 month LIBOR plus 2.00%		10,310		10,310
Statutory Trust IV, 3 month LIBOR plus 1.60%		15,464		—
American Horizons Statutory Trust I, 3 month LIBOR plus 3.15%		6,278		6,351
Total long-term debt	$	236,997	$	250,212

⁽¹⁾ The interest rate on the Company’s junior subordinated debt is based on the 3-month LIBOR rate. At December 31, 2006, the 3-month LIBOR rate was 5.36%.

FHLB advance repayments are amortized over periods ranging from eighteen months to twenty 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, 2006 were $454,159,000 under the blanket floating lien and $ 33,469,000 with a pledge of investment securities. The weighted average rate at December 31, 2006 was 5.07%.

In January 2007, the Company used the proceeds from an additional $20,000,000 in long term debt to fund its acquisition of Pulaski Investment Corporation.

The Company and the Bank also have various funding arrangements with commercial banks providing up to $80,000,000 in the form of federal funds and other lines of credit. At December 31, 2006, there was no balance outstanding on these lines and all of the funding was available to the Company.

Junior subordinated debt consists of a total of $52,672,000 in Junior Subordinated Deferrable Interest Debentures of the Company issued to statutory trusts that were funded by the issuance of floating rate capital securities of the trusts. Issues of $10,310,000 each were completed in November 2002, June 2003 and September 2004 and an issue of $15,464,000 was completed in October 2006. The Company used the proceeds from the October issuance to fund its acquisition of Pulaski Investment Corporation in January 2007. The remaining issue of $6,278,000, which was completed in March 2003, was assumed in the American Horizons acquisition. The debentures qualify as Tier 1 Capital for regulatory purposes. The term of the securities is 30 years, and they are callable at par by the Company anytime after 5 years. Interest is payable quarterly and may be deferred at any time at the election of the Company for up to 20 consecutive quarterly periods. During a deferral period, the Company is subject to certain restrictions, including being prohibited from declaring dividends to its common shareholders.

52

Advances and long-term debt at December 31, 2006 have maturities or call dates in future years as follows:

(dollars in thousands)	Amount
Year Ending December 31,
2007	$	36,339
2008		43,640
2009		77,905
2010		37,166
2011		17,619
2012 and thereafter		24,328
Total	$	236,997

NOTE 11 – ON-BALANCE SHEET DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES:

The Company has stand alone derivative financial instruments in the form of interest rate swap agreements and rate lock agreements, which derive their value from underlying interest rates. These transactions involve both credit and market risk. The notional amounts are amounts on which calculations, payments, and the value of the derivatives are based. Notional amounts do not represent direct credit exposures. Direct credit exposure is limited to the net difference between the calculated amounts to be received and paid, if any. Such difference, which represents the fair value of the derivative instruments, is reflected on the Company’s balance sheet in other assets and other liabilities.

The Company is exposed to credit-related losses in the event of nonperformance by the counterparties to these agreements. The Company controls the credit risk of its financial contracts through credit approvals, limits and monitoring procedures, and does not expect any counterparties to fail their obligations. The Company deals only with primary dealers.

Derivative instruments are generally either negotiated over-the-counter (OTC) contracts or standardized contracts executed on a recognized exchange. Negotiated OTC derivative contracts are generally entered into between two counterparties that negotiate specific agreement terms, including the underlying instrument, amount, exercise prices and maturity.

At December 31, 2006 and 2005, the information pertaining to outstanding interest rate swap agreements is as follows:

(dollars in thousands)	2006			2005
Notional amount	$	134,516		$	63,650
Weighted average pay rate		4.8	%		4.1	%
Weighted average receive rate		5.2	%		3.5	%
Weighted average maturity in years		5.8			4.6
Unrealized gain (loss) relating to interest rate swaps	$	270		$	1,093

No interest rate swap agreements were terminated prior to maturity in 2006. Changes in the fair value of interest rate swaps designated as hedging instruments of the variability of cash flows associated with long-term debt are reported in other comprehensive income. These amounts subsequently are reclassified into interest income and interest expense as a yield adjustment in the same period in which the related interest on the long-term debt affects earnings. As a result of these interest rate swaps, interest expense was decreased by $87,000 for the year ended December 31, 2006 and increased by $389,000 for the year ended December 31, 2005. Net cash settlements received on interest rate swaps not qualifying for hedge accounting in 2006 amounted to $527,000 and are reported in noninterest income.

Risk management results for the years ended December 31, 2006 and 2005 related to the balance sheet hedging of long-term debt indicate that the hedges were 100% effective and that there was no component of the derivative instruments’ gain or loss which was excluded from the assessment of hedge effectiveness.

