<PAGE>
HIBERNIA CORPORATION
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, 1997 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, 1997
Class A Common Stock, no par value 129,222,855 Shares
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheets
Hibernia Corporation and Subsidiaries June 30 December 31 June 30
Unaudited ($ in thousands) 1997 1996 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Cash and due from banks ............................................. $ 462,991 $ 558,440 $ 355,035
Short-term investments .............................................. 228,444 158,293 66,566
Securities available for sale ....................................... 2,050,015 2,178,674 2,037,136
Securities held to maturity ......................................... - - -
Loans, net of unearned income ....................................... 6,555,095 6,043,028 5,204,450
Reserve for possible loan losses ................................ (120,176) (127,768) (147,222)
- ---------------------------------------------------------------------------------------------------------------------------
Loans, net .................................................. 6,434,919 5,915,260 5,057,228
- ---------------------------------------------------------------------------------------------------------------------------
Bank premises and equipment ......................................... 171,106 172,107 127,999
Customers' acceptance liability ..................................... 1,183 135 440
Other assets ........................................................ 324,610 323,887 210,817
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Total assets ................................................ $ 9,673,268 $ 9,306,796 $ 7,855,221
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Liabilities
Deposits:
Demand, noninterest-bearing ..................................... $ 1,433,559 $ 1,540,917 $ 1,164,985
Interest-bearing ................................................ 6,535,306 6,280,886 5,463,924
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Total deposits .............................................. 7,968,865 7,821,803 6,628,909
- ---------------------------------------------------------------------------------------------------------------------------
Short-term borrowings ............................................... 591,463 331,796 296,669
Liability on acceptances ............................................ 1,183 135 440
Other liabilities ................................................... 134,776 165,328 120,763
Debt ................................................................ 7,028 51,349 26,842
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Total liabilities ........................................... 8,703,315 8,370,411 7,073,623
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Shareholders' equity Preferred Stock, no par value:
Authorized - 100,000,000 shares; 2,000,000 Series A issued
and outstanding at June 30, 1997 and December 31, 1996 ........... 100,000 100,000
Class A Common Stock, no par value:
Authorized - 200,000,000 shares; issued 129,172,549,
128,805,305, and 128,352,938 at June 30, 1997,
December 31, 1996 and June 30, 1996, respectively ................ 248,011 247,306 246,438
Surplus ............................................................. 379,918 377,028 373,668
Retained earnings ................................................... 257,550 217,797 183,099
Treasury stock at cost: 51,598, 50,000 and 6,331 shares at June 30,
1997, December 31, 1996, and June 30, 1996, respectively ......... (639) (569) (65)
Unrealized gains (losses) on securities available for sale .......... 3,388 8,141 (7,152)
Unearned compensation ............................................... (18,275) (13,318) (14,390)
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Total shareholders' equity .................................. 969,953 936,385 781,598
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Total liabilities and shareholders' equity .................. $ 9,673,268 $ 9,306,796 $ 7,855,221
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- ---------------
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
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Unaudited ($ in thousands), except per share data 1997 1996 1997 1996
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<S> <C> <C> <C> <C>
Interest income
Interest and fees on loans ............................. $ 141,020 $ 115,255 $ 273,861 $ 224,101
Interest on securities available for sale .............. 34,595 33,620 70,488 69,923
Interest on securities held to maturity ................ - - - -
Interest on short-term investments ..................... 3,006 2,225 5,939 4,813
- ---------------------------------------------------------------------------------------------------------------------------
Total interest income .............................. 178,621 151,100 350,288 298,837
- ---------------------------------------------------------------------------------------------------------------------------
Interest expense
Interest on deposits ................................... 69,616 58,171 136,326 115,844
Interest on short-term borrowings ...................... 5,609 3,603 10,092 7,020
Interest on debt ....................................... 112 384 747 779
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Total interest expense ............................. 75,337 62,158 147,165 123,643
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Net interest income ........................................ 103,284 88,942 203,123 175,194
Provision for possible loan losses ..................... - 550 - 975
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Net interest income after provision for possible loan losses 103,284 88,392 203,123 174,219
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Noninterest income
Service charges on deposits ............................ 17,497 14,007 33,571 27,054
Trust fees ............................................. 3,716 3,183 7,185 6,451
Other service, collection and exchange charges ......... 10,851 8,735 20,420 16,468
Other operating income ................................. 3,852 2,387 6,753 5,738
Securities gains (losses), net ......................... 356 46 371 113
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Total noninterest income ........................... 36,272 28,358 68,300 55,824
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Noninterest expense
Salaries and employee benefits ......................... 41,718 37,953 84,568 75,203
Occupancy expense, net ................................. 7,390 6,880 14,708 13,203
Equipment expense ...................................... 6,998 5,835 13,845 11,333
Data processing expense ................................ 5,273 5,011 9,793 10,315
Foreclosed property expense, net ....................... (250) (960) (574) (1,675)
Amortization of intangibles ............................ 3,443 963 7,009 1,924
Other operating expense ................................ 24,254 18,247 44,447 36,335
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Total noninterest expense .......................... 88,826 73,929 173,796 146,638
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Income before income taxes ................................. 50,730 42,821 97,627 83,405
Income tax expense ......................................... 17,795 14,678 34,078 28,960
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Net income ................................................. $ 32,935 $ 28,143 $ 63,549 $ 54,445
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Net income applicable to common shareholders ............... $ 31,210 $ 28,143 $ 60,099 $ 54,445
- ---------------------------------------------------------------------------------------------------------------------------
Net income per common share ................................ $ 0.25 $ 0.22 $ 0.47 $ 0.43
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- ---------------
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)
- ---------------------------------------------------------------------------------------------------------------------------
Preferred Common Retained
Stock Stock Surplus Earnings Other Total
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1996 ..... $ 100,000 $ 247,306 $ 377,028 $ 217,797 $ (5,746) $ 936,385
Net income ........................ - - - 63,549 - 63,549
Issuance of common stock: ......... -
Dividend Reinvestment Plan ..... - 260 1,503 - - 1,763
Stock Option Plan .............. - 397 1,070 - - 1,467
Restricted stock awards ........ - 4 20 - - 24
Retirement Security Plan ....... - 44 265 - - 309
Director compensation .......... - - 32 - 225 257
Cash dividends declared:
Common ($.16 per share) ........ - - - (20,346) - (20,346)
Preferred ($1.725 per share) ... - - - (3,450) - (3,450)
Acquisition of treasury stock ..... - - - - (295) (295)
Purchase of common shares by ESOP . - - - - (5,021) (5,021)
Allocation of ESOP shares ......... - - - - 64 64
Change in unrealized gains (losses)
on securities available for sale - - - - (4,753) (4,753)
- ---------------------------------------------------------------------------------------------------------------------------
Balances at June 30, 1997 ......... $ 100,000 $ 248,011 $ 379,918 $ 257,550 $ (15,526) $ 969,953
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</TABLE>
<TABLE>
<CAPTION>
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Preferred Common Retained
Stock Stock Surplus Earnings Other Total
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1995 ........ $ - $ 246,357 $ 373,556 $ 146,010 $ 1,884 $ 767,807
Net income ........................... - - - 54,445 - 54,445
Issuance of common stock:
Dividend Reinvestment Plan ........ - 13 61 - - 74
Stock Option Plan ................. - 63 4 - 418 485
Restricted stock awards ........... - 5 23 - 11 39
By pooled companies prior to merger - - 24 - - 24
Cash dividends declared:
Common ($.14 per share) ........... - - - (16,842) - (16,842)
By pooled companies prior to merger - - - (514) - (514)
Acquisition of treasury stock ........ - - - - (311) (311)
Change in unrealized gains (losses)
on securities available for sale .. - - - - (23,609) (23,609)
- ---------------------------------------------------------------------------------------------------------------------------
Balances at June 30, 1996 ............ $ - $ 246,438 $ 373,668 $ 183,099 $ (21,607) $ 781,598
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- ---------------
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) 1997 1996
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating activities
Net income ......................................................... $ 63,549 $ 54,445
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for possible loan losses .......................... - 975
Amortization of intangibles and deferred charges ............ 6,768 1,924
Depreciation and amortization ............................... 12,633 10,217
Premium amortization, net of discount accretion ............. 1,109 3,501
Realized securities gains, net .............................. (371) (113)
Gain on sale of assets ...................................... (1,143) (1,812)
Provision for losses on foreclosed and other assets ......... 436 931
Decrease in deferred income tax asset ....................... 1,296 1,010
Decrease (increase) in interest receivable and other assets . (5,769) 2,607
Increase (decrease) in interest payable and other liabilities (30,473) 2,035
- ------------------------------------------------------------------------------------------------------
Net cash provided by operating activities ..................... 48,035 75,720
- ------------------------------------------------------------------------------------------------------
Investing activities
Purchases of securities available for sale ......................... (114,104) (67,357)
Proceeds from sales of securities available for sale ............... 2,078 53,537
Proceeds from maturities of securities available for sale .......... 232,640 287,317
Net increase in loans .............................................. (655,137) (640,197)
Proceeds from sales of loans ....................................... 133,229 153,558
Purchases of premises, equipment and other assets .................. (15,020) (14,079)
Proceeds from sales of foreclosed assets ........................... 5,662 5,076
Proceeds from sales of premises, equipment and other assets ........ 150 920
- ------------------------------------------------------------------------------------------------------
Net cash used by investing activities ......................... (410,502) (221,225)
- ------------------------------------------------------------------------------------------------------
Financing activities
Net increase in domestic deposits .................................. 134,059 70,228
Net increase (decrease) in time deposits - foreign office .......... 13,071 (11,016)
Net increase in short-term borrowings .............................. 259,667 31,543
Proceeds from issuance of debt ..................................... - 66,335
Payments on debt ................................................... (44,321) (73,854)
Proceeds from issuance of common stock ............................. 3,820 622
Purchase of common stock by ESOP ................................... (5,021) -
Dividends paid ..................................................... (23,811) (17,356)
Acquisition of treasury stock ...................................... (295) (311)
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Net cash provided by financing activities ..................... 337,169 66,191
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Decrease in cash and cash equivalents ................................ (25,298) (79,314)
Cash and cash equivalents at beginning of year ....................... 716,733 500,915
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Cash and cash equivalents at end of period .................... $ 691,435 $ 421,601
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- ------------
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, 1996.
Note 2 MERGER AGREEMENTS Mergers are pending with four institutions:
Executive Bancshares, Inc. ("Executive"), Unicorp Bancshares - Texas, Inc.
("Unicorp"), Northwest Bancshares of Louisiana, Inc. ("Northwest"), and
ArgentBank ("Argent"). Certain of these mergers are pending shareholder and/or
regulatory approval. It is anticipated that these transactions will be accounted
for as a pooling of interests when consummated. The following table shows
selected balances and the estimated transaction value of each merger as of June
30, 1997 assuming a value of Hibernia Class A Common Stock of $13.9375.
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Transaction
($ in millions) Assets Loans Deposit Value
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
Executive ... $138.1 $ 66.0 $126.4 $ 16.8
Unicorp ..... 115.3 64.8 102.9 31.1
Northwest ... 105.2 36.8 92.0 21.3
Argent ...... 760.0 438.7 641.2 190.0
- ------------------------------------------------------------
</TABLE>
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. The options are granted at no less than the fair market value of the
stock at the date of grant. Options granted to directors under the 1987 Stock
Option Plan vest in six months. All other 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 to employees and directors, other than the chief
executive officer, become immediately exercisable if the holder of the option
dies while the option is outstanding. 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 generally expire 10 years from the date of grant
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, 1997, 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 154,246, 1,091,801, and 642,500, respectively.
The following tables summarize the activity in the plans during the
second quarter of 1997.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Weighted
Average
Incentive Non-Qualified Exercise Price
- ---------------------------------------------------------------------------------------
1987 Stock Option Plan:
<S> <C> <C> <C>
Outstanding, March 31, 1997 ...... 160,553 1,336,247 $ 7.47
Exercised ........................ (18,750) (5,875) 4.75
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Outstanding, June 30, 1997 ....... 141,803 1,330,372 $ 7.51
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Exercisable, June 30, 1997 ....... 141,803 1,330,372 $ 7.51
- ---------------------------------------------------------------------------------------
Long-Term Incentive Plan:
Outstanding, March 31, 1997 ...... 12,598 6,250,666 $ 9.54
Granted .......................... - 13,750 12.70
Award of restricted stock ........ - 1,900 -
Canceled ......................... - (15,312) 10.78
Exercised ........................ - (51,920) 7.44
Issuance of restricted stock ..... - (1,900) -
- ---------------------------------------------------------------------------------------
Outstanding, June 30, 1997 ....... 12,598 6,197,184 $ 9.56
- ---------------------------------------------------------------------------------------
Exercisable, June 30, 1997 ....... - 2,244,900 $ 7.51
- ---------------------------------------------------------------------------------------
1993 Directors' Stock Option Plan:
Outstanding, March 31, 1997 ...... - 248,750 $ 8.61
Granted .......................... - 70,000 13.00
Exercised ........................ - (28,750) 8.29
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Outstanding, June 30, 1997 ....... - 290,000 $ 9.70
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Exercisable, June 30, 1997 ....... - 116,250 $ 7.86
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</TABLE>
During 1995, the Company instituted an employee stock ownership plan
(ESOP) in which substantially all employees participate. The ESOP, with a
guarantee of the Parent Company, borrowed funds from Hibernia National Bank to
purchase Hibernia Class A Common Stock. The ESOP is authorized to acquire up to
$30,000,000 of Hibernia Class A Common Stock in open-market purchases of which
$8,629,000 remains for future purchases. As of June 30, 1997, the ESOP held
2,431,388 shares of Hibernia Class A Common Stock.
