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 three- and nine-month periods ended September 30, 2009. 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 2008 Annual Report on Form 10-K, and Part II, Item 1A of the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2009.

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, the risk factors described in Part I, Item 1A of the Company's 2008 Annual Report on Form 10-K.

THIRD QUARTER OVERVIEW

The Company's results of operations, financial condition, and liquidity for the nine months ended September 30, 2009 were significantly impacted by IBERIABANK's whole-bank acquisition of CapitalSouth Bank, a full-service commercial bank headquartered in Birmingham, Alabama ("CSB"), from the FDIC on August 21, 2009. IBERIABANK now operates ten former CSB branches in four Metropolitan Statistical Areas ("MSAs"): Birmingham, Montgomery, and Huntsville, Alabama, and Jacksonville, Florida. The acquisition was accounted for under the purchase method of accounting in accordance with generally-accepted accounting principles. Both the assets purchased and liabilities assumed were recorded at their respective acquisition-date fair values. The Company acquired assets of $535.9 million, which include loans of $363.8 million, investment securities of $46.0 million, and cash and fed funds sold of $9.5 million. In addition, the Company recorded a loss share receivable, representing the portion of estimated losses covered by a loss share agreement between IBERIABANK and the FDIC, of $87.0 million, which affords IBERIABANK significant protection against future losses. The Company also recorded a core deposit intangible asset of $0.4 million as part of the acquisition.

The Company assumed liabilities $552.7 million, which include $517.2 million in deposits and customer repurchase agreements, $30.6 million in long-term debt in the form of FHLB borrowings, and $4.9 million in other liabilities, including accrued interest.

Because the fair value of assets acquired and intangible assets created as a result of the acquisition exceeds the fair value of liabilities assumed, generally-accepted accounting principles allow the Company to record a gain resulting from the acquisition in its consolidated statements of income for the three and nine months ended September 30, 2009. The gain totaled $57.8 million for the three- and nine-months ended September 30, 2009.

In addition to the CSB acquisition, the Company's operating results and financial condition were also affected by the redemption on March 31, 2009 of the Company's Fixed Rate Cumulative Preferred Stock, Series A (the "preferred stock") held by the United States Department of the Treasury (the "Treasury"). On the redemption date, the Company paid $90.6 million to the Treasury to redeem the preferred stock and pay the accrued dividend. At the time of payment, the preferred stock had a carrying value of $87.8 million. The remaining $2.7 million included an accrued dividend of $0.6 million and an accelerated deemed dividend of $2.1 million. As a result, for the nine months ended September 30, 2009, the dividend paid on the preferred shares totaled $3.4 million, reducing income available to common shareholders by the same amount.

The Company's results of operations were also impacted by a change in accounting principle effective in the first quarter of 2009. In September 2008, the Financial Accounting Standards Board ("FASB") issued FASB EITF No. 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (ASC 260). EITF 03-6-1 clarifies share-based payment awards that entitle holders to receive non-forfeitable dividends before vesting should be considered participating securities and thus included in the calculation of basic earnings per share. Effective January 1, 2009, these awards are now included in the calculation of basic earnings per share under the "two-class" method, a change that reduces both basic and diluted earnings per share. The "two-class" method allocates earnings for the period between common shareholders and other security holders. All prior period earnings per share data presented has been adjusted retrospectively to conform to the provisions of the principle. As a result of the adoption, basic and diluted income per common share for the quarter ended September 30, 2009 were $0.03 per share lower than they would have been under the previously-used "treasury stock" method of per share calculation. For the three months ended September 30, 2008, basic and diluted income per common share were $0.02 lower under the current method than the previously reported method. For the nine months ended September 30, 2009, basic and diluted income per common share were $0.06 per share lower than under the previous method, and $0.07 lower per common share for the nine months ended September 30, 2008. Adoption had no effect on the Company's retained earnings or other components of equity. For additional information, see Note 3 to the Company's consolidated financial statements.

