IBERIABANK CORP - 10-Q Quarterly Report

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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 September 30, 2004

Commission File Number 0-25756

IBERIABANK Corporation

(Exact name of registrant as specified in its charter)

Louisiana

72-1280718

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

200 West Congress Street

Lafayette, Louisiana

70501

(Address of principal executive office)

(Zip Code)

(337) 521-4003

(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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

The registrant had 6,873,246 shares of common stock, $1.00 par value, which were issued and outstanding as of October 31, 2004.

IBERIABANK CORPORATION AND SUBSIDIARY

TABLE OF CONTENTS


		Page
Part I.	Financial Information

Item 1.	Financial Statements	2

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	8

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21

Item 4.	Controls and Procedures	21

Part II.	Other Information

Item 1.	Legal Proceedings	22

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	22

Item 3.	Defaults Upon Senior Securities	22

Item 4.	Submission of Matters to a Vote of Security Holders	22

Item 5.	Other Information	22

Item 6.	Exhibits and Reports on Form 8-K	23

Signatures		24

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

IBERIABANK CORPORATION AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS (unaudited)

(dollars in thousands, except share data)


	September 30, 2004			December 31, 2003			September 30, 2003
Assets
Cash and due from banks	$	39,384		$	48,849		$	50,749
Interest-bearing deposits in banks		13,719			20,722			16,944

Total cash and cash equivalents		53,103			69,571			67,693
Securities available for sale, at fair value		540,425			426,130			408,526
Securities held to maturity, fair values of $43,051, $55,207, and $62,112, respectively		41,756			53,492			60,378
Mortgage loans held for sale		10,624			5,781			4,129
Loans, net of unearned income		1,599,609			1,412,349			1,397,946
Allowance for loan losses		(19,885	)		(18,230	)		(17,482	)

Loans, net		1,579,724			1,394,119			1,380,464
Premises and equipment, net		37,595			31,992			28,947
Goodwill		64,731			59,523			60,683
Other assets		86,978			75,203			72,077

Total Assets	$	2,414,936		$	2,115,811		$	2,082,897

Liabilities
Deposits:
Noninterest-bearing	$	219,339		$	189,786		$	191,257
Interest-bearing		1,546,606			1,399,320			1,397,223

Total deposits		1,765,945			1,589,106			1,588,480
Short-term borrowings		214,139			162,590			119,273
Long-term debt		206,512			156,291			165,616
Other liabilities		14,788			12,655			20,764

Total Liabilities		2,201,384			1,920,642			1,894,133

Shareholders’ Equity
Preferred stock, $1 par value - 5,000,000 shares authorized		—			—			—
Common stock, $1 par value - 25,000,000 shares authorized; 8,649,777, 8,362,492, and 8,362,492 shares issued, respectively		8,650			8,362			8,362
Additional paid-in-capital		136,818			114,674			113,304
Retained earnings		134,636			119,967			115,301
Unearned compensation		(5,829	)		(2,668	)		(2,979	)
Accumulated other comprehensive income		431			183			(1,343	)
Treasury stock at cost - 1,772,117, 1,644,034, and 1,638,183 shares, respectively		(61,154	)		(45,349	)		(43,881	)

Total Shareholders’ Equity		213,552			195,169			188,764

Total Liabilities and Shareholders’ Equity	$	2,414,936		$	2,115,811		$	2,082,897

See Notes to Consolidated Financial Statements

IBERIABANK CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

(dollars in thousands, except per share data)


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2004		2003		2004		2003
Interest and Dividend Income
Loans, including fees	$	21,469	$	20,212	$	61,697	$	58,966
Mortgage loans held for sale, including fees		101		341		361		712
Investment securities:
Taxable interest		5,623		2,691		15,089		9,336
Tax-exempt interest		636		660		1,921		1,806
Other		218		178		573		581

Total interest and dividend income		28,047		24,082		79,641		71,401

Interest Expense
Deposits		6,126		5,284		17,375		16,044
Short-term borrowings		802		293		1,675		1,031
Long-term debt		1,888		1,806		5,275		4,649

Total interest expense		8,816		7,383		24,325		21,724

Net interest income		19,231		16,699		55,316		49,677

Provision for loan losses		857		1,599		2,616		4,748

Net interest income after provision for loan losses		18,374		15,100		52,700		44,929

Noninterest Income
Service charges on deposit accounts		3,317		3,073		9,266		8,625
ATM/debit card fee income		523		448		1,474		1,380
Gain on sale of mortgage loans, net		592		1,499		2,059		3,333
Gain on sale of assets		9		18		51		205
Gain on sale of investments, net		7		189		479		267
Other income		1,409		1,287		3,909		3,572

Total noninterest income		5,857		6,514		17,238		17,382

Noninterest Expense
Salaries and employee benefits		7,923		6,799		22,557		19,568
Occupancy and equipment		1,720		1,653		5,134		4,711
Franchise and shares tax		714		553		2,132		1,605
Communication and delivery		730		735		2,093		2,135
Marketing and business development		333		215		1,143		790
Data processing		375		456		1,135		1,348
Printing, stationery and supplies		200		223		636		643
Amortization of acquisition intangibles		222		232		674		564
Other expenses		2,012		2,057		5,953		6,148

Total noninterest expense		14,229		12,923		41,457		37,512

Income before income tax expense		10,002		8,691		28,481		24,799

Income tax expense		2,966		2,614		8,467		7,525

Net Income	$	7,036	$	6,077	$	20,014	$	17,274

Earnings per share - basic	$	1.05	$	0.93	$	2.98	$	2.75

Earnings per share - diluted	$	0.97	$	0.86	$	2.75	$	2.54

See Notes to Consolidated Financial Statements

IBERIABANK CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (unaudited)

(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, 2002	$	7,381	$	72,769	$	102,390		$	(2,690	)	$	712		$	(40,964	)	$	139,598

Comprehensive income:
Net income						17,274												17,274
Change in unrealized gain on securities available for sale, net of deferred taxes												(2,049	)					(2,049	)
Change in fair value of derivatives used for cash flow hedges, net of tax effect												(6	)					(6	)

Total comprehensive income																		15,219
Cash dividends declared, $.66 per share						(4,363	)											(4,363	)
Reissuance of treasury stock under stock option plan, net of shares surrendered in payment, including tax benefit, 125,459 shares				306											1,027			1,333
Common stock released by ESOP trust				1,249					358									1,607
Common stock earned by participants of recognition and retention plan trust, including tax benefit				140					417									557
Common stock issued for recognition and retention plan				613					(1,064	)					451			—
Common stock issued for acquisition		981		38,227														39,208
Treasury stock acquired at cost, 95,800 shares															(4,395	)		(4,395	)

Balance, September 30, 2003	$	8,362	$	113,304	$	115,301		$	(2,979	)	$	(1,343	)	$	(43,881	)	$	188,764


Balance, December 31, 2003	$	8,362	$	114,674	$	119,967		$	(2,668	)	$	183		$	(45,349	)	$	195,169

Comprehensive income:
Net income						20,014												20,014
Change in unrealized gain on securities available for sale, net of deferred taxes												155						155
Change in fair value of derivatives used for cash flow hedges, net of tax effect												93						93

