April 2, 1999
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N. W.
Washington, D. C. 20549
Re: Hibernia Corporation
Registration Statement Under Form S-4
Commission File No. 1-10294
Dear Sirs:
On behalf of Hibernia Corporation, attached herewith for filing under
the Securities Act of 1933, is a Registration Statement on Form S-4.
Please call the undersigned at (504) 533-2486 or Mark Fullmer at (504)
584-9324 if you have any questions concerning this filing.
Very truly yours,
Patricia C. Meringer
/s/Patricia C. Meringer
Corporate Counsel and
Secretary
PCM/mch
Enclosure
cc: Joseph Lomnicky
Robert M. Walmsley, Jr.
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON April 2, 1999
REGISTRATION NO. 333-___________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------------
HIBERNIA CORPORATION
(Exact name of Registrant as specified in its Charter)
Louisiana 6711 72-0724532
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification Number)
incorporation or Code Number)
organization)
313 Carondelet Street
New Orleans, Louisiana 70130
(504) 533-5332
(Address, including zip code, and telephone number,including
area code, of registrant's principal executive offices)
----------------------------------------
Gary L. Ryan
Senior Vice President and Corporate Counsel
HIBERNIA CORPORATION
313 Carondelet Street
New Orleans, Louisiana 70130
(504) 533-5560
(Name, address, including zip code, and telephone number,
including area code of agent for service)
----------------------------------------
COPIES TO:
Mark A. Fullmer Robert M. Walmsley, Jr.
PHELPS DUNBAR, L.L.P. CORRERO, FISHMAN, HAYGOOD, PHELPS
Suite 3000 WALMSLEY & CASTEIX, L.P.
400 Poydras Street 46th Floor, 201 St. Charles Avenue
New Orleans, LA. 70130 New Orleans, LA 70161
(504) 584-9324 (504) 586-5263
----------------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE PUBLIC
As soon as practicable after this registration statement is declared
effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_] __________________
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_] _________________
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for same. [_] _________________
<TABLE>
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CALCULATION OF REGISTRATION FEE
- ------------------------ ---------------------- ---------------------- ----------------------- ----------------------
<S> <C> <C> <C> <C>
Title of each class Amount to be Proposed Proposed Amount of
of securities Registered (1) maximum offering maximum aggregate Registration
to be registered price per share (1) offering price (1) fee (1)
- ------------------------ ---------------------- ---------------------- ----------------------- ----------------------
- ------------------------ ---------------------- ---------------------- ----------------------- ----------------------
Class A
Common Stock, no par 4,021,517 shares $4.32 $17,376,000 $ 4,831
value
- ------------------------ ---------------------- ---------------------- ----------------------- ----------------------
</TABLE>
(1) Based upon the book value of the securities to be received
by the registrant or canceled in the exchange or transaction as of
December 31, 1998 of $17,376,000 pursuant to Rule 457(f)(2) of the
Securities Act of 1933, as amended, excluding 32,944 shares of common
stock of First Guaranty owned by Hibernia Corporation and its
affiliates.
-------------------------------------------------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
WILL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT WILL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION
STATEMENT WILL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE>
NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS OF FIRST GUARANTY BANK
TO BE HELD ________________, 1999
You are hereby notified that a special meeting of shareholders of
common stock of First Guaranty Bank will be held at the main office of First
Guaranty Bank, 400 East Thomas Street, Hammond, Louisiana, 70401-3320, in the
Second Floor Auditorium on ______________, 1999, at _____ p.m. The following
matters will be considered and voted upon at this meeting:
1. A proposal to approve the Agreement and Plan of Merger dated
as of July 30, 1998, among First Guaranty, Hibernia National
Bank and Hibernia Corporation. The Agreement and Plan of
Merger provides that First Guaranty will be merged into
Hibernia National Bank. As a result of the merger, each
outstanding share of common stock of First Guaranty will be
converted into 1.33 shares of Hibernia Corporation common
stock.
2. A proposal to approve the merger between First Guaranty and
Hibernia National Bank.
3. Such other business as may be properly brought before the
meeting or at any adjournments or postponements of the
meeting.
Each shareholder who is the owner of First Guaranty common stock at the
close of business on ________________, 1999, is entitled to notice of and to
vote on the matters presented at the Special Meeting. You are cordially invited
to attend the meeting in person. We urge you, however, to complete, date and
sign the accompanying proxy card and return it promptly in the enclosed postage
prepaid envelope, whether or not you plan to attend the Special Meeting.
Dissenting holders of First Guaranty common stock who comply with the
procedural requirements of 12 U.S.C. ss.215a and La. R.S. 6:376, attached as
Appendix F to the proxy statement/prospectus, will be entitled to receive
payment of the fair cash value of their shares. Those rights are more fully
described in the accompanying proxy statement/prospectus.
By Order of the Board of Directors,
/s/ R. Collins Bonicard
R. Collins Bonicard, Secretary
Hammond, Louisiana
, 1999
Please sign, date and return the enclosed proxy card promptly
whether or not you plan to attend the meeting.
<PAGE>
FIRST GUARANTY BANK HIBERNIA CORPORATION
PROXY STATEMENT PROSPECTUS
SPECIAL MEETING OF SHAREHOLDERS 4,021,517 SHARES OF CLASS A COMMON STOCK
The Board of Directors of First Guaranty Bank approved the merger of
First Guaranty Bank into Hibernia National Bank at a meeting held on July 28,
1998 but now makes no recommendation as to how you should vote with respect to
the merger. If the merger is completed, you will receive 1.33 shares of Hibernia
common stock for each share of First Guaranty common stock and generally will
not recognize federal income tax gain or loss for the Hibernia common stock you
receive.
On _______, 1999, the closing price of Hibernia common stock on the New
York Stock Exchange was $_____, making the value of 1.33 shares of Hibernia
common stock equal to $______. The price of Hibernia common stock, however, will
fluctuate between now and the merger.
At the special meeting, you will consider and vote on the merger. The
merger cannot be approved unless holders of two-thirds of the First Guaranty
common stock approve it. No vote of Hibernia shareholders is required to approve
the merger.
As part of an agreement to settle litigation involving Hibernia,
Marshall Reynolds and First Guaranty, Mr. Reynolds, the Chairman of the Board of
First Guaranty, recommends that you vote in favor of the merger.
The proxy statement/prospectus provides you with detailed information
about the merger. We encourage you to read this document carefully. You also can
obtain other information about Hibernia from documents filed with the Securities
and Exchange Commission.
Whether or not you plan to attend the meeting, if you are a holder of
First Guaranty common stock, please take the time to vote by completing and
mailing the enclosed proxy card to us. If you fail to return your card or vote
in person, the effect will be a vote against the approval of the merger. You may
revoke your proxy by writing to First Guaranty's Secretary at any time before
the meeting or by attending the meeting and voting in person.
Neither the Securities and Exchange Commission nor any state regulators
have approved the Hibernia common stock to be issued in the merger or determined
if the proxy statement/prospectus is accurate or adequate.
Any representation to the contrary is a criminal offense.
