HIBERNIA CORPORATION
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1998 Commission File Number 1-10294
HIBERNIA CORPORATION
(Exact name of registrant as specified in its charter)
Louisiana 72-0724532
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
313 Carondelet Street, New Orleans, Louisiana 70130 (Address of
principal executive offices and zip code)
Registrant's telephone number, including area code (504) 533-5332
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at April 30, 1998
Class A Common Stock, no par value 152,396,281 Shares
<TABLE>
<CAPTION>
Consolidated Balance Sheets
Hibernia Corporation and Subsidiaries March 31 December 31 March 31
Unaudited ($ in thousands) 1998 1997 1997
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<S> <C> <C> <C>
Assets
Cash and due from banks .................................. $ 491,377 $ 574,626 $ 514,679
Short-term investments ................................... 206,583 445,715 287,922
Securities available for sale ............................ 2,553,056 2,526,612 2,571,643
Securities held to maturity .............................. - - -
Loans, net of unearned income ............................ 8,636,998 8,208,092 6,837,620
Reserve for possible loan losses ..................... (119,558) (122,401) (133,781)
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Loans, net ....................................... 8,517,440 8,085,691 6,703,839
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Bank premises and equipment .............................. 187,301 188,994 192,787
Customers' acceptance liability .......................... 248 144 284
Other assets ............................................. 351,418 338,763 340,344
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Total assets ..................................... $ 12,307,423 $ 12,160,545 $ 10,611,498
======================================================================================================================
Liabilities
Deposits:
Noninterest-bearing .................................. $ 1,805,475 $ 1,793,224 $ 1,650,882
Interest-bearing ..................................... 7,973,240 7,828,408 7,358,938
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Total deposits ................................... 9,778,715 9,621,632 9,009,820
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Short-term borrowings .................................... 463,605 715,876 376,143
Liability on acceptances ................................. 248 144 284
Other liabilities ........................................ 158,336 149,877 154,378
Debt ..................................................... 706,331 506,548 13,135
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Total liabilities ................................ 11,107,235 10,994,077 9,553,760
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Shareholders' equity Preferred Stock, no par value:
Authorized - 100,000,000 shares; 2,000,000 Series A
issued and outstanding at March 31, 1998,
December 31, 1997 and March 31, 1997 .................. 100,000 100,000 100,000
Class A Common Stock, no par value:
Authorized - 200,000,000 shares; issued 152,109,882,
151,516,727, and 150,913,511 at March 31, 1998,
December 31, 1997 and March 31, 1997, respectively .... 292,051 290,912 289,754
Surplus .................................................. 406,262 397,959 377,202
Retained earnings ........................................ 404,708 380,082 314,927
Treasury stock at cost: 62,137 shares at March 31, 1997 .. - - (734)
Unrealized gains (losses) on securities available for sale 14,554 14,902 (10,157)
Unearned compensation .................................... (17,387) (17,387) (13,254)
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Total shareholders' equity ....................... 1,200,188 1,166,468 1,057,738
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Total liabilities and shareholders' equity ....... $ 12,307,423 $ 12,160,545 $ 10,611,498
======================================================================================================================
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See notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
Consolidated Income Statements
Hibernia Corporation and Subsidiaries
Three Months Ended March 31
Unaudited ($ in thousands), except per-share data 1998 1997
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<S> <C> <C>
Interest income
Interest and fees on loans ............................. $ 180,591 $ 146,787
Interest on securities available for sale .............. 42,254 42,587
Interest on securities held to maturity ................ - -
Interest on short-term investments ..................... 3,362 3,787
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Total interest income .............................. 226,207 193,161
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Interest expense
Interest on deposits ................................... 82,745 75,111
Interest on short-term borrowings ...................... 8,807 4,623
Interest on debt ....................................... 8,573 749
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Total interest expense ............................. 100,125 80,483
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Net interest income ........................................ 126,082 112,678
Provision for possible loan losses ..................... 3,500 139
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Net interest income after provision for possible loan losses 122,582 112,539
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Noninterest income
Service charges on deposits ............................ 19,386 17,659
Trust fees ............................................. 3,884 3,636
Other service, collection and exchange charges ......... 13,381 9,877
Other operating income ................................. 3,336 3,128
Securities gains (losses), net ......................... 887 15
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Total noninterest income ........................... 40,874 34,315
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Noninterest expense
Salaries and employee benefits ......................... 49,788 47,436
Occupancy expense, net ................................. 7,943 8,045
Equipment expense ...................................... 7,409 7,615
Data processing expense ................................ 6,789 5,237
Foreclosed property expense, net ....................... 5 (310)
Amortization of intangibles ............................ 3,880 3,658
Other operating expense ................................ 26,759 22,661
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Total noninterest expense .......................... 102,573 94,342
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Income before income taxes ................................. 60,883 52,512
Income tax expense ......................................... 21,357 17,988
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Net income ................................................. $ 39,526 $ 34,524
=============================================================================================
Net income applicable to common shareholders ............... $ 37,801 $ 32,799
=============================================================================================
Net income per common share ................................ $ 0.25 $ 0.22
=============================================================================================
Net income per common share - assuming dilution ............ $ 0.25 $ 0.22
=============================================================================================
- -----------
See notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
Consolidated Statements of Changes in Shareholders' Equity
Hibernia Corporation and Subsidiaries
Unaudited ($ in thousands, except per-share data)
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Unrealized
Gains (Losses)
on Securities
Preferred Common Retained Available
Stock Stock Surplus Earnings for Sale Other Total
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<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1997 ..... $100,000 $290,912 $397,959 $ 380,082 $ 14,902 $(17,387) $ 1,166,468
Net income ........................ - - - 39,526 - - 39,526
Issuance of common stock:
Stock Option Plan .............. - 254 780 - - - 1,034
Restricted stock awards ........ - 847 7,244 - - - 8,091
Cash dividends declared:
Common ($.09 per share) ........ - - - (13,175) - - (13,175)
Preferred ($.8625 per share) ... - - - (1,725) - - (1,725)
Change in unrealized gains (losses)
on securities available for sale - - - - (348) - (348)
Other ............................. - 38 279 - - - 317
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Balances at March 31, 1998 ........ $100,000 $292,051 $406,262 $ 404,708 $ 14,554 $(17,387) $ 1,200,188
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</TABLE>
<TABLE>
<CAPTION>
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Unrealized
Gains (Losses)
on Securities
Preferred Common Retained Available
Stock Stock Surplus Earnings for Sale Other Total
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<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1996 ........ $100,000 $289,375 $375,579 $ 293,221 $ 7,976 $(13,887) $ 1,052,264
Net income ........................... - - - 34,524 - - 34,524
Issuance of common stock:
Dividend Reinvestment Plan ........ - 140 828 - - - 968
Stock Option Plan ................. - 195 530 - - - 725
Retirement Security Plan .......... - 44 265 - - - 309
Cash dividends declared:
Common ($.08 per share) ........... - - - (10,179) - - (10,179)
Preferred ($.8625 per share) ...... - - - (1,725) - - (1,725)
By pooled companies prior to merger - - - (914) - - (914)
Acquisition of treasury stock ........ - - - - - (165) (165)
Allocation of ESOP shares ............ - - - - - 64 64
Change in unrealized gains (losses)
on securities available for sale .. - - - - (18,133) - (18,133)
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Balances at March 31, 1997 ........... $100,000 $289,754 $377,202 $ 314,927 $(10,157) $(13,988) $ 1,057,738
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- --------------
See notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
Hibernia Corporation and Subsidiaries
Three Months Ended March 31
Unaudited ($ in thousands) 1998 1997
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<S> <C> <C>
Operating activities
Net income ............................................................ $ 39,526 $ 34,524
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for possible loan losses ............................. 3,500 139
Amortization of intangibles and deferred charges ............... 3,763 3,541
Depreciation and amortization .................................. 6,655 6,894
Discount accretion, net of premium amortization ................ (71) 556
Realized securities (gains) losses, net ........................ (887) (15)
Loss (gain) on sale of assets .................................. 375 (768)
Provision for losses on foreclosed and other assets ............ 246 146
Decrease in deferred income tax asset .......................... 285 181
Decrease (increase) in interest receivable and other assets .... (9,794) 9,133
Increase (decrease) in interest payable and other liabilities .. 16,667 (21,358)
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Net cash provided by operating activities ........................ 60,265 32,973
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Investing activities
Purchases of securities available for sale ............................ (898,196) (150,225)
Proceeds from maturities of securities available for sale ............. 466,177 154,217
Proceeds from sales of securities available for sale .................. 405,907 1,725
Net increase in loans ................................................. (513,071) (233,876)
Proceeds from sales of loans .......................................... 291,300 56,010
Purchases of loans .................................................... (214,592) (3,656)
Purchases of premises, equipment and other assets ..................... (12,289) (7,966)
Proceeds from sales of foreclosed assets and excess bank-owned property 622 2,693
Proceeds from sales of premises, equipment and other assets ........... 733 160
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Net cash used by investing activities ............................ (473,409) (180,918)
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Financing activities
Net increase in domestic deposits ..................................... 166,468 125,733
Net increase (decrease) in foreign time deposits ...................... (9,351) 6,546
Net increase (decrease) in short-term borrowings ...................... (252,271) 36,422
Proceeds from issuance of debt ........................................ 200,000 -
Payments on debt ...................................................... (217) (44,057)
Proceeds from issuance of common stock ................................ 1,034 2,002
Dividends paid ........................................................ (14,900) (12,833)
Acquisition of treasury stock ......................................... - (165)
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Net cash provided by financing activities ........................ 90,763 113,648
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Decrease in cash and cash equivalents ................................... (322,381) (34,297)
Cash and cash equivalents at beginning of year .......................... 1,020,341 836,898
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Cash and cash equivalents at end of period ....................... $ 697,960 $ 802,601
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- --------------
See notes to consolidated financial statements.
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
Hibernia Corporation and Subsidiaries
Unaudited
Note 1 BASIS OF PRESENTATION The accompanying unaudited consolidated
financial statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. For further information, refer to the audited consolidated
financial statements and notes included in Hibernia Corporation's Annual Report
on Form 10-K for the year ended December 31, 1997.
Note 2 MERGER AGREEMENTS The Company completed mergers with three
financial institutions in the first quarter of 1998: Northwest Bancshares of
Louisiana, Inc. (Northwest), ArgentBank (Argent), and Firstshares of Texas, Inc.
(Firstshares). These mergers were accounted for as poolings of interests. The
following table shows the consummation date, selected balances at the date of
merger, and the number of shares of Hibernia Class A Common Stock issued in each
merger.
