<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 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
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(Address of principal executive offices and zip code)
Registrant's telephone number, including area code (504) 533-5332
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at October 30, 1998
----- -------------------------------
Class A Common Stock, no par value 156,362,536 Shares
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheets
Hibernia Corporation and Subsidiaries September 30 December 31 September 30
Unaudited ($ in thousands) 1998 1997 1997
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Cash and due from banks .................................... $ 530,821 $ 580,235 $ 472,621
Short-term investments ..................................... 210,641 485,015 302,005
Securities available for sale .............................. 2,530,805 2,628,164 2,542,424
Securities held to maturity ................................ - - -
Loans, net of unearned income .............................. 9,594,693 8,286,492 7,804,261
Reserve for possible loan losses ....................... (127,005) (124,381) (129,233)
- ------------------------------------------------------------------------------------------------------------------------------
Loans, net ......................................... 9,467,688 8,162,111 7,675,028
- ------------------------------------------------------------------------------------------------------------------------------
Bank premises and equipment ................................ 189,696 190,020 194,191
Customers' acceptance liability ............................ 498 144 821
Other assets ............................................... 342,699 342,495 353,788
- ------------------------------------------------------------------------------------------------------------------------------
Total assets ....................................... $ 13,272,848 $ 12,388,184 $ 11,540,878
==============================================================================================================================
Liabilities
Deposits:
Noninterest-bearing .................................... $ 1,821,406 $ 1,820,896 $ 1,686,446
Interest-bearing ....................................... 8,098,667 7,993,522 7,676,283
- ------------------------------------------------------------------------------------------------------------------------------
Total deposits ..................................... 9,920,073 9,814,418 9,362,729
- ------------------------------------------------------------------------------------------------------------------------------
Short-term borrowings ...................................... 1,115,005 719,961 740,182
Liability on acceptances ................................... 498 144 821
Other liabilities .......................................... 222,916 151,032 156,866
Debt ....................................................... 705,898 506,548 109,793
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Total liabilities .................................. 11,964,390 11,192,103 10,370,391
- ------------------------------------------------------------------------------------------------------------------------------
Shareholders' equity
Preferred Stock, no par value:
Authorized - 100,000,000 shares; 2,000,000 Series A
issued and outstanding at September 30, 1998,
December 31, 1997 and September 30, 1997 ................. 100,000 100,000 100,000
Class A Common Stock, no par value:
Authorized - 300,000,000 shares; issued 156,133,824,
155,079,094, and 154,998,287 at September 30, 1998,
December 31, 1997 and September 30, 1997, respectively... 299,777 297,752 297,597
Surplus .................................................... 404,450 394,479 391,144
Retained earnings .......................................... 490,903 406,335 387,980
Treasury stock at cost: 51,898 shares at September 30, 1997 - - (643)
Unrealized gains (losses) on securities available for sale . 39,345 14,902 12,684
Unearned compensation ...................................... (26,017) (17,387) (18,275)
- ------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity ......................... 1,308,458 1,196,081 1,170,487
- ------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity ......... $ 13,272,848 $ 12,388,184 $ 11,540,878
==============================================================================================================================
- ---------------
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Income Statements
Hibernia Corporation and Subsidiaries
Three Months Ended Nine Months Ended
September 30 September 30
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Unaudited ($ in thousands), except per-share data 1998 1997 1998 1997
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income
Interest and fees on loans ............................. $ 199,227 $169,191 $ 574,991 $ 475,609
Interest on securities available for sale .............. 37,301 42,669 121,264 130,701
Interest on securities held to maturity ................ - - - -
Interest on short-term investments ..................... 4,214 4,304 11,934 12,364
- -------------------------------------------------------------------------------------------------------------------------------
Total interest income .............................. 240,742 216,164 708,189 618,674
- -------------------------------------------------------------------------------------------------------------------------------
Interest expense
Interest on deposits ................................... 87,964 82,857 258,763 239,874
Interest on short-term borrowings ...................... 10,988 8,807 27,741 19,632
Interest on debt ....................................... 10,133 902 28,562 1,876
- -------------------------------------------------------------------------------------------------------------------------------
Total interest expense ............................. 109,085 92,566 315,066 261,382
- -------------------------------------------------------------------------------------------------------------------------------
Net interest income ........................................ 131,657 123,598 393,123 357,292
Provision for possible loan losses ..................... 8,000 191 17,000 388
- -------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for possible loan losses 123,657 123,407 376,123 356,904
- -------------------------------------------------------------------------------------------------------------------------------
Noninterest income
Service charges on deposits ............................ 21,868 20,033 62,585 57,410
Trust fees ............................................. 4,204 3,871 12,499 11,480
Other service, collection and exchange charges ......... 15,727 11,653 44,364 32,908
Other operating income ................................. 3,845 2,235 12,660 9,480
Securities gains (losses), net ......................... 2,687 75 3,601 494
- -------------------------------------------------------------------------------------------------------------------------------
Total noninterest income ........................... 48,331 37,867 135,709 111,772
- -------------------------------------------------------------------------------------------------------------------------------
Noninterest expense
Salaries and employee benefits ......................... 52,336 51,299 155,131 146,595
Occupancy expense, net ................................. 8,141 8,742 26,142 25,463
Equipment expense ...................................... 7,752 8,022 22,925 23,488
Data processing expense ................................ 7,290 7,004 20,769 18,533
Foreclosed property expense, net ....................... (371) 114 (1,020) (442)
Amortization of intangibles ............................ 4,072 3,602 12,182 10,908
Other operating expense ................................ 23,073 23,798 76,342 74,152
- -------------------------------------------------------------------------------------------------------------------------------
Total noninterest expense .......................... 102,293 102,581 312,471 298,697
- -------------------------------------------------------------------------------------------------------------------------------
Income before income taxes ................................. 69,695 58,693 199,361 169,979
Income tax expense ......................................... 23,032 20,184 68,647 58,686
- -------------------------------------------------------------------------------------------------------------------------------
Net income ................................................. $ 46,663 $ 38,509 $ 130,714 $ 111,293
===============================================================================================================================
Net income applicable to common shareholders ............... $ 44,938 $ 36,784 $ 125,539 $ 106,118
===============================================================================================================================
Net income per common share ................................ $ 0.29 $ 0.24 $ 0.82 $ 0.69
===============================================================================================================================
Net income per common share - assuming dilution ............ $ 0.29 $ 0.24 $ 0.80 $ 0.68
===============================================================================================================================
- ---------------
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Changes in Shareholders' Equity
Hibernia Corporation and Subsidiaries
Unaudited ($ in thousands, except per-share data)
- ------------------------------------------------------------------------------------------------------------------------------------
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 $297,752 $394,479 $ 406,335 $14,902 $(17,387) $ 1,196,081
Net income ........................... - - - 130,714 - - 130,714
Issuance of common stock:
Stock Option Plan ................. - 855 2,357 - - - 3,212
Restricted stock awards ........... - 861 7,372 - - - 8,233
Cash dividends declared:
Common ($.27 per share) ........... - - - (40,570) - - (40,570)
Preferred ($2.5875 per share) ..... - - - (5,175) - - (5,175)
By pooled companies prior to merger - - - (401) - - (401)
Purchase of common stock by ESOP ..... - - - - - (8,630) (8,630)
Change in unrealized gains (losses)
on securities available for sale .. - - - - 24,443 - 24,443
Other ................................ - 309 242 - - - 551
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Balances at September 30, 1998 ....... $100,000 $299,777 $404,450 $ 490,903 $39,345 $(26,017) $ 1,308,458
====================================================================================================================================
-----------
- ------------------------------------------------------------------------------------------------------------------------------------
Unrealized
Gains (Losses)
on Securities
Preferred Common Retained Available
Stock Stock Surplus Earnings for Sale Other Total
- ------------------------------------------------------------------------------------------------------------------------------------
Balances at December 31, 1996 ........ $100,000 $296,215 $372,148 $ 316,413 $ 8,018 $(13,887) $ 1,078,907
Net income ........................... - - - 111,293 - - 111,293
Issuance of common stock:
Dividend Reinvestment Plan ........ - 385 2,295 - - - 2,680
Stock Option Plan ................. - 949 2,613 - - - 3,562
Restricted stock awards ........... - 4 20 - - - 24
Retirement Security Plan .......... - 44 265 - - - 309
Director compensation ............. - - 32 - - 225 257
By pooled companies prior to merger - - 13,919 - - - 13,919
Cash dividends declared:
Common ($.24 per share) ........... - - - (30,525) - - (30,525)
Preferred ($2.5875 per share) ..... - - - (5,175) - - (5,175)
By pooled companies prior to merger - - (4,026) - - (4,026)
Acquisition of treasury stock ........ - - - - - (299) (299)
Purchase of common stock by ESOP ..... - - - - (5,021) (5,021)
Allocation of ESOP shares ............ - - - - - 64 64
Change in unrealized gains (losses)
on securities available for sale .. - - - - 4,666 - 4,666
Other ................................ - - (148) - - - (148)
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Balances at September 30, 1997 ....... $100,000 $297,597 $391,144 $ 387,980 $12,684 $(18,918) $ 1,170,487
====================================================================================================================================
- ----------------
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
Hibernia Corporation and Subsidiaries
Nine Months Ended September 30
Unaudited ($ in thousands) 1998 1997
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating activities
Net income ............................................................ $ 130,714 $ 111,293
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for possible loan losses ............................. 17,000 388
Amortization of intangibles and deferred charges ............... 11,266 10,559
Depreciation and amortization .................................. 20,521 21,495
Premium amortization, net of discount accretion ................ 2,794 2,020
Realized securities gains, net ................................. (3,601) (494)
Gain on sale of assets ......................................... (537) (843)
Provision for losses on foreclosed and other assets ............ 241 1,011
Decrease in deferred income tax asset .......................... 1,252 1,506
Increase in interest receivable and other assets ............... (5,836) (1,338)
Increase (decrease) in interest payable and other liabilities .. 30,526 1,663
- --------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities ........................ 204,340 147,260
- --------------------------------------------------------------------------------------------------------------------
Investing activities
Purchases of securities available for sale ............................ (1,285,949) (371,989)
Proceeds from maturities of securities available for sale ............. 887,666 503,613
Proceeds from sales of securities available for sale .................. 584,105 48,533
Net increase in loans ................................................. (1,671,847) (1,101,939)
Proceeds from sales of loans .......................................... 1,040,121 296,147
Purchases of loans .................................................... (696,543) (218,637)
Acquisitions, net of cash acquired of $64,095 ......................... - 56,563
Purchases of premises, equipment and other assets ..................... (40,355) (25,973)
Proceeds from sales of foreclosed assets and excess bank-owned property 5,123 6,694
Proceeds from sales of premises, equipment and other assets ........... 998 433
- --------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities ............................ (1,176,681) (806,555)
- --------------------------------------------------------------------------------------------------------------------
Financing activities
Net increase in domestic deposits ..................................... 44,303 116,033
Net increase in foreign time deposits ................................. 61,420 34,282
Net increase in short-term borrowings ................................. 395,044 396,631
Proceeds from issuance of debt ........................................ 500,000 100,000
Payments on debt ...................................................... (300,650) (47,399)
Proceeds from issuance of common stock ................................ 3,212 6,502
Purchase of common stock by ESOP ...................................... (8,630) (5,021)
Dividends paid ........................................................ (46,146) (39,741)
Acquisition of treasury stock ......................................... - (299)
- --------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities ........................ 648,553 560,988
- --------------------------------------------------------------------------------------------------------------------
Decrease in cash and cash equivalents ................................... (323,788) (98,307)
Cash and cash equivalents at beginning of period ........................ 1,065,250 872,933
- --------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period ....................... $ 741,462 $ 774,626
====================================================================================================================
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.
In June 1998 the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which is required to be adopted in years
beginning after June 15, 1999. Because of the minimal use of derivatives,
management does not anticipate that the adoption of SFAS No. 133 will have a
significant effect on the financial condition or operating results of Hibernia
Corporation.
In March 1998 the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of Position
(SOP) 98-1, "Accounting for the Cost of Computer Software Developed or Obtained
for Internal Use," which is effective for financial statements for fiscal years
beginning after December 15, 1998. The adoption of SOP 98-1 is not expected to
have a material impact on the financial condition or operating results of
Hibernia Corporation.