Total comprehensive income																		20,262
Cash dividends declared, $.78 per share						(5,345	)											(5,345	)
Reissuance of treasury stock under stock option plan, net of shares surrendered in payment, including tax benefit, 124,284 shares				2,093											1,734			3,827
Common stock released by ESOP trust				1,587					330									1,917
Common stock earned by participants of recognition and retention plan trust, including tax benefit				291					493									784
Common stock issued for recognition and retention plan				2,965					(3,984	)					1,019			—
Common stock issued for acquisition		288		15,208														15,496
Treasury stock acquired at cost, 321,467 shares															(18,558	)		(18,558	)

Balance, September 30, 2004	$	8,650	$	136,818	$	134,636		$	(5,829	)	$	431		$	(61,154	)	$	213,552

See Notes to Consolidated Financial Statements

IBERIABANK CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(dollars in thousands)


	For the Nine Months Ended September 30,
	2004			2003
Cash Flows from Operating Activities
Net income	$	20,014		$	17,274

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,258			3,960
Provision for loan losses		2,616			4,748
Noncash compensation expense		2,447			1,958
Gain on sale of assets		(51	)		(235	)
Gain on sale of investments		(479	)		(267	)
Amortization of premium/discount on investments		2,275			4,747
Net change in loans held for sale		(4,843	)		8,127
Other operating activities, net		(4,615	)		(2,647	)

Net Cash Provided by Operating Activities		20,622			37,665

Cash Flows from Investing Activities
Proceeds from sales of securities available for sale		26,757			100,451
Proceeds from maturities, prepayments and calls of securities available for sale		109,031			124,585
Purchases of securities available for sale		(240,356	)		(290,159	)
Proceeds from sales of securities held to maturity		227			—
Proceeds from maturities, prepayments and calls of securities held to maturity		11,317			20,775
Purchases of securities held to maturity		—			(5,147	)
Proceeds from sale of loans		—			26,913
Increase in loans receivable, net		(138,008	)		(193,245	)
Proceeds from sale of premises and equipment		104			593
Purchases of premises and equipment		(6,758	)		(4,441	)
Proceeds from disposition of real estate owned		2,863			1,584
Cash received in excess of cash paid in acquisition		4,320			21,287
Other investing activities, net		(3,496	)		(3,883	)

Net Cash Used in Investing Activities		(233,999	)		(200,687	)

Cash Flows from Financing Activities
Increase in deposits		115,611			136,277
Net change in short-term borrowings		51,549			21,143
Proceeds from long-term debt		51,100			30,000
Repayments of long-term debt		(326	)		(13,549	)
Dividends paid to shareholders		(4,792	)		(3,678	)
Proceeds from sale of treasury stock for stock options exercised		2,325			1,333
Costs of issuance of common stock in acquisition		—			(191	)
Payments to repurchase common stock		(18,558	)		(4,395	)

Net Cash Provided by Financing Activities		196,909			166,940

Net (Decrease) Increase In Cash and Cash Equivalents		(16,468	)		3,918
Cash and Cash Equivalents at Beginning of Period		69,571			63,775

Cash and Cash Equivalents at End of Period	$	53,103		$	67,693

Supplemental Schedule of Noncash Activities
Acquisition of real estate in settlement of loans	$	1,470		$	1,284

Common stock issued in acquisition	$	15,496		$	38,586

Exercise of stock options with payment in company stock	$	45		$	681

Supplemental Disclosures
Cash paid for:
Interest on deposits and borrowings	$	24,018		$	22,596

Income taxes, net	$	4,350		$	6,580

See Notes to Consolidated Financial Statements

IBERIABANK CORPORATION AND SUBSIDIARY

Notes to Consolidated Financial Statements

(unaudited)

Note 1 – Basis of Financial Statement Presentation

The consolidated financial statements include the accounts of IBERIABANK Corporation 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. Through the Bank, the Company offers commercial and retail products and services to customers throughout the state, including south central Louisiana, north Louisiana, Baton Rouge and the greater New Orleans area.

All normal, recurring adjustments, which, in the opinion of management, are necessary for a fair presentation of the financial statements, have been included. The preparation of financial statements in conformity with generally accepted accounting principles 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. A material estimate that is susceptible to significant change in the near term is the allowance for loan losses.

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they 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. These interim financial statements should be read in conjunction with the audited financial statements and note disclosures for 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, 2003.

Note 2 – Earnings Per Share

For the three months ended September 30, 2004, basic earnings per share were based on 6,688,470 weighted average shares outstanding and diluted earnings per share were based on 7,231,401 weighted average shares outstanding. For the same period, the calculations for both basic and diluted shares outstanding exclude: (a) the weighted average unreleased shares owned by the Employee Stock Ownership Plan (“ESOP”) of 26,305; (b) the weighted average shares owned by the Recognition and Retention Plan Trust (“RRP”) of 172,937; and (c) the weighted average shares purchased in Treasury Stock of 1,762,065.

For the nine months ended September 30, 2004, basic earnings per share were based on 6,706,293 weighted average shares outstanding and diluted earnings per share were based on 7,271,734 weighted average shares outstanding. For the same period, the calculations for both basic and diluted shares outstanding exclude: (a) the weighted average unreleased shares owned by the Employee Stock Ownership Plan (“ESOP”) of 37,245; (b) the weighted average shares owned by the Recognition and Retention Plan Trust (“RRP”) of 155,062; and (c) the weighted average shares purchased in Treasury Stock of 1,688,268.

Note 3 – Recent Accounting Pronouncements

In March 2004, the Financial Accounting Standards Board (“FASB”) issued an Exposure Draft, Share-Based Payment, an Amendment of FASB Statements No. 123 and 95. The proposed change in accounting would replace existing requirements under Financial Accounting Standard (“FAS”) 123, Accounting for Stock-Based Compensation, and APB Opinion No. 25, Accounting for Stock Issued to Employees. Under this proposal, all forms of share-based payments to employees, including employee stock options, would be

recognized as a cost in the income statement. The fair value of the award would be measured at grant date, as is currently being done for disclosure purposes under FAS 123. The proposed Statement would be effective for interim periods beginning after June 15, 2005. Existing options at the date of adoption would be accounted for under the modified prospective method, whereby all outstanding options would be expensed beginning with the date of adoption. Retroactive restatement will be permitted, but will not be required.

The Company is in the process of evaluating its executive and manager level compensation programs, and is evaluating the effectiveness of stock options as a continuing form of compensation, including the appropriateness of the existing option valuation models. Compensation programs include, but are not limited to, restricted stock and stock option grants, the ESOP, the 401(k) Plan and other benefits provided by the Company. The Company is also evaluating the transition alternatives available at adoption.

In March 2004, the Securities and Exchange Commission (“SEC”) released Staff Accounting Bulletin No. 105 (SAB 105), “Application of Accounting Principles to Loan Commitments”. SAB 105 requires registrants to account for mortgage loan interest rate lock commitments related to loans held for sale as written options. SAB 105 did not have a material effect on the Company’s financial statements.

Note 4 – Compensation Cost for Stock-based Incentives

In October 1995, the FASB issued FAS 123, which requires disclosure of the compensation cost for stock-based incentives granted after January 1, 1995 based on the fair value at grant date for awards. The Company uses the intrinsic value method under APB Opinion 25 to account for stock options granted.

