UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
Commission File Number 0-25756
IBERIABANK Corporation (formerly ISB Financial Corporation)
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Louisiana 72-1280718
- ------------------------------------------------- -----------------------------
(State or other jurisdiction of incorporation or (I.R.S. Employer
organization) Identification Number)
1101 East Admiral Doyle Drive
New Iberia, Louisiana 70560
- ---------------------------------------- ------------------------
(Address of principal executive office) (Zip Code)
(337) 365-2361
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ____
--------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
As of May 9, 2000, 6,536,737 shares of the Registrants' common stock were issued
and outstanding. Of that total, 568,907 shares are held by the Registrant's
Employee Stock Ownership Plan, of which 249,978 shares were not committed to be
released.
<PAGE>
ISB FINANCIAL CORPORATION AND SUBSIDIARY
TABLE OF CONTENTS
PART 1. FINANCIAL INFORMATION PAGE
- ------- --------------------- ----
Item 1. Financial Statements
Consolidated Balance Sheets 3
(As of March 31, 2000 and December 31, 1999)
Consolidated Statements of Income (For the three 4
months ended March 31, 2000 and 1999)
Consolidated Statements of Shareholders' Equity (For the 5
three months ended March 31, 2000 and 1999)
Consolidated Statements of Cash Flows (For the three 6
months ended March 31, 2000 and 1999)
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 15
PART 2. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
2
<PAGE>
ISB FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands, except share data)
<TABLE>
<CAPTION>
ASSETS
------
March 31, December 31,
2000 1999
--------------- -----------------
<S> <C> <C>
Cash and due from banks $ 30,405 $ 39,443
Interest-bearing deposits in banks 11,683 8,270
--------------- -----------------
Total cash and cash equivalents 42,088 47,713
Investment securities:
Available for sale, at fair value 287,002 299,388
Held to maturity (fair value of $79,410 and $82,884, respectively) 83,307 85,493
Federal home loan bank stock, at cost 6,925 6,821
Loans held for sale 920 4,771
Loans, net of unearned income, less allowance for loan
losses of $8,951 and $8,749, respectively 869,283 834,333
Accrued interest receivable 7,236 8,017
Premises and equipment, net 25,499 25,957
Goodwill and acquisition intangibles 41,235 42,063
Other assets 9,920 9,022
--------------- -----------------
TOTAL ASSETS $1,373,415 $1,363,578
=============== =================
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
LIABILITIES:
Deposits:
Noninterest-bearing $ 123,815 $ 116,493
Interest-bearing 1,014,736 983,521
--------------- -----------------
Total deposits 1,138,551 1,100,014
Short-term borrowings 56,200 83,000
Accrued interest payable 3,172 5,385
Long-term debt 49,750 52,053
Other liabilities 8,484 5,937
--------------- -----------------
TOTAL LIABILITIES 1,256,157 1,246,389
--------------- -----------------
SHAREHOLDERS' EQUITY:
Preferred stock of $1 par value; 5,000,000 shares authorized; -0- shares issued - -
Common stock of $1 par value; 25,000,000 shares authorized; 7,380,671 shares issued 7,381 7,381
Additional paid-in capital 68,958 68,749
Retained earnings 71,013 69,065
Unearned common stock held by ESOP (2,500) (2,649)
Unearned common stock held by RRP trust (3,012) (3,024)
Accumulated other comprehensive income (9,076) (7,124)
Treasury stock, at cost, 843,934 and 821,934 shares (15,506) (15,209)
--------------- -----------------
TOTAL SHAREHOLDERS' EQUITY 117,258 117,189
--------------- -----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,373,415 $1,363,578
=============== =================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE>
ISB FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
------------------------------
2000 1999
------------- -------------
INTEREST AND DIVIDEND INCOME:
<S> <C> <C>
Loans, including fees $ 18,358 $ 16,566
Investment securities:
Taxable interest and dividends 6,220 5,990
Tax-exempt interest 22 35
Interest-bearing demand deposits 55 843
------------- -------------