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NOTE 12 – INCOME TAXES:

The provision for income tax expense consists of the following:

(dollars in thousands)	Years Ended December 31,
	2006			2005			2004
Current federal expense	$	7,518		$	8,784		$	8,400
Deferred federal expense		4,381			(3,236	)		1,816
Tax credits		(927	)		(568	)		(484	)
Tax benefits attributable to items charged to equity		2,981			2,452			1,836
Total income tax expense	$	13,953		$	7,432		$	11,568

There was a balance receivable of federal income taxes of $2,216,000 and balance due of $2,366,000 at December 31, 2006 and 2005, respectively. 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:

(dollars in thousands)	Years Ended December 31,
	2006			2005			2004
Federal tax based on statutory rate	$	17,377		$	10,301		$	13,617
Increase (decrease) resulting from:
Effect of tax-exempt income		(3,039	)		(2,831	)		(2,445	)
Interest and other nondeductible expenses		555			372			263
Nondeductible ESOP expense		—			149			625
Tax credits		(927	)		(568	)		(484	)
Other		(13	)		9			(8	)
Income tax expense	$	13,953		$	7,432		$	11,568
Effective rate		28.1	%		25.3	%		29.7	%

The net deferred tax asset at December 31, 2006 and 2005 is as follows:

(dollars in thousands)	2006			2005
Deferred tax asset:
Allowance for loan losses	$	9,973		$	12,803
Discount on purchased loans		22			521
Deferred compensation		695			426
Time deposits		154			391
Borrowings		1,048			1,468
Unrealized loss on investments classified as available for sale		1,874			3,414
Other		766			647
Subtotal		14,532			19,670
Deferred tax liability:
FHLB stock		(1,022	)		(1,067	)
Premises and equipment		(3,534	)		(3,636	)
Acquisition intangibles		(5,838	)		(5,502	)
Deferred loan costs		(1,297	)		(1,074	)
Unrealized gain on cash flow hedges		(95	)		(487	)
SWAP gain		(281	)		—
Other		(867	)		(777	)
Subtotal		(12,934	)		(12,543	)
Deferred tax asset, net	$	1,598		$	7,127

54

Retained earnings at December 31, 2006 and 2005 included approximately $21,864,000 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 13 – 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 1,593 and 39,761 shares at December 31, 2005 and 2004, respectively and the weighted average unvested shares in the Recognition and Retention Plan (“RRP”) of 333,753, 265,873, and 201,128 shares at December 31, 2006, 2005 and 2004, respectively. There were no shares outstanding in the ESOP at December 31, 2006. Shares not included in the calculation of diluted EPS because they are anti-dilutive were stock options of 57,643, 22,000 and 66,750 and RRP grants of 35,477, 27,171 and 16,875 at December 31, 2006, 2005 and 2004, respectively. The following sets forth the computation of basic net income per common share and diluted net income per common share.

	Years Ended December 31,
	2006		2005		2004
Numerator:
Income applicable to common shares	$	35,695,000	$	22,000,000	$	27,339,000
Denominator:
Weighted average common shares outstanding		9,401,245		9,154,994		8,377,008
Effect of dilutive securities:
Stock options outstanding		516,079		591,301		656,281
Warrants		9,185		11,099		8,838
Restricted stock grants		66,843		55,108		50,764
Weighted average common shares outstanding - assuming dilution		9,993,352		9,812,502		9,092,891
Earnings per common share	$	3.80	$	2.40	$	3.26
Earnings per common share - assuming dilution	$	3.57	$	2.24	$	3.01

NOTE 14 – 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, 2006 and 2005, that the Company and the Bank met all capital adequacy requirements to which they are subject.

As of December 31, 2006, 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 leverage ratios as set forth in the following table. 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 and ratios as of December 31, 2006 and 2005 are also presented in the table.

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(dollars in thousands)	Actual				Minimum				Well Capitalized
	Amount		Ratio		Amount		Ratio		Amount		Ratio
December 31, 2006
Tier 1 leverage capital:
IBERIABANK Corporation	$	274,875	9.01	%	$	121,971	4.00	%	$	N/A	N/A	%
IBERIABANK		213,276	7.02			121,523	4.00			151,904	5.00
Tier 1 risk-based capital:
IBERIABANK Corporation		274,875	11.81			93,091	4.00			N/A	N/A
IBERIABANK		213,276	9.19			92,876	4.00			139,313	6.00
Total risk-based capital:
IBERIABANK Corporation		303,976	13.06			186,183	8.00			N/A	N/A
IBERIABANK		242,311	10.44			185,751	8.00			232,189	10.00
December 31, 2005
Tier 1 leverage capital:
IBERIABANK Corporation	$	204,778	7.65	%	$	107,073	4.00	%	$	N/A	N/A	%
IBERIABANK		187,674	7.03			106,844	4.00			133,554	5.00
Tier 1 risk-based capital:
IBERIABANK Corporation		204,778	10.70			76,562	4.00			N/A	N/A
IBERIABANK		187,674	9.81			76,519	4.00			114,779	6.00
Total risk-based capital:
IBERIABANK Corporation		228,878	11.96			153,124	8.00			N/A	N/A
IBERIABANK		211,761	11.07			153,039	8.00			191,298	10.00

NOTE 15 – SHARE-BASED COMPENSATION:

The Company has various types of share-based compensation plans. These plans are administered by the Compensation Committee of the Board of Directors, which selects persons eligible to receive awards and determines the number of shares and/or options subject to each award, the terms, conditions and other provisions of the awards.

EMPLOYEE STOCK OWNERSHIP PLAN: In 1995, the Company established an Employee Stock Ownership Plan (“ESOP”) for the benefit of all eligible employees of the Bank. During 2005, the ESOP was fully funded and the plan was merged into the Company’s 401(k) plan. The leveraged ESOP was accounted for in accordance with SOP 93-6, Employers’ Accounting for Employee Stock Ownership Plans.