Applying FAS 123 would result in pro forma net income and earnings per share amounts as follows:


(dollars in thousands, except share amounts)	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
(unaudited)	2004			2003			2004			2003
Net Income:
As reported	$	7,036		$	6,077		$	20,014		$	17,274
Deduct: Stock option compensation expense under the fair value method, net of related tax effect		(356	)		(238	)		(966	)		(854	)

Pro forma	$	6,680		$	5,839		$	19,048		$	16,420

Earnings per share:
As reported - basic	$	1.05		$	0.93		$	2.98		$	2.75
Diluted	$	0.97		$	0.86		$	2.75		$	2.54

Pro forma - basic	$	1.00		$	0.90		$	2.84		$	2.62
diluted	$	0.93		$	0.83		$	2.64		$	2.44

Note 5 – Pro Forma Statements of Acquisition

The Company completed the acquisition of Alliance Bank of Baton Rouge (“Alliance”) on February 29, 2004. This acquisition expanded the Company’s presence into Baton Rouge, Louisiana.

The consolidated statements of income include the results of operations for Alliance from the acquisition date. The transaction resulted in $5.2 million of goodwill and $1.2 million of core deposit intangibles. The amount allocated to the core deposit intangible was determined by an independent valuation and is amortized over the estimated useful life of seven years using the straight line method.

In the acquisition, shareholders of Alliance received 287,285 shares of the Company’s common stock valued at $15.5 million. The combination was accounted for as a purchase with the purchase price allocated as follows:


(dollars in thousands) (unaudited)	Amount
Cash and due from banks	$	4,320
Investment securities		11,218
Loans, net		53,125
Premises and equipment, net		1,125
Goodwill		5,208
Core deposit and other intangibles		1,200
Other assets		1,970
Deposits		(61,772	)
Other liabilities		(898	)

Total purchase price	$	15,496

The results of operations of the Company subsequent to the acquisition date are included in the Company’s consolidated statements of income. The following pro forma information for the nine month periods ended September 30, 2004 and September 30, 2003 reflect the Company’s estimated consolidated results of operations as if the acquisition of Alliance occurred at January 1 of the respective periods, unadjusted for potential cost savings.


	Pro Forma Combined For the Nine Months Ended
(dollars in thousands, except share amounts) (unaudited)	September 30, 2004		September 30, 2003
Interest and dividend income	$	80,147	$	73,708

Interest expense		24,423		22,186

Net interest income		55,724		51,522

Provision for loan losses		2,627		4,795

Net interest income after provision for loan losses		53,097		46,727

Noninterest income		17,367		17,760

Noninterest expense		42,018		39,289

Income before income taxes		28,446		25,198

Income tax expense		8,474		7,640

Net income	$	19,972	$	17,558

Earnings per share – basic	$	2.95	$	2.67

Earnings per share – diluted	$	2.72	$	2.48

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The purpose of this discussion and analysis is to focus on significant changes in the financial condition and results of operations of the Company during the first nine months of the year. This discussion and analysis highlights and supplements information contained elsewhere in this quarterly report on Form 10-Q, particularly the preceding consolidated financial statements and notes. This discussion and analysis should be read in conjunction with the Company’s 2003 Annual Report on Form 10-K.

FORWARD-LOOKING STATEMENTS

To the extent that statements in this Form 10-Q relate to future plans, objectives, financial results or performance of the Company, these statements are deemed to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements, which are based on management’s current information, estimates and assumptions and the current economic environment, are generally identified by the use of the words “plan”, “believe”, “expect”, “intend”, “anticipate”, “estimate”, “project” or similar expressions. The Company’s actual strategies and results in future periods may differ materially from those currently expected due to various risks and uncertainties. Factors that may cause actual results to differ materially from these forward-looking statements include, but are not limited to, changes in market and economic conditions; changes in interest rates, deposit flows, loan demand and real estate values; competitive pressures; changes in accounting principles, policies or guidelines; changes in the Company’s loan or investment portfolio; legislative or regulatory changes; changes in monetary or fiscal policies; military or terrorist activities; litigation costs and expenses; and other economic, competitive, governmental, regulatory and technological factors affecting the Company’s business activities and prospects.

THIRD QUARTER OVERVIEW

During the third quarter of 2004, the Company earned $7.0 million, or $0.97 per share, on a diluted basis. This represents a 13.3% increase over the $0.86 per diluted share, or $6.1 million, earned for the third quarter of 2003. Net income for the nine months ended September 30, 2004 totaled $20.0 million, up 15.9%, compared to the first nine months of 2003. Quarterly and year to date comparatives are influenced, in part, by the acquisition of Alliance on February 29, 2004. Year to date comparisons between 2004 and 2003 are also influenced by the acquisition of Acadiana Bancshares, Inc. (“Acadiana”) on February 28, 2003. The key components of the Company’s performance are summarized below.

•	Total assets at September 30, 2004 were $2.4 billion, up $299.1 million, or 14.1%, from $2.1 billion at December 31, 2003. Shareholders’ equity increased by $18.4 million, or 9.4%, from $195.2 million at December 31, 2003 to $213.6 million at September 30, 2004.

•

Total loans at September 30, 2004 were $1.6 billion, an increase of $187.3 million, or 13.3%, from $1.4 billion at December 31, 2003. The increase from year end 2003 is reflective of internally generated growth of $133.6 million and the $53.7 million loan base obtained through the Alliance acquisition.

•

Total customer deposits increased $176.8 million, or 11.1%, from $1.6 billion at December 31, 2003 to $1.8 billion at September 30, 2004. The increase from year end 2003 is reflective of strong organic growth amounting to $115.0 million, as well as $61.8 million in customer deposits obtained through the Alliance acquisition.

•

Net interest income increased $2.5 million, or 15.2%, for the three months ended September 30, 2004, compared to the same period of 2003. For the nine months ended September 30, 2004, net interest income increased $5.6 million, or 11.4%, compared to the same period of 2003. These increases are largely attributable to increased volume. The corresponding net interest margin ratio on a tax-equivalent basis declined to 3.58% from 3.68% for the quarters ended September 30, 2004 and 2003, respectively, primarily due to market rate declines over the related periods. The impact on earning asset yields was more significant than on funding sources. Additionally, the Acadiana and Alliance acquisitions resulted in increased net interest income, but a reduction of the margin as a result of marking the acquired asset and liability mixes to current yields.

•

Noninterest income declined $657,000, or 10.1%, for the third quarter of 2004 as compared to the same period of 2003. The decline was mainly driven by decreased gains on the sale of mortgage loans and investment securities. This decline was partially offset by increased service charge revenues on deposit accounts and other revenue enhancement initiatives. For the nine months ended September 30, 2004, noninterest income decreased $144,000, or 8%, compared to the same period of 2003.

•

Noninterest expense increased by $1.3 million, or 10.1%, for the quarter ended September 30, 2004, as compared to the same quarter last year. For the nine months ended September 30, 2004, noninterest expense increased $3.9 million, or 10.5%, compared to the same period of 2003. These increases were primarily due to an increase in compensation expense as a result of additional staff related to the Acadiana and Alliance acquisitions, as well as several strategic hires over the past 15 months.

•

The Company provided $857,000 for possible loan losses during the third quarter of 2004, compared to $1.6 million for the third quarter of 2003. A total of $2.6 million for possible loan losses was recorded for the nine months ended September 30, 2004, compared to $4.7 million for the same period of 2003. The Company has been able to reduce the provision for loan losses due to continued improvement in credit quality. As of September 30, 2004, the allowance for loan losses as a percent of total loans was 1.24%, compared to 1.25% at September 30, 2003. Net charge-offs for the third quarter of 2004 were $655,000, or 0.17%, of average loans on an annualized basis, compared to $890,000, or 0.26%, a year earlier. The coverage of net charge-offs by the provision for loan losses was 1.31 times for the third quarter of 2004 and 1.80 times for the third quarter of 2003. The coverage of nonperforming assets by the allowance for loan losses was 3.20 times at the end of the third quarter of 2004, as compared to 2.53 times at September 30, 2003.