The date of this proxy statement/prospectus is _____________________,
1999, and will be mailed to the shareholders of First Guaranty on
_______________, 1999.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
SUMMARY ......................................................................................................... 1
Exchange Rate of Hibernia common stock for each First Guaranty Share.................................... 1
No Federal Income Tax on Shares Received in the Merger.................................................. 1
Exchange Rate Fair to Shareholders According to Investment Banks........................................ 1
The Companies........................................................................................... 2
The Merger.............................................................................................. 2
Meeting to Be Held ______________, 1999................................................................. 2
Record Date Set at ____________, 1999; One Vote Per Share of First Guaranty Stock....................... 2
First Guaranty Shareholder Vote Required................................................................ 2
Hibernia Shareholder Approval Not Required.............................................................. 3
Litigation and Settlement Agreement..................................................................... 3
Monetary Benefits to Officers and Directors of First Guaranty in the Merger............................. 4
Conditions That Must Be Satisfied for the Merger to Occur............................................... 4
Termination and Amendment of the Merger Agreement....................................................... 5
Hibernia to Use Pooling-of-Interests Accounting Treatment............................................... 5
Dissenters' Rights...................................................................................... 6
Share Price Information................................................................................. 6
THE PARTIES TO THE MERGER........................................................................................ 6
Introduction............................................................................................ 6
Hibernia Corporation.................................................................................... 6
Selected Financial Data................................................................................. 8
Selected Financial Data of Hibernia..................................................................... 8
First Guaranty.......................................................................................... 10
Selected Financial Data of First Guaranty............................................................... 10
Pro Forma Combined Selected Financial Information (Unaudited)........................................... 13
Comparative Per Share Information (Unaudited)........................................................... 15
MEETING INFORMATION.............................................................................................. 17
Solicitation and Revocation of Proxies.................................................................. 17
Quorum; Vote Required; Record Date...................................................................... 17
Recommendation by Marshall Reynolds..................................................................... 18
PROPOSED MERGER.................................................................................................. 18
General................................................................................................. 19
Background of the Merger................................................................................ 19
Terms of the Merger..................................................................................... 23
Financial Advisors...................................................................................... 23
First Guaranty's Financial Advisor...................................................................... 24
Opinions of Other Financial Advisors.................................................................... 27
Closing Date and Effective Date of the Merger........................................................... 39
Employee Benefits....................................................................................... 40
Surrender and Exchange of Stock Certificates............................................................ 40
Expenses................................................................................................ 41
Representations and Warranties.......................................................................... 41
Conditions to the Merger; Waiver........................................................................ 42
Regulatory and Other Approvals.......................................................................... 43
Business Pending the Merger............................................................................. 43
Termination............................................................................................. 44
Management and Operations After the Merger.............................................................. 45
Certain Differences in Rights of Shareholders........................................................... 45
Interests of Certain Persons in the Merger.............................................................. 47
Material Tax Consequences............................................................................... 48
Resale of Hibernia common stock......................................................................... 49
Rights of Dissenting Shareholders....................................................................... 50
Accounting Treatment.................................................................................... 52
CERTAIN REGULATORY CONSIDERATIONS................................................................................ 52
General................................................................................................. 52
Payment of Dividends.................................................................................... 52
Restrictions on Extensions of Credit.................................................................... 53
PRO FORMA FINANCIAL INFORMATION.................................................................................. 53
Pro Forma Combined Balance Sheet (Unaudited)............................................................ 53
Pro Forma Combined Income Statements (Unaudited)........................................................ 56
CERTAIN INFORMATION CONCERNING FIRST GUARANTY.................................................................... 61
Principal Business...................................................................................... 61
Competition............................................................................................. 61
Seasonality of Business and Customers................................................................... 62
Employees............................................................................................... 62
Properties.............................................................................................. 62
Litigation and Settlement Agreement..................................................................... 62
Other Legal Proceedings................................................................................. 64
Stock Prices and Dividends.............................................................................. 65
Security Ownership of Principal Shareholders and Management............................................. 66
FIRST GUARANTY FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 (AUDITED)..................... 68
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF FIRST GUARANTY
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998 AND 1997.................................................. 88
RELATIONSHIP WITH INDEPENDENT AUDITORS........................................................................... 106
VALIDITY OF SHARES............................................................................................... 106
EXPERTS 106..................................................................................................... 106
AVAILABLE INFORMATION............................................................................................ 106
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.................................................................. 107
FORWARD-LOOKING STATEMENTS....................................................................................... 108
</TABLE>
APPENDICES
APPENDIX A - AGREEMENT AND PLAN OF MERGER
APPENDIX B - SETTLEMENT AGREEMENT DATED AS OF DECEMBER 30, 1998 AMONG HIBERNIA
CORPORATION, HIBERNIA NATIONAL BANK, FIRST GUARANTY BANK AND
MARSHALL T. REYNOLDS
APPENDIX C - FAIRNESS OPINION OF CHAFFE & ASSOCIATES, INC.
APPENDIX D - FAIRNESS OPINION OF KEEFE, BRUYETTE & WOODS, INC.
APPENDIX E - FAIRNESS OPINION OF NATIONAL CAPITAL CORPORATION
APPENDIX F - CERTAIN PROVISIONS OF FEDERAL AND STATE LAW RELATING TO RIGHTS OF
DISSENTERS' SHAREHOLDERS
APPENDIX G - TAX OPINION OF ERNST & YOUNG
<PAGE>
SUMMARY
This summary highlights selected information from this proxy
statement/prospectus and may not contain all of the information that is
important to you. To understand the merger or for a more detailed description of
the legal terms of the merger, you should read carefully this entire document
and the documents to which we refer you. See "AVAILABLE INFORMATION" on page
106.
EXCHANGE RATE OF HIBERNIA COMMON STOCK FOR EACH FIRST GUARANTY SHARE (P. 23)
If the merger is completed, you will receive 1.33 shares of Hibernia
common stock for each share of First Guaranty common stock you own, plus cash
instead of any fractional share. On _________, 1999, the closing price of
Hibernia common stock on the New York Stock Exchange was $________. Because the
market price of Hibernia common stock fluctuates, you will not know when you
vote what the Hibernia shares will be worth when issued in the merger.
NO FEDERAL INCOME TAX ON SHARES RECEIVED IN THE MERGER (P. 48)
First Guaranty shareholders generally will not recognize gain or loss
for federal income tax purposes on shares of Hibernia common stock they receive
in the merger. Ernst & Young LLP, independent auditors for Hibernia, has issued
an opinion to this effect, which we have included as Appendix "G" to this proxy
statement/prospectus. First Guaranty shareholders will be taxed on cash received
instead of any fractional share. Tax matters are complicated, and tax results
may vary among shareholders. We urge you to contact your own tax advisor to
understand fully how the merger will affect you.
BOARD OF FIRST GUARANTY MAKES NO RECOMMENDATION (P. 19)
First Guaranty's board of directors voted unanimously, with two
abstentions, to make no recommendation to the shareholders as to how they should
vote their shares on the merger.
INVESTMENT BANKERS FIND MERGER FAIR (P. 23)
Chaffe & Associates, Inc., First Guaranty's financial advisor, has
advised that the consideration to be received in the merger by the shareholders
of First Guaranty was within the range of fairness from a financial point of
view so long as the price for Hibernia common stock was in a range between
$15.98 to $18.45 a share and thus as of January 6, 1998 was fair from a
financial point of view at a price of $17.38 a share but also has advised that
in their opinion the transaction was not sufficiently favorable that they would
advise the board to recommend the transaction to First Guaranty's shareholders.
Two other investment banking firms, Keefe, Bruyette & Woods, Inc. and National
Capital Corporation, were hired to render fairness opinions for inclusion in
this proxy statement/prospectus as part of a settlement of the litigation
between Hibernia, on the one hand, and First Guaranty and Marshall Reynolds, on
the other hand. Both have advised that in their respective opinions the value of
the Hibernia stock to be received by First Guaranty shareholders in the merger
was fair from a financial point of view. Keefe, Bruyette described the
transaction as near the upper end of the transactions that Keefe, Bruyette used
in analyzing the merger. National Capital advised that it believed the bottom
end of the fairness range to be a price of $15 a share for Hibernia common
stock. The full text of the three fairness opinions rendered are attached to
this proxy statement/prospectus as Appendices "C", "D", and "E". We encourage
you to read the opinions carefully.
THE COMPANIES (P. 6)
HIBERNIA CORPORATION
313 Carondelet Street
New Orleans, Louisiana 70130
(504) 533-3333
Hibernia Corporation is a bank holding company with a $14 billion in
assets. As of December 31, 1998, Hibernia Corporation was ranked, on the basis
of total assets, as the largest bank holding company headquartered in Louisiana.
FIRST GUARANTY BANK
400 East Thomas Street
Hammond, Louisiana 70141-3320
(504) 375-0300
First Guaranty Bank operates two full-service facilities in Hammond,
Louisiana and four additional banking centers. As of December 31, 1998, First
Guaranty had total assets of $245 million.
THE MERGER (P. 19)
We have attached the Agreement and Plan of Merger as Appendix "A" to
this proxy statement/prospectus. We encourage you to read that agreement, as it
is the legal document that governs the merger.
MEETING TO BE HELD ______________, 1999 (P. 17)
First Guaranty will hold the special shareholders' meeting at _______
P.M. on _____________, 1999, at the office of First Guaranty, 400 East Thomas
Street, Hammond, Louisiana. At the meeting you will vote on the merger
agreement, the merger, and conduct any other business that properly arises.
RECORD DATE SET AT ____________, 1999; ONE VOTE PER SHARE OF FIRST GUARANTY
STOCK (P. 17)
If you owned shares of First Guaranty common stock at the close of
business on __________, 1999, you are entitled to notice of and to vote on the
merger agreement, the merger and any other matters considered at the meeting.
On ____________, 1999, there were 3,056,041 shares of First Guaranty
common stock outstanding. You will have one vote at the meeting for each share
of First Guaranty stock you owned on __________, 1999.
FIRST GUARANTY SHAREHOLDER VOTE REQUIRED (P. 17)
Approval of the merger requires the affirmative vote of holders of at
least two-thirds of the outstanding shares of First Guaranty common stock.
Marshall Reynolds, who owns 966,096 shares of First Guaranty common stock, or
31.6% of the outstanding shares, has agreed as part of the settlement of
litigation involving Hibernia, Mr. Reynolds and First Guaranty to vote his
shares in favor of the merger at the Special Meeting, except in limited
circumstances described in the settlement agreement. The other directors of
First Guaranty own 501,691 shares of First Guaranty common stock, or 16.4% of
the outstanding shares. All have indicated their intention to vote their shares
against the merger.
HIBERNIA SHAREHOLDER APPROVAL NOT REQUIRED
The merger does not require approval of Hibernia's shareholders.
LITIGATION AND SETTLEMENT AGREEMENT (P. 62)
The merger agreement was signed by First Guaranty, Hibernia Corporation
and Hibernia National Bank on July 30, 1998. In August, 1998, employees of
Hibernia Corporation and First Guaranty met and First Guaranty began to provide
to Hibernia information requested by Hibernia. On September 6, 1998, at the
direction of First Guaranty's Board of Directors, Marshall Reynolds, Chairman of
First Guaranty's Board, requested that Hibernia agree to a voluntary termination
of the merger agreement due to a decline in the price of Hibernia's common
stock. Hibernia advised Mr. Reynolds that Hibernia wanted First Guaranty to
proceed with a shareholder vote on the merger. Following that meeting to
mid-September, Hibernia Corporation and First Guaranty disagreed over the type
of information that First Guaranty was to provide to Hibernia under the merger
agreement. First Guaranty supplied less information than Hibernia requested and
which Hibernia believed was necessary in order for the merger to be completed.