Total interest and dividend Income 24,655 23,434
------------- -------------
INTEREST EXPENSE:
Deposits 10,628 10,270
Short-term borrowings 814 0
Long-term debt 842 735
------------- -------------
Total interest expense 12,284 11,005
------------- -------------
Net interest income 12,371 12,429
Provision for loan losses 481 370
------------- -------------
Net interest income after provision for loan losses 11,890 12,059
------------- -------------
NONINTEREST INCOME:
Service charges on deposit accounts 1,974 1,880
ATM fee income 301 207
Gain on sale of loans, net 9 302
Gain on sale of property 0 0
Gain on sale of investments, net 0 0
Other income 875 711
------------- -------------
Total noninterest income 3,159 3,100
------------- -------------
NONINTEREST EXPENSE:
Salaries and employee benefits 5,027 5,134
Occupancy and equipment 1,364 1,375
Amortization of acquisition intangibles 828 853
Franchise and shares tax 347 263
Communication and delivery 706 662
Marketing and business development 324 270
Data processing 316 205
Printing, stationery and supplies 167 220
Other expenses 1,263 1,563
------------- -------------
Total noninterest expense 10,342 10,545
------------- -------------
Income before income tax expense 4,707 4,614
Income tax expense 1,752 1,755
------------- -------------
NET INCOME $ 2,955 $ 2,859
============= =============
EARNINGS PER SHARE - BASIC $ 0.48 $ 0.45
============= =============
EARNINGS PER SHARE - DILUTED $ 0.48 $ 0.44
============= =============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
ISB FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
Unearned
Unearned Common Accumulated Total
Additional Common Stock Other Share-
Common Paid In Retained Stock Held Held By Comprehensive Treasury holders'
Stock Capital Earnings By ESOP RRP Trust Income Stock Equity
---------- --------- ---------- ----------- ---------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1998 $ 7,381 $68,021 $63,527 $ (3,267) $(3,683) $ 349 $ (8,361) $ 123,967
Comprehensive income:
Net income 2,859 2,859
Change in unrealized gain (loss)
on securities available for sale,
net of deferred taxes (1,137) (1,137)
----------
Total comprehensive income 1,722
Cash dividends declared (974) (974)
Common stock released by ESOP trust 174 158 332
Common stock earned by participants of
recognition and retention plan trust,
including tax benefit 12 105 117
Treasury stock acquired at cost,
68,000 shares (1,389) (1,389)
Stock options exercised 1 15 16
---------- ---------- ---------- ----------- ---------- --------- ---------- ----------
BALANCE, MARCH 31, 1999 $ 7,381 $68,208 $65,412 $ (3,109) $(3,578) $ (788) $ (9,735) $ 123,791
========== ========== ========== =========== ========== ========= ========== ==========
BALANCE, DECEMBER 31, 1999 $ 7,381 $68,749 $69,065 $ (2,649) $(3,024) $ (7,124) $ (15,209) $ 117,189
Comprehensive income:
Net income 2,955 2,955
Change in unrealized gain (loss)
on securities available for sale,
net of deferred taxes (1,952) (1,952)
----------
Total comprehensive income 1,003
Cash dividends declared (1,007) (1,007)
Common stock released by ESOP trust 51 149 200
Common stock earned by participants of
recognition and retention plan trust,
including tax benefit 13 140 153
Common stock acquired by RRP trust 128 (128) 0
Compensation expense on stock option plans 17 17
Treasury stock acquired at cost, 22,000 shares (297) (297)
Stock options exercised 0 0
---------- ---------- ---------- ----------- ---------- --------- ---------- ----------
BALANCE, MARCH 31, 2000 $ 7,381 $68,958 $71,013 $ (2,500) $(3,012) $ (9,076) $ (15,506) $ 117,258
========== ========== ========== =========== ========== ========= ========== ==========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
<PAGE>
ISB FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Three Months Ended March 31, 2000 and 1999
(Dollars in thousands)
2000 1999
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,955 $ 2,859
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 1,675 1,655
Provision for loan losses 481 370
Compensation expense recognized
on RRP and stock options 170 117
Gain on sales of assets (61) (7)
Amortization of premium/discount on investments 18 32