•

In September 2004, the Company announced a definitive merger agreement with American Horizons Bancorp, Inc (“American Horizons”) of Monroe, Louisiana. The transaction is expected to be consummated during the first quarter of 2005, subject to regulatory and American Horizons shareholder approvals. Upon completion of the merger and operating system conversion, American Horizons branches will operate under the IBERIABANK name. At June 30, 2004, American Horizons had total assets of $265 million, loans of $210 million, deposits of $195 million and shareholders’ equity of $22 million.

•

In September 2004, the Company announced the closing of its third trust preferred securities offering totaling $10 million. The trust preferred securities were issued by a newly established subsidiary of the Company, IBERIABANK Statutory Trust III, a Delaware statutory business trust. The trust preferred securities are expected to qualify as Tier I capital for regulatory purposes.

•	In September 2004, the Company’s Board of Directors declared a quarterly cash dividend of $0.28 per common share, a 17% increase compared to the same quarter of 2003 and an 8% increase compared to the second quarter of 2004.

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 $2.2 billion during the quarter ended September 30, 2004, a $338.0 million, or 18.0%, increase compared to $1.9 billion during the quarter ended September 30, 2003. This is primarily the result of strong organic growth, coupled with the Alliance acquisition. For the nine months ended September 30, 2004, average earning assets amounted to $2.1 billion, an increase of $351.3 million, or 20.0%, from the same period of 2003, and an increase of $309.1 million, or 17.2%, from the year ended December 31, 2003.

Loans and Leases –The loan portfolio increased $187.3 million, or 13.3%, during the first nine months of 2004. Compared to September 30, 2003, the loan portfolio has increased $201.7 million, or 14.4%. The Company’s loan to deposit ratio at September 30, 2004, December 31, 2003 and September 30, 2003 was

90.6%, 88.9% and 88.0%, respectively. The percentage of fixed rate loans within the total loan portfolio has decreased slightly from 69% at the end of 2003 to 66% as of September 30, 2004. Table 1 sets forth the composition of the Company’s loan portfolio as of the dates indicated.

Table 1 – Loan Portfolio Composition


	September 30, 2004				December 31, 2003				September 30, 2003
(dollars in thousands)	Loans		Percent		Loans		Percent		Loans		Percent
Residential mortgage loans:

Residential 1-4 family	$	379,716	23.7	%	$	338,965	24.0	%	$	341,243	24.4	%
Construction		34,912	2.2			50,295	3.6			39,846	2.9

Total residential mortgage loans		414,628	25.9			389,260	27.6			381,089	27.3

Commercial loans:
Real estate		397,710	24.9			352,031	24.9			342,949	24.5
Business		275,390	17.2			199,275	14.1			198,925	14.2
Commercial leases		1,505	0.1			1,745	0.1			1,823	0.1

Total commercial loans and leases		674,605	42.2			553,051	39.1			543,697	38.8

Consumer loans:
Indirect automobile		228,829	14.3			229,636	16.3			233,675	16.7
Home equity		211,088	13.2			174,740	12.4			171,327	12.3
Other		70,459	4.4			65,662	4.6			68,158	4.9

Total consumer loans		510,376	31.9			470,038	33.3			473,160	33.9

Total loans receivable	$	1,599,609	100.0	%	$	1,412,349	100.0	%	$	1,397,946	100.0	%

Total commercial loans and leases increased 22.0% and 24.1% compared to December 31, 2003 and September 30, 2003, respectively. Commercial real estate loans increased $45.7 million, or 13.0%, and $54.8 million, or 16.0%, compared to December 31, 2003 and September 30, 2003, respectively. Commercial business loans increased $76.1 million, or 38.2%, and $76.5 million, or 38.4%, compared to December 31, 2003 and September 30, 2003, respectively. Growth in the commercial loan segment came from traditional commercial, private banking and institutional sectors with no one customer representing a disproportionate percentage of the increase. The Company acquired $20.1 million in commercial loans as a result of the Alliance acquisition.

Total consumer loans increased 8.6% and 7.9% compared to December 31, 2003 and September 30, 2003, respectively. Home equity loans have driven consumer loan growth, increasing $36.3 million, or 20.8%, and $39.8 million, or 23.2%, compared to December 31, 2003 and September 30, 2003, respectively. The Company acquired $33.6 million in consumer loans as a result of the Alliance acquisition.

Residential mortgage loans increased $25.4 million, or 6.5%, from December 31, 2003 to September 30, 2004. The Company continues to sell the majority of conforming mortgage loan originations and recognize the associated fee income rather than assume the rate risk associated with these longer term assets. Growth in residential mortgage loans is primarily related to credit extended to high net worth individuals through the private banking area. These mortgage loans traditionally have shorter durations, lower servicing costs and provide an opportunity to further relationships.

In addition to the entrance into the Baton Rouge market through the Alliance acquisition, the Company also opened new branches in Shreveport and New Orleans, Louisiana, and three loan production offices (“LPOs”) in Alexandria, Houma and Mandeville, Louisiana during 2004. The opening of the Shreveport branch has allowed the Company to take advantage of lending opportunities in Northwest Louisiana and other surrounding markets. The New Orleans addition is helping the Company strengthen and expand key private banking relationships in New Orleans. The LPOs expand the Company’s ability to provide mortgage loan and other products to markets previously not heavily served by the Company. Through September 30, 2004, performance in the Company’s new markets has met or exceeded management’s expectations.

Investment Securities – The Company’s investment securities available for sale increased $114.3 million, or 26.8%, to $540.4 million at September 30, 2004, compared to $426.1 million at December 31, 2003. The

increase was due to securities of $11.2 million obtained through the acquisition of Alliance, purchases of securities totaling $240.4 million, and a $238,000 increase in the market value of the portfolio, which were partially offset by sales of securities totaling $26.8 million and principal amortizations, maturities and calls totaling $109.0 million. Securities available for sale consist primarily of mortgage-backed securities.

The Company’s investment securities held to maturity decreased $11.7 million, or 21.9%, to $41.8 million at September 30, 2004, compared to $53.5 million at December 31, 2003. This decrease was primarily due to principal amortizations, maturities and calls. In June 2004, the Company sold three mortgage-backed securities out of the held to maturity portfolio resulting in an $11,000 loss. The securities had an amortized cost totaling $238,000. The sales were accounted for in accordance with FASB Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities. The held to maturity securities, which had paid down over 90%, were sold to take advantage of other investment opportunities. Securities held to maturity consist primarily of mortgage-backed securities and obligations of state and political subdivisions.

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 September 30, 2004, management’s assessment concluded that no declines are deemed to be other than temporary.

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 $7.0 million, or 33.8%, to $13.7 million at September 30, 2004, compared to $20.7 million at December 31, 2003.

Mortgage Loans Held for Sale – Loans held for sale increased $4.8 million or 83.8%, to $10.6 million at September 30, 2004, compared to $5.8 million at December 31, 2003. 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.

Asset Quality and Allowance for Loan Losses

Over time, the loan portfolio has transitioned to be more representative of a commercial bank. Accordingly, there is recognition of 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, developed an internal loan review function and significantly increased the allowance for loan losses. As a result, the credit quality of the Company’s assets has continued to improve as management assertively works to enhance underwriting risk/return dynamics within the loan portfolio. 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.