On September 22, 1998, Hibernia filed a lawsuit against First Guaranty
and Marshall Reynolds alleging that First Guaranty had engaged in actions that
constituted a breach of the merger agreement and that Marshall Reynolds had
engaged in actions that interfered with the contractual relations between
Hibernia and First Guaranty. First Guaranty and Mr. Reynolds denied the
allegations.
On December 30, 1998, Hibernia Corporation, Hibernia National Bank,
First Guaranty and Marshall Reynolds signed an agreement settling the lawsuit.
In the settlement agreement:
-- First Guaranty agreed to:
. Include in this proxy statement/prospectus fairness
opinions of (1) Keefe, Bruyette & Woods, Inc., hired by
First Guaranty at Hibernia's expense, and (2) National
Capital Corporation, hired by Hibernia at its own expense;
. To permit Keefe, Bruyette & Woods, Inc. and National
Capital Corporation to make presentations to First
Guaranty's Board; and
. To extend the deadline for the completion of the merger to
May 31, 1999.
-- Mr. Reynolds agreed to:
. Vote his shares in favor of the merger; and
. Recommend to the shareholders of First Guaranty in this
proxy statement/prospectus that they vote their shares in
favor of the merger.
-- Hibernia agreed that, following First Guaranty's compliance
with the settlement agreement, it will dismiss the lawsuit
following a First Guaranty shareholder vote on the merger.
MONETARY BENEFITS TO OFFICERS AND DIRECTORS OF FIRST GUARANTY IN THE MERGER
(P. 47)
You should be aware that First Guaranty directors and officers have
interests in the merger that differ from the interests of other First Guaranty
shareholders.
Officers of First Guaranty who remain employed by Hibernia after the
merger will continue to receive a salary and employee benefits.
The merger agreement provides for the indemnification of officers and
directors of First Guaranty for specified liabilities up to a total of
$10,000,000.
Stanley M. Dameron has agreed to an 18-month employment agreement with
Hibernia at his current salary of approximately $69,000 per year.
Don W. Ayres, the President and Chief Executive Officer and a Director
of First Guaranty, will be entitled under an agreement between him and First
Guaranty to be paid $250,000 following the merger if either (1) Hibernia does
not continue the employment of Mr. Ayres or (2) Mr. Ayres elects, within 90 days
after the merger, not to continue his employment with Hibernia or Hibernia
National Bank.
As part of the settlement of litigation involving Hibernia, Marshall
Reynolds and First Guaranty, Mr. Reynolds agreed (1) to recommend in this proxy
statement/prospectus that the First Guaranty shareholders vote in favor of the
merger agreement and the merger and (2) to vote his shares of First Guaranty
common stock in favor of the merger agreement and the merger if Keefe, Bruyette
and Woods, Inc. does not withdraw its fairness opinion. Following the
shareholder vote on the merger agreement and the merger, the litigation
involving Hibernia, First Guaranty and Mr. Reynolds will be dismissed and
Hibernia Corporation, Hibernia National Bank, Mr. Reynolds and First Guaranty
will be prohibited from suing or sponsoring suits against each other and their
officers, directors, shareholders, investment bankers and agents.
CONDITIONS THAT MUST BE SATISFIED FOR THE MERGER TO OCCUR (P. 42)
The following conditions must be met for us to complete the merger:
. The merger agreement and merger must be approved by First
Guaranty shareholders;
. Regulatory approvals must be obtained, particularly the approval
for the Office of the Comptroller of the Currency, which was
obtained on November 12,1998 and will expire on November 11, 1999
unless the Office of the Comptroller of the Currency grants an
extension of its approval;
. Receipt of an opinion concerning the tax consequences of the
merger;
. The continuing effectiveness of the registration statement
filed with the SEC;
. The absence of legal restraints that prevent the completion of
the merger;
. The representations and warranties set forth in the merger
agreement must be accurate on the date of the merger;
. The Hibernia common stock to be issued in the merger must be
approved for listing on the New York Stock Exchange;
. The merger must qualify for pooling-of-interests accounting
treatment;
. The favorable opinions of counsel must be obtained;
. Loan participations selected by Hibernia that previously were
sold by First Guaranty must be repurchased by First Guaranty;
. Loan participations owned by First Guaranty and selected by
Hibernia must be sold by First Guaranty; and
. Receipt by First Guaranty of an updated opinion of Chaffe &
Associates, Inc., that the exchange rate in the merger is fair,
from a financial point of view,to the First Guaranty shareholders
within five days of the merger or if Chaffe & Associates is
unable or unwilling to update its opinion,an updated opinion from
Keefe, Bruyette & Woods, Inc., to that effect within five days
of the date of the merger.
TERMINATION AND AMENDMENT OF THE MERGER AGREEMENT (P. 42 and 44)
We can agree at any time to terminate the merger agreement without
completing the merger. Either company may terminate the merger agreement in the
following circumstances:
. if the other company breaches its covenants, representations or
warranties in the merger agreement and the breach cannot be or is
not cured within 60 days after written notice of the breach;
. any application for any required federal or state regulatory
approval is denied and the time for all appeals has expired;
. the First Guaranty shareholders fail to approve the merger
agreement and the merger at the meeting; or
. the merger is not completed by March 31, 1999, or a date after
March 31, 1999 but not later than May 31, 1999, calculated in the
manner provided in the agreement settling the litigation
involving Hibernia, First Guaranty and Mr. Reynolds or any
condition to the merger cannot be satisfied by that date and will
not be waived by the party entitled to waive it.
Hibernia also can terminate the merger agreement in the following
circumstances:
. if the holders of more than 8.9% of the outstanding First
Guaranty common stock exercise statutory rights of dissent and
appraisal;
. if, after March 31, 1998, a material adverse change occurs in the
financial condition, result of operations, business or prospects
of First Guaranty; or
. if it shall determine in good faith that the merger does not
qualify as a pooling-of-interests for accounting purposes.
First Guaranty can also terminate the merger agreement in the following
circumstances:
. if after March 31, 1998, a material adverse change occurs in the
financial condition, results of operations, business or prospects
of Hibernia Corporation or Hibernia National Bank; or
. if First Guaranty does not receive an updated fairness opinion of
Chaffe & Associates, Inc. dated within five days of the closing
of the merger or if Chaffe & Associates is unable or unwilling
to update its opinion, First Guaranty does not receive an updated
fairness opinion from Keefe, Bruyette & Woods, Inc. within five
days of the date of the closing of the merger.
HIBERNIA TO USE POOLING-OF-INTERESTS ACCOUNTING TREATMENT (P. 52)
Hibernia will account for the merger as a pooling-of-interests. This
will enhance future earnings by avoiding the creation of goodwill relating to
the merger and enable Hibernia to avoid charges against future earnings
resulting from amortizing goodwill. This accounting method also means that after
the merger, Hibernia will report financial results as if First Guaranty always
had been combined with Hibernia.
DISSENTERS' RIGHTS (P. 50)
If you object to the merger and perfect your rights to dissent from the
merger as provided under applicable federal and state law, you will be entitled
to receive in cash the fair value of your shares of First Guaranty common stock.
SHARE PRICE INFORMATION (P. 8 and 65)
Hibernia common stock is listed on the New York Stock Exchange under
the symbol HIB. On July 29, 1998, the last full trading day before public
announcement of the proposed merger, Hibernia common stock closed at $19.0625
per share. On ___________, 1999, Hibernia common stock closed at $________.
First Guaranty shares of common stock are not traded on a stock
exchange or in any established market. Trades occur primarily between
individuals at a price mutually agreed upon by the buyer and seller. Trading in
First Guaranty's common stock has been infrequent.
THE PARTIES TO THE MERGER
INTRODUCTION
Hibernia Corporation ("Hibernia"), Hibernia National Bank ("HNB") and
First Guaranty Bank ("First Guaranty") are parties to the Agreement and Plan of
Merger dated as of July 30, 1998 (referred to herein as the "Merger Agreement").
The Merger Agreement provides that First Guaranty will be merged into HNB (the
"Merger") and HNB will survive the Merger. If the Merger is completed, holders
of First Guaranty common stock will receive 1.33 shares of Hibernia common stock
for each First Guaranty share (the "Exchange Rate").
HIBERNIA CORPORATION
Hibernia is a Louisiana corporation registered under the Bank Holding
Company Act of 1956, as amended (the "BHCA"). As of December 31, 1998, Hibernia
had total consolidated assets of approximately $14 billion and shareholders'
equity of approximately $1.3 billion. As of that time, Hibernia was ranked, on
the basis of total assets, as the largest bank holding company headquartered in
Louisiana.
As of December 31, 1998, Hibernia had two banking subsidiaries: HNB and
Hibernia National Bank of Texas. HNB provides retail and commercial banking
services through approximately 203 banking offices throughout Louisiana.
Hibernia National Bank of Texas provides retail and commercial banking services
through approximately 25 banking offices in 17 Texas counties. As of December
31, 1998, HNB was the largest bank headquartered in Louisiana.
Effective January 1, 1999, Hibernia National Bank of Texas was merged
into HNB which survived the merger. HNB will carry on the business previously
conducted by Hibernia National Bank of Texas.
From time to time, Hibernia investigates and holds discussions and
negotiations in connection with possible mergers or similar transactions with
other financial institutions. On July 1, 1998, Hibernia completed its merger
with Peoples Holding Corporation, the holding company of Peoples Bank & Trust
Company headquartered in Minden, Louisiana. On March 8, 1999, Hibernia completed
its merger with MarTex Bancshares, Inc., the holding company of First Service
Bank headquartered in Marshall, Texas.
