FILED PURSUANT TO RULE 424(B)(3)
REGISTRATION NO. 333-39635
<PAGE>
TO OUR SHAREHOLDERS:
You are cordially invited to attend a Special Meeting of Shareholders of
Northwest Bancshares of Louisiana, Inc. to be held at the Main office of the
Company at 214 South Washington, Mansfield, Louisiana 71052 on Tuesday, December
16, 1997 at 4:00 P.M. local time.
At this meeting, you will be asked to consider and vote upon the terms of an
Agreement and Plan of Merger dated as of June 26, 1997 (the "Agreement")
providing for, among other things, the merger of Northwest Bancshares of
Louisiana, Inc. ("Northwest") with and into Hibernia Corporation ("Hibernia"),
the parent company of Hibernia National Bank (the "Merger"). The Agreement
provides that, on the effective date of the Merger, depending on the Average
Market Price of Hibernia stock ten (10) business days prior to closing, each
outstanding share of common stock of Northwest will be converted into a maximum
of 4.531 shares and a minimum of 3.898 shares of Hibernia common stock. If the
average price of Hibernia common stock is less than $12.14, the merger will
convert to a cash transaction at $55.00 per share. The details of the conversion
to stock and the amount of cash for each share if the Merger becomes a cash
transaction are fully described in the accompanying Proxy Statement/Prospectus.
The enclosed Notice of Special Meeting of Shareholders and the Proxy
Statement/Prospectus explain the Merger and provide specific information about
the Merger and the Special Meeting. Please carefully read these materials and
thoughtfully consider the information contained in them. Your vote is of great
importance, as the approval of Northwest's shareholders is required to
consummate the Merger.
The Agreement has been approved by the Northwest Board of Directors and, while
the vote was not unanimous, your Board of Directors recommends that you vote FOR
the Agreement and the proposed Merger. As a result of the Merger, you will have
the opportunity to become a shareholder of Hibernia and own common stock in a
bank holding company whose stock is publicly traded on the New York Stock
Exchange.
Whether or not you plan to attend the Special Meeting, you are urged to
complete, date, sign and promptly return the enclosed proxy card to assure that
your shares will be voted at the Special Meeting.
Sincerely,
/s/ JOHN W. GARMANY
John W. Garmany
President and Chief Executive Officer
<PAGE>
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
OF
NORTHWEST BANCSHARES OF LOUISIANA, INC.
December 16, 1997
NOTICE IS HEREBY GIVEN that, pursuant to the call of the Board of Directors of
Northwest Bancshares of Louisiana, Inc. ("Northwest"), a Special Meeting of the
shareholders of Northwest will be held at the main office of Northwest
Bancshares of Louisiana, Inc., 214 South Washington, Mansfield, Louisiana 71052,
on December 16, 1997 at 4:00 p.m., for the purpose of considering and voting
upon the following matters:
1. A proposal to approve (a) the Agreement and Plan of Merger, effective as
of June 26, 1997 (the "Agreement") between Northwest and Hibernia Corporation
("Hibernia") pursuant to which (i) Northwest will be merged (the "Merger") into
Hibernia (which will survive the Merger), and (ii) each outstanding share of
common stock, no par value, of Northwest ("Northwest Common Stock") will be
converted into either (i) a minimum of 3.898 (if the Average Market Price of
Hibernia Common Stock is greater than $14.11) and a maximum of 4.531 (if the
Average Market Price is less than $14.11 and equal to or greater than $12.14)
shares of common stock, no par value, of Hibernia ("Hibernia Common Stock")(if
the Average Market Price of Hibernia Common Stock, as defined in the Agreement,
is greater than $14.11) or (ii) $55.00 per share in cash (if the Average Market
Price of Hibernia Common Stock, as defined in the Agreement, is less than
$12.14) (as described more fully in the accompanying Proxy Statement -
Prospectus) and (b) the Merger.
2. The transaction of such other business as may properly come before
the Special Meeting and any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on November 7,
1997 as the record date for determining the shareholders entitled to receive
notice of, and to vote at, the Special Meeting.
Each share of Northwest Common Stock will entitle the holder thereof to
one vote on all matters that come before the Special Meeting. Approval of the
Merger will require the affirmative vote of a majority of the issued and
outstanding shares of Northwest Common Stock, present in person or by proxy, at
the Special Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT HOLDERS OF NORTHWEST COMMON
STOCK VOTE "FOR" THE APPROVAL OF THE AGREEMENT AND THE MERGER.
Whether you intend to attend the Special Meeting, and regardless of the
number of shares you own, your vote is important. Please take a moment to
complete, date and sign the enclosed proxy card. Your proxy may be revoked by
notice to the Secretary of Northwest prior to the date of the Special Meeting,
by attending the Special Meeting or by executing and delivering a later dated
proxy to the Secretary prior to the Special Meeting.
By Order of the Board of Directors,
/s/ JOHN W. GARMANY
John W. Garmany
President and Chief Executive Officer
<PAGE>
PROXY STATEMENT
NORTHWEST BANCSHARES OF LOUISIANA, INC.
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 16, 1997
PROSPECTUS
HIBERNIA CORPORATION
1,752,706 SHARES OF
CLASS A COMMON STOCK
(NO PAR VALUE)
This Proxy Statement-Prospectus is being furnished to the holders of common
stock, no par value (the "Northwest Common Stock"), of Northwest Bancshares of
Louisiana, Inc., a Louisiana corporation ("Northwest"), in connection with the
solicitation of proxies by the Board of Directors of Northwest for use at a
special meeting of shareholders (the "Special Meeting") to be held at 4:00 p.m.,
local time, on December 16, 1997, at the office of Northwest, 214 South
Washington, Mansfield, Louisiana 71052, and at any adjournments or postponements
thereof.
At the Special Meeting, the holders of record of Northwest Common Stock as
of the close of business on November 7, 1997 (the "Record Date") will consider
and vote upon a proposal to approve (a) the Agreement and Plan of Merger
effective as of June 26, 1997 (the "Agreement") between Northwest and Hibernia
Corporation ("Hibernia") pursuant to which (i) Northwest will be merged (the
"Merger") into Hibernia and Hibernia will be the corporation surviving the
Merger and (ii) each outstanding share of Northwest Common Stock, except for
shares of Northwest Common Stock owned by Hibernia or its subsidiaries and
shares as to which dissenters' rights have been exercised and perfected under
Louisiana law, will be converted into either (i) a minimum of 3.898 and a
maximum of 4.531 shares of common stock, no par value, of Hibernia ("Hibernia
Common Stock"), or (ii) if the Average Market Price of Hibernia Common Stock is
less than $12.14, $55.00 per share in cash, and (b) the Merger. Cash will be
paid to holders of Northwest Common Stock in lieu of issuing fractional shares.
Whether Hibernia Common Stock or cash is exchanged for shares of Northwest
Common Stock will depend upon the Average Market Price of Hibernia Common Stock,
as defined in the Agreement. Also, if Hibernia Common Stock is to be exchanged
for Northwest Common Stock, the actual Exchange Rate (the number of shares of
Hibernia Common Stock to be exchanged for each share of Northwest Common Stock),
will depend upon the Average Market Price of Hibernia Common Stock. For a
description of the Agreement, which is included in its entirety as Appendix A to
this Proxy Statement-Prospectus, see "PROPOSED MERGER."
This Proxy Statement-Prospectus also constitutes a prospectus of
Hibernia with respect to the shares of Hibernia Common Stock to be issued
pursuant to the Agreement if the Merger is consummated.
See "PROPOSED MERGER -- Terms of the Merger."
The outstanding shares of Hibernia Common Stock are listed on the New York
Stock Exchange, Inc. (the "NYSE"). The last reported sale price of Hibernia
Common Stock on the NYSE Composite Transactions Reporting System on November 10,
1997 was $17.00 per share.
This Proxy Statement-Prospectus and the accompanying proxy card are
first being mailed to shareholders of Northwest on or about November 14, 1997.
No person is authorized to give any information or to make any
representations other than those contained in this Proxy Statement- Prospectus,
and, if given or made, such information or representation may not be relied upon
as having been made by Hibernia or Northwest.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROXY STATEMENT-PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
THE SHARES OF HIBERNIA COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS
ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY.
The date of this Proxy Statement-Prospectus is November 14, 1997.
<PAGE>
TABLE OF CONTENTS
Page
INTRODUCTION............................................... 1
AVAILABLE INFORMATION...................................... 1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............ 2
THE PARTIES TO THE MERGER.................................. 3
Hibernia.............................................. 3
Northwest............................................. 7
Pro Forma Combined Selected Financial Information
(Unaudited)......................................... 11
Comparative Per Share Information (Unaudited)......... 13
SUMMARY.................................................... 15
The Proposed Merger................................... 15
Management and Operations After the Merger............ 16
Recommendation of the Board of Directors.............. 16
Basis for the Terms of the Merger..................... 16
The Fairness Opinion.................................. 17
Votes Required........................................ 17
Conditions; Abandonment; Amendment.................... 18
Interests of Certain Persons in the Merger............ 18
Employee Benefits..................................... 19
Material Tax Consequences............................. 19
Dissenters' Rights.................................... 20
Differences in Shareholders' Rights................... 20
Accounting Treatment.................................. 20
Other Pending Merger Transactions for Hibernia........ 20
MEETING INFORMATION........................................ 21
Solicitation and Revocation of Proxies................ 21
Vote Required......................................... 22
Recommendation........................................ 24
PROPOSED MERGER............................................ 24
General............................................... 24
Background of and Reasons for the Merger.............. 25
Terms of the Merger................................... 27
Opinion of Financial Advisor.......................... 28
Closing Date and Effective Date of the Merger......... 31
Closing Date and
Employee Benefits..................................... 32
Distribution of Merger Consideration After the Merger. 32
Expenses.............................................. 34
Representations and Warranties;
Conditions to the Merger; Waiver.................... 34
Regulatory and Other Approvals........................ 35
Business Pending the Merger........................... 36
Termination........................................... 37
Management and Operations After the Merger............ 38
Certain Differences in Rights of Shareholders......... 38
Interests of Certain Persons in the Merger............ 41
Material Tax Consequences............................. 41
Resale of Hibernia Common Stock....................... 43
Rights of Dissenting Shareholders..................... 44
Accounting Treatment.................................. 46
CERTAIN REGULATORY CONSIDERATIONS.......................... 46
PRO FORMA FINANCIAL INFORMATION............................ 49
CERTAIN INFORMATION CONCERNING NORTHWEST................... 61
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT 66
NORTHWEST CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) June 30, 1997 and 1996.................... 70
Management's Discussion and Analysis of Financial
Condition and Results of Operations
June 30, 1997 and 1996.............................. 75
NORTHWEST CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY
INFORMATION - DECEMBER 31, 1996 AND 1995................. 82
Management's Discussion and Analysis of Financial
Condition and Results of Operations
December 31, 1996 and 1995..........................104
RELATIONSHIP WITH INDEPENDENT AUDITORS.....................116
VALIDITY OF SHARES.........................................116
EXPERTS....................................................116
APPENDIX A -- AGREEMENT AND PLAN OF MERGER...............117
APPENDIX B -- OPINION OF SOUTHARD FINANCIAL..............152
APPENDIX C -- SELECTED PROVISIONS OF THE LOUISIANA BUSINESS
CORPORATION LAW RELATING TO RIGHTS OF
DISSENTING SHAREHOLDERS................158
APPENDIX D -- OPINION OF ERNST & YOUNG LLP REGARDING CERTAIN
TAX MATTERS............................161
<PAGE>
INTRODUCTION
If the shareholders of Northwest approve the Agreement and the Merger,
Northwest will be merged into Hibernia, and Hibernia will be the corporation
surviving the Merger. If the Merger is completed, shareholders of Northwest
(except for shareholders who exercise and perfect their dissenters' rights under
Louisiana law) will receive either shares of Hibernia Common Stock or $55.00 in
cash for each share of Northwest Common Stock they own at the time the Merger is
effective. Shareholders of Northwest will be paid cash in lieu of any fractional
shares of Hibernia Common Stock to which they may otherwise be entitled. See
"PROPOSED MERGER -- Terms of the Merger." This Registration Statement relates to
1,752,706 shares of Hibernia Common Stock, which is the maximum number of shares
of Hibernia Common Stock that Hibernia will issue to the shareholders of
Northwest in connection with the Merger.
Shareholders of Northwest will be asked to approve the Agreement and the
Merger at a Special Meeting to be held on December 16, 1997. The proxy statement
relating to such Special Meeting is included in this Proxy Statement-Prospectus.
The terms of the Merger are described in this Proxy Statement-
Prospectus (see "Proposed Merger"), and a copy of the Agreement is attached
hereto as Appendix A for reference.
AVAILABLE INFORMATION
Hibernia is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities of the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's Regional Offices located at 7
World Trade Center, Suite 1300, New York, New York 10007 and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such materials can
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission
maintains a Web Site that contains reports, proxy and information statements and
other information and the address of that site is http://www.sec.gov. In
addition, reports, proxy statements and other information concerning Hibernia
may be inspected at the offices of the New York Stock Exchange, Inc. (the
"NYSE"), 20 Broad Street, New York, New York 10005, on which the shares of
Hibernia Common Stock are listed.
<PAGE>
Hibernia has filed with the Commission a registration statement on Form
S-4 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act")
with respect to the Hibernia Common Stock offered hereby. This Proxy Statement-
Prospectus does not contain all of the information set forth in the Registration
Statement. For further information with respect to Hibernia and the Hibernia
Common Stock offered hereby, reference is hereby made to the Registration
Statement. Statements contained in this Proxy Statement-Prospectus concerning
the provisions of certain documents are not necessarily complete and, in each
instance, reference is made to the copy of the document filed as an exhibit to
the Registration Statement, each such statement being qualified in all respects
by such reference. Copies of all or any part of the Registration Statement,
including exhibits thereto, may be obtained, upon payment of the prescribed
fees, at the offices of the Commission and the NYSE, as set forth above.
All information contained in this Proxy Statement-Prospectus relating to
Hibernia and its subsidiaries has been supplied by Hibernia, and all information
relating to Northwest and its subsidiaries has been supplied by Northwest.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Incorporated by reference in this Proxy Statement-Prospectus are the
following documents filed by Hibernia with the Commission pursuant to the
Exchange Act: Hibernia's (1) Annual Report on Form 10-K for the year ended
December 31, 1996, (2) definitive Proxy Statement dated March 19, 1997 relating
to its 1997 Annual Meeting of Shareholders held on April 29, 1997 except for the
information contained therein under the headings "Executive Compensation --
Report of the Executive Compensation Committee" and "Executive Compensation --
Stock Performance Graph", which are expressly excluded from incorporation in
this Registration Statement, (3) Quarterly Reports on Form 10-Q for the fiscal
quarters ended March 31 and June 30, 1997, (4) the Description of Capital Stock
included in its Current Report on Form 8-K dated November 2, 1994, and (5)
Current Reports on Form 8-K dated July 1, July 28, September 22, and October 28,
1997.
All documents subsequently filed by Hibernia with the Commission
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the
date of this Proxy Statement-Prospectus and prior to the termination of the
offering of Hibernia Common Stock made hereby will be deemed to be incorporated
by reference in this Proxy Statement-Prospectus and to be a part hereof from the
date such documents are filed, except that any and all information included in
any proxy statement filed by Hibernia under the headings "Executive Compensation
- -- Report of the Executive Compensation Committee" and "Executive Compensation
- -- Stock Performance Graph" are hereby expressly excluded from such
incorporation by reference. No statement made herein will be deemed to modify or
supersede any statement contained in a document incorporated or deemed to be
incorporated by reference. Any statement so modified or superseded will not be
deemed, except as so modified or superseded, to constitute a part of this Proxy
Statement-Prospectus.
Hibernia will provide, without charge, to each person, including any
beneficial owner, to whom this Proxy Statement- Prospectus is delivered, at the
written or oral request of any such person, a copy of any or all of the
information incorporated herein by reference other than exhibits to such
information (unless such exhibits are specifically incorporated by reference
into such information). Written or oral requests should be directed to Hibernia
Corporation, 313 Carondelet Street, New Orleans, Louisiana 70130, Attention:
Assistant Secretary, Telephone (504) 533-3411. To ensure timely delivery, any
request should be made before __________, 1997.
THE PARTIES TO THE MERGER
Hibernia
Hibernia is a Louisiana corporation registered under the Bank Holding
Company Act of 1956, as amended ("BHCA"). As of June 30, 1997, Hibernia had
total consolidated assets of approximately $9.7 billion and shareholders' equity
of approximately $970 million. As of June 30, 1997, Hibernia was ranked, on the
basis of total assets, as the largest bank holding company headquartered in
Louisiana.
As of June 30, 1997, Hibernia had two banking subsidiaries, Hibernia
National Bank ("HNB"), that provides retail and commercial banking services
through approximately 202 banking offices throughout Louisiana, and Hibernia
National Bank of Texas ("HNBT"), that provides retail and commercial banking
services through approximately 10 banking offices in two Texas counties. As of
June 30, 1997, HNB was the largest bank headquartered in Louisiana.
From time to time, Hibernia investigates and holds discussions and
negotiations in connection with possible mergers or similar transactions with
other financial institutions. At the date hereof, Hibernia has entered into
three definitive merger agreements with financial institutions other than
Northwest. See "Summary -- Other Pending Merger Transactions for Hibernia".
Hibernia expects to pursue other possible acquisition opportunities and intends
to continue to pursue such opportunities in the near future when available and
feasible in the light of Hibernia's business and strategic plans. Although it is
anticipated that such transactions may be entered into both before and after the
Merger, there can be no assurance as to when or if, or the terms upon which,
such transactions may be pursued or consummated. If required under applicable
law, any such transactions would be subject to regulatory approval and the
approval of shareholders of the acquired institution.
The principal executive offices of Hibernia are located at 313 Carondelet
Street, New Orleans, Louisiana 70130, and its telephone number is (504)
533-5532. For additional information concerning the business and financial
condition of Hibernia, reference is made to the Hibernia reports incorporated
herein by reference. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
Selected Financial Data. The closing market price per share of Hibernia Common
Stock on the NYSE on June 25, 1997, the business day prior to the announcement
of the proposed Merger was $14.25. There can be no assurance of the market price
of Hibernia Common Stock on the Closing Date.
<PAGE>
The following table sets forth certain consolidated financial
information for Hibernia. This information is based on the consolidated
financial statements and related notes of Hibernia contained in (i) its Annual
Report on Form 10-K for the year ended December 31, 1996 and (ii) its Quarterly
Report on Form 10-Q for June 30, 1997. See "INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE".
<PAGE>
<TABLE>
<CAPTION>
HIBERNIA CORPORATION
SELECTED FINANCIAL INFORMATION
Year Ended December 31 6 Months Ended June 30
- -----------------------------------------------------------------------------------------------------------------------------------
Unaudited ($ in thousands, except per share amounts)
1996 1995 1994 1993 1992 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest income ................ $ 366,217 $ 320,756 $ 301,116 $ 295,990 $ 293,134 $ 203,123 $ 175,194
Income from continuing operations .. 109,950 128,885 101,460 72,708 12,750 63,549 54,445
Per common share:
Income from continuing operations 0.85 1.02 0.80 0.57 0.17 0.47 0.43
Cash dividends .................. 0.29 0.25 0.19 0.03 - 0.16 0.14
Book value ...................... 6.58 6.07 4.99 4.67 4.73 6.84 6.18
SELECTED PERIOD-END BALANCES
Debt ............................... 51,349 34,361 21,012 39,198 39,071 7,028 26,842
Total assets ....................... 9,306,796 7,755,719 7,294,469 7,119,012 6,970,946 9,673,268 7,855,221
</TABLE>
Northwest
Northwest is a Louisiana corporation and a registered bank holding
company under the BHCA which owns all of the issued and outstanding shares of
stock of First National Bank in Mansfield, a national banking association(the
"Bank"). As of June 30, 1997, Northwest had total consolidated assets of $106.7
million and shareholders' equity of $11.9 million. The Bank has four offices in
DeSoto Parish, Louisiana. The Bank engages in retail and commercial banking
services, including taking deposits and extending secured and unsecured credit.
The principal offices of Northwest are located at 214 South Washington,
Mansfield, Louisiana 71052 and its telephone number is(318) 872-5164. For
additional information concerning the business of Northwest and its financial
condition, see "CERTAIN INFORMATION CONCERNING NORTHWEST", "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF
NORTHWEST" and "NORTHWEST CONSOLIDATED FINANCIAL INFORMATION."
<PAGE>
Selected Financial Data of Northwest
The following selected financial information of Northwest with respect
to each year in the five-year period ended December 31, 1996 and the six-month
periods ended June 30, 1997 and 1996 has been derived from the consolidated
financial statements of Northwest. The information set forth below should be
read in conjunction with Northwest's financial statements, the notes thereto,
and Northwest's Management's Discussion and Analysis of Financial Condition and
Results of Operations for the years ended December 31, 1996 and 1995 and the
six-month periods ended June 30, 1997 and 1996 appearing elsewhere in this Proxy
Statement - Prospectus.
<TABLE>
<CAPTION>
NORTHWEST BANCSHARES OF LOUISIANA, INC.
SELECTED FINANCIAL INFORMATION
Year Ended December 31 6 Months Ended June 30
- -------------------------------------------------------------------------------------------------------------------------------
Unaudited ($ in thousands, except per share amounts)
1996 1995 1994 1993 1992 1997 1996
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest income ................ $ 3,851 $ 3,638 $ 3,605 $ 3,665 $ 3,682 $ 2,070 $ 1,900
Income from continuing operations .. 1,370 1,226 1,127 1,341 1,230 771 671
Per common share:
Income from continuing operations 3.54 3.17 2.91 3.47 3.18 1.99 1.73
Cash dividends .................. 1.25 1.00 0.75 0.75 0.75 - -
Book value ...................... 28.79 26.72 23.44 23.08 19.92 30.88 27.64
SELECTED PERIOD-END BALANCES
Debt ............................... - - - - - - -
Total assets ....................... 98,501 95,712 92,877 90,487 93,090 106,709 103,130
</TABLE>
<TABLE>
<CAPTION>
NORTHWEST BANCSHARES OF LOUSIANA, INC.
QUARTERLY INCOME RESULTS
- ---------------------------------------------------------------------------
Unaudited ($ in thousands, except per share amounts)
- ---------------------------------------------------------------------------
3/31/97 6/30/97
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income .... $1,737 $1,818
Net interest income 1,008 1,062
Net income ......... 354 417
Net income per share 0.92 1.07
- ---------------------------------------------------------------------------
3/31/96 6/30/96 9/30/96 12/31/96
- ---------------------------------------------------------------------------
Interest income .... $1,682 $1,737 $1,759 $1,665
Net interest income 923 977 1,012 939
Net income ......... 322 349 350 349
Net income per share 0.83 0.90 0.91 .90
- ---------------------------------------------------------------------------
3/31/95 6/30/95 9/30/95 12/31/95
- ---------------------------------------------------------------------------
Interest income .... $1,566 $1,680 $1,666 $1,603
Net interest income 895 960 912 871
Net income ......... 279 311 313 323
Net income per share 0.72 0.80 0.81 0.84
</TABLE>
<PAGE>
Pro Forma Combined Selected Financial Information (Unaudited)
The following table sets forth certain unaudited pro forma combined
selected financial information for Hibernia, after giving effect to the merger
with Northwest. The pro forma information, which reflects the Merger using the
pooling-of-interests method of accounting, is presented for informational
purposes only and should not be construed as indicative of the actual operations
that would have occurred had the Merger been consummated at the beginning of the
periods indicated or that may be obtained in the future. See "Pro Forma
Financial Information" contained elsewhere herein.
<TABLE>
<CAPTION>
PRO FORMA HIBERNIA CORPORATION*
PRO FORMA COMBINED SELECTED FINANCIAL INFORMATION
Year Ended December 31 6 Months Ended June 30
- --------------------------------------------------------------------------------------------------------------
Unaudited ($ in thousands, except per share amounts)
1996 1995 1994 1997 1996
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net interest income ................ $ 370,068 $ 324,394 $ 304,721 $ 205,193 $ 177,094
Income from continuing operations .. 111,320 130,111 102,587 64,320 55,116
Per common share:
Income from continuing operations 0.85 1.01 0.79 0.47 0.43
Cash dividends .................. 0.29 0.25 0.19 0.16 0.14
Book value ...................... 6.59 6.08 5.00 6.86 6.19
SELECTED PERIOD-END BALANCES
Debt ............................... 51,349 34,361 21,012 7,028 26,842
Total assets ....................... 9,405,296 7,851,459 7,387,346 9,779,996 7,958,257
* Includes Hibernia Corporation and Northwest Bancshares of Louisiana, Inc.
</TABLE>
<PAGE>
Comparative Per Share Information (Unaudited)
The following table sets forth for Hibernia Common Stock and Northwest
Common Stock certain unaudited pro forma combined and unaudited pro forma
equivalent per share financial information for the six-month periods ended June
30, 1997 and 1996 and for the years ended December 31, 1996, 1995 and 1994.
Information under the column titled "Hibernia Corporation" is based on (i)
Hibernia's Annual Report on Form 10-K for the year ended December 31, 1996 and
(ii) Hibernia's Quarterly Report on Form 10-Q for the six-month period ended
June 30, 1997. Information under the column titled "Northwest Bancshares of
Louisiana, Inc." is based on, and should be read in conjunction with, the
historical financial statements and related notes and Management's Discussion
and Analysis of Financial Condition and Results of Operations of Northwest
contained elsewhere in this Proxy Statement - Prospectus.
Information under the column entitled "Pro Forma Hibernia Corporation
(with Northwest Bancshares of Louisiana, Inc.)" is based upon the pro forma
financial statements and related notes contained elsewhere herein. Such pro
forma combined information, which reflects the Merger, is presented for
informational purposes only and should not be construed as indicative of the
actual operations that would have occurred had the Merger been consummated at
the beginning of the periods indicated or that may be obtained in the future.
The pro forma combined information gives effect to the issuance, in each of the
periods presented, of 3.898 shares of Hibernia Common Stock for each outstanding
share of Northwest Common Stock. The pro forma combined information assumes the
Average Market Price of Hibernia Common Stock will be $18.00 per share. See
"PROPOSED MERGER -- Terms of the Merger."
The information under the column entitled "Northwest Bancshares of
Louisiana, Inc. Pro Forma Equivalent" is derived by multiplying the amounts
contained in the column titled "Pro Forma Hibernia Corporation (with Northwest
Bancshares of Louisiana, Inc.)" by the Exchange Rate (as defined in the Merger
Agreement) of 3.898. See "PROPOSED MERGER -- Terms of the Merger."
<TABLE>
<CAPTION>
HIBERNIA CORPORATION AND NORTHWEST BANCSHARES OF LOUISIANA, INC.
COMPARATIVE PER SHARE INFORMATION
- -------------------------------------------------------------------------------------------------------------------
Unaudited
PRO FORMA
HIBERNIA NORTHWEST
CORPORATION BANCSHARES OF
NORTHWEST (WITH NORTHWEST LOUISIANA, INC.
HIBERNIA BANCSHARES OF BANCSHARES OF PRO FORMA
CORPORATION LOUISIANA, INC. LOUISIANA, INC.) EQUIVALENT
- -------------------------------------------------------------------------------------------------------------------
Per Common Share:
<S> <C> <C> <C> <C>
Income from continuing operations:
For the six months ended June 30,
1997 $ 0.47 $ 1.99 $ 0.47 $ 1.83
1996 0.43 1.73 0.43 1.68
For the year ended December 31,
1996 $ 0.85 $ 3.54 $ 0.85 $ 3.31
1995 1.02 3.17 1.01 3.94
1994 0.80 2.91 0.79 3.08
Cash dividends:
For the six months ended June 30,
1997 $ 0.16 $ 0.00 $ 0.16 $ 0.62
1996 0.14 0.00 0.14 0.55
For the year ended December 31,
1996 $ 0.29 $ 1.25 $ 0.29 $ 1.13
1995 0.25 1.00 0.25 0.97
1994 0.19 0.75 0.19 0.74
Book Value:
At June 30, 1997 $ 6.84 $ 30.88 $ 6.86 $ 26.74
At December 31, 1996 6.58 28.79 6.59 25.68
</TABLE>
SUMMARY
This summary is necessarily general and abbreviated and has been
prepared to assist shareholders of Northwest in their review of this Proxy
Statement-Prospectus. This summary is not intended to be a complete explanation
of the matters covered in this Proxy Statement-Prospectus and is qualified in
its entirety by reference to the more detailed information contained elsewhere
in this Proxy Statement-Prospectus, the Appendices hereto and the documents
incorporated herein by reference. Shareholders of Northwest are urged to read
all of those documents in their entirety prior to the Special Meeting.
The Proposed Merger
The shareholders of Northwest will consider and vote upon the Agreement
and the Merger at the Special Meeting. If the shareholders of Northwest approve
the Agreement and the Merger and the other conditions to completing the Merger
are satisfied (see "PROPOSED MERGER -- Representations and Warranties;
Conditions to the Merger; Waiver"), the Merger will be completed on a date
thereafter chosen by the parties (the "Effective Date"). Shareholders of
Northwest, other than shareholders of Northwest who exercise and perfect
dissenters' rights under Louisiana law, will receive either shares of Hibernia
Common Stock or $55.00 in cash in exchange for each share of Northwest Common
Stock they own (the "Exchange Rate"), depending upon the Average Market Price of
Hibernia Common Stock (as defined in the Agreement). If the Average Market Price
of Hibernia Common Stock is $12.14 or higher, holders of Northwest Common Stock
will receive shares of Hibernia Common Stock in exchange for their shares of
Northwest Common Stock. The number of shares of Hibernia Common Stock to be
exchanged for each share of Northwest will be determined as follows:
($21,277,850 , 386,870) , the Average Market Price of Hibernia Common Stock;
provided, however, that if the Average Market Price of Hibernia Common Stock is
greater than $14.11, the Exchange Rate will be 3.898 shares of Hibernia Common
Stock for each share of Northwest Common Stock. Consequently, if the Average
Market Price is $12.14 or higher, the Exchange Rate will be between 3.898 and
4.53 shares of Hibernia Common Stock for each share of Northwest Common Stock.
If the Average Market Price is below $12.14, holders of Northwest Common Stock
will receive $55.00 in cash for each share of Northwest Common Stock held. If
cash is exchanged for shares of Northwest Common Stock, however, the Merger will
not qualify as a pooling of interests for accounting purposes and will not be a
tax-free transaction to holders of Northwest Common Stock. (See "Material Tax
Consequences."). If Hibernia Common Stock is exchanged for Northwest Common
Stock in the Merger, Northwest shareholders will be paid cash in lieu of any
fractional share of Hibernia Common Stock to which they may otherwise be
entitled.
If shares of Hibernia Common Stock are exchanged for shares of Northwest
Common Stock, then the Merger will qualify as a tax-free reorganization, and
shareholders of Northwest will not be required to pay federal income taxes on
the value of the Hibernia Common Stock they receive in the Merger.
Management and Operations After the Merger
Northwest and the Bank will cease to exist after the Merger. The
business of the Bank will be conducted through HNB after the merger. The Boards
of Directors of Hibernia and HNB following the Merger will consist of those
persons serving as directors immediately prior to the Merger.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS OF NORTHWEST ("NORTHWEST BOARD") HAS APPROVED THE
AGREEMENT AND THE MERGER, BELIEVES THAT THE MERGER IS IN THE BEST INTERESTS OF
THE SHAREHOLDERS OF NORTHWEST AND RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
MERGER AND THE RELATED AGREEMENT. (See "MEETING INFORMATION.") The Northwest
Board has received from Southard Financial (the "Advisor") an opinion that the
consideration to be paid to shareholders of Northwest in the Merger is fair,
from a financial point of view, to the shareholders of Northwest. See "PROPOSED
MERGER -- Opinion of Financial Advisor." The Northwest Board believes that the
Merger will provide significant value to all Northwest shareholders. In
recommending the Merger to the shareholders, the Northwest Board considered,
among other factors, the financial Terms of the Merger, the liquidity it will
afford Northwest's shareholders and the business earnings and potential for
future growth of Northwest and Hibernia. See "PROPOSED MERGER -- Background of
and Reasons for the Merger."
Basis for the Terms of the Merger
A number of factors were considered by the Northwest Board in approving
the Terms of the Merger, including, without limitation, information concerning
the financial condition, results of operations and prospects of Hibernia,
Northwest, HNB, HNBT and the Bank; the ability of Northwest to compete in its
relevant banking markets and to face additional competitive pressures due to
changes in the regulatory environment; the market price of Hibernia Common
Stock; the absence of an active trading market for Northwest Common Stock; the
consideration to be received by Northwest shareholders in relation to
Northwest's earnings and book value; the anticipated tax-free nature of the
Merger to Northwest's shareholders for federal income tax purposes; and the
financial terms of other recent business combinations in the banking industry.
See "PROPOSED MERGER -- Background of and Reasons for the Merger."
Advice and Opinion of Financial Advisor
The Advisor has rendered an opinion to Northwest that, based on and
subject to the procedures, matters and limitations described in its opinion and
such other matters as it considered relevant, as of the date of its opinion, the
consideration to be paid to shareholder of Northwest in the Merger is fair, from
a financial point of view, to the shareholders of Northwest. The Advisor's
opinion is attached as Appendix B to this Proxy Statement- Prospectus.
Shareholders are urged to read the opinion in its entirety for a description of
the procedures followed, matters considered, and limitations on the reviews
undertaken in connection therewith. See "PROPOSED MERGER -- Opinion of Financial
Advisor."
Votes Required
Approval of the Merger requires the affirmative vote of the holders of a
majority of the issued and outstanding shares of Northwest Common Stock, present
in person or by proxy, at the Special Meeting. (See "MEETING INFORMATION.") The
Northwest Board has fixed the close of business on November 7, 1997 as the
record date (the "Record Date") for determining the shareholders entitled to
receive notice of, and to vote at, the Special Meeting. Directors of Northwest
and the Bank from whom Hibernia has received commitments to vote in favor of the
Merger own 132,191 shares of Northwest Common Stock, representing 34.17% of
the Northwest Common Stock issued and outstanding as of the Record Date. See
"CERTAIN INFORMATION CONCERNING NORTHWEST -- Security Ownership of Principal
Shareholders and Management." The holders of those shares have agreed to vote
the stock for which they have voting power in favor of approval of the Merger
and the Agreement at any meeting of Northwest's shareholders held before March
31, 1998 at which the Merger is considered, unless the fairness opinion from the
Advisor is withdrawn or they are legally prohibited from voting in favor of the
Merger and the Agreement in the opinion of their counsel. See "MEETING
INFORMATION" and "CERTAIN INFORMATION CONCERNING NORTHWEST -- Security Ownership
of Principal Shareholders and Management." Approval of the Merger by
shareholders of Hibernia is not required under the laws of the State of
Louisiana.
Conditions; Abandonment; Amendment
Consummation of the Merger is subject to the satisfaction of a number of
conditions, including, among others, approval of the Agreement by the required
vote of the shareholders of Northwest, and approval of the proposed transaction
by the Board of Governors of the Federal Reserve System ("Federal Reserve
Board"), and the Office of the Comptroller of the Currency ("OCC"). Applicable
law provides that the Merger may not be consummated until at least 15, and the
Federal Reserve Board requires that the Merger be consummated no more than 90,
days after approval of the Federal Reserve Board is obtained. See "PROPOSED
MERGER -- Representations and Warranties; Conditions to the Merger; Waiver" and
"PROPOSED MERGER -- Regulatory and Other Approvals."
Substantially all of the conditions to consummation of the Merger
(except for required shareholder and regulatory approvals) may be waived at any
time by the party for whose benefit they were created, and the Agreement may be
amended or supplemented at any time by written agreement of the parties, except
that no such waiver, amendment or supplement executed after approval of the
Agreement by Northwest's shareholders may change the number of shares of
Hibernia Common Stock into which Northwest Common Stock will be converted by in
the Merger. Any other material change to the Agreement after the date of the
Special Meeting would require, however, a resolicitation of Northwest's
shareholders for the purpose of voting on the transaction as amended. In
addition, the Agreement may be terminated, either before or after shareholder
approval, under certain circumstances. See "PROPOSED MERGER -- Representations
and Warranties; Conditions to the Merger; Waiver" and "PROPOSED MERGER --
Closing Date and Effective Date of the Merger; Termination."
Interests of Certain Persons in the Merger
The executive officers of Northwest and members of the Northwest Board
have interests in the Merger that are in addition to their interests as
shareholders of Northwest. These benefits include, among others, the
continuation of certain employee benefits generally and provisions in the
Agreement relating to the indemnification of officers, directors and employees
of Northwest for certain liabilities up to certain aggregate limitations. See
"PROPOSED MERGER -- Employee Benefits" and -- "Interests of Certain Persons in
the Merger."
Employee Benefits
Hibernia has agreed as part of the Agreement that it will offer to all
former employees of Northwest and/or the Bank who become employees of Hibernia
or its subsidiaries the same employee benefits as those offered by Hibernia and
HNB to their employees, except that former employees of Northwest will not be
required to wait for any period in order to be eligible to participate in
Hibernia's flexible benefits plan (including its medical and dental coverage).
Hibernia will also give Northwest employees full credit for their years of
service (for both eligibility and vesting) with Northwest for purposes of
Hibernia's 401(k) plan, the Retirement Security Plan and Hibernia's Employee
Stock Ownership Plan ("ESOP") to the extent permitted under the terms of those
plans. Hibernia has also agreed to pay or provide certain other benefits. See
"PROPOSED MERGER---Employee Benefits."
Material Tax Consequences
If the consideration to be paid to Northwest shareholders in the Merger
(the "Merger Consideration") is to be paid in Hibernia Common Stock, it is a
condition to consummation of the Merger that the parties receive an opinion of a
nationally recognized public accounting firm to the effect that (i) the Merger,
when consummated in accordance with the Terms of the Merger Agreement, will
constitute a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), (ii) the exchange of Northwest
Common Stock, to the extent exchanged for Hibernia Common Stock, will not give
rise to a gain or loss to the shareholders of Northwest with respect to such
exchange, and (iii) the Louisiana income tax treatment to the shareholders of
Northwest will be substantially the same as the federal income tax treatment to
the shareholders of Northwest. The parties have received an opinion from Ernst &
Young LLP, certified public accountants, who serve as independent auditors for
Hibernia, to these effects. A copy of the tax opinion is attached hereto as
Appendix D. See "PROPOSED MERGER -- Material Tax Consequences."
Because of the complexities of the tax laws and because the tax
consequences may vary depending upon a holder's individual circumstances or tax
status, it is recommended that each shareholder of Northwest consult his, her,
or its tax advisor concerning the federal (and any applicable state, local or
other) tax consequences of the Merger to him, her or it.
Dissenters' Rights
Each holder of Northwest Common Stock who objects to the Merger and
perfects his or her rights to dissent from the Merger in accordance with the
Louisiana Business Corporation Law ("LBCL") is entitled to the rights and
remedies of dissenting shareholders provided in the LBCL, Title 12, Section 131,
a copy of which is attached hereto as Appendix C. As a result, dissenting
shareholders may receive value for their shares that is more or less than, or
equal to, the value received by other shareholders in the Merger. See "PROPOSED
MERGER -- Rights of Dissenting Shareholders." Shareholders who exercise and
perfect dissenters' rights will receive cash in exchange for their shares and
will be taxed on the cash they receive. See "Material Tax Consequences."
Differences in Shareholders' Rights
Shareholders of Northwest, to the extent they receive shares of Hibernia
Common Stock in the Merger, will become shareholders of Hibernia, and their
rights as such will be governed by Hibernia's Articles of Incorporation and
By-Laws. The rights of shareholders of Hibernia are different in certain
respects from the rights of shareholders of Northwest. See "PROPOSED MERGER --
Certain Differences in Rights of Shareholders."
Accounting Treatment
If the Merger Consideration is paid by exchanging Hibernia Common Stock,
the parties intend the Merger to be treated as a pooling of interests for
financial accounting purposes. See "PROPOSED MERGER -- Accounting Treatment."
Other Pending Merger Transactions for Hibernia
Other Pending Merger Transactions for Hibernia
On August 31, 1997, Hibernia completed a merger with Executive Bancshares,
Inc. ("Executive") and its wholly-owned subsidiaries, The First National Bank of
Paris and Collin County National Bank. As of June 30, 1997, Executive had total
consolidated assets of $138 million and shareholders' equity of $8 million. On
November 7, 1997, Hibernia completed a merger with Unicorp Bancshares-Texas,
Inc. and its banking subsidiary, OrangeBank. As of June 30, 1997, Unicorp had
assets of $115.3 million and shareholders' equity of $8.3 million. On July 16,
1997, Hibernia announced a definitive agreement to merge with ArgentBank. As of
June 30, 1997, ArgentBank reported total consolidated assets of $760 million and
shareholders' equity of $81.3 million. On October 24, 1997, Hibernia announced a
definitive agreement to merge with Firstshares of Texas, Inc. and its banking
subsidiary, First National Bank (Marshall). As of June 30, 1997, Firstshares had
consolidated assets of $291,492,000 and shareholders equity of $23,650,000.
Hibernia issued 1,161,680 shares in the Executive merger, 2,233,389 shares in
the Unicorp merger and expects to issue a maximum of approximately 17 million
shares of its Common Stock in the aggregate in the ArgentBank and Firstshares
mergers. Hibernia expects to account for all of these mergers as poolings of
interests. Shareholders of Northwest will not be entitled to vote on the mergers
with ArgentBank or Firstshares. The mergers with ArgentBank and Firstshares, if
completed, will not have a material impact on Hibernia's assets, liabilities,
financial condition or results of operations. The mergers with Unicorp,
ArgentBank and Firstshares are subject to terms and conditions similar or
identical to those applicable to the Merger and may be completed or abandoned
before or after completion of the Merger.
MEETING INFORMATION
This Proxy Statement-Prospectus is furnished in connection with the solicitation
of proxies by the Northwest Board for use at the Special Meeting. Each copy of
this Proxy Statement- Prospectus mailed to holders of Northwest Common Stock is
accompanied by a proxy card furnished in connection with the Northwest Board's
solicitation of proxies for use at the Special Meeting and at any adjournment
thereof. The Special Meeting is scheduled to be held at 4:00 p.m., Central
daylight time, on December 16, 1997, at the main office of Northwest (which is
the main office of the Bank), 214 South Washington, Mansfield, Louisiana. Only
holders of record of Northwest Common Stock at the close of business on the
Record Date are entitled to receive notice of and to vote at the Special
Meeting. At the Special Meeting, shareholders will consider and vote upon (a) a
proposal to approve the Agreement and the Merger, and (b) such other matters as
may properly be brought before the Special Meeting or any adjournment thereof.
HOLDERS OF NORTHWEST COMMON STOCK ARE REQUESTED TO COMPLETE, DATE AND SIGN
THE ACCOMPANYING PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED, POSTAGE PAID
ENVELOPE.
Solicitation and Revocation of Proxies
Any holder of Northwest Common Stock who has delivered a proxy may revoke it any
time before it is voted by attending the Special Meeting and voting in person,
or by giving notice of revocation in writing to the Secretary of Northwest prior
to the date of the Special Meeting or submitting a signed proxy card bearing a
later date before the Special Meeting. The shares of Northwest Common Stock
represented by properly executed proxy cards received at or prior to the Special
Meeting and not subsequently revoked will be voted as directed by the
shareholders submitting such proxies. If contrary instructions are not given on
a proxy card, executed proxy cards received by Northwest will be voted FOR
approval of the Agreement and the Merger. If any other matters are properly
presented at the Special Meeting for consideration, the persons named in the
proxy card will have discretionary authority to vote on such matters in
accordance with their best judgment. The Northwest Board is unaware of any
matter to be presented at the Special Meeting other than the proposal to approve
the Merger and the Agreement.
The cost of soliciting proxies from shareholders of Northwest, including
expenses incurred in preparing, assembling and mailing this Proxy
Statement-Prospectus, will be borne by Northwest, except that Hibernia will bear
all expenses incurred in printing this Proxy Statement-Prospectus. Such
solicitation will be made by mail but also may be made by telephone or other
means of telecommunications or in person by the directors, officers and
employees of Northwest (who will receive no additional compensation for doing
so).
NORTHWEST SHAREHOLDERS SHOULD NOT FORWARD ANY STOCK CERTIFICATES WITH THEIR
PROXY CARDS. IF THE MERGER IS APPROVED, SHAREHOLDERS WILL RECEIVE INSTRUCTIONS
REGARDING THE EXCHANGE OF THEIR STOCK CERTIFICATES AFTER THE MERGER HAS BEEN
COMPLETED.
