<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 June 30, 1996 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 July 31, 1996
Class A Common Stock, no par value 122,202,494 Shares
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheets
Hibernia Corporation and Subsidiaries June 30 December 31 June 30
Unaudited ($ in thousands) 1996 1995 1995
<S> <C> <C> <C>
Assets
Cash and due from banks $ 340,241 $ 384,307 $ 363,218
Short-term investments 61,484 91,003 67,095
Securities available for sale 1,880,789 2,163,123 563,796
Securities held to maturity (estimated fair value
at June 30, 1995 was $1,940,827) - - 1,939,334
Loans, net of unearned income 4,989,682 4,533,822 4,063,207
Reserve for possible loan losses (143,999) (147,678) (152,235)
Loans, net 4,845,683 4,386,144 3,910,972
Bank premises and equipment 119,875 120,339 119,918
Customers' acceptance liability 440 - 115
Other assets 206,171 197,619 200,331
Total assets $7,454,683 $ 7,342,535 $7,164,779
Liabilities
Deposits:
Demand, noninterest-bearing $1,119,969 $ 1,187,993 $1,133,540
Interest-bearing 5,173,305 5,041,682 4,988,230
Total deposits 6,293,274 6,229,675 6,121,770
Short-term borrowings 290,862 258,532 260,682
Liability on acceptances 440 - 115
Other liabilities 118,853 112,942 113,388
Debt 6,813 8,667 9,101
Total liabilities 6,710,242 6,609,816 6,505,056
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 122,116,317,
122,074,527 and 122,033,748 at June 30, 1996,
December 31, 1995 and June 30, 1995, respectively 234,463 234,383 234,305
Surplus 375,632 375,544 375,032
Retained earnings 155,277 120,803 67,087
Treasury stock at cost, 6,331; 17,407 and 10,746 shares at
June 30, 1996, December 31, 1995 and June 30, 1995,
respectively (65) (183) (94)
Unrealized gains (losses) on securities available for sale (6,476) 16,562 (563)
Unearned compensation (14,390) (14,390) (16,044)
Total shareholders' equity 744,441 732,719 659,723
Total liabilities and shareholders' equity $7,454,683 $ 7,342,535 $7,164,779
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Income Statements
Hibernia Corporation and Subsidiaries
Three Months Ended Six Months Ended
June 30 June 30
Unaudited ($ in thousands, except per share data) 1996 1995 1996 1995
<S> <C> <C> <C> <C>
Interest income
Interest and fees on loans $110,343 $ 91,312 $214,552 $177,150
Interest on securities available for sale 31,393 9,645 65,065 19,361
Interest on securities held to maturity - 31,347 - 60,841
Interest on short-term investments 2,170 729 4,739 3,446
Total interest income 143,906 133,033 284,356 260,798
Interest expense
Interest on deposits 54,956 54,225 109,418 105,838
Interest on short-term borrowings 3,518 3,734 6,832 5,826
Interest on debt 105 159 216 328
Total interest expense 58,579 58,118 116,466 111,992
Net interest income 85,327 74,915 167,890 148,806
Provision for possible loan losses - (145) - (140)
Net interest income after provision
for possible loan losses 85,327 75,060 167,890 148,946
Noninterest income
Service charges on deposits 13,015 10,855 25,184 21,865
Trust fees 3,013 2,882 6,047 5,703
Other service, collection and exchange charges 8,459 6,942 15,927 12,768
Gain on divestiture of banking offices - - - 2,361
Gain on sale of business lines 517 3,064 517 3,064
Other operating income 1,727 1,634 4,856 3,718
Securities gains (losses), net - (47) - (44)
Total noninterest income 26,731 25,330 52,531 49,435
Noninterest expense
Salaries and employee benefits 36,422 31,508 72,172 63,932
Occupancy expense, net 6,685 6,524 12,830 12,825
Equipment expense 5,603 4,836 10,868 9,520
Data processing expense 4,958 4,626 10,208 10,315
Foreclosed property expense, net (1,031) (516) (1,822) (558)
Other operating expense 18,715 20,345 37,055 40,847
Total noninterest expense 71,352 67,323 141,311 136,881
Income before income taxes 40,706 33,067 79,110 61,500
Income tax expense 14,103 2,316 27,795 4,811
Net income $ 26,603 $ 30,751 $ 51,315 $ 56,689
Net income per share $ 0.22 $ 0.26 $ 0.43 $ 0.47
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Changes in Shareholders' Equity
Hibernia Corporation and Subsidiaries
Unaudited ($ in thousands, except per-share data)
Gains
Shares of (Losses) on
Common Securities
Stock Common Retained Treasury Available Unearned
Six months ended June 30, 1996 Outstanding Stock Surplus Earnings Stock for Sale Compensation
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1995 122,057,120 $ 234,383 $ 375,544 $ 120,803 $ (183) $ 16,562 $ (14,390)
Net income - - - 51,315 - - -
Issuance of common stock:
Dividend Reinvestment Plan 6,594 13 61 - - - -
Stock Option Plan 72,764 62 5 - 418 -
Restricted stock awards 3,775 5 22 - 11 - -
Aquisition of treasury stock (30,267) - - - (311) - -
Cash dividends declared:
Common ($.14 per share) - - - (16,841) - - -
Change in unrealized gains (losses)
on securities available for sale - - - - - (23,038) -
Balances at June 30, 1996 122,109,986 $ 234,463 $ 375,632 $ 155,277 $ (65) $ (6,476) $ (14,390)
Gains
Shares of (Losses) on
Common Securities
Stock Common Retained Treasury Available Unearned
Six months ended June 30, 1995 Outstanding Stock Surplus Earnings Stock for Sale Compensation
Balances at December 31, 1994 121,616,747 $ 234,080 $ 374,744 $ 23,851 $ (2,414) $ (24,494) $ -
Net income - - - 56,689 - - -
Issuance of common stock:
Dividend Reinvestment Plan 88,637 170 477 - - - -
Stock Option Plan 5,972 12 27 - - - -
Retirement Security Plan 62,845 - (32) - 512 - -
Restricted stock awards 259,547 43 (160) - 1,902 - -
Aquisition of treasury stock (10,746) - - - (94) - -
Purchase of common shares
by ESOP - - - - - - (16,044)
Cash dividends declared:
Common ($.12 per share) - - - (13,100) - - -
By pooled companies prior
to merger - - - (447) - - -
Change in unrealized gains (losses)
on securities available for sale - - - - - 23,931 -
Other - - (24) 94 - - -
Balances at June 30, 1995 122,023,002 $ 234,305 $ 375,032 $ 67,087 $ (94) $ (563) $ (16,044)
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
Hibernia Corporation and Subsidiaries
Six Months Ended June 30
Unaudited ($ in thousands) 1996 1995
<S> <C> <C>
Operating activities
Net income $ 51,315 $ 56,689
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for possible loan losses - (140)
Amortization of intangibles and deferred charges 1,923 1,853
Depreciation and amortization 9,666 9,006
Premium amortization, net of discount accretion 2,645 3,586
Realized securities (gains) losses, net - 44
Gain on sale of assets (1,647) (6,113)
Provision for losses on foreclosed and other assets 1,065 155
Increase in deferred income tax asset (98) (7,179)
Decrease (increase) in interest receivable and other assets 1,960 (12,038)
Increase in interest payable and other liabilities 5,911 2,723
Net cash provided by operating activities 72,740 48,586
Investing activities
Purchases of securities held to maturity - (159,046)
Purchases of securities available for sale (31,716) (16,861)
Proceeds from sales of securities available for sale - 29,889
Maturities of securities held to maturity - 120,256
Maturities of securities available for sale 276,063 44,843
Net increase in loans (597,492) (542,438)
Proceeds from sales of loans 136,731 54,213
Purchases of premises, equipment and other assets (13,375) (12,435)
Proceeds from sales of foreclosed assets 5,025 4,209
Proceeds from divestiture of banking offices, net of $1,069 cash sold - (13,708)
Proceeds from sales of business lines 517 90,553
Proceeds from sales of premises, equipment and other assets 402 560
Net cash used by investing activities (223,845) (399,965)
Financing activities
Net increase in domestic deposits 74,615 90,981
Net increase (decrease) in time deposits - foreign office (11,016) 15,355
Net increase in short-term borrowings 32,330 101,947
Payments on debt (1,854) (2,745)
Issuance of common stock 597 2,951
Purchase of common stock by ESOP - (16,044)
Dividends paid (16,841) (13,547)
Acquisition of treasury stock (311) (94)
Net cash provided by financing activities 77,520 178,804
Decrease in cash and cash equivalents (73,585) (172,575)
Cash and cash equivalents at beginning of year 475,310 602,888
Cash and cash equivalents at end of period $401,725 $430,313
See notes to consolidated financial statements.
