<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1994 Commission File Number 1-10294
HIBERNIA CORPORATION
(Exact name of registrant as specified in its charter)
Louisiana 72-0724532
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
313 Carondelet Street, New Orleans, Louisiana 70130
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code (504) 533-5332
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at October 31, 1994
Class A Common Stock, no par value 96,633,751 Shares
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<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
Hibernia Corporation and Subsidiary September 30 December 31 September 30
Unaudited ($ in thousands) 1994 1993 1993
------------ ----------- ------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $270,340 $254,856 $245,678
Short-term investments 69,749 272,234 195,965
Securities available for sale 529,389 526,636 521,161
Securities held to maturity (estimated fair values at
September 30, 1994, December 31, 1993 and September 30, 1993,
respectively, were $1,584,607, $1,815,109, and $1,780,773) 1,632,539 1,784,561 1,742,334
Loans, net of unearned income 3,081,362 2,745,385 2,664,459
Reserve for possible loan losses (150,178) (168,856) (193,877)
Loans, net 2,931,184 2,576,529 2,470,582
Bank premises and equipment 100,448 93,564 97,296
Customers' acceptance liability 9,750 11,800 3,381
Receivables arising from securities transactions not yet settled 16,737 - -
Other assets 167,656 199,833 212,953
TOTAL ASSETS $5,727,792 $5,720,013 $5,489,350
LIABILITIES
Deposits:
Demand, noninterest-bearing $882,120 $946,326 $854,973
Interest-bearing 4,070,271 3,948,528 3,911,952
Total Deposits 4,952,391 4,894,854 4,766,925
Federal funds purchased and securities sold under
agreements to repurchase 137,632 153,241 127,438
Liability on acceptances 9,750 11,800 3,381
Payables arising from securities transactions not yet settled 16,413 50,875 20,600
Other liabilities 107,641 110,971 99,754
Debt 3,679 23,981 24,521
TOTAL LIABILITIES 5,227,506 5,245,722 5,042,619
SHAREHOLDERS' EQUITY
Preferred Stock, no par value:
Authorized - 100,000,000 shares; issued and
outstanding - none - - -
Class A Common Stock, no par value:
Authorized - 200,000,000 shares; issued
96,924,803, 96,633,258 and 96,605,185 at September 30, 1994,
December 31, 1993, and September 30, 1993 186,096 185,537 185,482
Surplus 392,282 389,691 389,550
Retained earnings (deficit) (63,011) (111,812) (127,801)
Treasury stock at cost, 200,000 shares (1,620) - -
Unrealized gain (loss) on securities available for sale (13,461) 11,275 -
ESOP commitment - (400) (500)
TOTAL SHAREHOLDERS' EQUITY 500,286 474,291 446,731
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $5,727,792 $5,720,013 $5,489,350
See notes to consolidated financial statements.
</TABLE>
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<TABLE>
CONSOLIDATED INCOME STATEMENTS
Hibernia Corporation and Subsidiary
<CAPTION>
3 Months Ended September 30 9 Months Ended September 30
--------------------------- ---------------------------
Unaudited ($ in thousands, except per-share data) 1994 1993 1994 1993
------ ------ ------ ------
<S> <C> <C> <C> <C>
Interest Income
Interest and fees on loans $64,982 $55,098 $180,138 $167,064
Interest on securities available for sale 8,560 8,596 24,612 29,168
Interest on securities held to maturity 23,321 23,359 72,104 67,907
Trading account interest 6 14 20 24
Interest on time deposits in domestic banks - 8 - 188
Interest on federal funds sold and securities
purchased under agreements to resell 1,165 2,135 4,222 7,780
Total Interest Income 98,034 89,210 281,096 272,131
Interest Expense
Interest on deposits 35,177 30,292 96,833 91,187
Interest on federal funds purchased and securities
sold under agreements to repurchase 1,450 964 3,935 2,944
Interest on debt 673 611 1,863 2,003
Total Interest Expense 37,300 31,867 102,631 96,134
Net Interest Income 60,734 57,343 178,465 175,997
Provision for possible loan losses (17,500) 2,355 (17,480) 11,983
Net Interest Income After Provision for
Possible Loan Losses 78,234 54,988 195,945 164,014
Noninterest Income
Trust fees 3,014 3,101 9,463 9,851
Service charges on deposits 9,751 8,933 28,692 26,148
Other service, collection and exchange charges 4,818 3,848 14,458 12,270
Other operating income 3,136 2,577 7,356 7,724
Securities gains (losses), net (1,682) 90 (1,517) 100
Total Noninterest Income 19,037 18,549 58,452 56,093
Noninterest Expense
Salaries and employee benefits 26,098 24,523 81,330 72,837
Occupancy expense, net 5,618 5,754 16,963 16,532
Equipment expense 3,446 3,096 9,638 9,369
Data processing expense 4,816 4,357 14,485 12,755
Foreclosed property expense, net (1,262) 1,167 (5,191) 5,883
Amortization of intangibles 17,487 1,879 20,476 6,119
Other operating expense 17,066 17,458 53,151 53,278
Total Noninterest Expense 73,269 58,234 190,852 176,773
Income Before Income Taxes and Cumulative
Effect of Accounting Change 24,002 15,303 63,545 43,334
Income tax expense 773 1,170 2,524 4,335
Income Before Cumulative Effect of
Accounting Change 23,229 14,133 61,021 38,999
Cumulative effect of accounting change - - - 3,043
Net Income $23,229 $14,133 $61,021 $42,042
Income Per Share
Income before cumulative effect of accounting change $0.24 $0.15 $0.63 $0.41
Cumulative effect of accounting change - - - 0.03
Net Income Per Share $0.24 $0.15 $0.63 $0.44
See notes to consolidated financial statements.
</TABLE>
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<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Hibernia Corporation and Subsidiary
<CAPTION>
Shares of Unrealized
Common Retained Gains (Losses)
Nine Months Ended September 30, 1994 Stock Common Earnings Treasury on Securities ESOP
Unaudited ($ in thousands) Outstanding Stock Surplus (Deficit) Stock Available for Sale Commitment Total
----------- ------- ------- --------- -------- ------------------ ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1993 96,633,258 $185,537 $389,691 ($111,812) $0 $11,275 ($400) $474,291
Net income - - - 61,021 - - - 61,021
Issuance of Common Stock:
Dividend Reinvestment Plan 151,685 290 918 - - - - 1,208
Stock Option Plan 11,954 23 36 - - - - 59
Exercise of Purchase Warrants 127,906 246 106 - - - 352
By pooled companies prior to merger - - 1,542 - - - - 1,542
Cash dividends declared:
Common Stock - - - (11,536) - - - (11,536)
By pooled companies prior to merger - - - (684) - - - (684)
Acquisition of Treasury Stock (200,000) - - - (1,620) - - (1,620)
Change in unrealized valuation of securities
available for sale - - - - - (24,736) - (24,736)
Reduction of ESOP Commitment - - - - - - 400 400
Other - - (11) - - - - (11)
Balances at September 30, 1994 96,724,803 $186,096 $392,282 ($63,011)($1,620) ($13,461) $0 $500,286
<CAPTION>
Shares of Unrealized
Common Retained Gains (Losses)
Nine Months Ended September 30, 1993 Stock Common Earnings Treasury on Securities ESOP
Unaudited ($ in thousands) Outstanding Stock Surplus (Deficit) Stock Available for Sale Commitment Total
Balances at December 31, 1992 95,418,503 $183,204 $388,452 ($166,648) $0 $0 ($594) $404,414
Net income - - - 42,042 - - - 42,042
Issuance of Common Stock:
Dividend Reinvestment Plan 5,636 11 30 - - - - 41
Stock Option Plan 29,893 57 90 - - - - 147
Exercise of Purchase Warrants 1,151,153 2,210 956 - - - - 3,166
Cash dividends declared:
Common Stock - - - (2,508) - - - (2,508)
By pooled companies prior to merger - - - (687) - - - (687)
Reduction of ESOP Commitment - - - - - - 94 94
Other - - 22 - - - - 22
Balances at September 30, 1993 96,605,185 $185,482 $389,550 ($127,801) $0 $0 ($500) $446,731
See notes to consolidated financial statements.