Vote Required
Approval of the Agreement requires the affirmative vote of the holders of a
majority of the issued and outstanding shares of Northwest Common Stock, present
in person or by proxy, at the Special Meeting. The Northwest Board has fixed the
close of business on November 7, 1997, as the Record Date for the determination
of shareholders entitled to notice of and to vote at the Special Meeting. As of
the Record Date, there were 386,870 shares of Northwest Common Stock outstanding
and entitled to vote at the Special Meeting, with each share being entitled to
one vote.
A majority of the outstanding shares of Northwest Common Stock constitutes a
quorum for purposes of the Special Meeting. An abstention will be considered
present for quorum purposes, but will have the same effect as a vote against the
proposal to be considered at the Special Meeting. A broker non-vote will not
count for quorum or voting purposes because brokers will not have discretionary
authority to vote with respect to the proposal and, therefore, a broker non-vote
will have no effect on the vote on the proposal. However, broker non-votes will
make it more difficult to achieve a quorum.
As of the Record Date, directors who have agreed to vote their shares in favor
of the Merger of Northwest beneficially owned a total of 132,191 shares, or
approximately 34.17% of the outstanding shares, of Northwest Common Stock. The
individuals will not be required to vote in favor of the Merger if the fairness
opinion from the Advisor is withdrawn or if they are prohibited by law from
voting in favor of the Merger and the Agreement in the opinion of their counsel.
Recommendation
For the reasons described below, the Northwest Board has approved the Agreement,
believes the Merger is in the best interests of Northwest and its shareholders
and recommends that holders of Northwest Common Stock vote FOR approval of the
Agreement and Merger. In making its recommendation to shareholders, the
Northwest Board considered, among other things, the opinion of the Advisor that
the consideration to be received by the holders of Northwest Common Stock
pursuant to the Merger is fair to such shareholders from a financial point of
view. See "Background of and Reasons for the Merger" and "Opinion of Financial
Advisor" under "PROPOSED MERGER", below.
PROPOSED MERGER
This section of the Proxy Statement-Prospectus describes certain aspects
of the Merger. The following description does not purport to be complete and is
qualified in its entirety by reference to the Agreement, which is attached as
Appendix A to this Proxy Statement-Prospectus and is incorporated herein by
reference. All shareholders are urged to read the Agreement carefully and in its
entirety.
General
If the shareholders of Northwest approve the Agreement and the Merger
and the other conditions to the consummation of the Merger are satisfied,
Northwest will be merged with and into Hibernia. At that time, the separate
existence of Northwest will cease. Simultaneously with the Merger, the Bank will
be merged into HNB, and the separate existence of the Bank will also cease. As
soon as practicable following the Effective Date, the operations previously
conducted by the Bank will be conducted under the name of HNB.
The type of consideration to be paid to Northwest shareholders will
depend upon the price at which Hibernia Common Stock is trading during the ten
business days prior to the trading date that falls immediately prior to the
Closing Date. The mean of the high and low prices of a share of Hibernia Common
Stock on those ten days is the "Average Market Price" for purposes of the
Agreement. If the Average Market Price is $12.14 or greater, the Merger
Consideration will be paid in shares of Hibernia Common Stock. If the Average
Market Price is less than $12.14, the Merger Consideration will be paid in cash.
If the Merger Consideration is paid in stock, shareholders of Northwest
will receive between 3.898 and 4.530 shares of Hibernia Common Stock for each
share of Northwest Common Stock. The precise number of shares to be exchanged
will be determined by the following formula: ($21,277,850 divided by 386,870)
divided by the Average Market Price of Hibernia Common Stock; provided that, if
the Average Market Price of Hibernia Common Stock is greater than $14.11,
Northwest shareholders will receive 3.898 shares of Hibernia Common Stock for
each share of Northwest Common Stock. As of the date hereof, the Average Market
Price has exceeded $14.11 for over [twenty] trading days.
If the Average Market Price is less than $12.14, Northwest shareholders
will receive $55.00 in cash for each share of Northwest Common Stock held by
them. In that event, the Merger will not qualify as a tax-free reorganization,
and shareholders of Northwest will owe taxes on the cash received by them in the
Merger. In addition, if the Merger Consideration is paid in cash, the Merger
will be accounted for as a purchase transaction, rather than a pooling of
interests.
Background of and Reasons for the Merger
Background. Since the early 1990's, Northwest has periodically received
expressions of interest as to the potential acquisition of or merger with
Northwest. For various reasons, such expressions of interest were not
entertained by the Northwest Board, but the Board remained willing to explore
the various strategic alternatives available to Northwest, including (i) a
strategy of independence, focusing on efficiencies and internal growth, (ii)
growth by acquisition of other institutions, and (iii) a sale of Northwest. In
late 1996, Hibernia presented an offer of merger to the Northwest Board which,
after negotiation, resulted in the Agreement.
Reasons for the Merger. The terms of the Agreement, including the Exchange Rate,
are the result of arms-length negotiations between Hibernia and Northwest and
their respective representatives. The Northwest Board believes that the Merger
is fair and in the best interests of its shareholders. In reaching that
decision, the Northwest Board consulted with its financial and other advisors,
as well as with Northwest's management, and considered a number of factors,
including, but not limited to, the following:
(a) the financial condition and results of operations of, and prospects for,
each of Hibernia and Northwest;
(b) the financial terms of the Merger, including the amount and type of
consideration to be received by Northwest's shareholders pursuant to the
Agreement;
(c) the Hibernia Common Stock that is anticipated to be received by holders of
Northwest Common Stock pursuant to the Agreement will be listed for trading on
the NYSE and will provide liquidity (which is believed to be important,
particularly to the older shareholders of Northwest), that is unavailable to
holders of Northwest Common Stock, for which an active trading market does not
exist;
(d) the Agreement will allow holders of Northwest Common Stock to become
shareholders of Hibernia, an institution which was, as of June 30, 1997, the
largest bank holding company headquartered in Louisiana;
(e) the Merger with Hibernia will alleviate concerns about maintaining
continuity on the Northwest Board of Directors in light of the increasing
average age of the Northwest directors;
(f) the recent changes in the regulatory environment, which likely will result
in Northwest facing additional competitive pressures in its market area from
other financial institutions with greater financial resources capable of
offering a broad array of financial services;
(g) if the Merger Consideration is paid in Hibernia Common Stock, the Merger is
expected to qualify as a tax-free reorganization so that neither Northwest nor
the holders of Northwest Common Stock (except to the extent that cash is
received in lieu of a fractional share of Hibernia Common Stock) will recognize
any gain in the transaction (see "Material Tax Consequences"); and
(h) the opinion received from the Advisor that the consideration to be received
by the holders of Northwest Common Stock pursuant to the Agreement is fair to
such shareholders from a financial point of view (as of the date of such
opinion) (see "Opinion of Financial Advisor").
The Northwest Board did not assign any specific or relative weight to the
foregoing factors in its considerations. The Northwest Board believes that the
Agreement and the Merger will provide significant value to all Northwest
shareholders.
Based on the foregoing, while not unanimously, the Northwest Board has
approved the Agreement and the Merger, believes that the Agreement and the
Merger are in the best interests of Northwest's shareholders, and recommends
that all holders of Northwest Common Stock vote "FOR" the approval of the
Agreement and the Merger.
Terms of the Merger
If the shareholders of Northwest approve the Agreement and the Merger
and the other conditions to the consummation of the Merger are satisfied (see
"PROPOSED MERGER--Representations and Warranties; Conditions to the Merger;
Waiver"), the Merger will be consummated on the Effective Date. Northwest
shareholders who do not exercise and perfect dissenters' rights will receive
either Hibernia Common Stock or cash for each share of Northwest Common Stock
they own as described above under "General." Also, if the Merger Consideration
is paid in Hibernia Common Stock, each shareholder of Northwest who would be
entitled to receive a fraction of a share of Hibernia Common Stock will receive
(without interest) an amount in cash equal to such part of a fractional share
multiplied by the Average Market Price of Hibernia Common Stock instead of a
fractional share. For this purpose, the Average Market Price of Hibernia Common
Stock is the average of the closing price of one share of Hibernia Common Stock
for the ten business days preceding the last trading day immediately prior to
the Closing Date (as reported in The Wall Street Journal).
On the Effective Date of the Merger, if the Merger Consideration is paid
in Hibernia Common Stock each share of Northwest Common Stock, other than shares
held by shareholders who exercise and perfect dissenters' rights in accordance
with Louisiana law and shares owned beneficially by Hibernia or its
subsidiaries, will automatically convert to the number of shares of Hibernia
Common Stock described above. Northwest shareholders will automatically be
entitled to all of the rights and privileges afforded to Hibernia shareholders
as of that date of that event. However, the exchange of Northwest stock
certificates for certificates representing Hibernia Common Stock will occur
after the Closing Date.
If the Merger Consideration is paid in cash, shareholders of Northwest will
receive $55.00 for each share of Northwest Common Stock owned by them. In this
case, shareholders will owe taxes on the cash received. See "Material Tax
Consequences."
SHAREHOLDERS OF NORTHWEST SHOULD NOT FORWARD THEIR STOCK CERTIFICATES TO
NORTHWEST OR HIBERNIA AT THIS TIME. IF THE MERGER IS CONSUMMATED, NORTHWEST'S
SHAREHOLDERS WILL RECEIVE INSTRUCTIONS REGARDING THE EXCHANGE OF THEIR
CERTIFICATES FOR HIBERNIA COMMON STOCK.
For a discussion of the rights of dissenting shareholders, see "PROPOSED
MERGER -- Rights of Dissenting Shareholders."
The Fairness Opinion
Northwest retained Southard Financial, a Memphis, Tennessee, financial
valuation consulting firm, to render its opinion as to the fairness, from a
financial point of view to the holders of Northwest Common Stock of the
consideration to be paid in the Merger. In connection with this engagement,
Southard Financial evaluated the financial terms of the Merger, but was not
asked to, and did not recommend the specific ratio of exchange between the
respective common stocks of Hibernia and Northwest and did not assist in
negotiating the Merger. The Exchange Ratio was determined by Hibernia and
Northwest after arm's length negotiations. Northwest did not place any
limitations on the scope of Southard Financial's investigation or review.
Southard Financial provided a written Fairness Opinion and supporting
documentation to the Northwest Board. The full text of the Fairness Opinion,
dated October 31, 1997, which sets forth certain assumptions made, matters
considered, and limitations on the review performed by Southard Financial, is
attached to this Proxy Statement-Prospectus as Appendix B and is incorporated
herein by reference. The summary of the Fairness Opinion set forth in this Proxy
Statement-Prospectus is qualified in its entirety by reference to the Fairness
Opinion.
THE FULL TEXT OF THE ADVISOR OPINION (THE "FAIRNESS OPINION") WHICH SETS
FORTH, AMONG OTHER THINGS, ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS
CONSIDERED, AND LIMITATIONS ON THE REVIEW UNDERTAKEN, IS ATTACHED AS APPENDIX B
TO THIS PROXY STATEMENT-PROSPECTUS. NORTHWEST'S SHAREHOLDERS ARE URGED TO READ
THE FAIRNESS OPINION CAREFULLY AND IN ITS ENTIRETY. THE FAIRNESS OPINION DOES
NOT CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER OF NORTHWEST AS TO HOW SUCH
SHAREHOLDER SHOULD VOTE AT THE SPECIAL MEETING.
In arriving at its opinion, Southard Financial conducted interviews with
officers of Hibernia and Northwest and reviewed the documents indicated in the
Fairness Opinion. Southard Financial did not independently verify the accuracy
and/or the completeness of the financial and other information reviewed in
rendering its opinion. Southard Financial did not, and was not requested to,
solicit third party indications of interest in acquiring any or all of the
assets of Northwest. Further, Southard Financial did not make an independent
determination of the value of the assets of Northwest or Hibernia, nor was it
furnished with any such determinations of value.
In connection with rendering its opinion, Southard Financial performed a
variety of financial analyses, which are summarized below. Southard Financial
believes that its analyses must be considered as a whole and that considering
only selected factors could create an incomplete view of the analyses and the
process underlying the Fairness Opinion. In its analyses, Southard Financial
made numerous assumptions, many of which are beyond the control of Northwest and
Hibernia. Any estimates contained in the analyses prepared by Southard Financial
are not necessarily indicative of future results or values, which may vary
significantly from such estimates. Estimates of value of companies do not
purport to be appraisals or necessarily reflect the prices at which companies or
their securities may actually be sold. None of the analyses performed by
Southard Financial was assigned a greater significance than any other. According
to the Agreement, and assuming that the Average Market Price of Hibernia stock
is above $14.11 per share at closing, Northwest shareholders would receive 3.898
equivalent shares of Hibernia stock for each share of Northwest stock exchanged
under the Agreement. Given the market price of Hibernia common stock at this
writing (above $14.11 per share since mid-July 1997, an exchange ratio of 3.898
is used for purposes of the analysis presented below. Further, this analysis
assumes that the Average Market Price remains equal to or above $12.14 up to
closing, such that the merger is still a stock-for-stock transaction accounted
for as a pooling of interests.
EARNINGS YIELD ANALYSIS: In evaluating the impact of the proposed Merger on
the shareholders of Northwest, Southard Financial determined that, based upon an
assumed exchange ratio of 3.898 shares of Hibernia stock for each share of
Northwest stock, the shareholders of Northwest would have seen no material
impact on earnings per share (defined as post merger combined earnings per share
times the assumed exchange ratio), had the merger been consummated prior to
January 1, 1997. Further, adjusting Hibernia earnings for amortization of
goodwill and core deposit intangibles (non-cash expenses), the earnings impact
of the merger would be positive.
DIVIDEND YIELD ANALYSIS: In evaluating the impact of the proposed Merger on
the shareholders of Northwest, Southard Financial reviewed the dividend paying
histories of Northwest and Hibernia. Based upon this review, it is reasonable to
expect that the shareholders of Northwest, in total, will receive dividends
below the level currently paid by Northwest after the merger is completed
(defined as post merger dividends per share times the assumed exchange ratio).
This is predicated on the assumption that Hibernia will continue per share
dividends at current levels.
BOOK VALUE ANALYSIS: In evaluating the impact of the proposed Merger on the
shareholders of Northwest, Southard Financial determined that the shareholders
of Northwest would have experienced an adverse impact on the book value of their
investment had the merger been consummated on December 31, 1996 or June 30,
1997. However, the shareholders of Northwest would be exchanging their shares
for Hibernia stock trading at 246% of book value.
GROWTH OUTLOOK FOR EARNINGS: An important difference between Hibernia and
Northwest is the outlook for growth in earnings per share. Northwest's earnings
per share remained nearly constant over the 1993-96 period, increasing from
$3.47 per share in 1993 to $3.54 per share in 1996. In comparison, Hibernia's
earnings per share (fully taxable basis) increased from $0.51 per share in 1993
to $0.90 per share in 1996, with a projected level of $1.00 in 1997. Further,
the outlook for Hibernia is for continued strong earnings per share growth for
1998.
ANALYSIS OF ALTERNATIVES: In evaluating the fairness of the proposed merger
to the shareholders of Northwest, Southard Financial reviewed with management
the terms of other offers received and discussions for the purchase/merger of
Northwest. Further, Southard Financial considered recent public market merger
pricing information.
ANALYSIS OF MARKET TRANSACTIONS: Based upon the merger terms and the recent
market price of Hibernia common stock, Northwest shareholders will receive about
239% of September 30, 1997 book value (based on peer levels of 10% capital) plus
dollar-for- dollar of excess capital ($1.628 million), 16.9 times estimated 1997
earnings, and 25.5% of assets. Based upon the review conducted by Southard
Financial, the pricing for Northwest in the merger is within the range of
multiples seen in recent bank acquisitions. Further, the shareholders of
Northwest would be exchanging their stock for shares of Hibernia, which is
trading at 17.4x earnings and 246% of book value.
FUNDAMENTAL ANALYSIS: Southard Financial reviewed the financial
characteristics of Hibernia and Northwest with respect to profitability, capital
ratios, liquidity, asset quality, and other factors. Southard Financial compared
Hibernia and Northwest to a universe of publicly traded banks and bank holding
companies and to peers groups prepared by the Federal Financial Institutions
Examination Council. Southard Financial found that the post-Merger combined
entity will have capital ratios and profitability ratios near those of the
public peer group.
LIQUIDITY: Unlike Northwest stock, Hibernia shares are listed and actively
traded on the New York Stock Exchange. Further, except in the case of officers,
directors, and certain large shareholders of Northwest, Hibernia shares received
will be freely tradeable with no restrictions.
Southard Financial is a financial valuation consulting firm, specializing
in the valuation of closely-held companies and financial institutions. Since its
founding in 1987, Southard Financial has valued non-traded securities of banks,
thrifts, and other companies for mergers and acquisitions, management buyouts,
employee stock ownership plans, and other purposes. For rendering the Fairness
Opinion, Northwest has agreed to pay Southard Financial a fee of $10,000, plus
reasonable out-of- pocket expenses. Southard Financial has never been engaged
previously by Northwest or Hibernia. Neither Southard Financial nor its
principals owns an interest in the securities of Northwest or Hibernia.
Closing Date and Effective Date of the Merger
Unless otherwise agreed upon by Hibernia and Northwest, and subject to
the conditions to the obligations of the parties to effect the Merger, the
closing date will occur on the first business day occurring after the last to
occur of: (i) the date that is 15 days after approval of the Merger by the
Federal Reserve Board; (ii) the date that is 15 days after the date of approval
of the Bank Merger by the OCC or (iii) the date that is five days after the
Special Meeting; or such later date within 60 days of such date as may be agreed
upon by Hibernia and Northwest. After all conditions to consummation of the
Merger have been satisfied or waived, the effective date of the Merger ("the
"Effective Date") will be the date and time of the consummation of the Merger
evidenced by the issuance by the Louisiana Secretary of State of a certificate
of merger relating to the Merger. It is expected that the Effective Date will
occur shortly after the Closing Date, on a date chosen by the parties to the
Merger.
It is possible that the necessary shareholder and regulatory approvals will
not be obtained or that other conditions precedent to the Merger will not be
satisfied. If all of the conditions to the Merger are met or waived, the parties
expect to complete the Merger during the fourth quarter of 1997.
The Board of Directors of either Hibernia or Northwest may terminate the
Agreement if the Merger is not consummated by March 31, 1998 or any condition to
the consummation of the Merger cannot be satisfied by March 31, 1998 and will
not be waived by the party or parties entitled to waive it. See "PROPOSED MERGER
- -- Conditions to Consummation of the Merger" and "PROPOSED MERGER --
Termination."
Employee Benefits
Hibernia has agreed as part of the Agreement that it will offer to all
former employees of Northwest and the Bank who become employed by Hibernia or
its subsidiaries as of the Effective Date the same employee benefits as those
offered by Hibernia, HNB, and HNBT to their employees, except that employees of
Northwest and the Bank will not be required to wait for any period in order to
be eligible to participate in Hibernia's flexible benefits plan (including its
medical and dental coverage). Hibernia will also give Northwest employees full
credit for their years of service (for both eligibility and vesting) with
Northwest for purposes of Hibernia's 401(k) plan, the Retirement Security Plan,
and its ESOP (to the extent permitted under the terms of those plans). If,
however, Hibernia determines in good faith that it cannot merge any benefit plan
of Northwest into a comparable benefit plan of Hibernia or HNB without creating
material potential liability for Hibernia's or HNB's plans, then Hibernia will
be entitled to freeze the existing benefit plan of Northwest and prohibit
participation by former employees of Northwest in Hibernia's or HNB's plans for
the period of time required by applicable law to ensure that Hibernia's or HNB's
plans are not deemed to be successor plans of the Northwest plan in question.
Hibernia has also agreed to permit Northwest to pay bonuses to employees
as of the closing date, as long as those bonuses are accrued, pro rated for the
period of time that has elapsed prior to the closing and are consistent in
amount with past practices for annual employee bonuses. If the Merger does not
occur prior to December 31, 1997, Hibernia will pay these bonuses to employees
who remain with Hibernia after the Merger. In that event, bonuses will be paid
at the same time as Hibernia's 1997 bonuses are paid.
Distribution of Merger Consideration After the Merger
Promptly after the Effective Date, Hibernia will cause Chase Mellon
Shareholder Services, acting in the capacity of Exchange Agent, to mail to each
non-dissenting shareholder of Northwest a letter of transmittal, together with
instructions for the exchange of such shareholder's certificates representing
shares of Northwest Common Stock. If the Merger Consideration is to be paid by
exchanging Hibernia Common Stock, the instructions will describe the procedures
for the exchange of shares of Northwest Common Stock for shares of Hibernia
Common Stock. In that event, until so exchanged, each certificate representing
Northwest Common Stock outstanding immediately prior to the Effective Date will
be deemed for all purposes to evidence ownership of the number of shares of
Hibernia Common Stock into which such shares have been converted on the
Effective Date. If the Merger Consideration is to be paid in cash, Northwest
shareholders' shares of Northwest Common Stock will be cancelled as of the
Effective Date, and the instructions received by Northwest Shareholders will
include the procedures for exchanging shares of Northwest for cash. In that
case, holders of Northwest Common Stock will have the right to receive cash for
their shares (without interest) upon surrender of certificates representing
those shares.
NORTHWEST'S SHAREHOLDERS SHOULD NOT SEND IN THEIR STOCK CERTIFICATES
UNTIL THEY RECEIVE THE LETTER OF TRANSMITTAL AND INSTRUCTIONS. Upon surrender to
the Exchange Agent of certificates for Northwest Common Stock, together with a
properly completed letter of transmittal, there will be issued and mailed to
each holder of Northwest Common Stock surrendering such items either (i) a
certificate representing the number of shares of Hibernia Common Stock to which
such holder is entitled as a result of the Merger and a check representing cash
paid in lieu of a fractional share, if any or (ii) a check in the amount of cash
due. If the Merger Consideration is paid by exchanging Hibernia Common Stock,
holders of record of Northwest Common Stock as of the Effective Date will be
entitled to vote at any meeting of Hibernia's shareholders the number of shares
of Hibernia Common Stock into which their Northwest Common Stock has been
converted regardless of whether such shareholders have surrendered their stock
certificates to the extent permitted by law. NO DIVIDEND OR OTHER DISTRIBUTION
PAYABLE AFTER THE EFFECTIVE DATE WITH RESPECT TO HIBERNIA COMMON STOCK, HOWEVER,
WILL BE PAID TO THE HOLDER OF ANY UNSURRENDERED NORTHWEST STOCK CERTIFICATE
UNTIL THE HOLDER DULY SURRENDERS SUCH CERTIFICATE. Upon such surrender, all
undelivered dividends and other distributions will be delivered to such
shareholder, in each case without interest and less the amount of taxes, if any,
that may have been withheld, imposed or paid thereon.
If the Merger Consideration is paid in cash, holders of Northwest Common
Stock will cease to have rights as shareholders of Northwest (except the right
to receive cash for their shares in accordance with the terms of the Merger)
after the Effective Date. Also, in that case, holders of Northwest Common Stock
will acquire no rights as Hibernia shareholders as a result of the Merger.
Northwest shareholders who cannot locate their Northwest stock
certificates are encouraged to contact John W. Garmany, President, 214 South
Washington, Mansfield, Louisiana 71052, telephone: (318) 872-5164 prior to the
Special Meeting. New certificates will be issued to Northwest shareholders who
have misplaced their certificates only if the shareholder executes an affidavit
certifying that the certificate cannot be located and agreeing to indemnify
Northwest and Hibernia (as its successor) against any claim that may be made
against either of them by the owner of the lost certificate(s). Northwest or
Hibernia (as its successor) may require a shareholder to post a bond in an
amount sufficient to support the shareholder's indemnification obligation.
Shareholders who have misplaced their stock certificates and shareholders who
hold certificates in names other than their own are encouraged to resolve those
matters prior to the Effective Date of the Merger in order to avoid delays in
receiving their Hibernia Common Stock, as applicable, if the Merger is approved
and consummated.
Expenses
The Agreement provides that all expenses incurred in connection with the
negotiation and execution of the Agreement and the consummation of the Merger
will be borne by the party that incurred them, regardless of whether the Merger
is consummated, provided that printing expenses related to copying and
distributing this Proxy Statement will be borne by Hibernia.
Representations and Warranties; Conditions to the Merger; Waiver
The Agreement contains representations and warranties by Northwest
regarding, among other things, its organization, authority to enter into the
Agreement, capitalization, properties, financial statements, pending and
threatened litigation, contractual obligations and contingent liabilities. The
Agreement also contains representations and warranties by Hibernia regarding,
among other things, its organization and authority to enter into the Agreement,
capitalization, financial statements, contractual obligations and public
reports. Except as otherwise provided in the Agreement, these representations
and warranties will not survive the Effective Date.
The obligations of Hibernia and Northwest to consummate the Merger are
conditioned upon, among other things, approval of the Agreement and Merger by
Northwest's shareholders; the receipt of necessary regulatory approvals,
including the approval of the Federal Reserve Board and the OCC; the receipt of
an opinion to the effect that the Merger, when consummated in accordance with
the terms of the Agreement and if the Merger Consideration is paid in shares of
Hibernia Common Stock, will constitute a reorganization within the meaning of
Section 368(a) of the Code, that Northwest's shareholders will recognize no gain
or loss for federal income tax purposes with respect to such exchange and
certain other tax- related matters; the effectiveness under the Securities Act
of a registration statement relating to the Hibernia Common Stock to be issued
in connection with the Merger and the absence of a stop order suspending such
effectiveness; the absence of an order, decree or injunction enjoining or
prohibiting the consummation of the Merger; the absence of litigation or
proceedings by a governmental agency seeking to prevent the consummation of the
Merger; the material accuracy of the representations and warranties set forth in
the Agreement as of the Closing Date; the listing of the Hibernia Common Stock
to be issued in the Merger on the NYSE; the receipt of certain opinions of
counsel; in the case of Hibernia, more than 6 directors fail to agree to
terminate their interest in the Northwest retirement policy for directors; and
in the case of Northwest, the receipt of updated fairness opinions of the
Advisor within five days of the scheduled mailing of the proxy statement to
Northwest shareholders and within five days of the Closing Date.
Except with respect to any required shareholder or regulatory approval,
substantially all of the conditions to consummation of the Merger may be waived
at any time by the party for whose benefit they were created, and the Agreement
may be amended or supplemented at any time by written agreement of the parties,
except that no such waiver, amendment or supplement executed after approval of
the Agreement by Northwest's shareholders may change the number of shares of
Hibernia Common Stock into which Northwest Common Stock will be converted in the
Merger. In addition, any material change in the terms of the Merger after the
Special Meeting would require a resolicitation of votes from Northwest's
shareholders.
Regulatory and Other Approvals
Hibernia is a registered bank holding company and as such is regulated
by the Federal Reserve Board. The approval of the Federal Reserve Board of the
Merger is required in order to consummate the Merger, and the Merger must be
consummated within 90 calendar days after such approval is obtained (unless the
Federal Reserve Board approves an extension of time). Approval of the Federal
Reserve Board for the Merger is expected to be obtained in late November, 1997.
HNB is regulated by the Office of the Comptroller of the Currency (the
"OCC", and consequently the merger of the Bank with and into HNB must be
approved by the OCC before it may be effected. The approval of the OCC of the
Bank Merger is also a condition to closing the Merger. The OCC approved the
Merger on October 31, 1997.
Northwest and Hibernia must wait at least 15 days after the date of the
Federal Reserve Board and the OCC approval before they may consummate the
Merger. During this 15-day period, the Department of Justice may object to the
Merger on antitrust grounds. As of the date of this Proxy Statement-Prospectus,
the Department of Justice has not objected to the Merger.
The shares of Hibernia Common Stock offered pursuant to the Proxy
Statement-Prospectus have been registered with the Commission. The shares,
however, will not be registered in any state due to the enactment on October 11,
1996 of the National Securities Markets Improvements Act of 1996 which exempts
from state regulation, among other things, securities listed on the NYSE such as
the shares of Hibernia Common Stock offered pursuant to this Proxy
Statement-Prospectus.
Certain conditions to completion of the Merger may not be met until
after the date of the Special Meeting, if they are met at all. Even if the
Merger is approved at the Special Meeting, there is a possibility that it will
not be consummated.
Business Pending the Merger
Under the terms of the Agreement, neither Northwest nor the Bank, among
other things, may, without the prior written consent of Hibernia or as otherwise
provided in the Agreement: (i) create or issue any additional shares of capital
stock or any options or other rights to purchase or acquire shares of capital
stock; (ii) enter into employment contracts with directors, officers or
employees or otherwise agree to increase the compensation of or pay any bonus to
such persons except in accordance with existing agreements, past practices
during the preceding three years or as provided for in the Agreement (provided
that Hibernia has consented to the payment on the Closing Date of bonuses
consistent in amount with past practice in the previous three years if such
bonuses have been accrued and are pro rated through the Closing Date (if the
Closing Date is a date other than December 31, 1997); (iii) enter into or
substantially modify any employee benefits plans (other than termination of the
retirement policy for directors); (iv) amend their respective Articles or
By-Laws; (v) other than as contemplated by the Agreement, establish any
automatic teller machines or branch or other banking offices; (vi) make any
capital expenditure(s) in excess of $25,000; (vii) merge with any other company
or bank or liquidate or otherwise dispose of its assets; (viii) in the case of
Northwest, and not the Bank, make, declare, set aside or pay any dividend or
make any distribution on, or directly or indirectly combine, redeem, purchase or
otherwise acquire, any shares of Northwest Common Stock (other than in a
fiduciary capacity), provided, however, that Northwest may make, declare, set
aside and pay regularly or specially declared dividends not to exceed $1.50 per
share of Northwest Common Stock for the year 1997 to be pro rated for the
portion of the year that has passed as of the Closing, if the Closing occurs
prior to December 31, 1997; or (ix) carry on its business other than in the
usual, regular and ordinary course in substantially the same manner as
previously conducted or as provided in the Agreement.
Termination
Prior to the Effective Date, the Agreement may be terminated by either
party, whether before or after approval of the Agreement and the Merger by
Northwest's shareholders, for the following reasons, among others: (i) in the
event of a breach by the other party of any representation, warranty or covenant
in the Agreement which would result in a material adverse change in the
financial condition, results of operations, business or prospects of the
breaching party and which has not been cured within 60 days after notice of the
breach or which results in a material increase in the cost of the non-breaching
party's performance of the Agreement; (ii) if any application for any required
federal or state regulatory approval has been denied, and the time for all
appeals of such denial has expired; (iii) if the shareholders of Northwest fail
to approve the Merger at the Shareholders Meeting; or (iv) in the event that the
Merger is not consummated by March 31, 1998 or any condition to consummation of
the Merger cannot be satisfied by March 31, 1998 and will not be waived by the
party or parties entitled to waive it. The Agreement also may be terminated (i)
at any time by the mutual consent of the parties; (ii) by Northwest, if after
June 26, 1997 a material adverse change occurs in the financial condition,
results of operations, business or prospects of Hibernia or HNB (excluding
changes in laws or regulations affecting banking institutions generally); (iii)
by Hibernia, if after June 26, 1997 a material adverse change occurs in the
financial condition, results of operations, business or prospects of Northwest
and the Bank (excluding changes in laws or regulations affecting banking
institutions generally); (iv) by Northwest, if Northwest does not receive an
updated fairness opinion from the Advisor dated within five days of the date of
scheduled mailing of this Proxy Statement-Prospectus to its shareholders, and
updated to within five days of the Closing Date, to the effect that the terms of
the Merger are fair to shareholders of Northwest from a financial point of view;
or (v) by Hibernia if more than 6 of the directors currently serving on the
Board of Directors of Northwest fail to agree to terminate their interest in the
retirement policy for members of the Board. Certain provisions of the Agreement,
including provisions relating to indemnification and confidentiality, survive
both the Merger and a termination of the Agreement without the Merger having
been completed.
Management and Operations After the Merger
On the Effective Date, Northwest will be merged with and into Hibernia
and will cease to exist after the Merger. Simultaneously with the Merger, the
Bank will be merged into HNB, and the separate existence of the Bank will also
cease. HNB will continue to operate as a wholly-owned subsidiary of Hibernia and
will offer banking services similar to those offered prior to the Merger.
The Boards of Directors of Hibernia and HNB following the Merger will
consist of those persons serving as directors immediately prior to the Merger.
Certain information regarding the directors of Hibernia elected at its annual
meeting of shareholders on April 29, 1997 is contained in documents incorporated
herein by reference. See "AVAILABLE INFORMATION."
Certain Differences in Rights of Shareholders
If the shareholders of Northwest approve the Merger and the Merger is
subsequently consummated, and if the Merger Consideration is paid by exchanging
Hibernia Common Stock for shares of Northwest Common Stock, then all
shareholders of Northwest, other than any shareholders who exercise and perfect
dissenters' rights, will become shareholders of Hibernia. As shareholders of
Hibernia, their rights will be governed by and subject to Hibernia's Articles of
Incorporation and By-Laws rather than Northwest's Articles of Incorporation and
Bylaws. The following is a summary of the principal differences between the
rights of shareholders of Northwest and Hibernia not described elsewhere in this
Proxy Statement-Prospectus which are due to differences in Hibernia's Articles
of Incorporation and By-Laws and Northwest's Articles of Incorporation and
Bylaws and the fact that Hibernia Common Stock is listed on the NYSE.
Stock. The total number of shares of all classes of stock which Hibernia
has authority to issue is 300,000,000, of which 200,000,000 shares are
designated as Class A Common Stock of no par value and 100,000,000 shares are
designated as preferred stock, without par value. The rights, preferences and
privileges with respect to shares of preferred stock may be determined by the
Hibernia Board of Directors. Consequently, shares of preferred stock and
additional common stock could be issued in circumstances in which it would make
an attempted acquisition of Hibernia more difficult. Hibernia currently has
2,000,000 shares of preferred stock outstanding. The holders of those preferred
shares are entitled to receive dividends on a quarterly basis and would have
limited voting rights if the dividends on their stock were not paid for a
certain period of time. If those voting rights were triggered, the preferred
shareholders may be able to elect a director to the board of directors of
Hibernia. Northwest is authorized to issue 500,000 shares of no par value common
stock only.
Liquidity of Stock. There currently is no ready market for the shares of
Northwest Common Stock, and such a market is not likely to develop in the
future. The shares of Hibernia Common Stock, if issued in the Merger, will be
registered under applicable securities laws and may therefore be freely resold
by persons who are not "affiliates" of Northwest or Hibernia. See "Resale of
Hibernia Stock." In addition, the Hibernia Common Stock is listed on the NYSE
and actively traded on that exchange. Current quotes of the market price of
Hibernia Common Stock are available from brokerage firms and other securities
professionals, as well as other sources, and are published in major newspapers
on a daily basis.
Directors' Qualifications. No individual will be elected a director of
Hibernia unless such individual owns, in his or her own right, at the time of
such election, not less than 100 shares of Hibernia voting stock. No individual
will be eligible for election as a director of Hibernia who has attained the age
of 71 prior to the date of such election. No individual who is or becomes a
business competitor 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 Hibernia Board
determines to be in competition with Hibernia will be eligible for election as a
director of Hibernia. Any financial institution having branches or affiliates
within any state in which Hibernia or any of its subsidiaries operates or having
(together with its affiliates) total assets or total deposits exceeding $500
million will be presumed to be a business competitor of Hibernia, unless the
Board of Directors of Hibernia (the "Hibernia Board") determines otherwise.
Northwest's directors need not be residents of Louisiana but must be
shareholders of the corporation.
Number of Directors. The number of Hibernia directors will be as
determined, from time to time, by resolution of the Hibernia Board. Applicable
law requires at least one director and places no limit on the number of
directors of Hibernia. The Northwest Board will consist of that number of
directors, not less than five nor more than twenty-five, as may from time to
time be prescribed by the Northwest Board or by resolution of the shareholders.
Term of Office of Directors. Hibernia's By-Laws provide that the
Hibernia Board shall consist of three classes, as nearly equal in number as
practicable, and that the term of office of the directors in each class shall be
three years. Northwest's Bylaws contain no similar provision with respect to
classes of directors and contain no provisions regarding directors' terms.
Louisiana law provides that directors serve until their successors are elected
and qualified.
Election of Directors. Northwest has cumulative voting for directors,
and each holder of Northwest Common Stock is entitled to cast a number of votes
equal to the number of shares he holds multiplied by the number of directors to
be elected. All of these votes may be cast for a single nominee or may be
distributed among the nominees, in the shareholder's discretion. Hibernia does
not allow cumulative voting.
Removal of Directors. Shareholders of Hibernia may remove one or more
director(s) for cause (defined as gross negligence or willful misconduct) by the
vote of a majority of the total voting power and may remove a director without
cause by a vote of two-thirds of the total voting power. A director of Northwest
may be removed from office by a vote of a majority of the total voting power.
Amendment of By-Laws. The By-Laws of Hibernia may be amended or repealed
by a vote of a majority of the total voting power outstanding or by a vote of
two-thirds of the "continuing directors" of the company, as defined in the
By-Laws. A "continuing director" for this purpose is generally a director who
was nominated for election by a majority of the existing directors.
The Northwest Bylaws may be amended, altered or repealed at any regular meeting
of the Board of Directors by a vote of a majority of the directors.
Special Meetings of Shareholders. Special meetings of the shareholders
of Hibernia may be called by the Chairman of the Board, the President, the Chief
Executive Officer, the Treasurer, or the Hibernia Board. In addition,
shareholders holding one-fifth or more of the total voting power of Hibernia may
request a special meeting of shareholders and, upon receipt of such request, the
Secretary of Hibernia is required to call a special meeting of the shareholders.
A special meeting of shareholders of Northwest may be called by the President,
the Board of Directors, or the holders of not less than one-third of the total
voting power.
Shareholder Proposals. Hibernia's By-Laws contain certain provisions
expressly allowing shareholders to submit shareholder proposals and to nominate
individuals for election as directors, under certain circumstances and provided
the shareholder complies with all of the conditions set forth in those
provisions. Northwest's Bylaws contain no specific provisions relating to
shareholder proposals, except that shareholders may make nominations in writing
for election to the Board of Directors, if made not less than fourteen nor more
than fifty days prior to the applicable shareholders' meeting.
Merger or Consolidation. Hibernia's Articles of Incorporation allow an
agreement of merger or consolidation to be approved by a majority vote of the
voting shares issued and outstanding, taken at a meeting called for the purpose
of such approval. Northwest's Articles permit approval of a merger upon the
affirmative vote of a majority of the voting power present.
Interests of Certain Persons in the Merger
The terms of the Agreement include certain provisions that protect the
officers and directors of Northwest and the Bank from and against liability for
actions arising while they served in those capacities for Northwest. The
Agreement provides for indemnification of such persons to the same extent as
they would have been indemnified under the Articles of Incorporation and ByLaws
of Hibernia in effect on May 28, 1997, except that the Agreement limits
Hibernia's aggregate liability for such indemnification to $5 million and
requires each officer and director eligible for such indemnification to execute
a joinder agreement in which such persons agree to cooperate with Hibernia in
any litigation or proceeding giving rise to a claim of indemnification.
The Agreement also provides for indemnification of Northwest's and the
Bank's officers, directors and certain affiliates from and against liability
arising under the Securities Act or otherwise insofar as such liability arises
out of or is based on an untrue statement or alleged untrue statement of a
material fact contained in this Proxy Statement-Prospectus or arises out of or
is based upon the omission or alleged omission to state herein a material fact
required to be stated herein or necessary to make the statements made herein not
misleading. This indemnification does not apply to statements made in reliance
on information furnished to Hibernia by Northwest for use in the Registration
Statement, including this Proxy Statement-Prospectus.
Material Tax Consequences
The following summary description of the material income tax
consequences of the Merger is not intended to be a complete description of the
federal income tax consequences of the Merger. Tax laws are complex, and each
shareholder's individual circumstances may affect the tax consequences to such
shareholder. In addition, no information is provided with respect to the tax
consequences of the Merger under applicable state, local or other tax laws. Each
shareholder is therefore urged to consult a tax advisor regarding the tax
consequences of the Merger to him.
Payment of Merger Consideration in Stock. If the Merger Consideration is
paid in Hibernia Common Stock, completion of the Merger is conditioned upon the
receipt of a tax opinion. This opinion must conclude that the Merger, when
consummated in accordance with the terms of the Agreement, will constitute a
reorganization within the meaning of Section 368(a) of the Code, that the
exchange of Northwest Common Stock for Hibernia Common Stock will not give rise
to the recognition of gain or loss for federal income tax purposes to
Northwest's shareholders with respect to such exchange and certain other tax
consequences of the Merger. See "PROPOSED MERGER -- Representations and
Warranties; Conditions to the Merger; Waiver."
If the Merger constitutes a reorganization within the meaning of Section
368 of the Code: (i) no gain or loss will be recognized by Northwest, the Bank,
Hibernia or HNB by reason of the Merger; (ii) a shareholder of Northwest will
not recognize any gain or loss for federal income tax purposes to the extent
Hibernia Common Stock is received in the Merger in exchange for Northwest Common
Stock; (iii) the tax basis in the Hibernia Common Stock received by a
shareholder of Northwest will be the same as the tax basis in the Northwest
Common Stock surrendered in exchange therefor; and (iv) the holding period, for
federal income tax purposes, for Hibernia Common Stock received in exchange for
Northwest Common Stock will include the period during which the shareholder held
the Northwest Common Stock surrendered in the exchange, provided that the
Northwest Common Stock was held as a capital asset at the Effective Date.
The parties have received an opinion of Ernst & Young LLP, certified
public accountants, regarding the tax effects of the Merger. This opinion
concludes that, if the Merger Consideration is paid in Hibernia Common Stock and
if the Merger is consummated in accordance with the terms of the Agreement, the
Merger will constitute a reorganization for purposes of Section 368(a) of the
Code and will have the tax effects described above in this section. A copy of
the opinion of Ernst & Young LLP above is attached hereto as Appendix D. As
noted in the opinion, the opinion is based upon certain representations and
assumptions described therein. Shareholders of Northwest are urged to review the
full text of the opinion of Ernst & Young LLP attached hereto as Appendix D with
regard to the tax consequences of the Merger to them.
Payment of Merger Consideration in Cash. If the Merger Consideration is
paid in cash, the Merger will be a taxable transaction to Northwest
shareholders. In this case, a shareholder will recognize gain or loss in an
amount equal to the difference between the total amount of cash received by the
shareholder in the Merger and his adjusted tax basis in his shares of Northwest
Common Stock. If the shares are capital assets in the hands of the holder, the
gain will be treated as capital gain.
Because of the complexities of the tax laws, and because the tax
consequences to a particular shareholder may be affected by matters that are
personal to him, it is recommended that each shareholder consult his own tax
advisor concerning the applicable federal, state and local tax consequences of
the Merger.
For information regarding the federal income tax consequences of cash
payments received by dissenting shareholders, see "PROPOSED MERGER -- Rights of
Dissenting Shareholders."
Resale of Hibernia Common Stock
The shares of Hibernia Common Stock issuable to shareholders of
Northwest upon consummation of the Merger have been registered under the
Securities Act. It is a condition to closing of the Merger that all shares of
Hibernia Common Stock issued in connection with the Merger be approved for
listing, upon official notice of issuance, on the NYSE. Such shares may be
traded freely by those shareholders not deemed to be affiliates of Northwest as
that term is defined under the Securities Act. The term "affiliate" generally
means each person who controls, or is a member of a group that controls, or who
is under common control with, Northwest, and for purposes hereof could be deemed
to include all executive officers, directors and 10% shareholders of Northwest.
Hibernia Common Stock received and beneficially owned by those
shareholders who are deemed to be affiliates of Northwest may be resold without
registration as provided by Rule 145, or as otherwise permitted under the
Securities Act. Such affiliates, provided they are not affiliates of Hibernia,
may publicly resell Hibernia Common Stock received by them in the Merger if they
register the resale of those shares or they comply with the restrictions of Rule
145. Anyone who is or may be an affiliate of Northwest should carefully consider
the resale restrictions imposed by Rule 145 prior to attempting to transfer any
shares of Hibernia Common Stock after the Merger. In addition, shares of
Hibernia Common Stock issued to affiliates of Northwest in the Merger will not
be transferable until financial statements pertaining to at least 30 days of
post-Merger combined operations of Hibernia and Northwest have been published,
in order to satisfy certain requirements of the Commission relating to
pooling-of-interests accounting treatment.