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
Hibernia Corporation and Subsidiaries
Unaudited
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. For further information, refer to the audited
consolidated financial statements and notes included in
Hibernia Corporation's Annual Report on Form 10-K for the year
ended December 31, 1995.
Note 2 MERGER AGREEMENTS A merger with CM Bank Holding
Company has received regulatory approval and is pending
shareholder approval. CM Bank Holding Company had $779 million
in assets, $362 million in loans and $618 million in deposits as
of June 30, 1996, and will be purchased for $202 million in cash.
This merger will be accounted for as a purchase of stock when
consummated, which is expected in the third quarter of 1996.
A merger with St. Bernard Bank and Trust Company has
received regulatory and shareholder approval. St. Bernard Bank
and Trust Company had $250 million in assets, $30 million in
loans and $227 million in deposits as of June 30, 1996, and will
be purchased for $46 million in cash. This merger will be
accounted for as a purchase of stock when consummated, which is
expected in the fourth quarter of 1996.
A merger with Texarkana National Bancshares, Inc. is pending
regulatory and shareholder approval. Texarkana National
Bancshares, Inc. had $402 million in assets, $215 million in
loans and $336 million in deposits as of June 30, 1996, and will
be acquired for approximately $77 million in Hibernia Corporation
Class A Common Stock. It is anticipated that this transaction
will be accounted for as a pooling of interests when consummated,
which is expected in the fourth quarter of 1996.
Note 3 EMPLOYEE BENEFIT PLANS 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 1993
Directors' Stock Option Plan become fully vested upon retirement
of the holder.
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
365 days. All options vest immediately upon a change in control
of the Company.
At June 30, 1996, 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 totaled 157,772;
610,343; and 712,500, respectively.
The table below summarizes the activity in the plans during
the second quarter of 1996:
<TABLE>
<CAPTION>
Incentive Non-Qualified
1987 STOCK OPTION PLAN
<S> <C> <C>
Outstanding, March 31, 1996 160,553 1,354,425
Exercised - (6,187)
Outstanding, June 30, 1996 160,553 1,348,238
Exercisable, June 30, 1996 140,390 1,201,484
LONG-TERM INCENTIVE PLAN
Outstanding, March 31, 1996 12,598 5,127,794
Granted ($10.4375) - 54,500
Canceled - (166,034)
Exercised - (43,116)
Outstanding, June 30, 1996 12,598 4,973,144
Exercisable, June 30, 1996 - 1,289,206
1993 DIRECTORS' STOCK OPTION PLAN
Outstanding, March 31, 1996 - 210,000
Granted ($10.4375) - 75,000
Outstanding, June 30, 1996 - 285,000
Exercisable, June 30, 1996 - 106,250
</TABLE>
Effective April 1, 1995, the Company instituted an employee
stock ownership plan (ESOP) in which substantially all employees
participate. The ESOP is authorized to spend up to $30 million
to acquire Hibernia Corporation Class A Common Stock in open-
market purchases. At June 30, 1996, $16 million of stock
(2,008,588 shares) had been acquired.
Note 4 PER SHARE DATA Income per common share is based on
the weighted average number of shares outstanding of 120,383,510
and 120,335,297 for the three months and six months ended June
30, 1996, and 120,445,501 and 121,169,411 for the three months
and six months ended June 30, 1995. These weighted averages
exclude uncommitted shares held by the ESOP.
<PAGE>
<TABLE>
<CAPTION>
QUARTERLY CONSOLIDATED SUMMARY OF INCOME
AND SELECTED FINANCIAL DATA (1)
Hibernia Corporation and Subsidiaries
Three Months Ended Six Months Ended
June 30 March 31 June 30 June 30 June 30
($ in thousands, except per-share data) 1996 1996 1995 1996 1995
<S> <C> <C> <C> <C> <C>
Interest income $143,906 $140,450 $133,033 $284,356 $260,798
Interest expense 58,579 57,887 58,118 116,466 111,992
Net interest income 85,327 82,563 74,915 167,890 148,806
Provision for possible loan losses - - (145) - (140)
Net interest income after provision for possible
loan losses 85,327 82,563 75,060 167,890 148,946
Noninterest income:
Noninterest income 26,731 25,800 25,377 52,531 49,479
Securities gains (losses), net - - (47) - (44)
Noninterest income 26,731 25,800 25,330 52,531 49,435
Noninterest expense 71,352 69,959 67,323 141,311 136,881
Income before taxes 40,706 38,404 33,067 79,110 61,500
Income tax expense 14,103 13,692 2,316 27,795 4,811
Net Income $26,603 $24,712 $30,751 $51,315 $56,689
Income per share (2) $0.22 $0.21 $0.26 $0.43 $0.47
Income per share (tax effected) (3) $0.22 $0.21 $0.17 $0.43 $0.32
Cash dividends declared per share (2) $0.07 $0.07 $0.06 $0.14 $0.12
Average shares outstanding (000s) (2) 120,384 120,287 120,446 120,335 121,169
Selected Quarter-End Balances (in millions)
Loans $4,989.7 $4,754.9 $4,063.2
Deposits 6,293.3 6,321.1 6,121.8
Debt 6.8 7.1 9.1
Equity 744.4 739.0 659.7
Total assets 7,454.7 7,474.6 7,164.8
Selected Average Balances (in millions)
Loans $4,878.5 $4,645.8 $3,995.0 $4,762.1 $3,898.0
Deposits 6,284.3 6,243.6 6,044.5 6,264.0 6,064.9
Debt 6.9 7.3 10.6 7.1 10.8
Equity 737.1 740.2 643.0 738.6 632.9
Total assets 7,454.4 7,391.7 7,083.0 7,423.1 7,052.0
Selected Ratios (%)
Return on average assets 1.43 1.34 1.74 1.38 1.61
Return on average assets (tax effected) (3) 1.43 1.34 1.18 1.38 1.10
Return on average equity 14.44 13.35 19.13 13.90 17.91
Return on average equity (tax effected) (3) 14.44 13.35 12.96 13.90 12.24
Net interest margin (taxable equivalent) 4.98 4.87 4.62 4.92 4.63
Efficiency (4) 62.97 63.76 66.16 63.36 68.02
Tier 1 risk-based capital 13.88 14.25 14.78
Total risk-based capital 15.14 15.52 16.05
Leverage 9.86 9.71 9.05
(1) All financial information has been restated for mergers accounted for
as poolings of interests. Prior periods have been conformed to current
year presentation.
(2) Income per share is based on the weighted average number of common
shares outstanding (net of uncommitted ESOP shares) in the respective
period. Dividends per share are historical amounts.
(3) The effective tax rate in 1995 was significantly less than the
Company's statutory tax rate due to the recognition of deferred tax
benefits. Previously reported operating results are adjusted to
reflect a 37% effective tax rate for 1995 to improve the comparibility of
these amounts to 1996 results.
(4) Noninterest expense as a percentage of taxable-equivalent net interest
income plus noninterest income (excluding securities transactions).
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's Discussion and Analysis presents a review of the major
factors and trends affecting the performance of Hibernia Corporation
(the "Company" or "Hibernia") and its bank subsidiary (the "Bank") and
should be read in conjunction with the accompanying consolidated
financial statements, notes and tables. Financial data for all
periods presented have been restated for mergers accounted for as
poolings of interests.
SECOND-QUARTER 1996 HIGHLIGHTS
Hibernia Corporation's second-quarter 1996 results showed continued
improvement in earnings per share on a comparable basis over the
second quarter of 1995, strong loan growth, and improving efficiency.