</TABLE>
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<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Hibernia Corporation and Subsidiary
Nine Months Ended September 30
Unaudited ($ in thousands) 1994 1993
Operating Activities
<S> <C> <C>
Net income $61,021 $42,042
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for possible loan losses (17,480) 11,983
Amortization of intangibles and deferred charges 20,475 6,162
Depreciation and amortization 9,222 9,235
Premium amortization, net of discount accretion 12,381 12,831
(Gain) loss on sales of investment securities 1,517 (100)
Gain on sale of assets (5,233) (5,749)
Deferred income taxes (13,295) (6,663)
ORE and other valuation adjustments 69 7,743
Increase in interest receivable and other assets (2,800) (2,566)
Increase (decrease) in interest payable and other liabilities (2,930) 19,264
Net Cash Provided By Operating Activities 62,947 94,182
Investing Activities
Purchases of securities (356,059) (1,097,526)
Maturities of securities 407,699 452,021
Proceeds from sales of securities 16,992 20,218
Net decrease (increase) in loans (481,428) 39,145
Proceeds from sales of loans 146,397 35,781
Purchases of premises, equipment and other assets (15,827) (8,124)
Proceeds from sales of premises and equipment 21,342 27,909
Net Cash Used By Investing Activities (260,884) (530,576)
Financing Activities
Net increase (decrease) in domestic deposits 39,616 (38,134)
Net increase in time deposits - foreign office 17,921 4,241
Net decrease in short-term borrowings (15,609) (314)
Issuance of debt - 8,473
Retirement of debt (20,302) (9,662)
Issuance of common stock 3,150 3,376
Acquisition of treasury stock (1,620) -
Dividends paid (12,220) (3,195)
Net Cash Provided (Used) By Financing Activities 10,936 (35,215)
Decrease in cash and cash equivalents (187,001) (471,609)
Cash and cash equivalents at beginning of year 527,090 913,252
Cash And Cash Equivalents at End of Period $340,089 $441,643
See notes to consolidated financial statements.
</TABLE>
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 BASIS OF PRESENTATION The accompanying unaudited
consolidated financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the
nine-month period ended September 30, 1994, are not necessarily
indicative of the results that may be expected for the year ending
December 31, 1994. For further information, refer to the audited
consolidated financial statements and notes included in the
Registrant's annual report on Form 10-K for the year ended December
31, 1993, and the Registrant's Current Report on Form 8-K dated
October 11, 1994.
Note 2 MERGER AGREEMENTS Mergers with Commercial Bancshares,
Inc., and Bastrop National Bank were effective July 1, 1994.
Mergers with First Bancorp of Louisiana, Inc., and First
Continental Bancshares, Inc., were effective August 1, 1994. These
mergers were accounted for as poolings of interests and
accordingly, financial data for all periods presented have been
restated.
Pending mergers with Pioneer Bancshares Corporation and First State
Bank and Trust Company are expected to be consummated in the fourth
quarter of 1994 pending regulatory and shareholder approval, and
pending mergers with American Bank and STABA Bancshares, Inc. are
expected to be consummated in early 1995 pending regulatory and
shareholder approval. The Company intends to account for all of
these pending mergers as poolings of interests.
Note 3 GOODWILL During the third quarter of 1994, the Company
recorded a $16.1 million charge for the impairment of goodwill
associated with mergers consummated in the mid- to late - 1980's.
As the result of a new organizational structure implemented during
the third quarter of 1994, management conducted an analysis which
estimated the discounted cumulative net income for each of its
primary geographic regions over the remaining amortization period
of the associated goodwill of approximately nine years. Purchase
prices for these acquisitions which gave rise to recording goodwill
reflected management's intent at the time to generate efficiencies
by merging the operations of the acquired banks and increasing
market share from the resulting base. The analysis indicated that
projected performance of the Company's existing franchise in two
regions would not be adequate to support the remaining unamortized
goodwill resulting from previous acquisitions. The impaired
goodwill was written off in one instance, and written down to
realizable value in another during the third quarter. The
remaining goodwill totals $22.6 million.
Note 4 STOCK OPTIONS The Company's stock option plans provide
incentive and non-qualified options to various key employees and
non-employee directors to purchase shares of Class A Common Stock
at no less than the fair market value of the stock at the date of
grant. All options granted prior to 1992 became exercisable six
months from the date of grant. The remaining options granted under
the 1987 Stock Option Plan, the Long-Term Incentive Plan and the
1993 Directors' Stock Option Plan become exercisable in the
following increments: 50% after the expiration of two years from
the date of grant, an additional 25% three years from the date of
grant and the remaining 25% four years from the date of grant.
Options granted under the 1987 Stock Option Plan generally expire
10 years from the date granted. Options granted under the Long-
Term Incentive Plan and the 1993 Directors' Stock Option Plan do
not expire unless the holder dies, retires, becomes permanently
disabled or leaves the employ of the Company, at which time the
options expire at various times ranging from 30 to 180 days. All
options vest immediately upon a change in control of the Company.
At September 30, 1994, the number of shares available for grant
under the 1987 Stock Option Plan, the Long-Term Incentive Plan and
the 1993 Directors' Stock Option Plan amounted to 156,216;
1,120,441; and 845,000, respectively.
The table below summarizes the activity in the plans during the
third quarter of 1994:
<TABLE>
<CAPTION>
Incentive Non-Qualified
1987 STOCK OPTION PLAN
<S> <C> <C>
Outstanding, June 30, 1994 190,741 1,366,750
Granted - 5,000
Canceled - -
Exercised - (7,279)
Outstanding, September 30, 1994 90,741 1,364,471
Exercisable, September 30, 1994 64,068 573,478
LONG-TERM INCENTIVE PLAN
Outstanding, June 30, 1994 12,598 2,492,457
Granted - 38,339
Canceled - (3,748)
Exercised - -
Outstanding, September 30, 1994 12,598 2,527,048
Exercisable, September 30, 1994 - -
1993 DIRECTORS' STOCK OPTION PLAN
Outstanding, June 30, 1994 - 155,000
Granted - -
Canceled - -
Exercised - -
Outstanding, September 30, 1994 - 155,000
Exercisable, September 30, 1994 - -
</TABLE>
Note 5 PER-SHARE DATA Income per common share data are based on
the weighted average number of shares outstanding of 96,728,744 and
96,816,796 for the nine months and three months ended September 30,
1994, and 96,055,341 and 96,464,668 for the nine months and three
months ended September 30, 1993.
Note 6 CONTINGENCIES The Company is a party to certain pending
legal proceedings arising from matters incidental to its business.
In addition, the Company is a named defendant in a shareholder
class-action suit which alleges that, during the period March 19,
1990, to July 30, 1991, the market value of the Company's common
stock was artificially inflated due to false and misleading news
releases and public statements and the failure to disclose material
facts. This suit is in the discovery stage. The Company intends
to contest the suit vigorously.
The Company has established reserves for potential litigation
losses of approximately $11,930,000 at September 30, 1994. In the
opinion of management and counsel, the aggregate unreserved
liability or loss, if any, for legal proceedings will not have a
significant effect on the consolidated financial statements of the
Company.