<TABLE>
<CAPTION>
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Merger Shares
($ in millions) .......................... Date Assets Loans Deposits Issued
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<S> <C> <C> <C> <C> <C>
Northwest ................................ January 1, 1998 $ 101.2 $ 36.5 $ 87.8 1,508,019
Argent ................................... February 1, 1998 769.7 449.3 635.8 13,317,236
Firstshares .............................. March 15, 1998 288.1 133.6 250.4 3,690,615
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</TABLE>
The Company is a party to a definitive merger agreement with Peoples
Holding Corporation (Peoples), which is pending shareholder and regulatory
approval. It is anticipated that the transaction will be accounted for as a
pooling of interests when consummated. The estimated transaction value of the
merger assuming a value of Hibernia Class A Common Stock of $20.50, the closing
price on April 30, 1998, is $73,000,000. At March 31, 1998 Peoples had total
assets of $238 million, loans of $78 million and deposits of $200 million.
Note 3 EMPLOYEE BENEFIT PLANS The Company's stock option plans provide
incentive and non-qualified options to various key employees and non-employee
directors. The options are granted at no less than the fair market value of the
stock at the date of grant. Options granted to directors upon inception of
service as a director vest in six months. Until October 1997 those options were
granted under the 1987 Stock Option Plan; after October 1997 those options are
granted under the 1993 Directors' Stock Option Plan. All other options granted
under the 1987 Stock Option Plan, the Long-Term Incentive Plan and the 1993
Directors' Stock Option Plan become exercisable in the following increments: 50%
after the expiration of two years from the date of grant, an additional 25%
three years from the date of grant and the remaining 25% four years from the
date of grant.
Options granted to employees and directors, other than the chief
executive officer, become immediately exercisable if the holder of the option
dies while the option is outstanding. Options granted under the 1987 Stock
Option Plan generally expire 10 years from the date granted. Options granted
under the Long-Term Incentive Plan and the 1993 Directors' Stock Option Plan
generally expire 10 years from the date of grant unless the holder dies,
retires, becomes permanently disabled or leaves the employ of the Company, at
which time the options expire at various times ranging from 30 to 365 days. All
options vest immediately upon a change in control of the Company.
The following tables summarize the option activity in the plans during
the first quarter of 1998. During 1997 the 1987 Stock Option Plan was
terminated; therefore, at March 31, 1998 there are no shares available for grant
under this plan. The termination did not impact options outstanding under the
1987 Stock Option Plan.
<TABLE>
<CAPTION>
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Weighted
Average
Incentive Non-Qualified Total Exercise Price
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<S> <C> <C> <C> <C>
1987 Stock Option Plan:
Outstanding, December 31, 1997 ................................ 141,803 1,241,739 1,383,542 $ 7.10
Exercised ..................................................... - (5,963) (5,963) 6.61
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Outstanding, March 31, 1998 ................................... 141,803 1,235,776 1,377,579 $ 7.10
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Exercisable, March 31, 1998 ................................... 141,803 1,235,776 1,377,579 $ 7.10
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Long-Term Incentive Plan:
Outstanding, December 31, 1997 ................................ 12,598 5,736,012 5,748,610 $ 9.65
Granted ....................................................... - 1,818,284 1,818,284 18.31
Canceled ...................................................... - (23,734) (23,734) 10.39
Exercised ..................................................... - (106,689) (106,689) 7.83
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Outstanding, March 31, 1998 ................................... 12,598 7,423,873 7,436,471 $ 11.79
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Exercisable, March 31, 1998 ................................... 12,598 3,113,249 3,125,847 $ 8.08
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Available for grant, March 31, 1998 ........................... 987,578
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1993 Directors' Stock Option Plan:
Outstanding, December 31, 1997 ................................ - 290,000 290,000 $ 9.70
Granted ....................................................... - 5,000 5,000 19.50
Exercised ..................................................... - (20,000) (20,000) 8.44
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Outstanding, March 31, 1998 ................................... - 275,000 275,000 $ 9.98
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Exercisable, March 31, 1998 ................................... - 96,250 96,250 $ 7.74
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Available for grant, March 31, 1998 ........................... 637,500
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</TABLE>
In addition to the above option activity in the plans, 441,896 shares
of restricted stock were awarded under the Long-Term Incentive Plan during the
first quarter of 1998.
During 1995, the Company instituted an employee stock ownership plan
(ESOP) in which substantially all employees participate. The ESOP, with a
guarantee of Hibernia Corporation, borrowed funds from Hibernia National Bank to
purchase Hibernia Class A Common Stock. The ESOP is authorized to acquire up to
$30,000,000 of Hibernia Class A Common Stock in open-market purchases of which
$8,629,000 remains for future purchases. As of March 31, 1998 the ESOP held
2,431,388 shares of Hibernia Class A Common Stock.
Note 4 NET INCOME PER COMMON SHARE The following sets forth the
computation of net income per common share and net income per common share
assuming dilution.
<TABLE>
<CAPTION>
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($ in thousands, except per-share data) Three Months Ended March 31
- ------------------------------------------------------------------------------------------
1998 1997
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Numerator:
Net income .................................... $ 39,526 $ 34,524
Preferred stock dividends ..................... 1,725 1,725
- ------------------------------------------------------------------------------------------
Numerator for net income per common share ..... 37,801 32,799
Effect of dilutive securities ................. - -
- ------------------------------------------------------------------------------------------
Numerator for net income per common
share - assuming dilution ................. $ 37,801 $ 32,799
- ------------------------------------------------------------------------------------------
Denominator:
Denominator for net income per common
share (weighted average shares outstanding) 150,080,167 149,183,816
Effect of dilutive securities:
Stock options ............................. 2,644,681 1,814,955
Purchase warrants ......................... 183,177 170,388
Restricted stock awards ................... 5,250 -
- ------------------------------------------------------------------------------------------
Denominator for net income per common
share - assuming dilution ................. 152,913,275 151,169,159
- ------------------------------------------------------------------------------------------
Net income per common share ....................... $ 0.25 $ 0.22
- ------------------------------------------------------------------------------------------
Net income per common share - assuming dilution ... $ 0.25 $ 0.22
- ------------------------------------------------------------------------------------------
</TABLE>
The weighted average shares outstanding exclude 1,813,456 and 1,589,425
average common shares in 1998 and 1997, respectively, held by the Hibernia
Employee Stock Ownership Plan which have not been committed to be released. The
common shares issued in all mergers accounted for as poolings of interests
consummated in 1997 and 1998 are considered to be outstanding as of January 1,
1997, the beginning of the earliest period presented.
Options with an exercise price greater than the average market price of
the Company's Class A Common Stock for the periods presented are antidilutive
and, therefore, are not included in the computation of net income per common
share - assuming dilution. During the first quarter of 1998 there were 22,500
antidilutive options outstanding with an exercise price of $20.25 per option,
and during the first quarter of 1997 there were 198,131 antidilutive options
outstanding with exercise prices ranging from $14.94 to $18.80.
Note 5 COMPREHENSIVE INCOME As of January 1, 1998, the Company adopted
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income." SFAS No. 130 establishes new rules for the reporting and
display of comprehensive income and its components; however, the adoption of
SFAS No. 130 had no impact on the Company's net income or shareholders' equity.
SFAS No. 130 requires unrealized gains or losses on the Company's available for
sale securities to be included in other comprehensive income. Prior to the
adoption of SFAS No. 130, these unrealized gains or losses were reported
separately only in shareholders' equity.
During the first quarter of 1998 and 1997, comprehensive income totaled
$39,178 and $16,391, respectively.
Note 6 AUTHORIZED SHARES On April 21, 1998 shareholders approved an
amendment to the Company's Articles of Incorporation to increase the number of
authorized shares of Class A Common Stock from 200,000,000 to 300,000,000.
<TABLE>
<CAPTION>
CONSOLIDATED SUMMARY OF INCOME AND SELECTED FINANCIAL DATA (1)
Hibernia Corporation and Subsidiaries
- ----------------------------------------------------------------------------------------------------------
Three Months Ended
- ----------------------------------------------------------------------------------------------------------
March 31 Dec. 31 March 31
($ in thousands, except per-share data) 1998 1997 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income ..................................... $ 226,207 $ 219,303 $ 193,161
Interest expense .................................... 100,125 96,928 80,483
- ----------------------------------------------------------------------------------------------------------
Net interest income ................................. 126,082 122,375 112,678
Provision for possible loan losses .................. 3,500 2,761 139
- ----------------------------------------------------------------------------------------------------------
Net interest income after provision
for possible loan losses ........................ 122,582 119,614 112,539
- ----------------------------------------------------------------------------------------------------------
Noninterest income:
Noninterest income ............................... 39,987 39,695 34,300
Securities gains (losses), net ................... 887 2,231 15
- ----------------------------------------------------------------------------------------------------------
Noninterest income .................................. 40,874 41,926 34,315
Noninterest expense ................................. 102,573 109,304 94,342
- ----------------------------------------------------------------------------------------------------------
Income before taxes ................................. 60,883 52,236 52,512
Income tax expense .................................. 21,357 19,654 17,988
- ----------------------------------------------------------------------------------------------------------
Net income .......................................... $ 39,526 $ 32,582 $ 34,524
- ----------------------------------------------------------------------------------------------------------
Net income applicable to common shareholders ........ $ 37,801 $ 30,857 $ 32,799
- ----------------------------------------------------------------------------------------------------------
Per common share information:
Net income ....................................... $ 0.25 $ 0.21 $ 0.22
Net income - assuming dilution ................... $ 0.25 $ 0.20 $ 0.22
Cash dividends declared .......................... $ 0.09 $ 0.09 $ 0.08
Average shares outstanding (000s) ................... 150,080 149,619 149,184
Average shares outstanding - assuming dilution (000s) 152,913 152,803 151,169
Dividend payout ratio ............................... 36.00% 43.64% 36.36%
- ----------------------------------------------------------------------------------------------------------
Selected quarter-end balances (in millions)
Loans ............................................... $ 8,637.0 $ 8,208.1 $ 6,837.6
Deposits ............................................ 9,778.7 9,621.6 9,009.8
Debt ................................................ 706.3 506.5 13.1
Equity .............................................. 1,200.2 1,166.5 1,057.7
Total assets ........................................ 12,307.4 12,160.5 10,611.5
- ----------------------------------------------------------------------------------------------------------
Selected average balances (in millions)
Loans ............................................... $ 8,447.1 $ 7,962.8 $ 6,722.4
Deposits ............................................ 9,573.2 9,281.8 8,799.7
Debt ................................................ 629.7 254.4 50.1
Equity .............................................. 1,186.5 1,156.7 1,061.8
Total assets ........................................ 12,264.1 11,754.7 10,476.8
- ----------------------------------------------------------------------------------------------------------
Selected ratios
Net interest margin (taxable-equivalent) ............ 4.60% 4.57% 4.81%
Return on assets .................................... 1.29% 1.11% 1.32%
Return on common equity ............................. 13.92% 11.68% 13.64%
Return on total equity .............................. 13.33% 11.27% 13.01%
Efficiency ratio .................................... 60.77% 66.35% 63.14%
Average equity/average assets ....................... 9.67% 9.84% 10.13%
Tier 1 risk-based capital ratio ..................... 11.11% 11.07% 12.51%
Total risk-based capital ratio ...................... 12.36% 12.32% 13.77%
Leverage ratio ...................................... 8.52% 8.58% 8.88%
- ----------------------------------------------------------------------------------------------------------
Tax-effected net income and ratios excluding
goodwill and core deposit intangible amortization
and balances (2)
Net income applicable to common shareholders ........ $ 40,461 $ 33,594 $ 35,734
Net income per common share ......................... $ 0.27 $ 0.22 $ 0.24
Net income per common share - assuming dilution ..... $ 0.26 $ 0.22 $ 0.24
Return on assets .................................... 1.39% 1.22% 1.45%
Return on common equity ............................. 17.31% 14.89% 17.56%
Efficiency ratio .................................... 58.97% 64.44% 60.87%
- ----------------------------------------------------------------------------------------------------------
- -------------
(1) All financial information has been restated for mergers accounted for as
poolings of interests. The effects of mergers accounted for as purchase
transactions have been included from the date of consummation. Prior periods
have been conformed to current-period presentation.