Current provision for deferred income taxes 0 (4)
FHLB stock dividends (104) (139)
Net change in loans held for sale 3,851 9,996
ESOP compensation 152 332
Other, net 588 4,405
--------- ---------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 9,725 19,616
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Activity in available for sale securities:
Maturities, prepayments and calls 9,575 9,500
Purchases 0 (24,837)
Activity in held to maturity securities:
Maturities, prepayments and calls 2,069 17,365
Purchases 0 (9,699)
Increase in loans receivable, net (35,691) (4,103)
Proceeds from sale of premises and equipment 113 87
Purchases of premises and equipment (280) (1,324)
Proceeds from disposition of real
estate owned & property 385 206
--------- ---------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (23,829) (12,805)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
(Decrease) increase in deposits 38,838 (41,359)
Net change in short term borrowings (26,800) 0
Repayments of long term debt (2,303) (283)
Dividends paid to shareholders (959) (984)
Proceeds from sale of treasury stock for
stock options exercised 0 16
Payments to repurchase common stock (297) (1,389)
--------- ---------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES 8,479 (43,999)
--------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (5,625) (37,188)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 47,713 145,871
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 42,088 $ 108,683
========= =========
SUPPLEMENTAL SCHEDULE OF NONCASH ACTIVITIES:
Acquisition of real estate in settlement of loans $ 256 $ 225
========= =========
SUPPLEMENTAL DISCLOSURES:
Cash paid (received) for:
Interest on deposits and borrowings $ 14,497 $ 11,433
========= =========
Income taxes $ 30 $ 450
========= =========
Income tax refunds $ -- $ --
========= =========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6
<PAGE>
ISB FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying consolidated financial statements were prepared in accordance
with the instructions to Form 10-Q, and therefore, do not include information or
footnotes necessary for a complete presentation of financial position, results
of operations and cash flows in conformity with generally accepted accounting
principles. All normal, recurring adjustments, which, in the opinion of
management, are necessary for a fair presentation of the financial statements,
have been included. These interim financial statements should be read in
conjunction with the audited financial statements and note disclosures for ISB
Financial Corporation (the "Company") previously filed with the Securities and
Exchange Commission in the Company's Annual Report on Form 10-K for the year
ended December 31, 1999.
BUSINESS
The Company's principal business is conducted through its wholly owned
subsidiary, IBERIABANK (the "Bank"), which conducts business from its main
office located in New Iberia, Louisiana. IBERIABANK operates 42 full service
offices in its market areas located in south central Louisiana, northeast
Louisiana and the greater New Orleans area. The Bank provides a variety of
financial services to individuals and businesses throughout its service area.
Primary deposit products are checking, savings and certificate of deposit
accounts and primary lending products are consumer, mortgage and commercial
loans. The Bank also offers discount brokerage services through it's wholly
owned subsidiary, Iberia Financial Services, LLC.
The Bank is subject to examination and regulation by the Office of Financial
Institutions of the State of Louisiana, which is the Bank's chartering authority
and primary regulator. The Bank is also subject to regulation by the FDIC and to
certain reserve requirements established by the Federal Reserve Board ("FRB").
As a Louisiana chartered commercial bank, deposits are insured by the Federal
Deposit Insurance Corporation ("FDIC") to the maximum extent permitted by law.
The Bank is a member of the Federal Home Loan Bank of Dallas ("FHLB").
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company, the
Bank and the Bank's wholly owned subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.