The Agreement requires Northwest to identify those persons who may be
deemed to be affiliates of Northwest and to endeavor to have each person so
identified to deliver to Hibernia a written agreement providing that such person
will not dispose of Northwest Common Stock or Hibernia Common Stock received in
the Merger except in compliance with the Securities Act, the rules and
regulations promulgated thereunder and the Commission's rules relating to
pooling-of-interests accounting treatment. In addition, Hibernia intends to
place stop transfer instructions with its transfer agent regarding Hibernia
Common Stock issued to affiliates of Northwest to ensure that transfers by those
persons comply with Rule 145 and the terms of any applicable affiliate resale
agreement with Hibernia.
Rights of Dissenting Shareholders
Louisiana law does not afford dissenters' rights to shareholders who
will receive solely shares of stock listed on a national securities exchange in
the Merger. Accordingly, if the Merger Consideration is paid in Hibernia Common
Stock, shareholders of Northwest will have no dissenters' rights.
The following discussion describes the rights of dissenting shareholders
if and only if the Merger Consideration is paid in cash.
Each Northwest shareholder who objects to the Merger is entitled to the
rights and remedies of dissenting shareholders provided in Section 131 of the
LBCL, a copy of which is set forth as Appendix D hereto.
Section 131 provides that shareholders of Louisiana corporations who
vote against a merger have the right to dissent if the merger is authorized by
less than eighty percent of the total voting power of the corporation. In order
to so dissent, the shareholder must file with the corporation a written
objection to the merger, which objection must be filed with the corporation
prior to or at the meeting at which the vote is taken. In addition, the
shareholder must vote against the merger at the meeting. If the merger is
approved by less than eighty percent of the total voting power of the
corporation, the corporation must provide by registered mail notice of such vote
to shareholders who filed a written objection and voted against the merger. A
dissenting shareholder may then file with the corporation a written demand for
the fair cash value of his, her, or its shares as of the day before the vote was
taken. The demand must be made within twenty days of the mailing of the notice
from the corporation and must include the fair value being requested by the
dissenting shareholder. The shareholder must also include in the demand a post
office address to which the corporation's reply may be sent and must deposit
his, her or its shares in escrow at a bank or trust company, duly endorsed and
transferred to the corporation on the sole condition that the fair value be
paid. If the corporation does not agree with the fair value requested by the
dissenting shareholder, it must notify the shareholder within twenty days after
receipt of the shareholder's demand and state in such notice the value it is
willing to pay for the shares. If a disagreement continues over the fair value,
the LBCL provides a method for determination of fair value by a district court
in the parish in which the corporation (if it still exists) or the merged
corporation has its registered office.
The amount received by a dissenting shareholder may be more or less
than, or equal to, the value of the Hibernia Common Stock received by other
Northwest shareholders in the Merger.
Shareholders who file a demand for payment of fair value cease to have
any rights as shareholders of the corporation thereafter. Also, shareholders may
withdraw their demand at any time before the corporation gives notice of
disagreement. Withdrawal of a demand thereafter requires the written consent of
the corporation in order to be effective.
Each step must be taken in strict compliance with the applicable
provisions of the statute in order for holders of Northwest Common Stock to
perfect dissenters' rights.
Whether Northwest Shareholders will receive cash or Hibernia Common Stock
for their Northwest shares will not be determined until the Closing Date, which
will occur after the Special Meeting of Shareholders. Any Shareholder desiring
to reserve the right to dissent if the Merger is for cash and is approved by
less than 80% of the Northwest Shareholders must file a Written Notice with
Northwest prior to the Special Shareholders' Meeting.
THE FOREGOING SUMMARY OF THE PROVISIONS OF THE LBCL RELATING TO
DISSENTERS' RIGHTS IS NECESSARILY INCOMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO EXCERPTS FROM THE LBCL SET FORTH HEREIN AS APPENDIX C.
Shareholders of Northwest who exercise and perfect dissenters' rights
and who receive cash for their shares of Northwest Common Stock will generally
be subject to federal and state income tax on all or a portion of the amount of
cash received. Furthermore, if the Merger is effected, the cash paid to
dissenting shareholders may be more or less than the value of the Hibernia
Common Stock issued to those shareholders of Northwest who voted in favor of the
Merger. The receipt of cash for shares will be generally treated as a complete
redemption of the shareholder's interest in the stock and, depending on the
individual shareholder's circumstances, may result in a capital gain to such
shareholder. The tax opinion rendered by Ernst & Young LLP and attached hereto
as Appendix D states that payments to dissenting shareholders are not exempt
from federal or state income tax. Shareholders desiring to dissent from the
Merger are urged to consult their tax advisors with regard to the tax
implications to them of exercising dissenters' rights.
Accounting Treatment
It is anticipated that the Merger will be accounted for as a pooling of
interests. In order for the Merger to qualify for pooling-of-interests
accounting treatment, among other things, 90% or more of the outstanding
Northwest Common Stock must be exchanged for Hibernia Common Stock. Also, in
order for the pooling-of-interests accounting method to apply, "affiliates" of
Northwest cannot, directly or indirectly, sell, transfer, pledge or otherwise
alienate or encumber any shares of Hibernia Common Stock received in the Merger
until such time as at least 30 days of post-Merger combined operations of
Northwest and Hibernia have been published. [Persons believed by Northwest to be
"affiliates" have agreed to comply with these restrictions.]
CERTAIN REGULATORY CONSIDERATIONS
General
As a bank holding company, Hibernia is subject to the regulation and
supervision of the Federal Reserve Board. Under the BHCA, bank holding companies
may not directly or indirectly acquire the ownership or control of more than 5%
of the voting shares or substantially all of the assets of any company,
including a bank, without the prior approval of the Federal Reserve Board. In
addition, bank holding companies are generally prohibited from engaging under
the BHCA in nonbanking activities, subject to certain exceptions.
Hibernia's banking subsidiaries, HNB and HNBT, are subject to
supervision and examination by applicable federal and state banking agencies.
HNB and HNBT are national banking associations subject to the regulation and
supervision of the OCC. HNB and HNBT are also subject to various requirements
and restrictions under federal and state law, including requirements to maintain
reserves against deposits, restrictions on the types and amounts of loans that
may be granted and the interest that may be charged thereon and limitations on
the types of investments that may be made and the types of services that may be
offered. Various consumer laws and regulations also affect the operations of HNB
and HNBT. In addition to the impact of regulation, commercial banks are affected
significantly by the actions of the Federal Reserve Board as it attempts to
control the money supply and credit availability in order to influence the
economy.
Payment of Dividends
Hibernia generally depends upon payment of dividends by HNB and HNBT in
order to pay dividends to its shareholders and to meet its other needs for cash
to pay expenses. Hibernia derives substantially all of its income from the
payment of dividends by HNB and HNBT, and its ability to pay dividends is
affected by the ability of HNB and HNBT to pay dividends. HNB and HNBT are
subject to various statutory restrictions on their ability to pay dividends to
Hibernia. Under such restrictions, the amount available for payment of dividends
to Hibernia by HNB was approximately $190 million and by HNBT was approximately
$6 million at June 30, 1997. In addition, the OCC has the authority to prohibit
any national bank from engaging in an unsafe or unsound practice, and the OCC
has indicated its view that it generally would be an unsafe and unsound practice
to pay dividends if the payment of the dividend would deplete a bank's capital
to an inadequate level. The ability of HNB and HNBT to pay dividends in the
future is presently, and could be further, influenced by bank regulatory
policies or agreements and by capital guidelines applicable to banks and bank
holding companies. Additional information in this regard is contained in
documents incorporated by reference herein. See "AVAILABLE INFORMATION."
In addition, consistent with its policy regarding bank holding companies
serving as a source of strength for their subsidiary banks, the Federal Reserve
Board has stated that, as a matter of prudent banking, a bank holding company
generally should not maintain a rate of cash dividends unless its net income
available to common stockholders has been sufficient to fully fund the
dividends, and the prospective rate of earnings retention appears to be
consistent with the holding company's capital needs, asset quality and overall
financial condition.
Restrictions on Extensions of Credit
HNB and HNBT are subject to restrictions imposed by federal law on the
ability of any national bank to extend credit to affiliates, including Hibernia,
to purchase the assets thereof, to issue a guarantee, acceptance or letter of
credit on their behalf (including an endorsement or standby letter of credit) or
to purchase or invest in the stock or securities thereof or to take such stock
or securities as collateral for loans to any borrower. Such extensions of credit
and issuances generally must be secured by eligible collateral. In addition, all
such transactions with a single affiliate are generally limited to 10% of HNB's
and HNBT's capital and surplus, and all such transactions with affiliates may
not exceed 20% of HNB's and HNBT's capital and surplus.
Hibernia's banking subsidiaries are also limited in the aggregate amount that
may be loaned to a single borrower or a group of borrowers that are deemed to be
affiliated with each other for purposes of these rules. These loans are limited
to 15% of HNB's and HNBT's capital and surplus.
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma combined balance sheet of Hibernia as
of June 30, 1997 and income statements of Hibernia for the six-month periods
ended June 30, 1997 and 1996 and the years ended December 31, 1996, 1995 and
1994 give effect to the pending merger with Northwest, assuming the Merger is
accounted for using the pooling-of-interests method of accounting, and as if the
Merger had been consummated on January 1, 1994.
The information at June 30, 1997 and for the six-month periods ended
June 30, 1997 and 1996 in the column titled "Hibernia Corporation" is summarized
from the unaudited consolidated financial statements of Hibernia contained in
Hibernia's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997.
The information for the years ended December 31, 1996, 1995 and 1994 in
the column titled "Hibernia Corporation" is summarized from the consolidated
financial statements of Hibernia contained in Hibernia's Annual Report on Form
10-K for the year ended December 31, 1996.
The information contained in the column titled "Northwest Bancshares of
Louisiana, Inc." is based on, and should be read in conjunction with the
financial statements and related notes and Management's Discussion and Analysis
of Financial Condition and Results of Operations of Northwest contained
elsewhere in this Proxy Statement - Prospectus.
The Pro Forma Financial Statements are presented for information
purposes only and are not necessarily indicative of the combined financial
position or results of operations which would actually have occurred if the
Merger had been consummated in the past or which may be obtained in the future.
<PAGE>
Pro Forma Combined Balance Sheet (Unaudited)
The following unaudited pro forma combined balance sheet combines the
balance sheets of Hibernia and Northwest as if the Merger had been effective on
June 30, 1997. This unaudited pro forma combined balance sheet should be read in
conjunction with the financial statements and related notes of Hibernia
contained in Hibernia's Quarterly Report on Form 10-Q for the quarter ended June
30, 1997 incorporated by reference into this Proxy Statement - Prospectus, and
the June 30, 1997 financial statements and related notes of Northwest included
elsewhere herein.
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA COMBINED BALANCE SHEET
Hibernia Corporation and Subsidiaries
June 30, 1997
- -----------------------------------------------------------------------------------------------------------------------------------
NORTHWEST PRO PRO FORMA
HIBERNIA BANCSHARES OF FORMA HIBERNIA
Unaudited ($ in thousands) CORPORATION LOUISIANA, INC. ADJUSTMENTS CORPORATION
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks .................................. $ 462,991 $ 4,566 $ 467,557
Short-term investments ................................... 228,444 7,995 236,439
Securities available for sale ............................ 2,050,015 39,390 $ 15,685 (B) 2,105,090
Securities held to maturity .............................. - 15,656 (15,656) (B) -
Loans, net of unearned income ............................ 6,555,095 36,871 6,591,966
Reserve for possible loan losses ..................... (120,176) (738) - (120,914)
- -----------------------------------------------------------------------------------------------------------------------------------
Loans, net ....................................... 6,434,919 36,133 - 6,471,052
- -----------------------------------------------------------------------------------------------------------------------------------
Bank premises and equipment .............................. 171,106 1,822 172,928
Customers' acceptance liability .......................... 1,183 - 1,183
Goodwill ................................................. 130,651 - 130,651
Other intangibles assets ................................. 21,748 - 21,748
Other assets ............................................. 172,211 1,147 (10) (B) 173,348
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS ..................................... $ 9,673,268 $ 106,709 $ 19 $ 9,779,996
===================================================================================================================================
LIABILITIES
Deposits:
Demand, noninterest-bearing .......................... $ 1,433,559 $ 16,571 $ 1,450,130
Interest-bearing ..................................... 6,535,306 77,123 6,612,429
- -----------------------------------------------------------------------------------------------------------------------------------
Total Deposits ................................... 7,968,865 93,694 8,062,559
- -----------------------------------------------------------------------------------------------------------------------------------
Short-term borrowings .................................... 591,463 - 591,463
Liability on acceptances ................................. 1,183 - 1,183
Other liabilities ........................................ 134,776 1,068 135,844
Debt ..................................................... 7,028 - 7,028
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES ................................ 8,703,315 94,762 - 8,798,077
- -----------------------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Preferred Stock .......................................... 100,000 - $ 100,000
Common Stock ............................................. 248,011 4,515 (1,620) (A) 250,906
Surplus .................................................. 379,918 7 1,463 (A) 381,388
Retained earnings ........................................ 257,550 8,156 265,706
Treasury stock ........................................... (639) (157) 157 (A) (639)
Unrealized gains (losses) on securities available for sale 3,388 (574) 19 (B) 2,833
Unearned compensation .................................... (18,275) - (18,275)
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY ....................... 969,953 11,947 19 981,919
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ....... $ 9,673,268 $ 106,709 $ 19 $ 9,779,996
===================================================================================================================================
- ----------------
See notes to Pro Forma Combined Balance Sheet.
</TABLE>
<PAGE>
HIBERNIA CORPORATION
NOTES TO PRO FORMA COMBINED BALANCE SHEET
June 30, 1997
A. Hibernia plans to issue approximately 1,508,019 shares of Hibernia
Common Stock, with an aggregate market value at the date of the Merger
of $27,144,342 based upon an assumed market value of $18.00 per share,
in exchange for 386,870 shares of Northwest Common Stock outstanding at
June 30, 1997 to effect the Merger with Northwest resulting in an
exchange rate of 3.898. The stated value of the Hibernia Common Stock
is $1.92 per share.
In accordance with the pooling-of-interests method of accounting, the
historical equities of the merged companies are combined for the
purposes of this pro forma combined balance sheet.
B. In accordance with Hibernia's investment policies, securities of
$15,656,000, with a market value of $15,685,000, classified as held to
maturity by Northwest will be reclassified by Hibernia as securities
available for sale. The impact on equity of the mark-to-market, net of
tax, is $19,000.
<PAGE>
Pro Forma Combined Income Statements (Unaudited)
The following unaudited pro forma combined income statements for the
six months ended June 30, 1997 and 1996 and the years ended December 31, 1996,
1995, and 1994 combine the income statements of Hibernia and Northwest as if the
Merger had been effective on January 1, 1994. The unaudited pro forma combined
income statements should be read in conjunction with the consolidated financial
statements and notes of Hibernia contained in Hibernia's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1997 and Hibernia's Annual Report on
Form 10-K for the year ended December 31, 1996, each incorporated by reference
into this Proxy Statement - Prospectus, and the financial statements and notes
for the years ended December 31, 1996 and 1995 and the six-month periods ended
June 30, 1997 and 1996 of Northwest contained elsewhere herein. The cost
associated with the Merger, estimated to be approximately $125,000, will be
accounted for as a current period expense when incurred.
<PAGE>
<TABLE>
<CAPTION>
HIBERNIA CORPORATION
PRO FORMA COMBINED INCOME STATEMENT
Six months ended June 30, 1997
NORTHWEST PRO FORMA
HIBERNIA BANCSHARES OF HIBERNIA
Unaudited ($ in thousands, except per share data) CORPORATION LOUISIANA, INC. CORPORATION
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income
Interest and fees on loans ................... $ 273,861 $ 1,747 $ 275,608
Interest on securities available for sale .... 70,488 1,605 72,093
Interest on securities held to maturity ...... - - -
Interest on short-term investments ........... 5,939 203 6,142
- --------------------------------------------------------------------------------------------------------------
Total interest income .................... 350,288 3,555 353,843
- --------------------------------------------------------------------------------------------------------------
Interest expense
Interest on deposits ......................... 136,326 1,485 137,811
Interest on short-term borrowings ............ 10,092 - 10,092
Interest on debt ............................. 747 - 747
- --------------------------------------------------------------------------------------------------------------
Total interest expense ................... 147,165 1,485 148,650
- --------------------------------------------------------------------------------------------------------------
Net interest income .............................. 203,123 2,070 205,193
Provision for possible loan losses ........... - - -
- --------------------------------------------------------------------------------------------------------------
Net interest income after provision
for possible loan losses ...................... 203,123 2,070 205,193
- --------------------------------------------------------------------------------------------------------------
Noninterest income
Service charges on deposits .................. 33,571 289 33,860
Trust fees ................................... 7,185 - 7,185
Other service, collection and exchange charges 20,420 108 20,528
Other operating income ....................... 6,753 15 6,768
Securities gains (losses), net ............... 371 - 371
- --------------------------------------------------------------------------------------------------------------
Total noninterest income ................. 68,300 412 68,712
- --------------------------------------------------------------------------------------------------------------
Noninterest expense
Salaries and employee benefits ............... 84,568 731 85,299
Occupancy expense, net ....................... 14,708 134 14,842
Equipment expense ............................ 13,845 131 13,976
Data processing expense ...................... 9,793 12 9,805
Foreclosed property expense, net ............. (574) - (574)
Amortization of intangibles .................. 7,009 - 7,009
Other operating expense ...................... 44,447 359 44,806
- --------------------------------------------------------------------------------------------------------------
Total noninterest expense ................ 173,796 1,367 175,163
- --------------------------------------------------------------------------------------------------------------
Income before income taxes ....................... 97,627 1,115 98,742
Income tax expense ............................... 34,078 344 34,422
- --------------------------------------------------------------------------------------------------------------
Income from continuing operations ................ $ 63,549 $ 771 $ 64,320
==============================================================================================================
Income from continuing operations
applicable to common shareholders ............ $ 60,099 $ 771 $ 60,870
==============================================================================================================
Pro forma weighted average common shares ......... 127,240,768 1,508,019 128,748,787
==============================================================================================================
Pro forma income per common share from
continuing operations (A) ................... $ 0.47 $ 0.47
==============================================================================================================
- -------------
See notes to Pro Forma Combined Income Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HIBERNIA CORPORATION
PRO FORMA COMBINED INCOME STATEMENT
Six months ended June 30, 1996
NORTHWEST PRO FORMA
HIBERNIA BANCSHARES OF HIBERNIA
Unaudited ($ in thousands, except per share data) CORPORATION LOUISIANA, INC. CORPORATION
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income
Interest and fees on loans ................... $ 224,101 $ 1,627 $ 225,728
Interest on securities available for sale .... 69,923 1,526 71,449
Interest on securities held to maturity ...... - - -
Interest on short-term investments ........... 4,813 266 5,079
- --------------------------------------------------------------------------------------------------------------
Total interest income .................... 298,837 3,419 302,256
- --------------------------------------------------------------------------------------------------------------
Interest expense
Interest on deposits ......................... 115,844 1,519 117,363
Interest on short-term borrowings ............ 7,020 - 7,020
Interest on debt ............................. 779 - 779
- --------------------------------------------------------------------------------------------------------------
Total interest expense ................... 123,643 1,519 125,162
- --------------------------------------------------------------------------------------------------------------
Net interest income .............................. 175,194 1,900 177,094
Provision for possible loan losses ........... 975 - 975
- --------------------------------------------------------------------------------------------------------------
Net interest income after provision
for possible loan losses ...................... 174,219 1,900 176,119
- --------------------------------------------------------------------------------------------------------------
Noninterest income
Service charges on deposits .................. 27,054 286 27,340
Trust fees ................................... 6,451 - 6,451
Other service, collection and exchange charges 16,468 112 16,580
Other operating income ....................... 5,738 - 5,738
Securities gains (losses), net ............... 113 - 113
- --------------------------------------------------------------------------------------------------------------
Total noninterest income ................. 55,824 398 56,222
- --------------------------------------------------------------------------------------------------------------
Noninterest expense
Salaries and employee benefits ............... 75,203 708 75,911
Occupancy expense, net ....................... 13,203 141 13,344
Equipment expense ............................ 11,333 120 11,453
Data processing expense ...................... 10,315 7 10,322
Foreclosed property expense, net ............. (1,675) 3 (1,672)
Amortization of intangibles .................. 1,924 - 1,924
Other operating expense ...................... 36,335 347 36,682
- --------------------------------------------------------------------------------------------------------------
Total noninterest expense ................ 146,638 1,326 147,964
- --------------------------------------------------------------------------------------------------------------
Income tax expense ............................... 28,960 301 29,261
- --------------------------------------------------------------------------------------------------------------
Income from continuing operations ................ $ 54,445 $ 671 $ 55,116
==============================================================================================================
Income from continuing operations
applicable to common shareholders ............ $ 54,445 $ 671 $ 55,116
==============================================================================================================
Pro forma weighted average common shares ......... 126,571,918 1,508,019 128,079,937
==============================================================================================================
Pro forma income per common share from
continuing operations (A) ................... $ 0.43 $ 0.43
==============================================================================================================
- -------------
See notes to Pro Forma Combined Income Statements.
</TABLE>
<PAGE>
HIBERNIA CORPORATION
NOTES TO PRO FORMA COMBINED INCOME STATEMENT Six months ended June 30, 1997 and
1996
A. Hibernia expects to achieve savings through reductions in operating
costs in connection with the Merger. The majority of savings will be
achieved through consolidation of certain operations. The extent to
which the savings will be achieved depends, among other things, on the
regulatory environment and economic conditions, and may be affected by
unanticipated changes in business activities, inflation and certain
external factors. Therefore, there can be no assurance that such
savings will be realized. No adjustment has been included in the
unaudited pro forma financial statements for the anticipated savings.
<PAGE>
<TABLE>
<CAPTION>
HIBERNIA CORPORATION
PRO FORMA COMBINED INCOME STATEMENT
Year ended December 31, 1996
NORTHWEST PRO FORMA
HIBERNIA BANCSHARES OF HIBERNIA
Unaudited ($ in thousands, except per share data) CORPORATION LOUISIANA, INC. CORPORATION
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income
Interest and fees on loans ................... $ 477,299 $ 3,219 $ 480,518
Interest on securities available for sale .... 138,549 3,265 141,814
Interest on securities held to maturity ...... - - -
Interest on short-term investments ........... 9,780 359 10,139
- --------------------------------------------------------------------------------------------------------------
Total interest income .................... 625,628 6,843 632,471
- --------------------------------------------------------------------------------------------------------------
Interest expense
Interest on deposits ......................... 242,570 2,979 245,549
Interest on short-term borrowings ............ 15,288 13 15,301
Interest on debt ............................. 1,553 - 1,553
- --------------------------------------------------------------------------------------------------------------
Total interest expense ................... 259,411 2,992 262,403
- --------------------------------------------------------------------------------------------------------------
Net interest income .............................. 366,217 3,851 370,068
Provision for possible loan losses ........... (12,625) - (12,625)
- --------------------------------------------------------------------------------------------------------------
Net interest income after provision
for possible loan losses ...................... 378,842 3,851 382,693
- --------------------------------------------------------------------------------------------------------------
Noninterest income
Service charges on deposits .................. 58,330 576 58,906
Trust fees ................................... 13,397 40 13,437
Other service, collection and exchange charges 33,985 203 34,188
Gain on sale of business lines ............... 517 - 517
Other operating income ....................... 9,436 84 9,520
Securities gains (losses), net ............... (5,306) - (5,306)
- --------------------------------------------------------------------------------------------------------------
Total noninterest income ................. 110,359 903 111,262
- --------------------------------------------------------------------------------------------------------------
Noninterest expense
Salaries and employee benefits ............... 161,170 1,449 162,619
Occupancy expense, net ....................... 26,959 288 27,247
Equipment expense ............................ 28,735 273 29,008
Data processing expense ...................... 20,234 20 20,254
Foreclosed property expense, net ............. (1,743) (31) (1,774)
Amortization of intangibles .................. 7,290 - 7,290
Other operating expense ...................... 77,088 777 77,865
- --------------------------------------------------------------------------------------------------------------
Total noninterest expense ................ 319,733 2,776 322,509
- --------------------------------------------------------------------------------------------------------------
Income before income taxes ....................... 169,468 1,978 171,446
Income tax expense ............................... 59,518 608 60,126
- --------------------------------------------------------------------------------------------------------------
Income from continuing operations ................ $ 109,950 $ 1,370 $ 111,320
==============================================================================================================
Income from continuing operations
applicable to common shareholders ............ $ 108,210 $ 1,370 $ 109,580
==============================================================================================================
Pro forma weighted average common shares ......... 126,765,513 1,508,019 128,273,532
==============================================================================================================
Pro forma income per common share from
continuing operations (A) ................... $ 0.85 $ 0.85
==============================================================================================================
- -------------
See notes to Pro Forma Combined Income Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HIBERNIA CORPORATION
PRO FORMA COMBINED INCOME STATEMENT
Year ended December 31, 1995
NORTHWEST PRO FORMA
HIBERNIA BANCSHARES OF HIBERNIA
Unaudited ($ in thousands, except per share data) CORPORATION LOUISIANA, INC. CORPORATION
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income
Interest and fees on loans ................... $ 389,609 $ 2,903 $ 392,512
Interest on securities available for sale .... 49,632 3,257 52,889
Interest on securities held to maturity ...... 116,237 - 116,237
Interest on short-term investments ........... 7,368 355 7,723
- --------------------------------------------------------------------------------------------------------------
Total interest income .................... 562,846 6,515 569,361
- --------------------------------------------------------------------------------------------------------------
Interest expense
Interest on deposits ......................... 226,669 2,856 229,525
Interest on short-term borrowings ............ 13,791 21 13,812
Interest on debt ............................. 1,630 - 1,630
- --------------------------------------------------------------------------------------------------------------
Total interest expense ................... 242,090 2,877 244,967
- --------------------------------------------------------------------------------------------------------------
Net interest income .............................. 320,756 3,638 324,394
Provision for possible loan losses ........... 1,140 - 1,140
- --------------------------------------------------------------------------------------------------------------
Net interest income after provision
for possible loan losses ...................... 319,616 3,638 323,254
- --------------------------------------------------------------------------------------------------------------
Noninterest income
Service charges on deposits .................. 48,715 563 49,278
Trust fees ................................... 12,498 40 12,538
Other service, collection and exchange charges 28,673 184 28,857
Gain on divestiture of banking offices ....... 2,361 - 2,361
Gain on sale of business lines ............... 3,402 - 3,402
Other operating income ....................... 8,317 77 8,394
Securities gains (losses), net ............... 248 - 248
- --------------------------------------------------------------------------------------------------------------
Total noninterest income ................. 104,214 864 105,078
- --------------------------------------------------------------------------------------------------------------
Noninterest expense
Salaries and employee benefits ............... 136,804 1,415 138,219
Occupancy expense, net ....................... 26,501 269 26,770
Equipment expense ............................ 21,648 228 21,876
Data processing expense ...................... 19,373 15 19,388
Foreclosed property expense, net ............. (699) (22) (721)
Amortization of intangibles .................. 3,709 - 3,709
Other operating expense ...................... 76,742 853 77,595
- --------------------------------------------------------------------------------------------------------------
Total noninterest expense ................ 284,078 2,758 286,836
- --------------------------------------------------------------------------------------------------------------
Income before income taxes ....................... 139,752 1,744 141,496
Income tax expense ............................... 10,867 518 11,385
- --------------------------------------------------------------------------------------------------------------
Income from continuing operations ................ $ 128,885 $ 1,226 $ 130,111
==============================================================================================================
Income from continuing operations
applicable to common shareholders ............ $ 128,885 $ 1,226 $ 130,111
==============================================================================================================
Pro forma weighted average common shares ......... 126,880,767 1,508,019 128,388,786
==============================================================================================================
Pro forma income per common share from
continuing operations (A) ................... $ 1.02 $ 1.01
==============================================================================================================
- -------------
See notes to Pro Forma Combined Income Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HIBERNIA CORPORATION
PRO FORMA COMBINED INCOME STATEMENT
Year ended December 31, 1994
NORTHWEST PRO FORMA
HIBERNIA BANCSHARES OF HIBERNIA
Unaudited ($ in thousands, except per share data) CORPORATION LOUISIANA, INC. CORPORATION
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income
Interest and fees on loans ................... $ 307,545 $ 2,343 $ 309,888
Interest on securities available for sale .... 53,134 3,290 56,424
Interest on securities held to maturity ...... 111,325 - 111,325
Interest on short-term investments ........... 7,941 214 8,155
- --------------------------------------------------------------------------------------------------------------
Total interest income .................... 479,945 5,847 485,792
- --------------------------------------------------------------------------------------------------------------
Interest expense
Interest on deposits ......................... 169,633 2,216 171,849
Interest on short-term borrowings ............ 6,225 26 6,251
Interest on debt ............................. 2,971 - 2,971
- --------------------------------------------------------------------------------------------------------------
Total interest expense ................... 178,829 2,242 181,071
- --------------------------------------------------------------------------------------------------------------
Net interest income .............................. 301,116 3,605 304,721
Provision for possible loan losses ........... (17,869) - (17,869)
- --------------------------------------------------------------------------------------------------------------
Net interest income after provision
for possible loan losses ...................... 318,985 3,605 322,590
- --------------------------------------------------------------------------------------------------------------
Noninterest income
Service charges on deposits .................. 47,139 530 47,669
Trust fees ................................... 13,092 40 13,132
Other service, collection and exchange charges 22,487 96 22,583
Other operating income ....................... 12,129 45 12,174
Securities gains (losses), net ............... (1,669) - (1,669)
- --------------------------------------------------------------------------------------------------------------
Total noninterest income ................. 93,178 711 93,889
- --------------------------------------------------------------------------------------------------------------
Noninterest expense
Salaries and employee benefits ............... 133,002 1,350 134,352
Occupancy expense, net ....................... 28,338 257 28,595
Equipment expense ............................ 17,871 191 18,062
Data processing expense ...................... 21,231 19 21,250
Foreclosed property expense, net ............. (7,064) (9) (7,073)
Amortization of intangibles .................. 23,231 - 23,231
Other operating expense ...................... 86,309 935 87,244
- --------------------------------------------------------------------------------------------------------------
Total noninterest expense ................ 302,918 2,743 305,661
- --------------------------------------------------------------------------------------------------------------
Income before income taxes ....................... 109,245 1,573 110,818
Income tax expense ............................... 7,785 446 8,231
- --------------------------------------------------------------------------------------------------------------
Income from continuing operations ................ $ 101,460 $ 1,127 $ 102,587
==============================================================================================================
Income from continuing operations
applicable to common shareholders ............ $ 101,460 $ 1,127 $ 102,587
==============================================================================================================
Pro forma weighted average common shares ......... 127,595,944 1,508,019 129,103,963
==============================================================================================================
Pro forma income per common share from
continuing operations (A) ................... $ 0.80 $ 0.79
==============================================================================================================
- -------------
See notes to Pro Forma Combined Income Statements.
</TABLE>
<PAGE>
HIBERNIA CORPORATION
NOTES TO PRO FORMA COMBINED INCOME STATEMENT Years ended December 31, 1996, 1995
and 1994
A. Hibernia expects to achieve savings through reductions in operating
costs in connection with the Merger. The majority of savings will be
achieved through consolidation of certain operations. The extent to
which the savings will be achieved depends, among other things, on the
regulatory environment and economic conditions, and may be affected by
unanticipated changes in business activities, inflation and certain
external factors. Therefore, there can be no assurance that such
savings will be realized. No adjustment has been included in the
unaudited pro forma financial statements for the anticipated savings.
CERTAIN INFORMATION CONCERNING NORTHWEST
Description of Business
Northwest was incorporated on July 21, 1981, under the laws of the State
of Louisiana for the purpose of becoming a bank holding company, as defined
under the BHCA, with respect to the Bank. Northwest acquired 98.209% of the
stock of the Bank on May 1, 1982, and the remainder on March 25, 1986. As of
June 30, 1997, Northwest had, on a consolidated basis, total assets of $106.7
million, total deposits of $93.7 million and total shareholders' equity of $11.9
million.
Northwest does not, as an entity, engage in separate business activities
of a material nature apart from the activities it performs for the Bank; it owns
no significant assets other than the stock of the Bank; and it derives all its
revenues from the Bank.
The Bank is a national banking association that was organized on March
16, 1920. The Bank's main facility is located in Mansfield, Louisiana, and the
Bank has additional branches in Grand Cane, Logansport, and Stonewall,
Louisiana. The Bank is a full-service commercial bank. The Bank meets its
commercial, industrial and financial customers' banking needs with a range of
financial services. Commercial lending activities include short-term and
medium-term loans, Small Business Administration loans, revolving credit
arrangements, inventory and accounts receivable financing, equipment financing
and interim real estate lending. Other services include cash management
programs, federal tax depository services and night depository services.
The Bank provides a full range of consumer banking services, including
savings and checking accounts, various savings programs and installment and
other personal loans. It makes automobile and other installment loans directly
to customers. The Bank makes home improvement and real estate loans and provides
safe deposit services. The Bank offers MasterCard and VISA credit cards to its
customers as an agent for another bank. The Bank has trust powers.
The business of the Bank is not seasonal in any material respect, and
neither the loans nor the deposits of the Bank are concentrated in any
individual or group that, if lost, would have a material effect on the business
of the Bank.
Supervision and Regulation
Banking is a complex, highly-regulated industry. The primary goals for
the bank regulatory scheme are to maintain a safe and sound banking system and
to facilitate the conduct of monetary policy.
As a bank holding company under the BHCA, Northwest is registered with
and subject to regulation by the Federal Reserve Board. Northwest files annual
and other reports with, and furnishes information to, the Federal Reserve, which
may make inspections of Northwest.
The BHCA provides that a bank holding company must obtain the prior
approval of the Federal Reserve for the acquisition of more than 5% of the
voting stock or substantially all of the assets of any bank or bank holding
company. In addition, the BHCA restricts the extension of credit to any bank
holding company by its subsidiary bank. The BHCA also provides that, with
certain exceptions, a bank holding company may not (i) engage in any activities
other than those of banking or managing or controlling banks and other
authorized subsidiaries, or (ii) own or control more than 5% of the voting
shares of any company that is not a bank. The Federal Reserve has deemed certain
limited activities to be closely related to banking and, therefore, permissible
activities for a bank holding company. Northwest has no intention of engaging in
any such activities at this time.
The Federal Reserve has cease-and-desist powers over bank holding
companies and their nonbanking subsidiaries if their activities constitute a
serious threat to the safety, soundness or stability of a subsidiary bank.
Federal regulatory agencies also have authority to regulate debt obligations
(other than commercial paper) issued by bank holding companies. This authority
includes the power to impose interest ceilings and reserve requirements on such
debt obligations. A bank holding company and its subsidiaries are also
prohibited from engaging in certain tie-in arrangements in connection with any
extension of credit, lease or sale of property or furnishing of services.
The Bank is subject to various requirements and restrictions under the
laws of the United States and the State of Louisiana, and to regulation,
supervision and regular examination by the Office of the Comptroller of the
Currency ("OCC"). The Bank is subject to the power of the OCC to enforce
compliance with applicable banking statutes and regulations. Such requirements
and restrictions include requirements to maintain adequate capital and reserves
against deposits, restrictions on the nature and amount of loans that may be
made and the interest that may be charged thereon and restrictions relating to
investments and other activities of the Bank.
The capital classification of a bank affects the frequency of
examinations of the Bank, impacts the ability of the Bank to engage in certain
activities and affects the deposit insurance premiums paid by the Bank. The
Bank's deposits are insured by the Bank Insurance Fund of the FDIC. Under
applicable law, the FDIC is authorized to assess insurance premiums on a bank's
deposits at a variable rate, depending on the probability that the deposit
insurance fund will incur a loss with respect to the Bank. (Under prior law, the
deposit insurance assessment was a flat rate, regardless of the likelihood of
loss.) In this regard, the FDIC determines the deposit insurance assessment
rates on the basis of the Bank's capital classification and supervisory
evaluations. Each of the categories have three subcategories, resulting in nine
assessment risk classifications. The three subcategories with respect to capital
are "well capitalized", "adequately capitalized", "healthy", "supervisory
concern" and "substantial supervisory concern". A bank is deemed "healthy" if it
is financially sound with only a few minor weaknesses. A bank is deemed subject
to "supervisory concern" if it has weaknesses that, if not corrected, could
result in significant deterioration of the Bank and increased risk to the Bank
Insurance Fund. A bank is deemed subject to "substantial supervisory concern" if
it poses a substantial probability of loss to the Bank Insurance Fund.
THE FOREGOING IS AN ATTEMPT TO SUMMARIZE SOME OF THE RELEVANT LAWS,
RULES AND REGULATIONS GOVERNING BANKS AND BANK HOLDING COMPANIES, BUT DOES NOT
PURPORT TO BE A COMPLETE SUMMARY OF ALL APPLICABLE LAWS, RULES AND REGULATIONS
GOVERNING BANKS AND BANK HOLDING COMPANIES.
Competition
The activities in which the Bank engages are highly competitive. The
Bank actively competes with other financial institutions in its efforts to
obtain deposits and make loans, in the scope and type of services offered, in
interest rates paid on time deposits and charged on loans, and in other aspects
of banking. In addition to competing with other commercial banks within and
without its primary service area, the Bank competes with other financial
institutions engaged in the business of making loans or accepting deposits, such
as savings and loan associations, credit unions, insurance companies, finance
companies, mortgage loan companies, certain governmental agencies and other
enterprises, certain of which are regulated to a lesser extent than the Bank,
thereby enjoying a competitive advantage. Additional competition for deposits
comes from government and private issues of debt obligations and other
investment alternatives for depositors, such as money market funds.
Employees
The Bank's employees and directors conduct Northwest's business, but are
not separately compensated as Northwest employees. The Bank currently has 45
full-time employees and four part-time employees.
Properties
The Bank's principal offices are located at 214 South Washington,
Mansfield, Louisiana. The main office of the Bank is located in a one-story
building, containing approximately 11,255 square feet with an unattached 3-lane
drive-in facility located on approximately one acre. The main office facility is
owned by the Bank and is unencumbered.
The Bank has a branch located at 102 Lake Road in Mansfield, Louisiana.
This branch consists of a 1,852 square foot facility with a 3-lane drive-in
facility, and an automated teller machine. This facility is owned by the Bank
and is unencumbered.
The Bank has a branch located at 8386 Highway 171, Grand Cane,
Louisiana. This branch consists of a 2,272 square foot facility with a 1-lane
drive-in facility. This facility is owned by the Bank and is unencumbered.
The Bank has a branch located at 105 Highway 5, Logansport, Louisiana.
This branch consists of a 3,540 square foot facility with a 2-lane drive-in
facility, and an automated teller machine. This facility is owned by the Bank
and is unencumbered.
The Bank has a branch located at 571 Highway 171, Stonewall, Louisiana.
This branch consists of a 1,840 square foot facility with a 1-lane drive-in
facility, and an automated teller machine. This facility is owned by the Bank
and is unencumbered.
Legal Proceedings
Northwest and the Bank are involved in various legal proceedings in the
normal course of their business. No such matters, either singularly or in the
aggregate, would have, in the opinion of their respective management, a material
adverse effect upon the financial condition of Northwest or the Bank, if
adversely concluded.
Market for the Common Stock and Dividends
Northwest's authorized capital stock consists of 500,000 shares of
common stock, no par value, of which 386,870 shares (excluding 13,130 shares
held as treasury shares) were issued and outstanding as of the Record Date.
There are presently 180 shareholders of record of Northwest. There is no
established public market for Northwest Common Stock, nor are there any
published quotations for such shares. Northwest acts as its own transfer agent
and registrar.
Occasionally, Northwest becomes aware of trades in Northwest Common
Stock and the prices at which such trades were effected. To the knowledge of
Northwest's management, there has been only one trade of Northwest Common Stock
since January 1, 1997, involving a total of 1,128 shares, each at a price of $60
per share. Such price represents an actual trade, but may not include all trades
that occurred during such period, and such price is the result of limited
trading and may not be representative of the actual fair market value of
Northwest Common Stock.
Northwest declared dividends of $1.25 per share and $1.00 per share in
1996 and 1995, respectively. These dividends were paid the first business day of
the following year. No dividends have been declared in 1997. The amount of
dividends that may be paid by Northwest is restricted under the terms of the
Agreement, which provides that the amount of such dividends may not exceed $1.50
per share for the year 1997, to be prorated for the portion of the year that has
passed as of the Closing, if the Closing occurs prior to December 31, 1997. As a
bank holding company that does not, as an entity, engage in separate business
activities, Northwest's ability to pay cash dividends depends upon the income it
receives from the Bank. Northwest's only sources of income are (i) dividends
paid to it indirectly by the Bank, and (ii) tax savings, if any, that result
from the filing of consolidated tax returns for Northwest and the Bank.
Northwest must pay all of its operating expenses from the funds received by
Northwest from the Bank.
As a national banking association, the Bank may pay cash dividends to
Northwest only out of adjusted retained net profits for the year in which the
dividend is paid and the two preceding years. In addition, the OCC has indicated
its view that it generally would be an unsafe and unsound practice to pay
dividends if the payout of the dividend would deplete a bank's capital to an
inadequate level. The ability of the Bank to pay dividends in the future is
presently, and could be further, influenced by bank regulatory policies or
agreements and by capital guidelines applicable to national bank.
The Bank is also subject to certain restrictions on the payment of
dividends as a result of the requirement that it maintain adequate levels of
capital in accordance with the guidelines promulgated from time to time by the
OCC. The OCC has issued risk-based capital regulations, which require banks to
maintain minimum capital levels based upon the relative safety of their assets.
Security Ownership of Principal Shareholders and Management
Ownership of Principal Shareholders
The following table sets forth information concerning all persons known
to Northwest to be beneficial owners, directly or indirectly, of more than 5% of
the outstanding shares of Northwest Common Stock, Northwest's only class of
voting securities, as of the Record Date. Unless otherwise indicated, the named
persons have direct beneficial ownership of the shares with sole voting and
investment power.
Amount and Nature
Name and Address of of Beneficial
Beneficial Owner Ownership Percent of Class
................................................................................
Lowrey Investment Co.,
a Partnership 77,324 19.99%
P. O. Box 1139
Mansfield, LA 71052
Charles C. Hunter 32,078(1) 8.29%
P. O. Box 839
Mansfield, LA 71052
McLaurin Partnership 21,172 5.47%
403 Herndon Avenue
Mansfield, LA 71052
(1) Includes 1,452 shares held by Mr. Hunter's wife, Bobbie Rogers Hunter.
Security Ownership of Management
The following table sets forth information concerning the shares of
Northwest Common Stock beneficially owned, directly or indirectly, by each
director and executive officer of Northwest, and all directors and executive
officers as a group as of the Record Date. Unless otherwise indicated, the named
persons have direct beneficial ownership of the shares with sole voting and
investment power.
Amount and Nature
Name and Address of of Beneficial
Beneficial Owner Ownership Percent of Class
................................................................................
Joel Bianca,
Senior Vice President 100 *
294 Pecan Drive
Shreveport, LA 71110
Larry Binning,
Vice President 20 *
P. O. Box 821
Mansfield, LA 71052
C. Alfred Flanders, Jr.,
Senior Vice President
and Director 1,581 *
P. O. Box 231
Mansfield, LA 71052
John W. Garmany, President
Chief Executive Officer and
Director 10,755(1) 2.78%
251 Amy Lane
Mansfield, LA 71052
Dr. Jack L. Grindle,
Director 12,380 3.20%
689 Hunt Road
Grand Cane, LA 71032
Calvin W. Hall, II,
Director 7,024(2) 1.82%
440 Forest Avenue
Mansfield, LA 71052
Charles C. Hunter,
Director 32,078(3) 8.29%
P. O. Box 839
Mansfield, LA 71052
E.A. Laffitte, Jr.,
Director 8,776 2.27%
5274 Highway 509
Mansfield, LA 71052
John W. Lowery, Jr.,
Director 80,272(4) 20.75%
P. O. Box 1139
Mansfield, LA 71052
J.C. McLaurin, Jr.,
Director 21,172(5) 5.47%
403 Herndon Avenue
Mansfield, LA 71052
Green Rives, Jr.,
Director 9,232(6) 2.39%
104 Julian Street
Mansfield, LA 71052
Joe B. Schmidt, Jr.,
Director 6,740 1.74%
P. O. Box 1329
Mansfield, LA 71052
Loretta Lowrey Woodward,
Director 2,960(7) *
P. O. Box 71
Mansfield, LA 71052
Thomas A. Woodward, Jr.,
Director 3,560(8) *
P. O. Box 71
Mansfield, LA 71052
__________ _______
Directors and
Officers of
Northwest as
a Group 196,650 50.83%
* Less than 1%
(1) Includes 3,544 shares held by the Matthews Trust of which Mr.