On December 1, 1998, Hibernia announced that it had entered into an
agreement to acquire four branches in Texas from Chase Manhattan Corp. for $87
million. Hibernia will acquire $452 million in deposits and will take over $1.3
billion in managed assets which include money in trust or personal asset
accounts. The acquisition of the branches is subject to regulatory approval and
is expected to close in the second quarter of 1999. Shareholders of First
Guaranty will not have the right to vote on this acquisition or any similar
transaction.
Hibernia expects to pursue other possible acquisition opportunities and
intends to continue to pursue such opportunities in the near future. Any
transactions may be entered into before or after the merger. The terms of any
future transactions cannot be predicted at this time. Also, future transactions
would be subject to regulatory approval and the approval of shareholders of the
acquired institution if required by law.
On March 11, 1999, Hibernia reported that it expected to add $18
million to its planned $12 million loan loss provision in the first quarter of
1999, bringing the total first-quarter loan loss provision to $30 million. The
increase is primarily related to one credit consisting of unsecured loans to a
large commercial customer which Hibernia has served with both lending and
deposit services for more than 25 years and which recently filed for bankruptcy
protection. Also affecting the loan loss provision is a loss on a loan made to a
company that experienced internal fraud. That loan had been placed on nonaccrual
status in the fourth quarter of 1998 and was disposed of completely through sale
and charge-off during the first quarter of 1999, as planned.
Hibernia further reported on March 11, 1999 that it expects to report
first-quarter earnings per share, assuming dilution, that are approximately
$0.10 lower than the $0.28 consensus estimate of analysts. This reduction
consists of approximately $0.03 per share for costs related to Hibernia's merger
with MarTex Bancshares, Inc. and approximately $0.07 per share for the
additional loan loss provision.
Hibernia also reported that looking ahead to additional March 31, 1999
results that it believes that nonperforming assets could be up as much as $25
million compared to December 31, 1998. Hibernia projects the reserve for
possible loan losses as a percentage of total loans to be 1.44% at March 31,
1999, compared to 1.28% at year-end 1998 and 1.39% at March 31, 1998. Reserves
as a percentage of nonperforming loans are expected to total approximately 230%
at March 31, 1999, compared to 319% at year-end 1998 and 425% at March 31, 1998.
Consistent with its policy, at year-end 1998, Hibernia had no commercial loans
90 days or more past due that were not on nonaccrual status. Hibernia expects to
continue to adhere to this policy.
The principal executive offices of Hibernia are located at 313
Carondelet Street, New Orleans, Louisiana 70130, and its telephone number is
(504) 533-3333. For additional information concerning the business and financial
condition of Hibernia, please refer to Hibernia's reports incorporated herein by
reference. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE".
SELECTED FINANCIAL DATA
The closing market price per share of Hibernia common stock on the NYSE
on July 29, 1998 was $19.0625. (That day was the last business day before
Hibernia and First Guaranty announced their proposed Merger.) The parties do not
know what the market price of Hibernia common stock will be on the Closing Date.
SELECTED FINANCIAL DATA OF HIBERNIA
The following table sets forth certain consolidated financial
information for Hibernia. This information is based on the consolidated
financial statements and related notes of Hibernia contained in its Annual
Report on Form 10-K for the year ended December 31, 1998. See "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE".
<PAGE>
<TABLE>
<CAPTION>
HIBERNIA CORPORATION
SELECTED FINANCIAL INFORMATION
Year Ended December 31
- ----------------------------------------------------------------------------------------------------------------------------------
Unaudited ($ in thousands, except per share amounts) 1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net interest income $ 530,534 $ 482,036 $ 422,269 $371,360 $ 348,714
Income from continuing operations 178,629 144,796 127,893 146,206 117,072
Per common share:
Income from continuing operations 1.12 0.90 0.83 0.96 0.76
Income from continuing operations -
assuming dilution 1.10 0.89 0.82 0.95 0.76
Cash dividends 0.375 0.33 0.29 0.25 0.19
Book value 7.94 7.15 6.41 5.93 4.92
SELECTED PERIOD-END BALANCES
Debt 805,689 506,548 57,192 36,744 23,461
Total assets 14,011,531 12,388,184 10,730,936 9,017,639 8,502,277
</TABLE>
<PAGE>
FIRST GUARANTY
First Guaranty is a Louisiana banking corporation. As of December 31,
1998, First Guaranty had total assets of $245 million and shareholders' equity
of $19.4 million. First Guaranty has six offices, all located in Tangipahoa
Parish in southeast Louisiana. First Guaranty engages in retail and commercial
banking services, including taking deposits and extending secured and unsecured
credit.
The principal offices of First Guaranty are located at 400 East Thomas
Street, Hammond, Louisiana, 70401-3320 and its telephone number is (504)
375-0300. Additional information concerning the business of First Guaranty and
its financial condition is included below under the heading "CERTAIN INFORMATION
CONCERNING FIRST GUARANTY", "FIRST GUARANTY FINANCIAL STATEMENTS FOR THE YEARS
ENDED DECEMBER 31, 1998 AND1997" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE TWELVE MONTHS ENDED
DECEMBER 31, 1998 AND 1997".
SELECTED FINANCIAL DATA OF FIRST GUARANTY
The following selected financial information of First Guaranty with
respect to the five-year period ended December 31, 1998 has been derived from
the financial statements of First Guaranty. The information set forth below
should be read in conjunction with First Guaranty's financial statement, the
notes thereto, and First Guaranty's Management's Discussion and Analysis of
Financial Condition and Results of Operations included elsewhere in this proxy
statement/prospectus.
<PAGE>
<TABLE>
<CAPTION>
FIRST GUARANTY BANK
SELECTED FINANCIAL INFORMATION
Year Ended December 31
- -----------------------------------------------------------------------------------------------------------------------------------
($ in thousands, except per share amounts) 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net interest income $11,182 $10,428 $ 9,827 $9,355 $ 8,284
Income from continuing operations 3,401 3,366 3,301 2,051 1,729
Per common share:
Income from continuing operations 1.04 1.03 1.01 0.62 0.57
Income from continuing operations -
assuming dilution 1.04 1.03 1.01 0.62 0.57
Cash dividends 0.40 0.40 0.34 0.28 0.20
Book value 5.68 5.04 4.41 3.75 3.35
SELECTED PERIOD-END BALANCES
Debt - - - - -
Total assets 245,329 223,537 198,064 184,311 167,990
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST GUARANTY BANK
QUARTERLY INCOME RESULTS
- --------------------------------------------------------------------------------------------------------------------------
Unaudited ($ in thousands, except per share amounts)
- --------------------------------------------------------------------------------------------------------------------------
3/31/98 6/30/98 9/30/98 12/31/98
------------------ ----------------- -----------------
- -----------------
<S> <C> <C> <C> <C>
Interest income $4,610 $4,787 $4,881 $4,900
Net interest income 2,716 2,861 2,762 2,843
Net income 923 912 930 636
Net income per share 0.28 0.28 0.29 0.19
- --------------------------------------------------------------------------------------------------------------------------
3/31/97 6/30/97 9/30/97 12/31/97
------------------ ----------------- -----------------
- -----------------
<S> <C> <C> <C> <C>
Interest income $4,106 $4,309 $4,466 $4,480
Net interest income 2,464 2,609 2,707 2,648
Net income 781 783 866 936
Net income per share 0.24 0.24 0.27 0.28
</TABLE>
<PAGE>
PRO FORMA COMBINED SELECTED FINANCIAL INFORMATION (UNAUDITED)
The following table sets forth certain unaudited pro forma combined
selected financial information for Hibernia and First Guaranty. The pro forma
information, which reflects the Merger using the pooling-of-interests method of
accounting, is presented for informational purposes only. The results shown here
are not necessarily indicative of the actual results that might have occurred if
the Merger had been completed at the beginning of the periods presented. Also,
this information is not necessarily indicative of results that might be achieved
in the future if the Merger is completed. See "PRO FORMA FINANCIAL INFORMATION"
contained elsewhere herein.
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA HIBERNIA CORPORATION*
PRO FORMA COMBINED SELECTED FINANCIAL INFORMATION
Year Ended December 31
- -------------------------------------------------------------------------------------------------------------
Unaudited ($ in thousands, except per share amounts) 1998 1997 1996
-----------------------------------------
<S> <C> <C> <C>
Net interest income $ 541,716 $ 492,464 $ 432,096
Income from continuing operations 182,030 142,206 131,194
Per common share:
Income from continuing operations 1.11 0.90 0.83
Income from continuing operations -
assuming dilution 1.09 0.89 0.82
Cash dividends 0.375 0.33 0.29
Book value 7.85 7.07 6.33
SELECTED PERIOD-END BALANCES
Debt 805,689 506,548 57,192
Total assets 14,254,857 12,611,726 10,928,883
- ----------
* Includes Hibernia Corporation and First Guaranty Bank
</TABLE>
<PAGE>
COMPARATIVE PER SHARE INFORMATION (UNAUDITED)
The following table sets forth for Hibernia common stock and First
Guaranty common stock certain unaudited pro forma combined and unaudited pro
forma equivalent per share financial information for the years ended December
31, 1998, 1997 and 1996. Information under the column entitled "Hibernia
Corporation" is based on Hibernia's Annual Report on Form 10-K for the year
ended December 31, 1998. Information under the column entitled "First Guaranty"
is based on, and should be read in conjunction with, the historical financial
statements and related notes and Management's Discussion and Analysis of
Financial Condition and Results of Operations of First Guaranty contained
elsewhere in this proxy statement/prospectus.