During the third quarter of 2009, the Company reported income available to common shareholders of $25.0 million, or $1.22 per common share on a diluted basis, representing a 185.0% increase compared to net income available to common shareholders of $8.8 million earned for the third quarter of 2008. On a per share basis, this represents an 84.6% increase from the $0.66 per diluted share earned for the third quarter of 2008. For the year, the Company reported income available to common shareholders of $39.2 million, an increase of $7.6 million, or 24.0%, from the same period in 2008. Earnings per diluted share were down 7.7%, or $0.18, during the first nine months of 2009.

Key components of the Company's performance are summarized below.

• Total assets at September 30, 2009 were $6.5 billion, an increase of $883.3 million, or 15.8%, from $5.6 billion at December 31, 2008. The increase was a result of the CSB assets acquired on August 21, 2009, as well as organic growth at the Company's IBERIABANK and IBERIABANK fsb subsidiaries. Asset growth was tempered by the preferred stock redemption in March 2009.

• Total shareholders' equity increased $116.4 million, or 15.9%, from $734.2 million at December 31, 2008 to $850.6 million at September 30, 2009. Shareholders' equity was impacted by the issuance of 4.4 million additional shares of the Company's common stock in July 2009 as part of an underwritten public equity offering. Additionally, net income of $42.6 million and other comprehensive income of $12.9 million earned during the first nine months of 2009 contributed to this increase. The increase was partially offset by the redemption of the Company's preferred stock during the first quarter of 2009.

• On May 20, 2009, the Company entered into a Warrant Repurchase Agreement (the "Repurchase Agreement") with the Treasury to repurchase the warrant to purchase 138,490 shares of the Company's common stock that the Company had issued and sold to the Treasury (the "Warrant") in connection with the Company's issuance and sale to the Treasury of $90 million aggregate liquidation preference of its preferred stock under the Treasury's Capital Purchase Program (the "CPP"). The Company repurchased the Warrant for $1.2 million. As a result of the Warrant repurchase, the Treasury does not own any Company securities under the CPP. A copy of the Repurchase Agreement is attached as Exhibit 10.1 to the Company's Current Report on Form 8-K dated May 20, 2009 (filed on May 20, 2009) and is incorporated herein by reference.

• Total loans at September 30, 2009 increased to $4.3 billion, a $554.4 million increase over December 31, 2008. Loan growth was driven by the Company's acquisition of CSB loans during the third quarter of 2009. The increase was seen primarily in the commercial loan portfolio, as commercial loans increased $516.1 million, or 22.5%.

• Total customer deposits increased $779.9 million, or 19.5%, from $4.0 billion at December 31, 2008 to $4.8 billion at September 30, 2009. The increase was attributable to the deposits acquired from CSB in August 2009. Growth was seen primarily in the Company's NOW savings and money market products.

• Net interest income increased $5.5 million, or 15.6%, for the three months ended September 30, 2009, compared to the same period of 2008. For the nine months ended September 30, 2009, net interest income increased $14.8 million, or 14.7%, compared to the same period of 2008. These increases were attributable to growth in the IBERIABANK and IBERIABANK fsb loan portfolios, as well as the Company's improved liquidity position. Because the proceeds provided by the Company's common and preferred stock issuances in late 2008 and 2009 provided the Company working capital of over $364 million, the Company was able to decrease its short-term borrowings, resulting in a $2.9 million, or 73.1%, decrease in short-term interest expense for the current nine-month period from September 30, 2008. The corresponding net interest margin ratios on a tax-equivalent basis were 3.03% and 3.01% for the quarters ended September 30, 2009 and 2008, respectively, and 3.07% and 2.97% for the nine months ended September 30, 2009 and 2008, respectively.