(2) Amortization and balances of core deposit intangibles are net of applicable
taxes. Goodwill amortization and balances are not tax effected.
</TABLE>
<PAGE>
HIBERNIA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Management's Discussion presents a review of the major factors and trends
affecting the performance of Hibernia Corporation (the "Company" or "Hibernia")
and its subsidiaries, principally Hibernia National Bank and Hibernia National
Bank of Texas, collectively referred to as the "Banks." This discussion should
be read in conjunction with the accompanying tables and consolidated financial
statements.
FIRST-QUARTER 1998 HIGHLIGHTS
Hibernia Corporation's first-quarter 1998 results showed continued
improvement in earnings over the first quarter of 1997 and strong growth in
loans, deposits and noninterest income.
Net income for the first quarter of 1998 totaled $39.5 million ($.25
per common share), up 14% from $34.5 million ($.22 per common share) in
the first quarter of 1997. Tangible earnings per common share were $.27
in the first quarter of 1998 compared to $.24 in the first quarter of
1997.
Pre-tax, pre-provision earnings were $64.4 million, a 22% increase from
the first quarter 1997 level of $52.7 million. The first quarter of
1998 included a provision for possible loan losses totaling $3.5
million. Although nominal provisions had been recorded by the merged
companies, this represents the first time a quarterly provision expense
has been recorded by the Company since the third quarter of 1993.
Tangible returns on assets (ROA) and common equity (ROCE) were 1.39%
and 17.31%, respectively, for the first quarter of 1998 compared to
1.45% and 17.56% for the same period a year ago.
First-quarter 1998 earnings improved compared to the same period last
year because of a $13.4 million (12%) increase in net interest income
(resulting from higher average earning assets) and a $5.7 million (17%)
improvement in noninterest income (excluding securities transactions).
These increases were partially offset by increases in noninterest
expense and income tax expense, which were up $8.2 million (9%) and
$3.4 million (19%), respectively.
Total loans grew $1.8 billion (26%) to $8.6 billion at March 31, 1998
compared to March 31, 1997. Commercial loans grew $871.2 million (36%)
to $3.3 billion, small business loans increased $158.3 million (10%) to
$1.7 billion and consumer loans increased $769.9 million (27%) to $3.6
billion.
Asset quality remained strong with nonperforming assets as a percentage
of loans plus foreclosed assets and excess bank-owned property at 0.39%
at March 31, 1998, compared to 0.37% at March 31, 1997. The reserve for
possible loan losses at March 31, 1998 was 4.2 times the level of
nonperforming loans.
Deposits increased $0.8 billion (9%) to $9.8 billion at March 31, 1998
compared to the first quarter of 1997.
In April 1998, Hibernia's Board of Directors declared a quarterly cash
dividend of $.09 per common share, a 13% increase from the $.08
quarterly dividend declared in April 1997.
Mergers with three institutions with combined assets of approximately
$1.2 billion were completed during the first quarter of 1998.
MERGER ACTIVITY
In the first quarter of 1998, the Company completed mergers with Northwest
Bancshares of Louisiana, Inc., parent company of the $101 million asset First
National Bank in Mansfield, ArgentBank with total assets of $770 million, and
Firstshares of Texas, Inc., parent company of the $288 million asset First
National Bank (Marshall). All three mergers were accounted for as poolings of
interests. During 1997, Hibernia completed two mergers with East Texas financial
institutions which were accounted for as poolings of interests. All prior-year
information has been restated to reflect the effect of the mergers.
Measures of financial performance subsequent to purchase transactions are
more relevant when comparing "tangible" results (i.e., before amortization of
goodwill and core deposit intangibles), because they are more indicative of cash
flows, and thus the Company's ability to support growth and pay dividends. The
tangible measures of financial performance are presented in the Consolidated
Summary of Income and Selected Financial Data on page 10.
The institutions with which the Company merged are collectively referred to
as the "merged companies." The merged companies in transactions accounted for as
poolings of interests are referred to as the "pooled companies," and the merged
companies in transactions accounted for as purchase transactions are referred to
as the "purchased companies."
A merger with Peoples Holding Corporation, parent of the $238 million asset
Peoples Bank & Trust Company, is pending regulatory and shareholder approval.
After this merger Hibernia would have approximately $12.5 billion in assets and
240 banking locations in 33 Louisiana parishes and nine Texas counties.
FINANCIAL CONDITION:
EARNING ASSETS
Earning assets averaged $11.3 billion in the first quarter of 1998, a $1.6
billion (17%) increase from the first-quarter 1997 average of $9.6 billion. The
growth in average earning assets was due to strong and diversified loan growth,
as a result of offering quality service and innovative lending products in
existing markets as well as in the markets of merger partners. Hibernia has
funded the loan growth through increases in deposits and borrowed funds.
Loans. Average loans for the first quarter of 1998 of $8.4 billion were up
$484.3 million (6%) from the fourth quarter of 1997 and up $1.7 billion (26%)
compared to the first quarter of 1997.
Table 1 presents Hibernia's commercial and small business loans classified
by repayment source and consumer loans classified by type at March 31, 1998,
December 31, 1997 and March 31, 1997. Total loans increased $428.9 million (5%)
during the first quarter of 1998, compared to December 31, 1997, as commercial
loans increased $225.0 million (7%), small business loans decreased $94.2
million (5%) and consumer loans increased $298.1 million (9%). Compared to March
31, 1997, loans increased $1.8 billion (26%). Commercial loans were up $871.2
million (36%), small business loans grew $158.3 million (10%) and consumer loans
increased $769.9 million (27%). Commercial and small business growth was spread
across most categories. The decreases in the small business portfolio overall
from December 31, 1997 to March 31, 1998 and in the commercial and industrial
segment of that portfolio from both March 31, 1997 and December 31, 1997 to
March 31, 1998 resulted primarily from the reclassification of merger bank loans
to their appropriate category after converting to Hibernia's loan system. In
consumer lending growth was concentrated in residential mortgage loans and
revolving credit loans.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
TABLE 1 - COMPOSITION OF LOAN PORTFOLIO
- ----------------------------------------------------------------------------------------------------
March 31, 1998 December 31, 1997 March 31, 1997
- ----------------------------------------------------------------------------------------------------
($ in millions) Loans Percent Loans Percent Loans Percent
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Commercial:
Commercial and
industrial ................ $1,224.8 14.2% $1,089.2 13.3% $ 902.2 13.2%
Services industry ............. 722.2 8.4 719.6 8.8 484.6 7.1
Real estate ................... 487.0 5.6 444.2 5.4 420.4 6.1
Health care ................... 275.9 3.2 251.7 3.1 215.9 3.2
Transportation, communications
and utilities .............. 239.8 2.8 253.6 3.1 196.4 2.9
Energy ........................ 298.7 3.4 279.0 3.4 171.4 2.5
Other ......................... 68.1 0.8 54.2 0.6 54.4 0.8
- ----------------------------------------------------------------------------------------------------
Total commercial ........... 3,316.5 38.4 3,091.5 37.7 2,445.3 35.8
- ----------------------------------------------------------------------------------------------------
Small Business:
Commercial and
industrial ................ 663.0 7.7 928.0 11.3 908.1 13.3
Services industry ............. 347.4 4.0 309.9 3.8 222.4 3.3
Real estate ................... 234.3 2.7 179.0 2.2 133.3 1.9
Health care ................... 83.7 0.9 74.1 0.9 60.0 0.9
Transportation, communications
and utilities .............. 58.1 0.7 38.0 0.5 29.6 0.4
Energy ........................ 42.4 0.5 17.3 0.2 9.8 0.1
Other ......................... 282.7 3.3 259.5 3.1 190.1 2.8
- ----------------------------------------------------------------------------------------------------
Total small business ....... 1,711.6 19.8 1,805.8 22.0 1,553.3 22.7
- ----------------------------------------------------------------------------------------------------
Consumer:
Residential mortgages:
First mortgages ............ 1,857.7 21.5 1,591.1 19.4 1,244.0 18.2
Junior liens ............... 133.8 1.6 129.4 1.6 118.9 1.7
Indirect ...................... 748.3 8.7 748.4 9.1 768.2 11.2
Revolving credit .............. 296.0 3.4 282.9 3.4 177.1 2.6
Other ......................... 573.1 6.6 559.0 6.8 530.8 7.8
- ----------------------------------------------------------------------------------------------------
Total consumer ............. 3,608.9 41.8 3,310.8 40.3 2,839.0 41.5
- ----------------------------------------------------------------------------------------------------
Total loans ...................... $8,637.0 100.0% $8,208.1 100.0% $6,837.6 100.0%
- ----------------------------------------------------------------------------------------------------
</TABLE>
Securities. Average securities decreased $37.2 million (1%) in the first
quarter of 1998 compared to the first quarter of 1997. Securities primarily
consist of mortgage-backed and U.S. government agency securities. Most
securities held by the Company qualify as pledgable securities and are used to
collateralize repurchase agreements and public fund deposits.
Short-Term Investments. Average short-term investments (primarily federal
funds sold) for the three months ended March 31, 1998, totaled $235.8 million,
down $53.4 million (18%) compared to an average of $289.2 million in the first
quarter of 1997.