Note 4 NET INCOME PER COMMON SHARE Net income per common share is based
on the weighted average number of common shares outstanding of 127,209,011 and
127,240,768 for the three months and six months ended June 30, 1997 and
126,620,131 and 126,571,918 for the three months and six months ended June 30,
1996. These weighted averages exclude uncommitted shares held by the ESOP.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard (SFAS) No. 128, "Earnings per Share",
which is required to be adopted on December 31, 1997. At that time, the Company
will be required to present both net income per common share and net income per
common share - assuming dilution. The adoption of SFAS No. 128 will not impact
the Company's net income per common share. However, the Company has not
previously been required to present net income per common share - assuming
dilution. If the Company had been required to adopt SFAS No. 128, net income per
common share - assuming dilution would have been $0.24 and $0.46 or the three
months and six months ended June 30, 1997 and $0.22 and $0.42 or the three
months and six months ended June 30, 1996.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED SUMMARY OF INCOME AND SELECTED FINANCIAL DATA (1)
Hibernia Corporation and Subsidiaries
- ----------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
- ------------------------------------------------------------------------------------------------------------------------------
June 30 March 31 June 30 June 30 June 30
($ in thousands, except per-share data) 1997 1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income ................................... $ 178,621 $ 171,668 $ 151,100 $ 350,288 $ 298,837
Interest expense .................................. 75,337 71,829 62,158 147,165 123,643
- --------------------------------------------------------------------------------------------------------------------------------
Net interest income ............................... 103,284 99,839 88,942 203,123 175,194
Provision for possible loan losses ................ - - 550 - 975
- --------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision
for possible loan losses ...................... 103,284 99,839 88,392 203,123 174,219
- --------------------------------------------------------------------------------------------------------------------------------
Noninterest income:
Noninterest income ............................. 35,916 32,013 28,312 67,929 55,711
Securities gains (losses), net ................. 356 15 46 371 113
- --------------------------------------------------------------------------------------------------------------------------------
Noninterest income ................................ 36,272 32,028 28,358 68,300 55,824
Noninterest expense ............................... 88,826 84,970 73,929 173,796 146,638
- --------------------------------------------------------------------------------------------------------------------------------
Income before taxes ............................... 50,730 46,897 42,821 97,627 83,405
Income tax expense ................................ 17,795 16,283 14,678 34,078 28,960
- --------------------------------------------------------------------------------------------------------------------------------
Net income ........................................ $ 32,935 $ 30,614 $ 28,143 $ 63,549 $ 54,445
- --------------------------------------------------------------------------------------------------------------------------------
Net income applicable to common shareholders ...... $ 31,210 $ 28,889 $ 28,143 $ 60,099 $ 54,445
- --------------------------------------------------------------------------------------------------------------------------------
Per common share information: (2)
Net income ..................................... $ 0.25 $ 0.23 $ 0.22 $ 0.47 $ 0.43
Cash dividends declared ........................ $ 0.08 $ 0.08 $ 0.07 $ 0.16 $ 0.14
Average shares outstanding (000s) ................. 127,209 127,273 126,620 127,241 127,406
Dividend payout ratio ............................. 32.00% 34.78% 31.82% 34.04% 32.56%
- --------------------------------------------------------------------------------------------------------------------------------
Selected quarter-end balances (in millions)
Loans ............................................. $ 6,555.1 $ 6,195.1 $ 5,204.4
Deposits .......................................... 7,968.9 7,932.4 6,628.9
Debt .............................................. 7.0 7.4 26.8
Equity ............................................ 970.0 940.6 781.6
Total assets ...................................... 9,673.3 9,381.8 7,855.2
- --------------------------------------------------------------------------------------------------------------------------------
Selected average balances (in millions)
Loans ............................................. $ 6,386.3 $ 6,092.3 $ 5,084.7 $ 6,240.1 $ 4,962.4
Deposits .......................................... 7,873.5 7,734.1 6,617.4 7,804.2 6,597.4
Debt .............................................. 7.2 44.3 27.3 25.6 27.4
Equity ............................................ 953.6 943.8 773.8 948.8 774.9
Total assets ...................................... 9,419.3 9,265.2 7,854.8 9,342.7 7,824.5
- --------------------------------------------------------------------------------------------------------------------------------
Selected ratios
Net interest margin (taxable-equivalent) .......... 4.87% 4.83% 4.94% 4.85% 4.88%
Return on assets .................................. 1.40% 1.32% 1.43% 1.36% 1.39%
Return on common equity ........................... 14.63% 13.69% 14.55% 14.16% 14.05%
Return on total equity ............................ 13.82% 12.97% 14.55% 13.40% 14.05%
Efficiency ratio .................................. 62.79% 63.41% 62.24% 63.09% 62.65%
Average equity/average assets ..................... 10.12% 10.19% 9.85% 10.16% 9.90%
Tier 1 risk-based capital ratio ................... 11.64% 12.00% 13.97%
Total risk-based capital ratio .................... 12.90% 13.26% 15.24%
Leverage ratio .................................... 8.86% 8.79% 9.84%
- --------------------------------------------------------------------------------------------------------------------------------
Tax-effected net income and ratios excluding
goodwill and core deposit intangible amortization
and balances (3)
Net income applicable to common shareholders ...... $ 33,963 $ 31,732 $ 28,920 $ 65,695 $ 55,999
Net income per common share (2) ................... $ 0.27 $ 0.25 $ 0.23 $ 0.52 $ 0.44
Return on assets .................................. 1.46% 1.39% 1.48% 1.43% 1.43%
Return on common equity ........................... 19.07% 18.14% 15.31% 18.61% 14.81%
Efficiency ratio .................................. 60.54% 60.94% 61.59% 60.74% 61.98%
- --------------------------------------------------------------------------------------------------------------------------------
- ----------------
(1) All financial information has been restated for mergers accounted for as
poolings of interests. The effects of mergers accounted for as purchase
transactions have been included from the date of consummation. Prior
periods have been conformed to current-period presentation.
(2) Income per common share data are based on the weighted average number of
common shares outstanding (net of uncommitted ESOP shares) in the
respective period. Dividends per common share are historical amounts.
(3) Amortization and balances of core deposit intangibles are net of
applicable taxes. Goodwill amortization and balances are not tax effected.
</TABLE>
<PAGE>
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" or "Hibernia")
and its subsidiaries, principally Hibernia National Bank and Hibernia National
Bank of Texas, collectively referred to as the "Banks." This discussion should
be read in conjunction with the accompanying tables and consolidated financial
statements.
MERGER ACTIVITY
In 1996, the Company completed five mergers, two in Louisiana and one in
Texas which were accounted for as poolings of interests, and two in Louisiana
which were accounted for as purchase transactions. All prior-year information
has been restated to reflect the effect of the mergers accounted for as poolings
of interests. For the two mergers in 1996 accounted for as purchase
transactions, the financial information of those institutions is combined with
Hibernia as of and subsequent to merger.
Measures of financial performance subsequent to the purchase transactions
are more relevant when comparing "tangible" results (i.e., before amortization
of goodwill and core deposit intangibles), because they are more indicative of
cash flows, and thus the Company's ability to support growth and pay dividends.
The tangible measures of financial performance are presented in the Consolidated
Summary of Income and Selected Financial Data on the preceding page.
The institutions with which the Company merged are collectively referred to
as the "merged companies." The merged companies in transactions accounted for as
poolings of interests are referred to as the "pooled companies," and the merged
companies in transactions accounted for as purchase transactions are referred to
as the "purchased companies."
Mergers are pending with four institutions (involving five banks) which
would increase assets to approximately $10.8 billion. Hibernia would then have
232 banking locations in 31 Louisiana parishes and five Texas counties. Pending
merger activity is summarized below:
<TABLE>
<CAPTION>
June 30, 1997 Anticipated
Assets Accounting Estimated
Bank Holding Company / Bank (millions) Treatment Merger Date
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Executive Bancshares, Inc. (Texas)/ ................... $138 Pooling Third Quarter 1997 *
First National Bank of Paris
Collin County National Bank
Unicorp Bancshares-Texas, Inc./ ....................... $115 Pooling Fourth Quarter 1997 **
OrangeBank
Northwest Bancshares of Louisiana, Inc./ .............. $105 Pooling Fourth Quarter 1997 **
First National Bank in Mansfield
ArgentBank (Louisiana) ................................ $760 Pooling Fourth Quarter 1997 **
- -----------------------------------------------------------------------------------------------------------
- -------------
* Pending shareholder approval.
** Pending regulatory and shareholder approval
</TABLE>
SECOND-QUARTER 1997 HIGHLIGHTS
Hibernia Corporation's second-quarter 1997 results showed continued
improvement in earnings over the second quarter of 1996, strong loan and deposit
increases and growth in noninterest income.
Net income for the second quarter of 1997 totaled $32.9 million ($.25
per common share), up 17% compared to $28.1 million ($.22 per common
share) for the second quarter of 1996. Tangible earnings per common
share were $.27 in the second quarter of 1997 compared to $.23 for the
second quarter of 1996. Net income for the first six months of 1997
totaled $63.5 million ($.47 per common share), up 17% compared to $54.4
million ($.43 per common share) for the first six months of 1996.
Tangible earnings per common share were $.52 for the first six months
of 1997 compared to $.44 for the first six months of 1996.
Tangible returns on assets (ROA) and common equity (ROCE) were 1.46%
and 19.07%, respectively, for the second quarter of 1997 compared to
1.48% and 15.31% for the same period a year ago. For the first six
months of 1997, tangible ROA and ROCE were 1.43% and 18.61%,
respectively, compared to 1.43%, and 14.81%, respectively for the same
period a year ago.
Second-quarter 1997 results improved compared to the same period last
year because of a $14.3 million (16%) increase in net interest income
(resulting from higher average earning assets) and a $7.9 million (28%)
improvement in noninterest income. These increases were partially
offset by increases in noninterest expense and income tax expense,
which were up $14.9 million (20%) and $3.1 million (21%), respectively.
Approximately 30% of the increase in noninterest income was related to
the purchased companies and 15% was due to a gain recognized on the
sale of Hibernia's interest in an electronic funds transfer network.
Approximately $7.3 million, or 49%, of the increase in noninterest
expense was related to amortization of purchase accounting intangibles
and additional noninterest expenses associated with the purchased
companies.
Results for the first six months of 1997 improved over the first six
months of 1996 due to a $27.9 million (16%) increase in net interest
income and a $12.5 million (22%) improvement in noninterest income.
These increases were partially offset by increases in noninterest
expense, up $27.2 million (19%) and income tax expense, which was up
$5.1 million (18%). Approximately $14.7 million, or 54%, of the
increase in noninterest expense was related to amortization of purchase
accounting intangibles and additional noninterest expenses associated
with the purchased companies.
Total loans grew $1.4 billion (26%) from June 30, 1996 to $6.6 billion
at June 30, 1997. Commercial loans grew $661.3 million (34%) to $2.6
billion. Small business banking loans increased $242.4 million (26%) to
$1.2 billion and consumer loans increased $447.0 million (19%) to $2.8
billion. Approximately 25% of the total loan growth was due to the
purchased companies.
Asset quality remained strong with reserve coverage of nonperforming
loans at 536% at June 30, 1997. Nonperforming assets as a percentage of
loans plus foreclosed assets and excess bank-owned property was 0.45%
at June 30, 1997, down slightly from 0.49% at June 30, 1996.
Deposits increased $1.3 billion (20%) from June 30, 1996 to $8.0
billion at June 30, 1997. A significant portion of this increase was
attributable to the purchased companies, which added almost $0.9
billion in deposits.
In July 1997, Hibernia's Board of Directors declared a quarterly cash
dividend of $.08 per common share, a 14% increase from the quarterly
dividend declared in July 1996.
FINANCIAL CONDITION:
EARNING ASSETS
Earning assets averaged $8.7 billion in the second quarter of 1997, a $1.3
billion (18%) increase from the second-quarter 1996 average of $7.4 billion. The
growth in average earning assets was due to the effect of the purchased
companies and new loan growth. Hibernia has funded the loan growth through
increases in deposits and borrowed funds and proceeds from maturing securities.
Loans. Table 1 presents Hibernia's commercial and small business banking loans
classified by repayment source and consumer loans classified by type at June 30,
1997, March 31, 1997 and June 30, 1996. Total loans increased $360.0 million
(6%) during the second quarter of 1997 as commercial loans increased $179.9
million (7%), small business banking loans were up $43.5 million (4%) and
consumer loans increased $136.6 million (5%). Compared to June 30, 1996, loans
increased $1.4 billion (26%). Commercial loans were up $661.3 million (34%),
small business banking loans grew $242.4 million (26%) and consumer loans
increased $447.0 million (19%). Commercial and small business banking growth was
spread across most categories. In consumer lending, growth was concentrated in
residential mortgage loans and revolving credit loans.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
TABLE 1 - COMPOSITION OF LOAN PORTFOLIO
- ------------------------------------------------------------------------------------------------------------
June 30, 1997 March 31, 1997 June 30, 1996
- ------------------------------------------------------------------------------------------------------------
($ in millions) Loans Percent Loans Percent Loans Percent
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Commercial:
Commercial and industrial ..... $ 934.3 14.3% $ 902.2 14.6% $ 756.6 14.5%
Services industry ............. 524.2 8.0 484.6 7.8 357.0 6.9
Real estate ................... 462.6 7.1 420.4 6.8 357.9 6.9
Health care ................... 230.2 3.5 215.9 3.5 182.2 3.5
Transportation, communications
and utilities .............. 191.0 2.9 196.4 3.2 158.4 3.0
Energy ........................ 223.4 3.4 171.4 2.7 102.6 2.0
Other ......................... 59.5 0.9 54.4 0.9 49.2 0.9
- ------------------------------------------------------------------------------------------------------------
Total commercial ........... 2,625.2 40.1 2,445.3 39.5 1,963.9 37.7
- ------------------------------------------------------------------------------------------------------------
Small Business Banking:
Commercial and industrial ..... 468.7 7.1 480.7 7.7 342.2 6.6
Services industry ............. 250.3 3.8 222.4 3.6 142.7 2.8
Real estate ................... 143.0 2.2 133.3 2.1 116.9 2.2
Health care ................... 55.5 0.8 59.9 1.0 40.9 0.8
Transportation, communications
and utilities .............. 29.9 0.5 29.6 0.5 20.2 0.4
Energy ........................ 13.3 0.2 9.8 0.2 7.6 0.1
Other ......................... 208.6 3.2 190.1 3.1 256.4 4.9
- ------------------------------------------------------------------------------------------------------------
Total small business banking 1,169.3 17.8 1,125.8 18.2 926.9 17.8
- ------------------------------------------------------------------------------------------------------------
Consumer:
Residential mortgages:
First mortgages ............ 1,236.3 18.9 1,112.2 17.9 929.8 17.9
Junior liens ............... 118.3 1.8 118.9 1.9 105.9 2.0
Indirect ...................... 712.5 10.9 727.4 11.7 730.9 14.1
Revolving credit .............. 232.1 3.5 177.1 2.9 105.1 2.0
Other ......................... 461.4 7.0 488.4 7.9 441.9 8.5
- ------------------------------------------------------------------------------------------------------------
Total consumer ............. 2,760.6 42.1 2,624.0 42.3 2,313.6 44.5
- ------------------------------------------------------------------------------------------------------------
Total loans ...................... $ 6,555.1 100.0% $ 6,195.1 100.0% $ 5,204.4 100.0%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Average loans for the second quarter of 1997 of $6.4 billion were up $294
million (5%) from the first quarter of 1997 and up $1.3 billion (26%) compared
to the second quarter of 1996. For the first six months of 1997 average loans
increased $1.3 billion (26%) compared to the first six months of 1996. The
purchased companies accounted for approximately 25% of the increases in both of
the periods.
Securities. Average securities decreased $25.3 million (1%) in the second
quarter of 1997 compared to the second quarter of 1996 and were down $48.4
million (2%) for the first six months of 1997 compared to the same period in
1996. The decreases were the result of the reinvestment of maturing securities
into higher-yielding loans, partially offset by the effect of the purchased
companies.
Short-Term Investments. Average short-term investments (primarily federal
funds sold) for the three months ended June 30, 1997, totaled $219.2 million, up
$50.1 million (30%) compared to an average of $169.1 million in the second
quarter of 1996. For the first six months of 1997 compared to the same period in
1996, short-term investments increased $39.9 million (22%) to $221.7 million.
ASSET QUALITY
Nonperforming assets as a percentage of total loans plus foreclosed assets
and excess bank-owned property at June 30, 1997 improved slightly to 0.45%, down
from 0.49% a year ago. This measure was up slightly from 0.39% at March 31,
1997. Nonperforming assets -- which include nonaccrual loans, restructured
loans, foreclosed assets and excess bank-owned property -- totaled $29.7 million
at June 30, 1997. Nonperforming assets increased $4.2 million (17%) from $25.5
million at June 30, 1996 and $5.8 million (24%) from $23.9 million at March 31,
1997.
Nonperforming loans, which totaled $22.4 million at June 30, 1997,
increased $4.2 million (23%) from a year ago, and $5.8 million (35%) from the
prior quarter end. Although nonperforming loans increased, the ratio of
nonperforming loans to total loans declined as the growth in the loan portfolio
outpaced the growth in nonperforming loans. Foreclosed assets totaled $4.5
million at June 30, 1997, up $0.1 million (3%) from both June 30, 1996 and March
31, 1997. Excess bank-owned property at June 30, 1997 was down $0.1 million (4%)
from $3.0 million a year earlier and down $0.2 million (6%) from March 31, 1997.
Table 2 presents a summary of nonperforming assets at the end of the last
five quarters. Table 3 shows loan delinquencies for the last five quarters. Both
the amount and percentages of loan delinquencies declined at June 30, 1997
compared to June 30, 1996 and March 31, 1997. Additionally, less than 7% of
delinquencies at June 30, 1997 were 90 days or more past due compared to almost
10% at March 31, 1997 and over 8% at June 30, 1996.
