Iberiabank to Take $32M Hit Tied to FDIC Deals

Iberiabank (IBKC) in Lafayette, La., will record a $32 million charge for the first quarter because of delays in the repayment of loans it bought from failed banks.

The $1.3 billion-asset company, which is set to announce its quarterly results on April 25, said Monday that the expected charge is tied to delays collecting on about $1.1 billion in loans made by four banks it bought from the Federal Deposit Insurance Corp. since 2009.

Iberia also said it expects to incur about $24 million in costs over the next two years because of how it plans to account for certain loss-sharing agreements with the FDIC.

Iberia said it has a plan to boost revenue and cut costs, which should add about $20 million to annual pretax earnings.

Iberia's purchases of CapitalSouth Bank in Birmingham, Ala.; Orion Bank in Naples, Fla.; Century Bank in Sarasota, Fla.; and Omni Bancshares in Metairie, La., brought in "tremendous franchises," Daryl Brown, Iberia's chief executive, told analysts during a conference call Monday morning. Still, resolving some of the loans acquired as part of the deals "has been very challenging for early adopters like us."

As part of the deals, the FDIC agreed to reimburse Iberia for loans the company bought if those loans turned out to be uncollectible. Iberia said that borrower repayments have exceeded expectations, leading to reduced reimbursements from the FDIC. Iberia also said that foreclosure-related delays and challenges to its ability to sell troubled loans in bulk have slowed its ability to recover repayments.

Iberia also said that it had adopted a standard published in October by the Financial Accounting Standards Board that will reduce the period that the company can write down certain assets acquired from the failed banks to five years from eight years. The change should increase Iberia's amortization expense by $24 million over the next two years. It will also lower yields on loans covered by the FDIC agreements by roughly 200 basis points.

Iberia said that its effort to operate more efficiently will largely offset the added amortization charge this year, but that the value of the savings would continue to improve earnings starting in 2014.