7
<PAGE>
2. LOANS RECEIVABLE
Loans receivable (in thousands) at March 31, 2000 and December 31, 1999 consists
of the following:
March 31, December 31,
2000 1999
---- ----
Residential mortgage loans:
Residential 1-4 family $ 273,745 $ 266,365
Construction 6,685 6,381
--------- ---------
Total residential mortgage loans 280,430 272,746
Commercial loans:
Business 81,185 82,485
Real estate 168,116 157,248
--------- ---------
Total commercial loans 249,301 239,733
Consumer loans:
Home equity 94,917 91,531
Automobile 24,288 23,432
Indirect automobile 194,012 179,350
Credit card loans 6,388 6,436
Other 28,898 29,854
--------- ---------
Total consumer loans 348,503 330,603
--------- ---------
Total loans receivable 878,234 843,082
Allowance for loan losses (8,951) (8,749)
--------- ---------
Loans receivable, net $ 869,283 $ 834,333
========= =========
3. EARNINGS PER SHARE
Basic earnings per share were based on 6,095,475 weighted average shares
outstanding during the three month period ended March 31, 2000. Diluted earnings
per share were based on 6,095,846 weighted average shares outstanding during the
three month period ended March 31, 2000. For the three months ended March 31,
2000, the weighted average number of common shares outstanding excludes (a) the
weighted average unreleased shares owned by the Employee Stock Ownership Plan
("ESOP") of 257,409; (b) the weighted average shares owned by the Management
Recognition Plan and Trust of 202,512 and (c) the weighted average shares
purchased in Treasury Stock of 825,274.
4. SUBSEQUENT EVENTS
On May 5, 2000, the shareholders of ISB Financial Corporation approved changing
the Company's name to IBERIABANK Corporation. The name change will take place
immediately. Effective May 15, 2000, the Company's stock symbol on the NASDAQ
National Market will change to "IBKC".
8
<PAGE>
This Form 10-Q may contain certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Examples of
forward-looking statements include, but are not limited to, estimates with
respect to the financial condition, results of operations and business of the
Company that are subject to various factors which would cause actual results to
differ materially from the estimates. These factors include, but are not limited
to, general economic conditions, changes in interest rates, deposit flows, loan
demand, real estate values, and competition; changes in accounting principles,
policies, or guidelines; changes in legislation or regulation; and other
economic, competitive, governmental, regulatory, and technological factors
affecting the Company's operations, pricing, products and services.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CHANGES IN FINANCIAL CONDITION
- ------------------------------
At March 31, 2000, the consolidated assets of the Company totaled $1.37 billion,
an increase of $9.8 million, or .72%, from December 31, 1999.
Loans, net of unearned income, less allowance for loan losses, increased by
$35.0 million, or 4.2%, to $869.3 million at March 31, 2000 compared to $834.3
million at December 31, 1999. Such increase was primarily the result of a $17.9
million, or 5.4% increase in consumer loans, reflecting growth of $14.6 million
in indirect automobile loans, $3.4 million in home equity loans and a net
decrease in remaining consumer loans of $1 million. Other loan increases
consisted of growth in commercial loans of $9.6 million, or 4.0% and mortgage
loans of $7.7 million, or 2.8%. The Company's loan to deposit ratio at March 31,
2000 was 76.3% compared to 75.8% at December 31, 1999. For additional
information on loans, see Note 2 to the Consolidated Financial Statements.
Loans held for sale decreased $3.9 million, or 80.7%, to $920,000 compared to
$4.8 million at December 31, 1999. Loans held for sale are single-family
residential mortgage loans to be sold in the secondary market.
Interest-bearing deposits at other institutions increased $3.4 million, or
41.3%, to $11.7 million at March 31, 2000, compared to $8.3 million at December
31, 1999.
The Company's investment securities available for sale decreased $12.4 million,
or 4.1%, to $287.0 million at March 31, 2000, compared to $299.4 million at
December 31, 1999. Such decrease was primarily the result of $9.4 million of
repayments in mortgage-backed securities or the maturity of investment
securities available for sale, and a $3.0 million additional decrease in the
market value of such securities.
The Company's investment securities held to maturity decreased $2.2 million, or
2.6%, to $83.3 million at March 31, 2000, compared to $85.5 million at December
31, 1999. Such decrease was primarily the result of repayments of
mortgage-backed securities or the maturity of investment securities held to
maturity.
9
<PAGE>
Deposits increased $38.5 million, or 3.5%, to $1,138.6 million at March 31,
2000, compared to $1,100.0 million at December 31, 1999. The increase in
deposits was primarily the result of a $55.9 million increase in savings account
balances as a result of promotional pricing, which was partially offset by a
$19.4 million decrease in time deposits due primarily to lower pricing of
non-relationship accounts.