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<TABLE>
QUARTERLY CONSOLIDATED SUMMARY OF INCOME
AND SELECTED FINANCIAL DATA (1)
Hibernia Corporation and Subsidiary
<CAPTION>
Three Months Ended Nine Months Ended
($ in thousands, except September 30 June 30 September 30 September 30 September 30
per-share data) 1994 1994 1993 1994 1993
<S> <C> <C> <C> <C> <C>
Interest income $98,034 $93,121 $89,210 $281,096 $272,131
Interest expense 37,300 33,573 31,867 102,631 96,134
Net interest income 60,734 59,548 57,343 178,465 175,997
Provision for possible loan losses (17,500) (85) 2,355 (17,480) 11,983
Net interest income after provision 78,234 59,633 54,988 195,945 164,014
Noninterest income:
Noninterest income 20,719 19,880 18,459 59,969 55,993
Securities gains (1,682) 3 90 (1,517) 100
Noninterest income 19,037 19,883 18,549 58,452 56,093
Noninterest expense 73,269 61,313 58,234 190,852 176,773
Income before taxes and cumulative
effect of accounting change 24,002 18,203 15,303 63,545 43,334
Income tax expense 773 771 1,170 2,524 4,335
Income before cumulative effect of
accounting change 23,229 17,432 14,133 61,021 38,999
Cumulative effect of accounting change - - - - 3,043
Net Income $23,229 $17,432 $14,133 $61,021 $42,042
Income per common share (2) $0.24 $0.18 $0.15 $0.63 $0.44
Cash dividends declared per share (3) $0.05 $0.04 - $0.13 -
Average shares outstanding (000s) 96,817 96,711 96,465 96,729 96,055
Selected Quarter-End Balances
($ in millions)
Loans $3,081.4 $2,908.4 $2,664.5
Total assets $5,727.8 $5,732.3 $5,489.3
Deposits $4,952.4 $4,915.7 $4,766.9
Debt $3.7 $22.4 $24.5
Equity $500.3 $486.2 $446.7
Selected Average Balances
($ in millions)
Loans $2,986.6 $2,839.7 $2,620.2 $2,851.8 $2,647.3
Total assets $5,724.1 $5,739.4 $5,468.6 $5,749.5 $5,489.8
Deposits $4,923.4 $4,935.2 $4,743.0 $4,925.0 $4,756.7
Debt $10.0 $22.4 $21.5 $18.5 $23.5
Equity $494.3 $483.0 $442.9 $486.4 $427.3
Selected Ratios (%)
Return on average assets 1.62 1.21 1.03 1.42 1.02
Return on average equity 18.80 14.44 12.76 16.73 13.16
Net interest margin 4.62 4.55 4.55 4.53 4.69
Efficiency (4) 88.73 (5) 76.10 75.57 78.97 (5) 74.87
Tier 1 risk-based capital 14.88 14.54 14.28
Total risk-based capital 16.17 15.84 15.58
Leverage 8.63 7.98 7.42
(1) Prior periods have been conformed to current-period presentation.
(2) Income per share data are based on the weighted average number of common shares outstanding in
the respective period.
(3) Dividends per share are historical amounts.
(4) Noninterest expense as a percentage of net interest income (T.E.) plus noninterest income (excluding
securities transactions).
(5) Excluding the effect of the charge for the impairment of goodwill, the efficiency ratio was 69.18% and
72.31% for the third quarter and first nine months of 1994, respectively.
</TABLE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Management's Discussion presents a review of the major factors and trends
affecting the performance of Hibernia Corporation (the "Company") and its bank
subsidiary (the "Bank") and should be read in conjunction with the accompanying
consolidated financial statements, notes and tables.
THIRD-QUARTER 1994 HIGHLIGHTS
Financial data for all periods presented have been restated for four mergers
consummated in the third quarter accounted for as poolings of interests. Total
assets acquired were as follows:
Assets @ 6/30/94
Bank Holding Company / Bank (millions) Merger Date
----------------------------------- ---------------- ---------------
Commercial Bancshares, Inc. / $ 165 July 1, 1994
First Commercial Bank
Bastrop National Bank 117 July 1, 1994
First Bancorp of Louisiana, Inc. / 214 August 1, 1994
First National Bank of West Monroe
Southern National Bank at Tallulah
First Continental Bancshares, Inc. / 375 August 1, 1994
First National Bank of Jefferson Parish _____
$ 871
Hibernia Corporation's third-quarter 1994 results showed continued
improvements in earnings, loan and deposit growth and asset quality.
* Net income totaled $23.2 million ($.24 per share), up 64% from $14.1
million ($.15 per share) in the third quarter of 1993 and up 33% over the
$17.4 million ($.18 per share) reported in the second quarter of 1994.
Net income for the first nine months of 1994 was $61.0 million ($.63 per
share), up 45% from $42.0 million ($.44 per share) for the same period
last year.
* Returns on assets (ROA) and equity (ROE) increased to 1.62% and 18.80%,
respectively, for the third quarter of 1994 compared to 1.03% and 12.76%
for the same period in 1993. For the first nine months of 1994 ROA and
ROE were 1.42% and 16.73% versus 1.02% and 13.16% in the comparable period
last year.
* Loans grew at an annual rate of 23.5% during the third quarter of 1994,
increasing to $3.1 billion at September 30, 1994, 16% higher than a year
earlier, and 6% higher than June 30, 1994.
* Nonperforming assets declined to $39.9 million, down 67% from a year ago
and 30% from June 30 of this year. Nonperforming assets as a percentage
of loans plus foreclosed assets were reduced to 1.29%, down from 4.50% at
September 30, 1993 and 1.93% at June 30, 1994.
* A $17.5 million negative provision for possible loan losses was recorded
in the third quarter, a result of the continuing improvement in asset
quality. For the third quarter of 1993 and for the first nine months of
1993, provisions were $2.4 million and $12.0 million, respectively.
* A $16.1 million charge for the impairment of goodwill associated with
acquisitions in the mid- to late-1980's.
* Pending merger activity is summarized below:
Assets @ 6/30/94
Bank Holding Company / Bank (millions) Merger Date
----------------------------------- ---------------- -----------------
Pioneer Bancshares Corporation / $362 Fourth Quarter,
Pioneer Bank and Trust Co. 1994 *
First State Bank and Trust Company $150 Fourth Quarter,
1994 *
American Bank (Norco) $ 94 First Quarter,
1995 *
STABA Bancshares, Inc. / $ 95 First Quarter,
State Bank and Trust Co. 1995 *
* Estimated. Pending regulatory and shareholder approval.
* In October, Hibernia's board of directors approved a cash dividend of $.06
per share, a 20% increase over the dividend declared in the previous
quarter.
The event in the third quarter with the longest-term impact was the refine-
ment of the Company's organizational structure to facilitate growth through more
responsive customer service and better sales results; provide enhanced product
development and delivery systems; and improve productivity.
FINANCIAL CONDITION:
EARNING ASSETS
Earning assets averaged $5,327.8 million in the third quarter of 1994,
a $204.7 million (4%) increase from the third-quarter 1993 average of
$5,123.1 million. Compared to the third quarter of 1993, average loans
increased $366.4 million (14%) while short-term investments decreased
$174.1 million (63%).
Loans. Average loans for the third quarter of 1994 of $2,986.6 million
were up $146.9 million (5%) from the second quarter of 1994 and up $366.4
million (14%) compared to the third quarter of 1993. For the first nine
months of 1994, average loans increased $204.5 million (8%) to $2,851.8
million compared to the same period in 1993.
Table 1 presents the Company's loan portfolio classified according to
industry concentration at September 30, 1994, June 30, 1994 and September
30, 1993. Total loans increased $173.0 million (6%) during the third
quarter of 1994. Commercial loans increased $87.1 million (5%), while
consumer loans increased $85.9 million (7%), primarily due to the
continued growth in indirect lending and residential mortgage loans.
Compared to September 30, 1993, loans increased $416.9 million (16%)
as consumer loans were up $235.2 million (22%), and commercial loans
increased $181.7 million (11%). The change in the mix during this period
evidences the Company's strategy of seeking growth in consumer lending
while maintaining preeminence in Louisiana commercial lending. Consumer
loans comprised 41.9% of the loan portfolio at September 30, 1994 compared
to 39.7% at September 30, 1993.
Securities Available for Sale. Average securities available for sale
decreased $3.8 million (1%) from the third quarter of 1993 to $554.2
million. For the first nine months of 1994, average securities available
for sale increased $8.2 million (1%) to $599.9 million compared to the
same period in 1993. Securities classified as "available for sale" are
primarily mortgage-backed securities. Beginning December 31, 1993,
securities available for sale are stated at fair value with the unrealized
gains or losses, net of tax, reported as a separate component of
shareholders' equity. During 1993, securities available for sale were
stated at amortized cost.