Garmany as President of First National Bank is Trustee .
(2) Includes 2,633 shares held by Mr. Hall's wife, Joyce C. Hall.
(3) Includes 1,452 shares held by Mr. Hunter's wife, Bobbie Rogers
Hunter.
(4) Includes 2,548 shares held by Mr. Lowrey's wife, Sophvine Lowery,
and 77,324 shares held by Lowrey Investment Co., a partnership, of which Mr.
Lowery is managing partner and in which he owns a 9.5% interest.
(5) Shares are held by McLaurin Partnership in which Mr. McLaurin owns a
74.172% interest.
(6) Includes 536 shares held by Mr. Rives' wife, Betty S. Rives.
(7) Includes 1,560 of the 3,120 shares held by Lowrey Motor Co., Inc.,
of which Mrs. Woodward owns 50% (and her husband, Thomas A. Woodward, Jr., owns
50%); and 1,000 of the 2,000 shares held directly or in trust for Mrs.
Woodward's minor child. Does not include 77,324 shares held by Lowrey Investment
Company, a partnership in which Mrs. Woodward owns a 39% interest (which shares
are included in shares of John W. Lowrey, Jr. as managing partner of the
partnership) or 1,000 shares held by Mrs. Woodward's husband, Thomas A. Woodward
(which shares are included under his name).
(8) Includes 1,560 of the 3,120 shares held by Lowrey Motor Co., Inc.,
of which Mr. Woodward owns 50% (and his wife, Loretta Lowrey Woodward, owns
50%); and 1,000 of the 2,000 shares held directly or in trust for Mr. Woodward's
minor child. Does not include 400 shares held by Mr. Woodward's wife, Loretta
Lowrey Woodward (which shares are included under her name).
<PAGE>
<TABLE>
<CAPTION>
NORTHWEST BANCSHARES OF LOUISIANA, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in Thousands)
June 30,
1997 1996
<S> <C> <C>
ASSETS: ...................................................................
Cash & due from banks ..................................................... $ 4,761 $ 4,998
Federal funds sold ........................................................ 7,800 5,250
Securities:
Available for sale ................................................. 39,390 34,392
Held to maturity ................................................... 15,656 23,142
Loans ..................................................................... 36,871 32,882
Less: Unearned interest ............................................ 35 40
Allowance for Loan losses .................................... 703 671
- ---------------------------------------------------------------------------------------------------------------
Net loans ................................................................. 36,133 32,171
Bank premises and equipment ............................................... 1,822 1,892
Other real estate owned ................................................... 35 81
Other Assets .............................................................. 1,112 1,204
- ---------------------------------------------------------------------------------------------------------------
Total assets ................................................. $ 106,709 $ 103,130
===============================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Non-interest bearing deposits ............................................. $ 16,571 $ 14,276
Interest bearing deposits ................................................. 77,123 77,314
- ---------------------------------------------------------------------------------------------------------------
Total deposits .................................................... 93,694 91,590
- ---------------------------------------------------------------------------------------------------------------
Federal funds purchased and security repurchase agreements ................ -0- -0-
Treasury, Tax and Loan note ............................................... 708 474
Other liabilities ......................................................... 360 372
- ---------------------------------------------------------------------------------------------------------------
Total liabilities .................................................. 94,762 92,436
===============================================================================================================
Shareholder's equity: Common stock, no par value 500,000
shares authorized, 400,00 shares issued, 386,870 shares
outstanding, 13,130 shares in treasury in 1996 and 1995 ................... 4,515 4,515
Paid in capital-gain on sale of treasury stock ............................ 7 7
Retained earnings ......................................................... 8,156 7,168
Cost of shares in treasury ................................................ (156) (156)
Unrealized gain (loss) on securities available for sale net of income taxes (575) (840)
- ---------------------------------------------------------------------------------------------------------------
Total stockholders' equity ................................................ 11,947 10,694
- ---------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity ................................ $ 106,709 $ 103,130
===============================================================================================================
- -------------
See accompanying notes
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NORTHWEST BANCSHARES OF LOUISIANA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in Thousands, except per share amounts)
Six months
ended June 30:
1997 1996
<S> <C> <C>
Interest Income
Loans, including fees .......................................... $ 1,747 $ 1.627
Securities:
U. S. Government ......................................... 1,418 1,355
States and political subdivisions ........................ 53 68
Federal Agencies and other ............................... 134 103
Federal funds sold ............................................. 203 266
- ---------------------------------------------------------------------------------------------------
Total interest income ............................... 3,555 3,419
===================================================================================================
Interest expense:
Deposits ................................................. 1,477 1,514
Federal funds purchased and security repurchase agreements -0- -0-
Treasury, Tax & Loan note ................................ 8 5
- ---------------------------------------------------------------------------------------------------
Total interest expense .............................. 1,485 1,519
- ---------------------------------------------------------------------------------------------------
Net interest income ............................................ 2,070 1,900
Provision for loan losses ...................................... -0- -0-
Net interest income and provision for loan losses .............. 2,070 1,900
- ---------------------------------------------------------------------------------------------------
Non-interest income
Service charges on deposit accounts ...................... 289 286
Mortgage servicing fees and other ........................ 108 112
Security and financial instrument gains, net ............. 15 -0-
- ---------------------------------------------------------------------------------------------------
Total non-interest income ........................... 412 398
- ---------------------------------------------------------------------------------------------------
Non-interest expenses
Salaries and employees benefits .......................... 731 708
Net occupancy of bank premises ........................... 265 261
Other .................................................... 371 357
- ---------------------------------------------------------------------------------------------------
Total non-interest expenses ......................... 1,367 1,326
- ---------------------------------------------------------------------------------------------------
Income before taxes ............................................ 1,115 972
Provision for income taxes ..................................... 344 301
- ---------------------------------------------------------------------------------------------------
Net Income ..................................................... $ 771 $ 671
===================================================================================================
Per share information:
Net income ............................................... $ 1.99 $ 1.73
- ---------------------------------------------------------------------------------------------------
Cash dividends ........................................... -0- -0-
- ---------------------------------------------------------------------------------------------------
Weighted average number of shares outstanding ............ 386,870 386,870
- ---------------------------------------------------------------------------------------------------
- ------------
See accompanying notes
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NORTHWEST BANCSHARES OF LOUISIANA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
(Dollars in Thousands)
Unrealized
Paid in Gain (Loss)
capital-gain On Securities
Capital Stock on sale of Retained Treasury Available
Shares Amount Treasury Stock Earnings Stock for Sale Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 ......... 386,870 $ 4,515 $ 7 $ 6,497 $ (156) $ (525) $10,338
Net Income ........................... - - 671 - - - 671
Cash dividends ....................... - - - - - - -
Change in unrealized gain (loss)
on securities available for sale,
net of income taxes of $162 ..... - - - - - (315) (315)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1996 ............. 386,870 $ 4,515 $ 7 $ 7,168 $ (156) $ (840) $10,694
====================================================================================================================================
Balance at December 31, 1996 ......... 386,870 $ 4,515 $ 7 $ 7,385 $ (156) $ (614) $11,137
Net Income ........................... - - 771 - - - 771
Cash dividends ....................... - - - - - - -
Change in unrealized gain (loss)
on securities available for sale,
Net of income taxes of $20 ...... - - - - - 39 39
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1997 ............. 386,870 $ 4,515 $ 7 $ 8,156 $ (156) $ (575) $11,947
====================================================================================================================================
- ----------------
See accompanying notes
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NORTHWEST BANCSHARES OF LOUISIANA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
Six months ended June 30,
1997 1996
<S> <C> <C>
Cash flow from operating activities:
Net income .............................................................. $ 771 $ 671
Adjustments to reconcile net income to net cash provide by operating
activities:
Depreciation and amortization ...................................... 123 128
Amortization of investment security premiums, net of discounts ..... 16 19
Increase in interest earned not collected .......................... (89) (59)
Decrease in accrued interest payable ............................... (28) (27)
(Increase) decrease in other assets ................................ 35 (72)
Increase in other liabilities ..................................... 115 108
- --------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities .................... 943 768
- --------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities: Proceeds from maturities of securities:
Held-to-maturity .................................................. 3,230 9,310
Available for sale ................................................ 1,043 3,056
Purchase of securities:
Held-to-maturity ................................................... (2,501) (5,015)
Available for sale ................................................. (4,650) (16,430)
Net increase in loans .......................................................... (33) (711)
Purchase of premises and equipment ............................................. (124) (54)
Net decrease in interest bearing deposits with Banks ........................... -0- 198
- --------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities ................ (3,035 (9,646)
- --------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net increase in demand deposits, NOW accounts, money market ............ 6,878 4,211
deposit accounts, and savings accounts
Net increase in certificates of deposit ................................. 592 2,875
Net increase in short-term borrowings ................................... 282 359
Cash dividends paid ..................................................... (484) (387)
Net cash provided by financing activities .......................... 7,268 7,058
- --------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents .................... 5,176 (1,820)
Cash and cash equivalents at January 1 .................................. 7,190 11,973
- --------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at June 30 .................................... $ 12,366 $ 10,153
====================================================================================================================
Suplemental disclosures:
Interest paid ........................................................... $ 1,512 $ 1,548
Income taxes paid ....................................................... $ 328 $ 267
- --------------
See accompanying notes
</TABLE>
<PAGE>
Northwest Bancshares of Louisiana, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements for Northwest
Bancshares of Louisiana, Inc. and Subsidiary have been prepared in accordance
with generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the six-month period ended June 30, 1997 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1997. For further information, refer to the consolidated financial
statements and footnotes thereto included in Northwest Bancshares of Louisiana,
Inc. and Subsidiary's annual report for the year ended December 31, 1996
contained elsewhere in this Proxy Statement - Prospectus.
Note B - Merger Agreement
On June 26, 1997, Northwest Bancshares of Louisiana, Inc. and Subsidiary and
Hibernia entered into an Agreement and Plan of Merger pursuant to which
Northwest Bancshares of Louisiana, Inc. and Subsidiary would merge with
Hibernia. The Merger, to be accounted for as a pooling of interests, will be
affected with the exchange of approximately $21.3 million in Hibernia Common
Stock for all of the outstanding Northwest Bancshares of Louisiana, Inc. and
Subsidiary Common Stock. Each outstanding share of Northwest Bancshares of
Louisiana, Inc. and Subsidiary Common Stock would be exchanged for shares of
Hibernia Common Stock with a market value of $55.00. The Exchange Rate will be
based upon the average closing price for one share of Hibernia Common Stock for
the ten-day period prior to closing subject to a minimum Exchange Rate of 3.898
shares of Hibernia Common Stock. If the average market price of Hibernia is less
than $12.14 per share the merger shall convert to a cash transaction and each
share of Northwest Common Stock shall receive $55.00 in cash.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF
NORTHWEST BANCSHARES OF LOUISIANA, INC. AND SUBSIDIARY
FOR THE SIX MONTHS ENDED
JUNE 30, 1997 AND JUNE 30, 1996
The following discussion provides certain information concerning the financial
condition and results of operations of Northwest Bancshares of Louisiana, Inc.
and Subsidiary for the six months ended June 30, 1997 and 1996. The financial
position and results of operations of Northwest Bancshares of Louisiana, Inc.
and Subsidiary resulted primarily from operations at its banking subsidiary, the
Bank. Management's discussion should be read in conjunction with the Northwest
Bancshares of Louisiana, Inc. and Subsidiary financial statements and
accompanying notes presented elsewhere in this Proxy Statement-Prospectus.
OVERVIEW
Northwest Bancshares of Louisiana, Inc. and Subsidiary reported net income for
the six months ended June 30, 1997 of $771,000, an increase of 14% from the same
period during 1996. Annualized returns on average assets and average equity for
the six months ended June 30, 1997 were 1.46% and 15.39% respectively compared
with 1.31% and 13.61% for the same period in 1996. The increase in net income is
principally attributed to improved net interest income resulting from growth in
the loan portfolio and non-interest bearing deposit accounts.
Northwest Bancshares of Louisiana, Inc. and Subsidiary's total assets at June
30, 1997 were $106,709,000, increase of 3.47% from June 30, 1996. Loans
increased $3,994,000 from June 30, 1996 to June 30, 1997 due to continued growth
in consumer and commercial loans. Total deposits at June 30, 1997 of $93,694,000
were up 2.30% compared with June 30, 1996 due primarily to increases in retail
deposits.
RESULTS OF OPERATIONS
Net Interest Income. Tax equivalent net interest income for the six months ended
June 30, 1997 was $2,097,000, a $163,000 or 8.43% increase from the same period
in 1996. This increase was due to an increase in higher paying earning assets.
Table 1 below presents the average balance sheets, interest income and expense,
and average yields or rates. Table 2 below presents an analysis of the changes
in tax-equivalent net interest income between the six month periods ended June
30, 1997 and June 30, 1996.
The following table sets forth certain information concerning the average
balances, interest income (on a fully tax equivalent basis), interest expense,
and average rates on Northwest Bancshares of Louisiana, Inc. and Subsidiary's
interest-earnings assets and interest-bearing liabilities for the periods
indicated (Dollars in Thousands).
<PAGE>
<TABLE>
<CAPTION>
Table 1
June 30,
1997 1996
Average Average Average
Average Interest Rates Balance Interest Rates
Balance Income/ Earned/ Income/ Earned/
Expense Paid Expense Paid
<S> <C> <C> <C> <C> <C> <C>
Earnings assets
Loans (before
allowance for
loan losses) .............. $37,015 $ 1,747 9.44% $32,885 $ 1,627 9.90%
- ----------------------------------------------------------------------------------------------------------------------
Investment securities:
Taxable securities ....... 51,263 1,552 6.06% 50,131 1,457 5.81%
Tax-exempt securities .... 2,278 80 7.02% 3,072 103 6.71%
- ----------------------------------------------------------------------------------------------------------------------
Total investment securities 53,541 1,632 6.10% 53,203 1,560 5.86%
- ----------------------------------------------------------------------------------------------------------------------
Federal funds sold and
securities purchased
under agreement
to resell ................ 7,789 203 5.21% 10,157 266 5.24%
- ----------------------------------------------------------------------------------------------------------------------
Total earnings assets ......... $98,345 $ 3,582 7.28% $96,245 $ 3,453 7.18%
======================================================================================================================
Interest-bearing liabilities:
Deposits ................. $93,019 $ 1,477 3.18% $91,481 $ 1,514 3.31%
Federal funds, purchased
and securities sold
under agreement
to repurchase ............ 2 -0- 0% -0- -0- 0%
Treasury Tax & Loan ....... 277 8 5.78% 182 5 5.49%
- ----------------------------------------------------------------------------------------------------------------------
Total interest-bearing
liabilities ................ $93,298 $ 1,485 3.18% $91,663 $ 1,519 3.31%
======================================================================================================================
Net interest income ........... $ 2,097 $ 1,934
======================================================================================================================
Net yield on earnings
assets.................... 4.26% 4.02%
======================================================================================================================
</TABLE>
The following table sets forth for the periods indicated changes in tax
equivalent net interest income between the six months ended June 30, 1997 and
June 30, 1996 for each major category of earning assets and interest bearing
liabilities attributable to changes in average volumes and rates.
<TABLE>
<CAPTION>
Table 2
CHANGES IN TAX EQUIVALENT NET INTEREST INCOME
(Dollars in Thousands)
Six months ended June 30, 1997 compared with six months ended June 30, 1996
Volume Rate Total
<S> <C> <C> <C>
Income earned on:
Loans ................................. $ 204 $ (84) $ 120
Taxable securities ............... 33 62 95
Tax-exempt securities ............ (27) 4 (23)
Short term investments ........... (2) (61) (63)
- ----------------------------------------------------------------------------------------
Total ........................ 208 (79) 129
- ----------------------------------------------------------------------------------------
Interest paid on:
Deposits .............................. 25 (62) (37)
Federal funds purchased and securities
sold under agreement to repurchase -0- -0- -0-
Treasury, Tax and Loan ................ 3 -0- 3
Total ........................ 28 (62) (34)
- ----------------------------------------------------------------------------------------
Net interest income ......................... $ 180 $ (17) $ 163
========================================================================================
- -----------
Changes not solely due to volume or rate changes are allocated to rate.
</TABLE>
Interest Rate Sensitivity. Interest rate risk is the potential impact on net
interest income due to changes in interest rates in any given time frame and the
opportunity to reprice interest earning assets and interest bearing liabilities.
Management uses simulation models to estimate the effect of significant interest
rate changes on net interest income and the fair market value of securities
available for sale. Management may alter the mix of floating and fixed-rate
assets and liabilities, change loan and deposit pricing schedules and adjust
maturities through sales and purchase of securities available for sale as a
means of limiting interest rate risk to an acceptable level.
Provision for Loan Losses. The provision for possible loan losses is the amount
that is added to Northwest Bancshares of Louisiana, Inc. and Subsidiary's
allowance for loan losses, by a charge against earnings, in order to maintain a
balance in the allowance for loan losses that is deemed by management to be
adequate to absorb the inherent risk of future loan losses in Northwest
Bancshares of Louisiana, Inc. and Subsidiary's loan portfolio. The amount of the
provision is dependent upon many factors, including management's evaluation of
historical loan loss experience in relation to outstanding loans, the existing
level of the allowance, reviews of loan quality, loan growth, changes in the
composition of the loan portfolio, general economic factors, the financial
condition of the borrowers, their ability to repay the loan and the value and
liquidity of collateral.
Northwest Bancshares of Louisiana, Inc. and Subsidiary's provision for loan
losses for the six months ended June 30, 1997 and 1996 was -0-. The allowance
for loan losses at June 30, 1997 was 1.91% of net loans outstanding compared
with 2.04% at June 30, 1996.
Non-Interest Income. Northwest Bancshares of Louisiana, Inc. and Subsidiary's
non-interest income for the six months ended June 30, 1997 increased 3.52% from
the same period in 1996 due to a merger of the ATM switch provider that
Northwest owned stock in.
Non-Interest Expense. Total non-interest expense for the six months ended June
30, 1997 increased $41,000 or 3.09% from the same period of 1996. This increase
is a result of increases in personnel, equipment and other costs.
Income Taxes. Northwest Bancshares of Louisiana, Inc. and Subsidiary's effective
estimated tax rate for the six months ended June 30, 1997 remained fairly
constant.
ANALYSIS OF FINANCIAL CONDITION
Investment Securities. For the period ended June 30, 1997 average investment
securities increased $338,000 or .64% from June 30, 1996. This increase is
attributed to average deposit growth over the period.
The composition, amortized cost and estimated fair value of investment
securities at the dates indicated are as follows: (Dollars in Thousands)
<PAGE>
<TABLE>
<CAPTION>
Table 3
Estimated
Amortized Cost Fair Value
<S> <C> <C>
At June 30, 1997:
Available-for sale
U. S. Government ............... $ 3,484 $ 3,467
State and political subdivisions -0- -0-
Federal agencies ............... 19,897 19,853
Mortgage-backed securities ..... 12,840 12,795
- ----------------------------------------------------------------------
Total debt securities ..... 36,221 36,115
Equity securities .............. 3,779 3,275
- ----------------------------------------------------------------------
Total Available -for-Sale $40,000 $39,390
======================================================================
Held-to-Maturity
U. S. Government ............... $ 4,518 $ 4,507
State and political subdivisions 2,149 2,166
Federal agencies ............... 8,989 9,012
- ----------------------------------------------------------------------
Total Held-to-Maturity . $15,656 $15,685
======================================================================
At June 30, 1996:
Available-for-sale
U. S. Government ............... $ 3,471 $ 3,401
State and political subdivisions 100 100
Federal agencies ............... 17,460 17,274
Mortgage-backed securities ..... 10,521 10,408
- ----------------------------------------------------------------------
Total debt securities ..... 31,552 31,183
Equity securities .............. 3,782 3,209
- ----------------------------------------------------------------------
Total Available-for-Sale $35,334 $34,392
======================================================================
Held-to-Maturity
U. S. Government ............... $ 9,036 $ 9,000
State and political subdivisions 2,918 2,911
Federal agencies ............... 11,188 11,087
- ----------------------------------------------------------------------
Total Held-to-Maturity .. $23,142 $22,998
======================================================================
</TABLE>
Loans. Average loans outstanding for the six months ended June 30, 1997 of
$37,015,000 were up $4,130,000 or 12.56% from the same period in 1996. In
general, all segments of the loan portfolio have experienced growth with the
larger increases centered in the consumer and commercial loan areas.
The following table sets forth the type and amount of Northwest Bancshares of
Louisiana, Inc. and Subsidiary's loans, net of unearned discount at June 30,
1997 and 1996: (Dollars in Thousands)
<TABLE>
<CAPTION>
June 30,
1997 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial, financial and agricultural $11,370 30.87% $ 8,363 25.46%
Real estate:
Construction .................... 363 .99% 651 1.98%
Mortgage ........................ 18,405 49.96% 17,970 54.72%
Installments ......................... 6,698 18.18% 5,858 17.84%
- ----------------------------------------------------------------------------------------------------
$36,836 100.00% $32,842 100.00%
====================================================================================================
</TABLE>
The following table summarizes changes in the allowance for loan losses for the
periods indicated:
(Dollars in Thousands)
<TABLE>
<CAPTION>
1997 1996
- -------------------------------------------------------------------------
<S> <C> <C>
Balance at beginning of year ................ $ 670 $ 669
Provisions for loan losses charged to expense -0- -0-
Loans charged to the allowance .............. (18) (19)
Recoveries on charged off loans ............. 51 21
- -------------------------------------------------------------------------
Balance at June 30 .......................... $ 703 $ 671
=========================================================================
</TABLE>
The following table summarized non-performing assets for the periods indicated.
(Dollars in Thousands)
<TABLE>
<CAPTION>
1997 1996
- -------------------------------------------------------------------
<S> <C> <C>
Non-performing loans
Non-accrual loans ................. $ 28 $ 32
90-day and over past due loans .... 4 43
- -------------------------------------------------------------------
Total non-performing loans ........ 32 75
Real estate acquired through foreclosure 35 81
Total non-performing assets ............ $ 67 $156
===================================================================
</TABLE>
Deposits. Total average deposits for the six months ended June 30, 1997 were
$93,019,000 an increase of 1.68% over the same period of 1996. The following
table summarizes the average daily balance of various deposit categories for the
periods indicated (Dollars In Thousands).
<PAGE>
<TABLE>
<CAPTION>
June 30,
1997 1996
- --------------------------------------------------------------
<S> <C> <C>
Average daily deposits:
Non-interest-bearing demand $16,175 $14,291
Interest-bearing demand ... 27,999 27,993
Savings ................... 7,962 7,742
Time deposits ............. 40,883 41,455
- --------------------------------------------------------------
$93,019 $91,481
==============================================================
</TABLE>
Capital. Northwest Bancshares of Louisiana, Inc. and Subsidiary's leverage ratio
at June 30, 1997 was 11.26% compared with 10.63% at June 30, 1996. Northwest
Bancshares of Louisiana, Inc. and Subsidiary are both considered to be well
capitalized according to standards established by various regulatory agencies as
defined by both leverage ratios and risk-based capital ratios.
<PAGE>
NORTHWEST BANCSHARES OF LOUISIANA, INC. AND SUBSIDIARY
FIRST NATIONAL BANK IN MANSFIELD
MANSFIELD, LOUISIANA
CONSOLIDATED FINANCIAL STATEMENTS
AND
December 31, 1996 and 1995
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To The Board of Directors and Shareholders
Northwest Bancshares of Louisiana, Inc.
Mansfield, Louisiana
We have audited the accompanying consolidated balance sheets of Northwest
Bancshares of Louisiana, Inc. and Subsidiary as of December 31, 1996 and 1995,
and the related consolidated statements of income, changes in shareholders'
equity, and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to in the first
paragraph present fairly, in all material respects, the consolidated financial
position of Northwest Bancshares of Louisiana, Inc. and Subsidiary as of
December 31, 1996 and 1995, and the consolidated results of their operations and
their cash flows for the years then ended, in conformity with generally accepted
accounting principles.
/s Edmonson & Waddell
Certified Public Accountants
January 3, 1997
(Except for Note 19, as to which
the date is September 30, 1997)
<PAGE>
<TABLE>
<CAPTION>
NORTHWEST BANCSHARES OF LOUISIANA, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
ASSETS 1996 1995
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash and due from banks ........................................................ $ 4,404,953.42 $ 3,772,210.30
Federal funds sold ............................................................. 2,800,000.00 8,250,000.00
Interest-bearing deposits with banks ........................................... 195,000.00 293,000.00
Securities available for sale, at fair value (note 2) .......................... 35,748,321.86 21,340,905.71
Securities to be held to maturity, at amortized cost (note 2) .................. 16,393,636.38 27,447,902.88
Loans held for sale ............................................................ 327,650.00 162,400.00
Loans receivable (note 3) ...................................................... 36,477,780.20 32,033,459.09
Less:
Allowance for possible loan losses (note 4) .............................. (669,587.76) (669,372.64)
Unearned interest ........................................................ (36,720.73) (45,218.92)
- -----------------------------------------------------------------------------------------------------------------------
Net loans receivable .............................................. 35,771,471.71 31,318,867.53
- -----------------------------------------------------------------------------------------------------------------------
Accrued income ................................................................. 864,320.15 962,785.13
Properties and equipment, net (note 5) ......................................... 1,820,638.57 1,965,923.72
Other real estate and repossessed assets ....................................... 34,502.00 34,502.00
Other assets and deferred charges .............................................. 140,367.98 163,492.47
- -----------------------------------------------------------------------------------------------------------------------
Total assets ...................................................... $98,500,862.07 $95,711,989.74
=======================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Demand deposits ............................................................. $14,298,058.82 $13,828,700.23
NOW account deposits ........................................................ 13,313,804.24 13,742,881.62
Savings and interest-bearing demand deposits ................................ 20,278,907.77 19,236,129.72
Time deposits (note 6) ...................................................... 38,277,489.39 37,684,463.41
- -----------------------------------------------------------------------------------------------------------------------
Total deposits .................................................... 86,168,260.22 84,492,174.98
- -----------------------------------------------------------------------------------------------------------------------
Other borrowed funds (note 7) .................................................. 425,401.25 114,964.79
Accrued expenses and other liabilities ......................................... 770,674.92 766,547.01
- -----------------------------------------------------------------------------------------------------------------------
Total liabilities ................................................. 87,364,336.39 85,373,686.78
- -----------------------------------------------------------------------------------------------------------------------
Commitments and contingent liabilities (note 12) ............................... - -
Shareholders' equity
Common stock, no par value
500,000 shares authorized, 400,000 shares issued, 386,870 shares outstanding,
13,130 shares in
treasury in 1996 and 1995 ................................................... 4,515,079.56 4,515,079.56
Paid in capital-gain on sale of treasury stock ................................. 6,981.40 6,981.40
Retained earnings .............................................................. 7,385,071.55 6,498,174.79
Cost of shares in treasury
13,130 shares in 1996 and in 1995 (deduction) ............................... (156,832.80) (156,832.80)
Net unrealized loss on securities available for sale,
net of tax of $50,538.04 in 1996 and $50,718.06
in 1995 (note 2) ............................................................ (613,774.03) (525,099.99)
- -----------------------------------------------------------------------------------------------------------------------
Total shareholders' equity ........................................ 11,136,525.68 10,338,302.96
- -----------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity ........................ $98,500,862.07 $95,711,989.74
=======================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NORTHWEST BANCSHARES OF LOUISIANA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, 1996 and 1995
1996 1995
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Interest income
Loans receivable ................................. $3,218,789.70 $2,903,369.92
Investment securities
U.S. Treasury securities ....................... 706,482.23 810,351.73
Obligations of other U.S. Government agencies
and corporations ............................. 2,021,426.58 1,870,959.17
Obligations of states and political subdivisions 133,981.94 154,929.28
U.S. Government guaranteed securities .......... 121,737.61 130,719.24
Collateralized mortgage obligations ............ 63,482.52 66,174.79
Mutual funds ................................... 159,893.00 163,839.30
Other securities ............................... 57,950.54 59,843.14
Federal funds sold ............................... 351,694.37 333,106.94
Deposits with banks .............................. 7,475.58 21,618.74
- ------------------------------------------------------------------------------------------
Total interest income .................... 6,842,914.07 6,514,912.25
- ------------------------------------------------------------------------------------------
Interest expense
Savings and interest-bearing demand deposits ..... 956,603.32 975,447.42
Time deposits .................................... 2,022,573.52 1,881,090.90
Other borrowed funds ............................. 12,385.51 20,713.76
- ------------------------------------------------------------------------------------------
Total interest expense ................... 2,991,562.35 2,877,252.08
- ------------------------------------------------------------------------------------------
Net interest income ...................... 3,851,351.72 3,637,660.17
- ------------------------------------------------------------------------------------------
Noninterest income
Service charges on deposit accounts .............. 575,888.84 562,909.05
Loan servicing fees .............................. 48,618.35 46,008.75
Other service charges and fees ................... 154,879.75 137,842.33
Net gains from sale of loans ..................... 30,475.52 35,059.19
Other income ..................................... 93,615.48 82,309.20
- ------------------------------------------------------------------------------------------
Total noninterest income ................. 903,477.94 864,128.52
- ------------------------------------------------------------------------------------------
Noninterest expenses
Salaries ......................................... 1,175,959.54 1,130,938.02
Employee benefits (note 8) ....................... 272,572.11 283,753.78
Occupancy expense ................................ 288,003.86 269,376.94
Equipment expense ................................ 272,931.96 228,093.12
Other expense .................................... 766,753.67 845,502.04
- ------------------------------------------------------------------------------------------
Total noninterest expenses ............... 2,776,221.14 2,757,663.90
- ------------------------------------------------------------------------------------------
Income before income taxes ............... 1,978,608.52 1,744,124.79
Provision for income taxes (note 9) ................. 608,124.26 517,923.89
- ------------------------------------------------------------------------------------------
Net income ............................... $1,370,484.26 $1,226,200.90
==========================================================================================
Net income per share of common stock ................ $ 3.54 $ 3.17
==========================================================================================
Average shares outstanding .......................... 386,870 386,870
==========================================================================================
- ----------
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NORTHWEST BANCSHARES OF LOUISIANA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Years Ended December 31, 1996 and 1995
Net Unrealized
Gain (Loss)
On Available Total
Common Paid In Retained Treasury for Sale Shareholders'
Stock Capital Earnings Stock Securities Equity
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCES
January 1, 1995 ...... $ 4,515,079.56 $ 6,981.40 $ 5,658,843.89 $ (156,832.80) $ (953,996.75) $ 9,070,075.30
- ------------------------------------------------------------------------------------------------------------------------------------
ADDITIONS
Net income (loss)
for year
Parent Company ..... 408.02 408.02
Subsidiary Company . 1,225,792.88 1,225,792.88
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (page 3) 1,226,200.90 1,226,200.90
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in
unrealized loss
on securities
available for sale,
net of tax
of $139,373.24 ....... 428,896.76 428,896.76
- ------------------------------------------------------------------------------------------------------------------------------------
Total additions .. 1,226,200.90 428,896.76 1,655,097.66
- ------------------------------------------------------------------------------------------------------------------------------------
DEDUCTIONS
Cash dividends paid
- $1.00 per share .... 386,870.00 386,870.00
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCES
December 31, 1995 .... 4,515,079.56 6,981.40 6,498,174.79 (156,832.80) (525,099.99) 10,338,302.96
- ------------------------------------------------------------------------------------------------------------------------------------
ADDITIONS
Net income (loss)
for year
Parent Company ..... (3,192.50) (3,192.50)
Subsidiary Company . 1,373,676.76 1,373,676.76
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (page 3) 1,370,484.26 1,370,484.26
- ------------------------------------------------------------------------------------------------------------------------------------
DEDUCTIONS
Cash dividends paid
-$1.25 per share ..... 483,587.50 483,587.50
Net change in
unrealized loss
on securities
available for sale,
net of tax
of $180.02 ........... 88,674.04 88,674.04
- ------------------------------------------------------------------------------------------------------------------------------------
Total deductions . 483,587.50 88,674.04 572,261.54
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCES
December 31, 1996 .... $ 4,515,079.56 $ 6,981.40 $ 7,385,071.55 $ (156,832.80) $ (613,774.03) $11,136,525.68
====================================================================================================================================
- ----------
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NORTHWEST BANCSHARES OF LOUISIANA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1996 and 1995
1996 1995
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income .................................................................. $ 1,370,484.26 $ 1,226,200.90
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for depreciation ................................................ 277,838.30 245,254.48
Amortization of investment security discounts ............................. (41,179.20) (37,111.55)
Amortization of investment security premiums .............................. 76,853.71 88,453.07
Deferred income taxes ..................................................... -0- 27,730.52
Decrease (increase) in interest receivable ................................ 24,559.78 (19,528.68)
Decrease (increase) in prepaid expenses ................................... 36.01 3,660.58
Increase (decrease) in interest payable ................................... (17,221.30) 59,811.16
Increase (decrease) in taxes payable ...................................... 23.26 (3,524.40)
Increase (decrease) in deposits payable ................................... -0- (550.00)
Equipment abandonment losses .............................................. -0- 1,050.04
Loss on sale of equipment ................................................. 1,678.88 -0-
- ----------------------------------------------------------------------------------------------------------------------
Total adjustments ............................................... 1,693,073.70 1,591,446.12
Recoveries on loan losses ................................................... 47,025.48 62,735.91
Decrease (increase) in other assets ......................................... 22,908.46 80,595.09
Increase (decrease) in loan principal payable ............................... (1,486.35) 10,195.18
- ----------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities ...................... 1,761,521.29 1,744,972.30
- ----------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Net (increase) decrease in interest bearing deposits with banks ............. 98,000.00 302,000.00
Purchases of securities available for sale .................................. (21,528,875.02) (4,000,000.00)
Purchases of securities to be held to maturity .............................. (5,015,312.50) (4,714,394.00)
Proceeds from maturities of securities available for sale ................... 7,021,869.34 1,834,952.94
Proceeds from maturities of securities to be held to maturity ............... 16,045,000.00 17,135,000.00
Principal collected on longer-term loans .................................... 54,082,754.63 33,695,976.19
Longer-term loans originated or acquired .................................... (58,747,634.29) (38,394,848.62)
Purchase of land, building and improvements ................................. (16,014.00) (68,970.99)
Purchase of equipment ....................................................... (118,968.03) (297,560.60)
Proceeds from sale of equipment ............................................. 750.00 -0-
- ----------------------------------------------------------------------------------------------------------------------
Net cash (used) provided by investing activities ................ (8,178,429.87) 5,492,154.92
- ----------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net increase (decrease) in demand deposits,
NOW accounts and savings accounts ......................................... $ 1,083,059.26 $ 1,539,799.54
Proceeds from sales of certificates of deposit .............................. 44,068,828.49 50,760,670.98
Payments for maturing certificates of deposit ............................... (43,475,802.51) (48,101,866.35)
Net increase (decrease) in borrowed funds ................................... 310,436.46 (2,794,696.87)
Cash dividends .............................................................. (386,870.00) (290,152.50)
- ----------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities ......................... 1,599,651.70 1,113,754.80
- ----------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ............................... (4,817,256.88) 8,350,882.02
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ................................. 12,022,210.30 3,671,328.28
- ----------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR ....................................... $ 7,204,953.42 $12,022,210.30
======================================================================================================================
Supplemental disclosures of cash flow information: Cash paid during the year
for:
Interest .................................................................. $ 3,008,783.65 $ 2,817,440.92
======================================================================================================================
Income Taxes .............................................................. $ 590,660.00 $ 446,563.04
======================================================================================================================
- ----------
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
NORTHWEST BANCSHARES OF LOUISIANA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1996 and 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Northwest Bancshares of Louisiana,
Inc. (Company) and its wholly owned subsidiary, First National Bank in
Mansfield (Bank) conform with generally accepted accounting principles and
general practices within the banking industry. The following is a
description of the more significant policies:
Nature of Operations
Northwest Bancshares of Louisiana, Inc. is a bank-holding company which
owns all of the outstanding common stock of First National Bank in
Mansfield. The Bank provides a variety of financial services through its
branches located in DeSoto Parish in Northwest Louisiana. The Bank's
primary deposit products are demand deposits, savings accounts, and
certificates of deposit. Its primary lending products are commercial
business loans, real estate loans, and installment loans.
Principles of Consolidation
The consolidated financial statements include the accounts of Northwest
Bancshares of Louisiana, Inc. and its wholly owned subsidiary, First
National Bank in Mansfield, after elimination of significant intercompany
balances and transactions.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Material estimates that are particularly susceptible to significant change
relate to the determination of the allowance for losses on loans and the
valuation of real estate acquired in connection with foreclosures or in
satisfaction of loans. In connection with the determination of the
allowances for losses on loans and foreclosed real estate, management
obtains independent appraisals for significant properties.
While management uses available information to recognize losses on loans
and foreclosed real estate, future additions to the allowances may be
necessary based on changes in local economic conditions. In addition,
regulatory agencies, as an integral part of their examination process,
periodically review the Bank's allowances for losses on loans and
foreclosed real estate. Such agencies may require the Bank to recognize
additions to the allowances based on their judgments about information
available to them at the time of their examination. Because of these
factors, it is reasonably possible that the allowances for losses on loans
and foreclosed real estate may change materially in the near term.
Investment in Securities
At December 31, 1993, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 115, Accounting for Certain Investments in Debt and
Equity Securities. SFAS No. 115 requires the classification of securities
into one of three categories: Available for Sale, Held to Maturity or
Trading.
Management determines the appropriate classification of securities at the
time of purchase and re-evaluates the classifications periodically. If
management has the intent and the Company has the ability at the time of
purchase to hold securities until maturity or on a long-term basis, they
are classified as securities to be held to maturity and are reported at
cost, adjusted for amortization of premiums and accretion of discounts
which are recognized in interest income. Securities to be held for
indefinite periods of time and not intended to be held to maturity or on a
long-term basis are classified as securities available for sale and are
carried at fair value. Securities held for indefinite periods of time
include securities that management intends to use as part of its asset and
liability management strategy and that may be sold in response to changes
in interest rates, prepayment rates, and other factors related to interest
rate, liquidity needs or other reasons. Trading securities are those held
principally for the purpose of selling in the near future and are carried
at fair value. The Company does not currently have any trading securities.
Realized and unrealized gains and losses for trading securities are
included in earnings. Unrealized gains and losses for available for sale
securities are excluded from earnings and reported, net of income tax
effect, as a separate component of shareholders' equity. Realized gains and
losses for securities classified as either available for sale or held to
maturity are reported in earnings. Gains and losses from securities sold
are determined using the specific identification method.
Allowance for Possible Loan Losses
The allowance for possible loan losses is maintained at a level which
management believes will be adequate to absorb probable losses on existing
loans that may become uncollectible. Management determines the adequacy of
the allowance based upon review of individual credits, past loan loss
experience, current economic conditions, the risk characteristics of the
various categories of loans and other pertinent factors. Loans deemed
uncollectible are charged to the allowance. Provisions for loan losses and
recoveries on loans previously charged off are added to the allowance.
Properties and Equipment
Properties and equipment are stated at cost, less accumulated depreciation.
The provision for depreciation has been computed using straight-line and
accelerated methods for both financial and tax purposes, based on the
estimated useful lives of the respective assets.
Loans Held for Sale
Mortgage loans originated and intended for sale in the secondary market are
carried at the lower of cost or estimated market value in the aggregate.
Net unrealized gains or losses are recognized through a valuation allowance
by charges to expense or income.
Interest Income on Loans
Interest on loans is accrued and credited to income based on the principal
amount outstanding. The accrual of interest on loans is discontinued when,
in the opinion of management, there is an indication that the borrower may
be unable to meet payments as they become due. Upon such discontinuance,
all unpaid accrued interest is reversed and, thereafter, interest is
recognized when collected.
Loan Origination Fees and Costs
Loan origination fees are deferred and amortized generally over the
contractual life of the related loans as an adjustment to interest income.
Likewise, direct loan origination costs are deferred and recognized as a
reduction in the yield of the loan.
Unearned Discount
Unearned discount on installment loans is deferred and amortized into
earnings by the sum-of-the-digits method, the result of which does not
differ materially from the interest method.
Other Real Estate and Repossessed Assets
Other real estate and repossessed assets include real estate and other
collateral acquired upon the default of loans and in-substance
foreclosures. Amounts are carried at the lower of the Bank's cost of
acquisition or the asset's fair value based upon recent appraisals.
Reductions in the balance of loans at the date of acquisition are charged
to the reserve for possible loan losses. Any subsequent write-downs to
reflect current fair value are charged to noninterest expense.
Income Taxes
Provisions for income taxes are based on amounts reported in the statement
of income (after exclusion of non-taxable income such as interest on state
and municipal securities) and include deferred taxes on temporary
differences in the recognition of income and expense for tax and financial
statement purposes. Deferred tax assets and liabilities are included in the
financial statements at currently enacted income tax rates applicable to
the period in which the deferred tax assets and liabilities are expected to
be realized or settled as prescribed in SFAS No. 109, Accounting for Income
Taxes. As changes in tax laws or rates are enacted, deferred tax assets and
liabilities are adjusted through the provision for income taxes.
Net Income Per Share of Common Stock
Net income per share of common stock is computed by dividing net income by
the weighted average number of shares of common stock outstanding during
the period.
Off-Balance Sheet Financial Instruments
In the ordinary course of business the Bank has entered into off-balance
sheet financial instruments consisting of commitments to extend credit and
standby letters of credit. Such financial instruments are recorded in the
financial statements when they become payable.
Fair Values of Financial Instruments
The following methods and assumptions were used by the Bank in estimating
fair values of financial instruments as disclosed herein:
Cash and cash equivalents. The carrying amounts of cash and short-term
instruments approximate their fair value.
Securities to be held to maturity and securities available for sale. Fair
values for investment securities, excluding restricted equity securities,
are based on quoted market prices. The carrying values of restricted equity
securities approximate fair values.
Cash and Cash Equivalents
For the purpose of presentation in the consolidated statements of cash
flows, cash and cash equivalents are defined as those amounts included in
the balance sheet captions "Cash and due from banks" and "Federal funds
sold".
Prior Year Balances
Certain prior year amounts have been reclassified to conform with current
year presentation.
NOTE 2 - INVESTMENT SECURITIES
The carrying amounts of investment securities as shown in the consolidated
balance sheets of the Company and their approximate fair values at December
31 were as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Securities available for sale -
December 31, 1996
U.S. Treasury securities ........ $ 3,477,003.65 $ -0- $ 20,362.15 $ 3,456,641.50
U.S. agency securities .......... 26,024,765.65 113,131.09 152,794.65 25,985,102.09
U.S. Government
guaranteed securities ......... 2,028,632.76 -0- 80,992.76 1,947,640.00
Collateralized mortgage
obligation securities ......... 1,000,000.00 -0- 7,610.40 992,389.60
State and municipal
securities .................... 100,000.00 -0- 12.43 99,987.57
Equity securities ............... 3,662,231.87 -0- 515,670.77 3,146,561.10
Restricted investment
security ...................... 120,000.00 -0- -0- 120,000.00
- ----------------------------------------------------------------------------------------------------------------------
$36,412,633.93 $ 113,131.09 $ 777,443.16 $35,748,321.86
======================================================================================================================
December 31, 1995
U.S. agency securities .......... $15,101,120.51 $ 108,886.71 $ 125,686.08 $15,084,321.14
U.S. Government
guaranteed securities ......... 2,033,371.38 -0- 73,621.38 1,959,750.00
Collateralized mortgage
obligation securities ......... 1,000,000.00 -0- 58,750.00 941,250.00
Equity securities ............... 3,662,231.87 -0- 426,647.30 3,235,584.57
Restricted investment
security ...................... 120,000.00 -0- -0- 120,000.00
- ----------------------------------------------------------------------------------------------------------------------
$21,916,723.76 $ 108,886.71 $ 684,704.76 $21,340,905.71
======================================================================================================================
Securities to be held to maturity -
December 31, 1996
U.S. Treasury securities ........ $ 5,526,278.65 $ 14,475.28 $ 21,689.79 $ 5,519,064.14
U.S. agency securities .......... 8,188,000.94 13,221.85 23,238.49 8,177,984.30
State and municipal
securities .................... 2,679,356.79 24,073.88 8,651.80 2,694,778.87
- ----------------------------------------------------------------------------------------------------------------------
$16,393,636.38 $ 51,771.01 $ 53,580.08 $16,391,827.31
======================================================================================================================
December 31, 1995
U.S. Treasury securities ........ $ 9,015,953.96 $ 79,317.04 $ 1,052.00 $ 9,094,219.00
U.S. agency securities .......... 15,199,784.50 15,245.00 70,624.67 15,144,404.83
State and municipal
securities .................... 3,232,164.42 28,290.00 8,442.42 3,252,012.00
- ----------------------------------------------------------------------------------------------------------------------
$27,447,902.88 $ 122,852.04 $ 80,119.09 $27,490,635.83
======================================================================================================================
</TABLE>
Investment securities with a carrying amount of $20,952,356.14 at December
31, 1996 and $16,714,162.00 at December 31, 1995, were pledged to secure
public deposits and for other purposes required or permitted by law.