There was no cost related to the ESOP during 2006. Compensation cost related to the ESOP for the years ended December 31, 2005 and 2004 was $530,000 and $2,221,000, respectively. The fair value of the unearned ESOP shares, using the closing quoted market price per share at year end was approximately $686,000 at December 31, 2004. There were no unearned ESOP shares outstanding as of December 31, 2006 and 2005. A summary of the ESOP share allocation as of December 31 of the year indicated is as follows:

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	2005		2004
Shares allocated beginning of year	484,974		477,301
Shares allocated during the year	12,923		54,528
Shares distributed during the year	(497,897	)	(46,855	)
Allocated shares held by ESOP at year end	—		484,974
Unreleased shares	—		12,923
Total ESOP shares	—		497,897

STOCK OPTION PLANS: The Company issues stock options under various plans to directors, officers and other key employees. 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. The stock options granted were issued with vesting periods ranging from one-and-a half to seven years. At December 31, 2006, future awards of 470,275 shares could be made under the stock option plans.

The stock option plans also permit the granting of Stock Appreciation Rights (“SARs”). SARs 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 SARs have been issued under the plans.

Effective January 1, 2006, the Company adopted SFAS No. 123 (R) utilizing the modified prospective method. Prior to the adoption of SFAS No. 123(R), the Company accounted for stock option grants in accordance with APB Opinion No. 25, “Accounting for Stock Issued to Employees” (the intrinsic value method), and accordingly, recognized no compensation expense for stock option grants for the years ended December 31, 2005 and 2004, except for the compensation expense resulting from the acceleration of vesting discussed below.

On December 30, 2005, the Board of Directors approved the immediate vesting of all outstanding unvested stock options awarded to employees, officers and directors outstanding as of that date. As a result of the accelerated vesting, the Company recorded $470,000 of compensation expense in 2005.

As a result of adopting SFAS No. 123(R), the Company’s net income for the year ended December 31, 2006 included $237,000 of compensation costs and $83,000 of income tax benefits related to stock options granted under share-based compensation arrangements. The impact on basic and diluted earnings per share was $0.02 for the year ended December 31, 2006. There would have been no effect on net income or earnings per share under APB Opinion No. 25.

The Company reported $3,112,000 of excess tax benefits as financing cash inflows during the year ended December 31, 2006 related to the exercise and vesting of share-based compensation grants. Since the Company selected the modified prospective transition method, 2005 cash flows have not been restated. Net cash proceeds from the exercise of stock options were $3,282,000 for the year ended December 31, 2006.

The Company uses the Black-Scholes option pricing model to estimate the fair value of share-based awards with the following weighted-average assumptions for the indicated periods:

	For the Year Ended December 31,
	2006			2005			2004
Expected dividends		2.0	%		2.0	%		1.8	%
Expected volatility		24.7	%		24.1	%		19.1	%
Risk-free interest rate		4.7	%		4.3	%		4.0	%
Expected term (in years)		7.0			7.0			7.0
Weighted-average grant-date fair value	$	16.56		$	14.28		$	11.58

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The assumptions above are based on multiple factors, including historical stock option exercise patterns and post-vesting employment termination behaviors, expected future exercise patterns and the expected volatility of the Company’s stock price.

At December 31, 2006, there was $2.0 million of unrecognized compensation cost related to stock options which is expected to be recognized over a weighted-average period of 6.3 years.

The following table represents the activity related to stock options:

	Number of shares		Weighted average exercise price		Weighted average remaining contract life
Outstanding Options, December 31, 2003	1,463,955		$	19.30
Granted	316,563			45.75
Canceled	(9,250	)		31.43
Exercised	(167,593	)		15.06
Outstanding Options, December 31, 2004	1,603,675			24.90
Granted	204,611			48.39
Canceled	(15,050	)		40.59
Exercised	(242,275	)		13.96
Outstanding options, December 31, 2005	1,550,961			29.55
Granted	135,726			58.25
Exercised	(188,870	)		18.56
Forfeited or expired	(2,500	)		43.46
Outstanding options, December 31, 2006	1,495,317		$	33.52	6.0 Years
Outstanding exercisable at December 31, 2004	741,073		$	16.67
Outstanding exercisable at December 31, 2005	1,550,961		$	29.55
Outstanding exercisable at December 31, 2006	1,359,591		$	31.05	5.7 Years

The following table presents the weighted average remaining life as of December 31, 2006 for options outstanding within the stated exercise prices:

Exercise \Price Range Per Share	Outstanding				Exercisable
	Number of Options	Weighted Average Exercise Price		Weighted Average Remaining Life	Number of Options	Weighted Average Exercise Price
$10.70 to $12.05	155,734	$	11.02	3.1 years	155,734	$	11.02
$12.71 to $15.80	27,482	$	14.71	2.7 years	27,482	$	14.71
$15.81 to $19.50	118,029	$	17.78	2.8 years	118,029	$	17.78
$19.51 to $29.90	329,741	$	22.20	4.7 years	329,741	$	22.20
$29.91 to $39.85	216,809	$	31.85	6.2 years	216,809	$	31.85
$39.86 to $49.79	499,796	$	46.35	7.7 years	499,796	$	46.35
$49.80 to $51.11	2,000	$	51.11	8.7 years	2,000	$	51.11
$51.12 to $54.91	10,000	$	51.64	8.8 years	10,000	$	51.64
$54.92 to $60.00	135,726	$	58.25	9.3 years	—		—
	1,495,317	$	33.52	6.0 years	1,359,591	$	31.05

Shares reserved for future stock option grants to employees and directors under existing plans were 470,275 at December 31, 2006. At December 31, 2006, the aggregate intrinsic value of shares underlying outstanding stock options and underlying exercisable stock options was $38.2 and $38.1 million, respectively. Total intrinsic value of options exercised was $5.5 million for the year ended December 31, 2006.