Securities Held to Maturity. Average securities held to maturity for
the third quarter of 1994 increased $16.2 million (1%) compared to the
same period a year ago, while the year-to-date average increased $199.7
million (13%) in 1994 compared to the first nine months of 1993. These
increases reflect the shift of funds from short-term investments as well
as the growth of the Company's investable funds.
Short-Term Investments. Average short-term investments (primarily
federal funds sold and reverse repurchase agreements) for the three months
ended September 30, 1994, decreased $174.0 million (63%) compared to the
third quarter of 1993 as the Company invested excess liquidity in higher-
yielding loans and securities. For the first nine months of 1994, this
shift in the allocation of earning assets resulted in a $189.5 million
decrease in average short-term investments compared to the same period in
1993.
ASSET QUALITY
Table 2 presents a summary of nonperforming assets at the end of the
past five quarters. Table 3 presents a summary of changes in
nonperforming assets for the third quarter and first nine months of 1994
and 1993.
Nonperforming assets -- which include nonaccrual loans, restructured
loans and foreclosed assets (including in-substance foreclosures) --
totaled $39.9 million at September 30, 1994, down 67% compared to $122.0
million at September 30, 1993. Nonperforming loans, which totaled $21.5
million at September 30, 1994, declined $54.7 million (72%) from a year
ago. Foreclosed assets totaled $18.4 million at September 30, 1994, and
included $12.7 million of in-substance foreclosures. Nonperforming assets
declined $16.7 million during the third quarter of 1994, and $58.0 million
since December 31, 1993. As illustrated in Table 3, $45.1 million of the
decline in 1994 was attributable to payments on and sales of nonperforming
assets. Also, $12.2 million of nonperforming loans were returned to
performing status. As a percentage of total loans plus foreclosed assets,
nonperforming assets at September 30, 1994, improved to 1.29% from 4.50%
at September 30, 1993, and 3.52% at year-end 1993.
In addition to the nonperforming assets discussed above, management has
identified other commercial loans for which payments are current that are
subject to potential future classification as nonperforming. As of
September 30, 1994, these loans totaled $17.3 million, compared to $46.8
million at June 30, 1994 and $33.7 million at year-end 1993.
RESERVE AND PROVISION FOR POSSIBLE LOAN LOSSES
The Company recorded a negative provision for possible loan losses of
$17.5 million for the third quarter and the first nine months of 1994
compared to provisions of $2.4 million and $12.0 million for the same
periods in 1993. The negative provision was the result of continued
improvement in asset quality, evidenced by declines in net charge-offs and
lower levels of nonperforming loans. With the declining level of
nonperforming loans and low net charge-offs, the reserve coverage
continued to strengthen. The reserve for possible loan losses as a
percentage of nonperforming loans increased to 700% at September 30, 1994
compared to 255% a year ago.
Net recoveries totaling $.5 million were recorded in the third quarter
of 1994, compared to net charge-offs of $3.6 million in the third quarter
of 1993. Gross charge-offs in the third quarter of 1994 were $4.2 million
(45%) less than the $9.3 million recorded in the same quarter a year ago.
Year-to-date net charge-offs were down $12.1 million (91%). As a
percentage of average loans, annualized net loan recoveries were .06% for
the third quarter of 1994 compared to annualized net charge-offs of .55%
of average loans for the same quarter in 1993. For the first nine months
of 1994 and 1993, annualized net charge-offs totaled .06% and .67%,
respectively.
The reserve for possible loan losses totaled $150.2 million, or 4.87%
of total loans, at September 30, 1994, compared to $193.9 million, or
7.28%, a year earlier. Even though the reserve for possible loan losses
has been declining over the last five quarters, in terms of both dollar
amounts and as a percentage of loans, the present level is considered
adequate to absorb future potential loan losses. In making this
determination, management considered the significant improvements in asset
quality discussed earlier, the reduced levels of loan charge-offs, and
increases in recoveries of loans previously charged-off, as well as
current economic conditions and market trends. Table 4 presents an
analysis of the activity in the reserve for possible loan losses for the
third quarter and first nine months of 1994 and 1993.
Because factors such as loan growth and the future collectibility of
loans are uncertain, a continuation of negative provisions in future
quarters cannot be predicted. Due to the significant improvements
recently achieved in loan quality and the current level of nonperforming
loans, it is unlikely that loan quality improvements will continue at a
pace similar to that seen in recent quarters. However, if loan growth
were to moderate, future provisions may be minimal or negative.
FUNDING SOURCES:
DEPOSITS AND BORROWINGS
Deposits. Average deposits totaled $4,923.4 million in the third
quarter of 1994, a $180.4 million (4%) increase from the third quarter of
1993. Average core deposits were up $131.0 million (3%) due to increases
in demand, NOW, and consumer time deposits. The increase in average
consumer time deposits reverses the earlier trends in these balances as
consumers return their funds to insured deposits with increases in
interest rates. Noncore deposits increased $49.4 million (6%) as public
fund certificates of deposit increased $50.5 million and foreign time
deposits increased $16.3 million, while other large denomination
certificates of deposits decreased $17.4 million.
Table 5 presents the composition of average deposits for the third and
second quarters of 1994 and the third quarter of 1993.
Borrowings. Average borrowings (which include federal funds purchased,
securities sold under agreements to repurchase and debt) increased $27.7
million to $178.8 million for the third quarter of 1994 compared to the
third quarter of 1993. The increase resulted from an increase in
repurchase agreements with major customers, as well as the purchase of
federal funds by the Bank from correspondent downstream banks, partially
offset by an $11.5 million decrease in long-term debt. This decrease is
the result of the Company's practice of retiring debt obtained through
mergers if the terms of such debt are not favorable. The Company's long-
term debt at September 30, 1994 is comprised of Federal Home Loan Bank
advances totaling $3.7 million obtained to match fund specific loans. The
Company maintains a $25 million line of credit from the Federal Home Loan
Bank as one tool in managing interest rate risk and liquidity.
INTEREST RATE SENSITIVITY
The primary objective of asset/liability management is controlling
interest rate risk. On a monthly basis, management monitors the
sensitivity of net interest income to changes in interest rates through
methods that include simulation and gap reports, and attempts to optimize
the asset/liability mix to minimize the impact of significant rate
movements within a broad range of interest rate scenarios. Management may
limit interest rate risk by alterations to the mix of floating- and fixed-
rate assets and liabilities, changes to pricing schedules and adjustments
of maturities through sales and purchases of securities. The Company has
entered into interest rate swap, forward and option contracts to hedge
interest rate risk on specific assets and liabilities. The total notional
amount of these contracts at September 30, 1994 was $36.8 million. In
addition, the Company provides various hedging products to customers while
incurring minimal exposure.
RESULTS OF OPERATIONS:
NET INTEREST INCOME
Taxable-equivalent net interest income for the three months ended
September 30, 1994, totaled $61.9 million, a $3.3 million increase from
the same period in 1993 and a $1.2 million increase from the second
quarter of 1994. Factors contributing to these increases were the
positive effect of the change in the mix of earning assets from lower-
yielding short-term investments into loans, overall growth in earning
assets, increased realization of fee income resulting from loan growth,
interest income realized on loans previously charged-off and higher yields
on securities and loans. These factors were partially offset by higher
rates paid on deposits. Increases in earning asset yields have kept pace
with increases in funds costs in the current rising interest rate
environment. However, the spread between the yield earned by the Company
on earning assets and the average rate paid on interest-bearing
liabilities will continue to experience pressure to contract as funding
costs continue to increase with market rates.
Taxable-equivalent net interest income increased $1.5 million from the
first nine months of 1993 to $181.6 million for the first nine months of
1994. The yields on both loans and securities (primarily mortgage-backed
securities) decreased in spite of the rise in market rates experienced in
the first nine months of 1994 as the levels of prepayments and
refinancings of consumer mortgages and large commercial loans surged in
anticipation of the increase in market rates. The unfavorable effect of
these lower yields partially offset the growth and the change in the mix
of earning assets.