Note 2 MERGER AGREEMENTS On July 1, 1998 Hibernia Corporation (the
Company) consummated a merger with Peoples Holding Corporation (Peoples)
accounted for as a pooling of interests, wherein the Company issued 3,562,367
shares of Class A Common Stock valued at $70,980,000, based on a per-share
market value of $19.925.
The Company is a party to definitive merger agreements with MarTex
Bancshares, Inc. (MarTex) and First Guaranty Bank (First Guaranty), which are
pending shareholder and regulatory approval. The estimated transaction values of
these mergers assuming a value of Class A Common Stock of $16.6875, the closing
price on October 30, 1998, are approximately $57,572,000 for MarTex and
$67,109,000 for First Guaranty. At September 30, 1998 MarTex had total assets of
$319 million, loans of $186 million and deposits of $289 million. At September
30, 1998 First Guaranty had total assets of $249 million, loans of $153 million
and deposits of $227 million. It is anticipated that these transactions will be
accounted for as poolings of interests when consummated.
On September 22, 1998, Hibernia filed a petition to require First
Guaranty to comply with the terms of the agreement, asserting that First
Guaranty, under the direction of its chairman, Marshall T. Reynolds, has failed
to comply with its obligations under the contract.
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 third quarter of 1998. During 1997 the 1987 Stock Option Plan was
terminated; therefore, at September 30, 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>
Weighted
Average
Incentive Non-Qualified Total Exercise Price
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1987 Stock Option Plan:
Outstanding, June 30, 1998 ............ 121,803 1,179,752 1,301,555 $ 6.84
Exercised ............................. (71,640) (415) (72,055) 4.19
- -----------------------------------------------------------------------------------------------------------------------
Outstanding, September 30, 1998 ....... 50,163 1,179,337 1,229,500 $ 7.00
=======================================================================================================================
Exercisable, September 30, 1998 ....... 50,163 1,179,337 1,229,500 $ 7.00
=======================================================================================================================
Long-Term Incentive Plan:
Outstanding, June 30, 1998 ............ 12,598 7,264,408 7,277,006 $ 11.95
Granted ............................... - 9,200 9,200 15.56
Canceled .............................. - (81,105) (81,105) 15.14
Exercised ............................. - (42,525) (42,525) 8.49
- -----------------------------------------------------------------------------------------------------------------------
Outstanding, September 30, 1998 ....... 12,598 7,149,978 7,162,576 $ 11.94
=======================================================================================================================
Exercisable, September 30, 1998 ....... 12,598 2,938,489 2,951,087 $ 8.10
=======================================================================================================================
Available for grant, September 30, 1998 1,020,404
=======================================================================================================================
1993 Directors' Stock Option Plan:
Outstanding, June 30, 1998 ............ - 345,000 345,000 $ 12.36
Canceled .............................. - (10,000) (10,000) 17.36
- -----------------------------------------------------------------------------------------------------------------------
Outstanding, September 30, 1998 ....... - 335,000 335,000 $ 12.21
=======================================================================================================================
Exercisable, September 30, 1998 ....... - 167,500 167,500 $ 8.86
=======================================================================================================================
Available for grant, September 30, 1998 577,500
=======================================================================================================================
</TABLE>
In addition to the above option activity in the plans, 19,800 shares of
restricted stock were awarded under the Long-Term Incentive Plan during the
third 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 $30,000,000 of Hibernia Class A Common Stock in open-market
transactions from March 1995 to May 1998. As of September 30, 1998 the ESOP held
2,855,567 shares of Hibernia Class A Common Stock. On October 22, 1998 the ESOP
acquired 1,018,675 additional shares of Hibernia Class A Common Stock, funded by
a $15 million addition to the borrowing from Hibernia National Bank.
Note 4 NET INCOME PER COMMON SHARE The following sets forth the
computation of net income per common share and net income per common share
assuming dilution.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
($ in thousands, except per-share data) Three Months Ended September 30 Nine Months Ended September 30
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Numerator:
Net income .................................... $ 46,663 $ 38,509 $ 130,714 $ 111,293
Preferred stock dividends ..................... 1,725 1,725 5,175 5,175
- ------------------------------------------------------------------------------------------------------------------------------------
Numerator for net income per common share ..... 44,938 36,784 125,539 106,118
Effect of dilutive securities ................. - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Numerator for net income per common
share - assuming dilution ................. $ 44,938 $ 36,784 $ 125,539 $ 106,118
====================================================================================================================================
Denominator:
Denominator for net income per common
share (weighted average shares outstanding) 153,891,542 152,879,173 153,813,647 152,769,711
Effect of dilutive securities:
Stock options ............................. 2,134,900 2,099,730 2,584,281 2,038,137
Purchase warrants ......................... 179,055 174,560 182,453 171,576
Restricted stock awards ................... 30,950 - 30,950 -
- ------------------------------------------------------------------------------------------------------------------------------------
Denominator for net income per common
share - assuming dilution ................. 156,236,447 155,153,463 156,611,331 154,979,424
- ------------------------------------------------------------------------------------------------------------------------------------
Net income per common share ....................... $ 0.29 $ 0.24 $ 0.82 $ 0.69
====================================================================================================================================
Net income per common share - assuming dilution ... $ 0.29 $ 0.24 $ 0.80 $ 0.68
====================================================================================================================================
</TABLE>
The weighted average shares outstanding exclude average common shares
held by the ESOP which have not been committed to be released. These shares
totaled 2,161,385 and 1,881,071 for the three months ended September 30, 1998
and 1997, respectively, and 2,004,814 and 1,763,198 for the nine months ended
September 30, 1998 and 1997, respectively. 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 three months ended September 30, 1998 and
1997 there were 1,990,885 antidilutive options outstanding with exercise prices
ranging from $18.28 to $21.72 per option, and 195,131 antidilutive options
outstanding with exercise prices ranging from $16.30 to $18.80, respectively.
During the nine months ended September 30, 1998 and 1997 there were 182,200
antidilutive options outstanding with exercise prices ranging from $19.50 to
$21.72 per option, and 198,131 antidilutive options outstanding with exercise
prices ranging from $14.94 to $18.80, respectively.
Note 5 COMPREHENSIVE INCOME As of January 1, 1998, the Company adopted
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.
Comprehensive income totaled $67,910,000 and $47,157,000 for the three
months ended September 30, 1998 and 1997, respectively, and $155,157,000 and
$115,959,000 for the nine months ended September 30, 1998 and 1997,
respectively.
<TABLE>
<CAPTION>
CONSOLIDATED SUMMARY OF INCOME AND SELECTED FINANCIAL DATA (1)
Hibernia Corporation and Subsidiaries
- ------------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
- ------------------------------------------------------------------------------------------------------------------------------------
Sept. 30 June 30 Sept. 30 Sept. 30 Sept. 30
($ in thousands, except per-share data) 1998 1998 1997 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income ..................................... $ 240,742 $ 237,201 $ 216,164 $ 708,189 $ 618,674
Interest expense .................................... 109,085 104,079 92,566 315,066 261,382
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income ................................. 131,657 133,122 123,598 393,123 357,292
Provision for possible loan losses .................. 8,000 5,500 191 17,000 388
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision
for possible loan losses ........................ 123,657 127,622 123,407 376,123 356,904
- ------------------------------------------------------------------------------------------------------------------------------------
Noninterest income:
Noninterest income ............................... 45,644 46,046 37,792 132,108 111,278
Securities gains (losses), net ................... 2,687 27 75 3,601 494
- ------------------------------------------------------------------------------------------------------------------------------------
Noninterest income .................................. 48,331 46,073 37,867 135,709 111,772
Noninterest expense ................................. 102,293 106,403 102,581 312,471 298,697
- ------------------------------------------------------------------------------------------------------------------------------------
Income before taxes ................................. 69,695 67,292 58,693 199,361 169,979
Income tax expense .................................. 23,032 23,744 20,184 68,647 58,686
- ------------------------------------------------------------------------------------------------------------------------------------
Net income .......................................... $ 46,663 $ 43,548 $ 38,509 $ 130,714 $ 111,293
- ------------------------------------------------------------------------------------------------------------------------------------
Net income applicable to common shareholders ........ $ 44,938 $ 41,823 $ 36,784 $ 125,539 $ 106,118
- ------------------------------------------------------------------------------------------------------------------------------------
Per common share information:
Net income ....................................... $ 0.29 $ 0.27 $ 0.24 $ 0.82 $ 0.69
Net income - assuming dilution ................... $ 0.29 $ 0.27 $ 0.24 $ 0.80 $ 0.68
Cash dividends declared .......................... $ 0.09 $ 0.09 $ 0.08 $ 0.27 $ 0.24
Average shares outstanding (000s) ................... 153,892 153,904 152,879 153,814 152,770
Average shares outstanding - assuming dilution (000s) 156,236 156,791 155,153 156,611 154,979
Dividend payout ratio ............................... 31.03% 33.33% 33.33% 32.93% 34.78%
- ------------------------------------------------------------------------------------------------------------------------------------
Selected quarter-end balances (in millions)
Loans ............................................... $ 9,594.7 $ 9,126.7 $ 7,804.3
Deposits ............................................ 9,920.1 9,908.8 9,362.7
Debt ................................................ 705.9 706.1 109.8
Equity .............................................. 1,308.4 1,255.4 1,170.5
Total assets ........................................ 13,272.8 12,821.5 11,540.9
- ------------------------------------------------------------------------------------------------------------------------------------
Selected average balances (in millions)
Loans ............................................... $ 9,347.8 $ 8,914.8 $ 7,609.4 $ 8,932.5 $ 7,178.0
Deposits ............................................ 9,938.7 9,890.8 9,349.4 9,867.3 9,165.3
Debt ................................................ 706.0 706.2 57.1 680.9 40.0
Equity .............................................. 1,275.5 1,243.0 1,153.2 1,245.2 1,114.5
Total assets ........................................ 12,938.4 12,623.0 11,384.4 12,687.8 11,000.9
- ------------------------------------------------------------------------------------------------------------------------------------
Selected ratios
Net interest margin (taxable-equivalent) ............ 4.42% 4.63% 4.78% 4.55% 4.80%
Return on assets .................................... 1.44% 1.38% 1.35% 1.37% 1.35%
Return on common equity ............................. 15.29% 14.64% 13.97% 14.62% 13.95%
Return on total equity .............................. 14.63% 14.01% 13.36% 14.00% 13.31%
Efficiency ratio .................................... 56.80% 58.50% 62.50% 58.57% 62.70%
Average equity/average assets ....................... 9.86% 9.85% 10.13% 9.81% 10.13%
Tier 1 risk-based capital ratio ..................... 11.02% 11.07% 11.90%
Total risk-based capital ratio ...................... 12.27% 12.32% 13.15%
Leverage ratio ...................................... 8.76% 8.70% 8.88%
- ------------------------------------------------------------------------------------------------------------------------------------
Tax-effected net income and ratios excluding goodwill
and core deposit intangible amortization and balances(2)
Net income applicable to common shareholders $ 47,590 $ 44,515 $ 39,635 $ 133,599 $ 114,862
Net income per common share $ 0.31 $ 0.29 $ 0.26 $ 0.87 $ 0.75
Net income per common share - assuming dilution $ 0.30 $ 0.28 $ 0.26 $ 0.85 $ 0.74
Return on assets 1.54% 1.48% 1.47% 1.48% 1.48%
Return on common equity 18.54% 17.95% 17.72% 17.92% 17.76%
Efficiency ratio 55.15% 56.83% 60.50% 56.87% 60.59%
====================================================================================================================================
- ----------
(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>
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.
THIRD-QUARTER 1998 HIGHLIGHTS
Hibernia Corporation's third-quarter 1998 results showed continued improvement
in earnings over the third quarter of 1997 and strong growth in loans, deposits
and noninterest income.
o Net income for the third quarter of 1998 totaled $46.7 million ($.29
per common share), up 21% compared to $38.5 million ($.24 per common
share) for the third quarter of 1997. Tangible income per common share
was $.31 in the third quarter of 1998 compared to $.26 in the third
quarter of 1997. Net income for the first nine months of 1998 totaled
$130.7 million ($.82 per common share), up 17% compared to $111.3
million ($.69 per common share) for the first nine months of 1997.