Federal Home Loan Bank short-term borrowings decreased $26.8 million, or 32.3%,
to $56.2 million at March 31, 2000, compared to $83.0 million at December 31,
1999. The net decrease in advances was in short term advances with a duration of
8 days or less. The decrease in advances was primarily the result of net deposit
increases, which was partially offset by the funding of loan originations.
Long-term debt decreased $2.3 million, or 4.4%, to $49.7 million at March 31,
2000, compared to $52.1 million at December 31, 1999. The decrease in long-term
debt was due primarily to principal repayments made on long-term borrowings. No
new long-term borrowings were made in the first quarter 2000.
Total shareholders' equity increased $69,000, or 0.06%, to $117.3 million at
March 31, 2000. The increase was the result of the Company's net income of $3.0
million, $200,000 of common stock released by the ESOP, $153,000 of common stock
earned by participants of the Recognition and Retention Plan and $17,000 of
compensation expense recognized on stock option plans, which was partially
offset by $297,000 of treasury stock acquired, $1.0 million of cash dividends
declared on common stock and a $2.0 million, after taxes, decrease in
accumulated other comprehensive income.
RESULTS OF OPERATIONS
- ---------------------
The Company reported net income of $3.0 million for the three months ended March
31, 2000, compared to $2.9 million earned during the three months ended March
31, 1999. The Company's net interest income decreased $58,000 and total
noninterest income increased $59,000 during the three months ended March 31,
2000 compared to the first quarter of 1999. Noninterest expense decreased
$203,000 and income tax expense decreased $3,000 during the three months ended
March 31, 2000 compared to the first quarter of 1999.
10
<PAGE>
AVERAGE BALANCES, NET INTEREST INCOME AND INTEREST YIELDS / RATES
The following table sets forth, for the periods indicated, information
regarding (i) the total dollar amount of interest income of the Bank 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.
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------------------------------------------------------
2000 1999
-------------------------------------- -----------------------------------
Average Average
Average Yield/ Average Yield/
(Dollars in thousands) Balance Interest Rate(1) Balance Interest Rate(1)
- -------------------------------------------------------------------------------------------- -----------------------------------
Loans receivable:
<S> <C> <C> <C> <C> <C> <C>
Mortgage loans $ 274,706 $ 5,439 7.92% $ 314,405 $ 6,428 8.18%
Commercial loans 240,651 5,507 9.05 199,797 4,450 8.91
Consumer and other loans 334,378 7,412 8.92 262,132 5,688 8.80
---------- -------- ---------- --------
Total Loans 849,735 18,358 8.63 776,334 16,566 8.58
---------- -------- ---------- --------
Investment securities 398,006 6,242 6.27 386,329 6,025 6.24
Other earning assets 4,662 55 4.74 80,037 843 4.27
---------- -------- ---------- --------
Total earning assets 1,252,403 24,655 7.87 1,242,700 23,434 7.57
-------- --------
Nonearning assets 102,185 120,656
---------- ----------
Total assets $1,354,588 $1,363,356
========== ==========
Interest-bearing liabilities:
Deposits:
Demand deposits $ 251,113 1,426 2.28 $ 292,971 1,553 2.15
Savings deposits 178,039 1,591 3.59 129,653 581 1.82
Certificates of deposits 577,336 7,611 5.30 643,001 8,136 5.13
---------- -------- ---------- --------
Total deposits 1,006,488 10,628 4.25 1,065,625 10,270 3.91
Borrowings 105,670 1,656 6.20 45,538 735 6.46
---------- -------- ---------- --------
Total interest-bearing liabilities 1,112,158 12,284 4.43 1,111,163 11,005 4.01
--------- --------
Noninterest - bearing demand deposits 116,002 116,676
Noninterest - bearing liabilities 10,548 11,090
---------- ----------
Total liabilities 1,238,708 1,238,929
Shareholders' Equity 115,880 124,427
---------- ----------
Total liabilities and shareholders' equity $1,354,588 $1,363,356
========== ==========
Net earning assets $ 140,245 $ 131,537
========== ==========
Net interest spread $ 12,371 3.44% $ 12,429 3.56%
======== ==== ======== ====
Net interest margin 3.93% 3.98%
==== ====
Ratio of average earning assets to
average interest-bearing liabilities 112.61% 111.84%
====== ======
- --------------------------------
(1) Annualized.