<TABLE>
<CAPTION>
-----
- ----------------------------------------------------------------------------------------------------------------
TABLE 2 - NONPERFORMING ASSETS
- ----------------------------------------------------------------------------------------------------------------
June 30 March 31 Dec.31 Sept. 30 June 30
($ in thousands) 1997 1997 1996 1996 1996
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans ........................ $ 22,411 $ 16,610 $ 16,043 $ 15,050 $ 18,217
Restructured loans ...................... - - - - -
- ----------------------------------------------------------------------------------------------------------------
Total nonperforming loans ........... 22,411 16,610 16,043 15,050 18,217
- ----------------------------------------------------------------------------------------------------------------
Foreclosed assets ....................... 4,464 4,330 5,206 4,571 4,323
Excess bank-owned property .............. 2,840 3,008 3,670 2,220 2,956
- ----------------------------------------------------------------------------------------------------------------
Total nonperforming assets .......... $ 29,715 $ 23,948 $ 24,919 $ 21,841 $ 25,496
- ----------------------------------------------------------------------------------------------------------------
Reserve for possible loan losses ........ $120,176 $119,878 $127,768 $133,221 $147,222
Nonperforming loans as a percentage
of total loans ...................... 0.34% 0.27% 0.27% 0.26% 0.35%
Nonperforming assets as a percentage
of total loans plus foreclosed assets
and excess bank-owned property ...... 0.45% 0.39% 0.41% 0.38% 0.49%
Reserve for possible loan losses as a
percentage of nonperforming loans ... 536.24% 721.72% 796.41% 885.19% 808.16%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
At June 30, 1997 the recorded investment in loans considered impaired under
Statement of Financial Accounting Standards (SFAS) No. 114 was $19.6 million.
The related reserve for possible loan losses was $3.6 million. The comparable
amounts at June 30, 1996 were $16.6 million and $2.6 million, respectively.
These loans are included in nonaccrual loans in Table 2.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
TABLE 3 - LOAN DELINQUENCIES (1)
- -----------------------------------------------------------------------------------------------------------
June 30 March 31 Dec.31 Sept. 30 June 30
($ in millions) 1997 1997 1996 1996 1996
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Days past due:
30 to 89 days ........................... $ 44.1 $ 45.5 $ 69.2 $ 47.7 $ 46.6
90 days or more ......................... 3.2 4.8 5.3 3.7 4.3
- -----------------------------------------------------------------------------------------------------------
Total delinquencies ................. $ 47.3 $ 50.3 $ 74.5 $ 51.4 $ 50.9
- -----------------------------------------------------------------------------------------------------------
Total delinquencies as a percentage of loans:
Commercial .............................. 0.19% 0.20% 0.84% 0.03% 0.05%
Small business banking .................. 0.96 1.17 1.31 1.28 1.00
Consumer ................................ 1.13 1.22 1.56 1.49 1.75
Total loans ............................. 0.72 0.81 1.23 0.90 0.98
- -----------------------------------------------------------------------------------------------------------
- -------------
(1) Accruing loans past due as to principal and/or interest 30 days or more.
</TABLE>
Table 4 presents a summary of changes in nonperforming loans for the
three-month and six-month periods ended June 30, 1997 and 1996. Loans totaling
$12.4 million were added to nonperforming loans during the second quarter of
1997. Payments and sales resulted in a $4.0 million reduction in nonperforming
loans and charge-offs further reduced nonperforming loans in the second quarter
of 1997 by $2.5 million. In the event that nonaccrual loans that have been
charged-off are recovered in subsequent periods, the recoveries would be
reflected in the reserve for possible loan losses in Table 5 and not as a
component of nonperforming loan activity.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
TABLE 4 - SUMMARY OF NONPERFORMING LOAN ACTIVITY
- ---------------------------------------------------------------------------------------
Three Months Six Months
Ended June 30 Ended June 30
- ---------------------------------------------------------------------------------------
($ in thousands) 1997 1996 1997 1996
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nonperforming loans
at beginning of period . $ 16,610 $ 18,886 $ 16,043 $ 17,692
Additions .................. 12,393 4,698 31,085 10,048
Charge-offs, gross ......... (2,486) (2,849) (5,491) (5,069)
Returns to performing status (150) (132) (1,041) (160)
Payments and sales ......... (3,956) (2,386) (18,185) (4,294)
- ---------------------------------------------------------------------------------------
Nonperforming loans
at end of period ....... $ 22,411 $ 18,217 $ 22,411 $ 18,217
- ---------------------------------------------------------------------------------------
</TABLE>
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 $19.3 million at June 30, 1997 compared
to $21.1 million at June 30, 1996 and $18.9 million at March 31, 1997.
RESERVE AND PROVISION FOR POSSIBLE LOAN LOSSES
As a result of the low level of nonperforming loans and strong reserve
coverage, no provision for possible loan losses was recorded for the second
quarter or first six months of 1997 compared to nominal provisions recorded in
the same periods of 1996 by one of the pooled companies. As of June 30, 1997 the
reserve for possible loan losses as a percentage of nonperforming loans was
536%, compared to 808% at June 30, 1996 and 722% at March 31, 1997.
Recoveries in the second quarter of 1997 included the collection of a large
commercial loan that had previously been charged-off and the sale of a group of
charged-off consumer loans in bankruptcy. As a result, Hibernia recognized net
recoveries of $0.3 million in the second quarter of 1997, compared to net
charge-offs of $1.2 million in the second quarter of 1996. For the first six
months of 1997, net charge-offs totaled $7.6 million compared to $4.3 million
for the first six months of 1996. As a percentage of average loans, annualized
net recoveries were 0.02% in the second quarter of 1997 compared to net
charge-offs of 0.09% in the second quarter of 1996. Annualized net charge-offs
for the first six months of 1997 and 1996 were 0.24% and 0.17%, respectively.
The reserve for possible loan losses totaled $120.2 million, or 1.83% of
total loans, at June 30, 1997, compared to $147.2 million, or 2.83%, a year
earlier. In terms of both dollar amount and as a percentage of loans, the
reserve for possible loan losses has been declining since the end of 1993 as a
result of net charge-offs, negative provisions and loan growth. Management has
deemed the present level to be adequate to absorb future potential loan losses
inherent in the existing portfolio considering the level and mix of the loan
portfolio, current economic conditions and market trends. Because factors such
as loan growth, the future collectibility of loans and the amounts and timing of
future cash flows expected to be received on impaired loans are uncertain, the
level of future provisions, if any, cannot be predicted. Table 5 presents an
analysis of the activity in the reserve for possible loan losses for the second
quarter and first six months of 1997 and 1996.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
TABLE 5 - RESERVE FOR POSSIBLE LOAN LOSSES ACTIVITY
- ---------------------------------------------------------------------------------------------------
Three Months Six Months
Ended June 30 Ended June 30
- ---------------------------------------------------------------------------------------------------
($ in thousands) 1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at beginning of period ... $ 119,878 $ 147,854 $ 127,768 $ 150,516
Loans charged off ................ (8,714) (7,005) (22,214) (14,113)
Recoveries ....................... 9,012 5,823 14,622 9,844
- ---------------------------------------------------------------------------------------------------
Net loans charged off ............ 298 (1,182) (7,592) (4,269)
Provision for possible loan losses - 550 - 975
- ---------------------------------------------------------------------------------------------------
Balance at end of period ......... $ 120,176 $ 147,222 $ 120,176 $ 147,222
- ---------------------------------------------------------------------------------------------------
Reserve for possible loan losses
as a percentage of loans ..... 1.83% 2.83% 1.83% 2.83%
Annualized net charge-offs as a
percentage of average loans .. (0.02)% 0.09% 0.24% 0.17%
- ---------------------------------------------------------------------------------------------------
</TABLE>
FUNDING SOURCES:
DEPOSITS AND BORROWINGS
Deposits. Average deposits totaled $7.9 billion in the second quarter of
1997, a $1.3 billion (19%) increase from the second quarter of 1996. For the
first six months of 1997 compared to the same period in 1996, average deposits
increased $1.2 billion (18%) to $7.8 billion. Excluding the growth in deposits
attributable to the purchased companies, average deposits grew $432.7 million
(6%) in the second quarter of 1997 and $383.4 million (5%) for the first six
months of 1997 over the comparable periods in 1996. This deposit growth resulted
from Hibernia's emphasis on attracting new deposits and expanding current
banking relationships through outstanding service and the introduction of new
products such as the 7-day CD and the Tower Super SavingsSM account (which
offers liquidity and a rate indexed to the 90-day Treasury bill auction discount
rate).
Table 6 presents the composition of average deposits for the second and
first quarters of 1997 and the second quarter of 1996.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
TABLE 6 - DEPOSIT COMPOSITION
- ------------------------------------------------------------------------------------------------------------
Second Quarter 1997 First Quarter 1997 Second Quarter 1996
- ------------------------------------------------------------------------------------------------------------
Average % of Average % of Average % of
($ in millions) Balances Deposits Balances Deposits Balances Deposits
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Demand, noninterest-bearing ... $ 1,367.8 17.4% $ 1,363.9 17.6% $ 1,149.3 17.4%
NOW accounts .................. 306.4 3.9 390.9 5.1 274.7 4.2
Money market deposit accounts . 1,546.2 19.6 1,545.5 20.0 1,450.6 21.9
Savings accounts .............. 669.3 8.5 505.3 6.5 364.1 5.5
Other consumer time deposits .. 2,531.9 32.2 2,532.5 32.7 2,237.8 33.8
- ------------------------------------------------------------------------------------------------------------
Total core deposits ....... 6,421.6 81.6 6,338.1 81.9 5,476.5 82.8
- ------------------------------------------------------------------------------------------------------------
Public fund certificates of
deposit of $100,000 or more 990.5 12.6 965.4 12.5 853.7 12.9
Certificates of deposit of
$100,000 or more .......... 380.3 4.8 362.9 4.7 243.6 3.7
Foreign time deposits ......... 81.1 1.0 67.7 0.9 43.6 0.6
- ------------------------------------------------------------------------------------------------------------
Total deposits ............ $ 7,873.5 100.0% $ 7,734.1 100.0% $ 6,617.4 100.0%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Average core deposits totaled $6.4 billion in the second quarter of 1997, a
$945.1 million (17%) increase from the second quarter of 1996. Average demand
deposits grew $218.5 million, NOW account balances were up $31.7 million, money
market deposits grew $95.6 million, savings deposits increased $305.2 million
and other consumer time deposits grew $294.1 million in the second quarter of
1997 compared to the second quarter of 1996. These increases were primarily due
to the purchased companies. In addition, savings deposits and consumer time
deposits experienced growth due to the introduction of new products.
Average noncore deposits increased $311.0 million (27%) from the second
quarter of 1996, with the purchased companies accounting for 30% of the
increase. Public fund certificates of deposit increased $136.8 million (16%) and
other large-denomination certificates of deposit increased $136.7 million (56%).
The increases in public funds deposits are due, in part, to greater access in
new markets (through mergers) to public agency funds as well as increases in
funds from previously existing relationships.
Borrowings. Average borrowings -- which include federal funds purchased,
securities sold under agreements to repurchase (repurchase agreements) and debt
- -- increased $117.8 million (35%) to $450.0 million for the second quarter of
1997 compared to the second quarter of 1996. For the first six months of 1997
compared to the same period in 1996 average borrowings increased $112.9 million
(35%) to $437.3 million. The most significant factor in the growth of borrowings
over prior periods is the increase in repurchase agreements related to cash
management products which "sweep" funds from deposit accounts. Average
repurchase agreements increased $77.4 million in the second quarter of 1997 and
$88.5 million for the first six months of 1997 over the comparable periods in
1996.
Fluctuations in short-term borrowings resulted from differences in the
timing 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 Company's long-term debt at June 30, 1997, which totaled $7.0 million,
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 minimizing 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. Derivative financial
instruments were entered into by one of the pooled companies to hedge against
exposure to changes in interest rates on the market value of the securities
available for sale portfolio. At June 30, 1996, the notional value of these
derivatives was $176.0 million. The fair value at that date of $2.8 million is
included in the securities available for sale portfolio. These derivatives were
liquidated during the first quarter of 1997. At June 30, 1997, Hibernia held
foreign exchange rate forward contracts totaling $17.5 million, which minimize
the Company's exchange rate risk on loans to be repaid in foreign currencies.
Hibernia also held an interest rate swap of $70.0 million which is used to
manage interest rate risk on specific deposits.
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 $145.2 million at June 30, 1997. In addition to these
customer-related financial instruments, the Company has entered into contracts
for its own account which total $75.2 million. As of June 30, 1997, Hibernia's
credit exposure related to derivative financial instruments held for trading
totaled $0.3 million.
RESULTS OF OPERATIONS:
NET INTEREST INCOME
Taxable-equivalent net interest income for the second quarter of 1997,
totaled $105.5 million, a $15.1 million increase from the same period in 1996
and up $3.6 million from the first quarter of 1997. Taxable-equivalent net
interest income for the first six months of 1997 totaled $207.5 million, a $29.2
million increase over the first six months of 1996.
Factors contributing to the increase in net interest income for the second
quarter and first six months of 1997 over the comparable periods in 1996
include: the effect of the purchased companies; the positive effect of the
change in the mix of earning assets from lower-yielding securities to loans,
which comprised 73.6% of average earning assets in the second quarter of 1997
compared to 69.1% in the second quarter of 1996; overall growth in earning
assets; and higher yields on securities. These factors were partially offset by
lower yields on loans. Loan yields in the second quarter and first six months of
1996 were positively impacted by an almost $2.2 million increase in income on
nonaccrual or previously charged-off loans.
The analysis of Consolidated Average Balances, Interest and Rates on the
following pages of this discussion presents the Company's taxable-equivalent net
interest income and average balances for the three months ended June 30, 1997,
March 31, 1997 and June 30, 1996, and for the first six months of 1997 and 1996.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED AVERAGE BALANCES, INTEREST AND RATES
- -----------------------------------------------------------------------------------------------------------------------------
Hibernia Corporation and Subsidiaries
Taxable-equivalent basis (1) Second Quarter 1997 First Quarter 1997
- -----------------------------------------------------------------------------------------------------------------------------
(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:
Commercial loans .............................. $2,573.3 $ 56,569 8.82% $2,369.1 $ 51,087 8.75%
Small business banking loans .................. 1,122.1 26,791 9.58 1,113.3 26,165 9.53
Consumer loans ................................ 2,690.9 58,592 8.73 2,609.9 56,535 8.77
- -----------------------------------------------------------------------------------------------------------------------------
Total loans (2) ........................... 6,386.3 141,952 8.91 6,092.3 133,787 8.90
- -----------------------------------------------------------------------------------------------------------------------------
Securities available for sale ................. 2,075.1 35,927 6.93 2,193.7 37,097 6.78
Short-term investments ........................ 219.2 3,006 5.50 224.2 2,933 5.30
- -----------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets ............. 8,680.6 $180,885 8.35% 8,510.2 $173,817 8.26%
- -----------------------------------------------------------------------------------------------------------------------------
Reserve for possible loan losses .................. (119.7) (123.9)
Noninterest-earning assets:
Cash and due from banks ....................... 367.2 389.8
Other assets .................................. 491.2 489.1
- -----------------------------------------------------------------------------------------------------------------------------
Total noninterest-earning assets .......... 858.4 878.9
- -----------------------------------------------------------------------------------------------------------------------------
Total assets .............................. $9,419.3 $9,265.2
- -----------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing deposits:
NOW accounts .............................. $ 306.4 $ 2,362 3.09% $ 390.9 $ 2,932 3.04%
Money market deposit accounts ............. 1,546.2 9,650 2.50 1,545.5 9,269 2.43
Savings accounts .......................... 669.3 5,067 3.04 505.3 3,161 2.54
Other consumer time deposits .............. 2,531.9 32,940 5.22 2,532.5 32,904 5.27
Public fund certificates of deposit
of $100,000 or more ................... 990.5 13,627 5.52 965.4 13,001 5.46
Certificates of deposit of $100,000 or more 380.3 4,890 5.16 362.9 4,566 5.10
Foreign time deposits ..................... 81.1 1,080 5.34 67.7 877 5.25
- -----------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits ....... 6,505.7 69,616 4.29 6,370.2 66,710 4.25
- -----------------------------------------------------------------------------------------------------------------------------
Short-term borrowings:
Federal funds purchased ................... 104.3 1,424 5.48 42.5 554 5.28
Repurchase agreements ..................... 338.5 4,185 4.96 337.8 3,930 4.72
Debt .......................................... 7.2 112 6.24 44.3 635 5.82
- -----------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities ........ 6,955.7 $ 75,337 4.34% 6,794.8 $ 71,829 4.29%
- -----------------------------------------------------------------------------------------------------------------------------
Noninterest liabilities:
Demand deposits ............................... 1,367.8 1,363.9
Other liabilities ............................. 142.2 162.7
- -----------------------------------------------------------------------------------------------------------------------------
Total noninterest-bearing liabilities ..... 1,510.0 1,526.6
- -----------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity ........................ 953.6 943.8
- -----------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $9,419.3 $9,265.2
- -----------------------------------------------------------------------------------------------------------------------------
SPREAD AND NET YIELD
Interest rate spread .............................. 4.01% 3.97%
Cost of funds supporting interest-earning assets .. 3.48% 3.43%
Net interest income/margin ........................ $105,548 4.87% $101,988 4.83%
- -----------------------------------------------------------------------------------------------------------------------------
- ---------------
(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.)