• Noninterest expense increased $10.9 million, or 25.1%, for the quarter ended September 30, 2009, as compared to the same quarter last year. For the nine months ended September 30, 2009, noninterest expense increased $27.5 million, or 22.8%, compared to the same period of 2008. The increase resulted primarily from higher salary and benefit costs of $5.9 million and $13.4 million for the three- and nine-month periods, respectively, as the Company has paid higher mortgage incentive commissions due to the increased mortgage activity during 2009, as well as hired additional executives and other personnel to continue staffing the Company's new markets and expanded operating activities. Noninterest expense also included a $6.4 million increase in net costs of OREO property for the nine months of 2009, as the Company has moved an increased number of properties into OREO. FDIC assessments have increased $5.0 million in the current year, as the Company is currently subject to additional insurance assessments enforced by the FDIC on all financial institutions. The Company incurred a special FDIC deposit insurance assessment in the second quarter of 2009 of $2.6 million.

• The Company recorded a provision for loan losses of $25.3 million during the third quarter of 2009, compared to a provision of $2.1 million for the third quarter of 2008. For the nine months ended September 30, 2009, the Company recorded a provision of $36.1 million, compared to a provision of $6.4 million for the same period in 2008. The increase in provisions for the three- and nine-month periods of 2009 is attributable to loan portfolio growth and a decline in overall asset quality, primarily in the third quarter of 2009, in portions of the Company's loan portfolios. As of September 30, 2009, the allowance for loan losses as a percent of total loans was 1.13%, a four basis point increase over the 1.09% at December 31, 2008. Net charge-offs for the third quarter of 2009 were $23.0 million, or 2.26% of average loans on an annualized basis, compared to $2.3 million, or 0.26%, a year earlier.

• In September 2009, the Company's Board of Directors declared a quarterly cash dividend of $0.34 per common share, consistent with the same quarter of 2008 and the first two quarters of 2009.

FINANCIAL CONDITION

Earning Assets

Earning assets are composed of interest or dividend-earning 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 $5.5 billion during the quarter ended September 30, 2009, an increase of $739.0 million, or 15.5%, from the year ended December 31, 2008 and $742.6 million, or 15.5% from September 30, 2008. For the nine months ended September 30, 2009, average earning assets totaled $5.2 billion, an increase of $537.9 million, or 11.6%, from the same period of 2008, and an increase of $498.2 million, or 10.7%, from the year ended December 31, 2008.

Loans and Leases - The average loan portfolio increased $323.6 million, or 9.2%, during the first nine months of 2009. On a period end basis, the loan portfolio increased $554.4 million, or 14.8%, of which $363.8 million, or 65.6%, was due to loans acquired from CSB. Organic growth, defined as total growth excluding the acquired CSB assets, was $190.7 million, or 5.1%.

The Company's average loan to deposit ratios at September 30, 2009 and December 31, 2008 were 91.0% and 92.4%, respectively. At September 30, 2009, the percentage of fixed rate loans within the total loan portfolio decreased to 61% from 67% at year-end. The following table sets forth the composition of the Company's loan portfolio as of the dates indicated.

                                         September 30,      December 31,       Increase/(Decrease)
(dollars in thousands)                       2009               2008           Amount         Percent
Residential mortgage loans:
Residential 1-4 family                  $       519,601    $      498,740    $   20,861           4.2 %
Construction/ Owner Occupied                     19,737            36,693       (16,956 )       (46.2 )%

Total residential mortgage loans                539,338           535,433         3,905           0.7 %
Commercial loans:
Real estate                                   1,808,787         1,522,965       285,822          18.8 %
Business                                      1,005,862           775,625       230,237          29.7 %

Total commercial loans                        2,814,649         2,298,590       516,059          22.5 %
Consumer loans:
Indirect automobile                             267,801           265,722         2,079           0.8 %
Home equity                                     525,721           501,036        24,685           4.9 %
Other                                           151,336           143,621         7,715           5.4 %

Total consumer loans                            994,858           910,379        34,479           3.8 %

Total loans receivable                  $     4,298,845    $    3,744,402    $  554,443          14.8 %

Total commercial loans increased $516.1 million, or 22.5%, compared to December 31, 2008. Commercial loan growth was split evenly between commercial real estate and business loans, which increased 18.8% and 29.7%, respectively, compared to December 31, 2008. The increase was driven by commercial loans acquired in the CSB acquisition, as well as organic growth at IBERIABANK and IBERIABANK fsb. The increase is consistent with the Company's growth strategy and focus on commercial loans.