Information under the column entitled "Pro Forma Hibernia Corporation
(with First Guaranty Bank)" is based upon the pro forma financial statements and
related notes contained elsewhere herein. Such pro forma combined information,
which reflects the Merger, is presented for informational purposes only and
should not be construed as indicative of the actual operations that would have
occurred had the Merger been completed at the beginning of the periods indicated
or that may be obtained in the future. The pro forma combined information gives
effect to the issuance, in each of the periods presented, of 1.33 shares of
Hibernia common stock for each outstanding share of First Guaranty common stock.
The information under the column entitled "First Guaranty Bank Pro
Forma Equivalent" is derived by multiplying the amount contained in the column
entitled "Pro Forma Hibernia Corporation (with First Guaranty Bank)" by 1.33,
the Exchange Rate for purposes of this pro forma presentation.
<PAGE>
<TABLE>
<CAPTION>
HIBERNIA CORPORATION AND FIRST GUARANTY BANK
COMPARATIVE PER SHARE INFORMATION
- ------------------------------------------------------------------------------------------------------------------------------------
Unaudited
PRO FORMA
HIBERNIA FIRST HIBERNIA FIRST
CORPORATION GUARANTY CORPORATION GUARANTY BANK
BANK (WITH FIRST PRO FORMA
GUARANTY BANK) EQUIVALENT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Common Share:
Income from continuing operations:
For the year ended December 31,
1998 $1.12 $1.04 $1.11 $ 1.48
1997 0.90 1.03 0.90 1.20
1996 0.83 1.01 0.83 1.10
Income from continuing operations assuming dilution:
For the year ended December 31,
1998 $1.10 $1.04 $1.09 $ 1.45
1997 0.89 1.03 0.89 1.18
1996 0.82 1.01 0.82 1.09
Cash dividends:
For the year ended December 31,
1998 $0.375 $0.40 $0.375 $ 0.50
1997 0.33 0.40 0.33 0.44
1996 0.29 0.34 0.29 0.39
Book Value:
At December 31, 1998 $7.94 $5.68 $7.85 $10.44
</TABLE>
<PAGE>
MEETING INFORMATION
You have received this proxy statement/prospectus because the First
Guaranty Board of Directors is soliciting your proxy for the Special Meeting.
Each copy of this proxy statement/prospectus mailed to holders of First Guaranty
common stock is accompanied by a proxy card for use at the Special Meeting and
at any adjournment of the Special Meeting. The Special Meeting is scheduled to
be held at ____ p.m., local time, on ________________, 1999, at the main offices
of First Guaranty, 400 East Thomas Street, Hammond, Louisiana, 70401-3320, in
the Second Floor Auditorium. Only holders of record of First Guaranty common
stock at the close of business on the Record Date are entitled to vote at the
Special Meeting. At the Special Meeting, holders of First Guaranty common stock
will consider and vote upon the Merger Agreement and the Merger. Any other
matters that are properly brought before the Special Meeting or any adjournment
of the Meeting also will be voted upon.
Please complete, date and sign the accompanying proxy card and return
it promptly in the enclosed, postage-paid envelope.
SOLICITATION AND REVOCATION OF PROXIES
If you have delivered a proxy for the Meeting, you may revoke it any
time before it is voted by attending the Special Meeting and voting in person.
You also may give notice in writing to the Secretary of First Guaranty before
the Special Meeting that you are revoking your proxy. Finally, you may submit a
completed and signed proxy card bearing a date later than your initial proxy and
if it is received before the Special Meeting, the later-dated proxy will be
voted. Proxy cards received at or before the Special Meeting and not
subsequently revoked will be voted as directed with respect to the Merger
Agreement and the Merger (either "FOR", "AGAINST" or "ABSTAIN"). If instructions
are not given, executed proxy cards will be voted FOR approval of the Merger
Agreement and the Merger. If any other matters are properly presented at the
Special Meeting for consideration, the persons named in the proxy card will have
discretionary authority to vote on those matters. The First Guaranty Board is
not aware of any matter to be presented at the Special Meeting other than the
proposal to approve the Merger and the Merger Agreement.
The cost of soliciting proxies from First Guaranty's shareholders will
be borne by First Guaranty, except that Hibernia will bear all expenses incurred
in printing this proxy statement/prospectus.
Hibernia intends to use services of Chase Mellon Shareholder Services,
a professional proxy solicitation firm, to help solicit proxies for the meeting
at a cost of approximately $15,000 plus individual solicitation and
out-of-pocket expenses.
FIRST GUARANTY SHAREHOLDERS SHOULD NOT FORWARD ANY STOCK CERTIFICATES WITH
THEIR PROXY CARDS. IF THE MERGER IS APPROVED, SHAREHOLDERS WILL RECEIVE
INSTRUCTION REGARDING THE EXCHANGE OF THEIR STOCK CERTIFICATES AFTER THE MERGER
HAS BEEN CONSUMMATED.
QUORUM; VOTE REQUIRED; RECORD DATE
A majority of the outstanding shares of First Guaranty common stock
constitutes a quorum for purposes of the Special Meeting. The affirmative vote
of the holders of two-thirds of the issued and outstanding shares of First
Guaranty common stock is required to approve the Merger and the Merger
Agreement. Votes may be cast in person or by proxy for the Special Meeting. The
record date for the Special Meeting is __________, 1999 (the "Record Date").
Shareholders of record as of the close of business on the Record Date are
entitled to notice of the Special Meeting and to vote at the Meeting. As of the
Record Date, there were 3,056,641 shares of First Guaranty common stock
outstanding and entitled to vote at the Special Meeting. Each share of First
Guaranty common stock is entitled to one vote at the Special Meeting.
Shares of First Guaranty common stock that are present in person or by
proxy, regardless of whether they are actually voted on the Merger Agreement and
the Merger, will be counted as present for the purpose of determining a quorum.
An "abstention" will have the same effect as a vote "against" the Merger
Agreement and the Merger (except that shares voted as abstentions are not
entitled to exercise dissenters' rights unless the holder has given notice in
writing at or before the Special Meeting that the holder dissents from the
Merger, because dissenters' rights are available only to shareholders that
actually vote (against) the Merger Agreement and the Merger or give such written
notice in writing of their objection thereto). Similarly, shares present but not
voted by brokers with discretionary voting authority (so called "broker
non-votes") will have the same effect as "abstentions".
As of the Record Date, the directors and executive officers of First
Guaranty beneficially owned a total of 1,467,787 shares of First Guaranty common
stock, or 48% of the issued and outstanding shares of First Guaranty common
stock. Mr. Reynolds, who owns 966,096 shares of First Guaranty common stock or
31.6% of the issued and outstanding shares, agreed in the agreement settling
litigation involving Hibernia, HNB, Mr. Reynolds and First Guaranty (the
"Settlement Agreement") and in a non-competition and lock-up agreement to vote
his shares in favor of the Merger Agreement and the Merger at the Special
Meeting. See "CERTAIN INFORMATION CONCERNING FIRST GUARANTY - Litigation and
Settlement Agreement." However, if Keefe, Bruyette withdraws its opinion that
the Exchange Rate is fair, from a financial point of view, to the holders of
First Guaranty common stock or if Mr. Reynolds is legally required to abstain
from voting or to vote against the Merger and the Merger Agreement in the
opinion of his counsel, he is not required to vote in favor of the Merger and
the Merger Agreement. The remaining 13 directors of First Guaranty beneficially
owning 501,691 shares of First Guaranty common stock, or 16.4% of the issued and
outstanding shares of First Guaranty common stock, were requested to agree to
the vote in favor of the Merger Agreement and the Merger but did not agree to do
so and have indicated an intention as of the Record Date to vote their shares
against the Merger Agreement and the Merger.
Under the Articles of Incorporation of First Guaranty, holders of First
Guaranty preferred stock are not entitled to notice of the Special Meeting and
are not entitled to vote on either the proposal to approve the Merger Agreement
or the proposal to approve the Merger.
RECOMMENDATION BY MARSHALL REYNOLDS
In accordance with his commitment under the Settlement Agreement, Mr.
Reynolds recommends that you vote in favor of the Merger Agreement and the
Merger.
PROPOSED MERGER
This section of the proxy statement/prospectus describes certain
aspects of the Merger. The following description is not intended to include each
aspect of the Merger, but rather contains only the significant terms of the
Merger. This discussion is qualified in its entirety by reference to the Merger
Agreement, which is attached as Appendix A to this proxy statement/prospectus
and is incorporated herein by reference. We urge you to read the Merger
Agreement carefully and in its entirety.
GENERAL
If the holders of First Guaranty common stock approve the Merger
Agreement and the Merger and the other conditions to the completion of the
Merger are satisfied, First Guaranty will be merged with and into HNB. At that
time, the separate existence of First Guaranty will cease. As soon as
practicable following the Effective Date, the operations previously conducted by
First Guaranty will be conducted under the name of HNB.
Hibernia will exchange shares of Hibernia common stock, plus cash
instead of any fractional share, for each outstanding share of First Guaranty
common stock as to which dissenters' rights have not been perfected and
exercised. Hibernia also will pay $1,030 cash, plus any accrued and unpaid
dividends on the First Guaranty Series B preferred stock, for each outstanding
share of First Guaranty preferred stock. Each share of Hibernia common stock
outstanding immediately before the effective date of the Merger will remain
outstanding and unchanged as a result of the Merger. See "Terms of the Merger",
below, for a discussion of Exchange Rate for the First Guaranty common stock.