- -----------------------------------------------------------------------------------------------------------------------------
Hibernia Corporation and Subsidiaries Six Months Ended
Taxable-equivalent basis (1) Second Quarter 1996 June 30,1997
- -----------------------------------------------------------------------------------------------------------------------------
(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:
Commercial loans .............................. $1,917.7 $ 45,313 9.50% $2,471.8 $107,656 8.78%
Small business banking loans .................. 900.6 20,743 9.26 1,117.7 52,957 9.55
Consumer loans ................................ 2,266.4 50,152 8.89 2,650.6 115,126 8.75
- -----------------------------------------------------------------------------------------------------------------------------
Total loans (2) ........................... 5,084.7 116,208 9.19 6,240.1 275,739 8.91
- -----------------------------------------------------------------------------------------------------------------------------
Securities available for sale ................. 2,100.4 34,192 6.52 2,134.1 73,024 6.85
Short-term investments ........................ 169.1 2,225 5.28 221.7 5,939 5.40
- -----------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets ............. 7,354.2 $152,625 8.34% 8,595.9 $354,702 8.31%
- -----------------------------------------------------------------------------------------------------------------------------
Reserve for possible loan losses .................. (148.3) (121.8)
Noninterest-earning assets:
Cash and due from banks ....................... 315.7 378.4
Other assets .................................. 333.2 490.2
- -----------------------------------------------------------------------------------------------------------------------------
Total noninterest-earning assets .......... 648.9 868.6
- -----------------------------------------------------------------------------------------------------------------------------
Total assets .............................. $7,854.8 $9,342.7
- -----------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing deposits:
NOW accounts .............................. $ 274.7 $ 1,879 2.75% $ 348.4 $ 5,294 3.06%
Money market deposit accounts ............. 1,450.6 8,469 2.35 1,545.9 18,919 2.47
Savings accounts .......................... 364.1 1,890 2.09 587.8 8,228 2.82
Other consumer time deposits .............. 2,237.8 31,000 5.57 2,532.1 65,844 5.24
Public fund certificates of deposit
of $100,000 or more ................... 853.7 11,214 5.28 978.0 26,627 5.49
Certificates of deposit of $100,000 or more 243.6 3,142 5.19 371.7 9,457 5.13
Foreign time deposits ..................... 43.6 577 5.32 74.4 1,957 5.30
- -----------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits ....... 5,468.1 58,171 4.28 6,438.3 136,326 4.27
- -----------------------------------------------------------------------------------------------------------------------------
Short-term borrowings:
Federal funds purchased ................... 43.8 564 5.18 73.6 1,978 5.42
Repurchase agreements ..................... 261.1 3,039 4.68 338.1 8,114 4.84
Debt .......................................... 27.3 384 5.65 25.6 747 5.88
- -----------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities ........ 5,800.3 $ 62,158 4.31% 6,875.6 $147,165 4.32%
- -----------------------------------------------------------------------------------------------------------------------------
Noninterest liabilities:
Demand deposits ............................... 1,149.3 1,365.9
Other liabilities ............................. 131.4 152.4
- -----------------------------------------------------------------------------------------------------------------------------
Total noninterest-bearing liabilities ..... 1,280.7 1,518.3
- -----------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity ........................ 773.8 948.8
- -----------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $7,854.8 $9,342.7
- -----------------------------------------------------------------------------------------------------------------------------
SPREAD AND NET YIELD
Interest rate spread .............................. 4.03% 3.99%
Cost of funds supporting interest-earning assets .. 3.40% 3.46%
Net interest income/margin ........................ $ 90,467 4.94% $207,537 4.85%
- -----------------------------------------------------------------------------------------------------------------------------
- ---------------
(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.)
- ----------------------------------------------------------------------------------------------------------------
Hibernia Corporation and Subsidiaries Six Months Ended
Taxable-equivalent basis (1) June 30, 1996
- ----------------------------------------------------------------------------------------------------------------
(Average balances $ in millions, Average
interest $ in thousands) Balance Interest Rate
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Interest-earning assets:
Commercial loans ............................................... $1,870.0 $ 87,374 9.40%
Small business banking loans ................................... 896.6 41,706 9.35
Consumer loans ................................................. 2,195.8 97,010 8.88
- ----------------------------------------------------------------------------------------------------------------
Total loans (2) ............................................ 4,962.4 226,090 9.16
- ----------------------------------------------------------------------------------------------------------------
Securities available for sale .................................. 2,182.5 71,095 6.52
Short-term investments ......................................... 181.8 4,813 5.32
- ----------------------------------------------------------------------------------------------------------------
Total interest-earning assets .............................. 7,326.7 $301,998 8.28%
- ----------------------------------------------------------------------------------------------------------------
Reserve for possible loan losses (149.1) Noninterest-earning assets:
Cash and due from banks ........................................ 318.2
Other assets ................................................... 328.7
- ----------------------------------------------------------------------------------------------------------------
Total noninterest-earning assets ........................... 646.9
- ----------------------------------------------------------------------------------------------------------------
Total assets ............................................... $7,824.5
- ----------------------------------------------------------------------------------------------------------------
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing deposits:
NOW accounts ............................................... $ 268.7 $ 3,755 2.81%
Money market deposit accounts .............................. 1,488.8 17,707 2.39
Savings accounts ........................................... 366.9 3,815 2.09
Other consumer time deposits ............................... 2,202.8 61,650 5.63
Public fund certificates of deposit
of $100,000 or more .................................... 826.1 22,036 5.36
Certificates of deposit of $100,000 or more ................ 224.2 5,760 5.17
Foreign time deposits ...................................... 41.1 1,121 5.49
- ----------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits ........................ 5,418.6 115,844 4.30
- ----------------------------------------------------------------------------------------------------------------
Short-term borrowings:
Federal funds purchased .................................... 47.4 1,221 5.18
Repurchase agreements ...................................... 249.6 5,799 4.67
Debt ........................................................... 27.4 779 5.72
- ----------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities ......................... 5,743.0 $123,643 4.33%
- ----------------------------------------------------------------------------------------------------------------
Noninterest liabilities:
Demand deposits ................................................ 1,178.8
Other liabilities .............................................. 127.8
- ----------------------------------------------------------------------------------------------------------------
Total noninterest-bearing liabilities ...................... 1,306.6
- ----------------------------------------------------------------------------------------------------------------
Total shareholders' equity ......................................... 774.9
- ----------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity ................. $7,824.5
- ----------------------------------------------------------------------------------------------------------------
SPREAD AND NET YIELD
Interest rate spread ............................................... 3.95%
Cost of funds supporting interest-earning assets ................... 3.40%
Net interest income/margin ......................................... $178,355 4.88%
- ----------------------------------------------------------------------------------------------------------------
- --------------
(1) Based on the statutory income tax rate of 35%.
(2) Yield computations include nonaccrual loans in loans outstanding.
</TABLE>
The net interest margin was 4.87% for the second quarter of 1997. The
reported net interest margin for the second quarter of 1996 of 4.94% would have
been 4.82% excluding the effect of the increased income on nonaccrual or
previously charged-off loans. Therefore, the net interest margin for the second
quarter of 1997 was up 5 basis points over the same period a year ago and up 4
basis points over the first quarter of 1997. The net interest margin for first
six months of 1997 was 4.85%, up slightly from the same period in 1996 (after a
6 basis points adjustment for the income on nonaccrual loans). The positive
effects of the change in the mix of earning assets and the increasing yields on
securities were partially offset by the negative impact of introductory rates
offered on Hibernia's Equity PrimeLine(R) loan product and Tower Super SavingsSM
account. During the second quarter of 1997, the rates on these products began to
reprice to market rates.
Table 7 details the net interest margin for the most recent five quarters.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
TABLE 7 - NET INTEREST MARGIN (taxable-equivalent)
- -----------------------------------------------------------------------------------------------
1997 1996
- -----------------------------------------------------------------------------------------------
Second First Fourth Third Second
Quarter Quarter Quarter Quarter Quarter
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Yield on earning assets ............ 8.35% 8.26% 8.33% 8.32% 8.34%
Rate on interest-bearing liabilities 4.34 4.29 4.29 4.32 4.31
- -----------------------------------------------------------------------------------------------
Net interest spread ............ 4.01 3.97 4.04 4.00 4.03
Contribution of
noninterest-bearing funds ...... 0.86 0.86 0.89 0.88 0.91
- -----------------------------------------------------------------------------------------------
Net interest margin ............ 4.87% 4.83% 4.93% 4.88% 4.94%
- -----------------------------------------------------------------------------------------------
Noninterest-bearing funds
supporting earning assets ...... 19.87% 20.16% 20.65% 20.24% 21.13%
- -----------------------------------------------------------------------------------------------
</TABLE>
Table 8 shows the composition of average earning assets for the five most
recent quarters, revealing the change in the mix of earning assets.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
TABLE 8 - INTEREST-EARNING ASSET COMPOSITION
- -------------------------------------------------------------------------------------------
1997 1996
- -------------------------------------------------------------------------------------------
Second First Fourth Third Second
(Percentage of average balances) Quarter Quarter Quarter Quarter Quarter
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial loans ................ 29.7% 27.8% 26.4% 26.0% 26.1%
Small business banking loans .... 12.9 13.1 13.9 13.5 12.2
Consumer loans .................. 31.0 30.7 31.0 31.8 30.8
- -------------------------------------------------------------------------------------------
Total loans ................. 73.6 71.6 71.3 71.3 69.1
- -------------------------------------------------------------------------------------------
Securities available for sale ... 23.9 25.8 26.4 26.4 28.6
Short-term investments .......... 2.5 2.6 2.3 2.3 2.3
- -------------------------------------------------------------------------------------------
Total interest-earning assets 100.0 % 100.0% 100.0% 100.0% 100.0%
- -------------------------------------------------------------------------------------------
</TABLE>
Table 9 presents an analysis of changes in taxable-equivalent net interest
income between the second quarter of 1997 and the first quarter of 1997 and
between the second quarter of 1997 and the second quarter of 1996.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
TABLE 9 - CHANGES IN TAXABLE-EQUIVALENT NET INTEREST INCOME (1)
- -------------------------------------------------------------------------------------------------------------------------
Second Quarter 1997 Compared to:
- -------------------------------------------------------------------------------------------------------------------------
First Quarter 1997 Second Quarter 1996
- -------------------------------------------------------------------------------------------------------------------------
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:
Commercial loans .............. $ 4,472 $ 1,010 $ 5,482 $ 14,595 $ (3,339) $ 11,256
Small business banking loans .. 209 417 626 5,263 785 6,048
Consumer loans ................ 1,761 296 2,057 9,253 (813) 8,440
- -------------------------------------------------------------------------------------------------------------------------
Loans ..................... 6,442 1,723 8,165 29,111 (3,367) 25,744
- -------------------------------------------------------------------------------------------------------------------------
Securities available for sale . (2,039) 869 (1,170) (416) 2,151 1,735
Short-term investments ........ (67) 140 73 684 97 781
- -------------------------------------------------------------------------------------------------------------------------
Total ................... 4,336 2,732 7,068 29,379 (1,119) 28,260
- -------------------------------------------------------------------------------------------------------------------------
Interest paid on:
NOW accounts .................. (649) 79 (570) 230 253 483
Money market
deposit accounts .......... 4 377 381 577 604 1,181
Savings accounts .............. 1,156 750 1,906 2,054 1,123 3,177
Other consumer time ........... (7) 43 36 3,904 (1,964) 1,940
Public fund certificates of
deposit of $100,000 or more 343 283 626 1,864 549 2,413
Certificates of deposit
of $100,000 or more ....... 222 102 324 1,758 (10) 1,748
Foreign deposits .............. 178 25 203 499 4 503
Federal funds purchased ....... 842 28 870 824 36 860
Repurchase agreements ......... 9 246 255 947 199 1,146
Long-term debt ................ (572) 49 (523) (309) 37 (272)
- -------------------------------------------------------------------------------------------------------------------------
Total ................... 1,526 1,982 3,508 12,348 831 13,179
- -------------------------------------------------------------------------------------------------------------------------
Taxable-equivalent
net interest income ........... $ 2,810 $ 750 $ 3,560 $ 17,031 $ (1,950) $ 15,081
- -------------------------------------------------------------------------------------------------------------------------
- ---------------
(1) Change due to mix (both volume and rate) has been allocated to volume and
rate changes in proportion to the relationship of the absolute dollar
amounts to the changes in each.
</TABLE>
NONINTEREST INCOME
Noninterest income for the second quarter of 1997 was up $7.9 million (28%)
to $36.3 million compared to the same period of 1996. For the first six months
of 1997 compared to the same period in 1996, noninterest income was up $12.5
million (22%). Excluding nonrecurring items in both the 1997 and 1996 periods,
noninterest income was up $7.2 million (26%) in the quarter and $13.2 million
(24%) in the first six months. Nonrecurring items include a $1.2 million gain
recognized in the second quarter of 1997 on the sale of Hibernia's interest in
an electronic funds transfer network; $0.5 million in the second quarter of 1996
to record an additional gain related to the 1995 sale of the municipal bond
administration business; and a $1.4 million gain on the settlement of an
acquired loan in the first quarter of 1996. Approximately 30% of the increases
in both the three-month and six-month periods was due to the purchased
companies.
The major categories of noninterest income for the three months and six
months ended June 30, 1997 and 1996 are presented in Table 10.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
TABLE 10 - NONINTEREST INCOME
- ----------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
- ----------------------------------------------------------------------------------------------------------------
Percentage Percentage
June 30 June 30 Increase June 30 June 30 Increase
($ in thousands) 1997 1996 (Decrease) 1997 1996 (Decrease)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service charges on deposits ...... $17,497 $14,007 25% $33,571 $27,054 24%
Trust fees ....................... 3,716 3,183 17 7,185 6,451 11
Other service, collection and
exchange charges:
Mortgage loan servicing fees . 2,025 1,926 5 4,027 3,880 4
Retail investment service fees 3,217 2,675 20 5,792 4,523 28
ATM fees ..................... 2,126 1,701 25 4,163 3,268 27
Other fees ................... 3,483 2,433 43 6,438 4,797 34
- ----------------------------------------------------------------------------------------------------------------
Total other service, collection
and exchange charges ......... 10,851 8,735 24 20,420 16,468 24
- ----------------------------------------------------------------------------------------------------------------
Other income ..................... 3,852 2,387 61 6,753 5,738 18
Securities gains (losses), net ... 356 46 674 371 113 228
- ----------------------------------------------------------------------------------------------------------------
Total noninterest income ..... $36,272 $28,358 28% $68,300 $55,824 22%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
Service charges on deposits increased $3.5 million (25%) for the second
quarter of 1997 and $6.5 million (24%) for the first six months of 1997 over the
comparable periods in 1996. The purchased companies accounted for over 50% of
the increases. Growth in fee-generating deposit accounts was the primary reason
for the remainder of the increases.