Tangible income per common share was $.87 for the first nine months of
1998 compared to $.75 for the first nine months of 1997.
o Pre-tax, pre-provision earnings were $77.7 million, a 32% increase from
the third quarter 1997 level of $58.9 million. The third quarter of
1998 included a provision for possible loan losses totaling $8.0
million.
o Tangible returns on assets (ROA) and common equity (ROCE) were 1.54%
and 18.54%, respectively, for the third quarter of 1998 compared to
1.47% and 17.72% for the same period a year ago. For the first nine
months of 1998, tangible ROA and ROCE were 1.48% and 17.92%,
respectively, compared to 1.48% and 17.76%, respectively, for the same
period a year ago.
o Third-quarter 1998 earnings improved compared to the same period last
year because of an $8.1 million (7%) increase in net interest income
(resulting from higher average earning assets), a $7.9 million (21%)
improvement in noninterest income (excluding securities transactions)
and securities gains of $2.7 million. These increases were partially
offset by an $8.0 million provision for loan losses and a $2.8 million
(14%) increase in income taxes.
o Net income for the first nine months of 1998 improved over the first
nine months of 1997 due to a $35.8 million (10%) increase in net
interest income, a $20.8 million (19%) improvement in noninterest
income (excluding securities transactions) and securities gains of $3.6
million. These increases were partially offset by a $17.0 million
provision for loan losses, a $13.8 million (5%) increase in noninterest
expense and a $10.0 million (17%) increase in income taxes.
o Total loans grew $1.8 billion (23%) from September 30, 1997 to $9.6
billion at September 30, 1998. Commercial loans grew $914.5 million
(33%) to $3.7 billion, small business loans increased $116.1 million
(6%) to $1.9 billion and consumer loans increased $759.8 million (24%)
to $4.0 billion.
o Asset quality remained strong with nonperforming assets as a percentage
of total loans plus foreclosed assets and excess bank-owned property of
.41% at September 30, 1998, unchanged from September 30, 1997. The
reserve coverage of nonperforming loans was 410% at September 30, 1998.
o Deposits increased $557.3 million (6%) to $9.9 billion at September 30,
1998 compared to September 30, 1997.
o In October 1998, Hibernia's Board of Directors declared a quarterly
cash dividend of 10.5 cents per common share, a 17% increase from 9
cents per common share declared in October 1997.
MERGER ACTIVITY
On July 1, 1998, the Company consummated a merger with Peoples Holding
Corporation, parent of the $232 million asset Peoples Bank & Trust Company. 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, Texas). All four 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 11.
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."
During the third quarter of 1998, Hibernia announced the signing of a
definitive agreement to merge with the $249 million asset First Guaranty Bank
(First Guaranty). On September 22, 1998, the Company filed a petition to require
First Guaranty to comply with the terms of the agreement, asserting that First
Guaranty has failed to comply with its obligations under the contract. A merger
is also pending with MarTex Bancshares, Inc. (MarTex), parent company of the
$319 million asset First Service Bank. The mergers with First Guaranty and
MarTex are pending regulatory and shareholder approval. It is anticipated that
these transactions will be accounted for as poolings of interests when
consummated. After these mergers Hibernia would have approximately $13.8 billion
in assets and 252 banking locations in 34 Louisiana parishes and 12 Texas
counties.
FINANCIAL CONDITION:
EARNING ASSETS
Earning assets averaged $12.1 billion in the third quarter of 1998, a $1.6
billion (15%) increase from the third-quarter 1997 average of $10.5 billion. For
the first nine months of 1998, average earning assets increased $1.6 billion
(16%) from the first nine months of 1997. The increase 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 and the reinvestment of proceeds from
maturing securities.
Loans. Average loans for the third quarter of 1998 of $9.3 billion were up
$433.0 million (5%) from the second quarter of 1998 and up $1.7 billion (23%)
compared to the third quarter of 1997. For the first nine months of 1998 average
loans increased $1.8 billion (24%) compared to the first nine months of 1997.
Table 1 presents Hibernia's commercial and small business loans classified
by repayment source and consumer loans classified by type at September 30, 1998,
June 30, 1998 and September 30, 1997. Total loans increased $468.0 million (5%)
during the third quarter of 1998 compared to June 30, 1998, as commercial loans
increased $177.9 million (5%), small business loans increased $50.7 million (3%)
and consumer loans increased $239.4 million (6%). Compared to September 30,
1997, loans increased $1.8 billion (23%). Commercial loans were up $914.5
million (33%), small business loans grew $116.1 million (6%) and consumer loans
increased $759.8 million (24%). Commercial and small business growth was spread
across most categories. The decrease in the commercial and industrial segment of
the small business portfolio from September 30, 1997 to June 30, 1998 and
September 30, 1998 resulted primarily from the reclassification of merger bank
loans to their appropriate category after converting to Hibernia's loan system.
In consumer lending, growth was concentrated in residential mortgage loans and
revolving credit loans.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
TABLE 1 - COMPOSITION OF LOAN PORTFOLIO
- -------------------------------------------------------------------------------------------------------------
September 30, 1998 June 30, 1998 September 30, 1997
- -------------------------------------------------------------------------------------------------------------
($ in millions) Loans Percent Loans Percent Loans Percent
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Commercial:
Commercial and industrial ..... $ 1,354.5 14.1% $ 1,217.9 13.3% $ 1,011.2 13.0%
Services industry ............. 942.8 9.8 849.0 9.3 575.9 7.4
Real estate ................... 440.0 4.6 470.8 5.2 474.4 6.1
Health care ................... 293.1 3.1 284.5 3.1 212.1 2.7
Transportation, communications
and utilities .............. 206.8 2.2 246.3 2.7 218.1 2.8
Energy ........................ 406.6 4.2 406.1 4.4 235.8 3.0
Other ......................... 59.2 0.6 50.5 0.6 61.0 0.8
- -------------------------------------------------------------------------------------------------------------
Total commercial ........... 3,703.0 38.6 3,525.1 38.6 2,788.5 35.8
- -------------------------------------------------------------------------------------------------------------
Small Business:
Commercial and industrial ..... 700.5 7.3 723.9 8.0 1,036.3 13.3
Services industry ............. 405.9 4.2 385.1 4.2 284.0 3.6
Real estate ................... 275.6 2.9 246.4 2.7 150.4 1.9
Health care ................... 107.7 1.1 98.7 1.1 67.2 0.9
Transportation, communications
and utilities .............. 70.4 0.7 67.2 0.7 34.2 0.4
Energy ........................ 37.5 0.4 39.2 0.4 13.9 0.2
Other ......................... 331.9 3.5 318.3 3.5 227.4 2.9
- -------------------------------------------------------------------------------------------------------------
Total small business ....... 1,929.5 20.1 1,878.8 20.6 1,813.4 23.2
- -------------------------------------------------------------------------------------------------------------
Consumer:
Residential mortgages:
First mortgages ............ 2,024.1 21.1 1,869.8 20.5 1,511.0 19.3
Junior liens ............... 173.7 1.8 152.8 1.7 123.2 1.6
Indirect ...................... 825.5 8.6 777.7 8.5 746.0 9.6
Revolving credit .............. 328.8 3.4 314.8 3.4 259.8 3.3
Other ......................... 610.1 6.4 607.7 6.7 562.4 7.2
- -------------------------------------------------------------------------------------------------------------
Total consumer ............. 3,962.2 41.3 3,722.8 40.8 3,202.4 41.0
- -------------------------------------------------------------------------------------------------------------
Total loans ...................... $ 9,594.7 100.0% $ 9,126.7 100.0% $ 7,804.3 100.0%
=============================================================================================================
</TABLE>
Securities. Average securities for the third quarter of 1998 decreased
$125.7 million (5%) from the second quarter of 1998 and decreased $145.7 million
(6%) compared to the third quarter of 1997. For the first nine months of 1998
average securities decreased $92.9 million (3%) compared to the first nine
months of 1997. The decreases were the result of the reinvestment of maturing
securities into higher-yielding loans. Securities primarily consist of
mortgage-backed and U.S. government agency securities. Most securities held by
the Company qualify as securities that may be pledged and are used to
collateralize repurchase agreements and public fund deposits.
Short-Term Investments. Average short-term investments (primarily federal
funds sold and repurchase agreements) for the three months ended September 30,
1998, totaled $275.8 million, down $25.4 million (8%) compared to an average of
$301.2 million in the third quarter of 1997. For the first nine months of 1998
compared to the same period in 1997, short-term investments decreased $30.5
million (10%) to $270.3 million.
ASSET QUALITY
Nonperforming assets -- which include nonaccrual loans, restructured loans,
foreclosed assets and excess bank-owned property -- totaled $39.5 million at
September 30, 1998. Nonperforming assets as a percentage of total loans plus
foreclosed assets and excess bank-owned property were .41% at September 30,
1998, virtually unchanged from September 30, 1997 and June 30, 1998.
Nonperforming loans, which totaled $31.0 million at September 30, 1998,
increased $6.3 million (26%) from a year ago, and decreased $0.3 million (1%)
from the prior quarter end. Foreclosed assets totaled $6.2 million at September
30, 1998, up $1.3 million (27%) from a year earlier, and up $3.2 million (110%)
from June 30, 1998. Excess bank-owned property at September 30, 1998 was up $0.1
million (5%) from September 30, 1997, and down $0.1 million (2%) from June 30,
1998. Table 2 presents a summary of nonperforming assets and selected ratios at
the end of the last five quarters.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
TABLE 2 - NONPERFORMING ASSETS
- ---------------------------------------------------------------------------------------------------------------
Sept. 30 June 30 March 31 Dec. 31 Sept. 30
($ in thousands) 1998 1998 1998 1997 1997
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans ........................ $ 30,986 $ 31,244 $ 28,563 $ 22,598 $ 24,684
Restructured loans ...................... - - - - -
- ---------------------------------------------------------------------------------------------------------------
Total nonperforming loans ........... 30,986 31,244 28,563 22,598 24,684
- ---------------------------------------------------------------------------------------------------------------
Foreclosed assets ....................... 6,183 2,946 2,758 2,577 4,873
Excess bank-owned property .............. 2,329 2,388 2,759 2,360 2,218
- ---------------------------------------------------------------------------------------------------------------
Total nonperforming assets .......... $ 39,498 $ 36,578 $ 34,080 $ 27,535 $ 31,775
- ---------------------------------------------------------------------------------------------------------------
Reserve for possible loan losses ........ $127,005 $123,327 $121,514 $124,381 $129,233
Nonperforming loans as a percentage
of total loans ...................... 0.32% 0.34% 0.33% 0.27% 0.32%
Nonperforming assets as a percentage
of total loans plus foreclosed assets
and excess bank-owned property ...... 0.41% 0.40% 0.39% 0.33% 0.41%
Reserve for possible loan losses as a
percentage of nonperforming loans ... 409.88% 394.72% 425.42% 550.41% 523.55%
===============================================================================================================
</TABLE>
At September 30, 1998 the recorded investment in loans considered impaired
under Statement of Financial Accounting Standards (SFAS) No. 114 was $27.8
million. The related portion of the reserve for possible loan losses was $5.8
million. The comparable amounts at September 30, 1997 were $19.8 million and
$3.1 million, respectively. These loans are included in nonaccrual loans in
Table 2.
Table 3 shows loan delinquencies for each of the last five quarters. Both
the amount and percentage of loan delinquencies to total loans declined at
September 30, 1998 compared to September 30, 1997 and increased compared to June
30, 1998. The amount of total delinquencies decreased $1.3 million (2%) from
September 30, 1997 and increased $8.8 million (18%) from June 30, 1998.
Delinquencies as a percentage of total loans at September 30, 1998 were .61%,
down from .76% a year ago and up slightly from .54% at June 30, 1998.
Accruing loans past due 90 days or more were $6.1 million at September 30,
1998 compared to $6.0 million at September 30, 1997 and $7.2 million at June 30,
1998. Commercial loan delinquencies were .08% of total commercial loans at
September 30, 1998 compared to .13% at September 30, 1997 and .12% at June 30,
1998. Small business loan delinquencies decreased to .74% at September 30, 1998,
from .92% at September 30, 1997 and were virtually unchanged from June 30, 1998.