Last year's results reflected a lower-than-normal effective federal
income tax rate as the Company recognized deferred tax benefits. To
make comparisons to 1996 results more meaningful, 1995 net income and
earnings per share results are adjusted on a proforma, fully tax-
effected basis, whereby tax expense is assumed at a "normal" effective
tax rate of 37%.
Net income for the second quarter of 1996 totaled $26.6
million ($.22 per share) and net income for the first six
months of 1996 totaled $51.3 million ($.43 per share). For
the second quarter of 1995 reported net income of $30.8
million ($.26 per share) would have been $20.8 million ($.17
per share) on a fully tax-effected basis. Similarly,
reported net income of $56.7 million ($.47 per share) for
the first half of 1995 would have been $38.7 million ($.32
per share) on a fully tax-effected basis. Therefore, on a
comparable basis, net income for the second quarter of 1996
improved 28% and earnings per share rose 29%. For the first
six months of 1996, net income was up 32% and earnings per
share grew 34% over the first half of 1995.
Returns on assets (ROA) and equity (ROE), were 1.43% and
14.44%, respectively, for the second quarter of 1996
compared to 1.18% and 12.96% on a fully tax-effected basis
in the second quarter of 1995. Reported ROA and ROE for the
second quarter of last year were 1.74% and 19.13%,
respectively. For the first six months of 1996, the ROA was
1.38%. The ROA for the first six months of 1995 was 1.10% on
a fully tax-effected basis and 1.61% as reported. ROE for
the first half of 1996 was 13.90% compared to 12.24% for the
first six months of 1995, on a fully tax-effected basis.
Reported ROE for the first half of 1995 was 17.91%.
Second-quarter 1996 pre-tax results improved compared to
the same period last year because of a $10.4 million (14%)
increase in net interest income (resulting from an improved
margin and higher average earning assets) and a $1.4 million
(6%) improvement in noninterest income, partially offset by
a $4.0 million (6%) increase in overhead. For the first
half of 1996, the increase in pre-tax income over 1995 was
due to the same factors as the quarterly improvement. For
the six-month period net interest income increased $19.1
million (13%) and noninterest income rose $3.1 million (6%),
while overhead increased $4.4 million (3%).
Loans grew $926.5 million (23%) from a year ago to $5.0
billion at June 30, 1996. Consumer loans increased $514.5
million (27%) to $2.4 billion and commercial loans grew
$412.0 million (19%) to $2.6 billion. Compared to March 31,
1996, loans increased at an annual rate of almost 20% as
consumer loans grew 18% and commercial loans grew 22%.
Asset quality remained strong with reserve coverage of
nonperforming assets at almost 826% at June 30, 1996
compared to 730% at June 30, 1995. Total nonperforming
assets declined to $23.9 million, down 18% from a year ago.
Nonperforming assets as a percentage of loans plus
foreclosed assets were reduced to .48%, compared to .72% at
June 30, 1995.
In July 1996, Hibernia's Board of Directors declared a
quarterly cash dividend of $.07 per share.
Pending mergers with three institutions would increase
assets to approximately $8.8 billion. Hibernia would then
have 198 locations in 29 Louisiana parishes and one Texas
county. Pending merger activity is summarized below:
<TABLE>
<CAPTION>
Assets
@ 6/30/96 Estimated
Bank Holding Company/Bank (millions) Accounting Merger Date
<S> <C> <C> <C>
CM Bank Holding Company/ $779 Purchase Third Quarter 1996 (1)
Calcasieu Marine National Bank
St. Bernard Bank & Trust Company $250 Purchase Fourth Quarter 1996
Texarkana National Bancshares, Inc./ $402 Pooling Fourth Quarter 1996 (2)
Texarkana National Bank
(1) Pending shareholder approval.
(2) Pending regulatory and shareholder approval.
</TABLE>
FINANCIAL CONDITION:
EARNING ASSETS
Earning assets averaged $7.0 billion in the second quarter of 1996,
a $360.3 million (5%) increase from the second-quarter 1995 average of
$6.6 billion. For the first six months of 1996, average earning
assets increased $368.2 million (6%) from the first six months of
1995. The increases in average assets for both the current quarter
and the first six months of 1996 were due to increases of
approximately $900 million in average loans, partially offset by
decreases of approximately $600 million in average securities.
Hibernia has funded the loan growth through the reinvestment of
proceeds from maturing securities and increases in deposits and
borrowed funds.
Loans. Average loans for the second quarter of 1996 of $4.9 billion
were up $232.7 million (5%) from the first quarter of 1996 and up
$883.5 million (22%) compared to the second quarter of 1995. Average
loans for the first six months of 1996 compared to the first six
months of 1995 increased $864.1 million (22%).
Table 1 presents the Company's loan portfolio classified according
to industry concentration at June 30 ,1996, March 31, 1996 and June
30, 1995. Total loans increased $234.8 million (5%) during the second
quarter of 1996. Commercial loans increased $132.3 million (5%),
while consumer loans increased $102.5 million (4%). Compared to June
30, 1995, loans increased $926.5 million (23%). Consumer loans were
up $514.5 million (27%), and commercial loans increased $412.0 million
(19%). The increase in consumer lending compared to March 31, 1996
was primarily due to increases in adjustable-rate residential mortgage
loans and indirect lending. Compared to June 30, 1995, the same
categories increased, along with other consumer loans. Consumer loans
comprised 48.8% of the loan portfolio at June 30, 1996 compared to
47.2% at June 30, 1995.
Securities. Average securities decreased $636.8 million (25%) in
the second quarter of 1996 compared to the second quarter of 1995.
For the first six months of 1996 average securities decreased $554.0
million (22%). The decreases are the result of the reinvestment of
maturing securities into higher-yielding loans.
Average securities available for sale increased approximately $1.4
billion for the second quarter and the first six months of 1996
compared to the same periods in 1995. In December 1995, in accordance
with the Financial Accounting Standards Board Special Report, "A Guide
to Implementation of Statement 115 on Accounting for Certain
Investments in Debt and Equity Securities" (Guide), the Company chose
to reclassify all of its securities held to maturity to the available
for sale portfolio. The amortized cost of the transferred securities
was $1.6 billion and net unrealized gains were $20.2 million. This
reclassification gives the Company greater flexibility in managing the
portfolio for income, interest-rate risk and liquidity. Although net
unrealized gains or losses in the available for sale portfolio are
reflected as a separate component of equity, these gains or losses are
not included in regulatory capital for purposes of computing capital
adequacy ratios. It is anticipated that future purchases of
securities will be classified as available for sale.
As a result of this reclassification, Hibernia had no securities
held to maturity for the second quarter or the first six months of
1996 compared to averages of $2.0 billion in both periods a year ago.
Short-Term Investments. Average short-term investments (primarily
federal funds sold) for the three months ended June 30, 1996, of
$164.8 million were up $113.6 million (222%) compared to an average of
$51.2 million in the second quarter of 1995. Average short-term
investments decreased $28.2 million (15%) from the first-quarter 1996
average of $193.0 million, as loan growth exceeded deposit increases.
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 loans for the three-month and six month periods ended
June 30, 1996 and 1995.
Nonperforming assets -- which include nonaccrual loans, restructured
loans, foreclosed assets and excess bank owned property -- totaled $23.9
million at June 30, 1996, down 18% compared to $29.2 million at
June 30, 1995 and down $3.2 million (12%) compared to $27.1
million at March 31, 1996. Nonperforming loans, which totaled
$17.4 million at June 30, 1996, declined $3.4 million (16%) from a
year ago, and declined $1.1 million (6%) from the first quarter
of 1996. Foreclosed assets, which totaled $6.5 million at
June 30, 1996, were down $1.8 million (22%) from a year earlier,
and down $2.1 million (24%) from March 31, 1996.
At June 30, 1996, the recorded investment in loans that were
considered to be impaired under SFAS No. 114 was $16.6 million. The
related reserve for possible loan losses was $2.6 million. The
comparable amounts at June 30, 1995 were $19.3 million and $1.4
million, respectively. These loans are included in nonaccrual loans in
Table 2.