Other service, collection and exchange charges were up $2.1 million (24%)
in the second quarter of 1997 and $4.0 million (24%) for the first six months of
1997 compared to the same periods in 1996, primarily due to increases in retail
investment service fees, ATM fees and debit and credit card fees. Retail
investment service fees increased $0.5 million in the second quarter and $1.3
million in first six months of 1997 compared to the same periods in 1996 because
of Hibernia's attractive product offerings such as mutual funds, annuities and
discount brokerage services and its expanded customer base resulting from the
merged companies. Hibernia's upgraded and expanded ATM network resulted in a
$0.4 million increase in ATM fees for the second quarter and a $0.9 million
increase in the first six months of 1997 over the comparable periods in 1996.
Fees resulting from the successful introductions in 1996 of Hibernia's
CheckmateSM debit card and Capital Access(C) credit card for small businesses
led to a $0.5 million increase in other fees for the second quarter of 1997. For
the first six months of 1997, this increase totaled $1.2 million.
Excluding the nonrecurring items previously mentioned, other income was up
$0.8 million (41%) for the second quarter of 1997 and up $1.7 million for the
first six months of 1997 (45%) compared to the same periods in 1996. The
increases were primarily due to gains recorded on the sale of originated
mortgage loans, income from direct holding company investments initiated in the
second quarter of 1996 and income from Hibernia's joint venture with a major
mortgage company that originates, underwrites, closes and services multi-family
housing loans under an FNMA program.
NONINTEREST EXPENSE
For the second quarter of 1997, noninterest expense totaled $88.8 million,
a $14.9 million (20%) increase from the second quarter of 1996. Amortization of
intangibles and noninterest expense associated with the purchased companies
accounted for almost 50% of the increase, with the remainder primarily due to
increases in staff costs and equipment expenses. Included in noninterest expense
are costs 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 revenues and
reduce costs. In addition, Vision 2000 is creating a culture that will
facilitate continuous improvement. The Vision 2000 expenses totaled $1.7 million
and $1.5 million in the second quarter of 1997 and 1996, respectively, and $2.5
million and $3.6 million in the first six months of 1997 and 1996, respectively.
Noninterest expense for the three months and six months ended June 30, 1997 and
1996 is presented by major category in Table 11.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
TABLE 11 - NONINTEREST EXPENSE
- -----------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
- -----------------------------------------------------------------------------------------------------------------------------------
Percentage Percentage
June 30 June 30 Increase June 30 June 30 Increase
($ in thousands) 1997 1996 (Decrease) 1997 1996 (Decrease)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Salaries ........................ $ 35,193 $ 31,824 11% $ 70,938 $ 62,261 14%
Benefits ........................ 6,525 6,129 6 13,630 12,942 5
- -----------------------------------------------------------------------------------------------------------------------------------
Total staff costs ........... 41,718 37,953 10 84,568 75,203 12
- -----------------------------------------------------------------------------------------------------------------------------------
Occupancy, net .................. 7,390 6,880 7 14,708 13,203 11
Equipment ....................... 6,998 5,835 20 13,845 11,333 22
- -----------------------------------------------------------------------------------------------------------------------------------
Total occupancy and equipment 14,388 12,715 13 28,553 24,536 16
- -----------------------------------------------------------------------------------------------------------------------------------
Data processing ................. 5,273 5,011 5 9,793 10,315 (5)
Telecommunications .............. 2,657 2,075 28 5,414 4,298 26
Advertising and promotional
expenses .................... 3,584 2,787 29 6,494 5,194 25
Postage ......................... 2,055 1,376 49 4,238 2,906 46
Stationery and supplies ......... 2,117 1,519 39 3,860 3,138 23
Professional fees ............... 1,300 1,357 (4) 2,781 2,880 (3)
Regulatory expense .............. 574 315 82 1,149 611 88
Loan collection expense ......... 1,010 477 112 1,775 982 81
Foreclosed property expense, net (250) (960) 74 (574) (1,675) 66
Amortization of intangibles ..... 3,443 963 258 7,009 1,924 264
Other ........................... 10,957 8,341 31 18,736 16,326 15
- -----------------------------------------------------------------------------------------------------------------------------------
Total noninterest expense ... $ 88,826 $ 73,929 20% $ 173,796 $ 146,638 19%
- -----------------------------------------------------------------------------------------------------------------------------------
Efficiency ratio (1)............. 62.79% 62.24% 63.09% 62.65%
Tangible efficiency ratio (2).... 60.54% 61.59% 60.74% 61.98%
- -----------------------------------------------------------------------------------------------------------------------------------
- ----------------
(1) Noninterest expense as a percentage of taxable-equivalent net interest
income plus noninterest income (excluding securities transactions).
(2) Noninterest expense (excluding amortization of purchase accounting
intangibles) as a percentage of taxable-equivalent net interest income
plus noninterest income (excluding securities transactions).
</TABLE>
Staff costs, the largest component of noninterest expense, increased $3.8
million (10%) in the second quarter of 1997 and $9.4 million (12%) for the first
six months of 1997 compared to the same periods a year ago. The purchased
companies accounted for more than half of the increases in both periods, while
higher accruals for incentives and bonuses (based on Hibernia's performance) and
normal merit increases were other major factors contributing to the increase in
staff costs.
Occupancy and equipment expenses increased $1.7 million (13%) in the second
quarter of 1997 and $4.0 million (16%) for the first six months of 1997 over the
comparable periods in 1996. Over 60% of the increases was attributable to the
purchased companies. Higher equipment expenses as a result of the ATM upgrades,
costs related to Vision 2000 and other technological enhancements were other
factors in these increases.
Data processing expenses increased $0.3 million (5%) for the second quarter
of 1997 compared to the second quarter of 1996. Data processing expenses
decreased $0.5 million (5%) for the first six months of 1997 from the comparable
period in 1996. Decreases in expenses related to Vision 2000 more than offset
the increased data processing expenses related to the purchased companies in
both periods.
Telecommunications expenses increased $0.6 million (28%) for the second
quarter of 1997 and $1.1 million (26%) for the first six months of 1997,
primarily due to expenses related to the Company's enhanced communications
capabilities, including the operation of its wide area network and enhanced ATM
network.
Advertising and promotional expenses increased $0.8 million (29%) in the
second quarter of 1997 and $1.3 million (25%) for the first six months of 1997
compared to the same periods in 1996 because of an increase in advertising
related to the introduction of new products, such as the Tower Super SavingsSM
account and the Hibernia Equity PrimeLine(R) loan, product development activity
and direct marketing. Postage increased $0.7 million (49%) in the second quarter
of 1997 and $1.3 million (46%) compared to the same periods in 1996, primarily
due to increased direct marketing efforts.
Regulatory expenses increased $0.3 million (82%) in the second quarter of
1997 and $0.5 million (88%) for the first six months of 1997 compared to the
second quarter and first six months of 1996, respectively. The lower expense
levels in 1996 are the result of the virtual elimination of FDIC premiums for
well-capitalized, highly-rated banks. Legislation enacted in the third quarter
of 1996 provided for assessments on banks (based on deposit levels) to pay
interest on bonds of the Financing Corporation (FICO). Hibernia's assessments
related to the FICO funding were $0.2 million for the second quarter and $0.4
million for the first six months of 1997.
Amortization of intangibles, a noncash expense, increased $2.5 million to
$3.4 million in the second quarter of 1997 compared to the second quarter of
1996, and increased $5.1 million to $7.0 million for the first six months of
1997 compared to the first six months of 1996. Goodwill and core deposit
intangibles created by the two purchase transactions in late 1996 were
responsible for the increases. Goodwill that resulted from these transactions,
totaling $120.1 million, is being amortized on a straight-line basis over 25
years. Core deposit intangibles totaling $18.5 million are being amortized on an
accelerated basis over 10 years.
The Company's efficiency ratio, defined as noninterest expense as a
percentage of taxable-equivalent net interest income plus noninterest income
(excluding securities transactions), is a key measure that management uses to
evaluate the success of efforts to control costs while generating revenue
efficiently. The tangible efficiency ratio, which excludes amortization of
purchase accounting intangibles from the calculation, was 60.54% for the second
quarter of 1997, a 105 basis point improvement from 61.59% for the same period
of 1996. For the first six months of 1997, the tangible efficiency ratio was
60.74% compared to 61.98% for the first six months of 1996. The improvement in
efficiency for both periods in 1997 reflects increases in net interest income
and noninterest income combined with a lower rate of increases in noninterest
expense (excluding amortization of intangibles).
INCOME TAXES
The Company recorded a $17.8 million income tax expense in the second
quarter of 1997, a $3.1 million (21%) increase from $14.7 million in the second
quarter of 1996 as pretax income rose 18%. For the first six months of 1997,
income tax expense totaled $34.1 million, up 18% compared to $29.0 million for
the first six months of 1996.
Hibernia National 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 Hibernia National Bank
are subject to Louisiana state income tax. Hibernia National Bank of Texas is
subject to Texas franchise tax.
CAPITAL
Shareholders' equity totaled $970.0 million at June 30, 1997, compared to
$781.6 million a year earlier. The increase is primarily the result of net
income over the most recent 12 months totaling $119.1 million, the issuance of
$100 million in preferred stock on September 30, 1996 and a $10.5 million change
in unrealized gains (losses) on securities available for sale. These increases
were partially offset by $39.4 million in dividends declared on common stock and
$5.2 million in dividends declared on preferred stock. Risk-based capital and
leverage ratios exceed the ratios required for designation as a
"well-capitalized" institution under regulatory guidelines. Table 12 presents
Hibernia's ratios along with selected components of the capital ratio
calculations for the most recent five quarters.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
TABLE 12 - CAPITAL
- --------------------------------------------------------------------------------------------------------------
June 30 March 31 Dec. 31 Sept. 30 June 30
($ in millions) 1997 1997 1996 1996 1996
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Risk-based capital:
Tier 1 ..................... $ 821.9 $ 801.0 $ 777.1 $ 778.1 $ 771.2
Total ...................... 910.5 884.8 858.1 854.9 841.2
Assets:
Quarterly average assets (1) 9,278.3 9,111.5 8,850.9 8,015.8 7,840.2
Net risk-adjusted assets ... 7,058.7 6,672.3 6,438.3 6,094.4 5,520.3
Ratios:
Tier 1 risk-based capital .. 11.64% 12.00% 12.07% 12.77% 13.97%
Total risk-based capital ... 12.90 13.26 13.33 14.03 15.24
Leverage ................... 8.86 8.79 8.78 9.71 9.84
- --------------------------------------------------------------------------------------------------------------
- -------------
(1) Excluding SFAS No. 115 adjustment and disallowed intangibles.
</TABLE>
The two mergers completed during 1996 that were accounted for as purchase
transactions enabled Hibernia to leverage its capital, acquiring assets (and
earnings capacity) without increasing equity. As a result of these transactions,
the Company's capital ratios have declined from previous levels, but still
significantly exceed the standards required for designation as a
"well-capitalized" institution.
The Fixed/Adjustable Rate Noncumulative Preferred Stock issued on September
30, 1996 is nonconvertible and qualifies as Tier 1 capital. The issuance allowed
Hibernia to maintain its strong capital ratios and enhances its ability to act
when future opportunities arise. A shelf registration statement filed by the
Company in July 1996 with the Securities and Exchange Commission allows the
Company to issue up to $250 million of securities over a two-year period,
including preferred stock and subordinated debt. The remaining $150 million in
securities included in this shelf registration provide Hibernia with the
flexibility to quickly modify its capital structure to meet competitive and
market conditions. As a result of the pending mergers previously discussed, the
Company is expected to issue 18.3 million shares of Hibernia Class A Common
Stock. These mergers are not expected to have a material impact on Hibernia's
capital ratios.
LIQUIDITY
Liquidity is a measure of ability to fund loan commitments and meet deposit
maturities and withdrawals in a timely and cost-effective way. Liquidity needs
can be met by generating profits, attracting new deposits and converting assets
(such as short-term investments and securities available for sale) to cash.
Management monitors liquidity through a periodic review of maturity profiles,
yield and rate behaviors, and loan and deposit forecasts to minimize funding
risks.
The loan-to-deposit ratio, one measure of liquidity, was 82.3% at June 30,
1997, 78.1% at March 31, 1997, and 78.5% at June 30, 1996. Another indicator of
liquidity is the large liability dependence ratio, which measures reliance on
short-term borrowings and other large liabilities (such as large-denomination
and public fund CDs and foreign deposits). Based on average balances, 19.80% 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
1997, up 107 basis points from the first quarter of 1997 and up 203 basis points
from the second quarter of 1996. Although short-term borrowings have increased
in the past year, a significant portion of the purchased funds results from a
cash management product that is just one part of a total customer relationship,
and thus is not subject to the same volatility as other sources of noncore
funds.
Attracting and retaining core deposits at competitive rates are the
Company's primary sources of liquidity. Hibernia's extensive retail office
network, aided by the introduction of new deposit products, provided $6.6
billion in core deposits at June 30, 1997, up $1.1 billion (20%) from $5.5
billion a year earlier. Large-denomination certificates of deposit, public
funds, and funds which can be purchased through the Banks' memberships in the
Federal Home Loan Bank of Dallas and from correspondent banks were additional
sources of liquidity. The Company can also raise additional funds through the
sale of securities registered on the shelf registration discussed in the Capital
section.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
EXHIBIT DESCRIPTION
3.1 Exhibit 3.1 to the Annual Report on Form 10-K for the fiscal
year ended December 31, 1996, filed with the Commission by the
Registrant (Commission File No. 0-7220) is hereby incorporated
by reference (Articles of Incorporation of the Registrant, as
amended to date)
3.2 By-Laws of the Registrant, as amended to date
10.13 Exhibit 10.13 to the Annual Report on Form 10-K for the fiscal
year ended December 31, 1988, filed with the Commission by the
Registrant (Commission File No. 0-7220) is hereby incorporated
by reference (Deferred Compensation Plan for Outside Directors
of Hibernia Corporation and its Subsidiaries, as amended to
date)
10.14 Exhibit 10.14 to the Annual Report on Form 10-K for the fiscal
year ended December 31, 1990, filed with the Commission by the
Registrant (Commission File No. 0-7220) is hereby incorporated
by reference (Hibernia Corporation Executive Life Insurance
Plan)
10.16 Exhibit 4.7 to the Registration Statement on Form S-8 filed
with the Commission by the Registrant (Registration No.
33-26871) is hereby incorporated by reference (Hibernia
Corporation 1987 Stock Option Plan, as amended to date)
10.34 Exhibit C to the Registrant's definitive proxy statement dated
August 17, 1992 relating to its 1992 Annual Meeting of
Shareholders filed by the Registrant with the Commission is
hereby incorporated by reference (Long-Term Incentive Plan of
Hibernia Corporation)
10.35 1993 Director Stock Option Plan of Hibernia Corporation, as
amended to date
10.36 Exhibit 10.36 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993 filed with the
Commission (Commission file no. 0-7220) is hereby incorporated
by reference (Employment agreement between Stephen A. Hansel
and Hibernia Corporation)
10.37 Exhibit 10.37 to the Registrant's Annual Report on Form 19-K;
Form 10-K for the fiscal year ended December 31, 1994 filed
with the Commission (Commission File No. 0-7220) is hereby
incorporated by reference (Employment Agreement) between J.