Consumer loan delinquencies decreased to 1.03% from 1.23% at September 30, 1997
and increased from .83% at June 30, 1998. The improvement in consumer
delinquencies from 1997 is primarily due to a change in the reporting
methodology from number of days to payment cycle dates for mortgage loans, a
methodology utilized in the banking industry.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
TABLE 3 - LOAN DELINQUENCIES (1)
- ------------------------------------------------------------------------------------------------------------
Sept. 30 June 30 March 31 Dec. 31 Sept. 30
($ in millions) 1998 1998 1998 1997 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Days past due:
30 to 89 days ........................... $ 52.0 $ 42.1 $ 36.9 $ 62.6 $ 53.4
90 days or more ......................... 6.1 7.2 6.9 5.8 6.0
- ------------------------------------------------------------------------------------------------------------
Total delinquencies ................. $ 58.1 $ 49.3 $ 43.8 $ 68.4 $ 59.4
- ------------------------------------------------------------------------------------------------------------
Total delinquencies as a percentage of loans:
Commercial .............................. 0.08% 0.12% 0.07% 0.18% 0.13%
Small business .......................... 0.74 0.76 0.74 0.83 0.92
Consumer ................................ 1.03 0.83 0.78 1.42 1.23
Total loans ............................. 0.61 0.54 0.50 0.83 0.76
============================================================================================================
- -------------
(1) Accruing loans past due as to principal and/or interest 30 days or more.
</TABLE>
Table 4 presents a summary of changes in nonperforming loans for the
three-month and nine-month periods ended September 30, 1998 and 1997. Loans
totaling $7.9 million were added to nonperforming loans during the third quarter
of 1998. Payments and sales resulted in a $3.8 million reduction in
nonperforming loans while $3.4 million of loans were transferred to OREO. Loans
totaling $0.4 million returned to performing status. Charge-offs further reduced
nonperforming loans in the third quarter of 1998 by $0.5 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 $49.4 million at September 30, 1998.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
TABLE 4 - SUMMARY OF NONPERFORMING LOAN ACTIVITY
- ------------------------------------------------------------------------------------------------------
Three Months Nine Months
Ended Sept. 30 Ended Sept. 30
- ------------------------------------------------------------------------------------------------------
($ in thousands) 1998 1997 1998 1997
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nonperforming loans
at beginning of period . $ 31,244 $ 23,696 $ 22,598 $ 17,109
Additions .................. 7,877 5,880 30,739 37,384
Charge-offs, gross ......... (509) (1,698) (2,283) (5,379)
Transfer to OREO ........... (3,396) (253) (4,093) (2,476)
Returns to performing status (433) (202) (2,595) (1,243)
Payments and sales ......... (3,797) (2,739) (13,380) (20,711)
- ------------------------------------------------------------------------------------------------------
Nonperforming loans
at end of period ....... $ 30,986 $ 24,684 $ 30,986 $ 24,684
======================================================================================================
</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 an $8.0 million provision
for possible loan losses in the third quarter of 1998. For the first nine months
of 1998, the Company recorded provisions totaling $17.0 million. The provision
for loan losses for the third quarter of 1998 and for the first nine months of
1998 exceeded net charge-offs by $3.7 million and $2.6 million, respectively.
Although nominal provisions had been recorded by the merged companies, the
provision in the first quarter of 1998 represented the first time a quarterly
provision expense had been recorded by the Company since the third quarter of
1993. Table 5 presents an analysis of the activity in the reserve for possible
loan losses for the third quarter and first nine months of 1998 and 1997.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
TABLE 5 - RESERVE FOR POSSIBLE LOAN LOSSES ACTIVITY
- --------------------------------------------------------------------------------------------------------------------
Three Months Nine Months
Ended Sept. 30 Ended Sept. 30
- --------------------------------------------------------------------------------------------------------------------
($ in thousands) 1998 1997 1998 1997
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at beginning of period ..... $ 123,327 $ 136,585 $ 124,381 $ 143,566
Loans charged off .................. (8,248) (10,905) (27,811) (33,821)
Recoveries ......................... 3,926 3,362 13,435 18,621
- --------------------------------------------------------------------------------------------------------------------
Net loans charged off .............. (4,322) (7,543) (14,376) (15,200)
Provision for possible loan losses . 8,000 191 17,000 388
Additions due to purchased companies - - - 479
- --------------------------------------------------------------------------------------------------------------------
Balance at end of period ........... $ 127,005 $ 129,233 $ 127,005 $ 129,233
- --------------------------------------------------------------------------------------------------------------------
Reserve for possible loan losses
as a percentage of loans ....... 1.32% 1.66% 1.32% 1.66%
Annualized net charge-offs as a
percentage of average loans .... 0.18% 0.40% 0.21% 0.28%
====================================================================================================================
</TABLE>
Net charge-offs totaled $4.3 million in the third quarter of 1998, compared
to $7.5 million in the third quarter of 1997. As a percentage of average loans,
annualized net charge-offs were 0.18% in the third quarter of 1998 compared to
.40% in the third quarter of 1997. For the first nine months of 1998, net
charge-offs totaled $14.4 million compared to $15.2 million for the first nine
months of 1997. Annualized net charge-offs for the first nine months of 1998 and
1997 were .21% and .28%, respectively.
The reserve for possible loan losses totaled $127.0 million, or 1.32% of
total loans at September 30, 1998, compared to $129.2 million, or 1.66% a year
earlier. The reserve for possible loan losses as a percentage of loans has been
declining since the end of 1993 as a result of net charge-offs and loan growth.
The reserve for possible loan losses as a percentage of nonperforming loans was
410% at September 30, 1998, compared to 524% at September 30, 1997 and 395% at
June 30, 1998. 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.
FUNDING SOURCES:
DEPOSITS
Average deposits totaled $9.9 billion in the third quarter of 1998, a $589.3
million (6%) increase from the third quarter of 1997. For the first nine months
of 1998 compared to the same period in 1997, average deposits increased $702.0
million (8%) to $9.9 billion. This growth resulted from Hibernia's emphasis on
attracting new deposits and expanding current banking relationships through
outstanding service and the promotion of products such as the Tower Super
SavingsSM account (which offers liquidity and a rate indexed to the 90-day
Treasury bill auction discount rate). Table 6 presents the composition of
average deposits for the third and second quarters of 1998 and the third quarter
of 1997.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
TABLE 6 - DEPOSIT COMPOSITION
- -----------------------------------------------------------------------------------------------------------------
Third Quarter 1998 Second Quarter 1998 Third Quarter 1997
- -----------------------------------------------------------------------------------------------------------------
Average % of Average % of Average % of
($ in millions) Balances Deposits Balances Deposits Balances Deposits
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Noninterest-bearing ........... $ 1,789.4 18.0% $ 1,795.2 18.2% $ 1,626.1 17.4%
NOW accounts .................. 320.7 3.2 323.9 3.3 474.5 5.1
Money market deposit accounts . 1,960.1 19.7 1,950.9 19.7 1,780.8 19.0
Savings accounts .............. 1,181.1 11.9 1,092.7 11.0 874.8 9.4
Other consumer time deposits .. 2,902.1 29.2 2,943.8 29.8 2,977.0 31.8
- -----------------------------------------------------------------------------------------------------------------
Total core deposits ....... 8,153.4 82.0 8,106.5 82.0 7,733.2 82.7
- -----------------------------------------------------------------------------------------------------------------
Public fund certificates of
deposit of $100,000 or more 972.4 9.8 1,012.6 10.2 998.4 10.7
Certificates of deposit of
$100,000 or more .......... 574.6 5.8 560.7 5.7 520.3 5.6
Foreign time deposits ......... 238.3 2.4 211.0 2.1 97.5 1.0
- -----------------------------------------------------------------------------------------------------------------
Total deposits ............ $ 9,938.7 100.0% $ 9,890.8 100.0% $ 9,349.4 100.0%
=================================================================================================================
</TABLE>
Average core deposits totaled $8.2 billion in the third quarter of 1998, a
$420.2 million (5%) increase from the third quarter of 1997. Average
noninterest-bearing deposits grew $163.3 million and savings deposits increased
$306.3 million in the third quarter of 1998 compared to the third quarter of
1997. NOW account average balances were down $153.8 million and money market
deposit accounts were up $179.3 million in the third quarter of 1998 compared to
the third quarter of 1997 primarily due to the enhanced Reserve Money Manager
account designed to create a more efficient sweep process.
Average noncore deposits were up $169.1 million (10%) from the third
quarter of 1997 to $1.8 billion or 18% of total deposits. Large denomination
certificates of deposit increased $28.3 million (2%) compared to the third
quarter of 1997. Foreign time deposits increased $140.8 million (144%) due to
successful efforts to market a treasury management product which moves
commercial customer funds into higher-yielding Eurodollar deposits.
BORROWINGS
Average borrowings -- which include federal funds purchased, securities sold
under agreements to repurchase (repurchase agreements) and debt -- increased
$808.0 million (112%) to $1.5 billion for the third quarter of 1998 compared to
the third quarter of 1997. For the first nine months of 1998 compared to the
same period in 1997 average borrowings increased $836.1 million (150%) to $1.4
billion.
Average debt for the third quarter of 1998 totaled $706.0 million, up from
$57.1 million in the third quarter of 1997. At September 30, 1998 the Company's
debt, which is comprised of advances from the Federal Home Loan Bank of Dallas
(FHLB), totaled $705.9 million. Debt increased $596.1 million from September 30,
1997 as Hibernia locked in attractive fixed rates to fund its growing loan
portfolio. The FHLB may demand payment of a $100 million callable advance at
quarterly intervals beginning in December 1998. If called prior to maturity,
replacement funding will be offered by the FHLB at a then-current rate. In
October 1998, the Company increased non-callable advances from the FHLB by $100
million. These additional advances are scheduled to mature in October 2001. 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 risk.
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 a 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 $21.1 million at September 30, 1998,
which minimize the Company's exchange rate risk on loans to be repaid in foreign
currencies. At September 30, 1998 the Company was party to an interest rate swap
contract with a notional amount of $125.0 million. This swap, which matured on
October 1, 1998, was entered into during the third 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 $299.8 million at September 30, 1998. In addition to these
customer-related financial instruments, the Company has entered into contracts
for its own account related to its mortgage origination activity which total
$293.7 million. As of September 30, 1998 Hibernia's credit exposure related to
derivative financial instruments held for trading totaled $5.1 million.
RESULTS OF OPERATIONS:
NET INTEREST INCOME
Taxable-equivalent net interest income for the third quarter of 1998 totaled
$134.4 million, an increase of $8.1 million from the same period in 1997.
Taxable-equivalent net interest income for the first nine months of 1998 totaled
$401.4 million, a $36.3 million increase over the first nine months of 1997.
Factors contributing to the increase in net interest income for the third
quarter and first nine months of 1998 over the comparable periods in 1997
include: overall growth in earning assets and the positive effect of the change
in the mix of earning assets from securities to loans as can be seen in Table 7.
These factors were partially offset by lower yields on loans and securities and
rising funding costs.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
TABLE 7 - INTEREST-EARNING ASSET COMPOSITION
- -----------------------------------------------------------------------------------------------------
1998 1997
- -----------------------------------------------------------------------------------------------------
Third Second First Fourth Third
(Percentage of average balances) Quarter Quarter Quarter Quarter Quarter
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial loans ................ 29.8% 29.4% 28.0% 26.4% 25.9%
Small business loans ............ 15.5 15.3 16.0 16.5 16.7
Consumer loans .................. 32.0 31.0 30.2 29.5 29.7
- -----------------------------------------------------------------------------------------------------
Total loans ................. 77.3 75.7 74.2 72.4 72.3
- -----------------------------------------------------------------------------------------------------
Securities available for sale ... 20.4 22.1 23.4 24.6 24.9
Short-term investments .......... 2.3 2.2 2.4 3.0 2.8
- -----------------------------------------------------------------------------------------------------
Total interest-earning assets 100.0% 100.0% 100.0% 100.0% 100.0%
- -----------------------------------------------------------------------------------------------------
</TABLE>
Taxable-equivalent net interest income for the third quarter of 1998 was
negatively impacted due to a $3.0 million adjustment related to revenue-sharing
arrangements with certain automobile dealers brought about by a
higher-than-expected level of consumer automobile loan prepayments. The behavior
of borrowers has indicated faster prepayments on these type of loans, resulting
in a decrease in the reserve established to protect the Company against the
impact of prepayments. This behavior is primarily due to economic and market
conditions, the current interest rate environment and the ability of the
borrowers to obtain alternative financing.
