It was a messy third quarter at Iberiabank in Lafayette, La.
The $21.7 billion-asset company warned investors late Wednesday that it recorded nearly $48 million in expenses associated with Hurricanes Irma and Harvey, a recent acquisition and a lawsuit tied to its mortgage business. The company also had $17 million in chargeoffs, largely tied to its energy book.
Iberiabank, which will report its earnings after the markets close on Oct. 19, shared the information in an effort to be transparent, Daryl Byrd, the company’s president and CEO, said in the release. “As always, we want to keep our shareholders abreast of the changing dynamics of the matters that affect our business,” he said.
The company said to expect an $8.5 million loan-loss provision associated with the hurricanes that hit Florida and Texas in recent weeks.
Iberiabank has eight branches with $2.6 billion in total loan commitments and $1.7 billion in loans outstanding in the Houston area, which was hard hit by Harvey in August. It also has 9.1 billion in total loan commitments and $7.7 billion in loan outstanding in Florida, including operations it obtained from it purchase of Sabadell United Bank.
While it suffered “minimal damage and incremental expense related” to its physical infrastructure from these storms, the company said it expects a short-term decline in business activity. Over time, however, deposit volumes and business economic activity could exceed historic norms, based on the company’s experiences with Hurricanes Katrina and Rita and last year’s major flooding in Louisiana.
Iberiabank also disclosed that it is working to resolve an issue with the Department of Housing and Urban Development. Last year, the company said it had received a subpoena from the agency’s Office of Inspector General seeking information about origination and quality-control practices for loans insured by the Federal Housing Administration.
The company later disclosed that it was the defendant in a lawsuit filed in U.S. District Court in Arkansas by two former employees of its mortgage business.
The company reached an $11.7 million settlement, subject to final review and approval by the Justice Department. Iberiabank had previously disclosed that its potential exposure was between $6 million and $17 million. Iberiabank, which had already set aside $6 million, reserved another $5.7 million in the third quarter, adding that it also plans to pursue insurance coverage.
As for its energy book, the company said it would record $17 million in chargeoffs in the third quarter, noting that it had made “significant progress” resolving nonaccruals. The company said the chargeoffs are tied to energy customers with nonaccrual loans that successfully negotiated prepackaged bankruptcies.
Iberiabank said it had previously reserved $7.8 million to cover those chargeoffs. The remaining $9.2 million in expected chargeoffs falls in the lower-end of the company’s previously forecast of possible losses.
The company said it still has $62.4 million in energy-related nonaccruals, consisting of ten credits that management believes are adequately collateralized and have appropriate reserves.
Iberiabank also warned that it had a $6 million chargeoff for a single non-energy commercial credit.
Finally, the company said it expects to record $30 million in merger- and severance-related expenses and $3 million for branch closures tied to the Sabadell United purchase.