Nonperforming assets, defined as nonaccrual loans, accruing loans past due 90 days or more and foreclosed property, amounted to $6.2 million, or 0.26% of total assets at September 30, 2004, compared to $7.3 million, or 0.34% of total assets at December 31, 2003. The allowance for loan losses amounted to $19.9 million, or 1.24% of total loans and 368.4% of total nonperforming loans, respectively, at September 30, 2004, compared to 1.29% and 355.9%, respectively, at December 31, 2003. Table 2 sets forth the composition of the Company’s nonperforming assets, including accruing loans past due 90 days or more, as of the dates indicated.

Table 2 – Nonperforming Assets and Troubled Debt Restructurings ⁽¹⁾


(dollars in thousands)	September 30, 2004			December 31, 2003			September 30, 2003
Nonaccrual loans:
Commercial, financial and agricultural	$	2,007		$	1,838		$	1,767
Mortgage		597			552			631
Loans to individuals		1,654			1,512			1,658

Total nonaccrual loans		4,258			3,902			4,056
Accruing loans 90 days or more past due		1,139			1,220			892

Total nonperforming loans ⁽¹⁾		5,397			5,122			4,948
Foreclosed property		817			2,134			1,962

Total nonperforming assets ⁽¹⁾		6,214			7,256			6,910
Performing troubled debt restructurings		—			—			—

Total nonperforming assets and troubled debt restructurings ⁽¹⁾	$	6,214		$	7,256		$	6,910

Nonperforming loans to total loans ⁽¹⁾		0.34	%		0.36	%		0.35	%
Nonperforming assets to total assets ⁽¹⁾		0.26	%		0.34	%		0.33	%
Allowance for loan losses to nonperforming loans ⁽¹⁾		368.4	%		355.9	%		353.3	%
Allowance for loan losses to total loans		1.24	%		1.29	%		1.25	%

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

Asset quality continues to be strong even with continued loan growth. The percentage of nonperforming assets to total loans decreased from 0.51% at the end of 2003 to 0.39% at September 30, 2004. Nonperforming asset balances decreased as well, by $1.0 million, or 14.4%, since the end of 2003. This decrease was primarily due to the sale of one commercial real estate property for $1.8 million during the first quarter of 2004. Nonperforming loans increased $275,000, or 5.4%, during the first nine months of the year. Net charge-offs for the third quarter of 2004 were $655,000, or 0.17% of average loans on an annualized basis, as compared to $890,000, or 0.26%, for the same quarter last year.

In determining the amount of the allowance for loan losses, management uses information from its portfolio management process, relationship managers and ongoing loan review efforts to stratify the loan portfolio into asset risk classifications and assigns a general or specific reserve allocation. The foundation for the allowance is a detailed review of the overall loan portfolio. The portfolio is segmented into homogenous pools (i.e., commercial, business banking, consumer, mortgage, indirect, and credit card), which are analyzed based on risk factors, current and historical performance and specific loan reviews (for significant loans). Consideration is given to the specific risk within these segments, the maturity of these segments (e.g., rapid growth versus fully seasoned), the Company’s strategy for each segment (e.g., growth versus maintain), and the historical loss rate for these segments both at the Company and its peers. Consideration is also given to the impact of a number of relevant external factors that influence components of the loan portfolio or the portfolio as a whole.

General reserve estimated loss percentages are based on the current and historical loss experience of each loan category, regulatory guidelines for losses, the status of past due payments, and management’s judgment of economic conditions and the related level of risk assumed. Specific reserves are determined on a loan-by-loan basis based on management’s evaluation of loss exposure for each credit, given current payment status of the loan and the value of any underlying collateral. Loans for which specific reserves are provided are excluded from the general reserve calculations described above to prevent duplicate reserves. Additionally, an unallocated reserve for the total loan portfolio is established to address the imprecision and estimation risk inherent in the calculations of general and specific reserves, and management’s evaluation of various

conditions that are not directly measured by any other component of the allowance. Such components would include current general economic conditions affecting key lending areas, credit quality trends, collateral values, loan volumes and concentrations, seasoning of the loan portfolio and the findings of internal credit examinations.

Based on the allowance determination process, the Company determines the current potential risk of loss that exists in the portfolio, even if not fully reflected in current credit statistics, such as nonperforming assets or nonperforming loans. In response to rapid growth and changes in the mix of the loan portfolio, the Company has increased its required allowance and feels that the allowance adequately reflects the current level of risk and incurred losses within the loan portfolio. 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. Because the allowance is based on assumptions and subjective judgments, it is not necessarily reflective of the charge-offs that may ultimately occur.

Table 3 presents the activity in the allowance for loan losses during the first nine months of 2004.

Table 3 – Summary of Activity in the Allowance for Loan Losses


(dollars in thousands)	September 30, 2004
Balance, December 31, 2003	$	18,230
Addition due to purchase transaction		586
Provision charged to operations		2,616
Loans charged off		(2,564	)
Recoveries		1,017

Balance, end of period	$	19,885

Other Assets

Included in this category are cash and due from banks, premises and equipment, goodwill and other assets. From December 31, 2003 to September 30, 2004, cash and due from banks decreased $9.5 million, or 19.4%, premises and equipment increased $5.6 million, or 17.5%, due to branch expansion and infrastructure improvements and goodwill increased $5.2 million, or 8.7%, as a result of the Alliance acquisition.

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. 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 the first nine months of the year.

Deposits – Total end of period deposits increased $176.8 million, or 11.1%, to $1.8 billion at September 30, 2004, compared to $1.6 billion at December 31, 2003. Compared to September 30, 2003, deposits increased $177.5 million, or 11.2%. Table 4 sets forth the composition of the Company’s deposits at the dates indicated.

Table 4 –Deposit Composition


	September 30, 2004				December 31, 2003				September 30, 2003
(dollars in thousands)	Deposits		Percent		Deposits		Percent		Deposits		Percent
Noninterest-bearing DDA	$	219,339	12.4	%	$	189,786	11.9	%	$	191,257	12.0	%
NOW accounts		514,189	29.1			449,938	28.3			420,581	26.5
Savings and money market accounts		411,606	23.3			350,295	22.1			362,737	22.8
Certificates of deposit		620,811	35.2			599,087	37.7			613,905	38.7

Total deposits	$	1,765,945	100.0	%	$	1,589,106	100.0	%	$	1,588,480	100.0	%

The growth in deposits for the first nine months of 2004 was spread across all customer deposit groups and includes $61.8 million of deposits assumed in the Alliance transaction. From December 31, 2003 to September 30, 2004, noninterest-bearing checking accounts increased $29.6 million, or 15.6%, interest-bearing checking account deposits increased $64.2 million, or 14.3%, savings and money market accounts increased $61.3 million, or 17.5%, and certificate of deposit accounts increased $21.7 million, or 3.6%. Excluding the effect of the Alliance acquisition, noninterest-bearing checking accounts would have increased $17.6 million, or 9.3%, interest-bearing checking account deposits would have increased $53.9 million, or 12.0%, savings and money market accounts would have increased $33.4 million, or 9.5% and certificate of deposit accounts would have increased $10.1 million, or 1.7%.

Short-term Borrowings – Short-term borrowings increased $51.5 million, or 31.7%, to $214.1 million at September 30, 2004, compared to $162.6 million at December 31, 2003. The Company’s short-term borrowings at September 30, 2004 were comprised of $165.0 million in FHLB of Dallas advances with maturities of three months or less and $49.1 million of securities sold under agreements to repurchase. 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.