Herbert Boydstun and Hibernia Corporation)
10.38 Exhibit 10.38 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993 filed with the
Commission (Commission File No. 0-7220) is hereby incorporated
by reference (Employment Agreement between E.R. "Bo" Campbell
and Hibernia Corporation)
10.39 Exhibit 10.39 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996 filed with the
Commission (Commission File No. 0-7220) is hereby incorporated
by reference (Employment Agreement between B.D. Flurry and
Hibernia Corporation)
10.40 Exhibit 10.40 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996 filed with the
Commission (Commission File No. 0-7220) is hereby incorporated
by reference (Split-Dollar Life Insurance Plan of the
Registrant effective as of July 1996)
10.41 Exhibit 10.41 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996 filed with the
Commission (Commission File No. 0-7220) is hereby incorporated
by reference (Nonqualified Deferred Compensation Plan for Key
Management Employees of the Registrant effective as of July
1996)
10.42 Exhibit 10.42 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996 filed with the
Commission (Commission File No. 0-7220) is hereby incorporated
by reference (Supplemental Stock Compensation Plan for Key
Management Employees effective as of July 1996)
10.43 Exhibit 10.43 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996 filed with the
Commission (Commission No. 0-7220) is hereby incorporated by
reference (Nonqualified Target Benefit (Deferred Award) Plan
of the Registrant effective as of July 1996)
21 Exhibit 21 to the Annual Report on Form 10-K of the Registrant
for the fiscal year ended December 31, 1996 filed with the
Commission (Commission File No. 0-7220) is hereby incorporated
by reference (Subsidiaries of the Registrant)
(b) Reports on Form 8-K
A report on Form 8-K dated May 12, 1997, was filed by the
registrant reporting Item 5 Other Events.
A report on Form 8-K dated May 28, 1997, was filed by the
registrant reporting Item 5 Other Events.
A report on Form 8-K dated June 27, 1997, was filed by the
registrant reporting Item 5 Other Events.
A report on Form 8-K dated July 16, 1997, 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: August 13, 1997 By: /s/ Ron E. Samford, Jr.
------------------- -----------------------
Ron E. Samford, Jr.
Executive Vice President and Controller
Chief Accounting Officer
<PAGE>
BY-LAWS
OF
HIBERNIA CORPORATION
(hereinafter called the "Corporation")
ARTICLE I
Meetings of Shareholders
Section 1.1. Annual Meeting. An annual meeting of shareholders for the
election of directors and the transaction of such other business as may properly
come before such meeting shall be held at such time, on such date and in such
place as may be specified by the Board of Directors in a notice of such meeting
given as hereinafter provided.
Section 1.2. Special Meetings.
(a) Special meetings of shareholders may be called at any time and
place for any purpose or purposes by the Chairman of the Board or the President
or the Chief Executive Officer or the Treasurer or the Board of Directors. At
any time, upon the written request of any shareholder(s) holding in the
aggregate one-fifth or more of the total voting power, such written request to
state the purpose(s) of the meeting and to be delivered to the Secretary, the
Secretary shall call a special meeting of shareholders to be held at such time,
on such date and in such place as the Secretary may fix.
(b) No business shall be considered and voted upon at a special meeting
of shareholders unless such business was included in the purpose(s) set forth in
the notice of the meeting.
Section 1.3. Shareholder Proposals.
(a) If any shareholder desires to submit a proposal for action at any
meeting of shareholders, including the nomination of one or more individuals for
election as a director, such shareholder (hereinafter the "proponent") and
proposal must satisfy and comply with all of the following conditions and
requirements:
(1) At the time of submitting the proposal, the proponent must
be the record or beneficial owner of at least 1% or $1,000 in market value of
shares having voting power on the proposal at the meeting and have held such
shares for at least one year, and the proponent shall continue to own such
shares through the date on which the meeting is held.
(2) The proposal must be submitted in writing and be
accompanied by written disclosure of the proponent's name, address, number of
shares owned, the dates upon which such shares were acquired and documentary
support of the proponent's ownership of such shares.
(3) The proposal and other required material must be received
by the Corporation not less than 120 days in advance of the date that
corresponds with the date of the Corporation's proxy statement sent to
shareholders in connection with the previous year's annual meeting of
shareholders (in the case of a proposal submitted in connection with an annual
meeting) or not less than 45 days in advance of the date on which the meeting is
scheduled to be held or within 10 days after notice of the meeting is first
given to shareholders, whichever is later (in the case of a proposal submitted
in connection with a special meeting of shareholders).
(4) If the proposal nominates one or more individuals for
election as a director, the proposal must include or be accompanied by a written
statement of each nominee's qualifications for election as a director and the
nominee's signed consent to being named as such a nominee and to serve if
elected.
(5) The proposal must be presented at the meeting for which it
is submitted by the proponent or a duly authorized and qualified representative.
(b) If the proponent or proposal fails, in any respect, to satisfy and
comply with all of the foregoing conditions and requirements, the proposal shall
be deemed as not properly coming before the meeting, and no votes cast in
support of the proposal shall be given effect, except for the purpose of
determining the presence of a quorum in accordance with Section 1.4.
(c) Notwithstanding any provision of these By-Laws to the contrary, the
Corporation may exclude from consideration by shareholders at any meeting of
shareholders any proposal permitted or required to be excluded from
consideration by applicable law, rule or regulation.
(d) This Section 1.3 shall not be applicable to proposals placed before
any meeting of shareholders by action of the Board of Directors.
Section 1.4. Quorum.
(a) Except as otherwise required by law, the presence at any meeting of
shareholders, in person or by proxy, of the holders of record of a majority of
the total voting power shall constitute a quorum for the transaction of
business. If a quorum is initially present at any meeting of shareholders, the
subsequent withdrawal of enough shareholders to leave less than a quorum or the
refusal of any shareholders present to vote shall not defeat the quorum.
(b) In the absence of a quorum, the persons holding a majority of the
voting power present may adjourn the meeting from time to time as they may
determine, without new notice being given other than announcement at the
meeting, until a quorum is present, but any meeting at which directors are to be
elected shall be adjourned only from day to day until such directors are
elected. In the case of any meeting called for the election of directors that is
so adjourned, the voting power present at the second of such adjourned meetings,
although less than a quorum as fixed in paragraph (a) of this Section, shall
nevertheless constitute a quorum for the purpose of electing directors. Except
as otherwise provided in the preceding sentence, at any adjourned meeting at
which a quorum shall be present, any business may be transacted that might have
been transacted at the meeting as originally called.
Section 1.5. Organization of Meetings. At all meetings of shareholders,
the Chairman of the Board or, in the absence of such officer, the Vice Chairman
or, in the absence of both such officers, any other officer present shall act as
chairman of the meeting; and the Secretary or, if the Secretary is unavailable,
any person appointed by the chairman of the meeting shall act as secretary of
the meeting.
Section 1.6. Voting.
(a) Shares of the Corporation held in a fiduciary capacity by another
corporation or other entity or organization entitled to vote for the election of
directors may be voted at any meeting of shareholders and counted in calculating
the voting power of the shareholders of the Corporation.
(b) Except as otherwise required by law, the Articles of Incorporation
or these By-Laws, a majority of votes actually cast shall decide any matter
properly brought before a shareholders' meeting, other than the election of
directors, which shall be by plurality.
Section 1.7. Proxies. Every proxy shall be duly authorized in writing,
signed by the shareholder or a duly authorized agent or attorney and filed with
the Secretary at or before the meeting of shareholders at which it is to be
exercised. Proxies so filed by means of telegram, facsimile transmission, or
similar means may be accepted as meeting the requirements of this Section.
ARTICLE II
Board of Directors
Section 2.1. General Powers. Subject to the provisions of law and the
Articles of Incorporation, all the corporate powers shall be vested in, and the
business and affairs of the Corporation shall be managed by, or under the
direction of, the Board of Directors.
Section 2.2. Number. The number of directors shall be as determined,
from time to time, by resolution of the Board of Directors.
Section 2.3. Qualifications.
(a) Directors need not be residents of the State of Louisiana. No
individual shall be elected a director unless such individual owns, in his or
her own right, at the time of such election, not less than 100 shares of the
Corporation having voting power.
(b) No individual shall be eligible for election as a director who has
attained the age of 71 prior to the date of such election. Any director who
attains the age of 71 may remain in office until the next succeeding annual
meeting of shareholders, at which time such director shall retire from the Board
of Directors. Notwithstanding the provisions of this paragraph (b), the Board of
Directors may, upon a finding that circumstances exist which make it likely that
the retirement of a particular director could result in harm to the business or
prospects of the Corporation and upon a vote of not less than 2/3 of the entire
Board of Directors, permit a director who will have attained the age of 71 prior
to the next succeeding annual meeting of shareholders but whose term as a
director would otherwise continue until a subsequent annual meeting to continue
to serve as a director until the expiration of such term.
(c) No individual who is or becomes a Business Competitor (as defined
below) or who is or becomes affiliated with, employed by or a representative of
any individual, corporation, association, partnership, firm, business enterprise
or other entity or organization which the Board of Directors, after having such
matter formally brought to its attention, determines to be in competition with
the Corporation or any of its subsidiaries (any such individual, corporation,
association, partnership, firm, business enterprise or other entity or
organization being hereinafter referred to as a "Business Competitor") shall be
eligible for election as a director. Such affiliation, employment or
representation may include, without limitation, service or status as an owner,
partner, shareholder, trustee, director, officer, consultant, employee, agent or
counsel or the existence of any relationship which results in the affected
person having an express or implied obligation to act on behalf of a Business
Competitor; provided, however, that passive ownership of a debt or equity
interest not exceeding l% of the outstanding debt or equity, as the case may be,
in any Business Competitor shall not constitute such affiliation, employment or
representation. Any financial institution having branches or affiliates within
any state in which the Corporation or any of its subsidiaries operates or having
(together with its affiliates) total assets or total deposits exceeding $500
million shall be presumed to be a Business Competitor unless the Board of
Directors determines otherwise.
Section 2.4. Nomination, Election, and Term of Office.
(a) Nominations of individuals for election as directors shall be made
by the Board of Directors. Other than the selection of nominees for election as
directors effected pursuant to the preceding sentence, all nominations of
individuals for election as directors must be made in accordance with the
provisions of Section 1.3.
(b) The Board of Directors shall consist of three classes, as nearly
equal in number as practicable, with the term of office of one class expiring
each year. At each annual meeting of shareholders, the successors to the class
of directors whose term shall then expire shall be elected to hold office for a
term lasting until the third succeeding annual meeting of shareholders and until
their successors are chosen and have qualified.
Section 2.5. Resignation. Any director may resign at any time by
delivering a written resignation to the Chairman of the Board, the President or
the Secretary. Unless otherwise specified therein, such resignation shall take
effect upon receipt thereof.
Section 2.6. Removal.
(a) A director may be removed from office by the Board of Directors for
cause or if he or she is interdicted or adjudicated an incompetent, adjudicated
a bankrupt, becomes incapacitated by illness or other infirmity to perform his
or her duties for a period of six months or longer or becomes affiliated with,
employed by or a representative of a Business Competitor as described in
paragraph (c) of Section 2.3.
(b) Notwithstanding any provision of law to the contrary, the
shareholders may remove from office any one or more of the directors without
cause only by vote of two-thirds of the total voting power at any special
meeting of shareholders called for such purpose; provided, however, that the
shareholders may remove from office any one or more of the directors for cause
by vote of a majority of the total voting power at such a special meeting of
shareholders.
(c) For purposes of this Section 2.6, "cause" means gross negligence or
willful misconduct.
ARTICLE III
Committees of the Board of Directors
Section 3.1. Audit Committee.
(a) At any time and from time to time, the Board of Directors shall
designate an Audit Committee of the Board of Directors to consist of two or more
directors of the Corporation who are independent of the management of the
Corporation or any subsidiary of the Corporation and who are not officers,
employees, large customers or corporate affiliates of the Corporation or any
subsidiary of the Corporation. At least two members of the Audit Committee shall
have banking or related financial management expertise.
(b) The Audit Committee shall supervise the Corporation's and its
subsidiaries' internal audit function and General Auditor; direct or review an
examination or audit of the books, records, and operations of the Corporation
and its subsidiaries at least annually; and review regulatory examination
reports, internal audit reports, management reports relating to internal control
structure and procedures for financial reporting and complying with certain laws
and regulations and audit, internal control and management reports relating to
the Corporation and its subsidiaries submitted by the outside auditors of the
Corporation and its subsidiaries. It shall supervise the loan review function of
any subsidiary and the Executive Vice President/Credit Risk Management or other
officer(s) primarily responsible for that function at any banking subsidiary of
the Corporation. It shall review and approve all actions required to be
performed on behalf of the Corporation and its subsidiaries and their directors
and officers pursuant to, and monitor compliance with, any agreement,
memorandum, order or other arrangement with bank regulatory authorities having
jurisdiction over the Corporation and its subsidiaries and review overall
compliance with laws and regulations pertaining to banks and bank holding
companies and shall have such further powers as may be delegated to it from time
to time by the Board of Directors.
(c) The Audit Committee shall have the authority to select and retain
outside counsel to assist in the performance of its duties.
Section 3.2. Executive Compensation Committee.
(a) At any time and from time to time, the Board of Directors shall
designate an Executive Compensation Committee of the Board of Directors to
consist of two or more directors of the Corporation.
(b) The Executive Compensation Committee shall have and may exercise
the following powers: to review and approve salaries, bonuses and other
compensation of officers of the Corporation and its subsidiaries having the rank
of Executive Vice President or higher or who report directly to the Chief
Executive Officer of the Corporation; to review and approve compensation plans
and policies for employees of the Corporation and its subsidiaries; to
administer all employee stock option and other stock based compensation and
benefit plans and to oversee the administration of all bonus and other
nonstock-based compensation and benefit plans of the Corporation; to supervise
compliance by the Corporation and its subsidiaries with laws and regulations
relating to the hiring, promotion and welfare and benefits of employees of the
Corporation and its subsidiaries; to recommend management development and
succession plans for the Corporation and its subsidiaries; and such further
powers as may be delegated to it from time to time by the Board of Directors.
(c) Salaries, bonuses and other compensation of officers of the
Corporation and its subsidiaries below the rank of Executive Vice President or
who do not report directly to the Chief Executive Officer of the Corporation
shall be determined from time to time by, or under the direction of, the Chief
Executive Officer of the Corporation.
Section 3.3. Executive Committee.
(a) At any time and from time to time, the Board of Directors may
designate an Executive Committee of the Board of Directors to consist of two or
more directors of the Corporation. Not less than a majority of the members of
the Executive Committee shall be independent directors of the Corporation. For
this purpose, any director other than a director whose principal employment is
by the Corporation or a subsidiary of the Corporation shall be deemed to be an
independent director of the Corporation. Any director who is not an independent
director of the Corporation and who is designated a member of the Executive
Committee shall be a nonvoting member of the Executive Committee. The Board of
Directors shall designate one of the members of the Executive Committee as
Chairman, who need not be the Chairman of the Board of Directors or an officer
of the Corporation.
(b) The Executive Committee shall have all the power and authority of
the Board of Directors except such power or authority (i) as may have been
delegated to another committee of the Board of Directors or (ii) as may not by
law be delegated to a committee of the Board of Directors.
(c) The Executive Committee may establish such rules for its operation
as it deems appropriate. Meetings of the Executive Committee may be called by
the Chairman of the Executive Committee or any two members thereof upon not less
than one day's prior notice by oral, written or electronic communication. For
purposes of quorum and voting by the Executive Committee, only the presence and
vote of the voting members of the Executive Committee shall be considered. At
the discretion of the Chairman of the Executive Committee, the Executive
Committee may meet in executive session without the presence of or notice to the
nonvoting members of the Executive Committee, and all action taken by the
Executive Committee in executive session shall be valid and binding action of
the Executive Committee.