Table 8 details the net interest margin for the most recent five quarters.
<TABLE>
<CAPTION>
TABLE 8 - NET INTEREST MARGIN (taxable-equivalent)
- -------------------------------------------------------------------------------------------------------------
1998 1997
- -------------------------------------------------------------------------------------------------------------
Third Second First Fourth Third
Quarter Quarter Quarter Quarter Quarter
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Yield on earning assets ............ 8.00 % 8.17 % 8.19 % 8.09% 8.27%
Rate on interest-bearing liabilities 4.47 4.43 4.42 4.41 4.35
- -------------------------------------------------------------------------------------------------------------
Net interest spread ............ 3.53 3.74 3.77 3.68 3.92
Contribution of
noninterest-bearing funds ...... 0.89 0.89 0.82 0.89 0.86
- -------------------------------------------------------------------------------------------------------------
Net interest margin ............ 4.42 % 4.63 % 4.59 % 4.57% 4.78%
- -------------------------------------------------------------------------------------------------------------
Noninterest-bearing funds
supporting earning assets ...... 20.01 % 19.94 % 18.78 % 20.09% 19.82%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
The net interest margin was 4.42% for the third quarter of 1998, down 36
basis points from the third quarter of 1997, and down 21 basis points from the
second quarter of 1998. The positive effects of the change in the mix of earning
assets was partially offset by the shift in the mix of funding sources toward
market rate funds, and when compared to the third quarter of 1997, the negative
impact of declining loan yields. In the third quarter of 1998, 57.1% of
Hibernia's earning assets were supported by market-rate funds compared to 53.4%
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 1997 illustrate the pricing strategies necessary to successfully promote
products in the current competitive environment.
The $3.0 million adjustment related to revenue-sharing arrangements with
certain automobile dealers described above negatively impacted the net interest
margin in the third quarter of 1998 (approximately ten basis points) and in the
first nine months of 1998 (approximately three basis points). In addition, the
net interest margin was reduced in the third quarter of 1998 and in the first
nine months of 1998 (approximately three basis points in each period) by the
funding cost of a transaction designed to utilize capital losses. The income
associated with this transaction will be recorded as a securities gain in
noninterest income rather than in net interest income. On a normalized basis,
the net interest margin would have been 4.53% in the third quarter of 1998 and
4.61% for the first nine months of 1998.
Table 9 presents an analysis of changes in taxable-equivalent net interest
income between the third quarter of 1998 and the second quarter of 1998 and
between the third quarter of 1998 and the third quarter of 1997.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
TABLE 9 - CHANGES IN TAXABLE-EQUIVALENT NET INTEREST INCOME (1)
- ------------------------------------------------------------------------------------------------------------------
Third Quarter 1998 Compared to:
- ------------------------------------------------------------------------------------------------------------------
Second Quarter 1998 Third Quarter 1997
- ------------------------------------------------------------------------------------------------------------------
Increase (Decrease) Due to Change In:
- ------------------------------------------------------------------------------------------------------------------
($ in thousands) Volume Rate Total Volume Rate Total
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Taxable-equivalent
interest earned on:
Commercial loans .............. $ 3,125 $ 300 $ 3,425 $ 19,111 $ (1,952) $ 17,159
Small business loans .......... 1,689 (739) 950 2,707 (1,071) 1,636
Consumer loans ................ 4,463 (2,739) 1,724 15,272 (3,895) 11,377
- ------------------------------------------------------------------------------------------------------------------
Loans ..................... 9,277 (3,178) 6,099 37,090 (6,918) 30,172
- ------------------------------------------------------------------------------------------------------------------
Securities available for sale . (1,995) (976) (2,971) (2,393) (3,068) (5,461)
Short-term investments ........ 339 139 478 (378) 288 (90)
- ------------------------------------------------------------------------------------------------------------------
Total ................... 7,621 (4,015) 3,606 34,319 (9,698) 24,621
- ------------------------------------------------------------------------------------------------------------------
Interest paid on:
NOW accounts .................. (30) (141) (171) (1,257) 719 (538)
Money market
deposit accounts .......... 59 495 554 1,187 15 1,202
Savings accounts .............. 739 572 1,311 2,523 1,101 3,624
Other consumer time deposits .. (543) 249 (294) (980) (244) (1,224)
Public fund certificates of
deposit of $100,000 or more (543) 23 (520) (357) (418) (775)
Certificates of deposit
of $100,000 or more ....... 187 147 334 730 235 965
Foreign deposits .............. 360 30 390 1,862 (9) 1,853
Federal funds purchased ....... 2,739 167 2,906 1,467 7 1,474
Repurchase agreements ......... 104 114 218 697 10 707
Debt .......................... (3) 281 278 9,320 (89) 9,231
- ------------------------------------------------------------------------------------------------------------------
Total ................... 3,069 1,937 5,006 15,192 1,327 16,519
- ------------------------------------------------------------------------------------------------------------------
Taxable-equivalent
net interest income ........... $ 4,552 $ (5,952) $ (1,400) $ 19,127 $ (11,025) $ 8,102
==================================================================================================================
(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
22 and 23 of this discussion presents the Company's taxable-equivalent net
interest income and average balances for the three months ended September 30,
1998, June 30, 1998 and September 30, 1997, and for the first nine months of
1998 and 1997.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED AVERAGE BALANCES, INTEREST AND RATES
- ------------------------------------------------------------------------------------------------------------------------------------
Hibernia Corporation and Subsidiaries
Taxable-equivalent basis (1) Third Quarter 1998 Second Quarter 1998
- ------------------------------------------------------------------------------------------------------------------------------------
(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 .............................. $ 3,604.6 $ 77,937 8.58% $ 3,460.0 $ 74,512 8.64%
Small business loans .......................... 1,876.1 43,658 9.23 1,803.9 42,708 9.50
Consumer loans ................................ 3,867.1 78,775 8.10 3,650.9 77,051 8.46
- ------------------------------------------------------------------------------------------------------------------------------------
Total loans (2) ........................... 9,347.8 200,370 8.51 8,914.8 194,271 8.74
- ------------------------------------------------------------------------------------------------------------------------------------
Securities available for sale ................. 2,472.6 38,936 6.29 2,598.3 41,907 6.45
Short-term investments ........................ 275.8 4,214 6.06 253.3 3,736 5.91
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets ............. 12,096.2 $ 243,520 8.00% 11,766.4 $ 239,914 8.17%
- ------------------------------------------------------------------------------------------------------------------------------------
Reserve for possible loan losses .................. (124.4) (121.6)
Noninterest-earning assets:
Cash and due from banks ....................... 417.6 429.9
Other assets .................................. 549.0 548.3
- ------------------------------------------------------------------------------------------------------------------------------------
Total noninterest-earning assets .......... 966.6 978.2
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets .............................. $ 12,938.4 $ 12,623.0
====================================================================================================================================
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing deposits:
NOW accounts .............................. $ 320.7 $ 2,865 3.54% $ 323.9 $ 3,036 3.76%
Money market deposit accounts ............. 1,960.1 12,978 2.63 1,950.9 12,424 2.55
Savings accounts .......................... 1,181.1 10,136 3.40 1,092.7 8,825 3.24
Other consumer time deposits .............. 2,902.1 37,920 5.18 2,943.8 38,214 5.21
Public fund certificates of deposit
of $100,000 or more ................... 972.4 13,123 5.35 1,012.6 13,643 5.40
Certificates of deposit of $100,000 or more 574.6 7,791 5.38 560.7 7,457 5.33
Foreign time deposits ..................... 238.3 3,151 5.25 211.0 2,761 5.25
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits ....... 8,149.3 87,964 4.28 8,095.6 86,360 4.28
- ------------------------------------------------------------------------------------------------------------------------------------
Short-term borrowings:
Federal funds purchased ................... 429.6 6,098 5.63 236.1 3,192 5.42
Repurchase agreements ..................... 391.0 4,890 4.96 382.6 4,672 4.90
Debt .......................................... 706.0 10,133 5.69 706.2 9,855 5.60
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities ........ 9,675.9 $ 109,085 4.47% 9,420.5 $ 104,079 4.43%
- ------------------------------------------------------------------------------------------------------------------------------------
Noninterest-bearing liabilities:
Noninterest-bearing deposits .................. 1,789.4 1,795.2
Other liabilities ............................. 197.6 164.3
- ------------------------------------------------------------------------------------------------------------------------------------
Total noninterest-bearing liabilities ..... 1,987.0 1,959.5
- ------------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity ........................ 1,275.5 1,243.0
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 12,938.4 $ 12,623.0
====================================================================================================================================
SPREAD AND NET YIELD
Interest rate spread .............................. 3.53% 3.74%
Cost of funds supporting interest-earning assets .. 3.58% 3.54%
Net interest income/margin ........................ $ 134,435 4.42% $ 135,835 4.63%
====================================================================================================================================
- ----------------
(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 (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
Hibernia Corporation and Subsidiaries Nine Months Ended
Taxable-equivalent basis (1) Third Quarter 1997 September 30, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
(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 .............................. $ 2,723.2 $ 60,778 8.85% $ 3,429.8 $ 220,300 8.59%
Small business loans .......................... 1,760.6 42,022 9.47 1,839.1 129,783 9.43
Consumer loans ................................ 3,125.6 67,398 8.57 3,663.6 228,157 8.32
- ------------------------------------------------------------------------------------------------------------------------------------
Total loans (2) ........................... 7,609.4 170,198 8.88 8,932.5 578,240 8.65
- ------------------------------------------------------------------------------------------------------------------------------------
Securities available for sale ................. 2,618.3 44,397 6.78 2,587.4 126,247 6.51
Short-term investments ........................ 301.2 4,304 5.67 270.3 11,934 5.90
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets ............. 10,528.9 $ 218,899 8.27% 11,790.2 $ 716,421 8.12%
- ------------------------------------------------------------------------------------------------------------------------------------
Reserve for possible loan losses .................. (134.4) (123.0)
Noninterest-earning assets:
Cash and due from banks ....................... 436.3 435.6
Other assets .................................. 553.6 585.0
- ------------------------------------------------------------------------------------------------------------------------------------
Total noninterest-earning assets .......... 989.9 1,020.6
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets .............................. $ 11,384.4 $ 12,687.8
====================================================================================================================================
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing deposits:
NOW accounts .............................. $ 474.5 $ 3,403 2.85% $ 349.1 $ 9,063 3.47%
Money market deposit accounts ............. 1,780.8 11,776 2.62 1,944.4 37,409 2.57
Savings accounts .......................... 874.8 6,512 2.95 1,085.5 26,724 3.29
Other consumer time deposits .............. 2,977.0 39,144 5.22 2,928.8 114,306 5.22
Public fund certificates of deposit
of $100,000 or more ................... 998.4 13,898 5.52 1,002.9 40,551 5.41
Certificates of deposit of $100,000 or more 520.3 6,826 5.20 573.9 22,698 5.29
Foreign time deposits ..................... 97.5 1,298 5.28 203.7 8,012 5.26
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits ....... 7,723.3 82,857 4.26 8,088.3 258,763 4.28
- ------------------------------------------------------------------------------------------------------------------------------------
Short-term borrowings:
Federal funds purchased ................... 326.2 4,624 5.62 330.0 13,718 5.56
Repurchase agreements ..................... 335.3 4,183 4.95 381.2 14,023 4.92
Debt .......................................... 57.1 902 6.26 680.9 28,562 5.61
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities ........ 8,441.9 $ 92,566 4.35% 9,480.4 $ 315,066 4.44%
- ------------------------------------------------------------------------------------------------------------------------------------
Noninterest-bearing liabilities:
Noninterest-bearing deposits .................. 1,626.1 1,779.0
Other liabilities ............................. 163.2 183.2
- ------------------------------------------------------------------------------------------------------------------------------------
Total noninterest-bearing liabilities ..... 1,789.3 1,962.2
- ------------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity ........................ 1,153.2 1,245.2
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 11,384.4 $ 12,687.8
====================================================================================================================================
SPREAD AND NET YIELD
Interest rate spread .............................. 3.92% 3.68%
Cost of funds supporting interest-earning assets .. 3.49% 3.57%