Long-term Borrowings – Long-term borrowings increased $50.2 million, or 32.1%, to $206.5 million at September 30, 2004, compared to $156.3 million at December 31, 2003. At September 30, 2004, the Company’s long-term borrowings were comprised of $175.6 million of fixed-rate advances from the FHLB of Dallas and $30.9 million in junior subordinated debt.

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 September 30, 2004, shareholders’ equity totaled $213.6 million, an increase of $18.4 million, or 9.4%, compared to $195.2 million at December 31, 2003. The increase in shareholders’ equity for the first nine months of the year was the result of the Company’s net income of $20.0 million, $1.9 million of common stock released by the Company’s ESOP trust, $784,000 of common stock earned by participants in the Company’s RRP trust, $3.8 million from the reissuance of treasury stock for stock options exercised, $15.5 million for the issuance of common stock as a result of the purchase accounting transaction with Alliance, and a $248,000 increase in other comprehensive income. Such increases were partially offset by cash dividends declared on the Company’s common stock of $5.3 million and repurchases of $18.6 million of the Company’s common stock that were placed into treasury.

On June 25, 2004, the Company announced a new Stock Repurchase Program authorizing the repurchase of up to 175,000 common shares. During the quarter ended September 30, 2004, the Company repurchased a total of 52,100 shares of its Common Stock under publicly announced Stock Repurchase Programs. Table 5 details these purchases during the quarter.

Table 5 – Stock Repurchases


Period	Number of Shares Purchased	Average Price Paid per Share		Number of Shares Purchased as Part of Publicly Announced Plans	Maximum Number of Shares that May Yet Be Purchased Under Plans
July 1-31, 2004	6,000	$	56.55	6,000	167,933
August 1-31, 2004	46,100	$	54.87	46,100	121,833
September 1-30, 2004	—		—	—	121,833

Total	52,100	$	55.06	52,100

No shares were repurchased during the quarter ended September 30, 2004, other than through publicly announced plans.

RESULTS OF OPERATIONS

Net income for the third quarter of 2004 totaled $7.0 million, compared to $6.1 million earned during the third quarter of 2003, an increase of $959,000, or 15.8%. For the nine months ended September 30, 2004, the Company reported net income of $20.0 million, compared to $17.3 million earned during the same period of 2003, an increase of $2.7 million, or 15.9%.

Included in earnings are the results of operations of Acadiana from the acquisition date of February 28, 2003 forward and Alliance from the acquisition date of February 29, 2004 forward.

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 analysis 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.

Net interest income increased $2.5 million, or 15.2%, to $19.2 million for the three months ended September 30, 2004, compared to $16.7 million for the three months ended September 30, 2003. The increase was due to a $4.0 million, or 16.5%, increase in interest income, which was partially offset by a $1.4 million, or 19.4%, increase in interest expense. The increase in net interest income was the result of a $338.0 million, or 18.0%, increase in the average balance of earning assets, which was partially offset by a $313.2 million, or 19.0%, increase in the average balance of interest-bearing liabilities. The yield on average earnings assets declined 8 basis points during this period, while the rate on average interest-bearing liabilities increased 1 basis point over the same period.

For the nine months ended September 30, 2004, net interest income increased $5.6 million, or 11.4%, to $55.3 million, compared to $49.7 million for the first nine months of 2003. The increase in net interest income was the result of a $351.3 million, or 20.0%, increase in the average balance of earning assets, which was partially offset by a $335.6 million, or 21.9%, increase in the average balance of interest-bearing liabilities. The yield on average earnings assets declined 41 basis points during this period, while the rate on average interest-bearing liabilities declined only 15 basis points over the same period.

The Company’s average interest rate spread, which is the difference between the yields earned on earning assets and the rates paid on interest-bearing liabilities, was 3.38% during the three months ended September 30, 2004, compared to 3.47% for the comparable period in 2003. 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 3.58% during the three months ended September 30, 2004, compared to 3.68%, for the comparable period in 2003.

The improvement in net interest income for both the three month and nine month periods ended September 30, 2004, as compared to the same periods in 2003, was primarily the result of increased volumes. Although earnings improved through increased net interest income, the related net interest spread and margin ratios compressed. The Company has been generally affected by the overall low level of rates, which has resulted in a limited ability to reduce transaction deposit accounts rates further, while at the same time asset yields trended down due to competitive pressures.

On a longer-term basis, the Company is most impacted by the duration of the low rate environment and significant refinancing of its asset base during this period which has resulted in lower spreads. Additionally, the change in the balance sheet mix as a result of the recent Acadiana and Alliance acquisitions, as well as the subsequent purchase accounting adjustments marking these portfolios to current market yields, while positive to net interest income, lowered both the net interest spread and margin. More recently, deposit growth has primarily consisted of transaction based accounts with shorter repricing expectations. Asset growth in excess of deposit increases has been funded primarily with short-term liabilities. Currently, under traditional measures of interest rate gap positions, the Company is moderately liability sensitive and will be impacted by the flattening of the yield curve if short-term rates rise and longer-term rates do not move upward at the same pace. The Company is currently taking steps to modify this position.

As of September 30, 2004, the Company’s financial model indicated that an immediate and sustained 100 basis point rise in rates over the next 12 months would approximate a 0.50% decrease in net interest income, while a 100 basis point decline in rates over the same period would approximate a 1.70% increase in net interest income from an unchanged rate environment. A similar 200 basis point rise in rates for the same period would approximate a 1.88% decrease in net interest income. Computations of interest rate risk do not necessarily include certain actions that management may undertake to manage this risk in response to anticipated changes in interest rates.

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.

Table 6 presents average balance sheets, net interest income and average interest rates for the three and nine month periods ended September 30, 2004 and 2003.

Table 6 - Average Balances, Net Interest Income and Interest Yields / Rates

The following table sets forth, for the periods indicated, information regarding (i) the total dollar amount of interest income of the Company from earning assets and the resultant average yields; (ii) the total dollar amount of interest expense on interest-bearing liabilities and the resultant average rate; (iii) net interest income; (iv) net interest spread; and (v) net interest margin. Information is based on average daily balances during the indicated periods. Investment security market value adjustments and trade-date accounting adjustments are not considered to be earning assets and, as such, the net effect of the adjustments is included in nonearning assets. Tax equivalent (TE) yields are calculated using a marginal tax rate of 35%.


	Three Months Ended September 30,														Nine Months Ended September 30,
	2004							2003							2004							2003
(dollars in thousands)	Average Balance			Interest		Average Yield/ Rate ⁽¹⁾		Average Balance			Interest		Average Yield/ Rate ⁽¹⁾		Average Balance			Interest		Average Yield/ Rate ⁽¹⁾		Average Balance			Interest		Average Yield/ Rate ⁽¹⁾
Earning assets:
Loans receivable:
Mortgage loans	$	405,511		$	5,506	5.43	%	$	368,491		$	5,407	5.87	%	$	393,356		$	16,227	5.50	%	$	325,478		$	15,149	6.21	%
Commercial loans (TE)⁽²⁾		654,772			7,749	4.86			528,149			6,565	5.11			612,251			21,273	4.79			496,829			19,216	5.35
Consumer and other loans		504,839			8,192	6.46			470,963			8,214	6.92			490,621			24,129	6.57			452,017			24,520	7.25
Lease financing receivables		1,550			22	5.55			1,865			26	5.41			1,629			68	5.48			1,940			81	5.48