As illustrated in Table 3, loans totaling $4.3 million were added to
nonperforming loans during the second quarter of 1996. Payments and
sales resulted in a $2.1 million reduction in nonperforming loans and
charge-offs further reduced nonperforming loans in the second quarter
of 1996 by $3.2 million. As a percentage of total loans plus
foreclosed assets, nonperforming assets at June 30, 1996, improved to
.48% from .72% a year ago and were down from .57% at March 31, 1996.
In addition to the nonperforming assets discussed above, other
commercial loans for which payments are current that are subject to
potential future classification as nonperforming totaled $21.1 million
as of June 30, 1996.
RESERVE AND PROVISION FOR POSSIBLE LOAN LOSSES
No provision for possible loan losses was recorded for the second
quarter or the first six months of 1996. Nominal negative provisions
were recorded for the comparable periods of 1995 at one of the merged
banks. The absence of a provision thus far in 1996 is a reflection of
continued strong reserve coverage. The reserve for possible loan
losses as a percentage of nonperforming loans was 826% at June 30,
1996, 784% at March 31, 1996, and 730% at June 30, 1995.
Net charge-offs totaled $.9 million in the second quarter of 1996,
compared to $1.4 million in the second quarter of 1995. For the first
six months of 1996, net charge-offs totaled $3.7 million compared to
$1.6 million for the same period in 1995. As a percentage of average
loans, annualized net charge-offs were .07% and .15% for the second
quarter and the first six months of 1996, respectively. In 1995 the
comparable net charge-off ratios were .14% and .08%, respectively.
The reserve for possible loan losses totaled $144.0 million, or
2.89% of total loans, at June 30, 1996, compared to $152.2 million, or
3.75%, a year earlier. In terms of both dollar amount and as a
percentage of loans, the reserve for possible loan losses has been
declining since the end of 1993 as a result of net charge-offs and
negative provisions. Management has deemed the present level to be
adequate to absorb future potential loan losses, considering the level
and mix of the loan portfolio, current economic conditions and market
trends. Because factors such as loan growth and the future
collectibility of loans are uncertain, the level of future provisions
(positive or negative), if any, cannot be predicted. Table 4 presents
an analysis of the activity in the reserve for possible loan losses
for the second quarter and the first six months of 1996 and 1995.
FUNDING SOURCES:
DEPOSITS AND BORROWINGS
Deposits. Average deposits totaled $6.3 billion in the second
quarter of 1996, a $239.8 million (4%) increase from the second
quarter of 1995. Average core deposits were up $75.3 million (1%) due
to increases in consumer time deposits and demand deposits. Average
deposits in the second quarter of 1996 increased $40.7 million (1%)
compared to the first quarter of 1996.
NOW account average balances were down $451.9 million and money
market deposit accounts were up $413.5 million in the second quarter
of 1996 compared to the second quarter of 1995. During the fourth
quarter of 1995, Hibernia instituted a new product, the Reserve Money
Manager account, in which each NOW account is joined with a money
market account. As needed, funds are moved from the money market
account to cover items presented for payment to the customer's NOW
account up to a maximum of six such transfers per statement cycle.
For the second quarter of 1996 the effect of the Reserve Money
Manager account was $524.3 million (reducing NOW account average
balances and increasing money market deposit account average
balances). Net of this effect, NOW account average balances were up
$72.4 million (11%) and money market deposit account average balances
were down $110.8 million (11%). Money market deposit accounts
declined because the rate paid on these accounts was less attractive
than those of other investment products. For the first six months of
1996 the effect of the Reserve Money Manager accounts was $530.0
million. Net of this effect NOW account average balances were up
$59.5 million (9%) for the first half of 1996 compared to the same
period in 1995 while money market deposit accounts decreased $120.5
million (12%) from the first six months of 1995.
Average noncore deposits increased $164.5 million (18%) from the
second quarter of 1995 as public fund certificates of deposit
increased $126.3 million (18%) in part due to greater access in new
markets (through mergers) to public agency funds as well as increases
in funds from existing relationships.
Table 5 presents the composition of average deposits for the second
and first quarters of 1996 and the second quarter of 1995.
Borrowings. Average borrowings -- which include federal funds
purchased, securities sold under agreements to repurchase (repurchase
agreements) and debt -- increased $23.9 million (8%) to $305.6 million
for the second quarter of 1996 compared to the second quarter of 1995.
For the first six months of 1996, borrowings increased $65.5 million
(28%) to $297.1 million. The increases for both periods result
primarily from growth in repurchase agreements resulting in new cash
management products which "sweep" funds from deposit accounts.
Average repurchase agreements increased $61.0 million in the second
quarter of 1996 and $80.8 million for the first six months of 1996
over the comparable periods in 1995 as a result of continued marketing
of these cash management products, which allow Hibernia customers to
earn interest on idle deposits. Fluctuations in short-term borrowings
can also stem from differences in the timing of the expansion of
lending opportunities and the growth of other funding sources
(deposits and proceeds from maturing securities). The Company's
reliance on these funds, while higher than a year ago, is still within
parameters determined by management to be prudent in terms of
liquidity and interest rate sensitivity.
The increases in repurchase agreements were partially offset by
decreases in federal funds purchased and long-term debt. The
Company's long-term debt at June 30, 1996 is comprised of advances
from the Federal Home Loan Bank of Dallas.
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. Using these
tools, management 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 alter the mix of floating-
and fixed-rate assets and liabilities, change pricing schedules and
enter into derivative contracts as means of limiting interest rate
risk.
On a limited basis, the Company has entered into interest rate and
foreign exchange rate swap, forward and option contracts to hedge
interest rate or foreign exchange risk on specific assets and
liabilities. At June 30, 1996, Hibernia held a $6.6 million foreign
exchange rate forward contract to protect against exchange rate risk
on a loan to be repaid in a foreign currency.
Derivative financial instruments are also held or issued by the
Company for trading purposes to provide customers the ability to
manage their own interest rate and foreign exchange risk. In general,
matched trading positions are established to minimize risk to the
Company. The notional value of these instruments totaled $224.8
million at June 30, 1996. In addition to these customer-related
derivative financial instruments, the Company has entered into trading
contracts for its own account which total $19.4 million. As of June
30, 1996, Hibernia's risk of loss due to interest rate fluctuations on
trading derivatives was less than $.2 million.
RESULTS OF OPERATIONS:
NET INTEREST INCOME
Taxable-equivalent net interest income for the three months ended
June 30, 1996, totaled $86.6 million, a $10.2 million increase from
the same period in 1995 and a $2.7 million increase from the first
quarter of 1996. For the first six months of 1996, net interest
income increased $18.8 million over the first six months of 1995 to
$170.5 million.
Factors contributing to the increase from the second quarter of 1995
include: the positive effect of the change in the mix of earning
assets from lower-yielding securities to loans (69.9% of average
earning assets in the second quarter of 1996 compared to 60.3% in the
second quarter of 1995); overall growth in earning assets; lower rates
paid on deposits and borrowings; higher yields on securities and a
higher level of interest income recorded on nonaccrual or previously
charged-off loans. These factors were partially offset by lower
yields on loans (market rates in the second quarter of 1996 were down
approximately 75 basis points from the second quarter of 1995). The
increase in net interest income in the second quarter of 1996 compared
to the first quarter of 1996 was due to the same factors discussed
above except that loan yields were up, even though market rates were
down slightly, primarily due to the income received on nonaccrual and
previously charged-off loans.
The increase in net interest income for the first six months of 1996
compared to the same period in 1995 was also the result of the change
in the mix of earning assets, the growth of earning assets, the
decline in funding costs, and the increase in the yield on the
securities portfolio, partially offset by lower yields on loans as the
extra income received on nonaccrual and previously charged-off loans
was offset by lower rates.
The net interest margin was 4.98% for the second quarter of 1996, up
36 basis points from the second quarter of 1995, and up 11 basis
points from the first quarter of 1996. Excluding income of $2.2
million received on two previously charged off loans, the net interest
margin would have been 4.86% for the second quarter of 1996, up 24
basis points from the second quarter of 1995 and virtually unchanged
from the first quarter of 1996. The net interest margin has improved
from the second quarter of 1995 primarily due to the positive effect
of the change in the mix in earning assets to higher yielding loans
and a decrease in funding costs of 15 basis points.