BACKGROUND OF THE MERGER
At various times in the 1990's, Hibernia and First Guaranty discussed
informally Hibernia's possible acquisition of First Guaranty. In early 1998, Mr.
Reynolds, the chairman of the Board of Directors of First Guaranty, informally
requested of Chaffe & Associates, Inc., a financial advisor of First Guaranty
("Chaffe & Associates"), its suggestion as to a possible asking price for First
Guaranty. Chaffe & Associates suggested an asking price of $80 million.
At a meeting between Mr. Reynolds and Stephen A. Hansel, the President
and Chief Executive Officer of Hibernia Corporation, Hibernia offered to acquire
First Guaranty in a fixed exchange rate transaction in which the holders of
First Guaranty common stock would receive 1.33 shares of Hibernia common stock
for each share of First Guaranty common stock that they owned. Mr. Reynolds
presented this proposal to the Board of Directors of First Guaranty.
On March 26, 1998, First Guaranty's Board of Directors for the first
time gave formal consideration to the Hibernia proposal. Chaffe & Associates
presented an analysis of the value of First Guaranty and estimated the fairness
range for First Guaranty common stock to be between $60 and $68 million,
equivalent to a market price of Hibernia common stock of $14.76 to $16.73 per
share based on the Exchange Rate of 1.33 shares of Hibernia common stock for
each share of First Guaranty common stock. Chaffe & Associates advised the Board
that, in their opinion, the terms of the offer were preemptively fair to the
holders of First Guaranty common stock, that is, the offer was sufficiently
favorable that Chaffe & Associates believed it highly unlikely that any
potential acquiror would be willing at that time to pay an equal or greater
price, even if it had the capacity to do so. This analysis was based on a
closing price for Hibernia Stock on March 23, 1998 of $21 per share. At that
price, the Exchange Rate of Hibernia common stock for First Guaranty's stock
placed an aggregate value of the transaction to the holders of First Guaranty
common stock of $85.365 million. First Guaranty's Board decided to proceed with
further discussions with Hibernia. Officers for First Guaranty were instructed
to proceed with further discussions with Hibernia and to permit Hibernia to
proceed with a due diligence investigation of First Guaranty.
After the March 26 meeting of the First Guaranty Board, Hibernia and
First Guaranty negotiated the Merger Agreement. First Guaranty did not request a
provision in the Merger Agreement that allowed First Guaranty to terminate
Hibernia's proposed acquisition of First Guaranty if the price of Hibernia
common stock dropped below a certain price. Instead, First Guaranty's obligation
to go forward with the Merger was conditioned not only on shareholder approval
but also on its receipt of a fairness opinion of its financial advisor both
before mailing this proxy statement/prospectus and before closing.
On July 28, 1998, at a special meeting of the Board of Directors of
First Guaranty, the Board reviewed and discussed a draft of the Merger
Agreement. Chaffe & Associates made another presentation to the Board. In its
oral report, Chaffe & Associates advised that since its presentation at the
March 26, 1998 meeting of the Board of Directors, it had adjusted its valuation
approach to give most weight to values derived by comparisons to the earnings
multiples of selected merger peer groups. Due in large part to that change in
emphasis, it raised the fairness range from its original estimate of $60 to $68
million to a fairness range of $65 and $75 million, equivalent to a market price
of Hibernia common Stock of $15.98 to $18.45 per share based on an Exchange Rate
of 1.33 shares of Hibernia common stock for each share of First Guaranty common
stock. Chaffe & Associates expressed their view that although the price of
Hibernia common stock had declined as of July 24, 1998 to $19.12 per share or
total transaction value of $77.723 million to the holders of First Guaranty
common stock, the stock price had averaged $20.37 per share in the period
between March 26 and July 24 and the value of the transaction at those prices
had averaged $82.8 million and the transaction remained preemptively fair from a
financial point of view to the holders of First Guaranty common stock. The Board
then accepted the fixed exchange rate offer of Hibernia and authorized entering
into the Merger Agreement with Hibernia. On July 30, 1998, the parties signed
the Merger Agreement. The parties then began preparation of materials necessary
to obtain required regulatory and shareholder approval.
Since 1994, Hibernia has completed 22 bank mergers. In the process of
acquiring those banks, Hibernia has developed procedures designed to facilitate
the flow of information between Hibernia and the banks which it intends to
acquire. It is Hibernia's belief that this sharing of information assists
Hibernia in planning for the transition to Hibernia of the operations of the
acquired bank after the completion of the merger and enables Hibernia to provide
reliable service to the customers of the acquired bank after the completion of
the merger.
In August, 1998, Hibernia, consistent with its past practices in other
bank acquisitions, began to request information from First Guaranty and schedule
meetings with management of First Guaranty to facilitate the transition of the
business of First Guaranty to Hibernia upon completion of the Merger. In August,
representatives of Hibernia and First Guaranty met and began to exchange
information.
During August, 1998, the United States stock market experienced a
significant decline. As examples, during August, 1998 the Dow Jones Industrial
Average declined 15% and the Standard & Poors 500 Index declined 14.5%. The
price of Hibernia common stock declined 28.5% during August. On August 27, 1998,
at a regularly scheduled meeting of the Board of Directors, the Board determined
that the value of the transaction to the shareholders of First Guaranty had
declined to such an extent that the Board was no longer of the belief that the
transaction was fair to the shareholders from a financial point of view. The
Board then authorized its chairman, Mr. Reynolds, to explore a voluntary mutual
termination of the Merger Agreement.
On September 6, 1998, Mr. Reynolds and Mr. Hansel met. At that meeting, Mr.
Reynolds requested that Hibernia consider a termination of the transaction by
mutual consent of the parties and Mr. Hansel expressed his concerns that
Hibernia believed that First Guaranty was not responding to requests for
information from Hibernia. In response to Mr. Reynolds' request, Mr. Hansel
advised Mr. Reynolds that Hibernia wanted First Guaranty to proceed to a
shareholder vote on the Merger.
The meeting of September 6 was followed by a meeting on September 8,
1998 between counsel for the parties in which Mr. Reynolds' request for a mutual
termination was reiterated by First Guaranty's counsel. At that meeting,
Hibernia's counsel advised First Guaranty's counsel that Hibernia intended to
proceed with the Merger. The meeting of September 8 was followed, in turn, by a
letter dated September 14, 1998, from counsel for Hibernia to counsel for First
Guaranty confirming that Hibernia wished to proceed with the Merger.
In the second week of September, Hibernia believes that it began to
encounter delays in receiving requested information from First Guaranty. In
September, First Guaranty advised Hibernia that it believed that, while it was
obligated to cooperate toward bringing the Merger to a vote of its shareholders,
it had no obligation, before a favorable vote on the Merger by First Guaranty
shareholders, to share sensitive competitive information not necessary for the
completion of Hibernia's due diligence. Hibernia and First Guaranty thereafter
began to disagree over the type of information that was to be provided prior to
the Special Meeting of First Guaranty's shareholders. First Guaranty supplied
less information than Hibernia requested and which Hibernia believed was
necessary in order for the Merger to be completed.
On September 17, 1998, at a regular meeting of the Board of Directors
of First Guaranty, the Board reviewed with counsel the obligations of First
Guaranty under the Merger Agreement and the Board of Directors' fiduciary
obligations with respect to making a recommendation to the shareholders of First
Guaranty with respect to the shareholder vote on the Merger. The Board decided
to consider the matter more fully at a special meeting to be called for that
purpose.
On September 22, 1998, Hibernia and HNB filed a lawsuit (the
"Litigation") against First Guaranty and Mr. Reynolds alleging that First
Guaranty Bank had engaged in actions constituting an anticipatory breach of the
Merger Agreement and alleging that Mr. Reynolds had engaged in actions
constituting tortious interference with contractual relations. Hibernia and HNB
requested that the court issue a preliminary and permanent injunction requesting
First Guaranty and Mr. Reynolds (1) to perform specifically First Guaranty's
obligations under the Merger Agreement, (2) to cease and desist further conduct
undermining or likely to undermine the completion of the Merger, and (3) to
employ their best efforts to assure that all actions necessary to complete the
Merger were conducted in a timely fashion, or alternatively, for damages against
First Guaranty and Mr. Reynolds. First Guaranty and Mr. Reynolds filed an answer
denying the allegations of Hibernia and HNB.
On September 24, 1998, at a special meeting of the Board of Directors
of First Guaranty, the Board considered both the status of the transaction and
the Litigation. Chaffe & Associates made another presentation to the Board.
Based on the closing price of Hibernia common stock on September 22, 1998 of $15
per share, which placed an aggregate value of the transaction to the holders of
First Guaranty common stock of approximately $61 million, Chaffe & Associates
informed the Board that it could not have issued a fairness opinion as of
September 24, 1998, if called upon to do so. By a vote of 10-1, the Board of
Directors of First Guaranty concluded that the proposed Merger had ceased at
that time to be in the best interest of the holders of First Guaranty common
stock. The Board then instructed the officers of First Guaranty to continue to
discharge the contractual obligations of First Guaranty under the Merger
Agreement but to seek at the same time Hibernia's approval of a mutual
termination of the Merger Agreement.