The third quarter and first nine months of 1994 includes $.6 million
and $1.7 million, respectively, in interest expense (including $.3 million
in premiums) on long-term debt that was retired in the third quarter.
The net interest margin was 4.62% for the third quarter of 1994
compared to 4.55% in the third quarter of 1993 and 4.55% in the second
quarter of 1994. Table 6 details the net interest margin for the most
recent five quarters.
Table 7 presents an analysis of the Company's taxable-equivalent net
interest income and average balance sheets for the three months ended
September 30, 1994, June 30, 1994, and September 30, 1993, and for the
first nine months of 1994 and 1993. Table 8 presents an analysis of
changes in taxable-equivalent net interest income between the third
quarter of 1994 and the second quarter of 1994 and between the third
quarter of 1994 and the third quarter of 1993.
NONINTEREST INCOME
Noninterest income for the third quarter of 1994 was up $.5 million
(3%) to $19.0 million compared to the same period of 1993. For the first
nine months of 1994 compared to the same period in 1993, noninterest
income increased $2.4 million (4%) to $58.5 million. The major categories
of noninterest income for the three months and nine months ended September
30, 1994, and the comparable periods in 1993 are presented in Table 9.
Service charges on deposits increased $.8 million (9%) for the third
quarter of 1994 compared to the third quarter of 1993 and $2.6 million
(10%) for the first nine months of 1994 compared to the same period in
1993 due to pricing increases and an increase in fee-generating deposit
balances. Retail investment service income rose $.2 million (25%) and
$1.0 million (28%) for the three month and nine month periods,
respectively. Computer service fees totaled $.2 million for the third
quarter and $1.1 million for the first nine months of 1994, a decrease of
$.3 million and $.9 million compared to the same periods in 1993. After
reevaluating the market and analyzing the Company's ability to efficiently
deliver value to the customer, management has decided to discontinue
pursuing third-party processing business. Other service, collection and
exchange fees increased $1.0 million and $2.2 million for the three month
and nine month periods in 1994 compared to the same periods in 1993 due to
significant increases in fees generated by the Bank's upgraded and
expanded ATM network. Other income rose $.6 million and $.4 million for
the third quarter and first nine months of 1994 compared to the same
periods in 1993. Included in other income in the third quarter of 1994 is
a $1.8 million gain related to the buy-back of residual balances of loans
securitized and sold in 1990. These increases were partially offset by
declines in gains from the sale of mortgage loans. The Company enters
into forward contracts to securitize and sell its expected production of
mortgage loans at a locked-in rate. The rise in mortgage loan rates in
the second and third quarter of 1994 resulted in a higher than expected
percentage of mortgage loan closings. To the extent that mortgage loan
production was greater than expected and given the rising rate
environment, sales in the secondary market resulted in a loss.
Securities losses totaled $1.7 million for the third quarter of 1994
and $1.5 million for the first nine months of 1994 compared to a $.1
million gain for the third quarter and first nine months of 1993. The
losses in 1994 resulted from the sale of securities classified as
available for sale acquired through mergers that did not fit the Company's
risk profile.
NONINTEREST EXPENSE
For the third quarter of 1994, noninterest expense totaled $73.3
million, a $15.0 million (26%) increase from the third quarter of 1993.
For the first nine months of 1994, noninterest expense compared to the
same period in 1993, was up $14.1 million (8%) to $190.9 million.
Noninterest expense for the three months and nine months ended September
30, 1994 and September 30, 1993, is presented by major category in Table
10.
The increase in 1994 relates primarily to increases in the amortization
of intangibles, which totaled $17.5 million and $20.5 million for the
third quarter and first nine months of 1994. Amortization totaled $1.9
million and $6.1 million in the comparable periods in 1993. The increases
of $15.6 million and $14.4 million for the 1994 periods compared to the
same periods in 1993 relate to a $16.1 million charge for the impairment
of goodwill associated with mergers consummated in the mid- to late-
1980's.
As a result of a new organizational structure implemented during the
third quarter of 1994 and improved management information systems,
management conducted an analysis which estimated the discounted cumulative
net income for each of its primary geographic regions over the remaining
amortization period of the associated goodwill of approximately nine
years. Purchase prices for acquisitions which gave rise to recording
goodwill reflected management's intent at the time to generate
efficiencies by merging the operations of the acquired banks and
increasing market share from the resulting base. However, the Company did
not achieve its objectives in two regions. Management's current analysis
indicated that projected performance of the Company's existing franchise
in these two regions would not be adequate to support the remaining
unamortized goodwill resulting from previous acquisitions. The impaired
goodwill was written off in one instance, and written down to realizable
value in another during the third quarter.
Excluding this $16.1 million charge for the impairment of goodwill,
total noninterest expense would have been $57.2 million for the third
quarter and $174.8 million for the first nine months of 1994.
Staff costs, the largest component of noninterest expense, increased
$1.6 million (6%) for the quarter compared to the same period a year ago,
while year-to-date staff costs were up $8.5 million (12%), including $2.5
million in severance and retention pay associated with mergers. In
addition, merit pay increases, management incentive programs based on the
Company's profitability and increases in the number of full-time
equivalent employees contributed to the rise in staff costs.
Outside data processing expenses for the third quarter of 1994 versus
the comparable period in 1993 increased $.5 million (11%) and year-to-date
expenses increased $1.7 million (14%) due to conversion efforts relating
to merger activities. In January 1995, the Company's outside data
processing will be provided by a new vendor. The Company expects the
change in vendors to result in significant savings in 1995 and beyond.
Equipment expenses increased $.4 million (11%) for the third quarter
and $.3 million (3%) for the first nine months of 1994 due to equipment
purchases in the third quarter related to mergers, conversions and
upgrades in the Company's teller systems and ATM network.
Net income from foreclosed property totaled $1.3 million in the third
quarter of 1994 and $5.2 million for the first nine months of 1994,
compared to net expenses of $1.2 million and $5.9 million for the
comparable periods in 1993. The decreases in net foreclosed asset expense
resulted from increased gains from the sale of foreclosed assets, lower
costs resulting from the reduced level of foreclosed assets and a
substantial reduction of charges to the valuation allowance for foreclosed
assets.
Deposit insurance premiums decreased over 8% for the third quarter and
13% for the first nine months of 1994 compared to the same periods a year
ago, down $.2 million for the quarter and $1.3 million year-to-date.
Computed under the risk-related premium system beginning in 1993, the
deposit insurance premium declined because of reductions in the assessment
rate used in the calculation of the premiums. These reductions reflect
the Bank's improved rating from the Office of the Comptroller of the
Currency.
The company's efficiency ratio, defined as noninterest expense as a
percentage of taxable-equivalent net interest income plus noninterest
income (excluding securities transactions), was 88.73% for the third
quarter of 1994 and 78.97% for the first nine months of 1994. Excluding
the effect of the $16.1 million charge for the impairment of goodwill, the
Company's efficiency ratio was 69.18% for the third quarter of 1994
compared to 75.57% in the third quarter of 1993. For the first nine
months of 1994, the adjusted efficiency ratio was 72.31% compared to
74.87% in the same period in 1993. The improvement in efficiency reflects
continued cost control efforts and increases in net interest income and
noninterest income (excluding securities transactions). The Company
expects this ratio to decline further in future periods. The declines are
expected to result from achievement of cost efficiencies contemplated in
completed, pending and future mergers, enhancement of noninterest revenue
sources and increased net interest income derived from improved asset
quality and a more advantageous earning asset mix.
INCOME TAXES
The Company recorded a $.8 million provision for income taxes in the
third quarter of 1994 and a $2.5 million provision in the first nine
months of 1994. For the same periods of 1993, provisions for income taxes
totaled $1.2 million and $4.3 million, respectively. The 1993 amounts
include federal income tax expense recorded by institutions with which the
Company merged in 1994. The Bank is subject to a Louisiana shareholder
tax based partly on income. In the third quarter and first nine months of
1994, the Company recorded a deferred federal tax benefit equal to its
current federal tax liability. At September 30, 1994 the Company had a
deferred tax asset of $37.3 million (net of a reserve of $39.5 million).