Net interest income/margin ........................ $ 126,333 4.78% $ 401,355 4.55%
====================================================================================================================================
- ----------------
(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 (CONTINUED)
- --------------------------------------------------------------------------------------------------
Hibernia Corporation and Subsidiaries Nine Months Ended
Taxable-equivalent basis (1) September 30, 1997
- --------------------------------------------------------------------------------------------------
(Average balances $ in millions, Average
interest $ in thousands) Balance Interest Rate
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Interest-earning assets:
Commercial loans .............................. $ 2,556.5 $ 168,475 8.81%
Small business loans .......................... 1,648.3 116,666 9.46
Consumer loans ................................ 2,973.2 193,394 8.69
- --------------------------------------------------------------------------------------------------
Total loans (2) ........................... 7,178.0 478,535 8.91
- --------------------------------------------------------------------------------------------------
Securities available for sale ................. 2,680.3 135,561 6.75
Short-term investments ........................ 300.8 12,364 5.50
- --------------------------------------------------------------------------------------------------
Total interest-earning assets ............. 10,159.1 $ 626,460 8.24%
- --------------------------------------------------------------------------------------------------
Reserve for possible loan losses Noninterest-earning assets:
Cash and due from banks ....................... 434.8
Other assets .................................. 543.6
- --------------------------------------------------------------------------------------------------
Total noninterest-earning assets .......... 978.4
- --------------------------------------------------------------------------------------------------
Total assets .............................. $ 11,000.9
==================================================================================================
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing deposits:
NOW accounts .............................. $ 524.3 $ 10,868 2.77%
Money market deposit accounts ............. 1,736.8 33,283 2.56
Savings accounts .......................... 754.9 16,061 2.84
Other consumer time deposits .............. 2,942.3 114,995 5.23
Public fund certificates of deposit
of $100,000 or more ................... 1,025.8 42,227 5.50
Certificates of deposit of $100,000 or more 496.0 19,185 5.17
Foreign time deposits ..................... 82.2 3,255 5.29
- --------------------------------------------------------------------------------------------------
Total interest-bearing deposits ....... 7,562.3 239,874 4.24
- --------------------------------------------------------------------------------------------------
Short-term borrowings:
Federal funds purchased ................... 178.8 7,335 5.49
Repurchase agreements ..................... 337.2 12,297 4.88
Debt .......................................... 40.0 1,876 6.26
- --------------------------------------------------------------------------------------------------
Total interest-bearing liabilities ........ 8,118.3 $ 261,382 4.30%
- --------------------------------------------------------------------------------------------------
Noninterest-bearing liabilities:
Noninterest-bearing deposits .................. 1,603.0
Other liabilities ............................. 165.1
- --------------------------------------------------------------------------------------------------
Total noninterest-bearing liabilities ..... 1,768.1
- --------------------------------------------------------------------------------------------------
Total shareholders' equity ........................ 1,114.5
- --------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 11,000.9
==================================================================================================
SPREAD AND NET YIELD
Interest rate spread .............................. 3.94%
Cost of funds supporting interest-earning assets .. 3.44%
Net interest income/margin ........................ $ 365,078 4.80%
==================================================================================================
- ------------
(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 third quarter of 1998 was up $10.5 million (28%) to
$48.3 million compared to the same period of 1997. For the first nine months of
1998 compared to the same period in 1997, noninterest income was up $23.9
million (21%). Excluding securities transactions noninterest income increased
$7.9 million (21%) in the third quarter of 1998 over the third quarter of 1997,
and was up $20.8 million (19%) for the first nine months of 1998 compared to the
same period in 1997. The major categories of noninterest income for the three
months and nine months ended September 30, 1998 and 1997 are presented in Table
10.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
TABLE 10 - NONINTEREST INCOME
- -----------------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
- -----------------------------------------------------------------------------------------------------------------------------
Percentage Percentage
Sept. 30 Sept. 30 Increase Sept. 30 Sept. 30 Increase
($ in thousands) 1998 1997 (Decrease) 1998 1997 (Decrease)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service charges on deposits ......... $21,868 $20,033 9% $ 62,585 $ 57,410 9%
Trust fees .......................... 4,204 3,871 9 12,499 11,480 9
Other service, collection and
exchange charges:
Mortgage loan fees ........... 3,840 2,706 42 10,778 7,013 54
Retail investment service fees 4,515 3,252 39 12,841 9,045 42
ATM fees ..................... 2,693 2,311 17 7,599 6,675 14
Other fees ................... 4,679 3,384 38 13,146 10,175 29
- -----------------------------------------------------------------------------------------------------------------------------
Total other service, collection
and exchange charges ............ 15,727 11,653 35 44,364 32,908 35
- -----------------------------------------------------------------------------------------------------------------------------
Other income ........................ 3,845 2,235 72 12,660 9,480 34
Securities gains (losses), net ...... 2,687 75 N/M 3,601 494 629
- -----------------------------------------------------------------------------------------------------------------------------
Total noninterest income ........ $48,331 $37,867 28% $135,709 $111,772 21%
=============================================================================================================================
- ---------------
N/M = Not meaningful
</TABLE>
Service charges on deposits increased $1.8 million (9%) for the third
quarter of 1998 and $5.2 million (9%) for the first nine months of 1998 over the
comparable periods in 1997 primarily due to increases in the number of accounts
and commercial account analysis fees.
Trust fees were up $0.3 million (9%) in the third quarter of 1998 and $1.0
million (9%) for the first nine months of 1998 compared to the same periods in
1997 primarily due to new business and market value increases.
Other service, collection and exchange charges were up $4.1 million (35%)
and $11.5 million (35%) in the third quarter and the first nine months of 1998,
respectively, compared to the same periods in 1997. Increases in fees from
mortgage processing, underwriting and servicing; retail investment services;
ATMs; and debit and credit cards were the major factors contributing to the
growth.
Mortgage loan fees increased $1.1 million in the third quarter and $3.8
million in the first nine months of 1998 compared to the same periods in 1997.
These increases were primarily due to an increase in mortgage lending activity.
In the first nine months of 1998, Hibernia processed more than $1.6 billion in
residential first mortgages as compared to $1.1 billion in all of 1997.
Market conditions and financial products attractive to consumers such as
mutual funds and discount brokerage services fueled a $1.3 million increase in
retail investment service fees for the third quarter and a $3.8 million increase
in the first nine months of 1998 over the comparable periods in 1997. Hibernia's
upgraded and expanded ATM network and an increase in the number of transactions
resulted in a $0.4 million increase in ATM fees for the third quarter and a $0.9
million increase in the first nine months of 1998 over the comparable periods in
1997. Fees resulting from Hibernia's CheckmateSM debit card and Capital
Access(C) credit card for small businesses primarily led to an increase in other
fees of $1.3 million for the third quarter of 1998 and $3.0 million for the
first nine months of 1998, compared to the same periods in 1997.
Other income was up $1.6 million (72%) for the third quarter of 1998 and
$3.2 million (34%) for the first nine months of 1998 primarily due to gains
associated with the sale of mortgage loans.
Securities gains totaled $2.7 million in the third quarter of 1998 and $3.6
million in the first nine months of 1998. Due to the current interest rate
environment the Company liquidated high quality securities for a $1.3 million
gain and used the proceeds to buy similar credit quality securities with a
higher yield. The remainder of the gain in the third quarter of 1998 resulted
primarily from a transaction designed to utilize capital losses.
NONINTEREST EXPENSE
In the third quarter of 1998, noninterest expense totaled $102.3 million, a $0.3
million decrease from the third quarter of 1997. Noninterest expense was up
$13.8 million (5%) for the first nine months of 1998, compared to the same
period in 1997 primarily due to increases in staff costs, data processing and
the amortization of intangibles. Noninterest expense for the three months and
nine months ended September 30, 1998 and 1997 is presented by major category in
Table 11.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
TABLE 11 - NONINTEREST EXPENSE
- ------------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
- ------------------------------------------------------------------------------------------------------------------------
Percentage Percentage
Sept. 30 Sept. 30 Increase Sept. 30 Sept. 30 Increase
($ in thousands) 1998 1997 (Decrease) 1998 1997 (Decrease)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Salaries ........................ $ 45,133 $ 43,738 3% $ 132,518 $ 123,146 8%
Benefits ........................ 7,203 7,561 (5) 22,613 23,449 (4)
- ------------------------------------------------------------------------------------------------------------------------
Total staff costs ........... 52,336 51,299 2 155,131 146,595 6
- ------------------------------------------------------------------------------------------------------------------------
Occupancy, net .................. 8,141 8,742 (7) 26,142 25,463 3
Equipment ....................... 7,752 8,022 (3) 22,925 23,488 (2)
- ------------------------------------------------------------------------------------------------------------------------
Total occupancy and equipment 15,893 16,764 (5) 49,067 48,951 -
- ------------------------------------------------------------------------------------------------------------------------
Data processing ................. 7,290 7,004 4 20,769 18,533 12
Telecommunications .............. 2,684 2,682 - 8,836 8,472 4
Advertising and promotional
expenses .................... 3,737 3,512 6 12,528 11,739 7
Postage ......................... 1,597 1,661 (4) 5,242 5,200 1
Stationery and supplies ......... 1,910 2,066 (8) 5,833 6,426 (9)
Professional fees ............... 991 1,636 (39) 4,864 4,983 (2)
Regulatory expense .............. 699 751 (7) 2,067 2,138 (3)
Loan collection expense ......... 982 872 13 3,168 2,647 20
Foreclosed property expense, net (371) 114 N/M (1,020) (442) (131)
Amortization of intangibles ..... 4,072 3,602 13 12,182 10,908 12
Other ........................... 10,473 10,618 (1) 33,804 32,547 4
- ------------------------------------------------------------------------------------------------------------------------
Total noninterest expense ... $ 102,293 $102,581 -% $ 312,471 $ 298,697 5%
- ------------------------------------------------------------------------------------------------------------------------
Efficiency ratio (1)................ 56.80% 62.50% 58.57% 62.70%
Tangible efficiency ratio (2)....... 55.15% 60.50% 56.87% 60.59%
========================================================================================================================
- ---------------
(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).
N/M = Not meaningful
</TABLE>
Staff costs, which represent approximately 50% of noninterest expense,
increased $1.0 million (2%) in the third quarter of 1998 and $8.5 million (6%)
for the first nine months of 1998 compared to the same periods 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 $0.9 million (5%) in the third
quarter of 1998, compared to the third quarter of 1997 as the 1997 periods
included higher expenses associated with merger banks. Expenses remained
virtually unchanged for the first nine months of 1998 over the comparable period
in 1997; however, the second quarter of 1998 included the establishment of a
$2.0 million reserve to improve customer delivery convenience by optimizing an
expanding banking office network. On a normalized basis, occupancy and equipment
expense decreased $1.9 million (4%) in the first nine months of 1998 compared to
the same period in 1997.
Data processing expenses increased $0.3 million (4%) for the third quarter
of 1998, compared to the third quarter of 1997. For the first nine months of
1998, data processing expenses increased $2.2 million (12%). These increases
were primarily 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.
Foreclosed property expense decreased $0.5 million and $0.6 million (131%)
in the third quarter and first nine months of 1998 over the comparable periods
in 1997 primarily due to significant gains on the sale of several properties
during 1998.
Amortization of intangibles, a noncash expense, increased $0.5 million to
$4.1 million in the third quarter of 1998 compared to the third quarter of 1997,
and increased $1.3 million to $12.2 million for the first nine months of 1998
compared to the first nine months of 1997. This increase is primarily due to an
increase in the amortization of mortgage servicing rights resulting from the
growth in mortgage lending activity.
The Company's efficiency ratio, defined as noninterest expense as a
percentage of taxable-equivalent net interest income plus noninterest income
(excluding securities transactions), is a key measure that management uses to
evaluate the success of efforts to control costs while generating revenue
efficiently. The efficiency ratio was 56.80% for the third quarter of 1998
compared to 62.50% for the same period in 1997. This ratio for the first nine
months of 1998 improved from 62.70% for the first nine months of 1997 to 58.57%
for the first nine months of 1998.