</TABLE>
11
<PAGE>
NET INTEREST INCOME
Net interest income decreased $58,000, or 0.47%, to $12.4 million for the three
months ended March 31, 2000, compared to $12.4 million for the three months
ended March 31, 1999. The decrease was due to a $1.3 million, or 11.6%, increase
in interest expense, which was partially offset by a $1.2 million, or 5.2%
increase in interest income. The increase in interest income was the result of a
$9.7 million, or 0.78%, increase in the average balance of earning assets,
together with a 30 basis point increase in the yield earned on earning assets.
The increase in interest expense was the result of a $995,000, or 0.09%,
increase in the average balance of interest-bearing liabilities, together with a
42 basis point increase in the cost thereof. The Company's interest rate spread
and net interest margin amounted to 3.44% and 3.93%, respectively, during the
three months ended March 31, 2000, compared to 3.56% and 3.98%, respectively,
for the comparable period in 1999.
INTEREST INCOME
The Company's total interest income was $24.7 million for the three months ended
March 31, 2000, compared to $23.4 million for the three months ended March 31,
1999. The reason for the $1.2 million, or 5.2%, increase in interest income was
a $1.8 million, or 10.8%, increase in interest income from loans, a $217,000, or
3.6%, increase in interest and dividends on investment securities, which was
partially offset by a $788,000, or 93.4%, decrease in interest on deposits held
at other institutions. The increase in interest income from loans was the result
of a $73.4 million, or 9.5%, increase in the average balance of loans, together
with a 5 basis point increase in the yield earned thereon. The increase in
interest income from investment securities was the result of a $11.7 million, or
3.0%, increase in the average balance of investment securities, together with a
3 basis point increase in the yield earned thereon. The decrease in interest
from deposits at other institutions was the result of a $75.4 million, or 94.2%,
decrease in the average balance of deposits at other institutions, which was
partially offset by a 47 basis point increase in the yield earned thereon.
INTEREST EXPENSE
The Company's total interest expense was $12.3 million during the three months
ended March 31, 2000, compared to $11.0 million for the three months ended March
31, 1999. The reasons for the $1.3 million, or 11.6%, increase in total interest
expense was a $921,000, or 125.3%, increase in interest expense on borrowings
due to a $60.1 million, or 132.0%, increase in the average balance of
borrowings, which was partially offset by a 26 basis point decrease in the cost
of such borrowings and a $358,000, or 3.5%, increase in interest expense on
deposits due to a $59.1 million, or 5.5%, decrease in the average balance of
interest-bearing deposits, which was partially offset by a 34 basis point
increase in the cost of such deposits.
PROVISION FOR LOAN LOSSES
The provision for loan losses was $481,000 for the three months ended March 31,
2000 as compared to $370,000 for the same period in 1999. The Company had $3.8
million of non performing assets, or .28% of total assets, at March 31, 2000,
compared to $3.3 million, or .24% of total assets, at December 31, 1999. As of
March 31, 2000, the ratio of the Company's allowance for loan losses to non
performing loans was 237.2%, compared to 279.3% at December 31, 1999.
12
<PAGE>
NONINTEREST INCOME
Noninterest income increased $59,000, or 1.9%, for the three months ended March
31, 2000 to $3.2 million, compared to $3.1 million for the three months ended
March 31, 1999. Such increase was due primarily to a $94,000, or 5.0%, increase
in service charges on deposit accounts, a $94,000, or 45.4%, increase in ATM fee
income and a $164,000, or 23.1%, increase in other income, all of which were
partially offset by a $293,000, or 97.0% decrease in gains on the sale of
mortgage loans in the secondary market.
The increase in other income is attributable to an increase in commission
income, gain on the sale of fixed assets and other sources of income.