The amortized cost and estimated market value of debt securities at
December 31, 1996, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
<TABLE>
<CAPTION>
Held to Maturity Available for Sale
Securities Securities
- ---------------------------------------------------------------------------------------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Due in one year or less . $ 7,442,015.94 $ 7,443,622.05 $12,178,084.78 $12,087,782.79
Due after one but within
five years ............ 8,951,620.44 8,948,205.26 13,716,004.65 13,741,973.76
Due after five but within
ten years ............. -0- -0- 5,273,858.65 5,224,649.77
Due after ten years ..... -0- -0- 1,462,453.98 1,427,354.44
- ---------------------------------------------------------------------------------------------------------
$16,393,636.38 $16,391,827.31 $32,630,402.06 $32,481,760.76
=========================================================================================================
</TABLE>
There were no sales of securities available for sale or securities to be
held to maturity during 1996 or 1995.
To decrease the carrying amount of equity securities to fair value, the
valuation allowance in shareholders' equity was decreased by $88,674.04 in
1996. To increase the carrying amount of securities available for sale to
fair value, the valuation allowance in shareholders' equity was increased
by $428,896.76 in 1995.
NOTE 3 - LOANS RECEIVABLE
The composition of loans receivable in the consolidated balance sheets at
December 31, 1996 and 1995 was as follows:
<TABLE>
<CAPTION>
1996 1995
- -----------------------------------------------------------------------
<S> <C> <C>
Commercial .............. $ 6,945,412.97 $ 7,426,164.72
Mortgage ................ 29,125,503.19 24,093,564.00
Installment ............. 406,864.04 513,730.37
- -----------------------------------------------------------------------
36,477,780.20 32,033,459.09
Unearned discount ....... (36,720.73) (45,218.92)
- -----------------------------------------------------------------------
36,441,059.47 31,988,240.17
Allowance for loan losses (669,587.76) (669,372.64)
- -----------------------------------------------------------------------
Net loans receivable .... $ 35,771,471.71 $ 31,318,867.53
=======================================================================
</TABLE>
Loans on which the accrual of interest has been discontinued or reduced
amounted to $51,416.34 and $74,017.25 at December 31, 1996 and 1995. If
interest on those loans had been accrued, such income would have
approximated $3,050.00 and $10,062.77 for 1996 and 1995. Interest income on
those loans, which is recorded only when received, amounted to $2,302.52
for 1996 and $-0- for 1995.
The Bank reduced loans through foreclosures in the amount of $45,959.19 in
1996 and $-0- in 1995.
NOTE 4 - ALLOWANCE FOR POSSIBLE LOAN LOSSES
Changes in the allowance for possible loan losses for 1996 and 1995 are
summarized as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
- -------------------------------------------------------------------
1996 1995
- -------------------------------------------------------------------
<S> <C> <C>
Balance, beginning of year $ 669,372.64 $ 638,031.07
Loans charged off ........ (46,810.36) (31,394.34)
Recoveries on loans ...... 47,025.48 62,735.91
- -------------------------------------------------------------------
Balance, end of year ..... $ 669,587.76 $ 669,372.64
===================================================================
</TABLE>
Impairment of loans having carrying values of $1,984,036.24 on December 31,
1996 and $492,738.00 on December 31, 1995 has been recognized in conformity
with FASB Statement No. 114, Accounting by Creditors for Impairment of a
Loan. The total allowance for credit losses related to those loans was
$198,212.00 on December 31, 1996 and $76,250.00 on December 31, 1995.
During 1996 and 1995 the average recorded investment in impaired loans was
$1,737,361.00 and $575,564.00, respectively. For impairment recognized in
conformity with FASB Statement No. 114, the entire change in present value
of expected cash flows is reported as bad debt expense in the same manner
in which impairment initially was recognized or as a reduction in the
amount of bad debt expense that otherwise would be reported.
Interest income recognized in 1996 and 1995 during the period in which the
underlying loans were impaired was $80,715.83 and $16,678.70, respectively.
NOTE 5 - PROPERTIES AND EQUIPMENT
Properties and equipment included in the consolidated balance sheets at
December 31, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
- --------------------------------------------------------------------
<S> <C> <C>
Land ........................ $ 251,672.06 $ 251,672.06
Banking houses .............. 2,380,004.90 2,363,990.90
Furniture and equipment ..... 1,625,333.23 1,516,072.08
- --------------------------------------------------------------------
Total cost .............. 4,257,010.19 4,131,735.04
Less accumulated depreciation 2,436,371.62 2,165,811.32
- --------------------------------------------------------------------
Net book value .......... $1,820,638.57 $1,965,923.72
====================================================================
</TABLE>
Depreciation expense charged to operating expenses amounted to $277,838.30
in 1996 and $245,254.48 in 1995.
NOTE 6 - TIME DEPOSITS
Included in time deposits at December 31, 1996 and 1995 are $11,088,351.22
and $9,628,021.12, respectively, of certificates of deposit in
denominations of $100,000 or more.
Interest expense applicable to time deposits of $100,000 or more amounted
to $636,437.58 and $502,065.85 for the years ended December 31, 1996 and
1995, respectively.
<TABLE>
<CAPTION>
At December 31, 1996, the scheduled maturities of CDs are as follows:
<S> <C>
1997 $30,720,147.53
1998 5,267,063.13
1999 1,303,210.04
2000 644,491.86
2001 and thereafter 342,576.83
-----------------------------------------
$38,277,489.39
=========================================
</TABLE>
NOTE 7 - SHORT-TERM BORROWINGS
Short-term borrowings consist of term federal funds purchased and treasury
tax and loan deposits that generally mature within one to one hundred
twenty days from the transaction date.
NOTE 8 - EMPLOYEE BENEFITS
Effective January 1, 1992, the Bank established a defined contribution
401(k) plan. The plan covers substantially all employees who satisfy
certain age and service requirements. Under the terms of the plan, the Bank
may make discretionary contributions out of net profits of the Bank. The
amount of the Bank's contributions to the plan is determined annually.
Employees may also make contributions to the plan through salary deduction
provision. The Bank's liability under the plan is limited to the extent of
its contributions to the plan. The Bank made contributions of $9,247.70 to
the plan for the year ended December 31, 1996 and $8,280.97 for the year
ended December 31, 1995.
NOTE 9 - INCOME TAXES
The consolidated provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
1996 1995
- ----------------------------------------------------------------
<S> <C> <C>
Current income taxes ....... $608,124.26 $490,193.37
Deferred income taxes ...... -0- 27,730.52
- ----------------------------------------------------------------
Provision for income taxes $608,124.26 $517,923.89
================================================================
</TABLE>
The provision for federal income taxes is less than that computed by
applying the federal statutory rate of 34% in 1996 and 1995, as indicated
in the following analysis:
<TABLE>
<CAPTION>
1996 1995
- ----------------------------------------------------------------------------------------------------------
Amount Rate Amount Rate
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income tax at federal statutory rate $672,726.90 34.0% $593,002.43 34.0%
Increase (decrease) resulting from:
Tax-exempt income ................ (62,242.06) (3.2%) (67,402.82) (3.9%)
Dividends received deduction ..... (12,078.84) (.6%) (12,529.00) (.7%)
Non-deductible expenses .......... 13,002.34 .7% 12,967.38 .7%
Other - net ...................... (3,284.08) (.2%) (8,114.10) (.4%)
- ----------------------------------------------------------------------------------------------------------
Provision for income taxes ... $608,124.26 30.7% $517,923.89 29.7%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
The components of the deferred income tax asset included in other assets
are as follows:
<TABLE>
<CAPTION>
1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax asset ........................ $354,241.44 $340,985.13
Less deferred tax asset valuation allowance 283,334.08 269,897.76
- -------------------------------------------------------------------------------
Net deferred tax asset ................ $ 70,907.36 $ 71,087.37
===============================================================================
</TABLE>
The tax effects of each type of significant item that gave rise to deferred
taxes are:
<TABLE>
<CAPTION>
1996 1995
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax asset
Net unrealized loss on equity securities available for sale $175,328.06 $145,060.08
Net unrealized loss on debt securities available for sale . 50,538.04 50,718.06
Allowance for credit losses ............................... 92,227.64 95,498.06
Capital loss carryforward ................................. 15,778.38 29,339.62
Other real estate losses .................................. 20,369.32 20,369.31
- -------------------------------------------------------------------------------------------------
Deferred tax asset .................................... 354,241.44 340,985.13
- -------------------------------------------------------------------------------------------------
Deferred tax asset valuation allowance
Net unrealized loss on equity securities available for sale 175,328.06 145,060.08
Allowance for credit losses ............................... 92,227.64 95,498.06
Capital loss carryforward ................................. 15,778.38 29,339.62
- -------------------------------------------------------------------------------------------------
Deferred tax asset valuation allowance ................ 283,334.08 269,897.76
- -------------------------------------------------------------------------------------------------
Net deferred tax asset ................................ $ 70,907.36 $ 71,087.37
=================================================================================================
</TABLE>
A valuation allowance was recorded against the deferred tax asset because
management is of the opinion that it is more likely than not that the
deferred tax asset will not be realized in full. The valuation allowance
increased $13,436.32 during the year ended December 31, 1996.
NOTE 10 - LOAN SERVICING
Mortgage loans serviced for others are not included in the accompanying
consolidated balance sheets. The unpaid principal balances of mortgage
loans serviced for others was $15,813,307.58 and $13,675,249.32 at December
31, 1996 and 1995, respectively.
Custodial escrow balances maintained in connection with the foregoing loan
servicing, and included in demand deposits, were approximately $58,782.10
and $45,962.70 at December 31, 1996 and 1995, respectively.
NOTE 11 - RELATED PARTIES
The Bank has entered into transactions with its directors, officers,
employees, significant shareholders and their affiliates (related parties).
Such transactions were made in the ordinary course of business with the
Bank, including borrowings, all of which, in the opinion of management,
were on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions
with other persons and did not involve more than a normal risk of
collectibility or present any other unfavorable features to the Bank. At
December 31, 1996 and 1995, the aggregate indebtedness of those individuals
and their interests as a group to the Bank was approximately $1,268,030.08
and $870,391.30, respectively. During 1996, new loans to related parties
amounted to $854,182.80 and repayments amounted to $456,544.02.
NOTE 12 - COMMITMENTS AND CONTINGENT LIABILITIES
The Bank's consolidated financial statements do not reflect various
commitments and contingent liabilities which arise in the normal course of
business and which involve elements of credit risk, interest rate risk and
liquidity risk. These commitments and contingent liabilities are described
in Note 13 - Financial Instruments.
A summary of the Bank's commitments and contingent liabilities at December
31, 1996, is as follows:
<TABLE>
<CAPTION>
<S> <C>
Commitments to extend credit $4,391,926.63
Standby letters of credit .. 198,900.00
- --------------------------------------------------
$4,590,826.63
==================================================
</TABLE>
During the year ended December 31, 1992, the Bank entered into a mortgage
selling and servicing contract with the Federal National Mortgage
Association. In connection with this contract, the Bank sells mortgage
notes to the Federal National Mortgage Association and contracts to service
the loans. As a result of the sales, the Bank makes certain warranties
regarding the notes. In the event any warranty made by the Bank regarding a
mortgage note proves to be untrue, the Bank may be required to repurchase
the mortgage note and indemnify the Federal National Mortgage Association
for any related losses.
Under the terms of a resolution passed by the Board of Directors of First
National Bank in Mansfield, any director who has served on the board for 20
years shall have the option to retire and upon retirement, the Bank is
committed to pay the director $450.00 per month for the remainder of the
director's life. As of December 31, 1996 and 1995, one director was
currently being paid under this commitment and an additional eight
directors were eligible to retire and receive this retirement compensation.
The Bank's potential future liability for this commitment based on life
expectancy of eligible directors was approximately $625,320.00 at December
31, 1996.
NOTE 13 - CONCENTRATIONS OF CREDIT
The Bank primarily serves customers located in DeSoto Parish, Louisiana.
Consequently, most of the Bank's loans, commitments and commercial and
standby letters of credit have been granted to customers in that market
area. Investments in state and municipal securities also involve
governmental entities within the Bank's market area. The concentrations of
credit by type of loan are set forth in Note 3. Commitments to extend
credit and commercial and standby letters of credit were granted primarily
to commercial borrowers. The Bank, as a matter of policy, does not extend
credit to any single borrower or group of related borrowers in excess of
its legal limits of approximately $1,624,836.96.
NOTE 14 - FINANCIAL INSTRUMENTS
The Bank is a party to financial instruments with off-balance sheet risk in
the normal course of business to meet the financing needs of its customers
and to reduce its own exposure to fluctuations in interest rates. These
financial instruments include commitments to extend credit and standby
letters of credit. Those instruments involve, to varying degrees, elements
of credit and interest-rate risk in excess of the amount recognized in the
statement of financial position. The contract or notional amounts of those
instruments reflect the extent of the Bank's involvement in particular
classes of financial instruments.
The Bank's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit
and standby letters of credit is represented by the contractual notional
amount of those instruments. The Bank uses the same credit policies in
making commitments and conditional obligations as it does for on-balance
sheet instruments.
Unless noted otherwise, the Bank does not require collateral or other
security to support financial instruments with credit risk.
Loan commitments - A loan commitment represents a contractual agreement to
lend up to a specified amount over a stated period of time as long as there
is no violation of any condition established in the contract and generally
requires the payment of a fee. Customers use credit commitments to ensure
that funds will be available for working capital purposes, for capital
expenditures and to ensure access to funds at specified terms and
conditions. Substantially all of the Bank's commitments to extend credit
are contingent upon customers maintaining specific credit standards at the
time of loan funding. Management assesses the credit risk associated with
certain commitments to extend credit in determining the allowance for
possible credit losses. Since the majority of the loan commitments are
expected to expire unfunded, the total commitment amounts do not represent
future cash requirements. Interest rates, in the event funding of the
commitments is required, are predominantly based on floating rates or
prevailing market rates at the time such commitments are funded.
Substantially all of these commitments expire in 1-2 years unless renewed
by the Bank.
Letters of credit - Standby letters of credit are issued to improve a
customer's credit standing with third parties, whereby the Bank agrees to
honor a financial commitment by issuing a guarantee to third parties in the
event the Bank's customer fails to perform. These instruments frequently
are issued in support of third-party debt, such as corporate debt issuance,
industrial revenue bonds and municipal securities, as well as
bid-or-performance-related contracts. Commercial letters of credit are
short-term commitments issued for trade purposes, primarily to finance the
movement of goods between a buyer and seller. This type of letter of credit
ensures prompt payment to the seller in accordance with its terms. Although
a commercial letter of credit is contingent upon the satisfaction of
specified conditions, it represents a current exposure if the customer
defaults on the underlying transaction. Credit risk exposure from standby
and commercial letters of credit is minimized by subjecting these
off-balance sheet instruments to the same credit policies and underwriting
standards used when making loans or committing to extend credit. The Bank
evaluates each customer's credit worthiness on a case-by-case basis. The
amount of collateral obtained, if deemed necessary, is based on such
evaluations. Acceptable collateral includes cash or cash equivalents,
marketable securities, deeds of trust, receivables, inventory, fixed assets
and financial guarantees. As with loan commitments, letters of credit are
expected to expire without requiring funding and therefore the contract
amounts do not represent future cash requirements.
Generally accepted accounting principles require disclosure of fair value
information about financial instruments for which it is practicable to
estimate fair value, whether or not the financial instruments are
recognized in the financial statements. When quoted market prices are not
available, fair values are based on estimates using present value or other
valuation methods. The valuation methods are significantly affected by the
assumptions used, including the discount rate and estimates of future cash
flows. Certain financial instruments and all non-financial instruments are
excluded from the disclosure requirements. Further, the disclosures do not
include estimated fair values for items which are not financial instruments
but which represent significant value to the Company. Accordingly, the
aggregate fair value amounts presented do not represent the underlying
value of the Company.
The estimated fair values of the Bank's financial instruments were as
follows:
<TABLE>
<CAPTION>
December 31, 1996
- -------------------------------------------------------------------------------------------
Carrying Fair
Amount Value
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Financial assets:
Cash and due from banks and federal funds sold $ 7,204,953.42 $ 7,204,953.42
Interest bearing deposits with banks ......... 195,000.00 195,000.00
Securities available for sale ................ 35,748,321.86 35,748,321.86
Securities to be held to maturity ............ 16,393,636.38 16,391,827.31
Loans held for sale .......................... 327,650.00 327,650.00
Loans receivable ............................. 35,771,471.71 35,771,471.71
Accrued interest receivable .................. 864,320.15 864,320.15
Financial liabilities:
Deposit liabilities .......................... 86,168,260.22 86,168,260.22
Short-term borrowings ........................ 425,401.25 425,401.25
</TABLE>
The fair value estimates presented are based on information available to
management as of December 31, 1996. Although management is not aware of any
factors that would significantly affect the estimated fair value amounts,
these amounts have not been revalued for purposes of these financial
statements since that date. Therefore, current estimates of fair value may
differ significantly from the amounts presented. None of the assets or
liabilities included above are held for trading purposes.
Management concluded that it is impracticable to estimate the fair value of
loans receivable, accrued interest receivable, deposit liabilities, and
off-balance sheet instruments without incurring excessive costs. Outside
specialists would be needed due to the complexity involved in estimating
the financial instruments' fair value. Therefore, fair values for these
items are based on carrying amounts.
NOTE 15 - REGULATORY MATTERS
The Bank is subject to various regulatory capital requirements administered
by its primary federal regulator, the Office of Comptroller of the Currency
(OCC). Failure to meet the minimum regulatory capital requirements can
initiate certain mandatory, and possible additional discretionary actions
by regulators, that if undertaken, could have a direct material affect on
the Bank's financial statements. Under the regulatory capital adequacy
guidelines and the regulatory framework for prompt corrective action, the
Bank must meet specific capital guidelines involving quantitative measures
of the Bank's assets, liabilities, and certain off-balance-sheet items as
calculated under regulatory accounting practices. The Bank's capital
amounts and classification under the prompt corrective action guidelines
are also subject to qualitative judgments by the regulators about
components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios of total risk-based
capital and Tier I capital to risk-weighted assets (as defined in the
regulations), and Tier I capital to adjusted total assets (as defined).
Management believes, as of December 31, 1996, that the Bank meets all the
capital adequacy requirements to which it is subject.
As of December 31, 1996, the most recent notification from the OCC, the
Bank was categorized as well capitalized under the regulatory framework for
prompt corrective action. To remain categorized as well capitalized, the
Bank will have to maintain minimum total risk-based, Tier I risk-based, and
Tier I leverage ratios as disclosed in the table below. There are no
conditions or events since the most recent notification that management
believes have changed the Bank's prompt corrective action category.
<TABLE>
<CAPTION>
For Capital
Adequacy Purposes and
to Be Adequately
Capitalized Under The
Prompt Corrective
Actual Action Provisions
- ----------------------------------------------------------------------------------------------------
Amount Ratio Amount Ratio
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
As of December 31, 1996:
Total Risk-Based Capital
(to Risk-Weighted Assets) $10,243,000 21.53% > $ 3,806,720 > 8.0%
- -
Tier I Capital
(to Risk-Weighted Assets) 9,647,000 20.27% > 1,903,360 > 4.0%
- -
Tier I Capital
(to Adjusted Total Assets) 9,647,000 9.68% > 3,986,200 > 4.0%
- -
As of December 31, 1995:
Total Risk-Based Capital
(to Risk-Weighted Assets) $10,102,000 23.47% > $ 3,443,301 > 8.0%
- -
Tier I Capital
(to Risk-Weighted Assets) 9,562,000 22.22% > 1,721,651 > 4.0%
- -
Tier I Capital
(to Adjusted Total Assets) 9,562,000 9.88% > 3,871,115 > 4.0%
- -
</TABLE>
NOTE 16 - RESTRICTIONS ON RETAINED EARNINGS
The Bank, as a National Bank, is subject to the dividend restrictions set
forth by the Comptroller of the Currency. Under such restrictions, the Bank
may not, without the prior approval of the Comptroller of the Currency,
declare dividends in excess of the sum of the current year's earnings plus
the retained earnings from the prior two years. The dividends, as of
December 31, 1996, that the Bank could declare, without the approval of the
Comptroller of the Currency, amounted to approximately $2,225,381.89.
NOTE 17 - DIVIDENDS DECLARED
On November 25, 1996 the Board of Directors of First National Bank in
Mansfield declared a cash dividend of $12.00 per share payable January 2,
1997 to shareholders of record on December 31, 1996.
On November 25, 1996 the Board of Directors of Northwest Bancshares of
Louisiana, Inc. declared a cash dividend of $1.25 per share payable January
2, 1997 to shareholders of records on December 31, 1996.
NOTE 18 - ORGANIZATION
Northwest Bancshares of Louisiana, Inc. was incorporated under the laws of
the State of Louisiana on July 21, 1981. On November 20, 1981, the Company
received the approval of the Board of Governors of the Federal Reserve
System to become a bank holding company under the Bank Holding Company Act
of 1956, as amended, and to acquire outstanding common stock of First
National Bank in Mansfield. In response to a private offer of exchange, the
Company received 100,000 shares (100%) of the outstanding common stock of
First National Bank in Mansfield. For these shares the Company exchanged
200,000 shares of its common stock. The Company's investment in the Bank
was recorded on the Company's books at an average cost of $45.15 per share.
On December 7, 1993, the Board of Directors of Northwest Bancshares of
Louisiana, Inc. authorized a stock split whereby record shareholders at the
close of business on January 1, 1994, received one additional share of
common stock for each share of stock held on such date resulting in the
issuance of an additional 200,000 shares of common stock. As a result of
the stock split, the number of issued and outstanding shares of stock
increased to 386,870 shares and the number of shares of stock in treasury
increased to 13,130 shares.
NOTE 19 - SUBSEQUENT EVENTS
Under the terms of a resolution passed by the Board of Directors of First
National Bank in Mansfield and Northwest Bancshares of Louisiana, Inc., the
retirement policy for members of the Board of Directors of First National
Bank in Mansfield (referred to in Note 12) is terminated as of July 8,
1997.
On June 26, 1997, Northwest Bancshares of Louisiana, Inc. and Subsidiary
and Hibernia Corporation entered into an Agreement and Plan of Merger
pursuant to which Northwest Bancshares of Louisiana, Inc. and Subsidiary
would merge with Hibernia. The Merger, to be accounted for as a pooling of
interests, will be affected with the exchange of approximately $21.3
million in Hibernia Common Stock for all of the outstanding Northwest
Bancshares of Louisiana, Inc. and Subsidiary Common Stock. Each outstanding
share of Northwest Bancshares of Louisiana, Inc. and Subsidiary Common
Stock would be exchanged for shares of Hibernia Common Stock with a market
value of $55.00. The Exchange Rate will be based upon the average closing
price for one share of Hibernia Common Stock for the ten-day period prior
to closing subject to a minimum Exchange Rate of 3.898 shares of Hibernia
Common Stock. If the average market price of Hibernia is less than $12.14
per share the merger shall convert to a cash transaction and each share of
Northwest Common Stock shall receive $55.00 in cash.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF
NORTHWEST BANCSHARES OF LOUISIANA, INC. AND SUBSIDIARY
DECEMBER 31, 1996 AND DECEMBER 31, 1995
The following discussion provides certain information concerning the financial
condition and results of operations of Northwest Bancshares of Louisiana, Inc.
and Subsidiary for the two years ended December 31, 1996 and 1995. The financial
position and results of operations of Northwest Bancshares of Louisiana, Inc.
And Subsidiary resulted primarily from operations at its banking subsidiary, the
Bank. Management's discussion should be read in conjunction with the Northwest
Bancshares of Louisiana, Inc. and Subsidiary financial statements and
accompanying notes presented elsewhere in this Proxy Statement- Prospectus.
OVERVIEW
Northwest Bancshares of Louisiana, Inc. and Subsidiary reported net income for
1996 of $1,370,484, an increase of 11.77% from net income of $1,226,201 for
1995. Returns on average assets and average equity for 1996 were 1.38% and
13.98% compared with 1.27% and 12.63% for 1995. The increase in net income for
1996 is due to improved net interest income due to an increase of earning assets
in relation to paying liabilities. Non interest income increased more than
non-interest expenses during the period.
Northwest Bancshares of Louisiana, Inc. and Subsidiary's total assets at
December 31, 1996 were $98,500,862, an increase of 2.91% from December 31, 1995.
Loans increased $4,641,000 from December 31, 1995 to December 31, 1996 due
principally to growth in consumer and commercial loans. Total deposits at
December 31, 1996 of $86,168,260 were up 1.98% compared with December 31, 1995.
This increase is attributed to the growth of all deposit products with the
exception of NOW account deposits.
RESULTS OF OPERATIONS
Net Interest Income. Tax equivalent net interest income for 1996 was $4,016,000,
a $206,000 or 5.41% increase from 1995. This increase was due to an increase in
earnings assets. Table 1 below presents the average balance sheets, interest
income and expense, and average yields or rates for 1996 and 1995. Table 2 below
presents an analysis of the changes in tax-equivalent net interest income
between 1995 and 1996.
The following table sets forth certain information concerning the average
balances, interest income (on a fully tax equivalent basis), interest expense,
and average rates on Northwest Bancshares of Louisiana, Inc. and Subsidiary's
interest-earning assets and interest-bearing liabilities for the years indicated
(Dollars in Thousands)
<TABLE>
<CAPTION>
December 31
1996 1995
Average Average
Interest Rates Interest Rates
Average Income/ Earned Average Income/ Earned/
Balance Expense Paid Balance Expense Paid
<S> <C> <C> <C> <C> <C> <C>
Earnings assets:
Loans (before
allowance for loan losses) $33,566 $ 3,316 9.88% $29,760 $ 3,000 10.08%
- ------------------------------------------------------------------------------------------------------------
Investment securities:
Taxable securities ......... 52,700 3,137 5.95% 51,903 3,126 6.02%
Tax-exempt securities ...... 2,994 203 6.78% 3,352 227 6.77%
- ------------------------------------------------------------------------------------------------------------
Total investment securities 55,694 3,340 6.00% 55,255 3,353 6.07%
- ------------------------------------------------------------------------------------------------------------
Federal funds sold and
securities purchased
under agreement to resell .. 6,668 352 5.28% 5,755 333 5.79%
- ------------------------------------------------------------------------------------------------------------
Total earnings assets ............ $95,928 $ 7,008 7.31% $90,770 $ 6,686 7.37%
============================================================================================================
Interest-bearing liabilities:
Deposits ................... $90,628 $ 2,980 3.29% $85,862 $ 2,856 3.33%
Federal funds purchased
and securities sold
under agreement to
repurchase ....................... 18 1 5.56% 52 4 7.69%
Treasury Tax & Loan .............. 246 11 4.47% 296 16 5.41%
- ------------------------------------------------------------------------------------------------------------
Total interest-bearing
liabilities ................ $90,892 $ 2,992 3.29% $86,210 $ 2,876 3.34%
============================================================================================================
Net interest income .............. $ 4,016 $ 3,810
Net yield on earnings assets ..... 4.12% 4.20%
============================================================================================================
</TABLE>
The following table sets forth for the periods indicated changes in tax
equivalent net interest income between 1995 and 1996 for each major category of
interest-earning assets and interest-bearing liabilities attributable to changes
in average volumes and rates.
<TABLE>
<CAPTION>
CHANGES IN TAX EQUIVALENT NET INTEREST INCOME (Dollars in
Thousands) 1996 Compared with 1995
Increase (Decrease) Due to Change in:
Volume Rate Total
<S> <C> <C> <C>
Income earned on :
Loans .................................................. $ 384 $ (68) $ 316
Taxable securities ............................... 48 (37) 11
Tax-exempt securities ............................ (24) -0- (24)
Short term investments ........................... 53 (34) 19
- --------------------------------------------------------------------------------------------------
Total ....................................... 461 (139) 322
==================================================================================================
Interest paid on:
Deposits ......................................... $ 159 $ (35) $ 124
Federal funds purchased and securities sold under
agreement to repurchase .......................... (3) -0- (3)
Treasury, Tax & Loan ............................. (3) (2) (5)
- --------------------------------------------------------------------------------------------------
Total ....................................... $ 153 (37) $ 116
==================================================================================================
Net Interest income .................................... $ 308 $(102) $ 206
==================================================================================================
- ------------
Changes not solely due to volume or rate changes are allocated to rate.
</TABLE>
Interest Rate Sensitivity. Interest rate risk is the potential impact on net
interest income due to changes in interest rates in any given time frame and the
opportunity to reprice interest-earning assets and interest-bearing liabilities.
Management uses simulation models to estimate the effect of significant interest
rate changes on net interest income and the fair market value of securities
available for sale. Management may alter the mix of floating and fixed-rate
assets and liabilities, change loan and deposit pricing schedules, and adjust
maturities through sales and purchases of securities available for sale as a
means of limiting interest rate risk to an acceptable level.
Provision for Loan Losses. The provision for possible loan losses is the amount
that is added to Northwest Bancshares of Louisiana, Inc. and Subsidiary's
allowance for loan losses, by a charge against earnings, in order to maintain a
balance in the allowance for loan losses that is deemed by management to be
adequate to absorb the inherent risk of future loan losses in Northwest
Bancshares of Louisiana, Inc. and Subsidiary's loan portfolio. The amount of the
provision is dependent upon many factors, including management's evaluation of
historical loan loss experience in relation to outstanding loans, the existing
level of the allowance, reviews of loan quality, loan growth, changes in the
composition of the loan portfolio, general economic factors, the financial
condition of the borrowers, their ability to repay the loan and the value and
liquidity of collateral.Northwest Bancshares of Louisiana, Inc. and Subsidiary's
1996 and 1995 provision for loan losses was -0-. The allowance for loan losses
of $669,588 was 1.82% of net loans outstanding at December 31, 1996. The
allowance for loan losses at December 31, 1995 was $669,373 or 2.08% of net
loans outstanding.
Non-Interest Income. Northwest Bancshares of Louisiana, Inc. and Subsidiary's
non-interest income for 1996 increased 4.55% from 1995 due to increase in
service charges on deposit accounts from increased account activity.
Non-Interest Expense. Total non-interest expense for 1996 increased $18,557 or
.67% from 1995. This increase is a result of increases in personnel, equipment
and other costs.
Income Taxes. Northwest Bancshares of Louisiana, Inc. and Subsidiary's ratio of
taxable income to total income before income taxes increased from 1996 to 1995,
resulting in an increase in the effective tax rate from 29.7% in 1995 to 30.7%
in 1996.
Financial Condition
Total Assets. At December 31, 1996 total consolidated assets were $98,500,862 an
increase of $2,788,872 or 2.91% from December 31, 1995. This increase in total
assets is due to continued growth in total deposits.
Investment Securities. Northwest Bancshares of Louisiana, Inc. and Subsidiary's
adopted Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments and Debt Securities" ("SFAS 115") , as of January 1, 1994.
SFAS 115 addresses the accounting and reporting for investments in equity
securities that have readily determinable fair value and for all investments in
debt securities and requires classification of securities as trading, available
for sale or held to maturity. Management determines the classification of
securities when they are purchased. Securities which Northwest Bancshares of
Louisiana, Inc. and Subsidiary has the intent and ability to hold to maturity
are classified as held to maturity and are stated at cost, adjusted for
amortization of premiums and accretion of discounts. Securities which may be
sold in response to interest rates, liquidity needs or other factors are
classified as available for sale. These securities are reflected at fair value,
and net unrealized gains or losses are reflected as a separate component of
shareholders' equity, net of income tax effects.
The composition of Northwest Bancshares of Louisiana, Inc. and Subsidiary's
investment portfolio directly reflects Northwest Bancshares of Louisiana, Inc.
and Subsidiary's investment strategy of maximizing portfolio yields subject to
risk and liquidity considerations. The composition, amortized cost and estimated
fair value of investment securities at December 31, 1996 and 1995 were as
follows:
(Dollars in Thousands)
<TABLE>
<CAPTION>
Amortized Estimated
Cost Fair Value
<S> <C> <C>
At December 31, 1996:
Available-for-Sale
U. S. Government ............... $ 3,477 $ 3,457
State and political subdivisions 100 100
Federal agencies ............... 28,053 27,933
Mortgage-backed securities ..... 1,000 992
- ---------------------------------------------------------------------
Total debt securities ..... $32,630 $32,482
Restricted investment security . 120 120
Equity securities .............. 3,662 3,146
- ---------------------------------------------------------------------
Total Available -for-Sale . $36,412 $35,748
=====================================================================
Held to Maturity
U.S. Government ................ $ 5,526 $ 5,519
State and political subdivisions 2,679 2,695
Federal agencies ............... 8,188 8,178
- ---------------------------------------------------------------------
Total Held-to-maturity ............... $16,393 $16,392
=====================================================================
At December 31, 1995:
Available -for-Sale
Federal agencies ............... $17,134 $17,044
Mortgage-backed securities ..... 1,000 941
- ---------------------------------------------------------------------
Total debt securities .......... 18,134 17,985
Restricted investment security . 120 120
Equity securities .............. 3,662 3,236
- ---------------------------------------------------------------------
Total Available-for-sale .. $21,916 $21,341
=====================================================================
Held-to-Maturity
U.S. Government ................ $ 9,016 $ 9,094
State and political subdivisions 3,232 3,252
Federal agencies ............... 15,200 15,144
- ---------------------------------------------------------------------
Total Held-to-maturity .... $27,448 $27,490
=====================================================================
</TABLE>
The amortized cost and estimated fair value of debt securities at December 31,
1996, by contractual maturities, are shown below. Actual maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayments penalties. (Dollars in
Thousands)
<TABLE>
<CAPTION>
Available-for-Sale Held-to-Maturity
Securities Securities
Esimated Estimated
Amortized Fair Amortized Fair
Cost Value Cost Value
<S> <C> <C> <C> <C>
Due in one year or less ... $12,178 $12,088 $ 7,442 $ 7,444
Due after one year
through five years .. 13,716 13,742 8,952 8,948
Due after five years
through ten years ... 5,274 5,225 -0- -0-
Due after ten years ....... 462 435 -0- -0-
- ---------------------------------------------------------------------------------------
$31,630 $31,490 $16,393 $16,392
Mortgage-backed securities 1,000 992 -0- -0-
- ---------------------------------------------------------------------------------------
$32,630 $32,482 $16,393 $16,392
=======================================================================================
</TABLE>
Loans. Northwest Bancshares of Louisiana, Inc. and Subsidiary engages in real
estate lending through real estate mortgage and construction lending, and
commercial and consumer lending. The specific underwriting criteria for each
major loan category is outlined in detail in the formal written loan policy and
is approved by the Board of Directors. In general, each loan is evaluated based
on, among other things, character and leverage capacity of the borrower, capital
and investment in a particular property, if applicable, cash flow, collateral,
market conditions for the borrower's business or project and prevailing economic
trends and conditions. The loan policies of the Bank, including the underwriting
criteria for major loan categories, are adjusted periodically with each change
approved by the Bank's Board of Directors. New criteria and new policies are the
result of regulatory changes, the experience of the existing portfolio,
financial and market conditions and competition in the Bank's primary market.
The Bank's Board of Directors weighs each new criteria after considering the
foregoing factors and in light of the overall financial conditions and
performance of the Bank. The Bank's underwriting criteria are routinely reviewed
by management and external examiners consistent with Bank policy and banking
regulations.
The table below sets forth the type and amount of Northwest Bancshares of
Louisiana, Inc. and Subsidiary's loans, net of unearned discount, at December
31, 1996 and 1995. (Dollars in Thousands)
<TABLE>
<CAPTION>
December 31,
1996 1995
<S> <C> <C>
Commercial, financial and agricultural loans, not secured by real estate $13,874 $ 7,315
Real estate construction loans .......................................... 722 1,478
Real estate mortgage loans .............................................. 16,376 17,570
Installment loans to consumers, not secured by real estate ............. 5,798 5,766
- ---------------------------------------------------------------------------------------------------------
$36,770 $32,129
=========================================================================================================
</TABLE>
As of December 31, 1996, the Bank had no major concentrations of its loan
portfolio to any one customer or in any one business or industry classification.
Loans have increased $4,641,000 or 14.44% for December 31, 1995 to December 31,
1996. This loan growth was primarily in commercial loans.
The percentage of loans in each category to total loans for each of the periods
indicated is shown below:
<TABLE>
<CAPTION>
December 31,
1996 1995
- ----------------------------------------------------------------------
<S> <C> <C>
Real estate loans:
Construction ................... 1.96% 4.60%
Mortgage ....................... 44.54 54.68
Total real estate loans ........ 46.50 59.28
Commercial, financial and agricultural 37.73 22.77
Installment .......................... 15.77 17.95
- ----------------------------------------------------------------------
100.00% 100.00%
======================================================================
</TABLE>
The maturity schedule and rate structure of Northwest Bancshares of Louisiana,
Inc. and Subsidiary's loan portfolio has an impact on Northwest Bancshares of
Louisiana, Inc. and Subsidiary's ability to meet its liquidity demands and
respond favorably to changes in interest rates. At December 31, 1996, 52.71% of
Northwest Bancshares of Louisiana, Inc. and Subsidiary's total loans were
scheduled to mature within one year or less and 51.68% of Northwest Bancshares
of Louisiana, Inc. and Subsidiary's total loans had floating or adjustable
interest rates. The following table provides information concerning loan
portfolio maturity, based on remaining scheduled repayments of principal, by
type of loan. Real estate loans are included in either the commercial or
installment classification depending upon the use of the real estate pledged as
collateral and are aged according. (Dollars in Thousands)
<TABLE>
<CAPTION>
At December 31, 1996:
Maturity or Earliest Reporting
Over One
One Year Through Five Over Five
Or Less Years Years Total
<S> <C> <C> <C> <C>
Commercial, financial and agricultural loans
Fixed rate .................................. $ 2,913 $ 3,072 $ 132 $ 6,117
Variable rate ............................... 5,215 2,538 7,753
Real estate loans:
Fixed rate .................................. 1,407 3,463 1,068 5,938
Variable rate ............................... 6,821 3,092 1,221 11,134
Installment loans:
Fixed rate .................................. 2,859 2,731 71 5,661
Variable rate ............................... 115 - - 115
Total loans
(Excluding non-accrual ........................ 19,330 14,896 2,492 36,718
loans)
Non-accrual loans ............................. 52 - - 52
- -----------------------------------------------------------------------------------------------------------
Total loans ................................... $19,382 $14,896 $ 2,492 $36,770
===========================================================================================================
</TABLE>
Normally borrowers are expected to meet contractual terms. In some cases,
however, borrowers are permitted to roll over obligations after appropriate
review of the credit quality and determination of the borrower's ability and
willingness to repay.
The data shown above is in a format which conforms with reports to the bank
regulatory agencies and has not been restated to reflect anticipated rollovers,
which management does not believe would materially affect the data presented.
Non-accrual, Past Due and Modified Loans. Non-performing assets include
non-performing loans and foreclosed real estate held for sale. Non-performing
loans include loansclassified as non-accrual or renegotiated to provide a
reduction or deferral of interest or principal and those past due 90 days or
more on which interest is still being accrued. It is the general policy of
Northwest Bancshares of Louisiana, Inc. and Subsidiary to place loans on
non-accrual status when, in the opinion of management, there exists sufficient
uncertainty as to the collectibility of the contractual interest or principal or
if the loan becomes 90 days delinquent, whichever comes first. Placing a loan on
a non-accrual status causes an immediate charge against earnings for the
interest which has been accrued but not yet collected on the loan and eliminates
future interest earnings with respect to that loan.
Interest on such loans is not recognized until all of the principal is collected
or until the loan is returned to a performing status. Interest income recognized
on non-accrual loans during 1996 and 1995 was not significant.
As of December 31, 1996, Northwest Bancshares of Louisiana, Inc. and Subsidiary
had non-performing assets totaling $92,000 or approximately .25% of total loans
and foreclosed property at such date compared with $120,000 and .37% at December
31, 1995.
Northwest Bancshares of Louisiana, Inc. and Subsidiary's non-performing loans at
December 31, 1996 and 1995 are shown below. (Dollars in Thousands)
<TABLE>
<CAPTION>
December 31
- -------------------------------------------------------------------------------
1996 1995
---- ----
<S> <C> <C>
Loans accounted for on a non-accrual basis ........... $52 $65
Loans which are contractually past due 90 or more days 6 -0-
Loans, the terms of which have been renegotiated ..... - -
- -------------------------------------------------------------------------------
Total non-performing loans ............................ $58 $65
===============================================================================
</TABLE>
Northwest Bancshares of Louisiana, Inc. and Subsidiary's management is not aware
of any loans classified for regulatory purposes and excluded from the above
table which represent or result from trends or uncertainties that will
materially impact future operating results, liquidity, or capital resources, or
represent material credits about which management is aware of any information
which causes doubts as to the ability of such borrowers to comply with the loan
repayment terms.
In May of 1993, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 114, "Accounting by Creditors for
Impairment of a Loan," which was amended by Statement of Financial Accounting
Standards No. 118, "Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosure," issued in October of 1994. These statements require
that impaired loans be measured at the present value of expected cash flows
discounted at the loan's effective interest rate, or, as a practical expedient,
at the loans observable market price or the fair value of the collateral if the
loan is collateral dependent. Northwest Bancshares of Louisiana, Inc. and
Subsidiary's adoption of these new standards on January 1, 1995, did not have a
significant effect on the allowance for loan losses or Northwest Bancshares of
Louisiana, Inc. and Subsidiary's method of income recognition for impaired
loans.
Allowance for Loan Losses. Northwest Bancshares of Louisiana, Inc. and
Subsidiary charges to operating expense an amount necessary to maintain the
balance in the allowance for possible loan losses at a level that is deemed to
be adequate to absorb all expected loan losses. Management determines the
adequacy of its reserve and the amount of any additional provision or negative
provision for possible loan losses based on many factors, including an
evaluation of historical loan loss experience in relation to outstanding loans,
the existing level of the allowance, reviews of loan quality, loan growth,
changes in the composition of the loan portfolio, general economic factors, the
financial condition of the borrowers and their ability to repay the loan and the
value and liquidity of collateral. The amount in the allowance for possible loan
losses is reviewed by management on a monthly basis to determine whether
additional provisions should be made or whether transfers from the allowance to
earnings are justified. Northwest Bancshares of Louisiana, Inc. and Subsidiary's
board of directors reviews the adequacy of the reserve on a quarterly basis.
The following table summarized averages of loan balances, changes in the
allowance for possible loan losses arising from loans charged off and recoveries
on loans previously charged off, by loan category, and the provision of or
possible loan losses charged to operating expense as of the dates and the
periods indicated. (Dollars in Thousands):
<TABLE>
<CAPTION>
December 31
1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
Average total loans net of discounts ....... $ 33,566 $ 29,760
===============================================================================
Beginning balance .......................... $ 669 638
Loans charged off:
Real estate:
Mortgage ....................... 15 15
Commercial, financial and agricultural -0- 1
Installment .......................... 32 15
Total charged off ............... 47 31
Recoveries:
Real estate:
Mortgage ....................... 30 43
Commercial, financial and agricultural -0- 11
Installment .......................... 18 8
Total recoveries ................ 48 62
Net loans charged off ...................... (1) (31)
Provision for loan losses .................. -0- -0-
Ending balance ............................. 670 669
===============================================================================
Ratio of net charge-offs during period .....
to average loans outstanding .0% (.10%)
</TABLE>
Northwest Bancshares of Louisiana, Inc. and Subsidiary's allowance for possible
loan losses at December 31, 1996 was $669,558, which, in management's opinion,
is adequate to cover possible losses in its current loan portfolio. However, no
assurance can be given that future changes in economic conditions that might
adversely affect Northwest Bancshares of Louisiana, Inc. and Subsidiary's
principal market area, borrowers or collateral values, and other circumstances
will not result in increased losses in Northwest Bancshares of Louisiana, Inc.
and Subsidiary's loan portfolio in the future.