ASSET QUALITY
Nonperforming assets -- which include nonaccrual loans, restructured loans,
foreclosed assets and excess bank-owned property -- totaled $33.9 million at
March 31, 1998. Nonperforming assets increased $8.8 million (35%) from $25.1
million at March 31, 1997 and increased $6.6 million (24%) from $27.3 million at
December 31, 1997. Although the increase in the volume of nonperforming assets
appears significant, when viewed as a percentage of total loans plus foreclosed
assets and excess bank-owned property the level at March 31, 1998 of .39% is
virtually unchanged from .37% at March 31, 1997 and up slightly from .33% at
December 31, 1997.
Nonperforming loans, which totaled $28.4 million at March 31, 1998,
increased $10.7 million (60%) from a year ago, and were up $6.0 million (27%)
from the prior quarter end. Foreclosed assets totaled $2.7 million at March 31,
1998, down $1.7 million (38%) from a year earlier, and up $0.2 million (8%) from
December 31, 1997. Excess bank-owned property at March 31, 1998 was down $0.2
million (8%) from March 31, 1997, and up $0.4 million (17%) from December 31,
1997. Table 2 presents a summary of nonperforming assets at the end of the last
five quarters.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
TABLE 2 - NONPERFORMING ASSETS
- --------------------------------------------------------------------------------------------------------------------
March 31 Dec. 31 Sept. 30 June 30 March 31
($ in thousands) 1998 1997 1997 1997 1997
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans ........................ $ 28,443 $ 22,420 $ 24,429 $ 23,457 $ 17,765
Restructured loans ...................... - - - - -
- --------------------------------------------------------------------------------------------------------------------
Total nonperforming loans ........... 28,443 22,420 24,429 23,457 17,765
- --------------------------------------------------------------------------------------------------------------------
Foreclosed assets ....................... 2,701 2,510 4,809 4,640 4,365
Excess bank-owned property .............. 2,760 2,360 2,218 2,841 3,008
- --------------------------------------------------------------------------------------------------------------------
Total nonperforming assets .......... $ 33,904 $ 27,290 $ 31,456 $ 30,938 $ 25,138
- --------------------------------------------------------------------------------------------------------------------
Reserve for possible loan losses ........ $119,558 $122,401 $127,158 $134,500 $133,781
Nonperforming loans as a percentage
of total loans ...................... 0.33% 0.27% 0.32% 0.32% 0.26%
Nonperforming assets as a percentage
of total loans plus foreclosed assets
and excess bank-owned property ...... 0.39% 0.33% 0.41% 0.42% 0.37%
Reserve for possible loan losses as a
percentage of nonperforming loans ... 420.34% 545.95% 520.52% 573.39% 753.06%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
At March 31, 1998 the recorded investment in loans considered impaired
under Statement of Financial Accounting Standards (SFAS) No. 114 was $25.0
million. The related portion of the reserve for possible loan losses was $4.2
million. The comparable amounts at March 31, 1997 were $14.5 million and $2.7
million, respectively. These loans are included in nonaccrual loans in Table 2.
Table 3 shows loan delinquencies for the last five quarters. Both the
amounts and percentages of loan delinquencies to total loans declined at March
31, 1998 compared to March 31, 1997 and December 31, 1997. The amount of total
delinquencies decreased $15.7 million (28%) from March 31, 1997 and $25.2
million (38%) from December 31, 1997. Delinquencies as a percentage of total
loans at March 31, 1998 were .48%, down from .83% a year ago and .81% at
December 31, 1997.
Accruing loans past due 90 days or more were $6.6 million at March 31, 1998
compared to $5.6 million at both March 31, 1997 and December 31, 1997.
Commercial loan delinquencies were .07% of total commercial loans at March 31,
1998 compared to .20% at March 31, 1997 and .18% at December 31, 1997. Small
business loan delinquencies decreased to .74% at March 31, 1998, from .91% at
March 31, 1997 and .84% at year-end 1997. Consumer loan delinquencies decreased
to .73% from 1.33% at March 31, 1997 and 1.38% at December 31, 1997.
Approximately three-fourths of this improvement is due to a change in the
reporting methodology from number of days to payment cycle dates for mortgage
loans, a methodology utilized in the banking industry.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
TABLE 3 - LOAN DELINQUENCIES (1)
- -------------------------------------------------------------------------------------------------------------
March 31 Dec. 31 Sept. 30 June 30 March 31
($ in millions) 1998 1997 1997 1997 1997
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Days past due:
30 to 89 days ........................... $ 34.6 $ 60.8 $ 51.3 $ 50.3 $ 51.3
90 days or more ......................... 6.6 5.6 5.7 3.6 5.6
- -------------------------------------------------------------------------------------------------------------
Total delinquencies ................. $ 41.2 $ 66.4 $ 57.0 $ 53.9 $ 56.9
- -------------------------------------------------------------------------------------------------------------
Total delinquencies as a percentage of loans:
Commercial .............................. 0.07% 0.18% 0.13% 0.19% 0.20%
Small business .......................... 0.74 0.84 0.88 0.83 0.91
Consumer ................................ 0.73 1.38 1.20 1.17 1.33
Total loans ............................. 0.48 0.81 0.74 0.74 0.83
- -------------------------------------------------------------------------------------------------------------
- -------------
(1) Accruing loans past due as to principal and/or interest 30 days or more.
</TABLE>
As illustrated in Table 4, loans totaling $9.8 million were added to
nonperforming loans during the first quarter of 1998. Payments and sales
resulted in a $2.0 million reduction in nonperforming loans and charge-offs
further reduced nonperforming loans in the first quarter of 1998 by $0.8
million. In the event nonaccrual loans that have been charged-off are recovered
in subsequent periods, the recoveries would be reflected in the reserve for
possible loan losses in Table 5 and not as a component of nonperforming loan
activity.
In addition to the nonperforming assets discussed above, other commercial
loans for which payments are current that are subject to potential future
classification as nonperforming totaled $27.7 million at March 31, 1998 compared
to $18.9 million at March 31, 1997 and $19.4 million at December 31, 1997.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
TABLE 4 - SUMMARY OF NONPERFORMING LOAN ACTIVITY
- -----------------------------------------------------------------
Three Months
Ended March 31
- -----------------------------------------------------------------
($ in thousands) 1998 1997
- -----------------------------------------------------------------
<S> <C> <C>
Nonperforming loans
at beginning of period . $ 22,420 $ 16,742
Additions .................. 9,821 19,148
Charge-offs, gross ......... (781) (3,005)
Returns to performing status (1,026) (891)
Payments and sales ......... (1,991) (14,229)
- -----------------------------------------------------------------
Nonperforming loans
at end of period ....... $ 28,443 $ 17,765
- -----------------------------------------------------------------
</TABLE>
RESERVE AND PROVISION FOR POSSIBLE LOAN LOSSES
The provision for possible loan losses is a charge to earnings in order to
maintain the reserve for possible loan losses at a level consistent with
management's assessment of the loan portfolio in light of current and expected
economic conditions. As a result of loan growth, the anticipated future
collectibility of loans and the amounts and timing of future cash flows expected
to be received on impaired loans, the Company recorded a $3.5 million provision
for possible loan losses in the first quarter of 1998. Although nominal
provisions had been recorded by the merged companies, this represents the first
time a quarterly provision expense has been recorded by the Company since the
third quarter of 1993. Table 5 presents an analysis of the activity in the
reserve for possible loan losses for the first quarter of 1998 and 1997.
Net charge-offs totaled $6.3 million in the first quarter of 1998, compared
to $7.9 million in the first quarter of 1997. As a percentage of average loans,
annualized net charge-offs were .30% in the first quarter of 1998 compared to
.47% in the first quarter of 1997. The decrease was due to lower consumer and
commercial net charge-offs.
The reserve for possible loan losses totaled $119.6 million, or 1.38% of
total loans, at March 31, 1998, compared to $133.8 million, or 1.96%, a year
earlier. In terms of both dollar amount and as a percentage of loans, the
reserve for possible loan losses has been declining since the end of 1993 as a
result of net charge-offs and loan growth. As of March 31, 1998 the reserve for
possible loan losses as a percentage of nonperforming loans was 420.3%, compared
to 753.1% at March 31, 1997 and 546.0% at December 31, 1997. The present level
of reserve for possible loan losses is considered to be adequate to absorb
future potential loan losses inherent in the existing portfolio considering the
level and mix of the loan portfolio, current economic conditions and market
trends.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
TABLE 5 - RESERVE FOR POSSIBLE LOAN LOSSES ACTIVITY
- -------------------------------------------------------------------
Three Months
Ended March 31
- -------------------------------------------------------------------
($ in thousands) 1998 1997
- -------------------------------------------------------------------
<S> <C> <C>
Balance at beginning of period ... $ 122,401 $ 141,541
Loans charged off ................ (10,326) (13,795)
Recoveries ....................... 3,983 5,896
- -------------------------------------------------------------------
Net loans charged off ............ (6,343) (7,899)
Provision for possible loan losses 3,500 139
- -------------------------------------------------------------------
Balance at end of period ......... $ 119,558 $ 133,781
- -------------------------------------------------------------------
Reserve for possible loan losses
as a percentage of loans ..... 1.38% 1.96%
Annualized net charge-offs as a
percentage of average loans .. 0.30% 0.47%
- -------------------------------------------------------------------
</TABLE>
FUNDING SOURCES:
DEPOSITS
Average deposits totaled $9.6 billion in the first quarter of 1998, a
$773.5 million (9%) increase from the first quarter of 1997. This growth
resulted from Hibernia's emphasis on attracting new deposits and expanding
current banking relationships through outstanding service and the introduction
of new products such as the Tower Super SavingsSM account (which offers
liquidity and a rate indexed to the 90-day Treasury bill auction discount rate).
Table 6 presents the composition of average deposits for the first quarter of
1998 and the fourth and first quarters of 1997.
Average core deposits totaled $7.8 billion in the first quarter of 1998, a
$566.8 million (8%) increase from the first quarter of 1997. Average
noninterest-bearing deposits grew $159.8 million and savings deposits increased
$367.2 million in the first quarter of 1998 compared to the first quarter of
1997. NOW account average balances were down $191.1 million and money market
deposit accounts were up $208.1 million in the first quarter of 1998 compared to
the first quarter of 1997 due to the enhanced Reserve Money Manager account
designed to create a more efficient sweep process.