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RESTRICTED STOCK PLANS: The Company issues restricted stock under various plans for certain officers and directors. A supplemental stock benefit plan adopted in 1999 and the 2001 and 2005 Incentive Plans also allow 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 is 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, 2006, 2005, and 2004, the amount included in compensation expense that was included in noninterest expense in the accompanying consolidated statements of income was $2,912,000, $1,824,000, and $1,113,000, respectively. Additional restricted stock awards may be issued through the 2001 and 2005 Incentive Compensation Plans. The weighted average grant date fair value of the restricted stock granted during the years ended December 31, 2006, 2005, and 2004 was $57.90, $48.85, and $46.12, respectively.

The share-based compensation plans allow for the issuance of restricted stock awards that may not be sold or otherwise transferred until certain restrictions have lapsed. The unearned share-based compensation related to these awards is being amortized to compensation expense over the vesting period (generally three to seven years). The share-based compensation expense for these awards was determined based on the market price of the Company’s common stock at the date of grant applied to the total number of shares granted amortized over the vesting period. As of December 31, 2006, unearned share-based compensation associated with these awards totaled $13,371,000. Upon adoption of SFAS No. 123(R), the Company was required to change its policy from recognizing forfeitures as they occur to one where expense is recognized based on expectations of the awards that will vest over the requisite service period. This change had an immaterial cumulative effect on the Company’s results of operations.

The following table represents restricted stock award activity for the twelve months ended December 31, 2006, 2005, and 2004, respectively:

	For the Year Ended December 31,
	2006		2005		2004
Balance, beginning of year	287,773		214,013		163,620
Granted	116,502		120,207		86,564
Forfeited	(4,930	)	(2,875	)	(3,483	)
Earned and issued	(61,515	)	(43,572	)	(32,688	)
Balance, end of year	337,830		287,773		214,013

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, 2006, 2005, and 2004. 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.

NOTE 16 – RELATED PARTY TRANSACTIONS:

In the ordinary course of business, the Company has granted loans to executive officers and directors and their affiliates amounting to $1,934,000 and $628,000 at December 31, 2006 and 2005, respectively. During the year ended December 31, 2006, total principal additions were $1,494,000 and total principal payments were $188,000. Unfunded commitments to executive officers and directors and their affiliates totaled $1,622,000 and $251,000 at December 31, 2006 and 2005.

59

Deposits from related parties held by the Company through the Bank at December 31, 2006 and 2005 amounted to $995,000 and $2,100,000, respectively.

NOTE 17 – OFF-BALANCE SHEET ACTIVITIES:

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, 2006, the fair value of guarantees under commercial and standby letters of credit was $225,000. This amount represents the unamortized fee associated with these guarantees and is included in the consolidated balance sheet of the Company. This fair value will decrease over time as the existing commercial and standby letters of credit approach their expiration dates.

At December 31, 2006 and 2005, the Company had the following financial instruments outstanding, whose contract amounts represent credit risk:

(dollars in thousands)	Contract Amount
	2006		2005
Commitments to grant loans	$	31,933	$	48,482
Unfunded commitments under lines of credit		539,212		397,568
Commercial and standby letters of credit		22,464		13,241

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 creditworthiness 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 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 18 – 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 No. 107 excludes certain financial instruments and all non-financial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.

60

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.

Investment Securities: Fair value equals quoted market prices and dealer quotes.

Loans: The fair value of mortgage loans receivable was estimated based on present values using entry-value rates at December 31, 2006 and 2005, weighted for varying maturity dates. Other loans receivable were valued based on present values using entry-value interest rates at December 31, 2006 and 2005 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, 2006 and 2005 for deposits of similar remaining maturities.

Short-term Borrowings: The carrying amounts of short-term borrowings maturing within ninety days approximate their fair values.

Long-term Debt: The fair values of long-term debt are estimated using discounted cash flow analyses based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements.

Derivative Instruments: Fair values for interest rate swap agreements are based upon the amounts required to settle the contracts.

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. At December 31, 2006 and 2005, the fair value of guarantees under commercial and standby letters of credit was immaterial.

The estimated fair values and carrying amounts of the Company’s financial instruments are as follows:

(dollars in thousands)	December 31, 2006				December 31, 2005
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial Assets
Cash and cash equivalents	$	84,905	$	84,905	$	126,800	$	126,800
Investment securities		581,352		581,509		572,582		572,832
Loans and loans held for sale, net		2,258,353		2,230,509		1,890,949		1,880,481
Derivative instruments		1,142		1,142		1,463		1,463
Financial Liabilities
Deposits	$	2,422,582	$	2,421,877	$	2,242,956	$	2,237,494
Short-term borrowings		202,605		202,591		68,849		68,849
Long-term debt		236,997		236,880		250,212		254,583
Derivative instruments		68		68		369		369

The fair value estimates presented herein are based upon pertinent information available to management as of December 31, 2006 and 2005. 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.