The consumer loan portfolio increased $34.5 million, or 3.8%, compared to December 31, 2008, driven primarily by growth in home equity loans and lines of credit of $24.7 million. Growth in other consumer loans, which include automobile, credit card, and personal loans, was tempered due to the current economic environment, as consumer activity has trended to saving rather than spending. Consumer loan growth was also impacted by the Company's tightened underwriting standards, a response to a weakened national and regional economy.

Overall loan growth for the third quarter of 2009 was tempered by a minimal increase in mortgage loans to $539.3 million from $535.4 million as of December 31, 2008. The Company tends to retain certain residential mortgage loans to high net worth individuals made through the private banking area. These mortgage loans traditionally have shorter durations, lower servicing costs and provide an opportunity to deepen client relationships. The Company does not originate or hold high loan to value, negative amortization, optional ARM, or other exotic mortgage loans in its portfolio.

As part of the CSB acquisition, the Company acquired $363.8 million in loans. These loans are covered by a loss share agreement with the FDIC which affords IBERIABANK significant loss protection. Under the loss share agreement, the FDIC will cover 80% of covered loan and foreclosed real estate losses up to $135,000,000 and 95% of losses that exceed that amount. Because of the loss protection provided by the FDIC, the risks of the CSB loans and foreclosed real estate are significantly different from those assets not covered under the loss share agreement. Accordingly, the Company presents loans subject to the loss share agreements as "covered loans" in the information below and loans that are not subject to the loss share agreement as "non-covered loans." The balances at September 30, 2009 are presented below.

                                           Non-covered     Covered
        (dollars in thousands)                Loans         Loans        Total
        Residential mortgage loans:
        Residential 1-4 family             $    453,577   $  66,025   $   519,601
        Construction/ Owner Occupied             19,737          -         19,737

        Total residential mortgage loans        473,314      66,025       539,338
        Commercial loans:
        Real estate                           1,589,015     219,772     1,808,787
        Business                                954,714      51,148     1,005,862

        Total commercial loans                2,543,729     270,920     2,814,649
        Consumer loans:
        Indirect automobile                     267,801          -        267,801
        Home equity                             513,875      11,846       525,721
        Other                                   147,285       4,050       151,336

        Total consumer loans                    928,961      15,896       994,858

        Total loans receivable             $  3,946,004   $ 352,841   $ 4,298,845

Asset Quality

The overall credit quality of the Company's originated assets is considered by management to be strong. Declines in asset quality in portions of the Company's portfolio have been noted, but management believes asset quality remains favorable when compared to its peers. Declines in asset quality during 2009 are primarily attributable to the Company's acquisition of CSB in the third quarter of 2009. Management seeks to recognize and disclose significant problem loans quickly and take prompt action in addressing material weaknesses in those credits. The Company will continue to monitor the risk-adjusted level of return within the loan portfolio.