Average noncore deposits were up $206.7 million (13%) to $1.7 billion or
18% of total deposits. Large denomination certificates of deposit increased
$113.4 million (8%) compared to the first quarter of 1997. Foreign time deposits
increased $93.3 million (138%) due to successful efforts to market a treasury
management product which moves commercial customer funds into higher-yielding
Eurodollar deposits.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
TABLE 6 - DEPOSIT COMPOSITION
- --------------------------------------------------------------------------------------------------------------
First Quarter 1998 Fourth Quarter 1997 First Quarter 1997
- --------------------------------------------------------------------------------------------------------------
Average % of Average % of Average % of
($ in millions) Balances Deposits Balances Deposits Balances Deposits
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Noninterest-bearing ........... $ 1,724.0 18.0% $ 1,694.1 18.2% $ 1,564.2 17.8%
NOW accounts .................. 366.9 3.8 416.4 4.5 558.0 6.3
Money market deposit accounts . 1,903.7 19.9 1,753.6 18.9 1,695.6 19.3
Savings accounts .............. 964.2 10.1 888.4 9.6 597.0 6.8
Other consumer time deposits .. 2,866.5 29.9 2,885.9 31.1 2,843.7 32.3
- --------------------------------------------------------------------------------------------------------------
Total core deposits ....... 7,825.3 81.7 7,638.4 82.3 7,258.5 82.5
- --------------------------------------------------------------------------------------------------------------
Public fund certificates of
deposit of $100,000 or more 1,019.5 10.7 975.7 10.5 1,019.6 11.6
Certificates of deposit of
$100,000 or more .......... 567.4 5.9 521.9 5.6 453.9 5.1
Foreign time deposits ......... 161.0 1.7 145.8 1.6 67.7 0.8
- --------------------------------------------------------------------------------------------------------------
Total deposits ............ $ 9,573.2 100.% $ 9,281.8 100.0% $ 8,799.7 100.0%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
BORROWINGS
Average borrowings -- which include federal funds purchased, securities
sold under agreements to repurchase (repurchase agreements) and debt --
increased $875.3 million (198%) to $1.3 billion for the first quarter of 1998
compared to the first quarter of 1997.
Average debt for the first quarter of 1998 totaled $629.7 million, up from
$50.1 million in the first quarter of 1997. At March 31, 1998 the Company's
debt, which is comprised of advances from the Federal Home Loan Bank of Dallas,
totaled $706.3 million. Debt increased $693.2 million from March 31, 1997 as
Hibernia locked in attractive fixed rates to fund its growing loan portfolio.
The Federal Home Loan Bank may demand payment of $300 million of callable
advances at quarterly intervals beginning in June 1998. The Company's reliance
on borrowings, while higher than a year ago, is still within parameters
determined by management to be prudent in terms of liquidity and interest rate
sensitivity.
INTEREST RATE SENSITIVITY
The primary objective of asset/liability management is controlling interest
rate risk. On a continuing basis, management monitors the sensitivity of net
interest income to changes in interest rates through methods that include
simulation and gap reports. Using these tools, management attempts to optimize
the asset/liability mix to minimize the impact of significant rate movements
within a broad range of interest rate scenarios. Management may alter the mix of
floating- and fixed-rate assets and liabilities, change pricing schedules and
enter into derivative contracts as means of minimizing interest rate risk.
On a limited basis, the Company has entered into interest rate and foreign
exchange rate swap, forward and option contracts to hedge interest rate or
foreign exchange risk on specific assets and liabilities. Hibernia held foreign
exchange rate forward contracts totaling $19.0 million at March 31, 1998, which
minimize the Company's exchange rate risk on loans to be repaid in foreign
currencies. At March 31, 1998 the Company was party to an interest rate swap
contract with a notional amount of $125.0 million. This swap, which matured on
April 1, 1998, was entered into during the first quarter of 1998 as a hedge
against a deposit relationship of the same maturity.
Derivative financial instruments are also held or issued by the Company for
trading purposes to provide customers the ability to manage their own interest
rate and foreign exchange risk. In general, matched trading positions are
established to minimize risk to the Company. The notional value of these
instruments totaled $286.6 million at March 31, 1998. In addition to these
customer-related financial instruments, the Company has entered into contracts
for its own account which total $236.8 million. As of March 31, 1998 Hibernia's
credit exposure related to derivative financial instruments held for trading
totaled $1.1 million.
RESULTS OF OPERATIONS:
NET INTEREST INCOME
Taxable-equivalent net interest income for the three months ended March 31,
1998, totaled $128.8 million, a $13.7 million increase from the same period in
1997 and up $3.8 million from the fourth quarter of 1997.
Factors contributing to the increase in net interest income from the first
quarter of 1997 include: overall growth in earning assets, higher yields on
securities and the positive effect of the change in the mix of earning assets
from lower-yielding securities to loans. The change in the mix of average
earning assets is evidenced by the increase in the ratio of loans as a
percentage of average earning assets to 74.9% in the first quarter of 1998
compared to 69.7% in the first quarter of 1997. These factors were partially
offset by lower yields on loans and rising funding costs as a result of
increases in borrowings.
Table 7 details the net interest margin for the most recent five quarters.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
TABLE 7 - NET INTEREST MARGIN (taxable-equivalent)
- -------------------------------------------------------------------------------------------------
1998 1997
- -------------------------------------------------------------------------------------------------
First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Yield on earning assets ............ 8.21% 8.10% 8.29% 8.30% 8.20%
Rate on interest-bearing liabilities 4.43 4.41 4.36 4.32 4.25
- -------------------------------------------------------------------------------------------------
Net interest spread ............ 3.78 3.69 3.93 3.98 3.95
Contribution of
noninterest-bearing funds ...... 0.82 0.88 0.86 0.87 0.86
- -------------------------------------------------------------------------------------------------
Net interest margin ............ 4.60% 4.57% 4.79% 4.85% 4.81%
- -------------------------------------------------------------------------------------------------
Noninterest-bearing funds
supporting earning assets ...... 18.71% 20.03% 19.77% 20.06% 20.38%
- -------------------------------------------------------------------------------------------------
</TABLE>
Table 8 shows the composition of earning assets for the most recent five
quarters, revealing the change in the mix of earning assets.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
TABLE 8 - INTEREST-EARNING ASSET COMPOSITION
- ------------------------------------------------------------------------------------------------
1998 1997
- ------------------------------------------------------------------------------------------------
First Fourth Third Second First
(Percentage of average balances) Quarter Quarter Quarter Quarter Quarter
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial loans ................ 28.6% 27.0% 26.4% 26.1% 24.6%
Small business loans ............ 15.8 16.3 16.6 15.8 15.9
Consumer loans .................. 30.5 29.8 30.0 29.5 29.2
- ------------------------------------------------------------------------------------------------
Total loans ................. 74.9 73.1 73.0 71.4 69.7
- ------------------------------------------------------------------------------------------------
Securities available for sale ... 23.0 24.1 24.3 25.9 27.3
Short-term investments .......... 2.1 2.8 2.7 2.7 3.0
- ------------------------------------------------------------------------------------------------
Total interest-earning assets 100.0% 100.0% 100.0% 100.0% 100.0%
- ------------------------------------------------------------------------------------------------
</TABLE>
The net interest margin was 4.60% for the first quarter of 1998 compared to
4.81% in the first quarter of 1997 and up 3 basis points from the fourth quarter
of 1997. The positive effects of the change in the mix of earning assets and the
increasing yields on securities were offset by the negative impact of declining
loan yields, as a result of increasing competition, and the shift in the mix of
funding sources toward market rate funds. In the first quarter of 1998, 56.6% of
Hibernia's earning assets were supported by market-rate funds compared to 50.8%
in the same period in 1997. The attractive introductory rates offered on
Hibernia's Equity PrimeLine(R) loan product and Tower Super SavingsSM account
during 1998 illustrate the pricing strategies necessary to successfully launch
new products in the current competitive environment.
In addition, the net interest margin was negatively impacted (approximately
3 basis points) in the first quarter of 1998 by the funding cost of a
transaction designed to utilize capital losses. The $0.8 million in income
associated with this transaction is recorded as a securities gain in noninterest
income rather than in net interest income.
Table 9 presents an analysis of changes in taxable-equivalent net interest
income between the first quarter of 1998 and the fourth quarter of 1997 and
between the first quarter of 1998 and the first quarter of 1997.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
TABLE 9 - CHANGES IN TAXABLE-EQUIVALENT NET INTEREST INCOME (1)
- ----------------------------------------------------------------------------------------------------------------------------
First Quarter 1998 Compared to:
- ----------------------------------------------------------------------------------------------------------------------------
Fourth Quarter 1997 First Quarter 1997
- ----------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) Due to Change In:
- ----------------------------------------------------------------------------------------------------------------------------
($ in thousands) Volume Rate Total Volume Rate Total
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Taxable-equivalent
interest earned on:
Commercial loans .............. $ 6,178 $ (3,229) $ 2,949 $ 18,076 $ (1,265) $ 16,811
Small business loans .......... 162 (294) (132) 5,958 600 6,558
Consumer loans ................ 3,962 (1,753) 2,209 12,876 (2,357) 10,519
- ----------------------------------------------------------------------------------------------------------------------------
Loans ..................... 10,302 (5,276) 5,026 36,910 (3,022) 33,888
- ----------------------------------------------------------------------------------------------------------------------------
Securities available for sale . (493) 3,389 2,896 (627) 504 (123)
Short-term investments ........ (978) 8 (970) (741) 315 (426)
- ----------------------------------------------------------------------------------------------------------------------------
Total ................... 8,831 (1,879) 6,952 35,542 (2,203) 33,339
- ----------------------------------------------------------------------------------------------------------------------------
Interest paid on:
NOW accounts .................. (367) 396 29 (1,449) 583 (866)
Money market
deposit accounts .......... 947 (438) 509 1,293 219 1,512
Savings accounts .............. 597 211 808 2,718 1,227 3,945
Other consumer time ........... (255) (634) (889) 296 93 389
Public fund certificates of
deposit of $100,000 or more 570 (184) 386 - 122 122
Certificates of deposit
of $100,000 or more ....... 641 (573) 68 1,552 (244) 1,308
Foreign deposits .............. 199 (47) 152 1,217 7 1,224
Federal funds purchased ....... (2,738) (121) (2,859) 3,590 62 3,652
Repurchase agreements ......... 236 (107) 129 382 150 532
Debt .......................... 5,126 (262) 4,864 7,898 (74) 7,824
- ----------------------------------------------------------------------------------------------------------------------------
Total ................... 4,956 (1,759) 3,197 17,497 2,145 19,642
- ----------------------------------------------------------------------------------------------------------------------------
Taxable-equivalent
net interest income ........... $ 3,875 $ (120) $ 3,755 $ 18,045 $ (4,348) $ 13,697
- ----------------------------------------------------------------------------------------------------------------------------
- ---------------
(1) Change due to mix (both volume and rate) has been allocated to volume and
rate changes in proportion to the relationship of the absolute dollar
amounts to the changes in each.