61

NOTE 19 – COMPREHENSIVE INCOME:

The following is a summary of the changes in the components of other comprehensive income:

(dollars in thousands)	Years Ended December 31,
	2006			2005			2004
Balance at beginning of year , net	$	(6,341	)	$	689		$	903
Unrealized gain (loss) on securities available for sale		310			(10,854	)		369
Reclassification adjustment for net (gains) losses realized in net income		4,087			39			(698	)
Net unrealized gain (loss)		4,397			(10,815	)		(329	)
Tax effect		(1,539	)		3,785			115
Net of tax change		2,858			(7,030	)		(214	)
Balance at end of year, net		(3,483	)		(6,341	)		689
Balance at beginning of year, net	$	712		$	(299	)	$	(720	)
Unrealized gain (loss) on cash flow hedges		(823	)		1,555			648
Tax effect		288			(544	)		(227	)
Net of tax change		(535	)		1,011			421
Balance at end of year, net		177			712			(299	)
Total change in other comprehensive income (loss), net of income taxes	$	2,323		$	(6,019	)	$	207
Total balance in other comprehensive income (loss), net of income taxes	$	(3,306	)	$	(5,629	)	$	390

NOTE 20 – 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 by the Bank in 2007 without permission will be limited to 2007 earnings plus an additional $24,090,000.

Accordingly, at January 1, 2007, $284,954,000 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 $24,320,000. In addition, dividends paid by the Bank to the Company would be prohibited if the effect thereof would cause the Bank’s capital to be reduced below applicable minimum capital requirements.

62

NOTE 21 – 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, 2006 and 2005

(dollars in thousands)	2006		2005
Assets
Cash in bank	$	48,440	$	2,799
Investment in subsidiary		309,044		281,967
Other assets		16,751		17,172
Total assets	$	374,235	$	301,938
Liabilities and Shareholders’ Equity
Liabilities	$	54,684	$	38,369
Shareholders’ equity		319,551		263,569
Total liabilities and shareholders’ equity	$	374,235	$	301,938

Condensed Statements of Income

Years Ended December 31, 2006, 2005 and 2004

(dollars in thousands)	2006		2005		2004
Operating income
Dividends from subsidiary	$	15,500	$	22,000	$	21,500
Other income		1,628		294		249
Total operating income		17,128		22,294		21,749
Operating expenses
Interest expense		3,127		2,250		1,498
Other expenses		4,377		3,174		1,942
Total operating expenses		7,504		5,424		3,440
Income before income tax expense and increase in equity in undistributed earnings of subsidiary		9,624		16,870		18,309
Income tax benefit		1,981		1,750		1,117
Income before increase in equity in undistributed earnings of subsidiary		11,605		18,620		19,426
Increase in equity in undistributed earnings of subsidiary		24,090		3,380		7,913
Net Income	$	35,695	$	22,000	$	27,339

63

Condensed Statements of Cash Flows

Years Ended December 31, 2006, 2005 and 2004

(dollars in thousands)	2006			2005			2004
Cash Flows from Operating Activities
Net income	$	35,695		$	22,000		$	27,339
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		(23	)		(16	)		48
Increase in equity in net income of subsidiary		(24,090	)		(3,380	)		(7,913	)
Noncash compensation expense		3,150			2,294			1,115
Gain on sale of assets		—			(13	)		—
Derivative gains on swaps		(803	)		—			—
Increase in dividend receivable from subsidiary		3,500			(5,000	)		(2,000	)
Cash retained from tax benefit associated with share-based payment arrangements		(3,112	)		—			—
Other, net		892			81			2,365
Net Cash Provided by Operating Activities		15,209			15,966			20,954
Cash Flows from Investing Activities
Cash received in excess of cash paid in acquisition		—			410			—
Proceeds from sale of premises and equipment		—			203			—
Capital contributed to subsidiary		—			(15	)		(66	)
Payments received from ESOP		—			151			277
Net Cash Provided by Investing Activities		—			749			211
Cash Flows from Financing Activities
Dividends paid to shareholders		(11,390	)		(8,836	)		(6,606	)
Proceeds from long-term debt		15,000			—			10,000
Common stock issued		30,000			—			—
Costs of issuance of common stock		(1,540	)		(6	)		—
Payments to repurchase common stock		(8,032	)		(17,504	)		(18,862	)
Proceeds from sale of treasury stock for stock options exercised		3,282			1,407			2,549
Cash retained from tax benefit associated with share-based payment arrangements		3,112			—			—
Net Cash Provided by (Used in) Financing Activities		30,432			(24,939	)		(12,919	)
Net Increase (Decrease) in Cash and Cash Equivalents		45,641			(8,224	)		8,246
Cash and Cash Equivalents at Beginning of Period		2,799			11,023			2,777
Cash and Cash Equivalents at End of Period	$	48,440		$	2,799		$	11,023

64

NOTE 22 – QUARTERLY RESULTS OF OPERATIONS:

(dollars in thousands, except per share data)	First Quarter		Second Quarter			Third Quarter			Fourth Quarter
Year Ended December 31, 2006
Total interest income	$	37,488	$	39,893		$	43,645		$	44,266
Total interest expense		15,068		17,138			19,719			21,845
Net interest income		22,420		22,755			23,926			22,421
Provision for (reversal of) loan losses		435		(1,902	)		(2,389	)		(3,947	)
Net interest income after provision for loan losses		21,985		24,657			26,315			26,368
Noninterest income		6,266		5,258			7,275			4,651
Noninterest expense		17,114		17,462			19,591			18,960
Income before income taxes		11,137		12,453			13,999			12,059
Income tax expense		3,091		3,598			4,120			3,144
Net Income	$	8,046	$	8,855		$	9,879		$	8,915
Earnings per share – basic	$	0.87	$	0.95		$	1.06		$	0.93
Earnings per share – diluted	$	0.81	$	0.89		$	0.99		$	0.87
Year Ended December 31, 2005
Total interest income	$	31,454	$	33,539		$	34,520		$	35,735
Total interest expense		10,905		12,265			13,478			13,802
Net interest income		20,549		21,274			21,042			21,933
Provision for loan losses		650		630			15,164			625
Net interest income after provision for loan losses		19,899		20,645			5,878			21,308
Noninterest income		6,081		6,745			6,640			6,674
Noninterest expense		15,676		16,047			15,773			16,943
Income (loss) before income taxes		10,304		11,343			(3,255	)		11,039
Income tax expense (benefit)		3,004		3,215			(1,914	)		3,126
Net Income (Loss)	$	7,300	$	8,128		$	(1,341	)	$	7,913
Earnings (loss) per share – basic	$	0.81	$	0.88		$	(0.15	)	$	0.86
Earnings (loss) per share – diluted	$	0.75	$	0.82		$	(0.15	)	$	0.80

65

EX-21

EXHIBIT 21

SUBSIDIARIES OF THE REGISTRANT

IBERIABANK Corporation, a Louisiana corporation, is a bank holding company that has elected to become a financial holding company. The table below sets forth all of IBERIABANK Corporation’s subsidiaries as to State or Jurisdiction of Organization as well as their relationship to IBERIABANK Corporation as of December 31, 2007. All of the subsidiaries listed below are included in the consolidated financial statements, and no separate financial statements are submitted for any subsidiary.

Subsidiary	State or Jurisdiction of Organization
IBERIABANK	Louisiana
Acadiana Holdings, LLC	Louisiana
IBERIABANK Insurance Services, LLC	Louisiana
Jefferson Insurance Corporation	Louisiana
Iberia Financial Services, LLC	Louisiana
Finesco, LLC	Louisiana

On January 31, 2007, the Company acquired Pulaski Investment Corporation, the bank holding company for Pulaski Bank and Trust Company. Pulaski Bank and Trust Company has four active, wholly-owned subsidiaries: Pulaski Mortgage Company, Lenders Title Company, Asset Exchange, Inc. and Pulaski Insurance Agency, Inc.

On February 1, 2007, the Company acquired Pocahontas Bancorp, Inc., the savings and loan holding company for First Community Bank. First Community Bank has three active, wholly-owned subsidiaries: Sun Realty, Inc. (d/b/a FCB Insurance Agency), P.F. Services, Inc., and Southern Mortgage Corporation.

EX-23

EXHIBIT 23

CONSENT OF INDEPENDENT REGISTERED ACCOUNTING FIRM

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, 333-41970, 333-64402, 333-117356 and 333-130273 and 333-135359) of our report dated February 16, 2007, on our audits of the consolidated financial statements of IBERIABANK Corporation and Subsidiary as of December 31, 2006 and 2005, and for each of the three years in the three-year period ended December 31, 2006, management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2006 and the effectiveness of the internal control over financial reporting as of December 31, 2006, which reports are incorporated by reference in this Annual Report on Form 10-K.

/s/ Castaing, Hussey & Lolan, LLC

New Iberia, Louisiana

March 14, 2007

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

SECTION 302 CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER

I, Daryl G. Byrd, President and Chief Executive Officer of IBERIABANK Corporation, certify that:

1. I have reviewed this annual report on Form 10-K of IBERIABANK Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: March 16, 2007	/s/ Daryl G. Byrd
	Daryl G. Byrd
	President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

SECTION 302 CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Anthony J. Restel, Executive Vice President and Chief Financial Officer of IBERIABANK Corporation, certify that:

1. I have reviewed this annual report on Form 10-K of IBERIABANK Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: March 16, 2007	/s/ Anthony J. Restel
	Anthony J. Restel
	Executive Vice President and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of IBERIABANK Corporation (the “Company”) on Form 10-K for the fiscal year ended December 31, 2006 (the “Report”), I, Daryl G. Byrd, President and Chief Executive Officer of the Company, certify that to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods covered in the Report.

/s/ Daryl G. Byrd

Daryl G. Byrd

President and Chief Executive Officer

March 16, 2007

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. The information furnished herein shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933.

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of IBERIABANK Corporation (the “Company”) on Form 10-K for the fiscal year ended December 31, 2006 (the “Report”), I, Anthony J. Restel, Executive Vice President and Chief Financial Officer of the Company, certify that to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods covered in the Report.

/s/ Anthony J. Restel

Anthony J. Restel

Executive Vice President and Chief Financial Officer

March 16, 2007

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. The information furnished herein shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933.