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

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

The Company utilizes an asset risk classification system in compliance with guidelines established by the Federal Reserve Board as part of its efforts to monitor commercial asset quality. In connection with examinations of insured institutions, both federal and state examiners also have the authority to identify problem assets and, if appropriate, classify them. There are three classifications for problem assets: "substandard," "doubtful" and "loss". Substandard assets have one or more defined weaknesses and are characterized by the distinct possibility that the insured institution will sustain some loss if the deficiencies are not corrected. Doubtful assets have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full questionable and there is a high probability of loss based on currently existing facts, conditions and values. An asset classified as loss is not considered collectable and is of such little value that continuance as an asset of the Company is not warranted. Commercial loans with adverse classifications are reviewed by the Loan Committee of the Board of Directors at least monthly. Loans are placed on nonaccrual status when, in the judgment of management, the probability of collection of principal and interest in full is deemed to be insufficient to warrant further accrual. When a loan is placed on nonaccrual status, previously accrued but unpaid interest for the current period is deducted from interest income. Prior period interest is charged-off to the allowance for loan losses.

Real estate acquired by the Company as a result of foreclosure or by deed-in-lieu of foreclosure is classified as other real estate owned ("OREO") until sold, and is carried at the balance of the loan at the time of acquisition or at estimated fair value less estimated costs to sell, whichever is less.

Nonperforming assets, defined as nonaccrual loans, accruing loans past due 90 days or more and foreclosed property, totaled $151.1 million, or 2.34 % of total assets, at September 30, 2009, compared to $46.6 million, or 0.83% of total assets, at December 31, 2008. Of the $151.1 million in nonperforming assets, $114.6 million, or 75.8%, relates to the IBERIABANK franchise, while $36.5 million, or 24.2%, relates to the IBERIABANK fsb franchise. The allowance for loan losses amounted to 1.13% of total loans and 38.1% of total nonperforming loans at September 30, 2009, compared to 1.09% and 134.9%, respectively, at December 31, 2008. The following table sets forth the composition of the Company's nonperforming assets as of the dates indicated.

                                                     September 30,            December 31,
(dollars in thousands)                                   2009                     2008
Nonaccrual loans:
Commercial, financial and agricultural              $       106,847          $       21,433
Mortgage                                                     10,366                   2,423
Loans to individuals                                          6,091                   3,969

Total nonaccrual loans                                      123,304                  27,825
Accruing loans 90 days or more past due                       4,698                   2,481

Total nonperforming loans(1)                                128,002                  30,306
OREO and foreclosed property                                 23,064                  16,312

Total nonperforming assets(1)                               151,066                  46,618
Performing troubled debt restructurings                       5,694                      -

Total nonperforming assets and troubled debt
restructurings(1)                                   $       156,760          $       46,618

Nonperforming loans to total loans(1)                          2.98 %                  0.81 %
Nonperforming assets to total assets(1)                        2.34 %                  0.83 %
Allowance for loan losses to nonperforming
loans(1)                                                       38.1 %                 134.9 %
Allowance for loan losses to total loans                       1.13 %                  1.09 %

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

Total nonperforming assets increased $104.4 million, or 224.1%, from year-end, due primarily to nonperforming assets acquired from CSB. Of IBERIABANK's $114.6 million in nonperforming assets at September 30, 2009, $96.7 million, or 84.4%, was acquired from CSB during the third quarter of 2009. The $96.7 million acquired represents 64.0% of total consolidated nonperforming assets. The nonperforming assets are covered by the loss-sharing agreement with the FDIC. Excluding the CSB assets, IBERIABANK nonperforming assets increased $7.9 million from December 31, 2009.

IBERIABANK fsb's nonperforming assets totaled $36.5 million at September 30, 2009, including $22.7 million of nonaccrual loans, compared to $36.7 million in nonperforming assets at December 31, 2008. The IBERIABANKfsb nonperforming assets are primarily construction and land development loans in Northwest Arkansas and Memphis. The Company's efforts to address risk in the IBERIABANK fsb builder construction portfolio led to a decrease in nonaccrual loans at IBERIABANK fsb. Since year-end, IBERIABANK fsb's nonperforming assets have decreased $0.2 million, or 0.4%. The IBERIABANK fsb builder construction portfolio continued its compression as homes were sold and loans paid down during the first nine months of 2009. The portfolio totaled $12.8 million at . . .