</TABLE>
The analysis of Consolidated Average Balances, Interest and Rates on pages
20 and 21 of this discussion presents the Company's taxable-equivalent net
interest income and average balances for the three months ended March 31, 1998,
December 31, 1997 and March 31, 1997.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
CONSOLIDATED AVERAGE BALANCES, INTEREST AND RATES
- ------------------------------------------------------------------------------------------------------------------
Hibernia Corporation and Subsidiaries
Taxable-equivalent basis (1) First Quarter 1998
- ------------------------------------------------------------------------------------------------------------------
(Average balances $ in millions, Average
interest $ in thousands) Balance Interest Rate
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Interest-earning assets:
Commercial loans ............................................... $ 3,226.5 $ 67,919 8.54%
Small business loans ........................................... 1,784.3 42,120 9.57
Consumer loans ................................................. 3,436.3 71,602 8.42
- ------------------------------------------------------------------------------------------------------------------
Total loans (2) ............................................ 8,447.1 181,641 8.71
- ------------------------------------------------------------------------------------------------------------------
Securities available for sale .................................. 2,595.0 43,928 6.79
Short-term investments ......................................... 235.8 3,362 5.78
- ------------------------------------------------------------------------------------------------------------------
Total interest-earning assets ................................. 11,277.9 $228,931 8.21%
- ------------------------------------------------------------------------------------------------------------------
Reserve for possible loan losses.................................... (121.1)
Noninterest-earning assets:
Cash and due from banks ........................................ 452.9
Other assets ................................................... 654.4
- ------------------------------------------------------------------------------------------------------------------
Total noninterest-earning assets .............................. 1,107.3
- ------------------------------------------------------------------------------------------------------------------
Total assets .............................................. $ 12,264.1
==================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing deposits:
NOW accounts .................................................. $ 366.9 $ 2,927 3.24%
Money market deposit accounts ................................. 1,903.7 11,859 2.53
Savings accounts .............................................. 964.2 7,655 3.22
Other consumer time deposits .................................. 2,866.5 37,262 5.27
Public fund certificates of deposit
of $100,000 or more ....................................... 1,019.5 13,223 5.26
Certificates of deposit of $100,000 or more ................... 567.4 7,718 5.52
Foreign time deposits ......................................... 161.0 2,101 5.29
- ------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits ............................ 7,849.2 82,745 4.28
- ------------------------------------------------------------------------------------------------------------------
Short-term borrowings:
Federal funds purchased ....................................... 318.7 4,345 5.53
Repurchase agreements ......................................... 369.7 4,462 4.89
Debt ........................................................... 629.7 8,573 5.52
- ------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities ........................ 9,167.3 $100,125 4.43%
- ------------------------------------------------------------------------------------------------------------------
Noninterest-bearing liabilities:
Noninterest-bearing deposits ................................... 1,724.0
Other liabilities .............................................. 186.3
- ------------------------------------------------------------------------------------------------------------------
Total noninterest-bearing liabilities ..................... 1,910.3
- ------------------------------------------------------------------------------------------------------------------
Total shareholders' equity ......................................... 1,186.5
- ------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity ................. $ 12,264.1
==================================================================================================================
SPREAD AND NET YIELD
Interest rate spread ............................................... 3.78%
Cost of funds supporting interest-earning assets ................... 3.61%
Net interest income/margin ......................................... $128,806 4.60%
==================================================================================================================
- --------------
(1) Based on the statutory income tax rate of 35%.
(2) Yield computations include nonaccrual loans in loans outstanding.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED AVERAGE BALANCES, INTEREST AND RATES
- -----------------------------------------------------------------------------------------------------------------------------
Hibernia Corporation and Subsidiaries
Taxable-equivalent basis (1) Fourth Quarter 1997 First Quarter 1997
- -----------------------------------------------------------------------------------------------------------------------------
(Average balances $ in millions, Average Average
interest $ in thousands) Balance Interest Rate Balance Interest Rate
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Commercial loans ............................. $ 2,937.8 $ 64,970 8.77% $ 2,369.1 $ 151,108 8.75%
Small business loans ......................... 1,777.5 42,252 9.43 1,531.5 35,562 9.42
Consumer loans ............................... 3,247.5 69,393 8.49 2,821.8 61,083 8.76
- -----------------------------------------------------------------------------------------------------------------------------
Total loans (2) .......................... 7,962.8 176,615 8.81 6,722.4 147,753 8.90
- -----------------------------------------------------------------------------------------------------------------------------
Securities available for sale ................ 2,626.3 41,032 6.24 2,632.2 44,051 6.71
Short-term investments ....................... 304.4 4,332 5.65 289.2 3,788 5.31
- -----------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets ............... 10,893.5 $ 221,979 8.10% 9,643.8 $ 195,592 8.20%
- -----------------------------------------------------------------------------------------------------------------------------
Reserve for possible loan losses ................. (125.1) (137.7)
Noninterest-earning assets:
Cash and due from banks ...................... 441.6 439.8
Other assets ................................. 544.7 530.9
- -----------------------------------------------------------------------------------------------------------------------------
Total noninterest-earning assets ............ 986.3 970.7
- -----------------------------------------------------------------------------------------------------------------------------
Total assets ............................ $11,754.7 $10,476.8
=============================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing deposits:
NOW accounts ................................ $ 416.4 $ 2,898 2.76% $ 558.0 $ .3,793 2.76%
Money market deposit accounts ............... 1,753.6 11,350 2.57 1,695.6 10,347 2.47
Savings accounts ............................ 888.4 6,847 3.06 597.0 3,710 2.52
Other consumer time deposits ................ 2,885.9 38,151 5.24 2,843.7 36,873 5.26
Public fund certificates of deposit
of $100,000 or more ..................... 975.7 12,837 5.22 1,019.6 13,101 5.21
Certificates of deposit of $100,000 or more . 521.9 7,650 5.82 453.9 6,410 5.73
Foreign time deposits ....................... 145.8 1,949 5.30 67.7 877 5.25
- -----------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits .......... 7,587.7 81,682 4.27 7,235.5 75,111 4.21
- -----------------------------------------------------------------------------------------------------------------------------
Short-term borrowings:
Federal funds purchased ..................... 519.3 7,204 5.50 55.0 693 5.11
Repurchase agreements ....................... 350.3 4,333 4.91 337.7 3,930 4.72
Debt ......................................... 254.4 3,709 5.79 50.1 749 6.07
- -----------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities ...... 8,711.7 $ 96,928 4.41% 7,678.3 $ 80,483 4.25%
- -----------------------------------------------------------------------------------------------------------------------------
Noninterest-bearing liabilities:
Noninterest-bearing deposits ................. 1,694.1 1,564.2
Other liabilities ............................ 192.2 172.5
- -----------------------------------------------------------------------------------------------------------------------------
Total noninterest-bearing liabilities ... 1,886.3 1,736.7
- -----------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity ....................... 1,156.7 1,061.8
- -----------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $11,754.7 $10,476.8
=============================================================================================================================
SPREAD AND NET YIELD
Interest rate spread ............................. 3.69% 3.95%
Cost of funds supporting interest-earning assets . 3.53% 3.39%
Net interest income/margin ....................... $ 125,051 4.57% $ 115,109 4.81%
=============================================================================================================================
- ---------------
(1) Based on the statutory income tax rate of 35%.
(2) Yield computations include nonaccrual loans in loans outstanding.
</TABLE>
NONINTEREST INCOME
Noninterest income for the first quarter of 1998 was up $6.6 million (19%)
to $40.9 million compared to the first quarter of 1997. Excluding securities
transactions noninterest income increased $5.7 million (17%) in the first
quarter of 1998 compared to the same period of 1997. The major categories of
noninterest income for the three months ended March 31, 1998 and 1997 are
presented in Table 10.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TABLE 10 - NONINTEREST INCOME
- --------------------------------------------------------------------------------
Three Months Ended
- --------------------------------------------------------------------------------
Percentage
March 31 March 31 Increase
1998 1997 (Decrease)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Service charges on deposits ...... $ 19,386 $ 17,659 10%
Trust fees ....................... 3,884 3,636 7
Other service, collection and
exchange charges:
Mortgage loan servicing fees . 3,380 2,023 67
Retail investment service fees 3,575 2,575 39
ATM fees ..................... 2,404 2,109 14
Other ........................ 4,022 3,170 27
- --------------------------------------------------------------------------------
Total other service, collection
and exchange charges ......... 13,381 9,877 35
- --------------------------------------------------------------------------------
Other income ..................... 3,336 3,128 7
Securities gains (losses), net ... 887 15 N/M
- --------------------------------------------------------------------------------
Total noninterest income ..... $ 40,874 $ 34,315 19%
- --------------------------------------------------------------------------------
- ----------
N/M = Not meaningful
</TABLE>
Service charges on deposits increased $1.7 million (10%) for the first
quarter of 1998 over the comparable period in 1997 primarily due to increases in
the price for certain deposit activities, the number of accounts and commercial
account analysis fees.
Trust fees were up $0.2 million (7%) for the first quarter of 1998 compared
to the same period in 1997 primarily due to new business and market value
increases.
Other service, collection and exchange charges were up $3.5 million (35%)
in the first quarter of 1998 compared to the first quarter of 1997. Increases in
fees from mortgage processing and mortgage underwriting, retail investment
services, ATMs, and debit and credit cards were the major factors contributing
to the growth. Mortgage loan servicing fees increased $1.4 million primarily due
to increases in mortgage loan originations. Market conditions and financial
products attractive to consumers such as mutual funds and discount brokerage
services fueled the $1.0 million increase in retail investment service fees.
Hibernia's upgraded and expanded ATM network resulted in a $0.3 million increase
in ATM fees. Fees resulting from Hibernia's CheckmateSM debit card and Capital
Access(C) credit card for small businesses contributed $0.6 million of the
increase in other fees.
Securities gains totaled $0.9 million in the first quarter of 1998
primarily due to the completion of a transaction designed to utilize capital
losses.
NONINTEREST EXPENSE
For the first quarter of 1998, noninterest expense totaled $102.6 million,
a $8.2 million (9%) increase from the first quarter of 1997. This increase in
noninterest expense was primarily due to increases in staff costs, data
processing and advertising and promotional expenses. Noninterest expense for the
three months ended March 31, 1998 and 1997 are presented by major category in
Table 11.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TABLE 11 - NONINTEREST EXPENSE
- --------------------------------------------------------------------------------
Three Months Ended
- --------------------------------------------------------------------------------
Percentage
March 31 March 31 Increase
($ in thousands) 1998 1997 (Decrease)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Salaries ........................ $ 42,087 $ 39,325 7%
Benefits ........................ 7,701 8,111 (5)
- --------------------------------------------------------------------------------
Total staff costs ........... 49,788 47,436 5
- --------------------------------------------------------------------------------
Occupancy, net .................. 7,943 8,045 (1)
Equipment ....................... 7,409 7,615 (3)
- --------------------------------------------------------------------------------
Total occupancy and equipment 15,352 15,660 (2)
- --------------------------------------------------------------------------------
Data processing ................. 6,789 5,237 30
Telecommunications .............. 3,232 2,920 11
Advertising and promotional
expenses .................... 5,392 3,546 52
Postage ......................... 1,903 1,918 (1)
Stationery and supplies ......... 1,915 1,964 (2)
Professional fees ............... 1,832 1,712 7
Regulatory expense .............. 644 674 (4)
Loan collection expense ......... 1,052 765 38
Foreclosed property expense, net 5 (310) N/M
Amortization of intangibles ..... 3,880 3,658 6
Other ........................... 10,789 9,162 18
- --------------------------------------------------------------------------------
Total noninterest expense ... $ 102,573 $ 94,342 9%
- --------------------------------------------------------------------------------
Efficiency ratio (1)............. 60.77%
Tangible efficiency ratio (2).... 58.97%
- --------------------------------------------------------------------------------
- ----------
(1) Noninterest expense as a percentage of taxable-equivalent net interest
income plus noninterest income (excluding securities transactions). (2)
Noninterest expense (excluding amortization of purchase accounting
intangibles) as a percentage of taxable-equivalent net interest income
plus noninterest income (excluding securities transactions).