After two months of discovery in the Litigation, First Guaranty,
Hibernia, HNB and Mr. Reynolds during December 1998 entered into settlement
discussions. First Guaranty, Hibernia, HNB and Mr. Reynolds signed the
Settlement Agreement on December 30, 1998, a copy of which is attached to this
proxy statement/prospectus as Appendix B. Under the Settlement Agreement, First
Guaranty and Mr. Reynolds agreed to allow the shareholders of First Guaranty to
decide whether or not to proceed with the Merger. First Guaranty agreed to
include in this proxy statement/prospectus the fairness opinions of Keefe,
Bruyette & Woods, Inc. ("Keefe, Bruyette"), who were to be hired by First
Guaranty at Hibernia's expense, and National Capital Corporation ("National
Capital"), who were to be hired by Hibernia at its own expense, to permit Keefe,
Bruyette and National Capital to make presentations to the First Guaranty Board
of Directors and to extend the deadline for the completion of the Merger to a
date no later than May 31, 1999. First Guaranty also agreed to send a letter to
all directors of First Guaranty requesting them to sign lock-up and
non-competition agreements committing themselves to vote their shares in favor
of the Merger. Mr. Reynolds agreed to sign a lock-up and non-competition
agreement thereby agreeing to vote his shares in favor of the Merger and further
agreed to recommend in this proxy statement/prospectus that the shareholders
vote in favor of the Merger. Hibernia and HNB agreed that, upon First Guaranty's
compliance with the Settlement Agreement, they would dismiss the Litigation with
prejudice following a shareholder vote in favor or against the Merger. See
"CERTAIN INFORMATION CONCERNING FIRST GUARANTY - Litigation and Settlement
Agreement."
On January 6, 1999, the Board of Directors of First Guaranty began a
meeting to receive and consider presentations made by Chaffe & Associates, First
Guaranty's financial advisor, as well as presentations made by Keefe, Bruyette,
National Capital, and Mr. Hansel, as agreed to by First Guaranty in the
Settlement Agreement, and to vote on what recommendation, if any, would be made
to the shareholders of First Guaranty in this proxy statement/prospectus
regarding the Merger Agreement and the Merger. The meeting began at 9 a.m. and
continued until 4 p.m., when it was adjourned to 9 a.m. the next morning. The
Board of Directors of First Guaranty reconvened its meeting on January 7, 1999
and received a further report from Chaffe & Associates both with respect to the
presentations made by Keefe, Bruyette and National Capital and with respect to
Chaffe & Associates' recommendation as financial advisor to the First Guaranty
Board of Directors on to the Merger Agreement and the Merger. The First Guaranty
Board of Directors then voted unanimously, with Mr. Reynolds, as Chairman, not
voting, to submit the matter to vote of the shareholders without recommendation.
In making its decision to withhold any recommendation, the Board of
Directors relied on the advice of Chaffe & Associates, its financial advisor,
and also gave special consideration to the following:
. Chaffe & Associates advised that, although the consideration to be
received in the Merger by the holders of First Guaranty common stock
was fair to them from a financial point of view, based on then current
market prices for Hibernia common stock, the consideration was at the
low end of the fairness range. Chaffe & Associates further advised the
Board that the Merger was not a transaction that Chaffe & Associates
would advise the Board of Directors of First Guaranty to recommend to
the shareholders because, in their view, the value of the consideration
to be received in the Merger was near the low end of the fairness range
based on the average daily closing price of Hibernia common stock for
the month of December, 1998 and for the three months ended December 31,
1998 and the short term prospects for Hibernia common stock were not
favorable.
. The fairness opinions and presentations made by Chaffe & Associates,
Keefe, Bruyette and National Capital to the effect that the
consideration to be received in the Merger by the holders of First
Guaranty common stock was fair to them from a financial point of view.
. The liquidity of Hibernia common stock which is traded on the New York
Stock Exchange compared to the relative illiquidity of the First
Guaranty common stock, particularly in the case of First Guaranty's
larger shareholders.
. The respective earnings of Hibernia and First Guaranty.
. The past performance and prospects of Hibernia common stock.
TERMS OF THE MERGER
If the holders of First Guaranty common stock approve the Merger
Agreement and the Merger and the other conditions to the completion of the
Merger are satisfied, the Merger will be completed on the date that the Office
of the Comptroller of the Currency ("OCC") issues a certificate of merger
relating to the Merger (the "Effective Date"). See "PROPOSED MERGER -
Representation and Warranties; Conditions to the Merger; Waiver" for a
discussion of the other conditions to completing the Merger.
On the Effective Date each outstanding share of First Guaranty common
stock, other than shares held by shareholders who exercise and perfect
dissenters' rights, automatically will convert into 1.33 shares of Hibernia
common stock. Shareholders who held First Guaranty common stock automatically
will be entitled to all of the rights and privileges afforded to holders of
Hibernia common stock at that time. However, the exchange of First Guaranty
stock certificates for certificates representing Hibernia common stock will
occur after the Effective Date.
YOU SHOULD NOT FORWARD YOUR STOCK CERTIFICATES TO FIRST GUARANTY OR
HIBERNIA AT THIS TIME. IF THE MERGER IS COMPLETED, YOU WILL RECEIVE INSTRUCTIONS
REGARDING THE EXCHANGE OF YOUR CERTIFICATES OF FIRST GUARANTY COMMON STOCK FOR
HIBERNIA COMMON STOCK.
For a discussion of the rights of dissenting shareholders, See
"PROPOSED MERGER - Rights of Dissenting Shareholders".
FINANCIAL ADVISORS
Three financial advisors made presentations on January 6, 1999 to the
First Guaranty Board of Directors: Chaffe & Associates, First Guaranty's
financial advisor; Keefe, Bruyette, hired by First Guaranty as part of the
settlement of the Litigation; and National Capital, hired by HNB and Hibernia.
Chaffe & Associates has been the exclusive financial advisor to the Board of
Directors and First Guaranty since 1990. As part of the settlement discussions,
First Guaranty agreed to select an investment banker to render an opinion for
inclusion in this proxy statement/prospectus on the fairness, from a financial
point of view, of the number of shares of Hibernia common stock to be exchanged
for each share of First Guaranty common stock (the "Merger Consideration"), and
Hibernia agreed to pay the fees of that investment banker. Hibernia submitted to
First Guaranty the names of 15 investment banking firms. Keefe, Bruyette was
selected by First Guaranty from that list. National Capital Corporation was
initially engaged by Hibernia and HNB in connection with the Litigation and,
thereafter, for the purpose of rendering a Fairness Opinion in connection with
the proposed Merger. The Fairness Opinions of Keefe, Bruyette and National
Capital are included in this Proxy Statement by reason of First Guaranty's
agreement to do so contained in the Settlement Agreement. The Board of Directors
of First Guaranty has received and considered the presentations of each of
Chaffe & Associates, Keefe, Bruyette and National Capital. Each of the three
financial advisors has rendered its opinion that the Merger Consideration to be
received by the holders of the First Guaranty common stock is fair to them from
a financial point of view. Copies of the opinions are attached to this proxy
statement/prospectus as Appendices C, D and E. At the same time, First
Guaranty's financial advisor, Chaffe & Associates, advised the First Guaranty
Board of Directors that in its view, although the consideration to be received
by the holders of the First Guaranty common stock was within the range of
fairness which Chaffe & Associates estimated to be between $65 million and $75
million, equivalent to a market price of Hibernia common stock of $15.98 and
$18.45, it was at the lower end of that range - $66 million based on the average
daily closing market price of Hibernia common stock of $16.24 for the month of
December 1998 or $65.6 million based on the average daily closing market price
of Hibernia common stock of $16.14 for the three months ended December 31, 1998.
Chaffe & Associates further advised that it could not, in the circumstances,
recommend the transaction to First Guaranty's board of directors because, in
their view, the value of the consideration to be received in the Merger was near
the low end of the fairness range and the short term prospects for Hibernia
Common Stock were not favorable. Keefe, Bruyette, on the other hand, described
the transaction as near the upper end of the transactions that Keefe, Bruyette
used in analyzing the Merger. National Capital's representative described the
consideration as average for his selected peer group.
First Guaranty's Financial Advisor
Chaffe & Associates was engaged by First Guaranty to advise its Board
of Directors with respect to the proposed Merger and the fairness, from a
financial point of view, of the consideration to be paid by Hibernia to the
holders of the First Guaranty common stock. On March 26, 1998, Chaffe &
Associates made their first formal presentation on the proposed Merger to the
First Guaranty Board of Directors. They presented an analysis of the value of
the First Guaranty and estimated the fairness range for First Guaranty common
stock to be between $60 and $68 million, equivalent to a market price for
Hibernia common stock of $14.76 and $16.73 per share. Based on a closing price
of $21 per share for Hibernia common stock on March 23, 1998, the Exchange Rate
of 1.33 shares of Hibernia common stock for one share of First Guaranty common
stock placed a value on First Guaranty common stock of $85.365 million in the
aggregate. Chaffe & Associates advised that in their opinion the terms of the
offer were preemptively fair to the holders of First Guaranty common stock that
is, the offer was sufficiently favorable that Chaffe & Associates believed it
highly unlikely that any potential acquiror would be willing at that time to pay
an equal or greater price, even if it had the capacity to do so.
At a meeting of the Board of Directors on July 28, 1998, Chaffe &
Associates expressed their view that the fairness range for the proposed
acquisition of First Guaranty common stock in the Merger was between $65 and $75
million, equivalent to a market price of Hibernia common stock of $15.98 and
$18.45 per share, and that, based on a closing price for Hibernia common stock
of $19.13 per share on July 24, 1998 and an average closing price of $20.38 per
share for the period between March 26 and July 24, which placed a value on the
transaction to the holders of First Guaranty common stock of $77.749 million and
$82.8 million, respectively, the transaction remained preemptively fair and in
the best interests of the holders of First Guaranty common stock.