The tangible efficiency ratio, which excludes amortization of purchase
accounting intangibles from the calculation, was 55.15% for the third quarter of
1998, a 535 basis point improvement from 60.50% for the same period of 1997. For
the first nine months of 1998, the tangible efficiency ratio was 56.87% compared
to 60.59% for the first nine months of 1997. The improvement in efficiency for
both periods in 1998 reflects higher revenue growth rates compared to expense
growth rates. The Company expects this ratio to decline further in future
periods. The declines are expected to result from achievement of cost
efficiencies contemplated in completed and pending mergers, enhancement of
noninterest revenue sources and increased net interest income.
YEAR 2000
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, departmental and vendor
application systems and its infrastructure by the end of the second quarter
1999. In addition to testing and making appropriate changes to its own internal
systems, the Company continues to discuss Year 2000 issues and their potential
impact on business operations with many of its customers and suppliers.
As of September 30, 1998, the Company has converted 18 of its 37 mission
critical systems and plans to substantially complete unit testing and
remediation on mission critical systems by the end of 1998. Unit testing and
validations began in the third quarter of 1998 and are scheduled throughout 1999
to continuously reaffirm the Year 2000 compliance of mission critical systems.
Non-mission critical systems are expected to be Year 2000 compliant prior to or
during the second quarter of 1999. All date-reliant infrastructure components
have been verified to be Year 2000 compliant. The Company and its
data-processing vendors and service providers will monitor progress and
implement contingency plans in the event that such procedures fail to achieve
their objectives.
The Company expects to continue incurring charges related to Year 2000
compliance; however, 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. Contract specifications
require the Company's third party data processor to ensure that all systems meet
Year 2000 compliance and other banking regulations. Hibernia plans to supplement
its vendors' efforts with an additional $1.0 million to $1.5 million investment
spread throughout 1998 and 1999, much of which has already been expensed, in
order to upgrade ATMs, hardware, software and other technology. This investment
will be funded through operating cash flows and will be expensed as incurred.
In the third quarter of 1998 and in the first nine months of 1998, the
Company incurred expenses amounting to approximately $0.9 million and $1.0
million, respectively. Year 2000 expenses were spread throughout a number of
noninterest expense categories and do not include computer equipment and
software that was scheduled to be replaced in the normal course of business.
The Company's estimate of Year 2000 investment costs and the estimated time
periods set forth above by which the Company expects to substantially complete
mission critical system programming and testing and implementation are based
upon management's best current estimates, which were derived utilizing numerous
assumptions about future events. There can be no guarantee that these estimates
will be achieved, and actual results could differ from those anticipated.
Because of the critical nature of the Year 2000 issues to our business and to
all of the financial services industry, if necessary modifications are not made
the Company's operations could be materially impacted. Hibernia and its data
processing vendors remain on schedule to ensure achievement of Year 2000
compliance, therefore, an adverse impact on the Company's operations is not
expected.
INCOME TAXES
The Company recorded $23.0 million in income tax expense in the third quarter of
1998, a $2.8 million (14%) increase from $20.2 million in the third quarter of
1997 as pretax income rose 19%. For the first nine months of 1998, income tax
expense totaled $68.6 million, up 17% compared to $58.7 million for the first
nine months of 1997.
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 $1,308.5 million at September 30, 1998 compared to
$1,170.5 million a year earlier. The increase is primarily the result of net
income over the most recent 12 months totaling $164.2 million, the issuance of
$16.1 million of common stock and a $26.7 million change in unrealized gains
(losses) on securities available for sale, partially offset by a $7.7 million
increase in unearned compensation, $55.4 million in dividends declared on common
stock and $6.9 million in dividends declared on preferred stock. Risk-based
capital and leverage ratios exceed the ratios required for designation as a
"well-capitalized" institution under regulatory guidelines. Table 12 presents
Hibernia's ratios along with selected components of the capital ratio
calculations for the most recent five quarters.
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 $150 million in securities included
in this shelf registration provide Hibernia with the flexibility to quickly
modify its capital structure to meet competitive and market conditions. As a
result of the pending mergers with First Guaranty and MarTex previously
discussed, the Company is expected to issue approximately 7.5 million shares of
Hibernia Class A Common Stock. These mergers are not expected to have a material
impact on Hibernia's capital ratios.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
TABLE 12 - CAPITAL
- ---------------------------------------------------------------------------------------------------------------------------------
Sept. 30 June 30 March 31 Dec. 31 Sept. 30
($ in millions) 1998 1998 1998 1997 1997
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Risk-based capital:
Tier 1 ..................... $ 1,118.2 $ 1,083.4 $ 1,057.8 $ 1,021.8 $ 995.7
Total ...................... 1,245.0 1,205.7 1,174.9 1,135.4 1,100.6
Assets:
Quarterly average assets (1) 12,766.1 12,453.9 12,321.3 11,806.8 11,213.6
Net risk-adjusted assets ... 10,145.8 9,783.4 9,370.0 9,076.5 8,368.9
Ratios:
Tier 1 risk-based capital .. 11.02% 11.07% 11.29% 11.26% 11.90%
Total risk-based capital ... 12.27 12.32 12.54 12.51 13.15
Leverage ................... 8.76 8.70 8.58 8.65 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, converting assets
(such as short-term investments, securities available for sale and loans) to
cash and increasing borrowings. 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 96.7% at September
30, 1998, 92.1% at June 30, 1998 and 83.4% at September 30, 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, 19.7% of Hibernia's loans and securities
were funded by net large liabilities (total large liabilities less short-term
investments) in the third quarter of 1998, up 104 basis points from the second
quarter of 1998 and up 39 basis points from the third 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 are the Company's primary sources of
liquidity. Hibernia's extensive retail office network, aided by the promotion of
attractive deposit products, provided $8.1 billion in core deposits at September
30, 1998, up $0.4 billion (5%) from $7.8 billion a year earlier. In addition,
Hibernia has a large base of treasury management-related repurchase agreements
and foreign deposits as part of total customer relationships. Because of the
nature of the relationships, these funds are considered stable and not subject
to the same volatility as other sources of noncore funds.
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 are 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.
The discussion above, entitled "Year 2000," includes certain "forward looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 ("PSLRA"). This statement is included for the express purpose of
availing Hibernia of the protections of the safe harbor provisions of the PSLRA.
Management's ability to predict results or effects of issues related to the year
2000 is inherently uncertain, and is subject to factors that may cause actual
results to differ materially from those projected. Factors that could affect the
actual results include the possibility that remediation efforts and contingency
plans will not operate as intended, the Company's failure to timely or
completely identify all software and hardware applications requiring
remediation, unexpected costs, and the uncertainty associated with the impact of
Year 2000 issues on the banking industry and on the Company's customers,
vendors, and others with whom it does business. Readers are cautioned not to
place undue reliance on these forward looking statements.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Hibernia has filed a complaint against First Guaranty Bank in
which Hibernia seeks to compel First Guaranty to comply with its
obligations under the merger agreement signed by the two parties
in June of this year. Discovery in this litigation does not seek
monetary damages.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
EXHIBIT DESCRIPTION
3.1 Exhibit 3.1 to the Quarterly Report on Form 10-Q (as amended)
for the fiscal quarter year ended June 30, 1998, filed with
the Commission by the Registrant (Commission File No. 0-7220)
is hereby incorporated by reference (Articles of Incorporation
of the Registrant, as amended to date)
3.2 Exhibit 3.2 to the Annual Report on Form 10-K for the fiscal
year ended December 31, 1996, filed with the Commission by the
Registrant (Commission File No. 0-7220) is hereby incorporated
by reference (By-Laws of the Registrant, as amended to date)
10.13 Exhibit 10.13 to the Annual Report on Form 10-K for the fiscal
year ended December 31, 1988, filed with the Commission by the
Registrant (Commission File No. 0-7220) is hereby incorporated
by reference (Deferred Compensation Plan for Outside Directors
of Hibernia Corporation and its Subsidiaries, as amended to
date)
10.14 Exhibit 10.14 to the Annual Report on Form 10-K for the fiscal
year ended December 31, 1990, filed with the Commission by the
Registrant (Commission File No. 0-7220) is hereby incorporated
by reference (Hibernia Corporation Executive Life
Insurance Plan)
10.16 Exhibit 4.7 to the Registration Statement on Form S-8 filed
with the Commission by the Registrant (Registration No.
33-26871) is hereby incorporated by reference (Hibernia
Corporation 1987 Stock Option Plan, as amended to date)
10.34 Exhibit C to the Registrant's definitive proxy statement dated
August 17, 1992 relating to its 1992 Annual Meeting of
Shareholders filed by the Registrant with the Commission is
hereby incorporated by reference (Long-Term Incentive Plan of
Hibernia Corporation)
10.35 Exhibit A to the Registrant's definitive proxy statement dated
March 23, 1993 relating to its 1993 Annual Meeting of
Shareholders filed by the Registrant with the Commission is
hereby incorporated by reference (1993 Director Stock Option
Plan of Hibernia Corporation)
10.36 Exhibit 10.36 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993 filed with the
Commission (Commission file no. 0-7220) is hereby incorporated
by reference (Employment agreement between Stephen A. Hansel
and Hibernia Corporation)
10.37 Exhibit 10.37 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994 filed with the
Commission (Commission File No. 0-7220) is hereby incorporated
by reference (Employment Agreement between J. Herbert Boydstun
and Hibernia Corporation)
10.38 Exhibit 10.38 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993 filed with the
Commission (Commission File No. 0-7220) is hereby incorporated
by reference (Employment Agreement between E.R. "Bo" Campbell
and Hibernia Corporation)
10.39 Exhibit 10.39 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996 filed with the
Commission (Commission File No. 0-7220) is hereby incorporated
by reference (Employment Agreement between B.D. Flurry and
Hibernia Corporation)
10.40 Exhibit 10.40 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996 filed with the
Commission (Commission File No. 0-7220) is hereby incorporated
by reference (Split-Dollar Life Insurance Plan of Hibernia
Corporation effective as of July 1996)
10.41 Exhibit 10.41 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996 filed with the
Commission (Commission File No. 0-7220) is hereby incorporated
by reference (Nonqualified Deferred Compensation Plan for Key
Management Employees of Hibernia Corporation effective as of
July 1996)
10.42 Exhibit 10.42 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996 filed with the
Commission (Commission File No. 0-7220) is hereby incorporated
by reference (Supplemental Stock Compensation Plan for Key
Management Employees effective as of July 1996)
10.43 Exhibit 10.43 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996 filed with the
Commission (Commission No. 0-7220) is hereby incorporated by
reference (Nonqualified Target Benefit (Deferred Award) Plan
of Hibernia Corporation effective as of July 1996))
10.44 Exhibit 10.44 to the Registrant's Annual Report on Form 10-K
(as amended) for the fiscal year ended December 31, 1997 filed
with the Commission (Commission No. 0-7220) is hereby
incorporated by reference (Form of Change of Control
Employment Agreement for Executive and Senior Officers of the
Registrant)
10.45 Exhibit 10.45 to the Registrant's Annual Report on Form 10-K
(as amended) for the fiscal year ended December 31, 1997
filed with the Commission (Commission No. 0-7220) is hereby
incorporated by reference(Employment Agreement between Randall
A. Howard and Hibernia Corporation)
27 Financial Data Schedule
99.1 Exhibit 99.1 to the Annual Report on Form 10-K (as amended)
dated June 24, 1998 is hereby incorporated by reference
(Annual Report of the Retirement Security Plan for the fiscal
year ended December 31, 1997)
99.2 Exhibit 99.1 to the Annual Report on Form 10-K (as amended)
dated June 24, 1998 is hereby incorporated by reference
(Annual Report of the Employee Stock Ownership Plan and Trust
for the fiscal year ended December 31, 1997)
(b) Reports on Form 8-K
A report on Form 8-K dated July 22, 1998, was filed by the
registrant reporting Item 5 Other Events.
A report on Form 8-K dated August 26, 1998, was filed by
the registrant reporting Item 5 Other Events.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized to sign on behalf of the registrant.
HIBERNIA CORPORATION
(Registrant)
Date: November 13, 1998 By: /s/ Ron E. Samford, Jr.
---------------------- -----------------------
Ron E. Samford, Jr.