</TABLE>
Staff costs, the largest component of noninterest expense, increased $2.4
million (5%) in the first quarter of 1998 compared to the same period a year
ago. Higher accruals for performance based incentives and bonuses and normal
merit increases were major factors contributing to the increase in staff costs.
Occupancy and equipment expenses decreased $0.3 million (2%) in the first
quarter of 1998, compared to the first quarter of 1997, primarily due to charges
taken in the first quarter of 1997 for the write-down of merger bank properties.
Data processing expenses increased $1.6 million (30%) for the first quarter
of 1998, compared to the first quarter of 1997, due to expenses related to
continued improvements in technology, Year 2000 compliance and increased
transaction volume related to growth in the Company's customer base.
The Company expects to continue incurring charges related to Year 2000
compliance; however, these costs have not been material to date and are not
expected to have a material impact on the Company's earnings in the future. The
majority of the costs associated with these efforts are the responsibility of
the Company's third party data processor which also provides many of the
Company's software applications. In addition, a portion of the Company's costs
is likely to constitute a reassignment of existing internal resources and,
therefore, is not expected to be incremental.
A team comprised of Hibernia employees and representatives of the Company's
third party data processor was formed in early 1997 to address year 2000 issues.
The team's plan is to achieve year 2000 compliance for all mainframe application
systems, local area network application systems and departmental and vendor
application systems by the end of 1998. In addition, the Company is discussing
year 2000 issues and their potential impact on business operations with many of
its customers and suppliers.
Telecommunications expenses increased $0.3 million (11%) in the first
quarter of 1998, compared to the first quarter of 1997, primarily due to
expenses related to the Company's enhanced communications capabilities,
including the operation of its wide area network and enhanced ATM network.
Advertising and promotional expenses increased $1.8 million (52%) in the
first quarter of 1998, compared to the first quarter of 1997, because of
increases in advertising, direct marketing and shareholder communications. The
increase in advertising was related to the expansion of the franchise into the
markets of merged companies and the promotion of products, such as the Tower
Super SavingsSM account and the Hibernia CheckmateSM debit card.
The Company's efficiency ratio, defined as noninterest expense as a
percentage of taxable-equivalent net interest income plus noninterest income
(excluding securities transactions), is a key measure that management uses to
evaluate the success of efforts to control costs while generating revenue
efficiently. The efficiency ratio at March 31, 1998 was 60.77% compared to
63.14% at March 31, 1997. The tangible efficiency ratio, which excludes
amortization of purchase accounting intangibles from the calculation, was 58.97%
for the first quarter of 1998, a 190 basis point improvement from 60.87% for the
same period of 1997. The improvement in efficiency for the first quarter of 1998
reflects increases in net interest income and noninterest income combined with a
lower rate of increases in noninterest expense.
INCOME TAXES
The Company recorded $21.4 million in income tax expense in the first
quarter of 1998, a $3.4 million (19%) increase from $18.0 million in the first
quarter of 1997 as pretax income rose 16%.
Hibernia National Bank is subject to a Louisiana shareholders' tax based
partly on income. The income portion of this tax is recorded as state income
tax. In addition, certain subsidiaries of the Company and Hibernia National Bank
are subject to Louisiana state income tax. Hibernia National Bank of Texas is
subject to Texas franchise tax.
CAPITAL
Shareholders' equity totaled $1,200.2 million at March 31, 1998 compared to
$1,057.7 million a year earlier. The increase is primarily the result of net
income over the most recent 12 months totaling $146.0 million, partially offset
by $49.3 million in dividends declared on common stock, $6.9 million in
dividends declared on preferred stock and a $24.7 million change in unrealized
gains (losses) on securities available for sale. Risk-based capital and leverage
ratios exceed the ratios required for designation as a "well-capitalized"
institution under regulatory guidelines. Table 12 presents Hibernia's ratios
along with selected components of the capital ratio calculations for the most
recent five quarters.
Market capitalization, defined as the number of outstanding shares of
common stock multiplied by the price of that stock, represents a company's
worth. Hibernia's market capitalization grew to $3.1 billion at March 31, 1998,
a 58% increase from $2.0 billion at March 31, 1997.
A shelf registration statement was filed by the Company in July 1996 with
the Securities and Exchange Commission which allows the Company to issue up to
$250 million of securities, including preferred stock and subordinated debt. The
Company issued $100 million of Fixed/Adjustable Rate Noncumulative Preferred
Stock on September 30, 1996. The remaining $150 million in securities included
in this shelf registration provide Hibernia with the flexibility to quickly
modify its capital structure to meet competitive and market conditions. As a
result of the pending merger with Peoples Holding Corporation previously
discussed, the Company is expected to issue approximately 3.6 million shares of
Hibernia Class A Common Stock. This merger is not expected to have a material
impact on Hibernia's capital ratios.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
TABLE 12 - CAPITAL
- -----------------------------------------------------------------------------------------------------------
March 31 Dec. 31 Sept. 30 June 30 March 31
($ in millions) 1998 1997 1997 1997 1997
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Risk-based capital:
Tier 1 ..................... $ 1,030.1 $ 994.0 $ 968.7 $ 938.7 $ 916.2
Total ...................... 1,146.1 1,106.4 1,072.4 1,036.6 1,008.3
Assets:
Quarterly average assets (1) 12,091.5 11,582.8 10,989.8 10,515.1 10,318.9
Net risk-adjusted assets ... 9,271.5 8,991.8 8,277.0 7,790.9 7,322.1
Ratios:
Tier 1 risk-based capital .. 11.11% 11.07% 11.70% 12.05% 12.51%
Total risk-based capital ... 12.36 12.32 12.96 13.30 13.77
Leverage ................... 8.52 8.58 8.81 8.93 8.88
- -----------------------------------------------------------------------------------------------------------
- -------------
(1) Excluding SFAS No. 115 adjustment and disallowed intangibles.
</TABLE>
LIQUIDITY
Liquidity is a measure of ability to fund loan commitments and meet deposit
maturities and withdrawals in a timely and cost-effective way. Liquidity needs
can be met by generating profits, attracting new deposits and converting assets
(such as short-term investments and securities available for sale) to cash.
Management monitors liquidity through a periodic review of maturity profiles,
yield and rate behaviors, and loan and deposit forecasts to minimize funding
risks.
The loan-to-deposit ratio, one measure of liquidity, was 88.3% at March 31,
1998, 85.3% at December 31, 1997, and 75.9% at March 31, 1997. Another indicator
of liquidity is the large liability dependence ratio, which measures reliance on
short-term borrowings and other large liabilities (such as large-denomination
and public fund certificates of deposit and foreign deposits). Based on average
balances, 19.93% of Hibernia's loans and investment securities were funded by
net large liabilities (total large liabilities less short-term investments) in
the first quarter of 1998, down 93 basis points from the fourth quarter of 1997
and up 235 basis points from the first quarter of 1997. The level of large
liability dependence is within limits established by management to maintain
liquidity and safety.
Attracting and retaining core deposits at competitive rates are the
Company's primary sources of liquidity. Hibernia's extensive retail office
network, aided by the introduction of new deposit products, provided $8.0
billion in core deposits at March 31, 1998, up $0.6 billion (7.3%) from $7.4
billion a year earlier. Large-denomination certificates of deposit, public
funds, and funds that can be purchased through the Banks' memberships in the
Federal Home Loan Bank of Dallas and from correspondent banks were additional
sources of liquidity. The Company can also raise additional funds through the
sale of securities registered on the shelf registration discussed in the Capital
section.
<PAGE>
HIBERNIA CORPORATION
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K*
(a) Exhibits
(b) Reports on Form 8-K
A report on Form 8-K dated January 9, 1998, was filed by
the registrant reporting Item 5 Other Events.
A report on Form 8-K dated February 10, 1998, was filed by
the registrant reporting Item 5 Other Events.
* Exhibits and Reports on Form 8-K have been separately filed with the
Commission.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized to sign on behalf of the registrant.
HIBERNIA CORPORATION
(Registrant)
Date: May 13, 1998 By: /s/ Ron E. Samford, Jr.
---------------------- -----------------------
Ron E. Samford, Jr.