Deposits and Other Liabilities. Northwest Bancshares of Louisiana, Inc. and
Subsidiary's average total deposits increased from $85,862,000 in 1995 to
$90,627,000 in 1996. The growth in deposits is primarily attributable to new
customer deposits and additional deposits from existing customers as a result
of consistent and constant marketing and advertising programs. Northwest
Bancshares of Louisiana, Inc. and Subsidiary does not rely on any brokered
deposits. The following table summarizes the amounts of average deposits and
average rates for the period indicated: (Dollars in Thousands):
<TABLE>
<CAPTION>
December 31
1996 1995
- -------------------------------------------------------------------------------------------------
Amount Rate Amount Rate
<S> <C> <C> <C> <C>
Non-interest -
bearing demand deposits ................. $14,369 0.00% $13,282 0.00%
Interest-bearing money market/NOW deposit 27,768 2.58% 26,944 2.45%
Savings deposits ........................ 7,657 2.65% 7,657 2.56%
Time deposits ........................... 40,833 5.17% 37,979 4.97%
- -------------------------------------------------------------------------------------------------
Total average deposits .................. $90,627 3.34% $85,862 3.20%
=================================================================================================
</TABLE>
Northwest Bancshares of Louisiana, Inc. and Subsidiary also has liabilities in
the form of borrowed funds, which generally consist of federal funds purchased
and Treasury, Tax and Loan Borrowings. Northwest Bancshares of Louisiana, Inc.
and Subsidiary had federal funds purchased and Treasury, Tax and Loan Borrowings
totaling $425,401 at December 31, 1996.
Liquidity and Interest Rate Sensitivity Management. The primary functions of
asset and liability management are to assure adequate liquidity and to maintain
an appropriate balance between interest-earning assets and interest-bearing
liabilities. Liquidity represents the Bank's ability to meet the daily demand
for funds from its customers to pay maturing deposits, honor checks and drafts,
extend credit and meet other commitments. Management monitors liquidity
requirements as warranted by interest rate trends, changes in the economy,
changes in the scheduled maturities, and interest rate sensitivity of the
investment and loan portfolios as well as deposits. The Bank attempts to match
rate -sensitive assets and liabilities in order to minimize exposure from
fluctuations in interest rates and to enhance consistent growth of net interest
income through periods of changing interest rates.
The asset portion of the balance sheet provides liquidity primarily through cash
and due from banks, loan principal repayments, and cash flows from investment
securities, federal funds sold and investment securities available for sale.
The liability portion of the balance sheet provides liquidity through various
interest and non-interest-bearing deposit accounts, federal funds purchased,
securities sold under agreements to repurchase, and other short-term borrowings.
Long-standing relationships with many institutions have provided the Bank with
the opportunity to buy and sell federal funds on a daily basis.
The Bank's liquidity, which is monitored by an Asset-Liability Committee, is
deemed by management to be adequate to meet all foreseen business demands.
Capital Resources. Northwest Bancshares of Louisiana, Inc. and Subsidiary are
subject to regulatory risk-based capital guidelines. In the risk-based capital
computation, all assets are weighted based upon assigned risk factors, and
certain off-balance sheet items are included, such as loan commitments and
standby letters of credit. Capital is separated into two categories, Tier 1 and
Tier 2, which combine for Total Capital. Tier 1 consists of common shareholder
equity and perpetual preferred stock, subject to certain limitations. Tier 2
capital consists of the reserve for loan losses and subordinated debt, subject
to certain limitations. In order to be considered adequately capitalized, the
guidelines provide for minimum Total Risk-Based Capital of 8 percent, half of
which must be Tier 1 capital.
In conjunction with the risk-based capital guidelines, the regulators have also
issued leverage capital guidelines. The leverage ratio consists of Tier 1
capital as a percent of average total assets. In order to be considered
adequately capitalized, the minimum leverage ratio for banks and bank holding
companies must equal at least 4 percent.
Using year end financial data, the following table indicates the capital
adequacy of Northwest Bancshares of Louisiana, Inc. and Subsidiary as of the
dates indicated compared to the regulatory requirements that were in effect at
such dates (Dollars in Thousands):
<TABLE>
<CAPTION>
December 31
1996 1995
- -----------------------------------------------------------------------------
<S> <C> <C>
Capital
Tier 1 capital ................ $ 10,541 $ 9,798
Tier 2 capital:
Allowance for loan losses 596 540
Total risk-based capital ...... $ 11,137 $ 10,338
=============================================================================
Net risk-weighted assets .......... $ 47,584 $ 43,041
=============================================================================
Adjusted total assets ............. $ 99,655 $ 95,816
=============================================================================
Capital Ratios:
Leverage ratio ................ 10.58% 10.23%
(Regulatory minimum) .... (4.00%) (4.00%)
Tier 1 risk-based capital ratio ... 22.15% 22.76%
(Regulatory minimum) .... (4.00%) (4.00%)
Total risk-based capital ratio .... 23.40% 24.02%
(Regulatory minimum) .... (8.00%) (8.00%)
</TABLE>
RELATIONSHIP WITH INDEPENDENT AUDITORS
Edmonson & Waddell, independent auditors, has continuously served as the
independent auditor for Northwest from 1982 through the present.
VALIDITY OF SHARES
The validity of the shares of Common Stock offered hereby has been passed upon
for Hibernia by Patricia C. Meringer, Corporate Counsel and Secretary of
Hibernia. As of the date of this Proxy Statement-Prospectus, Ms. Meringer owned
3,536 shares of Hibernia Common Stock and held options to purchase shares of
Hibernia Common Stock of which options to acquire 18,037 shares are currently
exercisable.
EXPERTS
The consolidated financial statements of Hibernia incorporated by
reference in Hibernia's Annual Report (Form 10- K) for the year ended December
31, 1996 have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon incorporated by reference therein and incorporated
herein by reference. Such consolidated financial statements are incorporated
herein by reference in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
The consolidated financial statements of Northwest at December 31, 1996
and 1995, and for each of the two years in the period ended December 31, 1996,
included in this Proxy Statement- Prospectus have been audited by Edmonson &
Waddell, independent auditors, as set forth in their report appearing elsewhere
herein, and are included in reliance upon such report given upon the authority
of such firm as experts in accounting and auditing.
APPENDICES
APPENDIX A
AGREEMENT AND PLAN OF MERGER
OF
NORTHWEST BANCSHARES OF LOUISIANA, INC.
WITH AND INTO
HIBERNIA CORPORATION
AGREEMENT AND PLAN OF MERGER dated as of June 26, 1997 (this
"Agreement"), adopted and made by and between Northwest Bancshares
of Louisiana, Inc. (Northwest) and Hibernia Corporation
("Hibernia").
Northwest is a corporation duly organized and existing under the laws of
the State of Louisiana; has its registered office at 214 South Washington,
Mansfield, Louisiana 71052; and is a bank holding company within the meaning of
the Bank Holding Company Act of 1956, as amended (the "Bank Holding Company
Act"). The presently authorized capital stock of Northwest consists solely of
500,000 shares of common stock of no par value ("Northwest Common Stock"). As of
March 31, 1997, 400,000 shares of Northwest Common Stock had been issued,
386,870 shares of Northwest Common Stock were outstanding, and 13,130 shares of
Northwest Common Stock were held in Northwest's treasury. All outstanding shares
of Northwest Common Stock have been duly issued and are validly outstanding,
fully paid and nonassessable. The foregoing are the only voting securities of
Northwest authorized, issued, or outstanding, and there are no existing options,
warrants, calls, or commitments of any kind obligating Northwest to issue any
share of its capital stock or any other security of which it is or will be the
issuer. None of the shares of Northwest's capital stock has been issued in
violation of preemptive rights of shareholders. Northwest owns 100 percent of
the outstanding voting shares of First National Bank in Mansfield(the "Bank"), a
national banking association organized and existing under the laws of the United
States of America. All of the issued and outstanding shares of capital stock of
the Bank are owned by Northwest. The Bank is (i) an "insured bank" as defined in
the Federal Deposit Insurance Act and applicable regulations thereunder, and
(ii) has been duly organized and is validly existing as a national bank under
the laws of the United States, and has full authority to conduct its business as
and where currently conducted.
Hibernia is a corporation duly organized and existing under the laws of
the State of Louisiana; has its registered office at 313 Carondelet Street, New
Orleans, Louisiana 70130; and is a bank holding company within the meaning of
the Bank Holding Company Act. Hibernia owns all of the issued and outstanding
shares of capital stock of Hibernia National Bank ("HNB") and Hibernia National
Bank of Texas ("HNBT"). The presently authorized capital stock of Hibernia is
300,000,000 shares, consisting of 100,000,000 shares of preferred stock, no par
value, and 200,000,000 shares of Class A voting common stock, no par value (the
Class A voting common stock being referred to hereinafter as "Hibernia Common
Stock"). As of March 31, 1997, 2,000,000 shares of Hibernia's preferred stock
were issued and outstanding, 128,940,436 shares of Hibernia Common Stock were
outstanding, and 62,137 shares of Hibernia Common Stock were held in Hibernia's
treasury. All outstanding shares of Hibernia Common Stock have been duly issued
and are validly outstanding, fully paid and nonassessable. The foregoing
Hibernia Common Stock and (in limited circumstances, the Hibernia Preferred
Stock) are the only voting securities of Hibernia authorized, issued or
outstanding and there are no existing options, warrants, calls or commitments of
any kind obligating Hibernia to issue any share of its capital stock or any
other security of which it is or will be the issuer, except that Hibernia has
authorized or reserved 1,968,750 shares of Hibernia Common Stock for issuance
under its 1987 Stock Option Plan, pursuant to which options covering 1,496,800
shares of Hibernia Common Stock were outstanding as of the date hereof;
7,880,703 (as adjusted) shares of Hibernia Common Stock for issuance under its
1992 Long-Term Incentive Plan, pursuant to which options covering 6,263,264
shares of Hibernia Common Stock were outstanding as of the date hereof;
1,000,000 shares of Hibernia Common Stock for issuance under its 1993 Director
Stock Option Plan, pursuant to which options covering 248,750 shares of Hibernia
Common Stock are outstanding on the date hereof; 144,780 shares of Hibernia
Common Stock are available for issuance pursuant to Hibernia's Dividend
Reinvestment and Stock Purchase Plan; and warrants covering 213,176 shares of
Hibernia Common Stock are outstanding None of the shares of Hibernia's capital
stock has been issued in violation of preemptive rights of shareholders. Pending
mergers with Executive Bancshares, Inc. and Unicorp Bancshares, Inc. are
expected to result in the issuance of no more than an additional 3.8 million
shares of Hibernia Common Stock.
HNB is a national banking association organized and existing under the
laws of the United States of America having its principal registered office at
313 Carondelet Street, New Orleans, Louisiana 70130. All of the issued and
outstanding shares of capital stock of HNB are owned by Hibernia. HNB is(i) an
"insured bank" as defined in the Federal Deposit Insurance Act and applicable
regulations thereunder, and (ii) has been duly organized and are validly
existing as national banks under the laws of the United States, and has full
authority to conduct its business as and where currently conducted.
The Boards of Directors of Northwest and Hibernia have duly approved
this Agreement and have authorized the execution hereof by Northwest's President
and Hibernia's President and Chief Executive Officer, respectively. Northwest
has directed that this Agreement be submitted to a vote of its shareholders in
accordance with Part XI of the Louisiana Business Corporation Law ("LBCL") and
the terms of this Agreement.
In consideration of their mutual promises and obligations, the parties
hereto adopt and make this Agreement for the merger of Northwest with and into
Hibernia and prescribe the terms and conditions of such merger and the mode of
carrying it into effect, which shall be as follows:
1. The Merger. On the Effective Date (as defined in Section 14 hereof),
Northwest shall be merged with and into Hibernia under the Articles of
Incorporation of Hibernia, pursuant to the provisions of, and with the effect
provided in, Part XI of the LBCL (the "Merger") and the Merger Agreement in
substantially the form of Exhibit 1 hereto (the "Merger Agreement").
2. Hibernia Capital Stock. The shares of the capital stock of Hibernia
issued and outstanding immediately prior to the Effective Date shall, on the
Effective Date, continue to be issued and outstanding.
3. Northwest Common Stock.
3.1. Conversion. On the Effective Date and subject to
the provisions of Section 3.7 hereof,
(a) each share of Northwest Common Stock issued and outstanding
immediately prior to the Effective Date, other than (i) shares as to which
dissenters' rights have been perfected and not withdrawn or otherwise forfeited
under Section 12: 131 of the LBCL and (ii) shares owned beneficially by Hibernia
or its subsidiaries, shall, by virtue of the Merger automatically and without
any action on the part of the holder thereof, become and be converted into the
number of shares of Hibernia Common Stock that equals the Exchange Rate set
forth in Section 3.8 hereof;
(b) holders of certificates which represent shares of Northwest
Common Stock outstanding immediately prior to the Effective Date (hereinafter
called "Old Certificates") shall cease to be, and shall have no rights as,
shareholders of Northwest;
(c) each share of Northwest Common Stock held in the treasury of
Northwest or owned beneficially by Hibernia or any of its subsidiaries shall be
canceled; and
(d) Old Certificates shall be exchangeable by the holders
thereof in the manner provided in the transmittal materials described below for
new certificates for the number of whole shares of Hibernia Common Stock to
which such holders shall be entitled in accordance with the Exchange Rate set
forth in Section 3.8 and a check representing cash paid in lieu of fractional
shares as provided in Section 3.2 hereof.
3.2. Fractional Shares. Each holder of Old Certificates who
would otherwise have been entitled to receive a fraction of a share of Hibernia
Common Stock (after taking into account all shares of Northwest Common Stock
represented by the Old Certificates then delivered by such holder) shall
receive, in lieu thereof, cash (without interest) in an amount equal to such
fractional part of a share multiplied by the average of the mean of high and low
prices of one share of Hibernia Common Stock for the five business days
preceding the Effective Date as reported in The Wall Street Journal, or, if the
Hibernia Common Stock is not then so reported, the average of the fair market
values of one share of Hibernia Common Stock on the five business days preceding
the Effective Date determined pursuant to such reasonable method as the Board of
Directors of Hibernia may adopt in good faith for such purpose, and no such
holder shall be entitled to dividends, voting rights or any other right of
shareholders in respect of any fractional share.
3.3. Transmittal Materials. As promptly as practicable after the
Effective Date, Hibernia shall send or cause to be sent to each former
shareholder of record of Northwest transmittal materials for use in exchanging
Old Certificates for certificates representing Hibernia Common Stock and a check
representing cash paid in lieu of fractional shares, if any. The letter of
transmittal will contain instructions with respect to the surrender of Old
Certificates and the distribution of certificates representing Hibernia Common
Stock. If any certificate for shares of Hibernia Common Stock is to be issued in
a name other than that in which an Old Certificate surrendered for exchange is
issued, the Old Certificate so surrendered shall be properly endorsed and
otherwise in proper form for transfer and the person requesting such exchange
shall affix any requisite stock transfer tax stamps to the Old Certificate
surrendered or provide funds for their purchase or establish to the satisfaction
of the exchange agent to be appointed by Hibernia in connection with such
exchange (the "Exchange Agent") that such taxes are not payable.
3.4. Rights as Shareholders. Former shareholders of Northwest
will be able to vote after the Effective Date at any meeting of Hibernia
shareholders or pursuant to any written consent procedure the number of whole
shares of Hibernia Common Stock into which their shares of Northwest Common
Stock are converted, regardless of whether they have exchanged their Old
Certificates. Whenever a dividend is declared by Hibernia on the Hibernia Common
Stock after the Effective Date, the declaration shall include dividends on all
shares issuable hereunder, but no shareholder will be entitled to receive his
distribution of such dividends until physical exchange of his Old Certificates
shall have been effected. Upon physical exchange of his Old Certificates, any
such person shall be entitled to receive from Hibernia an amount equal to all
dividends (without interest thereon and less the amount of taxes, if any, that
may have been withheld, imposed or paid thereon) declared, and for which the
payment has occurred, on the shares represented thereby.
3.5. Cancellation of Old Certificates. On and after the
Effective Date there shall be no transfers on the stock transfer books of
Northwest or Hibernia of the shares of Northwest Common Stock which were issued
and outstanding immediately prior to the Effective Date. If, after the Effective
Date, Old Certificates are properly presented to Hibernia, they shall be
canceled and exchanged for certificates representing shares of Hibernia Common
Stock and a check representing cash paid in lieu of fractional shares as herein
provided. Any other provision of this Agreement notwithstanding, neither the
Exchange Agent nor any party hereto shall be liable to a holder of Northwest
Common Stock for any amount paid or property delivered in good faith to a public
official pursuant to any applicable abandoned property, escheat, or similar law.
3.6. Property Transfers. From time to time, as and when
requested by Hibernia and to the extent permitted by Louisiana law, the officers
and directors of Northwest last in office shall execute and deliver such deeds
and other instruments and shall take or cause to be taken such further or other
actions as shall be necessary in order to vest or perfect in or to confirm of
record or otherwise to Hibernia title to, and possession of, all the property,
interests, assets, rights, privileges, immunities, powers, franchises, and
authorities of Northwest, and otherwise to carry out the purposes of this
Agreement.
3.7. Dissenters' Shares. Shares of Northwest Common Stock held
by any holder having rights of a dissenting shareholder as provided in Part XIII
of the LBCL, who shall have properly objected to the Merger and who shall have
properly demanded payment on his stock in accordance with and subject to the
provisions of Section 12:131 of the LBCL, shall not be converted as provided in
Section 3.1 hereof until such time as such holder shall have failed to perfect,
or shall have effectively lost, his right to appraisal of and payment for his
shares of Northwest Common Stock, at which time such shares shall be converted
as provided in Section 3.1 hereof.
3.8. Exchange Rate.
(a) Except as otherwise provided in this Section 3.8 to the contrary,
the Exchange Rate (i.e. the number of shares of Hibernia Common Stock that will
exchanged for each share of Northwest Common Stock) shall be the number that is
achieved by the following formula : ($21,277,850 , 386,870) , the Average Market
Price of Hibernia Common Stock (as defined in paragraph (d) of this Section
3.8).
(b) If the Average Market Price of Hibernia Common Stock (as
defined in paragraph (d) of this Section 3.8) is greater than $14.11, the
Exchange Rate shall be 3.898.
(c) If the Average Market Price of Hibernia Common Stock (as
defined in paragraph (e) of this Section 3.8) is less than $12.14, then the
Merger shall convert to a cash transaction, accounted for as a purchase, in
which the aggregate purchase price for all of the shares of Northwest Common
Stock shall be $21,277,850, and shareholders of Northwest shall receive $55.00
in cash for each share of Northwest Common Stock owned as of the Effective Date.
(d) For purposes of this Agreement, the Average Market Price of
Hibernia Common Stock on the Closing Date shall be the average of the mean of
the high and low prices of one share of Hibernia Common Stock for the ten
business days preceding the last trading day immediately prior to the Closing
Date as reported in The Wall Street Journal.
4. Articles of Incorporation; Bylaws. The Articles of Incorporation and
Bylaws of Hibernia in force immediately prior to the Effective Date shall on and
after the Effective Date continue to be the Articles of Incorporation and Bylaws
of Hibernia, respectively, unless altered, amended or repealed in accordance
with applicable law.
5. Employees. Hibernia shall cause to be provided as soon as
practicable after the Effective Date for the employees of Northwest and the Bank
immediately prior to the Effective Date the employee benefits then made
available to employees of Hibernia and its subsidiaries, subject to the terms
and conditions under which those employee benefits are made available to such
employees; provided, however, that for purposes of determining the eligibility
of an employee of Northwest or the Bank (or both) to receive, and the benefits
to which such employee shall be entitled, under Hibernia's benefits plans after
the Effective Date, any period of employment of such employee with Northwest or
the Bank shall be deemed equivalent to having been employed for that same period
by Hibernia and/or its subsidiaries and provided further, however, that if
Hibernia determines in good faith that it cannot merge any benefit plan of
Northwest into a comparable benefit plan of Hibernia or HNB without creating
material potential liability for Hibernia's or HNB's plan, then Hibernia shall
be entitled to freeze the existing benefit plan of Northwest and prohibit
participation by former employees of Northwest in Hibernia's plan for the period
of time required by applicable law to ensure that Hibernia's and HNB's benefit
plans are not deemed to be successor plans of the Northwest plan in question.
6. Negative Covenants. From the date hereof until the Effective Date,
or until the termination of this Agreement, Northwest covenants and agrees that
it will not do, or agree to commit to do, and Northwest will cause the Bank not
to do and not to agree or commit to do, without the prior written consent of
Hibernia, any of the following:
(a) in the case of Northwest (and not the Bank), make, declare,
set aside or pay any dividend or declare or make any distribution on, or
directly or indirectly combine, redeem, purchase or otherwise acquire, any
shares of Northwest Common Stock (other than in a fiduciary capacity); provided,
however, that Northwest may pay a dividend to its shareholders not to exceed
$1.50 per share for the year 1997, to be prorated for the portion of the year
that has passed as of the Closing if the Closing occurs prior to December 31,
1997.
(b) authorize the creation or issuance of or issue any
additional shares of its capital stock, or any options, calls, warrants, stock
appreciation rights or commitments relating to its capital stock or any
securities or obligations convertible into or exchangeable for, or giving any
person any right to subscribe for or acquire from it, shares of its capital
stock;
(c) enter into any employment contracts with, increase the rate
of compensation of, or pay or agree to pay any bonus to, any of its directors,
officers or employees, except in accordance with the existing policy; provided,
however, that bonuses may be paid to employees on or about the Closing Date
consistent in amount with past practice in the previous three years if such
bonuses have been accrued and are prorated through the Closing Date (if the
Closing Date is a date other than December 31, 1997) or, if the Closing Date is
December 31, 1997, then Hibernia agrees to pay bonuses to employees of Northwest
in an amount at least equal to the amount accrued by Northwest for that purpose,
consistent in timing with Hibernia's payment of year-end 1997 bonuses.
(d) enter into or substantially modify (except as may be
required by applicable law) any pension, retirement, stock option, stock
purchase, stock appreciation right, savings, profit sharing, deferred
compensation, consulting, bonus, group insurance or other employee benefit,
incentive or welfare contract, plan or arrangement, or any trust agreement
related thereto, in respect of any of its directors, officers or other
employees; provided, however, that Northwest shall terminate the Board of
Directors' retirement policy in place on the date hereof.
(e) other than as contemplated hereby, (i) carry on its business
other than in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted, (ii) amend its or the Bank's Articles of
Incorporation or Bylaws, (iii) impose, or suffer the imposition, on any share of
stock held by Northwest in the Bank, of any material lien, charge, or
encumbrance, or permit any such lien to exist, (iv) establish or add any
automatic teller machines or branch or other banking offices, (v) make any
capital expenditures in excess of $25,000 or (vi) take any action that would
materially and adversely affect the ability of any party hereto to obtain the
approvals necessary for consummation of the transactions contemplated hereby or
that would materially and adversely affect Northwest's ability to perform its
covenants and agreements hereunder;
(f) except with respect to transactions contemplated hereby,
merge with any other corporation or bank or permit any other corporation or bank
to merge into it or consolidate with any other corporation or bank; acquire
control over any other firm, bank, corporation or organization or create any
subsidiary (except in a fiduciary capacity or in connection with foreclosures in
bona fide loan transactions); liquidate; or sell or dispose of any assets or
acquire any assets, otherwise than in the ordinary course of its business
consistent with its past practice; or
(g) knowingly fail to comply with any laws, regulations,
ordinances, or governmental actions applicable to it and to the conduct of its
business in a manner significant, material and adverse to its business.
7. Representations and Warranties of Northwest. Northwest (and not its
directors or officers in their personal capacities) hereby represents and
warrants as follows:
7.1. Recitals. The facts set forth in the preamble to
this Agreement with respect to it are true and correct.
7.2. Organization and Qualification. Northwest is a corporation
and the Bank is a national banking association duly organized, validly existing,
and in good standing under the laws of the State of Louisiana and the United
States of America, respectively; each of Northwest and the Bank has the
corporate power and authority to carry on its business as it is now being
conducted and to own, lease and operate its assets, properties and business; and
Northwest has all requisite power and authority to execute and deliver this
Agreement and perform its obligations hereunder.
7.3. Ownership of Other Banks. Northwest does not own, directly
or indirectly, 5 percent or more of the outstanding capital stock or other
voting securities of any corporation, bank, or other organization except the
Bank. The presently authorized capital stock of the Bank consists solely of
100,000 shares of common stock of the par value of $10.00 each, of which 100,000
shares of common stock are issued and outstanding. The outstanding shares of
capital stock of the Bank are validly issued and outstanding, fully paid and,
except as may be affected by 12 U.S.C. Section 55, nonassessable and, except as
provided on Schedule 7.3 hereto, all of such shares are owned by Northwest, free
and clear of all liens, claims and encumbrances.
7.4. Corporate Authorization. The execution, delivery and
performance of this Agreement have been authorized by Northwest's Board of
Directors, and, subject to the approval of this Agreement by its shareholders in
accordance with the LBCL, all corporate acts and other proceedings required for
the due and valid authorization, execution, delivery and performance by
Northwest of this Agreement and the consummation of the Merger have been validly
and appropriately taken. Subject to such shareholder approval and to such
regulatory approvals as are required by law, this Agreement is a legal, valid
and binding obligation of Northwest, enforceable against Northwest in accordance
with its terms, except that enforcement may be limited by bankruptcy,
reorganization, insolvency and other similar laws and court decisions relating
to or affecting the enforcement of creditors' rights generally and by general
equitable principles or principles of Louisiana law that are similar to
equitable principles in jurisdictions that recognize a distinction between law
and equity.
7.5. No Conflicts. Except as disclosed on Schedule 7.5 hereto,
the execution and delivery of this Agreement by Northwest does not, and the
consummation of the transactions contemplated hereby by it will not, constitute
(i) a breach or violation of, or a default under, any law, rule or regulation or
any judgment, decree, order, governmental permit or license, or agreement,
indenture or instrument of Northwest or the Bank or to which Northwest or the
Bank is subject, which breach, violation or default would have a material and
adverse effect on the financial condition, properties, businesses or results of
operations of Northwest and the Bank taken as a whole or on the transactions
contemplated hereby, (ii) to the best of the knowledge of Northwest's
management, a breach or violation of, or a default under, any law, rule or
regulation or any judgment, decree, order, governmental permit or license, or
agreement, indenture or instrument of Northwest or the Bank or to which
Northwest or the Bank is subject, or (iii) a breach or violation of, or a
default under, the Articles of Incorporation or Bylaws of Northwest or the Bank;
and the consummation of the transactions contemplated hereby will not require
any consent or approval under any such law, rule, regulation, judgment, decree,
order, governmental permit or license or the consent or approval of any other
party to any such agreement, indenture or instrument, other than any required
approvals of shareholders and applicable regulatory authorities.
7.6. Financial Statements; Dividend Restrictions. Northwest has
delivered to Hibernia prior to the execution of this Agreement true and correct
copies of the following consolidated financial statements (collectively referred
to herein as the "Northwest Financial Statements"): Northwest's Consolidated
Balance Sheets as of March 31, 1997 and 1996 (unaudited) and December 31, 1996,
1995 and 1994 (audited); Consolidated Statements of Income and Changes in
Stockholders' Equity and Consolidated Statements of Cash Flows for the years
ended December 31, 1996, 1995 and 1994 (audited), and Consolidated Statements of
Income for the three-month periods ended March 31, 1997 and 1996 (unaudited).
Each of the Northwest Financial Statements (including the related notes) fairly
presents the consolidated results of operations of Northwest and the Bank for
the respective periods covered thereby and the consolidated financial condition
of Northwest and the Bank as of the respective dates thereof (subject, in the
case of unaudited statements, to year-end audit adjustments that will not be
material in amount or effect), in each case in accordance with GAAP consistently
applied during the periods involved, except as may be noted therein. Except as
disclosed in the Northwest Financial Statements, including the notes thereto, or
Schedule 7.6 hereto, and except as otherwise required by this Agreement, there
are no restrictions in any note, indenture, agreement, statute or otherwise
(except for statutes or regulations applicable to Louisiana corporations or
national banks generally) precluding Northwest or the Bank from paying
dividends, in each case when, as and if declared by its Board of Directors.
7.7. No Material Adverse Change. Since March 31, 1997, there has
been no event or condition of any character (whether actual, or to the knowledge
of Northwest or the Bank, threatened or contemplated) that has had or can
reasonably be anticipated to have, or that, if concluded or sustained adversely
to Northwest, would reasonably be anticipated to have, a material adverse effect
on the financial condition, results of operations, business or prospects of
Northwest or the Bank, excluding changes in laws or regulations that affect
banking institutions generally.
7.8. Litigation and Proceedings. Except as set forth on Schedule
7.8 hereto, no litigation, proceeding or controversy before any court or
governmental agency is pending against Northwest that in the opinion of its
management is likely to have a material and adverse effect on the business,
results of operations or financial condition of Northwest and the Bank taken as
a whole, and, to the best of its knowledge, no such litigation, proceeding or
controversy has been threatened or is contemplated. Except as disclosed on
Schedule 7.8 hereto, no member of Northwest's consolidated group is subject to
any written agreement, memorandum, or order with or by any bank or bank holding
company regulatory authority restricting its operations or requiring any
material actions.
7.9. Material Contracts. Except for this Agreement and
arrangements made in the ordinary course of business or disclosed on Schedule
7.9 hereto, neither Northwest nor the Bank is bound by any material contract to
be performed after the date hereof that is not terminable by Northwest or the
Bank without penalty or liability on thirty days prior notice.
7.10. Brokers' or Finders' Fees. No agent, broker, investment
banker, investment or financial advisor or other person acting on behalf of
Northwest or the Bank or under their authority is entitled to any commission,
broker's or finder's fee from any of the parties hereto in connection with any
of the transactions contemplated by this Agreement.
7.11. Contingent Liabilities. Except as disclosed on Schedule
7.11 hereto or as reflected in the Northwest Financial Statements and except in
the case of the Bank for unfunded loan commitments made in the ordinary course
of business consistent with past practices, as of March 31, 1997, neither
Northwest nor the Bank has any obligation or liability (contingent or otherwise)
that was material, or that when combined with all similar obligations or
liabilities would have been material, to Northwest and the Bank taken as a whole
and there does not exist a set of circumstances resulting from transactions
effected or events occurring prior to, on, or after March 31, 1997, or from any
action omitted to be taken during such period that, to the knowledge of
Northwest, could reasonably be expected to result in any such material
obligation or liability.
7.12. Tax Liability. The amounts set up as liabilities for taxes
in the Northwest Financial Statements are sufficient for the payment of all
respective taxes (including, without limitation, federal, state, local, and
foreign excise, franchise, property, payroll, income, capital stock, and sales
and use taxes) accrued in accordance with GAAP and unpaid at the respective
dates thereof.
7.13. Material Obligations Paid. Since March 31, 1997, neither
Northwest nor the Bank has incurred or paid any obligation or liability that
would be material to Northwest on a consolidated basis, except for obligations
incurred or paid in connection with transactions by it in the ordinary course of
its business consistent with its past practices.
7.14. Tax Returns; Payment of Taxes. All federal, state, local,
and foreign tax returns (including, without limitation, estimated tax returns,
withholding tax returns with respect to employees, and FICA and FUTA returns)
required to be filed by or on behalf of Northwest or the Bank have been timely
filed or requests for extensions have been timely filed and granted and have not
expired for periods ending on or before December 31, 1992, and all returns filed
are complete and accurate to the best information and belief of their respective
managements; all taxes shown on filed returns have been paid. As of the date
hereof, there is no audit, examination, deficiency or refund litigation or
matter in controversy with respect to any taxes that might result in a
determination materially adverse to Northwest or the Bank except as reserved
against in the Northwest Financial Statements. All taxes, interest, additions
and penalties due with respect to completed and settled examinations or
concluded litigation have been paid, and Northwest's reserves for bad debts at
December 31, 1994, as filed with the Internal Revenue Service were not greater
than the maximum amounts permitted under the provisions of Section 585 of the
Internal Revenue Code of 1986, as amended (the "Internal Revenue Code").
7.15. Loans. To the best knowledge and belief of its management,
each loan reflected as an asset of Northwest in the Northwest Financial
Statements, as of March 31, 1997, or acquired since that date, is the legal,
valid, and binding obligation of the obligor named therein, enforceable in
accordance with its terms (except as such enforceability may be affected by
bankruptcy, reorganization, insolvency and other similar laws and court
decisions relating to or affecting the enforcement of creditors' rights
generally), and no loan is subject to any asserted defense, offset or
counterclaim known to Northwest, except as disclosed in writing to Hibernia on
or prior to the date hereof.
7.16. Allowance for Loan Losses. The allowances for possible
loan losses shown on the balance sheets of Northwest as of March 31, 1997 are
adequate in all material respects under the requirements of regulatory
accounting principles (and to the best knowledge and belief of Northwest, GAAP)
and the balance sheets of Northwest as of December 31, 1996 are adequate in all
material respects under the requirements of GAAP, to provide for possible
losses, net of recoveries, relating to loans previously charged off, on loans
outstanding (including accrued interest receivable) as of March 31, 1997 or
December 31, 1996, respectively, and each such allowance has been established in
accordance with GAAP (in the case of allowances shown on the balance sheets of
Northwest as of December 31, 1996) or regulatory accounting principles (in the
case of allowances shown on the balance sheets of Northwest as of March 31,
1997).
7.17. Title to Assets; Adequate Insurance Coverage.
(a) As of March 31, 1997, Northwest and the Bank had, and except
with respect to assets disposed of for adequate consideration in the ordinary
course of business since such date, now have, good and merchantable title to all
real property and good and merchantable title to all other material properties
and assets reflected in the Northwest Financial Statements, free and clear of
all mortgages, liens, pledges, restrictions, security interests, charges and
encumbrances of any nature except for (i) mortgages and encumbrances which
secure indebtedness which is properly reflected in the Northwest Financial
Statements or which secure deposits of public funds as required by law; (ii)
liens for taxes accrued but not yet payable; (iii) liens arising as a matter of
law in the ordinary course of business with respect to obligations incurred
after March 31, 1997, provided that the obligations secured by such liens are
not delinquent or are being contested in good faith; (iv) such imperfections of
title and encumbrances, if any, as do not materially detract from the value or
materially interfere with the present use of any of such properties or assets or
the potential sale of any such owned properties or assets; and (v) capital
leases and leases, if any, to third parties for fair and adequate consideration.
Northwest and the Bank own, or have valid leasehold interests in, all material
properties and assets, tangible or intangible, used in the conduct of its
business. Any real property and other material assets held under lease by
Northwest or the Bank are held under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
or proposed to be made by Hibernia in such lease of such property.
(b) With respect to each lease of any real property or a
material amount of personal property to which Northwest or the Bank is a party,
except for financing leases in which Northwest or the Bank is lessor, (i) such
lease is in full force and effect in accordance with its terms; (ii) all rents
and other monetary amounts that have become due and payable thereunder have been
paid; (ii) there exists no default or event, occurrence, condition or act which
with the giving of notice, the lapse of time or the happening of any further
event, occurrence, condition or act would become a default under such lease; and
(iv) neither the Merger nor the merger of the Bank and HNB will constitute a
default or a cause for termination or modification of such lease.
(c) Neither Northwest nor the Bank has any legal obligation,
absolute or contingent, to any other person to sell or otherwise dispose of any
substantial part of its assets or to sell or dispose of any of its assets except
in the ordinary course of business consistent with past practices.
(d) To the knowledge and belief of its management, the policies
of fire, theft, liability and other insurance maintained with respect to the
assets or businesses of Northwest and the Bank provide adequate coverage against
loss and the fidelity bonds in effect as to which Northwest or the Bank is named
insured.
7.18. Employee Plans. To the best of Northwest's knowledge and
belief, it, the Bank, and all "employee benefit plans," as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), that cover one or more employees employed by Northwest or the Bank:
(i) is in compliance with all laws, regulations,
reporting and licensing requirements and orders applicable to its business or to
such plan or any of its employees (because of such employee's activities on
behalf of it), the breach or violation of which could have a material and
adverse effect on such business; and
(ii) has received no notification from any agency
or department of federal, state or local government or the staff thereof
asserting that any such entity is not in compliance with any of the statutes,
regulations or ordinances that such governmental authority enforces, or
threatening to revoke any license, franchise, permit or governmental
authorization, and is subject to no agreement with any such governmental
authority with respect to its assets or business.
7.19. Copies of Employee Plans. On or prior to the date hereof,
Northwest has provided Hibernia with true, complete and accurate copies of all
pension, retirement, stock purchase, stock bonus, stock ownership, stock option,
savings, stock appreciation right or profit-sharing plans, any employment,
deferred compensation, consultant, severance, bonus, or collective bargaining
agreement or group insurance contract, or any other incentive, welfare, or
employee benefit plan or agreement maintained by it or the Bank for its or the
Bank's employees or former employees.
7.20. Plan Liability. Except for liabilities to the Pension
Benefit Guaranty Corporation pursuant to Section 4007 of ERISA, all of which
have been fully paid, and except for liabilities to the Internal Revenue Service
under section 4971 of the Internal Revenue Code, all of which have been fully
paid, neither Northwest nor the Bank has any liability to the Pension Benefit
Guaranty Corporation or to the Internal Revenue Service with respect to any
pension plan qualified under Section 401 of the Internal Revenue Code.
7.21. No Default. Neither Northwest nor the Bank is in default
in any material respect under any contract, agreement, commitment, arrangement,
lease, insurance policy or other instrument to which it is a party or by which
its respective assets, business or operations may be bound or affected or under
which it or its respective assets, business or operations receive benefits, and
there has not occurred any event that with the lapse of time or the giving of
notice or both would constitute such a default.
7.22. Minutes. Prior to the date hereof, Northwest has made
available to Hibernia, for inspection pursuant to the terms of Section 9.5
hereof, the minutes of meetings of Northwest's and the Bank's Board of Directors
and all committees thereof held prior to the date hereof, which minutes are
complete and correct in all respects and fully and fairly present the
deliberations and actions of such Boards and committees and accurately reflect
the business condition and operations of Northwest and the Bank as of the dates
and for the periods indicated therein.
7.23. Insurance Policies. Attached hereto as Schedule 7.23 is a
schedule detailing all policies of fire, theft, public liability, and other
insurance (including without limitation fidelity bonds and directors and
officers liability insurance) maintained by Northwest or the Bank at the date
hereof. Except as disclosed on Schedule 7.23 hereto, neither Northwest nor the
Bank has received any notice of a premium increase or cancellation with respect
to any of its insurance policies or bonds, and within the last three years,
neither Northwest nor the Bank has been refused any insurance coverage sought or
applied for, and it has no reason to believe that existing insurance coverage
cannot be renewed as and when the same shall expire, upon terms and conditions
as favorable as those presently in effect, other than possible increases in
premiums or unavailability of coverage that do not result from any extraordinary
loss experience of Northwest or the Bank.
7.24. Investments. Except for pledges to secure public or trust
deposits, none of the investments reflected in the Northwest Financial
Statements under the heading "Investment Securities," and none of the
investments made by Northwest or the Bank since March 31, 1997, and none of the
assets reflected in the Northwest Financial Statements under the heading "Cash
and Due From Banks," is subject to any restriction, whether contractual or
statutory, that materially impairs the ability of Northwest or the Bank freely
to dispose of such investment at any time. With respect to all repurchase
agreements to which Northwest or the Bank is a party, Northwest or the Bank, as
the case may be, has a valid, perfected first lien or security interest in the
government securities or other collateral securing each such repurchase
agreement which equals or exceeds the amount of the debt secured by such
collateral under such agreement.
7.25. Environmental Matters. Neither Northwest nor the Bank nor,
to the knowledge of Northwest and the Bank, any previous owner or operator of
any properties at any time owned (including any properties owned as a result of
foreclosure of a loan, whether still owned or subsequently resold) leased, or
occupied by Northwest or the Bank or used by Northwest or the Bank in their
respective business ("Northwest Properties") used, generated, treated, stored,
or disposed of any hazardous waste, toxic substance, or similar materials on,
under, or about Northwest Properties except in compliance with all applicable
federal, state, and local laws, rules, and regulations pertaining to air and
water quality, hazardous waste, waste disposal, air emissions, and other
environmental matters ("Environmental Laws"). Neither Northwest nor the Bank has
received any notice of noncompliance with Environmental Laws, applicable laws,
orders, or regulations of any governmental authorities relating to waste
generated by any such party or otherwise or notice that any such party is liable
or responsible for the remediation, removal, or clean-up of any site relating to
Northwest Properties.
8. Representations and Warranties of Hibernia. Hibernia (and not its
directors or officers in their personal capacities) hereby represents and
warrants as follows:
8.1. Recitals. The facts set forth in the preamble to
this Agreement with respect to it are true and correct.
8.2. Organization and Qualification. Hibernia is a corporation,
and HNB is a national banking association, duly organized, validly existing and
in good standing under the laws of the State of Louisiana and the United States
of America, respectively. Each of Hibernia and its material subsidiaries has the
corporate power and authority to carry on its business as it is now being
conducted and to own, lease and operate its assets, properties and business, and
Hibernia has all requisite power and authority to execute and deliver this
Agreement and perform its obligations hereunder.
8.3. Shares Fully Paid and Non Assessable. The outstanding
shares of capital stock of Hibernia Corporation and HNB are validly issued and
outstanding, fully paid and nonassessable (subject, in the case of HNB, to 12
U.S.C. Section 55) and all of such shares of HNB are owned directly or
indirectly by Hibernia free and clear of all liens, claims, and encumbrances.
The shares of Hibernia Common Stock to be issued in connection with the Merger
pursuant to this Agreement will have been duly authorized and, when issued in
accordance with the terms of this Agreement, will be validly issued, fully paid,
and nonassessable.
8.4. Due Authorization. The execution, delivery and performance
of this Agreement have been authorized by Hibernia's Board of Directors, and,
subject to the regulatory and other approvals required by Section 12 hereof, all
corporate acts and other proceedings required for the due and valid
authorization, execution, delivery and performance by Hibernia of this Agreement
and the consummation of the Merger have been validly and appropriately taken.
Subject to receipt of the regulatory and other approvals required by Section 12
hereof, this Agreement is a legal, valid, and binding obligation of Hibernia
enforceable against Hibernia in accordance with its terms, except that
enforcement may be limited by bankruptcy, insolvency, and other laws of general
applicability relating to or affecting creditors' rights generally and by
general equitable principles or principles of Louisiana law that are similar to
equitable principles in jurisdictions that recognize a distinction between law
and equity.
8.5. No Conflicts. Except as disclosed on Schedule 8.5 hereto,
the execution and delivery of this Agreement by Hibernia does not, and the
consummation of the transactions contemplated hereby by it will not, constitute
(i) a breach or violation of, or a default under, any law, rule, or regulation
or any judgment, decree, order, governmental permit or license, or agreement,
indenture, or instrument of Hibernia or its subsidiaries or by which Hibernia or
any of its subsidiaries is subject, which breach, violation or default would
have a material and adverse effect on the financial condition, properties,
businesses, or results of operations of Hibernia and its subsidiaries taken as a
whole or on the transactions contemplated hereby, (ii) to the best of the
knowledge of Hibernia's management, a breach or violation of, or a default
under, any law, rule, or regulation or any judgment, decree, order, governmental
permit or license, or agreement, indenture, or instrument of Hibernia or its
subsidiaries or to which Hibernia or any of its subsidiaries is subject, or
(iii) a breach or violation of, or a default under the Articles of Incorporation
or Association or Bylaws of Hibernia, or of its subsidiaries, and the
consummation of the transactions contemplated hereby will not require any
consent or approval under any such law, rule, regulation, judgment, decree,
order, governmental permit or license or the consent or approval of any other
party to any such agreement, indenture, or instrument, other than any required
approvals of shareholders and applicable regulatory authorities.