The Company expects that in mid-to late-1995, its deferred tax asset will
be fully recorded based on the increase in its carryback potential for
taxes paid and on its ability to generate future taxable income. As a
result, while the Company's income tax provision in 1994 is entirely
attributable to state taxes based partly on income, the Company expects to
record federal income tax expense throughout 1995 at an effective tax rate
higher than its current effective rate but significantly lower than the
current federal statutory rate.
CAPITAL
Shareholders' equity topped one-half billion dollars for the first time
in the Company's history, totaling $500.3 million at September 30, 1994,
compared to $446.7 million at September 30, 1993. The increase is
primarily the result of net income over the most recent 12 months totaling
$77.4 million, partially offset by $12.5 million in cash dividends paid
and $13.5 million in unrealized losses on securities available for sale.
Risk-based capital and leverage ratios for the Company and the Bank exceed
the ratios required for designation as a "well-capitalized" institution
under regulatory guidelines. Table 11 presents these ratios for the
Company and the Bank for the most recent five quarters.
LIQUIDITY
The Company's loan-to-deposit ratio, one measure of liquidity, was
62.2% at September 30, 1994 compared to 56.1% at December 31, 1993 and
55.9% at September 30, 1993. Management believes that current and
projected levels of short-term investments and securities available for
sale are adequate to meet the Company's liquidity needs. The Company's
continuing improvement in certificate of deposit ratings enhances its
ability to raise funds in the open market. In addition, membership in the
Federal Home Loan Bank of Dallas further enhances liquidity management by
providing a readily accessible source of funds such as the $25 million
line of credit previously discussed.
<PAGE>
<TABLE>
TABLE 1 - LOAN COMPOSITION
<CAPTION>
September 30, 1994 June 30, 1994 September 30, 1993
Loans Percentage Loans Percentage Loans Percentage
($ in millions) Outstanding of Total Outstanding of Total Outstanding of Total
<S> <C> <C> <C> <C> <C> <C>
Commercial:
Energy $67.3 2.2 % $53.2 1.8 % $77.4 2.9 %
Transportation,
communications
and utilities 96.8 3.2 99.7 3.4 108.5 4.1
Commercial real estate 427.0 13.9 425.9 14.7 368.7 13.8
Health care 219.5 7.1 220.7 7.6 224.5 8.4
Services 292.8 9.5 289.1 9.9 216.7 8.1
Commercial and
industrial 589.2 19.1 518.0 17.8 522.3 19.6
Other commercial 96.4 3.1 95.3 3.3 89.2 3.4
Total commercial 1,789.0 58.1 1,701.9 58.5 1,607.3 60.3
Consumer:
Residential mortgage 487.6 15.8 472.9 16.3 451.2 17.0
Indirect 447.3 14.5 391.6 13.5 282.4 10.6
Student 79.5 2.6 69.7 2.4 62.0 2.3
Revolving credit 69.2 2.2 61.5 2.1 50.9 1.9
Other 208.8 6.8 210.8 7.2 210.7 7.9
Total consumer 1,292.4 41.9 1,206.5 41.5 1,057.2 39.7
Total Loans $3,081.4 100.0 % $2,908.4 100.0 % $2,664.5 100.0 %
</TABLE>
<PAGE>
<TABLE>
TABLE 2 - NONPERFORMING ASSETS
<CAPTION>
Sept. 30 June 30 March 31 Dec. 31 Sept. 30
($ in thousands) 1994 1994 1994 1993 1993
---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $16,642 $29,439 $43,885 $59,655 $73,915
Restructured loans 4,809 345 402 1,841 2,212
Total nonperforming loans 21,451 29,784 44,287 61,496 76,127
Foreclosed assets 18,418 26,788 29,170 36,365 45,875
Total nonperforming assets $39,869 $56,572 $73,457 $97,861 $122,002
Accruing loans past due
90 days or more $2,154 $3,467 $3,615 $3,797 $3,850
Reserve for possible loan losses $150,178 $167,201 $168,392 $168,856 $193,877
Nonperforming assets as a percentage
of loans plus foreclosed assets 1.29 % 1.93 % 2.62 % 3.52 % 4.50 %
Reserve for possible loan losses as a
percentage of nonperforming loans 700.10 % 561.38 % 380.23 % 274.58 % 254.68 %
</TABLE>
<PAGE>
<TABLE>
TABLE 3 - ANALYSIS OF CHANGES IN NONPERFORMING ASSETS
<CAPTION>
Three Months Nine Months
Ended September 30 Ended September 30
($ in thousands) 1994 1993 1994 1993
-------------------- ---------------------
<S> <C> <C> <C> <C>
Nonperforming assets
at beginning of period $56,572 $141,496 $97,861 $215,892
Additions 3,605 12,139 9,886 38,332
Gross charge-offs (3,291) (8,644) (10,513) (24,122)
Returned to performing status (929) (4,500) (12,230) (28,975)
OREO valuations 561 (1,933) (51) (7,580)
Payments and sales of assets (16,649) (16,556) (45,084) (71,545)
Nonperforming assets
at end of period $39,869 $122,002 $39,869 $122,002
</TABLE>
<PAGE>
<TABLE>
TABLE 4 - RESERVE FOR POSSIBLE LOAN LOSSES
<CAPTION>
Three Months Nine Months
Ended September 30 Ended September 30
($ in thousands) 1994 1993 1994 1993
-------------------- -----------------------
<S> <C> <C> <C> <C>
Balance at beginning of period $167,201 $194,772 $168,856 $194,859
Reserves acquired through mergers - 360 - 360
Less:
Loans charged off 5,170 9,326 14,336 26,449
Recoveries 5,647 5,716 13,138 13,124
Net charge-offs (recoveries) (477) 3,610 1,198 13,325
Provision for possible loan losses (17,500) 2,355 (17,480) 11,983
Balance at end of period $150,178 $193,877 $150,178 $193,877
Reserve for possible loan losses
as a percentage of loans 4.87 % 7.28 % 4.87 % 7.28 %
Net charge-offs (recoveries)
as a percentage of average loans (0.06)% 0.55 % 0.06 % 0.67 %
</TABLE>
<PAGE>
<TABLE>
TABLE 5 - DEPOSIT COMPOSITION
<CAPTION>
Third Quarter 1994 Second Quarter 1994 Third Quarter 1993
Average % of Average % of Average % of
($ in millions) Outstandings Deposits Outstandings Deposits Outstandings Deposits
------------------------- ------------------------ -----------------------
<S> <C> <C> <C> <C> <C> <C>
Demand, noninterest-bearing $874.1 17.7 % $894.8 18.1 % $812.4 17.1 %
NOW accounts 527.9 10.7 546.7 11.1 490.3 10.3
Money market deposit accounts 992.9 20.2 1,017.9 20.6 1,016.3 21.4
Savings accounts 241.6 4.9 247.9 5.0 240.7 5.1
Other consumer time deposits 1,474.7 30.0 1,434.3 29.1 1,420.5 30.0
Total core deposits 4,111.2 83.5 4,141.6 83.9 3,980.2 83.9
Public fund certificates of
deposit of $100,000 or more 637.4 13.0 629.5 12.8 586.9 12.4
Certificates of deposit of
$100,000 or more 154.2 3.1 149.8 3.0 171.6 3.6
Foreign time deposits 20.6 0.4 14.3 0.3 4.3 0.1
Total deposits $4,923.4 100.0 % $4,935.2 100.0 % $4,743.0 100.0 %