Executive Vice President and Controller
Chief Accounting Officer
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-END> Mar-31-1998
<CASH> 491,377
<INT-BEARING-DEPOSITS> 4,154
<FED-FUNDS-SOLD> 202,429
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 2,553,056
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 8,636,998
<ALLOWANCE> (119,558)
<TOTAL-ASSETS> 12,307,423
<DEPOSITS> 9,778,715
<SHORT-TERM> 463,605
<LIABILITIES-OTHER> 158,584
<LONG-TERM> 706,331
0
100,000
<COMMON> 292,051
<OTHER-SE> 808,137
<TOTAL-LIABILITIES-AND-EQUITY> 12,307,423
<INTEREST-LOAN> 180,591
<INTEREST-INVEST> 42,254
<INTEREST-OTHER> 3,362
<INTEREST-TOTAL> 226,207
<INTEREST-DEPOSIT> 82,745
<INTEREST-EXPENSE> 100,125
<INTEREST-INCOME-NET> 126,082
<LOAN-LOSSES> 3,500
<SECURITIES-GAINS> 887
<EXPENSE-OTHER> 102,573
<INCOME-PRETAX> 60,883
<INCOME-PRE-EXTRAORDINARY> 39,526
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 39,526
<EPS-PRIMARY> 0.25
<EPS-DILUTED> 0.25
<YIELD-ACTUAL> 4.60
<LOANS-NON> 28,443
<LOANS-PAST> 6,564
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 27,658
<ALLOWANCE-OPEN> 122,401
<CHARGE-OFFS> 10,326
<RECOVERIES> 3,983
<ALLOWANCE-CLOSE> 119,558
<ALLOWANCE-DOMESTIC> 119,558
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Dec-31-1997
<CASH> 574,626
<INT-BEARING-DEPOSITS> 2,474
<FED-FUNDS-SOLD> 407,298
<TRADING-ASSETS> 35,943
<INVESTMENTS-HELD-FOR-SALE> 2,526,612
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 8,208,092
<ALLOWANCE> (122,401)
<TOTAL-ASSETS> 12,160,545
<DEPOSITS> 9,621,632
<SHORT-TERM> 715,876
<LIABILITIES-OTHER> 150,021
<LONG-TERM> 506,548
0
100,000
<COMMON> 290,912
<OTHER-SE> 775,556
<TOTAL-LIABILITIES-AND-EQUITY> 12,160,545
<INTEREST-LOAN> 645,609
<INTEREST-INVEST> 164,792
<INTEREST-OTHER> 15,725
<INTEREST-TOTAL> 826,126
<INTEREST-DEPOSIT> 316,401
<INTEREST-EXPENSE> 353,011
<INTEREST-INCOME-NET> 473,115
<LOAN-LOSSES> 3,118
<SECURITIES-GAINS> 2,650
<EXPENSE-OTHER> 404,586
<INCOME-PRETAX> 217,875
<INCOME-PRE-EXTRAORDINARY> 140,985
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 140,985
<EPS-PRIMARY> 0.90
<EPS-DILUTED> 0.88
<YIELD-ACTUAL> 4.75
<LOANS-NON> 22,420
<LOANS-PAST> 5,576
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 19,366
<ALLOWANCE-OPEN> 141,541
<CHARGE-OFFS> 45,308
<RECOVERIES> 22,571
<ALLOWANCE-CLOSE> 122,401
<ALLOWANCE-DOMESTIC> 122,401
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 9-mos 6-mos 3-mos
<FISCAL-YEAR-END> Dec-31-1997 Dec-31-1997 Dec-31-1997
<PERIOD-END> Sep-30-1997 Jun-30-1997 Mar-31-1997
<CASH> 465,151 523,582 514,679
<INT-BEARING-DEPOSITS> 3,155 4,553 4,852
<FED-FUNDS-SOLD> 267,435 293,280 283,070
<TRADING-ASSETS> 0 0 0
<INVESTMENTS-HELD-FOR-SALE> 2,435,746 2,546,082 2,571,643
<INVESTMENTS-CARRYING> 0 0 0
<INVESTMENTS-MARKET> 0 0 0
<LOANS> 7,726,375 7,281,766 6,837,620
<ALLOWANCE> (127,158) (134,500) (133,781)
<TOTAL-ASSETS> 11,314,681 11,074,888 10,611,498
<DEPOSITS> 9,170,939 9,189,974 9,009,820
<SHORT-TERM> 735,902 618,785 376,143
<LIABILITIES-OTHER> 156,439 147,820 154,662
<LONG-TERM> 109,793 12,675 13,135
0 0 0
100,000 100,000 100,000
<COMMON> 290,757 290,080 289,754
<OTHER-SE> 750,851 715,554 667,984
<TOTAL-LIABILITIES-AND-EQUITY> 11,314,681 11,074,888 10,611,498
<INTEREST-LOAN> 469,999 302,715 146,787
<INTEREST-INVEST> 125,431 84,467 42,587
<INTEREST-OTHER> 11,393 7,427 3,787
<INTEREST-TOTAL> 606,823 394,609 193,161
<INTEREST-DEPOSIT> 234,719 153,555 75,111
<INTEREST-EXPENSE> 256,083 165,262 80,483
<INTEREST-INCOME-NET> 350,740 229,347 112,678
<LOAN-LOSSES> 358 181 139
<SECURITIES-GAINS> 419 419 15
<EXPENSE-OTHER> 295,281 193,864 94,342
<INCOME-PRETAX> 165,640 108,423 52,512
<INCOME-PRE-EXTRAORDINARY> 108,403 70,884 34,524
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 108,403 70,884 34,524
<EPS-PRIMARY> 0.69 0.45 0.22
<EPS-DILUTED> 0.68 0.45 0.22
<YIELD-ACTUAL> 4.82 4.83 4.81
<LOANS-NON> 24,429 23,457 17,765
<LOANS-PAST> 5,713 3,578 5,601
<LOANS-TROUBLED> 0 0 0
<LOANS-PROBLEM> 17,901 19,301 18,900
<ALLOWANCE-OPEN> 141,541 141,541 141,541
<CHARGE-OFFS> 33,673 22,831 13,795
<RECOVERIES> 18,453 15,130 5,896
<ALLOWANCE-CLOSE> 127,158 134,500 133,781
<ALLOWANCE-DOMESTIC> 127,158 134,500 133,781
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Dec-31-1996
<CASH> 613,974
<INT-BEARING-DEPOSITS> 4,054
<FED-FUNDS-SOLD> 218,870
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 2,605,624
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 6,663,986
<ALLOWANCE> (141,541)
<TOTAL-ASSETS> 10,502,702
<DEPOSITS> 8,877,575
<SHORT-TERM> 339,721
<LIABILITIES-OTHER> 175,950
<LONG-TERM> 57,192
0
100,000
<COMMON> 289,375
<OTHER-SE> 662,889
<TOTAL-LIABILITIES-AND-EQUITY> 10,502,702
<INTEREST-LOAN> 528,216
<INTEREST-INVEST> 166,272
<INTEREST-OTHER> 12,291
<INTEREST-TOTAL> 706,779
<INTEREST-DEPOSIT> 274,986
<INTEREST-EXPENSE> 292,641
<INTEREST-INCOME-NET> 414,138
<LOAN-LOSSES> (12,135)
<SECURITIES-GAINS> (5,157)
<EXPENSE-OTHER> 355,030
<INCOME-PRETAX> 190,580
<INCOME-PRE-EXTRAORDINARY> 124,665
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 124,665
<EPS-PRIMARY> 0.83
<EPS-DILUTED> 0.82
<YIELD-ACTUAL> 4.85
<LOANS-NON> 16,742
<LOANS-PAST> 5,772
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 29,800
<ALLOWANCE-OPEN> 163,738
<CHARGE-OFFS> 35,989
<RECOVERIES> 20,069
<ALLOWANCE-CLOSE> 141,541
<ALLOWANCE-DOMESTIC> 141,541
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 9-mos 6-mos 3-mos
<FISCAL-YEAR-END> Dec-31-1996 Dec-31-1996 Dec-31-1996
<PERIOD-END> Sep-30-1996 Jun-30-1996 Mar-31-1996
<CASH> 496,278 399,891 367,483
<INT-BEARING-DEPOSITS> 3,107 776 704
<FED-FUNDS-SOLD> 297,395 93,430 291,360
<TRADING-ASSETS> 0 0 0
<INVESTMENTS-HELD-FOR-SALE> 2,500,197 2,509,733 2,625,793
<INVESTMENTS-CARRYING> 0 0 0
<INVESTMENTS-MARKET> 0 0 0
<LOANS> 6,302,184 5,780,354 5,473,846
<ALLOWANCE> (147,046) (160,953) (161,219)
<TOTAL-ASSETS> 9,958,506 9,005,518 8,977,488
<DEPOSITS> 8,388,301 7,640,751 7,614,861
<SHORT-TERM> 373,261 306,868 302,432
<LIABILITIES-OTHER> 157,210 134,216 137,977
<LONG-TERM> 24,269 33,949 37,409
0 0 0
100,000 0 0
<COMMON> 288,945 288,506 288,439
<OTHER-SE> 626,520 601,228 596,370
<TOTAL-LIABILITIES-AND-EQUITY> 9,958,506 9,005,518 8,977,488
<INTEREST-LOAN> 381,546 248,155 120,685
<INTEREST-INVEST> 123,834 83,941 43,139
<INTEREST-OTHER> 8,854 5,967 3,224
<INTEREST-TOTAL> 514,234 338,063 167,048
<INTEREST-DEPOSIT> 200,687 131,598 65,421
<INTEREST-EXPENSE> 213,305 139,730 69,377
<INTEREST-INCOME-NET> 300,929 198,333 97,671
<LOAN-LOSSES> (12,349) 917 242
<SECURITIES-GAINS> (5,386) 164 67
<EXPENSE-OTHER> 261,445 163,300 80,675
<INCOME-PRETAX> 136,788 94,076 45,958
<INCOME-PRE-EXTRAORDINARY> 89,739 61,819 30,026
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 89,739 61,819 30,026
<EPS-PRIMARY> 0.60 0.42 0.20
<EPS-DILUTED> 0.60 0.41 0.20
<YIELD-ACTUAL> 4.86 4.86 4.83
<LOANS-NON> 15,981 19,070 19,591
<LOANS-PAST> 4,067 4,393 6,365
<LOANS-TROUBLED> 0 0 0
<LOANS-PROBLEM> 30,210 21,100 21,800
<ALLOWANCE-OPEN> 163,738 163,738 163,738
<CHARGE-OFFS> 24,578 14,403 7,205
<RECOVERIES> 14,675 10,385 4,434
<ALLOWANCE-CLOSE> (147,046) 160,953 (161,219)
<ALLOWANCE-DOMESTIC> (147,046) 160,953 (161,219)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-END> Dec-31-1995
<CASH> 455,897
<INT-BEARING-DEPOSITS> 319
<FED-FUNDS-SOLD> 132,160
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 2,760,743
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 5,236,837
<ALLOWANCE> (163,738)
<TOTAL-ASSETS> 8,837,441
<DEPOSITS> 7,517,554
<SHORT-TERM> 277,441
<LIABILITIES-OTHER> 129,033
<LONG-TERM> 36,744
0
0
<COMMON> 288,425
<OTHER-SE> 588,244
<TOTAL-LIABILITIES-AND-EQUITY> 8,837,441
<INTEREST-LOAN> 432,146
<INTEREST-INVEST> 193,607
<INTEREST-OTHER> 9,873
<INTEREST-TOTAL> 635,626
<INTEREST-DEPOSIT> 255,037
<INTEREST-EXPENSE> 271,100
<INTEREST-INCOME-NET> 364,526
<LOAN-LOSSES> 342
<SECURITIES-GAINS> 806
<EXPENSE-OTHER> 316,214
<INCOME-PRETAX> 160,024
<INCOME-PRE-EXTRAORDINARY> 142,844
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 142,844
<EPS-PRIMARY> 0.96
<EPS-DILUTED> 0.95
<YIELD-ACTUAL> 4.66
<LOANS-NON> 18,461
<LOANS-PAST> 3,070
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 23,100
<ALLOWANCE-OPEN> 170,254
<CHARGE-OFFS> 25,858
<RECOVERIES> 19,000
<ALLOWANCE-CLOSE> 163,738
<ALLOWANCE-DOMESTIC> 163,738
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