8.6. Reports of Hibernia. As of their respective dates, none of
its Annual Report on Form 10-K for the fiscal year ended December 31, 1996, its
Quarterly Report on Form 10-Q for the period ended March 31, 1997, and its proxy
statement for its 1997 annual meeting of shareholders, each in the form
(including exhibits) filed with the Securities and Exchange Commission (the
"SEC") and its quarterly report to shareholders for the period ended March 31,
1994 (collectively, the "Hibernia Reports"), contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading. There is no fact or circumstance
that, individually or in the aggregate, materially and adversely has affected or
is so affecting, or, in the opinion of the executive officers of Hibernia, may
reasonably be expected in the future to so affect, the business, financial
condition, net worth, properties, prospects or results of operations of Hibernia
and its subsidiaries, taken as a whole, that has not been disclosed in the
Hibernia Reports. Each of the balance sheets in or incorporated by reference
into the Hibernia Reports (including the related notes) fairly presents the
financial position of the entity or entities to which it relates as of its date
and each of the statements of income and stockholders' equity and statement of
cash flows or equivalent statements in the Hibernia Reports (including any
related notes and schedules) fairly presents the results of operations and
changes in stockholders' equity, as the case may be, of the entity or entities
to which it relates for the periods set forth therein (subject, in the case of
unaudited statements, to year-end audit adjustments that will not be material in
amount or effect), in each case in accordance with GAAP consistently applied
during the periods involved, except as may be noted therein. Copies of the
Hibernia Reports have been furnished to Northwest on or before the date hereof.
8.7. No Material Adverse Change. Since March 31, 1997, there has
been no event or condition of any character (whether actual, or to the knowledge
of Hibernia or HNB, threatened or contemplated) that has had or can reasonably
be anticipated to have, or that, if concluded or sustained adversely to
Hibernia, would reasonably be anticipated to have, a material adverse effect on
the financial condition, results of operations, business or prospects of
Hibernia or HNB, excluding changes in laws or regulations that affecting banking
institutions generally.
9. Agreements and Covenants. Hibernia and Northwest each hereby agrees
and covenants to the other that:
9.1. Shareholder Approvals. If required by applicable law, this
Agreement shall be submitted to its respective shareholders at a special meeting
called and held in accordance with applicable provisions of law (to be scheduled
to the extent possible for the date of the shareholders' meeting for the other
party hereto, if any) at which its shareholders shall be asked to consider and
vote upon this Agreement and the transactions contemplated hereby.
9.2. Actions Necessary to Complete Merger. It shall use its best
efforts in good faith to take or cause to be taken all action necessary or
desirable under this Agreement on its part as promptly as practicable so as to
permit the consummation of this Agreement at the earliest possible date
(including obtaining the consent or approval of each governmental authority and
individual, partnership, corporation, association, or any other form of business
or professional entity whose consent or approval is required for the
consummation of the transactions contemplated hereby, requesting the delivery of
appropriate opinions and letters from its counsel and recommending that this
Agreement be approved by its shareholders) and cooperate fully with the other
party hereto to that end; provided, however, that neither party shall be
obligated to take or cause to be taken any action which is or creates a material
burden on such party, except to the extent such actions are reasonably
anticipated to be required in order to effect the Merger.
9.3. Preparation of Registration Statement and Proxy Statement.
It shall prepare as promptly as practicable jointly with the other party hereto
a proxy statement to be mailed to the shareholders of each party the
shareholders of which are to vote upon this Agreement in connection with the
transactions contemplated hereby and to be part of a registration statement (the
"Registration Statement") to be filed by Hibernia with the SEC pursuant to the
Securities Act of 1933, as amended (the "1933 Act") with respect to the shares
to be issued in the Merger. When the Registration Statement or any
post-effective amendment thereto shall become effective, and at all times
subsequent to such effectiveness, up to and including the time of the last
shareholder meeting with respect to the transactions contemplated hereby, such
Registration Statement and all amendments or supplements thereto, with respect
to all information set forth therein furnished or to be furnished by Hibernia
relating to Hibernia and by Northwest relating to Northwest, (i) will comply in
all material respects with the provisions of the 1933 Act and the rules and
regulations of the SEC thereunder and (ii) will not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements contained therein not misleading.
Hibernia will advise Northwest promptly after it receives notice thereof of the
time when the Registration Statement has become effective or any supplement or
amendment has been filed, of the issuance of any stop order, of the suspension
of the qualification of the Hibernia Common Stock issuable in connection with
the Merger for offering or sale in any jurisdiction, of the initiation or threat
of any proceeding for any such purpose, or of any request by the SEC for the
amendment or supplement of the Registration Statement or for additional
information.
9.4. Press Releases and Public Statements. Unless approved by
Hibernia in advance, Northwest will not issue any press release, marketing or
advertising material or other written statement for general circulation relating
to the transactions contemplated hereby, except as otherwise required by law.
The parties will cooperate in any public announcements directly related to the
Merger; provided, however, that, in the event Hibernia determines to file a
current report on Form 8-K that discloses only the substantive facts of a
previously released press release, such filing may be made without prior
consultation with Northwest so long as Northwest is furnished with a copy of
such report within a reasonable time after its filing.
9.5. Material Developments; Access to Information.
(i) In order to afford Northwest access to such
information as it may reasonably deem necessary to perform its due diligence
review with respect to Hibernia and its assets in connection with the Merger,
Hibernia shall (and shall cause HNB to), (A) upon reasonable notice, afford
Northwest and its officers, employees, counsel, accountants and other authorized
representatives, during normal business hours throughout the period prior to the
Effective Date and to the extent consistent with applicable law, access to its
premises, properties, books, records and personnel, and to furnish Northwest and
such representatives with such financial and operating data and other
information of any kind respecting its business and properties as Northwest
shall from time to time reasonably request to perform such review, (B) furnish
Northwest with copies of all reports filed by Hibernia with the Securities and
Exchange Commission ("SEC") throughout the period after the date hereof prior to
the Effective Date promptly after such reports are so filed, and (C) promptly
advise Northwest of the occurrence before the Effective Date of any event or
condition of any character (whether actual or to the knowledge of Hibernia,
threatened or contemplated) that has had or can reasonably be anticipated to
have, or that, if concluded or sustained adversely to Hibernia, would reasonably
be anticipated to have, a material adverse effect on the financial condition,
results of operations, business or prospects of its consolidated group as a
whole.
(ii) In order to afford Hibernia access to such
information as it may reasonably deem necessary to perform any due diligence
review with respect to the assets of Northwest to be acquired as a result of the
Merger, Northwest shall (and shall cause the Bank to), upon reasonable notice,
afford Hibernia and its officers, employees, counsel, accountants, and other
authorized representatives access, during normal business hours throughout the
period prior to the Effective Date, to all of its and the Bank's properties,
books, contracts, commitments, loan files, litigation files, and records
(including, but not limited to, the minutes of the Boards of Directors of
Northwest and the Bank and all committees thereof), and it shall (and shall
cause the Bank to), upon reasonable notice and to the extent consistent with
applicable law, furnish promptly to Hibernia such information as Hibernia may
reasonably request to perform such review.
(iii) No investigation pursuant to this Section 9.5
shall affect or be deemed to modify any representation or warranty made by, or
the conditions to the obligations to consummate the Merger of, either party to
this Agreement.
9.6. Prohibited Negotiations. Prior to the Effective Date,
neither Northwest nor the Bank shall solicit or encourage inquiries or proposals
with respect to, furnish any information relating to, or participate in any
negotiations or discussions concerning, any acquisition or purchase of all or a
substantial portion of the assets of, or of a substantial equity interest in,
Northwest or the Bank or any business combination with Northwest or the Bank
other than as contemplated by this Agreement. Northwest shall instruct each
officer, director, agent, or affiliate of it or the Bank to refrain from doing
any of the above, and Northwest will notify Hibernia promptly if any such
inquiries or proposals are received by, any such information is requested from,
or any such negotiations or discussions are sought to be initiated with,
Northwest; provided, however, that nothing contained in this section shall be
deemed to prohibit any officer or director of Northwest or the Bank from taking
any action that, in the opinion of counsel to Northwest or the Bank, a copy of
which opinion shall be furnished to Hibernia upon its request, is required by
applicable law.
9.7. Affiliates. Prior to the Closing Date (as defined in
Section 14 hereof), Northwest shall deliver to Hibernia a letter identifying all
persons whom it believes to be "affiliates" of Northwest for purposes of Rule
145(c) or Rule 144 (as applicable) under the 1933 Act ("Affiliates"). Northwest
shall use its best efforts to cause each person so identified to deliver to
Hibernia prior to the Effective Date a written agreement in substantially the
form of Exhibit 9.7 hereto providing, among other things, that such person will
not dispose of Hibernia Common Stock received in the Merger except in compliance
with the 1933 Act and the rules and regulations thereunder and except in
accordance with Section 201.01 of the SEC's Codification of Financial Reporting
Policies; provided, however, that Northwest shall have no such obligation to use
its best efforts to cause any such identified person to deliver to Hibernia such
agreement if such person may not lawfully execute such agreement.
9.8. Adjustment for Changes in Outstanding Shares. In the event
that prior to the Effective Date the outstanding shares of Hibernia Common
Stock shall have been increased, decreased, or changed into or exchanged fora
different number or kind of shares or securities by reorganization,
recapitalization, reclassification, stock dividend, stock split, or other
like changes in the Hibernia's capitalization, then an appropriate and
proportionate adjustment shall be made in the number and kind of shares of
Hibernia Common Stockto be thereafter delivered pursuant to Section 3.1 hereof.
9.9. Accounting Treatment. It shall use its best efforts to
cause the Merger to qualify for pooling-of-interests accounting treatment to the
extent factors affecting such treatment are within its control (except that no
breach of this Section 9.9 shall have occurred if the Exchange Rate is
determined in accordance with paragraph (c) of Section 3.8).
9.10. Cooperation in Bank Merger. Promptly upon request by
Hibernia, Northwest shall, and it shall cause the Bank to, take any and all
necessary or appropriate actions to cause the Bank to become merged with and
into HNB effective as of, or as soon as practicable after, the Effective Date if
so requested by Hibernia; provided, however, that Northwest acknowledges and
agrees that the determination as to when and if the Bank and HNB shall be merged
shall be solely within Hibernia's discretion.
9.11. Adoption of Accounting Policies. As soon as practicable
after the satisfaction or waiver of all conditions to the Closing set forth in
Section 12 of this Agreement and in any event prior to the Effective Date
(unless this Agreement is terminated pursuant to Section 13 hereof), Northwest
shall, and it shall cause the Bank to, take any and all necessary or appropriate
actions to adopt all Hibernia accounting procedures and policies (including
without limitation those policies pertaining to charged-off and non-accrual
assets); provided, however, that no such action taken by Northwest or the Bank
at the request of Hibernia or HNB pursuant to this Section shall be deemed to
be, or be deemed to cause, a breach of any representation or warranty made by
Northwest herein.
9.12. Indemnification of Directors and Officers of Northwest and
the Bank.
(a) From and after the Effective Date of the Merger, Hibernia
agrees to indemnify and hold harmless each person who, as of the date
immediately prior to the Closing Date, served as an officer or director of
Northwest or the Bank (an "Indemnified Person") from and against all damages,
liabilities, judgments and claims (and related expenses including, but not
limited to, attorney's fees and amounts paid in settlement) based upon or
arising from his capacity as an officer or director of Northwest or the Bank, to
the same extent as he would have been indemnified under the Articles of
Incorporation and/or Bylaws of Hibernia, as such documents were in effect on the
date of this Agreement as if he were an officer or director of Hibernia at all
relevant times; provided, however, that the indemnification provided by this
Section shall not apply to any claim against an Indemnified Person if such
Indemnified Person knew or should have known of the existence of the claim and
failed to make a good faith effort to require Northwest or the Bank, as the case
may be, to notify its director and officer liability insurance carrier of the
existence of such claim prior to the Closing Date.
(b) The rights granted to the Indemnified Persons hereby shall
be contractual rights inuring to the benefit of all Indemnified Persons and
shall survive this Agreement and any merger, consolidation or reorganization of
Hibernia or HNB.
(c) The rights to indemnification granted by this subsection
9.12 are subject to the following limitations: (i) the total aggregate
indemnification to be provided by Hibernia pursuant to subsection 9.12(a) shall
not exceed, as to all of the Indemnified Persons as a group, the sum of $5
million, and Hibernia shall have no responsibility to any Indemnified person for
the manner in which such sum is allocated among that group (but nothing in this
subsection is intended to prohibit the Indemnified Persons from seeking
reallocation among themselves); (ii) a director or officer who would otherwise
be an Indemnified Person under this subsection 9.12 shall not be entitled to the
benefits hereof unless such director or officer has executed a Joinder Agreement
(the "Joinder Agreement") in the form of Exhibit 9.12 hereto; and (iii) amounts
otherwise required to be paid by Hibernia to an Indemnified Person pursuant to
this subsection 9.12 shall be reduced by any amounts that such Indemnified
Person recovers by virtue of the claim for which other employees and officers
indemnification is sought.
(d) Hibernia agrees that the $5 million indemnification limit
set forth in paragraph (c) of this Section 9.12 shall not apply to any damages,
liabilities, judgments and claims (and related expenses, including but not
limited to attorney's fees and amounts paid in settlement) insofar as they arise
out of or are based upon the matters for which indemnification is provided in
Section 11.2 hereof.
9.13 Covenant to Close. At such time as is deemed appropriate by
the parties hereto or as otherwise set forth in this Agreement, and upon
satisfaction or waiver of each of the conditions to Closing of the Merger, the
parties agree to take such actions as are reasonably necessary or appropriate to
effect the Closing and the Merger.
10. Permits, Consents and Approvals. As promptly as practicable after
the date hereof:
(a) Hibernia shall submit an application to the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board") for
approval of the transactions contemplated hereby in accordance with the
provisions of the Bank Holding Company Act;
(b) Hibernia shall submit an application to the Comptroller of
the Currency (the "Comptroller") for approval of the transactions contemplated
hereby in accordance with the provisions of the Bank Merger Act;
(c) Northwest shall endeavor to have its Affiliates execute a
written agreement in substantially the form of Exhibit 9.7 hereto; provided,
however, that Northwest shall have no such obligation prior to the receipt by
the Board of Directors of Northwest of the Fairness Opinion; and
(d) Northwest shall endeavor to have each of the directors of
Northwest and the Bank execute a Non-Competition Agreement in substantially the
form of Exhibit 10(d) hereto; provided, however, that Northwest shall have no
such obligation prior to the receipt by the Board of Directors of Northwest of
the Fairness Opinion.
11. Confidentiality; Hold Harmless; Restriction on
Acquisitions.
11.1. Confidentiality. The parties hereto acknowledge that each
of them or their representatives or agents has engaged in, and may continue to
engage in, certain due diligence reviews and examinations with respect to the
other and that, in the course of such reviews and examination, has received or
may receive in the future confidential or proprietary information. Hibernia and
Northwest agree, for a period of five years after the date hereof on behalf of
themselves, their respective officers, directors, employees, representatives and
agents, that they will not use any information obtained pursuant to due
diligence investigations for any purpose unrelated to the consummation of the
transactions contemplated by this Agreement, and, if the Merger is not
consummated, will hold all such information and documents in confidence unless
and until such time as such information or documents otherwise become publicly
available or as it is advised by counsel that any such information or document
is required by law to be disclosed, in which event the party required to make
such disclosure shall advise and consult with the other party reasonably in
advance of such disclosure regarding the information proposed to be disclosed.
In the event of the termination of this Agreement, Hibernia and Northwest shall,
promptly upon request by the other party, either destroy or return any documents
so obtained. The parties hereto expressly acknowledge and agree that the terms
of this Section 11.1 shall supersede any prior agreements relating to the
confidentiality of information received by the parties hereto from each other.
11.2. Hold Harmless. Hibernia will indemnify and hold harmless
Northwest, each of its directors and officers and each person, if any who
controls Northwest or the Bank within the meaning of the 1933 Act against any
losses, claims, damages or liabilities, joint, several or solidary, to which
they or any of them may become subject, under the 1933 Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement, or in any amendment
or supplement thereto, or arising out of or based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse each
such person for any legal or other expenses reasonably incurred by such person
in connection with investigating or defending any such action or claim;
provided, however, that Hibernia shall not be liable in any such case to the
extent that any such loss, claim, damage or liability (or action in respect
thereof) arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in the Registration Statement or
any such amendment or supplement in reliance upon and in conformity with
information furnished to Hibernia by Northwest or the Bank for use therein.
Promptly after receipt by an indemnified party hereunder of notice of the
commencement of any action, such indemnified party shall, if a claim in respect
thereof is to be made against Hibernia under this Section, notify Hibernia in
writing of the commencement thereof. In case any such action shall be brought
against any indemnified party and it shall notify Hibernia of the commencement
thereof, Hibernia shall be entitled to participate therein, and to the extent
that it shall wish, to assume the defense thereof, with counsel satisfactory to
such indemnified party, and, after notice from Hibernia to such indemnified
party of its election to so assume the defense thereof, Hibernia shall not be
liable to such indemnified party under this Section 11.2 for any legal expenses
of counsel other than that selected by Hibernia as set forth above or any other
expenses subsequently incurred by such indemnified party.
12. Conditions. The consummation of the Merger is conditioned upon:
12.1. Shareholder Approval; Dissenters. Approval of
this Agreement by the required vote of shareholders of Northwest.
12.2. Federal Reserve Board and OCC Approvals. Procurement by
Hibernia of the approval of the Federal Reserve Board of the Merger and the
Comptroller of the Bank Merger and any and all other transactions contemplated
hereby.
12.3. Other Approvals. Procurement of all other consents and
approvals and satisfaction of all other requirements prescribed by law that are
necessary to the consummation of the transactions contemplated by this
Agreement.
12.4. No Restraining Action. No litigation or proceeding
initiated by any governmental authority shall be pending before any court or
agency that shall present a claim to restrain, prohibit or invalidate the
transactions contemplated hereby and neither Hibernia nor Northwest shall be
prohibited by any order of any court or other governmental authority from
consummating the transactions provided for in this Agreement.
12.5. Opinion of Hibernia Counsel. Northwest and its directors
shall have received an opinion, dated the Closing Date, of counsel for Hibernia,
in form and substance satisfactory to Northwest, as to such matters as Northwest
may reasonably request with respect to the transactions contemplated hereby.
12.6. Opinion of Northwest Counsel. Hibernia, its directors and
its officers who sign the Registration Statement shall have received an opinion,
dated the Closing Date, of Gerrish & McCreary, P.C., for Northwest, in form and
substance satisfactory to Hibernia, which shall cover such matters as Hibernia
may reasonably request with respect to the transactions contemplated hereby.
12.7. Representations, Warranties and Agreements of Northwest.
Each of the representations, warranties, and agreements of Northwest contained
herein in all material respects shall be true on, or complied with by, the
Closing Date as if made on such date (or on the date when made in the case of
any representation or warranty which specifically relates to an earlier date)
and Hibernia shall have received a certificate signed by the Chairman of the
Board and the President of Northwest, dated the Closing Date, to such effect;
Northwest shall have furnished to Hibernia such other certificates as Hibernia
shall reasonably request in connection with the Closing (as defined in Section
14 hereof), evidencing compliance with the terms hereof and its status, business
and financial condition. Northwest shall have furnished Hibernia with such
further documents or other materials as Hibernia shall have reasonably requested
in connection with the transactions contemplated hereby.
12.8. Representations, Warranties and Agreements of Hibernia.
Each of the representations, warranties and agreements of Hibernia contained
herein in all material respects shall be true on, or complied with by, the
Closing Date as if made on such date (or the date when made in the case of any
representations or warranty which specifically relates to an earlier date) and
Northwest shall have received a certificate signed by the Chief Executive
Officer and the Treasurer of Hibernia, dated the Closing Date, to such effect;
Hibernia shall have furnished to Northwest such other certificates as Northwest
shall reasonably request in connection with the Closing, evidencing compliance
with the terms hereof and its status, business and financial condition. Hibernia
shall have furnished Northwest with such further documents or other materials as
Northwest shall have reasonably requested in connection with the transactions
contemplated hereby.
12.9. Effective Registration Statement. The Registration
Statement shall have become effective and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the SEC
and Northwest shall have received a certificate to such effect from the officer
of Hibernia designated as its agent for service on the cover page of the
Registration Statement (which certificate may be to the knowledge of such
officer).
12.10. Tax Opinion. Hibernia and shareholders of Northwest shall
have received an opinion of a nationally recognized public accounting firm
satisfactory to Northwest, which opinion shall be satisfactory in form and
substance to Hibernia and Northwest, to the effect that the Merger when
consummated in accordance with the terms hereof will constitute a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code, and that the
exchange of Northwest Common Stock to the extent exchanged for Hibernia Common
Stock will not give rise to gain or loss to the shareholders of Northwest with
respect to such exchange and that the Louisiana income tax treatment to the
shareholders of Northwest will be substantially the same as the federal income
tax treatment to the shareholders of Northwest.
12.11. Listing on New York Stock Exchange. The shares of
Hibernia Common Stock issuable to the holders of Northwest Common Stock in the
Merger shall have been approved for listing on the New York Stock Exchange, Inc.
on or before the Closing Date, subject to official notice of issuance.
12.12. Fairness Opinion. Northwest shall have received a letter
from Southard Financial dated within five days of the scheduled date of mailing
of the Proxy Statement to its shareholders, and updated to within five days of
the Closing Date to the effect that the terms of the Merger are fair to its
shareholders from a financial point of view.
12.13. Termination of Interests in Retirement Plan. Northwest
shall use its best efforts to obtain the consent of each current director
serving on the Board of Directors of Northwest and each director who has retired
from the Board of Directors since December of 1985 to the termination of the
retirement plan in place for directors of Northwest (which plan was adopted in
1985 and amended in 1989) and to termination of any and all interest in such
plan that each such directors may have.
12.14. Assertion of Conditions. A failure to satisfy any of the
requirements set forth in Section 12.5, 12.8, 12.11 or 12.12 shall only
constitute conditions to consummation of the Merger if asserted by Northwest and
a failure to satisfy any of the requirements set forth in Section 12.6 or 12.7
shall only constitute conditions to consummation of the Merger if asserted by
Hibernia.
13. Termination. This Agreement may be terminated prior to the Closing
Date, either before or after its approval by the shareholders of the parties
hereto, in any of the following events:
13.1. Mutual Consent. By the mutual consent of the parties
hereto, if the Board of Directors of each party so determines by vote of a
majority of the members of its entire Board.
13.2. Breach of Representation, Warranty or Covenant. By either
party hereto, in the event of a breach by the other party (a) of any covenant or
agreement contained herein or (b) of any representation or warranty herein, if
(i) the facts constituting such breach reflect a material and adverse change in
the financial condition, results of operations, business, or prospects taken as
a whole, of the breaching party, which in either case cannot be or is not cured
within 60 days after written notice of such breach is given to the party
committing such breach, or (ii) in the event of a breach of a warranty or
covenant, such breach results in a material increase in the cost of the
non-breaching party's performance of this Agreement.
13.3. Passage of Time; Inability to Satisfy Conditions. By
either party hereto, in the event that (i) the Merger is not consummated by
March 31, 1998, or (ii) any condition to Closing cannot be satisfied by March
31, 1998 and will not be waived by the party or parties entitled to waive it.
13.4. Failure to Obtain Regulatory Approval. By either party
hereto, at any time after the Federal Reserve Board, the Federal Reserve Bank or
the Comptroller has denied any application for any approval or clearance
required to be obtained as a condition to the consummation of the Merger and the
time period for all appeals or requests for reconsideration thereof has run.
13.5. Failure to Obtain Shareholder Approval. By either party
hereto, if the Merger is not approved by the required vote of shareholders of
Northwest.
13.6. Material Adverse Change. By Northwest, if a material
adverse change as described in Section 8.7 of this Agreement occurs, and by
Hibernia, if a material adverse change as described in Section 7.7 hereof
occurs, after the date hereof and prior to the Closing.
13.8. Fairness Opinion. By Northwest, if it shall not have
received a letter from Southard Financial dated within five days of the
scheduled date of mailing of its proxy statement to its shareholders, and
updated to within five days of the Closing Date, to the effect that the terms of
the Merger are fair to its shareholders from a financial point of view.
13.9. Due Diligence. By Hibernia, within 30 days after the date
hereof, if its due diligence review of Northwest results in a discloses material
liabilities, obstacles to the Merger or other circumstances that are not
disclosed in this Agreement or the Schedules hereto and that, in the good faith
judgment of Hibernia, materially alter the economic basis for, or feasibility
of, the Merger; provided, however, that the sole remedy that Hibernia shall have
in that event pursuant to this Section 13.9 shall be the termination of this
Agreement.
13.10. Termination of Retirement Plan. By Hibernia, in the event
that more than 6 of the directors currently serving on the Board of Directors of
Northwest, fail to agree to terminate their interest in the retirement policy
for members of the Board adopted in 1985 and amended in 1989.
14. Closing and Effective Date. The closing of the Merger (the
"Closing") shall take place at the office of Hibernia at 313 Carondelet Street,
New Orleans, Louisiana, at 11:00 a.m. local time, or at such other place or time
as shall be mutually agreeable to the parties hereto, on the first business day
occurring after the last to occur of: (i) the date that falls 15 days after the
date of the order of the Federal Reserve Board approving the Merger pursuant to
the Bank Holding Company Act; (ii) the date that falls 15 days after the date of
the order of the Comptroller approving the merger of the Bank with and into HNB
pursuant to the Bank Merger Act; and (iii) the date that falls 5 days after the
date on which the last meeting of shareholders called to approve this Agreement
is held; or such later date within 60 days of such date as may be agreed upon
between the parties hereto (the date and time of the Closing being referred to
herein as the "Closing Date"). Immediately upon consummation of the Closing, or
on such other later date as the parties hereto may agree, the Merger Agreement
shall be certified, executed, acknowledged and delivered to the Secretary of
State of the State of Louisiana (the "Secretary") for filing pursuant to and in
accordance with the provisions of Section 12:112 of the LBCL. The Merger shall
become effective as of the date and time of issuance by the Secretary of a
certificate of merger relating to the Merger (such date and time being referred
to herein as the "Effective Date").
15. Survival and Termination of Representations, Warranties and
Covenants.
15.1. Except as otherwise provided in this Section 15, the
representations, warranties and covenants contained in this Agreement shall
terminate as of the earlier of the Effective Date or the termination of this
Agreement. Upon termination of such representations, warranties and covenants,
such provisions shall be of no further force or effect, and no party hereto
shall have any legal right to redress, whether for breach of contract or
otherwise, as a result of a breach of any such provision.
15.2. The provisions and agreements set forth in Sections 3, 5,
9.12 and 11 and the last sentence of Section 8.3 hereof shall survive the
Closing, if the Closing occurs, for the benefit of the shareholders, directors
and officers of Northwest who are the intended beneficiaries of such provisions.
15.3. The provisions of Section 11 and liabilities for a breach
of the provisions of Sections 9.2 or 9.13 shall survive the termination of this
Agreement if this Agreement terminates without the Closing or the Merger having
occurred, in which event liability for a breach of Section 9.2 or Section 9.13
shall survive the termination of the Agreement for a period of 180 days
following the date on which the Agreement terminates. Nevertheless, no party to
this Agreement shall have a legal right to redress or cause of action for a
breach of Section 9.2 except in those circumstances in which such breach
directly resulted in the termination of the Agreement.
15.4. In consideration of the mutual benefits and agreements
contained in this Agreement, each of the parties hereto, on behalf of itself and
its successors and assigns, hereby irrevocably waives any right or cause of
action which otherwise would survive in the absence of this Section 15.
16. Amendment; Waivers. To the extent permitted under applicable law,
prior to the Closing Date any provision of this Agreement may be amended or
modified at any time, either before or after its approval by the shareholders of
the parties hereto, (i) by an agreement in writing among the parties hereto
approved by their respective Boards of Directors and executed in the same manner
as this Agreement, and (ii) as provided in Section 12:112 of the LBCL. Except
with respect to any required shareholder or regulatory approval, each party
hereto, by written instrument signed by a duly authorized officer of such party,
may at any time (whether before or after approval of this Agreement by the
shareholders of Hibernia or Northwest) extend the time for the performance of
any of the obligations or other acts of the other party hereto and may waive (i)
any inaccuracies of the other party in the representations or warranties
contained in this agreement or any document delivered pursuant hereto, (ii)
compliance with any of the covenants, undertakings, or agreements of the other
party, or satisfaction of any of the conditions precedent to its obligations,
contained herein or (iii) the performance by the other party of any of its
obligations set out herein or therein; provided that no such waiver executed
after approval of this Agreement by the shareholders of Hibernia or Northwest
shall change the number of shares of Hibernia Common Stock into which shares of
Northwest Common Stock will be converted by the Merger.
17. Execution in Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to constitute an original. Each such
counterpart shall become effective when one counterpart has been signed by each
party hereto.
18. Governing Law. This Agreement shall be governed by, and interpreted
in accordance with, the laws of the State of Louisiana applicable to agreements
made and entirely to be performed within such State, except as federal law may
be applicable.
19. Expenses. Each party hereto will bear all expenses incurred by it in
connection with this Agreement and the transactions contemplated hereby,
including the fees, expenses and disbursements of its counsel and auditors,
provided that printing expenses shall be borne by Hibernia.
20. No Assignment. Prior to the Effective Date, neither party hereto may
assign any of its rights or obligations under this Agreement to any other person
without the prior written consent of the other bank holding company that is a
party hereto, including any transfer or assignment by operation of law.
21. Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally
or sent by registered or certified mail, postage prepaid, to the Chief Executive
Officer of each party hereto at the address of such party set forth in the
preamble to this Agreement and shall be deemed to have been given as of the date
so personally delivered or mailed. A copy of all notices or other communications
directed to Hibernia shall be sent to:
Hibernia Corporation
313 Carondelet Street
New Orleans, Louisiana 70130
Attention: Corporate Law Division
and a copy of all notices or other communications directed to
Northwest shall be sent to:
John Garmany
First National Bank of Mansfield
214 S. Washington
Mansfield, Louisiana 71052-2436
with a copy to:
Jeffrey C. Gerrish
Gerrish & McCreary, P.C.
700 Colonial Road, Suite 200
Memphis, Tennessee 38117
22. Headings. The headings in this Agreement are inserted for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement.
23. Entire Agreement. This Agreement and the Schedules and Exhibits
hereto supersede any and all oral or written agreements and understandings
heretofore made relating to the subject matter hereof and contain the entire
agreement of the parties relating to the subject matter hereof. The terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the parties hereto, and their respective successors. Nothing in this Agreement
or in the Merger Agreement is intended to or shall be construed to confer upon
or to give any person other than the parties hereto any rights, remedies,
obligation or liabilities under or by reason of this Agreement except as
expressly provided herein.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed in counterparts by their duly authorized officers and their corporate
seals to be hereunto affixed, all as of the day and year first above written.
Hibernia Corporation
Stephen A. Hansel
President and Chief Executive
Officer
Attest:
Patricia C. Meringer
Secretary
Northwest Bancshares of Louisiana, Inc.
By: Its Board of Directors
__________________________________
John C. Burford, Jr.
__________________________________
C. Alfred Flanders, Jr.
__________________________________
John W. Garmany
__________________________________
Jack L. Grindle
__________________________________
Calvin W. Hall, II
__________________________________
Charles C. Hunter
__________________________________
Earnest A. Lafitte, Jr.
__________________________________
Jade W. Lowrey, Jr.
__________________________________
John C. McLaurin, Jr.
__________________________________
Joe B. Schmidt, Jr.
__________________________________
Loretta C. Woodward
__________________________________
Thomas A. Woodward, Jr.
__________________________________
Green Rives, Jr.
Attest:
___________________________________
Secretary
APPENDIX B
OPINION OF SOUTHARD FINANCIAL
FAIRNESS OPINION
MERGER BY AND BETWEEN
HIBERNIA CORPORATION
AND
NORTHWEST BANCSHARES
OF LOUISIANA, INC.
November 3, 1997
Board of Directors
Northwest Bancshares of Louisiana, Inc.
Mansfield, Louisiana
RE: Fairness Opinion Relative to Pending Agreement of Northwest Bancshares of
Louisiana, Inc., Mansfield, Louisiana, to Merge with and into Hibernia
Corporation, New Orleans, Louisiana.
Directors:
The Board of Directors of Northwest Bancshares of Louisiana, Inc.
("Northwest" or the Company") retained Southard Financial, in its capacity as a
financial valuation and consulting firm, to render its opinion of the fairness,
from a financial viewpoint, of the acquisition of Northwest by Hibernia
Corporation ("Hibernia"). Southard Financial and its principals have no past,
present, or future contemplated financial, equity, or other interest in either
Northwest or Hibernia. This opinion is issued based upon financial data as of
September 30, 1997.
Approach to Assignment
The approach to this assignment was to consider the following factors:
A review of the financial performance and position of Northwest and the
value of its common stock;
A review of the financial performance and position of Hibernia and the
value of its common stock;
A review of recent Bank merger transactions;
A review of the current and historical market prices of bank holding
companies in Louisiana and surrounding states;
A review of the investment characteristics of the common stock of Northwest
and Hibernia;
A review of the Agreement and Plan of Reorganization between Hibernia and
Northwest;
An evaluation of the impact of the merger on the expected return to the
current shareholders of Northwest; and,
An evaluation of other factors as was considered necessary to render this
opinion.
It is Southard Financial's understanding that the merger and resulting
exchange of the stock of Hibernia for the outstanding common stock of Northwest
constitutes a non- taxable exchange for federal income tax purposes.
DUE DILIGENCE REVIEW PROCESS
In performing this assignment, Southard Financial reviewed the documents
specifically outlined in Exhibit 1 pertaining to Northwest and in Exhibit 2
pertaining to Hibernia.
Review of Northwest Bancshares of Louisiana, Inc.
Southard Financial visited with the management of First National Bank in
Mansfield, Mansfield, Louisiana. Discussions included questions regarding the
current and historical financial position and performance of Northwest, its
outlook for the future, and other pertinent factors.
Review of Hibernia Corporation
Southard Financial visited with the management of Hibernia Corporation in
New Orleans, Louisiana. Discussions included questions regarding the current and
historical financial position and performance of Hibernia, its outlook for the
future, and other pertinent factors. Southard Financial also reviewed publicly
available information relative to Hibernia and its stock.
Merger Documentation
Southard Financial reviewed the Agreement and Plan of Reorganization (the
"Agreement"). Appropriate aspects of this Agreement were discussed with the
management of Northwest and Hibernia. (See Exhibit 3, Terms of the Agreement and
Plan of Reorganization.)
Southard Financial did not independently verify the information reviewed,
but relied on such information as complete and accurate in all material
respects. Southard Financial did not make any independent evaluation of the
assets of Hibernia or Northwest, but reviewed data supplied by the management of
both institutions.
MAJOR CONSIDERATIONS
Numerous factors were considered in the overall review of the proposed
merger. The review process included considerations regarding Northwest,
Hibernia, and the proposed merger. The major considerations are as follows:
Northwest Bancshares of Louisiana, Inc.
Historical earnings;
Historical dividend payments;
Outlook for future performance, earnings, and dividends;
Economic conditions and outlook in Northwest's market;
The competitive environment in Northwest's market;
Comparisons with peer banks and bank holding companies;
Potential risks in the loan and securities portfolios;
Recent minority stock transactions in Northwest's common stock; and,
Other such factors as were deemed appropriate in rendering this opinion.
Hibernia Corporation
Historical earnings;
Historical dividend payments;
Outlook for future performance, earnings, and dividends;
Economic conditions and outlook in Hibernia's market;
The competitive environment in Hibernia's market;
Comparisons with peer banks and bank holding companies;
Recent minority stock transactions in Hibernia's common stock; and,
Other such factors as were deemed appropriate in rendering this opinion.
Common Factors
Historical and current bank merger pricing; and,
Current market prices for minority blocks of common stocks of regional
bank holding companies in Louisiana and surrounding states.
The Proposed Merger
The terms of the Agreement and Plan of Reorganization;
The specific pricing of the merger;
Adequacy of the consideration paid to the shareholders of Northwest;
The assumption that the merger will be treated as a tax-free exchange;
The impact on Hibernia's capital and liquidity positions;
The historical dividend payments of Hibernia and the likely impact
on the dividend income of the current shareholders of
Northwest (equivalency of cash dividends);
Pro-forma combined income statements for Hibernia post merger and
the expected returns to Northwest shareholders (equivalency of
earnings yield);
The market for minority blocks of Hibernia common stock; and,
Other such factors as deemed appropriate.
OVERVIEW OF FAIRNESS ANALYSIS
In connection with rendering its opinion, Southard Financial performed a
variety of financial analyses, which are summarized below. Southard Financial
believes that its analyses must be considered as a whole and that considering
only selected factors could create an incomplete view of the analyses and the
process underlying the opinion. The preparation of a fairness opinion is a
complex process involving subjective judgment and is not susceptible to partial
analyses. In its analyses, Southard Financial made numerous assumptions, many of
which are beyond the control of Northwest and Hibernia. Any estimates contained
in the analyses prepared by Southard Financial are not necessarily indicative of
future results or values, which may vary significantly from such estimates.
Estimates of value of companies do not purport to be appraisals or necessarily
reflect the prices at which companies or their securities may actually be sold.
None of the analyses performed by Southard Financial was assigned greater
significance than any other. (More details on the analyses prepared by Southard
Financial are contained in Exhibits 3-7.)
Earnings Yield Analysis
In evaluating the impact of the proposed merger on the shareholders of
Northwest, Southard Financial determined that, based upon an assumed exchange
ratio of 3.898 shares of Hibernia stock for each share of Northwest stock, the
shareholders of Northwest would have seen no material impact on earnings per
share (defined as post merger combined earnings per share times the assumed
exchange ratio), had the merger been consummated prior to January 1, 1997.
Further, adjusting Hibernia earnings for amortization of goodwill and core
deposit intangibles (non-cash expenses), the earnings impact of the merger would
be positive (see Exhibit 4).
Dividend Yield Analysis
In evaluating the impact of the proposed merger on the shareholders of
Northwest, Southard Financial reviewed the dividend paying histories of
Northwest and Hibernia. Based upon this review, it is reasonable to expect that
the shareholders of Northwest, in total, will receive dividends below the level
currently paid by Northwest after the merger is completed (defined as post
merger dividends per share times the assumed exchange ratio). This is predicated
on the assumption that Hibernia will continue per share dividends at current
levels (see Exhibit 4).
Book Value Analysis
In evaluating the impact of the proposed merger on the shareholders of
Northwest, Southard Financial determined that the shareholders of Northwest
would have experienced an adverse impact on the book value of their investment
had the merger been consummated on December 31, 1996 or June 30, 1997. However,
the shareholders of Northwest would be exchanging their shares for Hibernia
stock trading at 246% of book value (see Exhibit 4).
Growth Outlook for Earnings
An important difference between Hibernia and Northwest is the outlook for
growth in earnings per share. Northwest's earnings per share remained nearly
constant over the 1993-96 period, increasing from $3.47 per share in 1993 to
$3.54 per share in 1996. In comparison, Hibernia's earnings per share (fully
taxable basis) increased from $0.51 per share in 1993 to $0.90 per share in
1996, with a projected level of $1.00 in 1997. Further, the outlook for Hibernia
is for continued strong earnings per share growth for 1998.
Analysis of Alternatives
In evaluating the fairness of the proposed merger to the shareholders of
Northwest, Southard Financial reviewed with management the terms of other offers
received and discussions for the purchase/merger of Northwest. Further, Southard
Financial considered recent public market merger pricing information (see
Exhibit 5).
Analysis of Market Transactions
Based upon the merger terms and the recent market price of Hibernia common
stock, Northwest shareholders will receive about 239% of September 30, 1997 book
value (based on peer levels of 10% capital) plus dollar-for-dollar of excess
capital ($1.628 million), 16.9 times estimated 1997 earnings, and 25.5% of
assets. Based upon the review conducted by Southard Financial, the pricing for
Northwest in the merger is within the range of multiples seen in recent bank
acquisitions. Further, the shareholders of Northwest would be exchanging their
stock for shares of Hibernia, which is trading at 17.4x earnings and 246% of
book value (see Exhibit 5).
Fundamental Analysis
Southard Financial reviewed the financial characteristics of Northwest and
Hibernia with respect to profitability, capital ratios, liquidity, asset
quality, and other factors. Southard Financial compared Northwest and Hibernia
to a universe of publicly traded banks and bank holding companies and to peer
groups prepared by the Federal Financial Institutions Examination Council
(FFIEC). Southard Financial found that the post-merger combined entity will have
capital ratios and profitability ratios near those of the public peer group and
the FFIEC peer group (predominantly non-publicly traded banks). (See Exhibits 6-
7.)
Liquidity
Unlike Northwest stock, Hibernia shares are listed and actively traded on
the New York Stock Exchange. Further, except in the case of officers, directors,
and certain large shareholders of Northwest, Hibernia shares received will be
freely tradeable with no restrictions.
Summary of Analyses
The summary set forth does not purport to be a complete description of the
analyses performed by Southard Financial. The analyses performed by Southard
Financial are not necessarily indicative of actual values, which may differ
significantly from those suggested by such analyses. Southard Financial did not
appraise any individual assets or liabilities of Northwest or Hibernia.
Throughout the due diligence process, all information provided by Northwest,
Hibernia, and third party sources, was relied upon by Southard Financial without
independent verification. Based upon the analyses discussed above, and other
analyses performed by Southard Financial, the impact of the merger on the
shareholders of Northwest is expected to be favorable.
FAIRNESS OPINION
Based upon the analyses of the foregoing and such matters as were
considered relevant, it is the opinion of Southard Financial that the terms of
the offer for the acquisition of Northwest Bancshares of Louisiana, Inc. by
Hibernia Corporation pursuant to the Agreement and Plan of Reorganization are
fair, from a financial viewpoint, to the shareholders of Northwest Bancshares of
Louisiana, Inc. Thank you for this opportunity to be of service to the
shareholders of Northwest Bancshares of Louisiana, Inc.
Sincerely yours,
SOUTHARD FINANCIAL
/s/ DAVID A. HARRIS, CFA, ASA
David A. Harris, CFA, ASA
/s/ DOUGLAS K. SOUTHARD, DBA, CFA, ASA
Douglas K. Southard, DBA, CFA, ASA
Attachments:
Exhibit 1: Northwest Bancshares of Louisiana, Inc., Document Review List
Exhibit 2: Hibernia Corporation, Document Review List
Exhibit 3: Terms of the Agreement and Plan of Reorganization
Exhibit 4: Expected Impact of the Merger on the Shareholders of
Northwest Bancshares of Louisiana, Inc.
Exhibit 5: Comparison of the Merger Pricing to Public Market Transactions
Exhibit 6: Overview of Northwest Bancshares of Louisiana, Inc.
Exhibit 7: Overview of Hibernia Corporation
Exhibit 8: Qualifications of Southard Financial
APPENDIX C
Excerpts From Section 131 of the
Louisiana Business Corporation Law
C. Except as provided in the last sentence of this subsection, any
shareholder electing to exercise such right of dissent shall file with the
corporation, prior to or at the meeting of shareholders at which such proposed
corporate action is submitted to a vote, a written objection to such proposed
corporate action, and shall vote his shares against such action.
If such proposed corporate action be taken by the required vote, but by less
than eighty per cent of the total voting power, and the merger consolidation or
sale, lease or exchange of assets authorized thereby be effected, the
corporation shall promptly thereafter give written notice thereof, by registered
mail, to each shareholder who filed such written objection to, and voted his
shares against, such action, at such shareholder's last address on the
corporation's records. Each such shareholder may, within twenty days after the
mailing of such notice to him, but not thereafter, file with the corporation a
demand in writing for the fair cash value of his shares as of the day before
such vote was taken; provided that he state in such demand the value demanded,
and a post office address to which the reply of the corporation may be sent, and
at the same time deposit in escrow in a chartered bank or trust company located
in the parish of the registered office of the corporation, the certificates
representing his shares, duly endorsed and transferred to the corporation upon
the sole condition that said certificates shall be delivered to the corporation
upon payment of the value of the shares determined in accordance with the
provisions of this section. With his demand the shareholder shall deliver to the
corporation, the written acknowledgment of such bank or trust company that it so
holds his certificates of stock. Unless the objection, demand and acknowledgment
aforesaid be made and delivered by the shareholder within the period above
limited, he shall conclusively be presumed to have acquiesced in the corporate
action proposed or taken.
D. If the corporation does not agree to the value so stated and
demanded, or does not agree that a payment is due, it shall, within twenty days
after receipt of such demand and acknowledgment, notify in writing the
shareholder, at the designated post office address, of its disagreement, and
shall state in such notice the value it will agree to pay if any payment should
be held to be due; otherwise it shall be liable for, and shall pay to the
dissatisfied shareholder, the value demanded by him for his shares.