EX-99

Exhibit 99

IBERIABANK CORPORATION

AUDIT COMMITTEE CHARTER

This Audit Committee Charter has been amended and restated as of August 11, 2004, and further amended and restated as of August 21, 2006. The Audit Committee shall review and reassess this Charter annually and recommend any proposed changes to the Board of Directors for approval.

Purpose

The Audit Committee is appointed by the Board of Directors of IBERIABANK Corporation (the “Company”) to assist in monitoring:

· the integrity of the financial statements of the Company,

· the independent auditors’ qualifications and independence,

· the performance of the Company’s internal audit function and independent auditors, and

· the compliance by the Company with legal and regulatory requirements.

The function of the Audit Committee is oversight. Management of the Company is responsible for the preparation and integrity of the Company’s financial statements. Management also is responsible for maintaining appropriate accounting and financial reporting principles and policies as well as internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. The independent auditors are responsible for planning and performing proper audits, including an audit of the Company’s annual consolidated financial statements filed on Form 10-K, and other procedures, including a review of each quarterly report on Form 10-Q.

Committee Membership

The Audit Committee will be comprised of three or more directors as determined by the Board, each of whom shall be independent directors as defined in applicable rules of the Securities and Exchange Commission and the NASD. The members will be free from any financial, family or other material personal relationship that, in the opinion of the Board or Audit Committee members, would interfere with the exercise of his or her independence from management and the Company. All members of the Audit Committee will be able to read and understand fundamental financial statements, including a balance sheet, income statement and cash flow statement. No member of the Audit Committee shall have participated in the preparation of the financial statements of the Company or any current subsidiary of the Company at any time during the past three years. At least one member will have past employment experience in finance or accounting, requisite professional certification in accounting, or any other comparable experience or background which results in the individual’s financial sophistication and will qualify as an “audit committee financial expert” as that term is defined in the rules of the Securities and Exchange Commission promulgated from time to time in connection with Section 407 of the Sarbanes-Oxley Act of 2002.

The members of the Audit Committee and the Committee Chairperson shall be appointed by the Board of Directors. Audit Committee members may be replaced by the Board.

Meetings

The Audit Committee shall meet as often as it determines, but not less frequently than quarterly. The Audit Committee shall meet periodically in separate executive sessions with management (including the Chief Executive Officer and Chief Financial Officer), the Internal Audit Manager, the Corporate Controller, and the independent auditors, and have such other direct and independent interaction with such persons from time to time as the members of the Audit Committee deem necessary or appropriate. The Audit Committee may request any officer or other employee of the Company or the Company’s outside or general counsel or independent auditors to attend a meeting of the Committee or to meet with any members of, or consultants to, the Committee.

Authority and Responsibilities

The Audit Committee shall have the sole authority to select, appoint, retain and, if necessary, replace the independent auditors. The Audit Committee shall be directly responsible for the evaluation, compensation, and oversight of the work of the independent auditors, including resolution of disagreements between management and the auditors regarding financial reporting. The Audit Committee shall review and evaluate the performance of the independent auditors and review with the full Board of Directors any proposed discharge of the independent auditors.

The Audit Committee shall pre-approve all auditing services, internal control-related services and permitted non-audit services (including the terms thereof) to be performed for the Company by its independent auditors. The Audit Committee shall review and pre-approve permitted tax services in accordance with the Securities and Exchange Commission’s Order Approving the Proposed Ethics and Independence Rules Concerning Independence, Tax Services, and Contingent Fees adopted by the Public Company Accounting Oversight Board on July 26, 2005 (“PCAOB Rules”); to the extent permissible under the PCAOB Rules, such review and pre-approval may be on an annual basis through approval of general policies and procedures of the independent auditors as to permitted tax services. The Audit Committee shall not engage the independent auditors to perform specific non-audit services proscribed by law or regulation. The Audit Committee may also consider, with management, the rationale for employing audit firms other than the principal independent auditors. The Audit Committee may form and delegate authority to subcommittees consisting of one or more members when appropriate, including authority to grant pre-approvals of audit and permitted non-audit services, provided that decisions of such subcommittee to grant pre-approvals shall be presented to the full Audit Committee at its next scheduled meeting.

2

The Audit Committee shall have the authority, to the extent it deems necessary or appropriate to carry out its duties, to retain independent legal, accounting, or other advisors. The Company shall provide for appropriate funding, as determined by the Audit Committee, for payment of:

· compensation to any independent auditors engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company,

· compensation to any advisors employed by the Company as authorized under this Charter, and

· ordinary administrative expenses of the Audit Committee that are necessary or appropriate to carry out its duties.

The Audit Committee shall make regular reports to the Board of Directors. The Audit Committee shall review and reassess the adequacy of this Charter annually and recommend any proposed changes to the Board for approval. The Audit Committee shall annually review the Audit Committee’s own performance and prepare or approve an agenda for the ensuing year or review and approve the agenda submitted by the Internal Audit Manager.

The Committee shall consider any changes that are necessary as a result of new laws or regulations. The Audit Committee will perform such other functions as assigned by law, the Company’s charter or bylaws, or the Board of Directors.

The Audit Committee, to the extent it deems necessary or appropriate, shall:

Financial Statement and Disclosure Matters

· Review and discuss with management and the independent auditors the annual audited financial statements and related footnotes, including disclosures made in management’s discussion and analysis.