Total loans		1,566,672			21,469	5.52			1,369,468			20,212	5.94			1,497,857			61,697	5.56			1,276,264			58,966	6.24
Mortgage loans held for sale		8,488			101	4.76			23,034			341	5.92			9,781			361	4.92			16,765			712	5.66
Investment securities (TE)^{(2) (3)}		600,659			6,259	4.40			445,602			3,351	3.33			561,277			17,010	4.29			421,689			11,142	3.83
Other earning assets		36,351			218	2.39			36,099			178	1.96			37,658			573	2.03			40,514			581	1.92

Total earning assets		2,212,170			28,047	5.16			1,874,203			24,082	5.24			2,106,573			79,641	5.15			1,755,232			71,401	5.56

Allowance for loan losses		(19,721	)						(17,097	)						(19,318	)						(16,074	)
Nonearning assets		202,923							192,982							215,228							176,613

Total assets	$	2,395,372						$	2,050,088						$	2,302,483						$	1,915,771

Interest-bearing liabilities:
Deposits:
NOW accounts	$	516,417			1,490	1.15		$	389,478			857	0.87		$	506,120			3,942	1.04		$	335,016			2,296	0.92
Savings and money market accounts		413,115			803	0.77			362,865			665	0.73			401,771			2,307	0.77			353,421			2,289	0.87
Certificates of deposit		626,960			3,833	2.43			628,419			3,762	2.37			624,640			11,126	2.38			600,714			11,459	2.55

Total interest-bearing deposits		1,556,492			6,126	1.57			1,380,762			5,284	1.52			1,532,531			17,375	1.51			1,289,151			16,044	1.66
Short-term borrowings		227,549			802	1.38			99,263			293	1.15			177,116			1,675	1.24			105,144			1,031	1.29
Long-term debt		175,032			1,888	4.22			165,840			1,806	4.26			162,328			5,275	4.27			142,035			4,649	4.32

Total interest-bearing liabilities		1,959,073			8,816	1.78			1,645,865			7,383	1.77			1,871,975			24,325	1.73			1,536,330			21,724	1.88

Noninterest-bearing demand deposits		212,931							193,449							203,839							181,470
Noninterest-bearing liabilities		13,507							23,158							18,467							21,561

Total liabilities		2,185,511							1,862,472							2,094,281							1,739,361
Shareholders’ equity		209,861							187,616							208,202							176,410

Total liabilities and shareholders’ equity	$	2,395,372						$	2,050,088						$	2,302,483						$	1,915,771

Net earning assets	$	253,097						$	228,338						$	234,598						$	218,902

Ratio of earning assets to interest-bearing liabilities		112.92	%						113.87	%						112.53	%						114.25	%

Net interest spread				$	19,231	3.38	%				$	16,699	3.47	%				$	55,316	3.42	%				$	49,677	3.68	%

Tax equivalent benefit						0.12	%						0.14	%						0.13	%						0.15	%

Net interest income (TE) / Net interest margin (TE) (2)				$	19,950	3.58	%				$	17,383	3.68	%				$	57,398	3.62	%				$	51,590	3.91	%

⁽¹⁾	Annualized.

⁽²⁾	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%.

⁽³⁾	Balances exclude unrealized gain or loss on securities available for sale and impact of trade date accounting.

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.

As a result of continued improvement in asset quality, the Company lowered the loan loss provision during the quarter ended September 30, 2004 to $857,000 compared to $1.6 million for the same period in 2003. For the nine months ended September 30, 2004, the provision for loan losses was $2.6 million compared to $4.7 million for the first nine months of 2003. The allowance for loan losses as a percentage of outstanding loans, net of unearned income, was 1.24% at September 30, 2004, compared to 1.25% at September 30, 2003, and 1.29% at December 31, 2003.

Noninterest Income– The Company’s total noninterest income was $5.9 million for the three months ended September 30, 2004, $657,000, or 10.1%, lower than the $6.5 million earned for the same period in 2003. The primary reasons for the decrease in noninterest income were a $907,000 decrease in gains on the sale of mortgage loans in the secondary market and a $182,000 decrease in the gain on sale of investment securities. These decreases were partially offset by a $244,000 increase in service charges on deposit accounts, a $120,000 increase in broker sales commissions, and a $75,000 increase in ATM/debit card fee income.

For the nine months ended September 30, 2004, total noninterest income decreased $144,000, or 0.8%, from $17.4 million to $17.2 million compared to the nine months ended September 30, 2003. The primary reasons for the decrease in noninterest income were a $1.3 million decrease in gains on the sale of mortgage loans in the secondary market and a $154,000 decrease in gains on the sale of fixed assets. These decreases were partially offset by a $641,000 increase in service charges on deposit accounts, a $390,000 increase in broker sales commissions, a $212,000 increase in the gain on sale of investment securities, and a $94,000 increase in ATM/debit card fee income. Table 7 illustrates the changes in each significant component of noninterest income.

On a forward-looking basis, gains on the sale of mortgage loans will generally depend on mortgage interest rates. Over time, an increase in rates should reduce origination fees and profit from the sale of loans, while a decrease in rates should increase this revenue.

Table

7 – Noninterest Income


	Three Months Ended						Nine Months Ended
	September 30,				Percent Increase (Decrease)		September 30,				Percent Increase (Decrease)
(dollars in thousands)	2004		2003		Percent Increase (Decrease)		2004		2003		Percent Increase (Decrease)
Service charges on deposit accounts	$	3,317	$	3,073	7.9	%	$	9,266	$	8,625	7.4	%
ATM/debit card fee income		523		448	16.7			1,474		1,380	6.8
Gain on sale of mortgage loans, net		592		1,499	(60.5	)		2,059		3,333	(38.2	)
Gain on sale of assets		9		18	(50.0	)		51		205	(75.1	)
Gain on sale of investments, net		7		189	(96.3	)		479		267	79.4
Other income		1,409		1,287	9.5			3,909		3,572	9.4

Total noninterest income	$	5,857	$	6,514	(10.1	)%	$	17,238	$	17,382	( 0.8	)%

Noninterest Expense – The Company’s total noninterest expense was $14.2 million for the three months ended September 30, 2004, $1.3 million, or 10.1%, higher than the $12.9 million incurred for the same period in 2003. Noninterest expense increased $3.9 million, or 10.5%, for the nine months ended September 30, 2004, to $41.5 million, compared to $37.5 million for the nine months ended September 30, 2003. Table 8 illustrates the changes in each significant component of noninterest expense.

Table 8 – Noninterest Expense


	Three Months Ended						Nine Months Ended
	September 30,				Percent Increase (Decrease)		September 30,				Percent Increase (Decrease)
(dollars in thousands)	2004		2003		Percent Increase (Decrease)		2004		2003		Percent Increase (Decrease)
Salaries and employee benefits	$	7,923	$	6,799	16.5	%	$	22,557	$	19,568	15.3	%
Occupancy and equipment		1,720		1,653	4.1			5,134		4,711	9.0
Franchise and shares tax		714		553	29.1			2,132		1,605	32.8
Communication and delivery		730		735	(0.7	)		2,093		2,135	(2.0	)
Marketing and business development		333		215	54.9			1,143		790	44.7
Data processing		375		456	(17.8	)		1,135		1,348	(15.8	)
Printing, stationery and supplies		200		223	(10.3	)		636		643	(1.1	)
Amortization of acquisition intangibles		222		232	(4.3	)		674		564	19.5
Other expenses		2,012		2,057	(2.2	)		5,953		6,148	(3.2	)

Total noninterest expense	$	14,229	$	12,923	10.1	%	$	41,457	$	37,512	10.5	%

The increase in noninterest expense for the three month period ending September 30, 2004 as compared to the same period in 2003, primarily related to a $1.1 million increase in salaries and employee benefits expense due to increased staffing associated with the Alliance acquisition, several tactical hires and the rising cost associated with the increased market value of the Company’s common stock as it relates to the Company’s ESOP. Also included in this increase were higher one-time expenses associated with recruiting new personnel of approximately $173,000 over the same period a year ago. Increases in other non-interest expense items included $161,000 in franchise and share tax assessments, $118,000 in marketing and business development expenses, and $67,000 in occupancy and equipment expense. These increases were partially offset by a decrease of $81,000 in data processing expense and $10,000 in amortization of acquisition intangibles.