Section 3.4. Board Governance Committee.
(a) At any time and from time to time, the Board of Directors may
designate a Board Governance Committee of the Board of Directors to consist of
three or more nonemployee directors of the Corporation.
(b) The Board of Governance Committee shall (i) screen and recommend,
as it deems appropriate, potential candidates for membership on the Boards of
Directors of the Corporation and its subsidiaries, (ii) recommend terms of
office for directors and the number of directors to comprise the full Boards of
Directors, (iii) recommend retirement policies (including any remuneration
associated with retirement) for nonemployee directors, (iv) review annually
performance of the directors, (v) monitor the orientation process for new
directors, (vi) review and recommend modifications, as it deems appropriate, to
the Corporation's system of compensation for directors, and (vii) such other
related responsibilities and duties as may be assigned to it by the Board of
Directors.
Section 3.5. Credit Committee.
(a) At any time and from time to time, the Board of Directors shall
designate a Credit Committee of the Board of Directors to consist of two or more
directors of the Corporation.
(b) The Credit Committee shall oversee the lending and credit functions
of its subsidiary banks; review and approve the overall credit policies and
procedures of its subsidiary banks, including concentrations, credit quality
measures and underwriting guidelines; review and approve lending authorities and
exceptions thereto; and monitor the credit training and approval functions.
Subject to approval by the Board of Directors, the Credit Committee shall also
review and approve policy and methodology for the Allowance for Loan and Lease
Losses (the "Allowance") and review and approve strategic plans, such as planned
loan growth, change in portfolio composition and new lending related products.
It shall have such further powers as may be delegated to it from time to time by
the Board of Directors.
Section 3.6. Trust Committee.
(a) At any time and from time to time, so long as the subsidiary banks
of the Corporation are exercising fiduciary powers, the Board of Directors shall
designate a Trust Committee of the Board of Directors to consist of two or more
directors of the Corporation.
(b) The Trust Committee shall exercise general oversight of the Trust
activities of the subsidiary banks of the Corporation, including without
limitation all committees, officers, and employees therein; shall have the power
to pass upon all questions of policy and administration bearing upon the
investment of trust funds and the general conduct of the Trust activities of the
subsidiary banks of the Corporation; and shall review regulatory examination and
audit reports relating to the Trust activities of the subsidiary banks of the
Corporation. Audits of Trust activities may be conducted by the internal or
external auditors of the Corporation and its subsidiaries.
Section 3.7. Other Committees. At any time and from time to time the
Board of Directors may designate one or more additional committees of the Board
of Directors, each such committee to have such name, to consist of such persons
and to exercise such powers as may be determined from time to time by the Board
of Directors.
Section 3.8. General Provisions.
(a) Each member of any committee of the Board of Directors shall hold
office until the next succeeding designation of such committee and until such
member's successor shall have been designated and qualified, or until his or her
earlier death, resignation or removal. If any director who is a member of any
committee of the Board of Directors shall die, resign or otherwise leave or be
removed from the Board of Directors, the director's term of office as a member
of such committee shall automatically expire at the same time as such death,
resignation, leaving or removal.
(b) Any member of any committee of the Board of Directors may resign at
any time by delivering a written resignation to the Chairman of the Board, the
President or the Secretary of the Corporation. Unless otherwise specified
therein, such resignation shall take effect upon receipt thereof by the Chairman
of the Board, the President or the Secretary of the Corporation.
(c) The Board of Directors may remove from office any member of any
committee of the Board of Directors at any time, with or without cause, and may
proceed to designate a successor for the unexpired term of office.
(d) The Board of Directors may fill any vacancy (howsoever resulting)
on any committee of the Board of Directors.
ARTICLE IV
Board and Committee Meetings
Section 4.1. Annual Meeting of the Board. On the same day as the annual
meeting of shareholders, the Board of Directors shall meet for the purposes of
organization, the election of officers, and the transaction of other business.
Such meeting may be held on such other date, and at such time and in such place,
as shall be specified by the Chairman of the Board, the President, the Chief
Executive Officer or the Secretary (each of whom is sometimes herein referred to
as a "Designated Officer") in a notice thereof given as hereinafter provided or
in a waiver or waivers of notice thereof signed by all the directors not present
at such meeting.
Section 4.2. Regular Meetings of the Board. Regular meetings of the
Board of Directors shall be held on such dates, at such times and in such places
as shall be specified in notices thereof given as hereinafter provided or in a
waiver or waivers of notice thereof signed by all the directors not present at
any such meeting to which such waiver or waivers apply.
Section 4.3. Special Meetings of the Board. Special meetings of the
Board of Directors may be called at any time by a Designated Officer.
Section 4.4. Meetings of Committees. Meetings of any committee of the
Board of Directors may be called at any time by the Chairman of the Board or the
Chief Executive Officer. In addition, meetings of any committee of the Board of
Directors may be called at any time by the Chairman of such committee after
consultation with the Chairman of the Board or the Chief Executive Officer.
Minutes of each committee of the Board of Directors shall be kept by the
Secretary or such other person as the Secretary, or the Chairman of such
committee, shall designate.
Section 4.5. Notice of Meetings. A Designated Officer (or the chairman
of the particular committee, in the case of a meeting of any committee of the
Board of Directors) shall cause written notice of the time and place of every
meeting of the Board of Directors or of any committee thereof to be given to the
Chairman of the Board, the President, the Chief Executive Officer and each
director or committee member, as the case may be, in person or to his or her
address as it appears on the records of the Corporation by mail, telegram or
other means of written communication (excluding facsimile or other means of
electronic transmission) at least three days prior to the day fixed for the
meeting or by facsimile or other means of electronic transmission or any means
of oral communication given not later than the date preceding the date of the
meeting. If given by mail, telegram or other written communication, such notice
shall be deemed to have been given when the same shall have been placed in the
United States mail, postage prepaid, or when the same shall have been delivered
to the telegraph or other communication company, charges prepaid, and addressed
to the director or committee member, as the case may be, at the aforesaid
address. If given by facsimile or other means of electronic transmission or oral
communication, such notice shall be deemed to have been given when the same
shall have been sent or communicated over telephone or other electronic means of
communication to the director or committee member, as the case may be, or his or
her apparent representative or in a manner reasonably designed to arrive at such
person's office, home, or other location where the Corporation has been advised
such person is located. The purpose(s) of any meeting of the Board of Directors
or of any meeting of any committee of the Board of Directors need not be given
in the notice thereof, and any and all business of the Board of Directors or the
committee, as the case may be, may be transacted at the meeting.
Section 4.6. Waiver of Notice. Notice of any meeting of the Board of
Directors or a committee thereof need not be given to any director or committee
member, as the case may be, if such notice is waived by him or her in writing,
either before or after such meeting. Directors or committee members present at a
meeting of the Board of Directors or committee thereof, as the case may be,
shall be deemed to have received, or to have waived, due notice thereof, except
where a director or committee member, as the case may be, attends for the
express purpose of objecting to the transaction of any business on the ground
that the meeting is not lawfully called or convened. Any meeting of the Board of
Directors or a committee thereof shall be a valid and binding meeting without
any notice thereof having been given if all the directors or committee members,
as the case may be, shall be present thereat.
Section 4.7. Quorum.
(a) The presence at any meeting of the Board of Directors or a
committee thereof of a majority of the members in office at the time of the
meeting of the Board of Directors or committee, as the case may be, shall
constitute a quorum for the transaction of business.
(b) In the absence of a quorum, a majority of the directors or
committee members present at any meeting may adjourn such meeting without
provision for any further meeting or from time to time as they may determine,
without new notice being given other than announcement at the meeting, until a
quorum shall be present. If a quorum is present when the meeting or adjourned
meeting is convened, the directors or committee members remaining present may
continue to do business, taking action by vote of a majority of a quorum as
fixed above, until adjournment, notwithstanding the subsequent withdrawal of
enough directors or committee members to leave less than a quorum as fixed above
or the refusal of any director or committee member present to vote.
Section 4.8. Use of Conference Telephone. Directors or committee
members may participate in and hold a meeting of the Board of Directors or a
committee thereof, as the case may be, by means of conference telephone or
similar communications equipment, provided that all persons participating in the
meeting can hear and communicate with each other. Such participation shall
constitute presence in person at such meeting, except where a person
participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
Section 4.9. Voting. Except as otherwise required by law, the Articles
of Incorporation, or Section 4.7, the acts of a majority of the directors of
committee members present at a meeting or adjourned meeting of the Board of
Directors or a committee thereof, as the case may be, at which a quorum is
present shall be the acts of the Board of Directors or such committee,
respectively.
Section 4.10. Director's Assent. A director who was present or
represented at any meeting of the Board of Directors or a committee thereof at
which any action was authorized or taken shall be presumed to have assented to
such action unless such director's dissent therefrom was either noted in the
minutes of the meeting or filed promptly thereafter with the Secretary. Such
right to dissent shall not apply to a director who voted in favor of such
action.
Section 4.11. Action by Consent in Writing. Any action which may be
taken at a meeting of the Board of Directors or any committee thereof may be
taken by a consent in writing signed by all of the directors or by all members
of the committee, as the case may be. Any such consent may be signed at any time
or times and may be signed in two or more counterparts.
Section 4.12. Emergency Provisions. During the existence or continuance
of any emergency resulting from an attack on the United States or during any
nuclear or atomic disaster:
(a) A meeting of the Board of Directors may be called by any officer
or, in the event no officer is available, a director.
(b) Notice of any meeting of the Board of Directors need be given only
to such of the directors as it may be feasible to reach at the time and by such
means as may be feasible at the time, including without limitation publication
or radio.
(c) Any director or directors in attendance at any meeting of the Board
of Directors shall constitute a quorum for the transaction of business.
(d) If all of the directors are absent or otherwise unavailable, any
officer or officers present shall be deemed to be a director or directors for
all purposes.
ARTICLE V
Officers
Section 5.1. Principal Officers.
(a) The principal officers of the Corporation shall be a Chairman of
the Board, a Vice Chairman of the Board, a Chief Executive Officer, a President,
a Chief Financial Officer, a Chief Accounting Officer, a Treasurer, a Secretary
and a Controller.
(b) The Board of Directors may leave any of the offices enumerated in
paragraph (a) of this Section vacant, except the offices of President,
Treasurer, and Secretary.
Section 5.2. Other Officers. The Board of Directors may appoint such
other officers and agents at any time as may be necessary for the business of
the Corporation, each of whom shall have such authority and perform such duties
as may be prescribed in these By-Laws or by the Board of Directors from time to
time.
Section 5.3. Election, Term of Office and Qualifications.
(a) Except as otherwise provided in these By-Laws, the principal
officers of the Corporation shall be elected annually by the Board of Directors
at its annual meeting. Each officer shall hold office until the next succeeding
annual meeting of the Board of Directors and until his or her successor shall
have been elected and qualified, or until death, resignation, or removal.
(b) Officers need not be shareholders of the Corporation nor residents
of the State of Louisiana. If not already holding office as directors of the
Corporation at the time of their selection, the Chairman of the Board and the
President shall be elected as directors simultaneously with their selection as
such officers. No other officer need be a director. Except as otherwise provided
by law, any two or more offices may be held by the same person, provided that no
person holding more than one office may sign, in more than one capacity, any
certificate or other instrument required by law to be signed by two officers.
Section 5.4. Resignation. Any officer may resign at any time by
delivering a written resignation to the Chairman of the Board, the President or
the Secretary. Unless otherwise specified therein, such resignation shall take
effect upon receipt thereof.
Section 5.5. Vacancies. During the existence or continuance of any
emergency resulting from an attack, catastrophe or disaster, whether natural or
man-made, and the absence or other unavailability of the Chief Executive
Officer, such officers or other persons designated by, or in accordance with,
any emergency plan adopted by the Board of Directors or any other action taken
by the Board of Directors shall serve as officers of the Corporation.
Section 5.6. Chairman of the Board. The Chairman of the Board shall
preside at all meetings of shareholders, the Board of Directors and, unless
another person is designated Chairman of the Executive Committee, the Executive
Committee and shall be a nonvoting, ex-officio member of all other committees of
the Board of Directors. The Chairman of the Board shall guide the activities and
deliberations of the Board of Directors, work with management to set the
schedules for and agendas of meetings of the Board of Directors and endeavor to
ensure that the Board of Directors is adequately informed and duly consulted and
functions effectively in making decisions and carrying out the responsibilities
of the Board of Directors to shareholders, regulators and the public. The
Chairman of the Board shall endeavor to ensure that the Board of Directors
receives adequate administrative support and is properly organized with respect
to the structure, responsibilities, staffing and compensation of the Board of
Directors and the committees thereof and has adequate liability indemnification
and insurance and shall endeavor to ensure that members of the Board of
Directors receive accurate and timely reports and appropriate and adequate
education and training in key matters of oversight and corporate governance. The
Chairman of the Board shall, working with the other members of the Board of
Directors and the Chief Executive Officer, seek to ensure that long-term goals
and growth of the Corporation are in line with the interests of shareholders,
customers, employees, communities and governmental agencies, and to protect the
rights and interests of shareholders of the Corporation through oversight and
scrutiny of policies, finances, operations and controls. The Chairman of the
Board shall, working with the other members of the Board of Directors and the
Chief Executive Officer, seek to ensure that there is effective participation by
members of the Board of Directors in responding to and taking actions as a
result of audit and loan review findings and regulatory examinations and that
the Corporation and its subsidiaries carry out all responsibilities required by
applicable laws and regulations. The Chairman of the Board shall promote the
proper relationship between the Board of Directors and management of the
Corporation and the Boards of Directors and management of any subsidiaries and
corporate affiliates of the Corporation. The Chairman of the Board shall work
cooperatively with the Chief Executive Officer with respect to all proposed
initiatives with regulatory agencies, major investors and representatives of
lenders to the Corporation and its subsidiaries. The Chairman of the Board shall
advise and consult with the Chief Executive Officer with respect to proposed
significant engagements of consultants, advisors and legal counsel prior to
seeking approval of any such engagement by the Board of Directors or the
Executive Committee.
Section 5.7. Vice Chairman of the Board. There shall be one or more
Vice Chairmen of the Board of Directors. At least one such Vice Chairman shall
be designated, in the absence of the Chairman of the Board, to preside at
meetings of shareholders, the Board of Directors and, unless another person is
designated Chairman of the Executive Committee, the Executive Committee and
shall perform such other duties as may be assigned him or her by the Board of
Directors. A Vice Chairman of the Board may also serve as a member of any other
committee of the Board of Directors in accordance with membership requirements
of such other committees.
Section 5.8. Chief Executive Officer. The Chief Executive Officer shall
have the authority and perform the duties of general supervision and management
of the business, property and affairs of the Corporation, including, without
limitation, the power to appoint and remove all officers, employees and agents
of the Corporation, subject to applicable law and the control of the Board of
Directors. Except as otherwise required by law, the Chief Executive Officer may
sign any and all deeds, mortgages, contracts, bonds, certificates, reports and
other documents, instruments and obligations in the name and on behalf of the
Corporation. In general, the Chief Executive Officer shall have all authority
and perform all other duties incident to the office of chief executive officer
of a corporation and shall have and exercise all such other powers as from time
to time may be assigned by the Board of Directors.
Section 5.9. President. The President shall have such authority and
perform such duties as from time to time may be assigned by the Board of
Directors or the Chief Executive Officer.
Section 5.10. Chief Financial Officer. The Chief Financial Officer
shall have the overall responsibility and authority for the management of the
financial affairs of the Corporation and shall have such specific duties as may
be assigned from time to time by the Board of Directors or the Chief Executive
Officer.