Table 6 details the net interest margin for the most recent five
quarters. Table 7 shows the composition of earning assets for the
most recent five quarters, revealing the change in the mix of earning
assets.
Table 8 presents an analysis of changes in taxable-equivalent net
interest income between the second quarter of 1996 and the first
quarter of 1996 and between the second quarter of 1996 and the second
quarter of 1995.
The analysis of Consolidated Average Balances, Interest and Rates at
the end of this discussion presents the Company's taxable-equivalent
net interest income and average balances for the three months ended
June 30, 1996, March 31, 1996 and June 30, 1995 and for the first six
months of 1996 and 1995. The implementation of the Reserve Money
Manager account resulted in increases in the rate paid on NOW accounts
for the current quarter and for the first six months of 1996 compared to
the same periods in 1995. Excluding the impact of the Reserve Money
Manager account NOW rates would have been 2.17% for the quarter and
2.18% for the first six months of 1996, virtually unchanged from the
comparable periods in 1995.
NONINTEREST INCOME
Noninterest income for the second quarter of 1996 was up $1.4
million (6%) to $26.7 million compared to the same period of 1995 and
up $3.1 million for the first six months of 1996 compared to the first
six months of 1995. Nonrecurring items are included in both 1996 and
1995. These include a $2.4 million gain in the first quarter of 1995
related to the divestiture of three banking offices in Northwest
Louisiana in connection with Hibernia's merger with Pioneer Bancshares
Corporation; a $.6 million fee earned in the first quarter of 1995 to
amend the terms of a large commercial credit; gains in the second
quarter of 1995 to record the sale of the Company's student loan
portfolio and municipal bond administration business totaling $1.5
million and $1.6 million, respectively; a $1.4 million gain on the
settlement of an acquired loan in the first quarter of 1996; and $.5
million in the second quarter of 1996 to record an additional gain
related to the sale of the municipal bond administration business.
Excluding these nonrecurring items, noninterest income increased
$4.0 million (18%) in the second quarter of 1996 over the second
quarter of 1995, and was up $7.3 million (17%) over the first six
months of 1995. The major categories of noninterest income for the
three months and six months ended June 30, 1996, and the comparable
periods in 1995 are presented in Table 9.
Service charges on deposits increased $2.2 million (20%) for the
second quarter of 1996 and $3.3 million (15%) for the first six months
of 1996 over the comparable periods in 1995 primarily due to increases
in the price for certain deposit activities, the number of accounts
and commercial account analysis fees.
Other service, collection and exchange fees were up $1.5 million
(22%) and $3.2 million (25%) in the second quarter and the first six
months of 1996, respectively, compared to the same periods in 1995.
The major factors in these increases were significant growth in fees
generated by the Bank's upgraded and expanded ATM network, fees
resulting from the successful introduction of Hibernia's debit card in
1996 and growth in fees from retail investment services.
Excluding the nonrecurring items previously mentioned, other income
was up $.1 million (6%) and $.3 million (11%) for the second quarter
and the first six months of 1996 compared to the same periods in 1995.
NONINTEREST EXPENSE
For the second quarter of 1996, noninterest expense totaled $71.4
million, a $4.0 million (6%) increase from the second quarter of 1995.
For the first six months of 1996 noninterest expense totaled $141.3
million, a $4.4 million (3%) increase over the first six months of
1995. Included in noninterest expense is $1.5 million for the second
quarter of 1996 and $3.6 million for the first six months of 1996
related to Hibernia's strategic improvement process -- Vision 2000.
Through customer-focused business process redesign and technology
enhancements, this corporate-wide effort will provide opportunities to
increase revenue and reduce costs. In addition, Vision 2000 will
create a culture which will facilitate continuous improvement.
Noninterest expense for the three months and six months ended June 30,
1996 and 1995 is presented by major category in Table 10.
Staff costs, the largest component of noninterest expense, increased
$4.9 million (16%) in the second quarter of 1996 and $8.2 million
(13%) in the first six months of 1996 compared to the same periods a
year ago. Costs related to the Hibernia employee stock ownership plan
(ESOP) which was instituted in the second quarter of 1995, an increase
in Hibernia's contributions to the 401(k) plan, higher accruals for
incentives and bonuses, and increases in various medical and insurance
benefits were the major factors contributing to these increases.
Occupancy and equipment expenses increased $.9 million (8%) in the
second quarter of 1996 and $1.4 million (6%) in the first six months
of 1996 compared to the same periods in 1995. These increases were
primarily due to higher depreciation expenses related to the purchase
of computer equipment to facilitate system conversions for merged
banks and to upgrade the Bank's teller systems, ATMs and wide area
network.
Data processing expenses increased $.3 million (7%) for the second
quarter of 1996 compared to the second quarter of 1995. For the first
six months of 1996, data processing expenses decreased $.1 million
(1%). The 1996 periods include $.9 million and $2.2 million for the
three months and six months, respectively, in Vision 2000 expenses.
The first six months of 1995 included approximately $1.0 million in
duplicate expenses to outside vendors as Hibernia completed its
conversion to a new data processor in the second quarter of 1995.
Excluding the Vision 2000 expenses and the duplicate expenses in 1995
data processing expenses decreased $.6 million for the second quarter
and $1.3 million for the first six months of 1996 compared to the same
periods in 1995. In addition to the savings from the new data
processor, increased efficiencies derived from combining the separate
operations of merger partners also contributed to the decreases.
Income from foreclosed property, net of expenses, totaled $1.0
million in the second quarter of 1996, and $1.8 million in the first
six months of 1996, compared to $.5 million and $.6 million,
respectively, for the same periods a year ago as the 1996 periods
included significant gains on the sale of several properties.
Regulatory expenses decreased $3.2 million (92%) in the second
quarter of 1996 and $6.7 million (92%) for the first six months of
1996 compared to the same periods in 1995 due to the virtual
elimination of FDIC premiums for well-capitalized, highly-rated banks.
Telecommunications expenses increased $.2 million (13%), for the
second quarter of 1996 and $.8 million (24%) for the first six months
of 1996 compared to the same periods in 1995 primarily due to a change
in the manner in which these expenses are incurred. During 1995,
Hibernia built and outsourced the operation of its own wide area
network to replace the network of its prior data processing provider.
Expenses that were previously included in data processing are
currently classified as telecommunications. In addition, data line
expenses related to the Bank's enhanced ATM network and merger
activity also increased telecommunications expenses.
Professional fees decreased $.3 million (20%) for the second quarter
of 1996, and $1.2 million (31%) for the first six months of 1996
compared to the same periods in 1995 as the decreases in legal and
professional fees related to mergers and litigation more than offset
Vision 2000 consultant fees.
State taxes on equity increased $.4 million and $.8 million, for the
second quarter and the first six months of 1996, respectively compared
to 1995 due to the growth in equity.
Advertising and promotional expenses increased $.4 million (19%) in
the second quarter of 1996 and $1.2 million (32%) in the first six
months of 1996 compared to the same periods in 1995 because of a
general increase in advertising and product development activity.
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 62.97% for the second
quarter of 1996 compared to 66.16% for the same period in 1995. This
ratio for the first six months of 1996 improved from 68.02% for the
first six months of 1995 to 63.36% for the first six months of 1996.
The improvement in efficiency reflects increases in net interest
income and noninterest income combined with proportionately lower
increases in overhead.
INCOME TAXES
The Company recorded $14.1 million in income taxes in the second
quarter of 1996 and $27.8 million in the first six months of 1996.
For the comparable periods in 1995, federal income tax expense totaled
$2.3 million and $4.8 million, respectively. During 1995, the Company
recorded federal income taxes at a lower-than-normal effective tax
rate due to previously unrecognized deferred tax benefits.
The Bank is subject to a Louisiana shareholder tax based partly on
income. The income portion of this tax is recorded as state income
tax. In addition, certain subsidiaries of the Company and the Bank
are subject to Louisiana state income tax.