Executive Vice President and Controller
Chief Accounting Officer
(in his capacity as a duly authorized officer
of the Registrant and in his capacity as
Chief Accounting Officer)
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<PERIOD-END> Sep-30-1998 Jun-30-1998 Mar-31-1998
<CASH> 530,821 479,304 501,397
<INT-BEARING-DEPOSITS> 4,339 4,303 4,154
<FED-FUNDS-SOLD> 206,302 237,091 240,884
<TRADING-ASSETS> 0 0 0
<INVESTMENTS-HELD-FOR-SALE> 2,530,805 2,542,441 2,660,606
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<INVESTMENTS-MARKET> 0 0 0
<LOANS> 9,594,693 9,126,742 8,715,289
<ALLOWANCE> (127,005) (123,327) (121,514)
<TOTAL-ASSETS> 13,272,848 12,821,483 12,544,783
<DEPOSITS> 9,920,073 9,908,846 9,978,349
<SHORT-TERM> 1,115,005 788,753 469,341
<LIABILITIES-OTHER> 223,414 162,330 160,175
<LONG-TERM> 705,898 706,114 706,330
0 0 0
100,000 100,000 100,000
<COMMON> 299,777 299,553 298,891
<OTHER-SE> 908,681 855,887 831,697
<TOTAL-LIABILITIES-AND-EQUITY> 13,272,848 12,821,483 12,544,783
<INTEREST-LOAN> 574,991 375,764 182,548
<INTEREST-INVEST> 121,264 83,963 43,715
<INTEREST-OTHER> 11,934 7,719 3,983
<INTEREST-TOTAL> 708,189 467,446 230,246
<INTEREST-DEPOSIT> 258,763 170,798 84,439
<INTEREST-EXPENSE> 315,066 205,980 101,901
<INTEREST-INCOME-NET> 393,123 261,466 128,345
<LOAN-LOSSES> 17,000 9,000 3,500
<SECURITIES-GAINS> 3,601 914 887
<EXPENSE-OTHER> 312,471 210,178 103,776
<INCOME-PRETAX> 199,361 129,666 62,373
<INCOME-PRE-EXTRAORDINARY> 130,714 84,051 40,503
<EXTRAORDINARY> 0 0 0
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<NET-INCOME> 130,714 84,051 40,503
<EPS-PRIMARY> 0.82 0.52 0.25
<EPS-DILUTED> 0.80 0.51 0.25
<YIELD-ACTUAL> 4.55 4.61 4.59
<LOANS-NON> 30,986 31,244 28,563
<LOANS-PAST> 6,077 7,183 6,917
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<LOANS-PROBLEM> 49,387 44,145 27,658
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<RECOVERIES> 13,435 9,509 4,028
<ALLOWANCE-CLOSE> 127,005 123,327 121,514
<ALLOWANCE-DOMESTIC> 127,005 123,327 121,514
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<PERIOD-END> Dec-31-1997
<CASH> 580,235
<INT-BEARING-DEPOSITS> 2,474
<FED-FUNDS-SOLD> 446,598
<TRADING-ASSETS> 35,943
<INVESTMENTS-HELD-FOR-SALE> 2,628,164
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<INVESTMENTS-MARKET> 0
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0
100,000
<COMMON> 297,752
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<INTEREST-DEPOSIT> 323,247
<INTEREST-EXPENSE> 360,022
<INTEREST-INCOME-NET> 482,036
<LOAN-LOSSES> 3,148
<SECURITIES-GAINS> 2,725
<EXPENSE-OTHER> 409,254
<INCOME-PRETAX> 223,631
<INCOME-PRE-EXTRAORDINARY> 144,796
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 144,796
<EPS-PRIMARY> 0.90
<EPS-DILUTED> 0.89
<YIELD-ACTUAL> 4.74
<LOANS-NON> 22,598
<LOANS-PAST> 5,767
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 19,366
<ALLOWANCE-OPEN> 143,565
<CHARGE-OFFS> 45,597
<RECOVERIES> 22,785
<ALLOWANCE-CLOSE> 124,381
<ALLOWANCE-DOMESTIC> 124,381
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<ALLOWANCE-UNALLOCATED> 26,768
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<PERIOD-END> Sep-30-1997 Jun-30-1997 Mar-31-1997
<CASH> 472,621 530,703 521,702
<INT-BEARING-DEPOSITS> 3,155 4,553 4,852
<FED-FUNDS-SOLD> 298,850 309,090 307,835
<TRADING-ASSETS> 0 0 0
<INVESTMENTS-HELD-FOR-SALE> 2,542,424 2,671,869 2,693,803
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<INVESTMENTS-MARKET> 0 0 0
<LOANS> 7,804,261 7,357,886 6,914,682
<ALLOWANCE> (129,233) (136,585) (135,817)
<TOTAL-ASSETS> 11,540,878 11,302,930 10,845,226
<DEPOSITS> 9,362,729 9,384,786 9,211,303
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<LIABILITIES-OTHER> 157,687 149,009 155,828
<LONG-TERM> 109,793 12,675 13,135
0 0 0
100,000 100,000 100,000
<COMMON> 297,597 296,920 296,594
<OTHER-SE> 772,890 736,911 688,510
<TOTAL-LIABILITIES-AND-EQUITY> 11,540,878 11,302,930 10,845,226
<INTEREST-LOAN> 475,609 306,418 148,623
<INTEREST-INVEST> 130,701 88,032 44,314
<INTEREST-OTHER> 12,364 8,061 4,134
<INTEREST-TOTAL> 618,674 402,511 197,071
<INTEREST-DEPOSIT> 239,874 157,017 76,846
<INTEREST-EXPENSE> 261,382 168,817 82,261
<INTEREST-INCOME-NET> 357,292 233,694 114,810
<LOAN-LOSSES> 388 197 150
<SECURITIES-GAINS> 494 419 15
<EXPENSE-OTHER> 298,697 196,116 95,462
<INCOME-PRETAX> 169,979 111,286 53,892
<INCOME-PRE-EXTRAORDINARY> 111,293 72,784 35,434
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<NET-INCOME> 111,293 72,784 35,434
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<EPS-DILUTED> 0.68 0.45 0.22
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<LOANS-PAST> 5,974 3,838 5,736
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<LOANS-PROBLEM> 17,901 19,301 18,900
<ALLOWANCE-OPEN> 143,565 143,565 143,565
<CHARGE-OFFS> 33,821 22,915 13,848
<RECOVERIES> 18,621 15,258 5,950
<ALLOWANCE-CLOSE> 129,233 136,585 135,817
<ALLOWANCE-DOMESTIC> 129,233 136,585 135,817
<ALLOWANCE-FOREIGN> 0 0 0
<ALLOWANCE-UNALLOCATED> 0 0 0
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<PERIOD-END> Dec-31-1996
<CASH> 621,279
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<FED-FUNDS-SOLD> 247,600
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<INVESTMENTS-HELD-FOR-SALE> 2,719,754
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 6,738,380
<ALLOWANCE> (143,565)
<TOTAL-ASSETS> 10,730,936
<DEPOSITS> 9,073,291
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0
100,000
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<INTEREST-INVEST> 173,601
<INTEREST-OTHER> 13,481
<INTEREST-TOTAL> 722,098
<INTEREST-DEPOSIT> 281,973
<INTEREST-EXPENSE> 299,829
<INTEREST-INCOME-NET> 422,269
<LOAN-LOSSES> (12,127)
<SECURITIES-GAINS> (5,152)
<EXPENSE-OTHER> 359,815
<INCOME-PRETAX> 195,282
<INCOME-PRE-EXTRAORDINARY> 127,893
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 127,893
<EPS-PRIMARY> 0.83
<EPS-DILUTED> 0.82
<YIELD-ACTUAL> 4.83
<LOANS-NON> 17,109
<LOANS-PAST> 5,918
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 29,800
<ALLOWANCE-OPEN> 165,099
<CHARGE-OFFS> 36,228
<RECOVERIES> 20,608
<ALLOWANCE-CLOSE> 143,565
<ALLOWANCE-DOMESTIC> 143,565
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 34,859
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<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> 503,409 405,461 373,642
<INT-BEARING-DEPOSITS> 3,107 776 704
<FED-FUNDS-SOLD> 313,385 103,855 314,625
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<INVESTMENTS-HELD-FOR-SALE> 2,628,542 2,644,784 2,753,660
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<INVESTMENTS-MARKET> 0 0 0
<LOANS> 6,372,496 5,848,395 5,536,483
<ALLOWANCE> (148,775) (162,685) (162,965)
<TOTAL-ASSETS> 10,184,657 9,229,113 9,201,895
<DEPOSITS> 8,582,186 7,833,098 7,808,840
<SHORT-TERM> 377,541 310,855 306,041
<LIABILITIES-OTHER> 159,178 136,168 139,998
<LONG-TERM> 24,269 33,949 37,409
0 0 0
100,000 0 0
<COMMON> 295,785 295,346 295,279
<OTHER-SE> 645,698 619,697 614,328
<TOTAL-LIABILITIES-AND-EQUITY> 10,184,657 9,229,113 9,201,895
<INTEREST-LOAN> 386,454 251,345 122,264
<INTEREST-INVEST> 129,376 87,617 44,933
<INTEREST-OTHER> 9,723 6,590 3,597
<INTEREST-TOTAL> 525,553 345,552 170,794
<INTEREST-DEPOSIT> 205,916 135,070 67,155
<INTEREST-EXPENSE> 218,681 143,295 71,157
<INTEREST-INCOME-NET> 306,872 202,257 99,637
<LOAN-LOSSES> (12,349) 917 242
<SECURITIES-GAINS> (5,386) 164 67
<EXPENSE-OTHER> 264,957 165,708 81,906
<INCOME-PRETAX> 140,304 96,288 47,018
<INCOME-PRE-EXTRAORDINARY> 92,192 63,413 30,845
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 92,192 63,413 30,845
<EPS-PRIMARY> 0.60 0.42 0.20
<EPS-DILUTED> 0.60 0.41 0.20
<YIELD-ACTUAL> 4.82 4.83 4.79
<LOANS-NON> 16,152 19,206 19,869
<LOANS-PAST> 4,181 4,452 6,451
<LOANS-TROUBLED> 0 0 0
<LOANS-PROBLEM> 30,210 21,100 21,800
<ALLOWANCE-OPEN> 165,099 165,099 165,099
<CHARGE-OFFS> 24,717 14,490 7,227
<RECOVERIES> 14,826 10,487 4,484
<ALLOWANCE-CLOSE> 148,775 162,685 162,965
<ALLOWANCE-DOMESTIC> 148,775 162,685 162,965
<ALLOWANCE-FOREIGN> 0 0 0
<ALLOWANCE-UNALLOCATED> 0 0 0
</TABLE>
<TABLE> <S> <C>
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<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-END> Dec-31-1995
<CASH> 463,758
<INT-BEARING-DEPOSITS> 319
<FED-FUNDS-SOLD> 153,350
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 2,910,405
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 5,285,042
<ALLOWANCE> (165,099)
<TOTAL-ASSETS> 9,017,639
<DEPOSITS> 7,668,973
<SHORT-TERM> 281,125
<LIABILITIES-OTHER> 129,998
<LONG-TERM> 36,744
0
0
<COMMON> 295,265
<OTHER-SE> 605,534
<TOTAL-LIABILITIES-AND-EQUITY> 9,017,639
<INTEREST-LOAN> 437,025
<INTEREST-INVEST> 199,967
<INTEREST-OTHER> 10,928
<INTEREST-TOTAL> 647,920
<INTEREST-DEPOSIT> 260,281
<INTEREST-EXPENSE> 276,560
<INTEREST-INCOME-NET> 371,360
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<SECURITIES-GAINS> 958
<EXPENSE-OTHER> 319,856
<INCOME-PRETAX> 164,293
<INCOME-PRE-EXTRAORDINARY> 146,206
<EXTRAORDINARY> 0
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<NET-INCOME> 146,206
<EPS-PRIMARY> 0.96
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<YIELD-ACTUAL> 4.66
<LOANS-NON> 18,515
<LOANS-PAST> 3,201
<LOANS-TROUBLED> 0
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<ALLOWANCE-OPEN> 171,454
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<RECOVERIES> 19,236
<ALLOWANCE-CLOSE> 165,099
<ALLOWANCE-DOMESTIC> 165,099
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 48,615
</TABLE>