Section 5.11. Chief Accounting Officer. The Chief Accounting Officer
shall have the overall responsibility and authority for management and oversight
of the accounting and financial control functions of the Corporation and shall
have such specific duties as may be assigned from time to time by the Board of
Directors or the Chief Executive Officer.
Section 5.12. Controller. The Controller shall have all authority and
perform all duties incident to the office of a controller of a corporation and
have and exercise all such other powers as from time to time may be assigned by
the Board of Directors or the Chief Executive Officer.
Section 5.13. Treasurer. The Treasurer shall have all authority and
perform all duties incident to the office of treasurer of a corporation and have
and exercise all such other powers as from time to time may be assigned by the
Board of Directors, the Chief Executive Officer or the President.
Section 5.14. Secretary. The Secretary shall:
(1) attend all meetings of shareholders and the Board of Directors and
keep minutes of all such meetings in records provided for that purpose;
(2) give and send, or cause to be given and sent, and receive all
notices to or from the Corporation required or permitted by law, the Articles of
Incorporation or these By-Laws;
(3) be custodian of the corporate seal and see that it, or a facsimile
thereof, is affixed to or printed on all documents, instruments and obligations
as may be necessary or proper;
(4) attest or countersign any and all deeds, mortgages, contracts,
bonds, certificates, reports and other documents, instruments and obligations
that are necessary or proper to be attested or countersigned in the course of
the business of the Corporation, except where such attestation or countersigning
would conflict or be inconsistent with the express direction of the Board of
Directors;
(5) execute and deliver all certificates that are necessary or proper
to be executed and delivered in the course of the business of the Corporation;
(6) maintain, or cause to be maintained, stock books and records,
showing the names of all persons who are shareholders of the Corporation, their
addresses as furnished by each such shareholder and the number of shares held by
each of them; and
(7) in general, have all authority and perform all duties incident to
the office of secretary of a corporation and have and exercise all such other
powers as from time to time may be assigned by the Board of Directors, the Chief
Executive Officer or the President.
Section 5.15. Assistant Treasurers and Assistant Secretaries. Each
Assistant Treasurer and Assistant Secretary shall have the authority and perform
the duties of the Treasurer or the Secretary, as the case may be, in the absence
or disability of the Treasurer or the Secretary, respectively, and shall have
and exercise such powers as from time to time may be assigned by the Board of
Directors, the Chief Executive Officer, the President, or by the Treasurer or
the Secretary, respectively.
<PAGE>
ARTICLE VI
Certificates of Stock
Section 6.1. Certificates. Every shareholder of record of the
Corporation shall be entitled to a certificate or certificates of stock, to be
in such form as may be required by law and as the Board of Directors may
prescribe, certifying the number of shares of the Corporation owned by the
shareholder.
Section 6.2. Execution of Certificates. The certificates of stock of
the Corporation shall be numbered and shall be signed by (i) the Chairman of the
Board, the President or any Vice President and (ii) the Treasurer or any
Assistant Treasurer or the Secretary or any Assistant Secretary, and its seal,
or a facsimile thereof, shall be affixed or printed thereon.
Section 6.3. Transfers of Stock. The Board of Directors, the Secretary
or any other officer or agent designated by the Board of Directors may make such
rules and regulations, not inconsistent with law, the Articles of Incorporation,
or these By-Laws, as may be deemed necessary or proper with respect to the
exchange, transfer and registration of shares and certificates of stock of the
Corporation and the replacement of any certificate alleged to have been lost,
destroyed, mutilated or stolen.
ARTICLE VII
Miscellaneous Provisions
Section 7.1. Corporate Seal. The Corporation shall have a corporate
seal and may use the same by causing it, or a facsimile thereof, to be impressed
or affixed or in any manner reproduced, but failure to affix the corporate seal
shall not affect the validity of any document or instrument. The form of the
corporate seal shall be established and may be altered from time to time at the
pleasure of the Board of Directors.
Section 7.2. Fiscal Year. The fiscal year of the Corporation shall end
at the close of business on the 31st day of December of each year.
Section 7.3. Depositories. All funds and securities of the Corporation
shall be deposited to the credit of the Corporation in such account or accounts
in such depository or depositories as shall be designated in writing from time
to time by the Treasurer or any other employee of the Corporation to whom such
power may from time to time be delegated by the Board of Directors or the
Treasurer. Checks, drafts, notes and other orders drawn against such funds or
securities may be signed in the name and on behalf of the Corporation by the
Treasurer or such other employee. Any certificate, document or instrument signed
by the Treasurer, the Secretary or such other employee that designates a person
or persons to sign such checks, drafts, notes or other orders and which quotes
this Section or which is set forth on a depository's standard form, shall
constitute sufficient authorization for such depository to honor and pay any
such checks, drafts, notes or other orders.
<PAGE>
HIBERNIA CORPORATION
1993 DIRECTOR STOCK OPTION PLAN
Amended and Restated as of July 23, 1997
1. Definitions
In this Plan, except where the context otherwise indicates, the
following definitions apply:
a. "Agreement" means the written agreement implementing the
grant of an Option.
b. "Board" means the Board of Directors of the Corporation.
c. "Code" means the Internal Revenue Code of 1986, as amended.
d. "Committee" means the committee appointed by the Board to
administer the Plan, which committee shall meet the standards imposed
by Rule 16b-3 under the Securities Exchange Act of 1934, as amended, or
any similar successor rule, and all of the members of which shall be
Nonemployee Directors. Unless otherwise determined by the Board or
required by this Plan, the Executive Compensation Committee of the
Board shall be the Committee.
e. "Common Stock" means the Class A common voting stock, no
par value, of the Corporation.
f. "Corporation" means Hibernia Corporation, a Louisiana
corporation, and any successor thereto.
g. "Date of Exercise" means the date on which the Corporation
receives notice of the exercise of an Option in accordance with the
terms of Article 7.
h. "Date of Grant" means the date on which an Option is
granted by the Committee or otherwise granted pursuant to the terms of
the Plan.
i. "Fair Market Value" of a Share means on any day the amount
equal to the average of the reported high and low sale prices for
shares of Common Stock on the NYSE, or other market in which the Common
Stock is traded, on such day as reported by such source as the
Committee may select, or, if such price quotations are not available,
then the fair market value of a Share as determined by the Committee
pursuant to a reasonable method adopted in good faith for such purpose.
j. "Nonemployee Director" means a director of the Corporation
who is not, and has not been for a period of at least one year prior to
the date as of which the determination is made, an employee of the
Corporation or a Subsidiary.
k. "Nonstatutory Stock Option" means an Option granted under
the Plan that is not an incentive stock option within the meaning of
Section 422 of the Code.
l. "NYSE" means the New York Stock Exchange, Inc.
m. "Option" means an option to purchase Shares granted in
accordance with the terms of Article 6.
n. "Option Period" means the period during which an Option may
be exercised.
o. "Option Price" means the price per Share at which an Option
may be exercised.
p. "Optionee" means a Nonemployee Director to whom an Option
has been granted.
q. "Plan" means the Hibernia Corporation 1993 Director Stock
Option Plan.
r. "Share" means a share of authorized but unissued or
reacquired Common Stock.
s. "Subsidiary" means a corporation at least 50% of the total
combined voting power of all classes of stock of which is owned by the
Corporation, either directly or through one or more other Subsidiaries.
2. Purpose
The Plan is intended to assist in attracting and retaining Nonemployee
Directors of outstanding ability and to promote the identification of their
interests with those of the shareholders of the Corporation.
3. Administration
The Plan shall be administered by the Committee. In addition to any
other powers granted to the Committee, it shall have the following powers,
subject to the express provisions of the Plan:
a. to determine all other terms and provisions of each Agreement, which
need not be identical;
b. to construe and interpret the Agreements and the Plan;
c. to provide for the payment of the Option Price in cash, shares of
Common Stock valued at Fair Market Value on the Date of Exercise, or a
combination of cash and shares of Common Stock;
d. to provide for satisfaction of federal, state or local tax
liabilities incurred in connection with the exercise of a Nonstatutory Stock
Option through, without limitation, retention of shares of Common Stock
otherwise issuable on the exercise of a Nonstatutory Stock Option or delivery of
Common Stock to the Corporation by the Optionee under such terms and conditions
as the Committee deems appropriate; and
e. to make all other determinations and take all other actions
necessary or advisable for the administration of the Plan.
Any determinations made or actions taken by the Committee pursuant to
the Plan shall be binding and final.
4. Eligibility
Options may be granted only to Nonemployee Directors. A Nonemployee
Director who has been granted an Option may be granted additional Options as
provided in the Plan.
5. Stock Subject to the Plan
a. There is hereby reserved for issuance upon the exercise of Options
granted under the Plan an aggregate of 1,000,000 Shares.
b. If an Option expires or terminates for any reason without having
been fully exercised, the unpurchased Shares which had been subject to such
Option at the time of its expiration or termination shall become available for
other Options to be granted under the Plan.
c. The Shares issued upon the exercise of an Option shall be charged
against the number of Shares subject to the Plan and such number of Shares shall
not become available for the grant of other Options.
6. Options for Nonemployee Directors
a. Unless prohibited by applicable law or contract to which the
Corporation is a party or is otherwise subject, on the date that corresponds to
the first business day after the Annual Meeting of Shareholders of the Company
in each year commencing in 1993, each Nonemployee Director of the Company shall
automatically and without further action by any person be granted an Option to
purchase 5,000 shares of Common Stock at an exercise price equal to the Fair
Market Value of the Common Stock on such Date of Grant. If any such grant is
prohibited by law or contract, it shall be made on the first business day after
such legal or contractual restriction or limitation is no longer effective.
b. Each Option granted pursuant to this Article 6 will become initially
exercisable as to 50% of the Shares subject thereto on the date that is two
years following the Date of Grant, as to an additional 25% of the Shares subject
thereto on the date that is three years following the Date of Grant and as to
the remaining 25% of the Shares subject thereto on the date that is four years
following the Date of Grant. To the extent not theretofore exercised, each
Option will expire upon the earlier to occur of (i) the date of any affiliation
of the Optionee with a competitor of the Corporation and its Subsidiaries or
(ii) ten years following the Date of Grant.
c. Nonemployee Directors may not be granted Options otherwise than
pursuant to this Article 6, except that each person who first becomes a
Nonemployee Director after October 20, 1997 automatically and without further
action by any person will be granted, on the date such person first becomes a
Nonemployee Director, a Nonstatutory Stock Option to purchase 5,000 Shares at an
Option Price equal to the Fair Market Value of the Shares on such Date of Grant.
Each Option granted pursuant to this Article 6(c) will be come exercisable in
full on the date six months following the Date of Grant and, to the extent not
theretofore exercised, will expire upon the earlier to occur of (i) the date of
any affiliation of the Optionee with a competitor of the Corporation and its
Subsidiaries or (ii) ten years following the Date of Grant.
7. Exercise
An Option may, subject to the provisions of the Agreement under which
it was granted, be exercised in whole or in part by delivery to the Corporation
of written notice of exercise, in such form as the Committee may prescribe,
accompanied by full payment for the Shares with respect to which such Option is
exercised. The Committee may provide that any Option shall be immediately
exercisable in full on the later of (i) the date on which a change of control of
the Corporation occurs, or (ii) six months after the Date of Grant, if a change
of control of the Corporation has occurred prior to six months after the Date of
Grant. The Committee may define change of control for this purpose in such
manner as it deems appropriate under the circumstances.
8. Nontransferability
Options granted under the Plan shall not be transferable otherwise than
by will or the laws of descent and distribution. An Option may be exercised only
by the Optionee during his lifetime.
9. Capital Adjustments
The number and class of Shares subject to each outstanding Option, the
Option Price thereof and the provisions of Articles 5 and 6 shall be subject to
such adjustment, if any, as the Committee in its sole discretion deems
appropriate to reflect such events as stock dividends, stock splits,
recapitalizations, mergers, consolidations or reorganizations of or by the
Corporation.
10. Termination and Amendment
The Board shall have the power to terminate the Plan and the Committee
shall have the power to amend it in any respect, provided that after the Plan
has been approved by the shareholders of the Corporation, the Committee may not,
without the approval of the shareholders of the Corporation, amend the Plan so
as to change the aggregate number of Shares which may be issued under the Plan
(except as provided in Article 9), change the class of persons eligible to
receive Options or increase materially the benefits accruing to participants
under the Plan and provided further that the provisions of paragraph (a) of
Article 6 may not be amended more than once every six months other than to
comport with changes in the Code, the Employee Retirement Security Act or the
rules thereunder. No termination or amendment of the Plan shall adversely affect
the rights or obligations of the holder of any Option previously granted under
the Plan.
11. Modification, Extension and Renewal of Options
Subject to the terms and conditions of the Plan, the Committee may
modify, extend or renew outstanding Options or accept the surrender of
outstanding Options (to the extent not theretofore exercised) granted under the
Plan or under any other stock option plan of the Corporation and authorize the
granting of new Options in substitution therefor on such terms consistent with
the Plan as the Committee may specify, provided, however, that no modification
of an Option granted under the Plan shall, without the consent of the Optionee,
alter or impair any of such Optionee's rights or obligations.
12. Effectiveness of the Plan
The Plan and any amendments requiring shareholder approval pursuant to
Article 10 are subject to approval by vote of the shareholders of the
Corporation after their adoption by the Board or the Committee, respectively.
Subject to such approval, the Plan and any amendments are effective on the date
of such adoption. Options may be granted prior to shareholder approval of the
Plan or amendments, but any such Option shall be granted subject to approval of
the Plan or amendments by the shareholders. Except as may otherwise be required
under Rule 16b-3 of the Exchange Act, the day on which any Option granted prior
to shareholder approval of the Plan or such amendments is granted shall be the
Date of Grant for all purposes as if the Option had not been subject to such
approval. No Option granted subject to shareholder approval may be exercised
prior to receipt of such approval.
13. Term of the Plan
Unless sooner terminated by the Board pursuant to Article 10, the Plan
shall terminate on January 26, 2003, and no Options may be granted after
termination. Termination of the Plan shall not affect the validity of any Option
outstanding on the date of termination.
14. Indemnification of Committee
In addition to such other rights of indemnification as they may have as
directors or as members of the Committee, the members of the Committee shall be
indemnified by the Corporation against the reasonable expenses, including
attorneys' fees, actually and reasonably incurred in connection with the defense
of any action, suit or proceeding, or in connection with any appeal therein, to
which they or any of them may be a party by reason of any action taken or
failure to act under or in connection with the Plan or any Option granted
hereunder, and against all amounts reasonably paid by them in settlement thereof
or paid by them in satisfaction of a judgment in any such action, suit or
proceeding, to the fullest extent permitted under applicable law.
15. General Provisions
a. The establishment of the Plan shall not confer upon any Nonemployee
Director any legal or equitable right against the Corporation, any Subsidiary or
the Committee, except as expressly provided in the Plan.
b. The Plan does not constitute inducement or consideration for the
employment or service of any Nonemployee Director, nor is it a contract between
the Corporation or any Subsidiary and Nonemployee Director. Participation in the
Plan shall not give a Nonemployee Director any right to be retained in the
service of the Corporation or any Subsidiary.
c. The interests of any Nonemployee Director under the Plan or any
Option are not subject to the claims of creditors and may not, in any way, be
assigned, alienated or encumbered.
d. The Plan shall be governed, construed and administered in accordance
with the laws of the State of Louisiana.
<PAGE>
ARTICLE VIII
Amendments
Subject to the power of the shareholders to change or repeal these
By-Laws by vote of a majority of the total voting power, these By-Laws may be
altered, amended, modified, or repealed at any time and from time to time by
vote of two-thirds of the Continuing Directors at the time in office. For
purposes of these By-Laws, "Continuing Directors" means the directors who (i)
were serving as directors on the date this Article VIII was first adopted or
(ii) were first nominated for election as directors by a majority of (A) the
directors described in clause (i) and (B) the directors who were previously
nominated in accordance with this clause (ii).
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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