CAPITAL
Shareholders' equity totaled $744.4 million at June 30, 1996,
compared to $659.7 million at June 30, 1995. The increase is
primarily the result of net income over the most recent 12 months
totaling $120.3 million, and a $1.7 million decrease in unearned
compensation related to the ESOP instituted on April 1, 1995. These
increases were partially offset by $32.0 million in dividends and by a
$5.9 million net decrease due to changes in unrealized gains and
losses on securities available for sale. Risk-based capital and
leverage ratios exceed the ratios required for designation as a "well-
capitalized" institution under regulatory guidelines. Table 11
presents these ratios along with selected components of the capital
ratio calculations for the most recent five quarters.
The Company's strong capital position allowed Hibernia to take
advantage of two attractive purchase transactions. The anticipated
mergers with CM Bank Holding Company and St. Bernard Bank and Trust,
expected to close later this year, will enable Hibernia to leverage
its capital by adding assets without increasing equity. Although
Hibernia's capital ratios will decline as a result of these mergers,
they would still exceed the minimum ratios required for an institution
to be designated by banking regulators as "well capitalized."
In July 1996, the Company filed a shelf registration statement with
the Securities and Exchange Commission which allows the Company to
issue up to $250 million of securities over a two-year period,
including preferred stock and subordinated debt, either of which could
be convertible to common stock. The net proceeds from any sale of the
securities registered on this shelf registration would be used for
general corporate purposes.
LIQUIDITY
The loan-to-deposit ratio, one measure of liquidity, was 79.3% at
June 30, 1996, 75.2% at March 31, 1996, and 66.4% at June 30, 1995.
This increase indicates that loans are growing faster than deposits,
necessitating greater reliance on other sources of funds. Although
short-term borrowings have increased in the past year, a significant
portion of the purchased funds is part of a total customer
relationship, and thus is not subject to the same volatility as other
sources of noncore funds. A measure of reliance on short-term
borrowings and other large liabilities (such as large-denomination and
public fund CD's and foreign deposits) is the large liability
dependence ratio. Based on average balances, 18.04% of Hibernia's
loans and investment securities were funded by net large liabilities
(total large liabilities less short-term investments) in the second
quarter of 1996 compared to 17.52% for the same period in 1995. For
the first six months of each year, these ratios were 17.11% and 15.80%
for 1996 and 1995, respectively.
Liquidity needs can be met by the conversion of assets and by
raising additional funds. Reductions in short-term investments, sales
of securities available for sale and securitization of portions of the
loan portfolio are some of the ways to meet liquidity needs through
the conversion of assets. Hibernia attempts to meet the need for
additional funding primarily through the generation of deposits
through its extensive retail office network. In addition, the
Company's strong financial condition and profitability provide ample
access to large-denomination liabilities as a source of liquidity.
These include certificates of deposit greater than $100,000 and public
fund deposits, as well as funds which can be purchased through the
Bank's membership in the Federal Home Loan Bank of Dallas and from
correspondent banks. The Company can also raise additional funds
through the sale of securities registered on the shelf registration
discussed above.
<TABLE>
<CAPTION>
TABLE 1 - COMPOSITION OF LOAN PORTFOLIO
June 30, 1996 March 31, 1996 June 30, 1995
($ in millions) Loans % Loans % Loans %
<S> <C> <C> <C> <C> <C> <C>
Commercial:
Commercial and
industrial $ 1,055.4 21.1% $ 993.4 20.9% $ 764.1 18.8%
Commercial real estate 452.0 9.0 440.0 9.2 478.3 11.8
Services 447.0 9.0 394.1 8.3 346.1 8.6
Health care 207.7 4.2 208.2 4.4 216.2 5.3
Transportation, utilities
and communications 171.0 3.4 182.1 3.8 158.6 3.9
Individual 113.8 2.3 103.1 2.2 99.1 2.4
Energy 108.9 2.2 102.6 2.2 81.4 2.0
Total commercial 2,555.8 51.2 2,423.5 51.0 2,143.8 52.8
Consumer:
Residential mortgages:
First mortgages 1,094.1 21.9 1,047.2 22.0 857.9 21.1
Junior liens 119.8 2.4 92.0 1.9 86.8 2.1
Indirect 730.9 14.7 703.4 14.8 585.3 14.4
Revolving credit 107.9 2.2 97.6 2.1 84.4 2.1
Other 381.2 7.6 391.2 8.2 305.0 7.5
Total consumer 2,433.9 48.8 2,331.4 49.0 1,919.4 47.2
Total loans $ 4,989.7 100.0% $ 4,754.9 100.0% $ 4,063.2 100.0%
</TABLE>
<TABLE>
<CAPTION>
TABLE 2 - NONPERFORMING ASSETS
June 30 March 31 Dec. 31 Sept. 30 June 30
($ in thousands) 1996 1996 1995 1995 1995
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $ 17,434 $ 18,492 $ 17,318 $ 19,611 $ 20,858
Restructured loans - - - - -
Total nonperforming loans 17,434 18,492 17,318 19,611 20,858
Foreclosed assets 3,547 5,578 5,344 6,305 6,053
Excess bank owned property 2,955 3,023 2,946 2,245 2,244
Total nonperforming assets $ 23,936 $ 27,093 $ 25,608 $ 28,161 $ 29,155
Accruing loans past due
90 days or more $ 3,791 $ 5,795 $ 2,794 $ 2,843 $ 5,311
Reserve for possible loan losses $143,999 $144,913 $147,678 $152,053 $152,235
Nonperforming loans as a percentage
of total loans 0.35% 0.39% 0.38% 0.46% 0.51%
Nonperforming assets as a percentage
of total loans plus foreclosed assets
and excess bank owned property 0.48% 0.57% 0.56% 0.66% 0.72%
Reserve for possible loan losses as a
percentage of nonperforming loans 825.97% 783.65% 852.74% 775.35% 729.86%
</TABLE>
<TABLE>
<CAPTION>
TABLE 3 - SUMMARY OF NONPERFORMING LOAN ACTIVITY
Three Months Six Months
Ended June 30 Ended June 30
($ in thousands) 1996 1995 1996 1995
<S> <C> <C> <C> <C>
Nonperforming loans
at beginning of period $18,492 $21,801 $17,318 $27,631
Additions 4,310 3,940 9,668 8,940
Charge-offs, gross (3,186) (2,825) (5,828) (5,362)
Returns to performing status (132) (1,162) (160) (5,524)
Payments and sales (2,050) (896) (3,564) (4,827)
Nonperforming loans
at end of period $17,434 $20,858 $17,434 $20,858
</TABLE>
<TABLE>
<CAPTION>
TABLE 4 - RESERVE FOR POSSIBLE LOAN LOSSES ACTIVITY