For the nine months ended September 30, 2004 as compared to the same period in the prior year, the increase in noninterest expense was due primarily to a $3.0 million increase in salaries and employee benefits as a result of increased staffing levels associated with the Acadiana and Alliance acquisitions and other reasons noted above. Other increases included $527,000 in the franchise and share tax assessments, $423,000 in occupancy and equipment expense, and $353,000 in marketing and business development expenses. These increases were partially offset by a decrease of $213,000 in data processing expense. Amortization of acquisition intangibles increased $110,000 in association with the Acadiana acquisition.

Income Tax Expense – Income tax expense increased $352,000, or 13.5%, for the three months ended September 30, 2004 to $3.0 million, compared to $2.6 million for the three months ended September 30, 2003. The effective tax rates for the three months ended September 30, 2004 and 2003 were 29.7% and 30.1%, respectively. For the nine months ended September 30, 2004, income tax expense increased $942,000, or 12.5%, to $8.5 million, compared to $7.5 million for the nine months ended September 30, 2003. The effective tax rates for the nine months ended September 30, 2004 and 2003 were 29.7% and 30.3%, respectively.

The increase in income tax expense was principally due to the increase in pre-tax earnings. The difference between the effective tax rate and the statutory tax rate primarily relates to variances in items that are either nontaxable or nondeductible, mainly the nondeductible portion of the ESOP compensation expense, nontaxable portion of interest income from municipal investments and loans and nontaxable increase in cash surrender value on bank owned life insurance policies.

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 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 September 30, 2004 totaled $333.7 million. Based on past experience, management believes that a significant portion of maturing deposits will remain with the Company, including those obtained through acquisitions. Additionally, the majority of the investment securities 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.

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 September 30, 2004, the Company had $335.1 million of outstanding advances from the FHLB of Dallas. The Company and IBERIABANK also have various funding arrangements with commercial banks providing up to $75 million in the form of federal funds and other lines of credit. At September 30, 2004, the Company had no outstanding balance on a $15.0 million line of credit with a correspondent bank. In addition, the Company had issued junior subordinated debt of $30 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.

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. At September 30, 2004, the total approved loan commitments outstanding amounted to $25.4 million. At the same time, commitments under unused lines of credit, including credit card lines, amounted to $298.1 million.

At September 30, 2004, the Company and IBERIABANK had regulatory capital that was in excess of regulatory requirements. The Company’s actual levels and current requirements as of September 30, 2004 are detailed below:


	Actual Capital				Required Capital
(dollars in thousands)	Amount		Percent		Amount		Percent
Tier 1 Leverage	$	174,582	7.50	%	$	93,073	4.00	%
Tier 1 Risk-Based	$	174,582	11.00	%	$	63,503	4.00	%
Total Risk-Based	$	194,427	12.25	%	$	127,006	8.00	%

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Quantitative and qualitative disclosures about market risk are presented at December 31, 2003 in Item 7A of the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 15, 2004. Additional information required for this Item 3 is included herein under Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

Item 4. Controls and Procedures

An evaluation of the effectiveness of the Company’s disclosure controls and procedures as of September 30, 2004, 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 Securities Exchange Act of 1934 (the “Exchange Act”).

Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed by the Company under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to the Company’s management, including the CEO and the CFO, as appropriate, to allow timely decisions regarding required disclosures. Disclosure controls include review of internal controls that are designed to provide reasonable assurance that transactions are properly authorized, assets are safeguarded against unauthorized or improper use and transactions are properly recorded and reported. 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 control over financial reporting.

The Company will become subject to Section 404 of The Sarbanes-Oxley Act of 2002 effective December 31, 2004. That law requires management to assess and report on the effectiveness of the Company’s internal controls over financial reporting. Additionally, it requires the Company’s independent registered public accounting firm to report on management’s assessment as well as report on its own assessment of the effectiveness of the Company’s internal controls over financial reporting.

Any control system, no matter how well conceived and operated, can provide only reasonable assurance that its objectives are achieved. The design of a control system inherently has limitations, including the controls’ cost relative to their benefits. Additionally, controls can be circumvented. No cost-effective control system can provide absolute assurance that all control issues and instances of fraud, if any, will be detected.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Not Applicable

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Information regarding purchases of equity securities is included herein on page 16 under Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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 September 29, 2004, American Horizons Bancorp, Inc. (“American Horizons”), the holding company for American Horizons Bank of Monroe, Louisiana, entered into an Agreement and Plan of Merger (the “Agreement”) with the Company, pursuant to which American Horizons will be acquired by the Company. The Agreement calls for shareholders of American Horizons to receive 0.3771 shares of the Company’s common stock per outstanding share of American Horizons common stock, subject to adjustment based on the market price of the Company’s common stock. In addition, shareholders of American Horizons have the right to receive an additional cash payment of up to $1.6 million, based on the successful disposition of predetermined loans prior to closing. Based on the closing price of the Company’s common stock on September 28, 2004 of $57.00 per share, the transaction has an estimated total value of $48.2 million, assuming exercise of all outstanding stock options and a full cash payment of $1.6 million. American Horizons will have 2,167,093 shares outstanding at closing assuming exercise of all outstanding stock options.

The foregoing information does not purport to be complete and is qualified in its entirety by reference to the Agreement attached as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated September 29, 2004, and made a part hereof by reference thereto. The press release issued by the Company on September 29, 2004 also is incorporated herein by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K dated September 29, 2004.

Item 6. Exhibits and Reports on Form 8-K

(a)

Exhibit Index.


Exhibit No. 31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit No. 31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit No. 32.1		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit No. 32.2		Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b)

Reports on Form 8-K.

(1) Current Report on Form 8-K dated July 21, 2004, furnishing under Item 12, the announcement of the Company’s results of operations for the quarter and six months ended June 30, 2004.

(2) Current Report on Form 8-K dated July 22, 2004, furnishing under Item 9, management’s confirmation of EPS guidance for 2004 and guidance for 2005.

(3) Current Report on Form 8-K dated September 20, 2004, furnishing under Items 1.01 and 2.03, announcement of completion of a trust preferred securities financing in the amount of $10 million and the related entrance into a Junior Subordinated Indenture, a Placement Agreement, a Guarantee Agreement and an Amended and Restated Trust Agreement. Also, under Item 8.01, the announcement of the Company’s declaration of a quarterly cash dividend of $0.28 per share.

(4) Current Report on Form 8-K dated September 29, 2004, furnishing under Item 1.01, announcement of a definitive merger agreement between the Company and American Horizons Bancorp, Inc.

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: November 9, 2004	By:	/s/ Daryl G. Byrd
		Daryl G. Byrd
		President and Chief Executive Officer

Date: November 9, 2004	By:	/s/ Marilyn W. Burch
		Marilyn W. Burch
		Executive Vice President and Chief Financial Officer

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