</TABLE>
<PAGE>
<TABLE>
TABLE 6 - NET INTEREST MARGIN (taxable-equivalent)
<CAPTION>
1994 1993
------------------------------- -----------------
Third Second First Fourth Third
Quarter Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C>
Yield on earning assets 7.40 % 7.07 % 6.82 % 6.94 % 7.02 %
Rate on interest-bearing liabilities 3.50 3.18 3.08 3.06 3.10
Net interest spread 3.90 3.89 3.74 3.88 3.92
Contribution of
noninterest-bearing funds 0.72 0.66 0.69 0.65 0.63
Net interest margin 4.62 % 4.55 % 4.43 % 4.53 % 4.55 %
Noninterest-bearing funds
supporting earning assets 20.64 % 20.89 % 22.41 % 21.42 % 20.33 %
</TABLE>
<PAGE>
<TABLE>
TABLE 7 - CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES
Taxable-equivalent basis (1)
<CAPTION>
Third Quarter 1994 Second Quarter 1994 Third Quarter 1993
Interest Interest Interest
(Average balances $ in millions, Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
interest income/expense $ in thousands) Balances Expense Rate Balances Expense Rate Balances Expense Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans (2) $2,986.6 $65,931 8.75 % $2,839.7 $60,235 8.51 % $2,620.2 $56,182 8.51 %
Securities available for sale 554.2 8,647 6.28 615.7 8,475 5.51 558.0 8,597 6.16
Securities held to maturity 1,683.8 23,407 5.55 1,763.4 24,324 5.52 1,667.6 23,528 5.63
Short-term investments 103.2 1,171 4.50 126.9 1,230 3.89 277.3 2,157 3.09
Total interest-earning assets 5,327.8 $99,156 7.40 % 5,345.7 $94,264 7.07 % 5,123.1 $90,464 7.02 %
Reserve for possible loan losses (167.8) (170.0) (198.5)
Noninterest-earning assets:
Cash (excluding items in process of collection) 140.2 148.3 127.1
Items in process of collection 117.8 109.7 98.1
Other assets 306.1 305.7 318.8
Total noninterest-earning assets 564.1 563.7 544.0
Total assets $5,724.1 $5,739.4 $5,468.6
LIABILITIES AND SHAREHOLDERS'
EQUITY
Interest-bearing liabilities:
Interest-bearing deposits:
NOW accounts $527.9 $2,159 1.62 % $546.7 $2,153 1.58 % $490.3 $1,844 1.49 %
Money market deposit accounts 992.9 6,121 2.45 1,017.9 5,740 2.26 1,016.3 6,216 2.43
Savings accounts 241.6 1,116 1.83 247.9 1,138 1.84 240.7 1,156 1.90
Other consumer time deposits 1,474.7 16,876 4.54 1,434.3 15,123 4.23 1,420.5 14,654 4.09
Public fund certificates of deposits
of $100,000 or more 637.4 7,244 4.51 629.5 5,946 3.79 586.9 4,814 3.25
Certificates of deposits of $100,000 or more 154.2 1,412 3.63 149.8 1,460 3.91 171.6 1,574 3.64
Foreign time deposits 20.6 249 4.81 14.3 143 4.01 4.3 33 3.01
Total interest-bearing deposits 4,049.3 35,177 3.45 4,040.4 31,703 3.15 3,930.6 30,291 3.06
Short-term borrowings 168.8 1,450 3.40 166.0 1,317 3.18 129.6 964 2.95
Debt (3) 10.0 673 26.80 22.4 554 9.91 21.5 611 11.26
Total interest-bearing liabilities 4,228.1 $37,300 3.50 % 4,228.8 $33,574 3.18 % 4,081.7 $31,866 3.10 %
Noninterest-bearing liabilities:
Demand deposits 874.1 894.8 812.4
Other liabilities 127.6 132.8 131.6
Total noninterest-bearing liabilities 1,001.7 1,027.6 944.0
Total shareholders' equity 494.3 483.0 442.9
Total liabilities and
shareholders' equity $5,724.1 $5,739.4 $5,468.6
SPREAD AND NET YIELD
Interest rate spread 3.90 % 3.89 % 3.92 %
Cost of funds supporting interest-earning assets 2.78 % 2.52 % 2.47 %
Net interest income/margin $61,856 4.62 % $60,690 4.55 % $58,598 4.55 %
(1) Based on the statutory income tax rate of 35%.
(2) Excludes unearned income. For purposes of yield computations, nonaccrual loans are included in loans outstanding.
(3) Third quarter and first nine months of 1994 interest expense includes a $300 thousand premium to retire debt associated
with mergers.
</TABLE>
<PAGE>
<TABLE>
TABLE 7 - CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES (continued)
Taxable-equivalent basis (1)
<CAPTION>
Nine Months Ended Nine Months Ended
September 30, 1994 September 30, 1993
Interest Interest
(Average balances $ in millions, Average Income/ Yield/ Average Income/ Yield/
interest income/expense $ in thousands) Balances Expense Rate Balances Expense Rate
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans (2) $2,851.8 $182,926 8.58 % $2,647.3 $170,635 8.62 %
Securities available for sale 599.9 24,821 5.52 591.7 29,171 6.57
Securities held to maturity 1,749.8 72,291 5.51 1,550.1 68,450 5.89
Short-term investments 154.1 4,243 3.68 343.6 7,991 3.11
Total interest-earning assets 5,355.6 $284,281 7.09 % 5,132.7 $276,247 7.19 %
Reserve for possible loan losses (169.1) (197.6)
Noninterest-earning assets:
Cash (excluding items in process of collection) 145.7 127.8
Items in process of collection 112.3 101.4
Other assets 305.0 325.5
Total noninterest-earning assets 563.0 554.7
Total assets $5,749.5 $5,489.8
LIABILITIES AND SHAREHOLDERS'
EQUITY
Interest-bearing liabilities:
Interest-bearing deposits:
NOW accounts $543.0 $6,413 1.58 % $494.6 $5,910 1.60 %
Money market deposit accounts 1,015.7 17,881 2.35 1,006.4 18,687 2.48
Savings accounts 245.0 3,369 1.84 234.8 3,464 1.97
Other consumer time deposits 1,441.5 46,430 4.31 1,434.0 43,503 4.06
Public fund certificates of deposits
of $100,000 or more 619.1 18,038 3.90 608.6 15,006 3.30
Certificates of deposits of $100,000 or more 151.8 4,239 3.73 166.3 4,518 3.63
Foreign time deposits 14.7 463 4.21 4.4 98 2.97
Total interest-bearing deposits 4,030.8 96,833 3.21 3,949.1 91,186 3.09
Short-term borrowings 164.9 3,935 3.19 134.8 2,944 2.92
Debt (3) 18.5 1,863 13.48 23.5 2,003 11.37
Total interest-bearing liabilities 4,214.2 $102,631 3.26 % 4,107.4 $96,133 3.13 %
Noninterest-bearing liabilities:
Demand deposits 894.2 807.6
Other liabilities 154.7 147.5
Total noninterest-bearing liabilities 1,048.9 955.1
Total shareholders' equity 486.4 427.3
Total liabilities and
shareholders' equity $5,749.5 $5,489.8
SPREAD AND NET YIELD
Interest rate spread 3.83 % 4.06 %
Cost of funds supporting interest-earning assets 2.56 % 2.50 %
Net interest income/margin $181,650 4.53 % $180,114 4.69 %
(1) Based on the statutory income tax rate of 35%.
(2) Excludes unearned income. For purposes of yield computations, nonaccrual loans are included in loans outstanding.
(3) Third quarter and first nine months of 1994 interest expense includes a $300 thousand premium to retire debt associated
with mergers.