Three Months Six Months
Ended June 30 Ended June 30
($ in thousands) 1996 1995 1996 1995
<S> <C> <C> <C> <C>
Balance at beginning of period $ 144,913 $ 153,777 $ 147,678 $ 153,957
Loans charged off (6,669) (5,117) (13,353) (10,803)
Recoveries 5,755 3,720 9,674 9,221
Net loans charged off (914) (1,397) (3,679) (1,582)
Provision for possible loan losses - (145) - (140)
Balance at end of period $ 143,999 $ 152,235 $ 143,999 $ 152,235
Reserve for possible loan losses
as a percentage of loans 2.89% 3.75% 2.89% 3.75%
Annualized net charge-offs as a
percentage of average loans 0.07% 0.14% 0.15% 0.08%
</TABLE>
<TABLE>
<CAPTION>
TABLE 5 - DEPOSIT COMPOSITION
Second Quarter 1996 First Quarter 1996 Second Quarter 1995
Average % of Average % of Average % of
($ in millions) Balances Deposits Balances Deposits Balances Deposits
<S> <C> <C> <C> <C> <C> <C>
Demand, noninterest-bearing $ 1,107.3 17.6% $ 1,164.3 18.7% $ 1,088.2 18.0%
NOW accounts 231.4 3.7 219.4 3.5 683.3 11.3
Money market deposit accounts 1,395.8 22.2 1,466.4 23.5 982.3 16.2
Savings accounts 346.3 5.5 352.3 5.6 348.1 5.8
Other consumer time deposits 2,107.9 33.6 2,041.9 32.7 2,011.5 33.3
Total core deposits 5,188.7 82.6 5,244.3 84.0 5,113.4 84.6
Public fund certificates of
deposit of $100,000 or more 832.2 13.2 776.0 12.4 705.9 11.7
Certificates of deposit of
$100,000 or more 219.8 3.5 184.8 3.0 193.7 3.2
Foreign time deposits 43.6 0.7 38.5 0.6 31.5 0.5
Total deposits $ 6,284.3 100.0% $ 6,243.6 100.0% $ 6,044.5 100.0%
</TABLE>
<TABLE>
<CAPTION>
TABLE 6 - NET INTEREST MARGIN (taxable-equivalent)
1996 1995
Second First Fourth Third Second
Quarter Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C>
Yield on earning assets 8.36% 8.23% 8.27% 8.20% 8.14%
Rate on interest-bearing liabilities 4.30 4.34 4.41 4.43 4.45
Net interest spread 4.06 3.89 3.86 3.77 3.69
Contribution of
noninterest-bearing funds 0.92 0.98 0.98 0.93 0.93
Net interest margin 4.98% 4.87% 4.84% 4.70% 4.62%
Noninterest-bearing funds
supporting earning assets 21.44% 22.46% 22.12% 21.10% 20.86%
</TABLE>
<TABLE>
<CAPTION>
TABLE 7 - INTEREST-EARNING ASSET COMPOSITION
1996 1995
Second First Fourth Third Second
(Percentage of average balances) Quarter Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C>
Loans 69.9% 67.1% 65.8% 62.1% 60.3%
Securities available for sale 27.7 30.1 8.7 8.3 9.0
Securities held to maturity - - 24.2 27.3 29.9
Total securities 27.7 30.1 32.9 35.6 38.9
Short-term investments 2.4 2.8 1.3 2.3 0.8
Total interest-earning assets 100.0% 100.0% 100.0% 100.0% 100.0%
</TABLE>
<TABLE>
<CAPTION>
TABLE 8 - CHANGES IN TAXABLE-EQUIVALENT NET INTEREST INCOME (1)
Second Quarter 1996 Compared to:
First Quarter 1996 Second Quarter 1995
Increase (Decrease) Due to Change In:
($ in thousands) Volume Rate Total Volume Rate Total
<S> <C> <C> <C> <C> <C> <C>
Taxable-equivalent
interest earned on:
Loans $ 5,302 $ 745 $ 6,047 $ 20,168 $ (1,283) $ 18,885
Securities available for sale (2,423) 126 (2,297) 21,960 101 22,061
Securities held to maturity - - - (31,717) - (31,717)
Short-term investments (373) (26) (399) 1,500 (59) 1,441
Total 2,506 845 3,351 11,911 (1,241) 10,670
Interest paid on:
NOW accounts 88 (85) 3 (2,994) 953 (2,041)
Money market
deposit accounts (412) (309) (721) 2,487 (1,107) 1,380
Savings accounts (31) (7) (38) (10) (135) (145)
Other consumer time 921 (597) 324 1,345 (630) 715
Public fund certificates of
deposit of $100,000 or more 745 (326) 419 1,777 (1,622) 155
Certificates of deposit
of $100,000 or more 444 30 474 318 249 567
Foreign deposits 69 (36) 33 165 (65) 100
Federal funds purchased (73) (1) (74) (445) (149) (594)
Repurchase agreements 268 10 278 738 (360) 378
Long-term debt (6) - (6) (57) 3 (54)
Total 2,013 (1,321) 692 3,324 (2,863) 461
Taxable-equivalent
net interest income $ 493 $ 2,166 $ 2,659 $ 8,587 $ 1,622 $ 10,209
(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>
<TABLE>
<CAPTION>
TABLE 9 - NONINTEREST INCOME
Three Months Ended Six Months Ended
Percentage Percentage
June 30 June 30 Increase June 30 June 30 Increase
($ in thousands) 1996 1995 (Decrease) 1996 1995 (Decrease)
<S> <C> <C> <C> <C> <C> <C>
Service charges on deposits $ 13,015 $ 10,855 20 % $ 25,184 $ 21,865 15 %
Trust fees 3,013 2,882 5 6,047 5,703 6
Other service, collection and
exchange charges:
Retail investment service income 2,656 1,605 65 4,490 3,156 42
Mortgage loan servicing income 1,767 1,958 (10) 3,566 3,801 (6)
ATM fees 1,677 1,332 26 3,221 2,354 37
Other 2,359 2,047 15 4,650 3,457 35
Total other service, collection
and exchange charges 8,459 6,942 22 15,927 12,768 25
Other income:
Gain on divestiture of
banking offices - - - - 2,361 (100)
Gain on sale of business
lines 517 3,064 (83) 517 3,064 (83)
Other income 1,727 1,634 6 4,856 3,718 31
Total other income 2,244 4,698 (52) 5,373 9,143 (41)
Securities gains (losses), net (47) (100) - (44) (100)
Total Noninterest Income $ 26,731 $ 25,330 6 % $ 52,531 $ 49,435 6 %
</TABLE>
<TABLE>
<CAPTION>
TABLE 10 - NONINTEREST EXPENSE
Three Months Ended Six Months Ended
Percentage Percentage
June 30 June 30 Increase June 30 June 30 Increase
($ in thousands) 1996 1995 (Decrease) 1996 1995 (Decrease)
<S> <C> <C> <C> <C> <C> <C>
Salaries $ 30,456 $ 26,631 14 % $ 59,544 $ 53,874 11 %
Benefits 5,966 4,877 22 12,628 10,058 26
Total staff costs 36,422 31,508 16 72,172 63,932 13
Occupancy, net 6,685 6,524 2 12,830 12,825 -
Equipment 5,603 4,836 16 10,868 9,520 14
Total occupancy and equipment 12,288 11,360 8 23,698 22,345 6
Data processing 4,958 4,626 7 10,208 10,315 (1)
Foreclosed property expense, net (1,031) (516) (100) (1,822) (558) (227)
Regulatory expense 274 3,439 (92) 546 7,200 (92)
Postage 1,315 1,155 14 2,781 2,409 15
Stationery and supplies 1,451 1,656 (12) 2,994 3,314 (10)
Telecommunications 2,039 1,810 13 4,225 3,416 24
Professional fees 1,156 1,439 (20) 2,544 3,695 (31)
State taxes on equity 1,500 1,089 38 3,000 2,178 38
Advertising and promotional
expenses 2,657 2,240 19 4,962 3,766 32
Amortization of intangibles 963 896 7 1,923 1,853 4
Other 7,360 6,621 11 14,080 13,016 8
Total Noninterest Expense $ 71,352 $ 67,323 6% $ 141,311 $ 136,881 3 %
Efficiency ratio (1) 62.97 % 66.16 % 63.36 % 68.02 %
(1) Noninterest expense as a percentage of taxable-equivalent net interest
income plus noninterest income (excluding securities transactions).