NONINTEREST EXPENSE
Noninterest expense decreased $203,000, or 1.9%, for the three months ended
March 31, 2000, to $10.3 million, compared to $10.5 million for the three months
ended March 31, 1999. Such decrease was due in part to a $142,000 decrease in
the ESOP retirement contribution expense caused by the decrease in the average
fair market value of Company stock. Reclassification of deposits according to
use for reserve purposes later in 1999 resulted in quarterly savings of FDIC
insurance of $64,000. The carrying cost associated with other real estate owned,
net of gains on sale of property, declined by $45,000. Additional decreases of
$75,000 in employee development, $53,000 in stationery and supplies, and
$182,000 in miscellaneous other expenses reflects Management's emphasis on
controlling discretionary expenses. These decreases were offset in part by
increases of $106,000 in professional fees, $111,000 in the cost of computer
related expenses and $84,000 in the share tax assessment.
INCOME TAX EXPENSE
Income tax expense remained basically flat due to equivalent levels of taxable
income.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company's liquidity, represented by cash and cash equivalents, is a product
of its operating, investing and financing activities. The Company's primary
sources of funds are deposits, amortization, prepayments and maturities of
outstanding loans, investment securities and other short-term investments and
funds provided from operations. While scheduled payments from the amortization
of loans, maturing investment securities, and short-term investments are
relatively predictable sources of funds, deposit flows and loan and investment
security prepayments are greatly influenced by general interest rates, economic
conditions and competition. In addition, the Company obtains additional funds
through borrowings, which provide liquidity to meet lending requirements. The
Bank has been able to generate sufficient cash through its deposits as well as
borrowings. At March 31, 2000, the Company had $100.4 million in outstanding
advances from the FHLB of Dallas and $5.6 million in outstanding debt from Union
Planters Bank, N.A.
13
<PAGE>
Liquidity management is both a daily and long-term function of business
management. Excess liquidity is generally invested in short-term investments
such as over night deposits. On a longer-term basis, the Company maintains a
strategy of investing in various lending products. The Company uses its sources
of funds primarily to meet its ongoing commitments and fund loan commitments. At
March 31, 2000, the total approved loan commitments outstanding amounted to
$39.3 million. At the same time, commitments under unused lines of credit,
including credit card lines, amounted to $114.0 million. Certificates of deposit
scheduled to mature in twelve months or less at March 31, 2000 totaled $397.0
million. Based on past experience management believes that a significant portion
of maturing deposits will remain with the Company. The Company anticipates it
will continue to have sufficient funds to meet its liquidity requirements.
At March 31, 2000, the Company and its subsidiary had regulatory capital, which
was in excess of regulatory requirements. The current requirements and the
Company's actual levels as of March 31, 2000 are detailed below (dollars in
thousands):
Required Capital Actual Capital
------------------ ------------------
Amount Percent Amount Percent
------ ------- ------ -------
Tier 1 Leverage $52,533 4.00% $85,022 6.47%
Tier 1 Risk-Based $34,484 4.00% $85,022 9.86%
Total Risk-Based $68,968 8.00% $93,973 10.90%
14
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Quantitative and qualitative disclosures about market risk are presented at
December 31, 1999 in Item 7A of the Company's Annual Report on Form 10-K, filed
with the Securities and Exchange Commission on March 31, 2000. Management
believes there have been no material changes in the Company's market risk since
December 31, 1999.
15
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
Not Applicable
Item 2. Changes in Securities
---------------------
Not Applicable
Item 3. Defaults Upon Senior Securities
-------------------------------
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not Applicable
Item 5. Other Information
-----------------
On May 5, 2000, the shareholders of ISB Financial Corporation
approved changing the Company's name to IBERIABANK Corporation. The
name change will take place immediately. Effective May 15, 2000, the
Company's stock symbol on the NASDAQ National Market will change to
"IBKC".
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
Exhibit 27 - Financial Data Schedule
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
IBERIABANK CORPORATION
Date: May 12, 2000 By: /s/ Daryl G. Byrd
-------------- -------------------------------
Daryl G. Byrd
President
Date: May 12, 2000 By: /s/ Marilyn Burch
-------------- ------------------------------
Marilyn Burch
Senior Vice President and Controller
17
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