E. In case of disagreement as to such fair cash value, or as to whether
any payment is due, after compliance by the parties with the provisions of
subsections C and D of this section, the dissatisfied shareholder, within sixty
days after receipt of notice in writing of the corporation's disagreement, but
not thereafter, may file suit against the corporation, or the merged or
consolidated corporation, as the case may be, in the district court of the
parish in which the corporation or the merged or consolidated corporation, as
the case may be, has its registered office, praying the court to fix and decree
the fair cash value of the dissatisfied shareholder's shares as of the day
before such corporate action complained of was taken, and the court shall, on
such evidence as may be adduced in relation thereto, determine summarily whether
any payment is due, and, if so, such cash value, and render judgment
accordingly. Any shareholder entitled to file such suit may, within such
sixty-day period but not thereafter, intervene as a plaintiff in such suit filed
by another shareholder, and recover therein judgment against the corporation for
the fair cash value of his shares. No order or decree shall be made by the court
staying the proposed corporate action, and any such corporate action may be
carried to completion notwithstanding any such suit. Failure of the shareholder
to bring suit, or to intervene in such a suit, within sixty days after receipt
of notice of disagreement by the corporation shall conclusively bind the
shareholder (1) by the corporation's statement that no payment is due, or (2) if
the corporation does not contend that no payment is due, to accept the value of
his shares as fixed by the corporation in its notice of disagreement.
F. When the fair value of the shares has been agreed upon between the
shareholder and the corporation, or when the corporation has become liable for
the value demanded by the shareholder because of failure to give notice of
disagreement and of the value it will pay, or when the shareholder has become
bound to accept the value the corporation agrees is due because of his failure
to bring suit within sixty days after receipt of notice of the corporation's
disagreement, the action of the shareholder to recover such value must be
brought within five years from the date the value was agreed upon, or the
liability of the corporation became fixed.
G. If the corporation or the merged or consolidated corporation, as the
case may be, shall, in its notice of disagreement, have offered to pay to the
dissatisfied shareholder on demand an amount in cash deemed by it to be the fair
cash value of his shares, and if, on the institution of a suit by the
dissatisfied shareholder claiming an amount in excess of the amount so offered,
the corporation or the merged or consolidated corporation, as the case may be,
shall deposit in the registry of the court, there to remain until the final
determination of the cause, the amount so offered, then, if the amount finally
awarded such shareholder, exclusive of interest and costs, be more than the
amount offered and deposited as aforesaid, the costs of the proceeding shall be
taxed against the corporation, or the merged or consolidated corporation, as the
case may be; otherwise the costs of the proceeding shall be taxed against such
shareholder.
H. Upon filing a demand for the value of his shares, the shareholder
shall cease to have any of the rights of a shareholder except the rights
accorded by this section. Such a demand may be withdrawn by the shareholder at
any time before the corporation gives notice of disagreement, as provided in
subsection D of this section. After such notice of disagreement is given,
withdrawal of a notice of election shall require the written consent of the
corporation. If a notice of election is withdrawn, or the proposed corporate
action is abandoned or rescinded, or a court shall determine that the
shareholder is not entitled to receive payment for his shares, or the
shareholder shall otherwise lost his dissenter's rights, he shall not have the
right to receive payment for his shares, his share certificates shall be
returned to him (and, on his request, new certificates shall be issued to him in
exchange for the old ones endorsed to the corporation), and he shall be
reinstated to all his rights as a shareholder as of the filing of his demand for
value, including any intervening preemptive rights, and the right to payment of
any intervening dividend or other distribution, or, if any such rights have
expired or any such dividend or distribution other than in cash has been
completed, in lieu thereof, at the election of the corporation, the fair value
thereof in cash as determined by the board as of the time of such expiration or
completion, but without prejudice otherwise to any corporate proceedings that
may have been taken in the interim.
APPENDIX D
FORM OF TAX OPINION OF ERNST & YOUNG LLP
[date]
Hibernia Corporation
313 Carondelet Street
New Orleans, Louisiana 70130
Northwest Bancshares of Louisiana, Inc.
214 South Washington
Mansfield, Louisiana 71052
Dear Sir or Madam:
This letter is in response to your request that we provide you with our opinion
concerning certain federal income tax consequences which would arise from
consummation of the proposed merger of Northwest Bancshares of Louisiana, Inc.
("Northwest") with and into Hibernia Corporation ("Hibernia") (the "Northwest
Merger"), and the proposed merger of First National Bank in Mansfield ("Bank")
with and into Hibernia National Bank ("HNB") (the "Bank Merger"). (Hereinafter,
the Northwest Merger and the Bank Merger are referred to collectively as the
"Proposed Mergers.")
In rendering this opinion, we have relied upon the facts, summarized below, as
they have been presented to us orally by the management of Hibernia and verified
in: the Statements of Facts and Representations dated [date] provided by the
respective managements of Northwest, Bank, Hibernia, and HNB; the Agreement and
Plan of Merger made and entered into by and between Northwest and Hibernia as of
June 26, 1997 (the "Agreement"); the Agreement to Merge between Bank and HNB
(the "Bank Plan of Merger"); and the Registration Statement (Form S-4), as
declared effective by the Securities and Exchange Commission on [date] and
containing the Proxy Statement - Prospectus of Northwest and Hibernia dated
[date] ("Prospectus"). (These are sometimes hereinafter referred to collectively
as "Documents.")
You have represented to us that the facts contained in the Documents provide an
accurate and complete description of the facts and circumstances concerning the
Proposed Mergers. We have made no independent investigation of the factual
matters and circumstances and, therefore, have relied upon the facts and
representations in the Documents for purposes of this letter. Any changes to the
facts or Documents may affect the conclusions stated herein.
We understand that reference to Ernst & Young LLP and our opinion is included in
the Prospectus relating to the issuance of Hibernia Common Stock in connection
with the Proposed Mergers and the special meeting of the Northwest shareholders
with respect thereto. We consent to such reference in the Prospectus under the
captions "Summary," "Proposed Merger- Representations and Warranties; Conditions
to the Merger; Waiver" and "--Material Tax Consequences." We also understand
that the form of this letter is included as an appendix to the Form S-4
Registration Statement and the Prospectus. We consent to such inclusion.
STATEMENT OF FACTS
Northwest is a corporation organized and existing under the laws of the State of
Louisiana, and is a bank holding company within the meaning of the Bank Holding
Company Act of 1956, as amended. As of June 30, 1997, the authorized capital
stock of Northwest was 500,000 shares of common stock, no par value ("Northwest
Common Stock"). As of June 30, 1997, 400,000 shares of Northwest Common Stock
had been issued, 386,870 shares of Northwest Common Stock were outstanding, and
13,130 shares of Northwest Common Stock were held in Northwest's treasury. The
shares of Northwest Common Stock are held by approximately 180 shareholders.
There are no options, warrants, subordinated rights or other rights to purchase
Northwest Common Stock outstanding as of the date hereof.
Bank is principally engaged in the banking business. The presently authorized
capital stock of Bank is 100,000 shares of common stock, par value $10.00 per
share, all of which were issued and outstanding and held by Northwest (referred
to as "Bank Common Stock").
Hibernia is a bank holding company organized and existing under the laws of the
State of Louisiana. The presently authorized capital stock of Hibernia is
300,000,000 shares, consisting of 100,000,000 shares of preferred stock, no par
value, and 200,000,000 shares of Class A voting common stock, no par value (the
Class A voting common stock being referred to hereinafter as "Hibernia Common
Stock"). As of June 30, 1997, 2,000,000 shares of Hibernia's preferred stock
were issued and outstanding, 129,120,951 shares of Hibernia Common Stock were
outstanding, and 51,598 shares of Hibernia Common Stock were held in Hibernia's
treasury. As of June 30, 1997, Hibernia has the following existing options,
warrants, calls or commitments of any kind obligating Hibernia to issue any
share of its capital stock or any other security of which it is or will be the
issuer: Hibernia has authorized or reserved 1,626,421 shares of Hibernia Common
Stock for issuance under its 1987 Stock Option Plan, pursuant to which options
covering 1,472,175 shares of Hibernia Common Stock were outstanding as of June
30, 1997; 7,301,583 (as adjusted) shares of Hibernia Common Stock for issuance
under its Long-Term Incentive Plan, pursuant to which options covering 6,209,782
shares of Hibernia Common Stock were outstanding as of June 30, 1997; 932,500
shares of Hibernia Common Stock for issuance under its 1993 Directors' Stock
Option Plan, pursuant to which options covering 290,000 shares of Hibernia
Common Stock are outstanding as of June 30, 1997; 81,999 shares of Hibernia
Common Stock are available for issuance pursuant to Hibernia's Dividend
Reinvestment and Stock Purchase Plan; and warrants covering 213,176 shares of
Hibernia Common Stock are outstanding. On August 31, 1997, Hibernia completed a
merger with Executive Bancshares, Inc. which resulted in the issuance of
1,161,680 shares of Hibernia Common Stock. In addition, three transactions
currently pending, when consummated, will result in the issuance of no more than
19,300,000 additional shares of Hibernia Common Stock.
Additionally, on March 14, 1995, Hibernia and its Board of Directors
authorized an employee stock ownership plan ("ESOP") to be funded with $30.0
million of Hibernia Common Stock. The $30.0 million purchase of Hibernia Common
Stock will be funded through a loan from HNB. Hibernia Common Stock for the ESOP
will be purchased as it becomes available on the open market at market prices,
or in private negotiated transactions, other than from former shareholders of
Northwest Common Stock, at such prices as may be agreed by the parties to the
transaction, using funds drawn down on the loan as needed. At June 30, 1997,
2,431,388 shares have been acquired. Hibernia Common Stock is traded on the New
York Stock Exchange.
HNB is a nationally chartered bank engaged principally in the banking business
in the state of Louisiana. HNB is a wholly owned subsidiary of Hibernia.
BUSINESS PURPOSE
The management of Hibernia has represented to us that Hibernia desires to
consummate the Proposed Mergers in order to improve its presence in the
Louisiana market. As discussed in the Prospectus under the caption, "Proposed
Merger-Background of and Reasons for Merger," the Northwest Board of Directors
believes the shareholders of Northwest will benefit from being part of a larger
banking entity, the stock of which is publicly traded.
PROPOSED TRANSACTIONS
In accordance with the above-stated business purpose, the following transactions
have been proposed:
1. After all necessary regulatory and shareholder approvals have been granted,
there will be simultaneous mergers (i.e., the Proposed Mergers) of Northwest
with and into Hibernia in accordance with the Louisiana Business Corporation Law
("LBCL"), and Bank with and into HNB in accordance with the provisions of Bank
Merger Act, 12 U.S.C. Sections 1828 et. seq. and 12 U.S.C. Section 215a ("Bank
Merger Act"). Upon the completion of the Northwest Merger, Hibernia will cause
the Bank Merger to occur.
2. In the Northwest Merger, Hibernia will acquire all of the assets and assume
all of the liabilities of Northwest in exchange for Hibernia Common Stock. As a
result of the Northwest Merger, each share of the issued and outstanding
Northwest Common Stock shall be converted into and become the number of shares
of Hibernia Common Stock determined in accordance with the exchange rate (the
"Exchange Rate"). The Exchange Rate shall be the number that is obtained by the
following formula: ($21,277,850 , 386,870) , the Average Market Price of
Hibernia Common Stock (as defined below); provided, however, that if the Average
Market Price of Hibernia Common Stock is greater than $14.11, the Exchange Rate
shall be 3.898. Furthermore, if the Average Market Price of Hibernia Common
Stock is less than $12.14, then the Northwest Merger shall convert to a cash
transaction, in which the aggregate purchase price for all the shares of
Northwest Common Stock shall be $21,277,850, and the shareholders of Northwest
shall receive $55.00 in cash for each share of Northwest Common Stock held as of
the effective date of the Northwest Merger.
The Average Market Price of Hibernia Common Stock is defined as the average of
the mean of the high and low prices of one share of Hibernia Common Stock for
ten business days preceding the last trading day immediately prior to the
Closing Date as reported in The Wall Street Journal.
3. Holders of shares of Northwest Common Stock outstanding immediately prior to
the effective date of the Northwest Merger shall cease to be, and shall have no
rights as, shareholders of Northwest after the Northwest Merger.
4. In the Bank Merger, HNB will acquire all the assets and assume all of the
liabilities of Bank in constructive exchange for Hibernia Common Stock. As a
result of the Bank Merger, each share of the issued and outstanding Bank Common
Stock shall cease to be outstanding and will be canceled. No additional shares
of Hibernia Common Stock will actually be issued, nor will shares of HNB Common
Stock be issued in the Bank Merger.
5. No fractional shares will be issued. Each holder of Northwest Common Stock
who would otherwise have been entitled to receive a fraction of a share of
Hibernia Common Stock shall receive in lieu thereof, cash (without interest) in
an amount equal to such fractional part of a share multiplied by the average of
the mean of the high and low prices of one share of Hibernia Common Stock for
the five business days preceding the last trading day immediately prior to the
Closing Date as reported in The Wall Street Journal.
6. By following certain statutory procedures, shareholders of Northwest Common
Stock may exercise dissenter's rights entitling them to receive in cash the
value of their respective Northwest Common Stock in lieu of receiving Hibernia
Common Stock in the Northwest Merger.
REPRESENTATIONS
For purposes of our evaluation, we have received from the respective managements
of Northwest, Bank, Hibernia, HNB, Statements of Facts and Representations,
dated [date], as set forth below. References to the "Code" are to the Internal
Revenue Code of 1986, as amended.
The following representations have been made in connection with the Northwest
Merger:
(a) The fair market value of the Hibernia Common Stock to be received by each
shareholder of Northwest Common Stock will be approximately equal to the fair
market value of the Northwest Common Stock surrendered in the exchange.
(b) There is no plan or intention by the shareholders of Northwest who own five
percent or more of the Northwest Common Stock and to the best knowledge of
management of Northwest, there is no intention on the part of the remaining
shareholders of Northwest, to sell, exchange, or otherwise dispose of a number
of shares of Hibernia Common Stock received in the transaction that would reduce
the Northwest shareholders' ownership of Hibernia Common Stock to a number of
shares having a value, as of the date of the transaction, of less than 50
percent of the value of all the formerly outstanding stock of Northwest as of
the same date. For purposes of this representation, any shares of Northwest
Common Stock surrendered by dissenters, or exchanged for cash in lieu of
fractional shares of Hibernia Common Stock, will be treated as outstanding on
the date of the transaction. Moreover, shares of Northwest Common Stock and
shares of Hibernia Common Stock held by former Northwest shareholders and
otherwise sold, redeemed, or disposed of prior to June 26, 1997, in
contemplation of this transaction, subsequent to that date, or subsequent to
this transaction will be considered in making this representation.
(c) Hibernia has no plan or intention to reacquire any of its Common Stock
issued in the Northwest Merger other than to acquire a nominal amount of shares
of Common Stock that may be acquired in ordinary business transactions
(including, but not limited to, open market purchases in brokers' transactions).
(d) Hibernia has no plan or intention to sell or otherwise dispose of any of the
assets of Northwest acquired in the transaction except for dispositions made in
the ordinary course of business.
(e) Any liabilities of Northwest assumed by Hibernia and any liabilities to
which the transferred assets of Northwest are subject were incurred by Northwest
in the ordinary course of its business.
(f) Following the transaction, Hibernia will continue, substantially unchanged,
the business of Northwest as operated, prior to the Proposed Mergers, through
Northwest's subsidiary (Bank) which will be merged with and into HNB.
(g) Except for expenses relating to the registration of the Hibernia Common
Stock and certain proxy printing and mailing expenses to be paid solely by
Hibernia, which are directly related to the Proposed Mergers in accordance with
the guidelines established in Revenue Ruling 73-54, 1973-1 C.B. 187, Hibernia,
Northwest, and the shareholders of Northwest will pay their respective expenses,
if any, incurred in connection with the transactions.
(h) There is no intercorporate indebtedness existing between Northwest and its
affiliates on the one hand and Hibernia and its affiliates on the other hand
which was issued, acquired, or will be settled at a discount.
(i) No two parties to the transaction are investment companies as defined in
Section 368(a)(2)(F)(iii) and (iv) of the Code.
(j) Northwest is not under the jurisdiction of a court in a Title 11 or similar
case within the meaning of Section 368(a)(3)(A) of the Code.
(k) The fair market value of the assets of Northwest to be transferred to
Hibernia will equal or exceed the sum of the liabilities assumed by Hibernia
plus the amount of liabilities, if any, to which the transferred assets are
subject.
(l) The payment of cash in lieu of fractional shares of Hibernia Common Stock is
solely for the purpose of avoiding the expense and inconvenience to Hibernia of
issuing fractional shares and does not represent separately bargained for
consideration. The total cash consideration that will be paid in the transaction
to the Northwest shareholders instead of issuing fractional shares of Hibernia
will not exceed one percent of the total consideration that will be issued in
the transaction to the Northwest shareholders in exchange for their shares of
Northwest Common Stock. The fractional share interests of each holder of
Northwest Common Stock will be aggregated, and no Northwest shareholder will
receive cash in an amount equal to or greater than the value of one full share
of Hibernia Common Stock for its Northwest Common Stock.
(m) None of the compensation received by any shareholder- employees of Northwest
or its affiliates will be separate consideration for, or allocable to, any of
their shares of Northwest Common Stock; none of the shares of Hibernia Common
Stock received by any shareholder-employees will be separate consideration for,
or allocable to, any employment agreement; and the compensation paid to any
shareholder-employees will be for services actually rendered and will be
commensurate with amounts paid to third parties bargaining at arm's-length for
similar services.
(n) The Northwest Merger will qualify as a statutory merger under the LBCL.
(o) The shareholders of Northwest (immediately before the proposed transaction)
receiving shares of Hibernia Common Stock will not own (immediately after the
proposed transaction) more than 50 percent of the fair market value of Hibernia
Common Stock.
The following representations have been made in connection with the Bank Merger:
(aa) No additional Hibernia Common Stock will be issued or exchanged in the Bank
Merger. No HNB Common Stock will be issued or exchanged in the Bank Merger.
(bb) There is no plan or intention by the shareholder of Bank to sell, exchange
or otherwise dispose of a number of shares of Hibernia Common Stock
constructively received in the transaction that would reduce the Bank
shareholder's constructive ownership of Hibernia Common Stock to a number of
shares having a value, as of the date of the transaction, of less than 50
percent of the value of all of the formerly outstanding Bank Common Stock as of
the same date. For purposes of this representation, any shares of Bank Common
Stock constructively exchanged for cash or other property, surrendered by
dissenters, or exchanged for cash in lieu of fractional shares of HNB Common
Stock will be treated as outstanding Bank Common Stock on the date of the
transaction. Moreover, shares of Bank Common Stock and shares of Hibernia Common
Stock held by Bank or its shareholder and otherwise sold, redeemed, or disposed
of prior to June 26, 1997, in contemplation of this transaction, or subsequent
to this transaction will be considered in making this representation.
(cc) HNB will acquire at least 90 percent of the fair market value of the net
assets and at least 70 percent of the fair market value of the gross assets held
by Bank immediately prior to the Bank Merger. For purposes of this
representation, amounts paid by Bank to dissenters, Bank assets used to pay its
reorganization expenses, and all redemptions and distributions (except for
regular, normal dividends) made by Bank immediately preceding the transfer, will
be included as assets of Bank held immediately prior to the transaction.
(dd) Prior to the transaction, Hibernia will be in control of HNB within the
meaning of Section 368(c) of the Code wherein "control" is defined to mean the
ownership of stock possessing at least 80 percent of the total combined voting
power of all classes of stock entitled to vote and at least 80 percent of the
total number of shares of all other classes of the corporation.
(ee) Following the transaction, HNB will not issue additional shares of its
Common Stock that would result in Hibernia losing control of HNB within the
meaning of Section 368(c) of the Code.
(ff) Hibernia has no plan or intention to reacquire any of its Common Stock
constructively issued in the Bank Merger.
(gg) Hibernia has no plan or intention to liquidate HNB; to merge HNB into
another corporation; to sell or otherwise dispose of the Common Stock of HNB; or
to cause HNB to sell or otherwise dispose of any of the assets of Bank acquired
in the transaction, except for dispositions made in the ordinary course of
business. As Hibernia consummates other mergers, it is likely that some or all
of the merged banks will be merged with and into HNB. At this time, the
discussion provided under the caption "Summary Other Pending Transactions for
Hibernia" in the Prospectus provides a complete list of all pending mergers that
are covered by definitive agreements as of June 26, 1997. However, no Common
Stock of HNB will be issued as consideration in any of the pending mergers.
(hh) The liabilities of Bank assumed by HNB and the liabilities to which the
transferred assets of Bank are subject were incurred by Bank in the ordinary
course of its business.
(ii) Following the transaction, HNB will continue the historic business of Bank
or will use a significant portion of Bank's historic business assets in its
business.
(jj) Except for expenses relating to the registration of Hibernia Common Stock
and certain proxy printing and mailing expenses to be paid solely by Hibernia,
which are directly related to the Proposed Mergers in accordance with the
guidelines established in Revenue Ruling 73-54, 1973-1 C.B. 187, Hibernia, HNB,
Bank and the shareholder of Bank will pay their respective expenses, if any,
incurred in connection with the transaction.
(kk) There is no intercorporate indebtedness existing between Hibernia and Bank
and their affiliates or between HNB and Bank that was issued, acquired, or will
be settled at a discount.
(ll) No two parties to the Bank Merger are investment companies as defined in
Section 368(a)(2)(F)(iii) and (iv) of the Code.
(mm) Bank is not under the jurisdiction of a court in a Title 11 or similar case
within the meaning of Section 368(a)(3)(A) of the Code.
(nn) The basis and fair market value of the assets of Bank transferred to HNB
will each equal or exceed the sum of the liabilities assumed by HNB, plus the
amount of liabilities, if any, to which the transferred assets are subject.
(oo) The merger of Bank into HNB will qualify as a statutory merger under the
Bank Merger Act.
TECHNICAL ANALYSIS
The following technical analysis is applicable only if the Average Market Price
of Hibernia Common Stock is equal to or greater than $12.14. If the Average
Market Price of Hibernia Common Stock is less than $12.14, no Hibernia Common
Stock will be exchanged in the transaction and the following discussion is not
applicable.
Section 368(a)(1)(A) of the Code provides that a reorganization (a "Type A"
reorganization) includes a statutory merger or consolidation. Such a
reorganization can only be achieved by strict compliance with the applicable
corporation laws of the United States or a state or territory of the United
States. A statutory merger occurs wherein one party (the surviving corporation)
to the transaction absorbs the other party whose corporate existence ceases. It
has been represented by the management of Hibernia that the merger of Northwest
with and into Hibernia, wherein Hibernia Common Stock is to be exchanged for
Northwest Common Stock, is to occur as a statutory merger under applicable state
law.
Section 368(a)(2)(D) of the Code provides that the acquisition by one
corporation in exchange for stock of a corporation which is in control of the
acquiring corporation, of substantially all of the properties of another
corporation, shall not disqualify a transaction under Section 368(a)(1)(A) if
(i) no stock of the acquiring corporation is used in the transaction and (ii)
the transaction would have otherwise qualified as a Type A reorganization had
the merger been into the controlling corporation. It has been represented by the
management of Hibernia that the merger of Bank with and into HNB, wherein
Hibernia Common Stock is to be constructively exchanged for Bank Common Stock,
is to occur as a statutory merger under applicable state and national law.
Revenue Procedure 77-37, 1977-2 C.B. 568 (3.01) provides that, for advance
ruling purposes, the "substantially all" requirement of Section 368(a)(2)(D) is
satisfied if there is a transfer of assets representing at least 90 percent of
the fair market value of the net assets and at least 70 percent of the fair
market value of the gross assets held by the transferor corporation immediately
prior to the transfer. Any payments to dissenters and any redemptions and
distributions (except for regular dividend distributions) made by the
corporation immediately preceding the transfer and which are a part of the
transaction will be considered as assets held by the corporation immediately
prior to the transfer. Additionally, the payment of expenses incurred in
connection with the Proposed Mergers is taken into consideration in applying the
"substantially all" test.
In the proposed Bank Merger, it has been represented by the respective
managements of Bank and HNB that HNB will acquire assets representing at least
90 percent of the fair market value of the net assets and 70 percent of the fair
market value of the gross assets of Bank and that, for this purpose, the fair
market value of the net and gross assets of Bank will be determined before
payment by Bank of any expenses incurred by it in connection with the Bank
Merger, before payment to any dissenters to the Bank Merger, and before any
redemptions and distributions (except for regular, normal dividends) made by
Bank immediately preceding the transfer. Based upon the foregoing
representations, the "substantially all" requirement will be met in the Bank
Merger.
Additional Requirements
Sections 1.368-1(b) and 1.368-2(g) of the Income Tax Regulations (the
"Regulations") provide that the following additional requirements must be met
for a transaction to qualify as a reorganization within the meaning of Section
368 of the Code:
(i) "continuity of interest" must be present,
(ii) "continuity of business enterprise" must exist, and
(iii) the transaction must be undertaken for reasons pertaining to the
continuance of the business of a corporation which is a party to the
transaction.
Continuity of Interest In general, the continuity of interest test requires the
owners of the reorganized entity to receive and retain a meaningful equity in
the surviving entity. See e.g., Pinellas Ice & Cold Storage Co. v. Comm'r, 287
U.S. 462 (1933); Cortland Specialty Company v. Comm'r, 60 F.2d 937 (2d Cir.
1932), cert. denied, 288 U.S. 599 (1932); Helvering v. Minnesota Tea Co., 296
U.S. 378 (1935).
Revenue Procedure 77-37, 1977-2 C.B. 568 (Section 3.02) provides that, for
advance ruling purposes, the continuity of interest requirement is satisfied if
there is a continuing interest through stock ownership in the acquiring or
transferee corporation (or a corporation in "control" thereof within the meaning
of Section 368(c) of the Code) on the part of the former shareholders of the
acquired or transferor corporation which is equal in value as of the effective
date of the reorganization, to at least 50 percent of the value of all of the
formerly outstanding stock of the acquired or transferor corporation as of that
date. Sales, redemptions, and other dispositions of stock occurring prior or
subsequent to the exchange which are part of the plan of reorganization will be
considered in determining whether there is a 50 percent continuing interest
through stock ownership as of the effective date of the reorganization.
Based upon our understanding of the facts presented to us orally and as set
forth in the Statements of Facts and Representations dated [date], the 50
percent continuity of interest test of Revenue Procedure 77-37, supra, will be
met in the Northwest Merger and the Bank Merger. It has been represented by the
management of Northwest that the shareholders of Northwest have no plan or
intention to sell, exchange or otherwise dispose of a number of Hibernia shares
to be received in the transaction that will reduce their Hibernia Common Stock
holdings to less than the requisite 50 percent continuity of interest.
Accordingly, in the Northwest Merger there will be a continuing interest through
Common Stock ownership in Hibernia on the part of the former shareholders of
Northwest.
In Revenue Ruling 68-526, 1968-2 C.B. 156, the Internal Revenue Service (the
"Service") held that the acquisition of the assets (and assumption of
liabilities) of a parent corporation and its 60 percent owned subsidiary
constituted separate tax-free reorganizations when the transactions occurred
pursuant to one plan of reorganization and for valid business reasons. In
Revenue Ruling 76-528, 1976-2 C.B. 103, the Service clarified that the
continuity of interest requirement was met in Revenue Ruling 68-526 with respect
to the subsidiary acquisition even when the parent had no assets other than
stock of a subsidiary because, in light of the acquisition of the parent's
assets, and its dissolution pursuant to the plan of reorganization, the parent's
shareholders, in effect, "stepped into the parent's shoes" as the only qualified
parties to receive and continue the stock interest formerly held by the parent
corporation. Although no assurance can be given that the Service will agree, the
rationale of the above Revenue Rulings suggests that the continuity of interest
maintained by the Northwest shareholders in the Northwest Merger is relevant in
determining whether the continuity of interest requirement is satisfied in the
Bank Merger. See also PLR 9109044 (December 4, 1990) where the Service, after
applying the step transaction doctrine, ruled that a sideways merger of a Bank
Holding Company and its wholly owned banking subsidiary into an acquiring bank
holding company and its banking subsidiary respectively constituted
reorganizations under Section 368(a)(1)(C) and Section 368(a)(2)(D).
In the past, the Service has frequently ruled on certain facts that the
simultaneous mergers of a parent and its wholly-owned subsidiary into an
acquiring parent corporation and its wholly-owned subsidiary, respectively each
qualified as a Section 368(a)(1)(A) reorganization (see e.g., PLR 9111025
(December 14, 1990), 9047015 (August 24, 1990) and 9003053 (October 26, 1989)).
In other rulings involving slightly different facts (i.e., minority shareholders
in the subsidiary), the Service held that the subsidiary mergers were Section
368(a)(1)(A) reorganizations by reason of Section 368(a)(2)(D) (see e.g., PLR
9109044 (December 4, 1990), 8943067 (August 2, 1989) and 8942090 (July 27,
1989)).
Although private letter rulings are not binding on the Service as precedent,
they are cited to illustrate a consistent rulings position. In recent years,
while the Service has declined to rule on whether a transaction qualifies as a
reorganization pursuant to Section 368(a)(1)(A) of the Code (see section
3.01(24) of Rev. Proc. 97-3) it has consistently ruled that the receipt by a
target parent's shareholders of stock of an acquiring corporation will not
prevent a lower tier target's merger from satisfying the continuity of interest
requirement of Section 1.368-1(b) of the Regulations. See, for example, PLR
9237031 (June 16, 1992), PLR 9317027 (January 29, 1993), and PLR 9510059 (March
10, 1995).
Continuity of Business Enterprise
Section 1.368-1(b) of the Regulations also provides that a continuity of
business enterprise (as described in Section 1.368-1(d) of the Regulations) is a
requisite to a reorganization. Section 1.368-1(d) of the Regulations provides
that continuity of business enterprise requires that the acquiring corporation
either continue the acquired corporation's historic business or use a
significant portion of the acquired corporation's historic assets in a business.
The proposed Bank Merger will meet the continuity of business enterprise test of
Section 1.368-1(d) because, based upon the representation of the management of
HNB, HNB will continue the historic business of Bank or will use a significant
portion of Bank's historic assets in a business.
Revenue Ruling 85-197, 1985-2 C.B. 120, provides that for purposes of the
continuity of business enterprise requirement, the historic business of a
holding company is the business of its operating subsidiary. Similarly, Revenue
Ruling 85-198, 1985-2 C.B. 120, held that the continuity of business enterprise
requirement was met upon the merger of two bank holding companies where the
business of a former subsidiary of the acquired holding company was continued
through a subsidiary of the acquiring corporation. Accordingly, the continuity
of business enterprise requirement is met with regard to the Northwest Merger
because Hibernia through its wholly-owned subsidiary HNB, will continue the
banking business indirectly conducted by Northwest.
Business Purpose
Section 1.368-2(g) of the Regulations provides that a reorganization must be
undertaken for reasons germane to the continuance of the business of a
corporation which is a party to the reorganization. As heretofore indicated in
the "Business Purpose" Section set forth above, there are substantial business
reasons for the Proposed Mergers. Accordingly, the Proposed Mergers each satisfy
the business purpose requirement as set forth in the Regulations.
Constructive Exchange of Shares
To avoid the expense and inconvenience of issuing Hibernia shares to itself in
the Bank Merger, and because Northwest's shareholders will have already received
fair value for their shares, the shares of Bank Common Stock obtained by
Hibernia in the Northwest Merger shall be canceled. (See the preceding
discussion regarding Rev. Rul. 76-528). In the Bank Merger, which occurs
simultaneously, but is to be described in the closing documents covering the
Proposed Mergers as a step following the Northwest Merger, HNB technically would
acquire the assets of Bank by issuing shares of Hibernia Common Stock to the
Bank shareholder, Hibernia (as the result of the Northwest Merger).
The tax court has consistently held that the physical transfer of shares is not
necessary if it would be a "meaningless gesture," particularly in situations
where common ownership is present. See, Fowler Hosiery Co., 36 T.C. 201 (1961),
aff'd 301 F.2d 394 (7th Cir. 1962) and William Holton George, 26 T.C. 396
(1956). In fact, the Service has ruled that the absence of an actual physical
exchange of shares does not prevent a transaction from qualifying as a tax-free
reorganization if such an exchange would have been a "meaningless gesture" or a
"useless task." See Rev. Rul. 70-240, 1970-1 C.B. 81 and Rev. Rul. 75-383,
1975-2 C.B. 127. See also Davant v. Commissioner, 366 F.2d 874 (5th Cir. 1966);
James Armour, Inc., 43 T.C. 295 (1964); American Manufacturing Co., 55 T.C. 204
(1970). In addition, the Service held in Revenue Ruling 78-47, 1978-1 C.B. 113,
that a physical issuance of shares was unnecessary in order to eliminate certain
expenses associated with a reorganization.
The Service has also consistently permitted constructive exchanges in private
letter rulings. See e.g., PLR 9247019 (August 24, 1992) and 9137029 (June 13,
1991) citing Revenue Ruling 78-47; PLR 9319017 (February 5, 1993) citing Revenue
Ruling 70-240; PLR 8750071 (September 17, 1987), 8722021 (February 25, 1987),
8620043 (February 14, 1986), 8403028 (October 17, 1983), and 8306010 (November
4, 1982).
Based on the above, the constructive exchange described herein does not prevent
the Bank Merger from qualifying as a tax-free reorganization.
Other Statutory Provisions
Section 368(b) of the Code defines the term "a party to a reorganization" to
include a corporation resulting from a reorganization, and both corporations, in
the case of a reorganization resulting from the acquisition by one corporation
of stock or properties of another.
Section 361(a) of the Code provides that no gain or loss shall be recognized to
a transferor corporation which is a party to a reorganization on any exchange
pursuant to the plan of reorganization solely for stock or securities in another
corporation which is a party to the reorganization.
Section 1032 of the Code provides that no gain or loss shall be recognized
to a corporation on the receipt of money or other property in exchange for stock
of such corporation. Revenue Ruling 57-278, 1957-1 C.B. 124, provides that a
subsidiary will not recognize gain upon the exchange of its parent's stock for
property in connection with a tax-free reorganization. See also Treasury
Regulations (Treas. Regs.) Section 1.1032-2.
Section 354(a)(1) of the Code provides that no gain or loss shall be recognized
if stock or securities in a corporation which is a party to a reorganization
are, in pursuance of the plan of reorganization, exchanged solely for stock or
securities in such corporation or in another corporation which is a party to the
reorganization.
Cash received by shareholders of Northwest Common Stock who dissent, will be
treated as received in exchange for his or her stock subject to the provisions
and limitations of Section 302 of the Code. See Treas. Reg. Sec. 1.354-1(d), Ex.
(3). If, as a result of such distribution, a shareholder owns no Northwest
Common Stock either directly or indirectly through the application of Section
318 of the Code, the redemption will be treated as a complete termination of
interest under Section 302(b)(3) of the Code and such cash will be treated as a
distribution in exchange for stock under Section 302(a) of the Code.
Section 362(b) of the Code generally provides that if property is acquired by a
corporation in connection with the reorganization, then the basis shall be the
same as it would be in the hands of the transferor, increased by the amount of
gain recognized to the transferor on such transfer.
Section 1223(2) of the Code provides that in determining a taxpayer's holding
period for property, there shall be included the period for which such property
was held by another person, if such property has, for the purpose of determining
gain or loss from a sale or exchange, the same basis in whole or in part in such
taxpayer's hands as it would have had in the hands of such other person.
Section 381 of the Code applies to certain transactions, including those
transactions to which Section 361 of the Code applies, where there is a transfer
in connection with a reorganization described in Section 368(a)(1)(A) or in
Section 368(a)(1)(A) and Section 368(a)(2)(D) of the Code.
FEDERAL INCOME TAX CONSEQUENCES
Based solely upon the Statements of Facts and Representations, the Agreement,
and the Bank Plan of Merger, it is our opinion that the following federal income
tax consequences will result, but only to the extent that the Average Market
Price of Hibernia Common Stock equals or exceeds $12.14:
In the merger of Northwest with and into Hibernia:
(1) Provided the proposed merger of Northwest with and into Hibernia qualifies
as a statutory merger under Louisiana law, the Northwest Merger will be a
reorganization within the meaning of Section 368(a)(1)(A) of the Code. Northwest
and Hibernia will each be a party to a reorganization within the meaning of
Section 368(b) of the Code.
(2) No gain or loss will be recognized by Northwest upon the transfer of its
assets to Hibernia in exchange solely for Hibernia Common Stock, cash for
dissenters, if any, and the assumption by Hibernia of the liabilities of
Northwest, since any cash for dissenters will be distributed to the shareholders
(Sections 361(a), 361(b), and 357(a) of the Code).
(3) No gain or loss will be recognized by Hibernia on receipt of the Northwest
assets in exchange for Hibernia Common Stock, cash and the assumption by
Hibernia of the liabilities of Northwest (Section 1032(a) of the Code).
(4) The basis of the assets of Northwest in the hands of Hibernia will, in each
case, be the same as the basis of those assets in the hands of Northwest
immediately prior to the transaction (Section 362(b) of the Code).
(5) The holding period of the assets of Northwest in the hands of Hibernia will,
in each case, include the period for which such assets were held by Northwest
(Section 1223(2) of the Code).
(6) No gain or loss will be recognized, with respect to the receipt of Hibernia
Common Stock, by the shareholders of Northwest who receive solely Hibernia
Common Stock and cash for fractional shares in exchange for their shares of
Northwest Common Stock (Section 354(a)(1) of the Code). With respect to the cash
received in lieu of fractional shares, see Item 12 below.
(7) The cash received by a dissenting shareholder of Northwest in exchange
for his or her Northwest Common Stock will be treated as having been received by
such shareholder as a distribution in redemption of his or her stock subject to
the provisions and limitations of Section 302 of the Code. If, as a result of
such distribution, a shareholder owns no Northwest Common Stock either directly
or indirectly through the application of Section 318, the redemption will be
treated as a complete termination of interest under Section 302(b)(3) and such
cash will be treated as a distribution in exchange for stock under Section
302(a).
(8) The basis of Hibernia Common Stock to be received by the shareholders of
Northwest Common Stock will be, in each instance, the same as the basis of their
stock surrendered in exchange therefor, decreased by the amount of cash
received, if any, and increased by the amount of gain, if any, recognized in the
exchange. (Section 358(a)(1) of the Code).
(9) The holding period of the Hibernia Common Stock to be received by the
shareholders of Northwest Common Stock in the transaction will include in each
instance, the period during which the Northwest Common Stock surrendered in
exchange therefor is held as a capital asset on the date of the surrender
(Section 1223(l) of the Code).
(10) Hibernia will succeed to and take into account those tax attributes of
Northwest described in Section 381(c) of the Code. (Section 381(a) of the Code
and Section 1.381(a)-1 of the Regulations.) These items will be taken into
account by Hibernia subject to the conditions and limitations specified in
Sections 381, 382, 383, and 384 of the Code and the Regulations thereunder.
(11) As provided by Section 381(c)(2) of the Code and Section 1.381(c)(2)-1 of
the Regulations, Hibernia will succeed to and take into account the earnings and
profits, or deficit in earnings and profits, of Northwest as of the date of
transfer. Any deficit in the earnings and profits of Northwest will be used only
to offset the earnings and profits accumulated after the date of transfer.
(12) The payment of cash in lieu of fractional share interests of Hibernia
Common Stock will be treated as if the fractional shares were distributed as
part of the exchange and then were redeemed by Hibernia. These cash payments
will be treated as distributions in full payment in exchange for the stock
redeemed, subject to the provisions and limitations of Section 302(a) of the
Code (Rev. Rul. 66-365, 1966-2 C.B. 116 and Rev. Proc. 77-41, 1977-2 C.B.
574).
(13) Northwest will close its taxable year as of the date of the distribution or
transfer. Hibernia will not close its taxable year merely because of the
Northwest Merger.
(Section 381(b) of the Code).
In the merger of Bank with and into HNB:
(14) Provided the proposed merger of Bank with and into HNB qualifies as
statutory merger under the Bank Merger Act, the acquisition by HNB of
substantially all of the assets of Bank solely in constructive exchange for
Hibernia Common Stock and the assumption by HNB of the liabilities of Bank, will
qualify as a reorganization under the provisions of Sections 368(a)(1)(A) and
368(a)(2)(D) of the Code. Bank, Hibernia and HNB will each be a party to a
reorganization within the meaning of Section 368(b) of the Code.
(15) No gain or loss will be recognized by either Hibernia or HNB upon the
acquisition by HNB of substantially all of the assets of Bank in constructive
exchange for Hibernia Common Stock and the assumption of Bank's liabilities
(Section 1032(a) of the Code). (See Treas. Regs. Section 1.1032-2 and Rev. Rul.
57-278, 1957-1 C.B. 124.)
(16) The basis of the assets of Bank acquired by HNB will be the same in the
hands of HNB as the basis of such assets in the hands of Bank immediately prior
to the exchange (Section 362(b) of the Code).
(17) The basis of the HNB Common Stock in the hands of Hibernia will be
increased by an amount equal to the basis of the Bank assets in the hands of HNB
and decreased by the sum of the amount of the liabilities of Bank assumed by HNB
and the amount of liabilities to which the assets of Bank are subject (Section
1.358-6(c)(1) of Treas. Regs.).
(18) The holding period of the assets of Bank received by HNB will, in each
instance, include the period for which such assets were held by Bank (Section
1223(2) of the Code).
(19) As provided by Section 381(c) of the Code and Section 1.381(c)(2)-1 of the
Regulations, HNB will succeed to and take into account the earnings and profits,
or deficit in earnings and profits, of Bank as of the date of transfer.
Any deficit in the earnings and profits of Bank or HNB will be used only to
offset the earnings and profits accumulated after the date of transfer.
(20) The shareholder of HNB will recognize no gain or loss upon the constructive
exchange of Bank Common Stock solely for Hibernia Common Stock. (Section
354(a)(1) of the Code.)
(21) Bank will recognize no gain or loss on the transfer of its assets to HNB in
constructive exchange for Hibernia Common Stock and the assumption by HNB of the
liabilities of Bank, as described above. (Sections 361(a) and 357(a) of the
Code.)
(22) Bank will close its taxable year as of the date of the distribution or
transfer. HNB will not close its taxable year merely because of the Bank Merger.
(Section 381(b) of the Code.)
(23) Pursuant to Section 381(a) of the Code and Section 1.381(a)-1 of the
Regulations, HNB will succeed to and take into account the items of Bank
described in Section 381(c) of the Code. These items will be taken into account
by HNB subject to the provisions and limitations specified in Sections 381, 382,
383 and 384 of the Code and Regulations promulgated thereunder.
SCOPE OF OPINION
The scope of this opinion is expressly limited to the federal income tax issues
specifically addressed in (1) through (23) in the section entitled "Federal
Income Tax Consequences" above.
Specifically, our opinion has not been requested and none is expressed with
regard to the federal, foreign, state or local income tax consequences for
Hibernia, HNB, Northwest, the Bank or any of their shareholders if the
transaction is solely for cash consideration due to the Average Market Price of
Hibernia Common Stock being less than $12.14 as described in the section
entitled "Proposed Transactions" above. Our opinion has not been requested and
none is expressed with regard to the federal, foreign, state or local income tax
consequences for the shareholders of Hibernia or with regard to the foreign,
state or local income tax consequences for the shareholders of Northwest, Bank,
and HNB. We have made no determination nor expressed any opinion as to any
limitations, including those which may be imposed under Section 382, on the
availability of net operating loss carryovers (or built-in gains or losses), if
any, after the Proposed Mergers, the application (if any) of the alternative
minimum tax to this transaction, nor the application of any consolidated return
or employee benefit issues which may arise as a result of the Proposed Mergers
unless expressly stated above. Further, we have made no determination as whether
Northwest dividend distributions have been sufficient to eliminate any
undistributed personal holding company tax liability, if applicable. We have
made no determination nor expressed any opinion as to the fair market value of
any of the assets being transferred in the Proposed Mergers nor the common
shares being exchanged in the Proposed Mergers. Furthermore, our opinion has not
been requested and none is expressed with respect to any foreign, state or local
tax consequences to Northwest, Bank, Hibernia, and HNB.
Our opinion, as stated above, is based upon the analysis of the Code, the
Regulations thereunder, current case law, and published rulings. The foregoing
are subject to change, and such change may be retroactively effective. If so,
our views, as set forth above, may be affected and may not be relied upon.
Further, any variation or differences in the facts or representations recited
herein, for any reason, might affect our conclusions, perhaps in an adverse
manner, and make them inapplicable. In addition, we have undertaken no
obligation to update this opinion for changes in facts or law occurring
subsequent to the date hereof.
This letter represents our opinions as to the interpretation of existing law
and, accordingly, no assurance can be given that the Service or the courts will
agree with the above analysis.
/s/ ERNST & YOUNG LLP
Ernst & Young LLP