</TABLE>
<TABLE>
<CAPTION>
TABLE 11 - CAPITAL
June 30 March 31 Dec. 31 Sept. 30 June 30
($ in millions) 1996 1996 1995 1995 1995
<S> <C> <C> <C> <C> <C>
Risk-based capital
Tier 1 $ 733.4 $ 714.3 $ 697.1 $ 667.6 $ 639.6
Total 800.4 778.0 758.3 725.2 695.0
Quarterly average assets * 7,439.2 7,357.0 7,141.4 7,146.5 7,067.3
Net risk-adjusted assets 5,285.3 5,014.3 4,810.5 4,512.9 4,328.9
Ratios:
Leverage 9.86% 9.71% 9.76% 9.34% 9.05%
Tier 1 risk-based capital 13.88 14.25 14.49 14.79 14.78
Total risk-based capital 15.14 15.52 15.76 16.07 16.05
*Excluding SFAS No. 115 adjustment and disallowed intangibles.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED AVERAGE BALANCES, INTEREST AND RATES
Taxable-equivalent basis (1) Second Quarter 1996 First Quarter 1996 Second Quarter 1995
(Average balances $ in millions, Average Average Average
interest $ in thousands) Balance Interest Rate Balance Interest Rate Balance Interest Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans (2) $4,878.5 $111,287 9.17 % $4,645.8 $105,240 9.11 % $3,995.0 $ 92,402 9.28 %
Securities available for sale 1,935.6 31,706 6.56 2,083.6 34,003 6.53 594.9 9,645 6.49
Securities held to maturity - - - - - - 1,977.5 31,717 6.42
Total securities 1,935.6 31,706 6.56 2,083.6 34,003 6.53 2,572.4 41,362 6.43
Short-term investments 164.8 2,170 5.30 193.0 2,569 5.35 51.2 729 5.71
Total interest-earning assets 6,978.9 $145,163 8.36 % 6,922.4 $141,812 8.23 % 6,618.6 $134,493 8.14 %
Reserve for possible loan losses (145.3) (147.0) (153.9)
Noninterest-earning assets:
Cash and due from banks 300.5 305.3 306.6
Other assets 320.3 311.0 311.7
Total noninterest-earning assets 620.8 616.3 618.3
Total assets $7,454.4 $7,391.7 $7,083.0
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing deposits:
NOW accounts $ 231.4 $ 1,670 2.90 % $ 219.4 $ 1,667 3.06 % $ 683.3 $ 3,711 2.18 %
Money market deposit accounts 1,395.8 8,026 2.31 1,466.4 8,747 2.40 982.3 6,646 2.71
Savings accounts 346.3 1,792 2.08 352.3 1,830 2.09 348.1 1,937 2.23
Other consumer time deposits 2,107.9 29,164 5.56 2,041.9 28,840 5.68 2,011.5 28,449 5.67
Public fund certificates of deposits
of $100,000 or more 832.2 10,934 5.28 776.0 10,515 5.45 705.9 10,779 6.12
Certificates of deposits
of $100,000 or more 219.8 2,793 5.11 184.8 2,319 5.05 193.7 2,226 4.61
Foreign time deposits 43.6 577 5.32 38.5 544 5.68 31.5 477 6.06
Total interest-bearing deposits 5,177.0 54,956 4.27 5,079.3 54,462 4.31 4,956.3 54,225 4.39
Short-term borrowings:
Federal funds purchased 37.5 480 5.14 43.3 554 5.15 70.9 1,074 6.08
Repurchase agreements 261.2 3,038 4.68 238.0 2,760 4.66 200.2 2,660 5.33
Debt 6.9 105 6.11 7.3 111 6.13 10.6 159 5.99
Total interest-bearing liabilities 5,482.6 $58,579 4.30 % 5,367.9 $57,887 4.34 % 5,238.0 $ 58,118 4.45 %
Noninterest-bearing liabilities:
Demand deposits 1,107.3 1,164.3 1,088.2
Other liabilities 127.4 119.3 113.8
Total noninterest-bearing liabilities 1,234.7 1,283.6 1,202.0
Total shareholders' equity 737.1 740.2 643.0
Total liabilities and
shareholders' equity $7,454.4 $7,391.7 $7,083.0
SPREAD AND NET YIELD
Interest rate spread 4.06 % 3.89 % 3.69 %
Cost of funds supporting interest-earning assets 3.38 % 3.36 % 3.52 %
Net interest income/margin $ 86,584 4.98 % $ 83,925 4.87 % $ 76,375 4.62 %
(1) Based on the statutory income tax rate of 35%.
(2) Yield computations include nonaccrual loans in loans outstanding.
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED AVERAGE BALANCES, INTEREST AND RATES (cont.)
Six Months Ended Six Months Ended
Taxable-equivalent basis (1) June 30, 1996 June 30, 1995
(Average balances $ in millions, Average Average
interest $ in thousands) Balance Interest Rate Balance Interest Rate
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans (2) $4,762.1 $ 216,527 9.14 % $3,898.0 $ 179,322 9.27 %
Securities available for sale 2,009.6 65,709 6.55 601.3 19,361 6.44
Securities held to maturity - - - 1,962.3 61,606 6.29
Total securities 2,009.6 65,709 6.55 2,563.6 80,967 6.33
Short-term investments 178.9 4,739 5.31 120.8 3,446 5.75
Total interest-earning assets 6,950.6 $ 286,975 8.29 % 6,582.4 $ 263,735 8.06 %
Reserve for possible loan losses (146.1) (153.6)
Noninterest-earning assets:
Cash and due from banks 302.9 308.7
Other assets 315.7 314.5
Total noninterest-earning assets 618.6 623.2
Total assets $7,423.1 7,052.0
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing deposits:
NOW accounts $ 225.4 $ 3,337 2.98 % $ 695.9 $ 7,518 2.18 %
Money market deposit accounts 1,431.1 16,773 2.36 1,021.6 14,090 2.78
Savings accounts 349.3 3,622 2.09 352.5 3,932 2.25
Other consumer time deposits 2,074.9 58,004 5.62 1,987.0 54,182 5.50
Public fund certificates of deposits
of $100,000 or more 804.1 21,449 5.36 688.3 20,495 6.01
Certificates of deposits of $100,000 or more 202.3 5,112 5.08 199.4 4,659 4.71
Foreign time deposits 41.1 1,121 5.49 33.5 962 5.79
Total interest-bearing deposits 5,128.2 109,418 4.29 4,978.2 105,838 4.29
Short-term borrowings:
Federal funds purchased 40.4 1,034 5.15 52.0 1,523 5.91
Repurchase agreements 249.6 5,798 4.67 168.8 4,303 5.14
Debt 7.1 216 6.13 10.8 328 6.10
Total interest-bearing liabilities 5,425.3 $ 116,466 4.32 % 5,209.8 $ 111,992 4.33 %
Noninterest-bearing liabilities:
Demand deposits 1,135.8 1,086.7
Other liabilities 123.4 122.6
Total noninterest-bearing liabilities 1,259.2 1,209.3
Total shareholders' equity 738.6 632.9
Total liabilities and shareholders' equity $7,423.1 $7,052.0
SPREAD AND NET YIELD
Interest rate spread 3.97 % 3.73 %
Cost of funds supporting interest-earning assets 3.37 % 3.43 %
Net interest income/margin $ 170,509 4.92 % $ 151,743 4.63 %
(1) Based on the statutory income tax rate of 35%.
(2) Yield computations include nonaccrual loans in loans outstanding.
</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 July 8, 1996, was
filed by the registrant reporting Item 5 Other Events.
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: August 13, 1996 By: /s/ Ron E. Samford, Jr.
Ron E. Samford, Jr.
Executive Vice President and
Controller (principal accounting
officer)
<TABLE> <S> <C>
<ARTICLE> 9
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 340,241
<INT-BEARING-DEPOSITS> 484
<FED-FUNDS-SOLD> 61,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,880,789
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 4,989,682
<ALLOWANCE> 143,999
<TOTAL-ASSETS> 7,454,683
<DEPOSITS> 6,293,274
<SHORT-TERM> 290,862
<LIABILITIES-OTHER> 119,293
<LONG-TERM> 6,813
0
0
<COMMON> 234,463
<OTHER-SE> 509,978
<TOTAL-LIABILITIES-AND-EQUITY> 7,454,683
<INTEREST-LOAN> 214,552
<INTEREST-INVEST> 65,065
<INTEREST-OTHER> 4,739
<INTEREST-TOTAL> 284,356
<INTEREST-DEPOSIT> 109,418
<INTEREST-EXPENSE> 116,466
<INTEREST-INCOME-NET> 167,890
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 141,311
<INCOME-PRETAX> 79,110
<INCOME-PRE-EXTRAORDINARY> 51,315
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 51,315
<EPS-PRIMARY> .43
<EPS-DILUTED> .43
<YIELD-ACTUAL> 4.92
<LOANS-NON> 17,434
<LOANS-PAST> 3,791
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 21,100
<ALLOWANCE-OPEN> 144,913
<CHARGE-OFFS> 6,669
<RECOVERIES> 5,755
<ALLOWANCE-CLOSE> 143,999
<ALLOWANCE-DOMESTIC> 143,999
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 38,300
</TABLE>