· Review and discuss the independent auditors’ audit of the financial statements and their report thereon.

· Review and discuss with management and the independent auditors the Company’s quarterly financial statements prior to the filing of its quarterly reports on Form 10-Q, including the results of the independent auditors’ review of the quarterly financial statements.

· Discuss with management and the independent auditors significant financial reporting issues and judgments made in connection with the preparation of the Company’s financial statements, including any significant changes in the Company’s selection or application of accounting principles.

· Review and discuss with management and the independent auditors any major issues as to the adequacy of the Company’s internal controls, any special steps adopted in light of material control deficiencies and the adequacy of disclosures about changes in internal control over financial reporting.

3

• Review and discuss with management (including the Internal Audit Manager) and the independent auditors the Company’s internal controls report and the independent auditors’ attestation of the report prior to the filing of the Company’s annual reports on 10-K.

• Review and discuss with any public accounting firm that performs an audit of the Company:

• all critical accounting policies and practices to be used;

• all alternative treatments of financial information within generally accepted accounting principles that have been discussed with management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditors; and

• other material written communications between the independent auditors and management, such as any management letter or schedule of unadjusted differences.

• Discuss with management and the independent auditors the effect of regulatory and accounting initiatives as well as off-balance sheet structures on the Company’s financial statements.

• Inquire of management, the Internal Audit Manager, and the independent auditors about significant risks or exposure and the steps management has taken to monitor and control such exposures.

• Discuss with the independent auditors the matters required to be discussed by Statement on Auditing Standards No. 61 (“SAS 61”) relating to the conduct of the audit, including any difficulties encountered in the course of the audit work, any restrictions on the scope of activities or access to requested information, and any significant disagreements with management.

• Review with management the policies and procedures with respect to officers’ expense accounts and perquisites, including their use of corporate assets, and consider the results of any review of these areas by the internal auditor or independent auditors.

Oversight of Relationship with the Independent Auditors

• Review and evaluate the lead partner of the independent auditor team.

• Ensure the rotation of the audit partner as required by law. Consider whether, in order to assure continuing auditor independence, it is appropriate to adopt a policy of rotating the independent auditing firm on a regular basis.

• Meet with the independent auditors prior to the audit to discuss the planning and staffing of the audit. Discuss any significant changes required in the independent auditors’ audit plan.

• Receive from the independent auditors a formal written statement (x) delineating all relationships between the auditors and the Company, consistent with Independence Standards Board Standard 1, and (y) confirming that such auditors do not provide tax services to any individual who fills a “financial reporting oversight role” at the Company or to an immediate family member of any such individual, consistent with the PCAOB Rules, unless an exclusion from such prohibition is available under the PCAOB Rules.

4

• Actively engage in a dialogue with the independent auditors with respect to any disclosed relationships or services that may impact the objectivity and independence of the auditors.

• Take, or recommend that the Board of Directors take, appropriate action to oversee the independence of the independent auditors.

Oversight of Internal Audit Function

• Review and concur the appointment, replacement, reassignment, and dismissal of the Internal Audit Manager. Periodically assess the performance of the Internal Audit Manager and the Internal Audit department.

• Review with the independent auditors, the Corporate Controller, and the Internal Audit Manager, the audit scope and plan of the internal auditors and the independent auditors. Address the coordination of audit efforts to assure the completeness of coverage, reduction of redundant efforts, and the effective use of audit resources.

• Review with management and the Internal Audit Manager:

• significant findings on internal audits during the year and management’s responses thereof,

• any difficulties the internal audit team encountered in the course of their audits, including any restrictions on the scope of their work or access to required information,

• any changes required in the scope of their internal audit,

• the internal auditing department budget and staffing,

• the internal auditing department charter, and

• Internal Auditing’s compliance with the Institute of Internal Auditors’ Standards for the Professional Practice of Internal Auditing.

Compliance Oversight Responsibilities:

• Periodically review the Company’s code of ethics to ensure that it is adequate and up-to-date. Review with the Company’s general or outside counsel the results of their review of the monitoring of compliance with the Company’s code of ethics.

• Review procedures for the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters. Review any complaints that might have been received, current status, and resolution if one has been reached.

• Discuss with management and the independent auditors any correspondence from regulators or governmental agencies and any published reports which raise material issues regarding the Company’s financial statements or accounting policies.

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• Discuss with the Company’s general or outside counsel and the Internal Audit Manager any legal or regulatory matters that may have a material impact on the financial statements or the Company’s compliance policies and internal controls.

Audit Committee Report

A report from the Audit Committee will be included in the annual proxy statement disclosing whether a written charter was adopted and, if so, a copy of the charter will be included at least every three years. In addition the report must include the names of all committee members and whether the committee:

• reviewed and discussed the audited financial statements with management,

• discussed with the independent auditors matters requiring discussion by SAS 61,

• received the written disclosures and letter from the independent auditors required by Independence Standards Board No. 1, and discussed with the auditors their independence, and

• based on the above, recommended to the full Board that the audited financial statements be included in the Company’s annual report on Form 10-K.

Related Party Transactions

The Audit Committee will conduct an appropriate review of all related party transactions (i.e., transactions required to be disclosed pursuant to Securities and Exchange Commission Regulation S-K, Item 404) for potential conflict of interest situations prior to approval of such transactions.

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