</TABLE>
<PAGE>
<TABLE>
TABLE 8 - CHANGES IN TAXABLE-EQUIVALENT NET INTEREST INCOME (1)
<CAPTION>
Third Quarter 1994 Compared to:
Second Quarter 1994 Third Quarter 1993
Increase (Decrease) Due to Change In:
($ in thousands) Volume Rate Total Volume Rate Total
--------------------------------- -------------------------------
Taxable-Equivalent
<S> <C> <C> <C> <C> <C> <C>
Interest Earned On:
Loans $ 3,186 $ 2,510 $ 5,696 $ 8,048 $ 1,701 $ 9,749
Securities available for sale (896) 1,068 172 (60) 110 50
Securities held to maturity (1,104) 187 (917) 228 (349) (121)
Short-term investments (251) 192 (59) (1,714) 728 (986)
Total 935 3,957 4,892 6,502 2,190 8,692
Interest Paid On:
NOW accounts (75) 81 6 147 168 315
Money market deposit accounts (143) 524 381 (145) 50 (95)
Savings accounts (28) 6 (22) 4 (44) (40)
Other consumer time deposits 433 1,320 1,753 575 1,647 2,222
Public fund certificates of
deposit of $100,000 or more 76 1,222 1,298 444 1,986 2,430
Certificates of deposit
of $100,000 or more 42 (90) (48) (159) (3) (162)
Foreign time deposits 71 35 106 186 30 216
Short-term borrowings 23 110 133 322 164 486
Debt (433) 553 119 (451) 513 62
Total (34) 3,761 3,726 923 4,511 5,434
Taxable-Equivalent
Net Interest Income $ 969 $ 196 $ 1,166 $ 5,579 $(2,321) $ 3,258
(1) Change due to mix (both rate and volume) has been allocated to volume and rate changes in proportion to the
relationship of the absolute dollar amounts to the changes in each.
</TABLE>
<PAGE>
<TABLE>
TABLE 9 - NONINTEREST INCOME
<CAPTION>
Three Months Ended Nine Months Ended
Percentage Percentage
Sept. 30 Sept. 30 Increase Sept. 30 Sept. 30 Increase
($ in thousands) 1994 1993 (Decrease) 1994 1993 (Decrease)
------------------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C> <C>
Trust fees $ 3,014 $ 3,101 (3)% $ 9,463 $ 9,851 (4)%
Service charges on deposits 9,751 8,933 9 28,692 26,148 10
Other service, collection and
exchange charges:
Mortgage loan servicing income 1,268 1,403 (10) 4,002 4,407 (9)
Retail investment service income 1,316 1,057 25 4,612 3,590 28
Other 2,234 1,388 61 5,844 4,273 37
Gain on settlement of acquired loans 675 287 135 1,145 1,031 11
Other income:
Computer services 181 494 (63) 1,057 1,907 (45)
Other income 2,280 1,796 27 5,154 4,786 8
Total fee income 20,719 18,459 12 59,969 55,993 7
Securities gains (losses), net (1,682) 90 N/M (1,517) 100 N/M
Total Noninterest Income $19,037 $18,549 3 % $58,452 $56,093 4 %
N/M = Not meaningful
</TABLE>
<PAGE>
<TABLE>
TABLE 10 - NONINTEREST EXPENSE
<CAPTION>
Three Months Ended Nine Months Ended
Percentage Percentage
Sept. 30 Sept. 30 Increase Sept. 30 Sept. 30 Increase
($ in thousands) 1994 1993 (Decrease) 1994 1993 (Decrease)
----------------------------------- -------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Salaries $22,382 $20,340 10 % $ 68,836 $ 60,439 14 %
Benefits 3,716 4,183 (11) 12,494 12,398 1
Total staff costs 26,098 24,523 6 81,330 72,837 12
Occupancy, net 5,618 5,754 (2) 16,963 16,532 3
Equipment 3,446 3,096 11 9,638 9,369 3
Data processing 4,816 4,357 11 14,485 12,755 14
Foreclosed property expense, net (1,262) 1,167 N/M (5,191) 5,883 N/M
Deposit insurance and
examination fees 2,885 3,120 (8) 8,801 10,081 (13)
Postage 968 974 (1) 2,873 2,806 2
Stationery and supplies 1,250 998 25 2,962 2,782 6
Professional fees 1,646 1,655 (1) 5,066 6,268 (19)
Amortization of intangibles 17,487 1,879 831 20,476 6,119 235
Other 10,317 10,711 (4) 33,449 31,341 7
Total Noninterest Expense $73,269 $58,234 26 % $190,852 $176,773 8 %
Efficiency ratio (1) 88.73 % (2) 75.57 % 78.97 % (2) 74.87 %
N/M = Not meaningful
(1) Noninterest expense as a percentage of taxable-equivalent net interest income plus noninterest income (excluding
securities transactions).
(2) Excluding the effect of the charge for the impairment of goodwill, the efficiency ratio was 69.18% and 72.31% for
the third quarter and first nine months of 1994, respectively.
</TABLE>
<PAGE>
<TABLE>
TABLE 11 - QUARTERLY SELECTED CAPITAL ADEQUACY RATIOS
<CAPTION>
Sept. 30 June 30 March 31 Dec. 31 Sept. 30
1994 1994 1994 1993 1993
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Hibernia National Bank:
Risk-based capital
Tier 1 risk-based capital ratio 13.73 % 14.20 % 14.08 % 13.35 % 13.42 %
Total risk-based capital ratio 15.02 % 15.50 % 15.38 % 14.67 % 14.72 %
Leverage ratio 7.96 % 7.78 % 7.38 % 7.04 % 6.96 %
Hibernia Corporation:
Risk-based capital
Tier 1 risk-based capital ratio 14.88 % 14.54 % 14.72 % 15.56 % 14.28 %
Total risk-based capital ratio 16.17 % 15.84 % 16.02 % 16.87 % 15.58 %
Leverage ratio 8.63 % 7.98 % 7.73 % 8.25 % 7.42 %
</TABLE>
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(b) Reports on Form 8-K
A report on Form 8-K dated August 18,
1994, was filed by the registrant
reporting Item 5 Other Events.
A report on Form 8-K dated September 22,
1994 was filed by the registrant
reporting Item 5 Other Events.
A report on Form 8-K dated October 11,
1994 was filed by the registrant
reporting Item 2 Acquisition of Assets.
A report on Form 8-K dated November 2,
1994 was filed by the registrant
reporting Item 5 Other Events.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized to sign on
behalf of the registrant.
HIBERNIA CORPORATION
(Registrant)
Date: November 14, 1994 By: /s/ Ron E. Samford, Jr.
Ron E. Samford, Jr.
Executive Vice President and
Controller (principal accounting
officer)
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<EXCHANGE-RATE> 1
<CASH> 270,340
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 69,675
<TRADING-ASSETS> 74
<INVESTMENTS-HELD-FOR-SALE> 529,389
<INVESTMENTS-CARRYING> 1,632,539
<INVESTMENTS-MARKET> 1,584,607
<LOANS> 3,081,362
<ALLOWANCE> 150,178
<TOTAL-ASSETS> 5,727,792
<DEPOSITS> 4,952,391
<SHORT-TERM> 137,632
<LIABILITIES-OTHER> 133,804
<LONG-TERM> 3,679
<COMMON> 186,096
0
0
<OTHER-SE> 314,190
<TOTAL-LIABILITIES-AND-EQUITY> 500,286
<INTEREST-LOAN> 180,138
<INTEREST-INVEST> 96,716
<INTEREST-OTHER> 4,242
<INTEREST-TOTAL> 281,096
<INTEREST-DEPOSIT> 96,833
<INTEREST-EXPENSE> 102,631
<INTEREST-INCOME-NET> 178,465
<LOAN-LOSSES> (17,480)
<SECURITIES-GAINS> (1,517)
<EXPENSE-OTHER> 190,852
<INCOME-PRETAX> 63,545
<INCOME-PRE-EXTRAORDINARY> 61,021
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 61,021
<EPS-PRIMARY> .63
<EPS-DILUTED> .63
<YIELD-ACTUAL> 7.09
<LOANS-NON> 16,642
<LOANS-PAST> 2,154
<LOANS-TROUBLED> 4,809
<LOANS-PROBLEM> 17,300
<ALLOWANCE-OPEN> 168,856
<CHARGE-OFFS> 14,336
<RECOVERIES> 13,138
<ALLOWANCE-CLOSE> 150,178
<ALLOWANCE-DOMESTIC> 150,178
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 42,000
</TABLE>