At a meeting of the First Guaranty Board of Directors held on September
24, 1998, Chaffe & Associates made another presentation. Based on a closing
price on September 22, 1998 for Hibernia common stock of $15 per share and a
consequent aggregate value of $61 million for the consideration to be paid in
the Merger to the holders of First Guaranty common stock, Chaffe & Associates
advised the Board of Directors that the value of the consideration had declined
below the bottom end of the fairness range and that Chaffe & Associates would be
unable at that time to deliver a fairness opinion if called upon to do so.
On January 6, 1999, at a special meeting of the Board of Directors of
First Guaranty called to evaluate the fairness of the consideration to be
received in the proposed Merger and whether the proposed Merger was in the best
interests of the holders of First Guaranty common stock, Chaffe & Associates
reiterated its previously expressed opinion that, despite a significant
reduction in the number and size of bank merger transactions over the preceding
three months, the values implied in the reported transactions selected by Chaffe
& Associates as comparable to the proposed Merger had not changed since the
presentation they made on July 28, 1998 and that range of fairness remained
between $65 to $75 million, equivalent to a market price of Hibernia common
stock of $15.98 and $18.45 per share. With Hibernia stock averaging $15.97 a
share in the period between September 23 and December 24, 1998 and closing at $
17.38 a share on December 31, 1998, the value of the transaction to the holders
of First Guaranty common stock based on these prices was approximately $64.9 and
$70.6 million, respectively. At these prices, the transaction was within the
fairness range for the proposed acquisition of First Guaranty common stock and
Chaffe & Associates advised that the transaction was fair from a financial point
of view to the holders of First Guaranty common stock but was not sufficiently
favorable to cause Chaffe & Associates to advise that the Board should recommend
the transaction to its shareholders. Chaffe further advised that it believed HNB
to be an excellent and well run bank but lacked confidence in HNB's ability to
show near-term appreciation in the price of its stock.
Methods of valuation used by Chaffe & Associates in making its
evaluations and recommendations included three approaches: (1) comparable
publicly-traded banks or bank holding companies which values First Guaranty
common stock by reference to the market price of the common stock of comparable
institutions, plus an added control premium; (2) comparable transactions which
values First Guaranty common stock by reference to prices paid in merger
transactions for comparable institutions; and (3) dividend discount model which
values the present discounted value of a projected stream of dividends over a
period of one to four years, followed by the sale of the bank. The results
estimated through use of those varying methods are summarized in the table
included below:
<PAGE>
<TABLE>
<CAPTION>
FIRST GUARANTY BANK
Summary of Value Indications
<S> <C> <C> <C> <C> <C> <C> <C>
Comparable Comparable Transactions Selected Transactions
Publicly-Traded One Year Six Month
Companies US South US Asset ROAA ROAE
Price-Earnings $ 72,204,546 $ 76,567,780 $ 67,096,624 $ 76,084,027 $ 70,604,800 $ 55,012,907 $ 49,018,853
Price-to-Tangible $ 53,717,036 $ 60,320,025 $ 63,273,564 $ 56,292,795 $ 50,410,386 $ 63,606,221 $ 63,133,193
Book (Adjusted)
Price-to-Assets $ 61,694,676 $ 64,326,933 $ 65,356,137 $ 54,759,971 $ 53,840,262 $ 72,035,586 $ 66,169,334
Price-to-Deposits $ 63,477,658 $ 67,055,467 $ 67,915,407 $ 57,215,860 $ 61,777,695 $ 76,234,856 $ 72,490,066
Tangible Book N/A $ 57,788.084 $ 59,796,031 $ 48,755,846 $ 42,632,624 $ 58,394,251 $ 56,628,560
Premium
</TABLE>
<TABLE>
<CAPTION>
Dividend Discount Model
<S> <C> <C> <C> <C> <C>
Price-to-Earnings Multiple
Holding Period (Years) 17.0 20.0 23.0
1 $ 60,977,596 $ 63,174,987 $ 71,503,073 $ 74,079,760 $ 82,028,549 $ 84,984,533
2 $ 59,659,623 $ 63,987,114 $ 69,727,470 $ 74,793,646 $ 79,795,318 $ 85,600,178
3 $ 58,398,953 $ 64,791,925 $ 68,029,068 $ 75,501,101 $ 77,659,183 $ 86,210,277
4 $ 57,193,096 $ 65,589,485 $ 66,404,510 $ 76,202,182 $ 75,615,924 $ 86,814,879
</TABLE>
While Chaffe & Associates did not assign any specific weighting to the
different factors and methods, it did advise that it had given most weight to
those values derived by comparison to the earnings multiples of the merger peer
groups it had selected.
The fairness opinion of Chaffe & Associates (the "Chaffe & Associates
Fairness Opinion") is directed only to the question of whether the consideration
to be received by the First Guaranty shareholders under the Merger Agreement is
fair and equitable from a financial perspective and does not constitute a
recommendation to any First Guaranty shareholder to vote in favor of the Merger.
No limitations were imposed on Chaffe & Associates regarding the scope of its
investigation or otherwise by First Guaranty.
Based on the results of the various analyses described above, Chaffe &
Associates concluded that the Merger Consideration to be received by First
Guaranty shareholders under the Merger Agreement is fair from a financial
perspective to the common shareholders of First Guaranty.
Chaffe & Associates is entitled to receive fees in the amount of
$25,000, plus out-of-pocket expenses, for rendering the Chaffe & Associates
Fairness Opinion. In addition, as financial advisor to First Guaranty, Chaffe &
Associates is entitled to receive fees on the basis of its standard hourly rates
for time expended in connection with advising First Guaranty with respect to the
Merger, in rendering the Chaffe & Associates Fairness Opinion, and with respect
to the Litigation. The fees received by Chaffe & Associates in connection with
these services are not dependent or contingent on the closing of the Merger. It
is estimated that total fees payable to Chaffe & Associates in connection with
these matters will be approximately $300,000. In addition, First Guaranty has
agreed to indemnify Chaffe & Associates and its directors, officers and
employees, from liability in connection with the transaction, and to hold Chaffe
& Associates harmless from any losses, actions, claims damages, expenses or
liabilities related to any of Chaffe & Associate's acts or decisions made in
the absence of gross negligence or willful misconduct.
Opinions of Other Financial Advisors
KEEFE, BRUYETTE
As part of the settlement of the Litigation and under the Settlement
Agreement, a copy of which is attached to this proxy statement/prospectus as
Exhibit B, First Guaranty hired Keefe, Bruyette on December 22, 1998 to render a
fairness opinion as to the fairness of the Merger Consideration, from a
financial point of view, to the holders of First Guaranty common stock.
Under the terms of the Settlement Agreement, representatives of Keefe,
Bruyette attended the meeting of the First Guaranty Board held on January 6,
1999 at which the First Guaranty Board reviewed Keefe, Bruyette's fairness
opinion. At the January 6, 1999 meeting, Keefe, Bruyette rendered an oral
opinion (previously submitted in writing) that, as of December 28, 1998, the
Merger Consideration was fair to the holders of shares of First Guaranty Common
from a financial point of view.
The full text of Keefe, Bruyette's updated written opinion (the "Keefe,
Bruyette Fairness Opinion") is attached as Appendix D to this proxy
statement/prospectus and is incorporated herein by reference. The description of
the opinion set forth herein is qualified in its entirety by reference to
Appendix D. First Guaranty stockholders are urged to read the opinion in its
entirety for a description of the procedures followed, assumptions made, matters
considered, and qualifications and limitations on the review undertaken by
Keefe, Bruyette in connection therewith.
Keefe, Bruyette's opinion is directed to the First Guaranty Board and
addresses only the Exchange Rate. It does not address the underlying business
decision of the Board of Directors to proceed with the Merger and does not
constitute a recommendation to any First Guaranty shareholder as to how such
shareholder should vote at the Special Meeting with respect to the Merger or any
other matter related thereto.
Keefe, Bruyette has informed First Guaranty that in arriving at its
written opinion, Keefe, Bruyette, among other things: (1) reviewed First
Guaranty's Annual Reports on Form 10-K and related audited financial information
for the three fiscal years ended December 31, 1997 and certain of First
Guaranty's quarterly reports on Form 10-Q and related unaudited financial
information; (2) reviewed Hibernia's Annual Reports on Form 10-K and related
audited financial information for the three fiscal years ended December 31, 1997
and certain of Hibernia's quarterly reports on Form 10-Q and related unaudited
financial information; (3) reviewed certain limited financial information,
including financial budgets, relating to the respective businesses, earnings,
assets and prospects of First Guaranty and Hibernia furnished to Keefe, Bruyette
by senior management of First Guaranty and Hibernia; and; (4) conducted certain
limited discussions with members of senior management of First Guaranty and
Hibernia concerning the respective businesses, financial condition, earnings,
assets, liabilities, operations, regulatory condition, financial forecasts,
contingencies and prospects of First Guaranty and Hibernia and their respective
views as to the future financial performance of First Guaranty, Hibernia, and
the combined entity, as the case may be, following the Merger; (5) reviewed the
historical market prices and trading activity for First Guaranty common stock
and Hibernia common stock and compared them with that of certain publicly traded
companies which Keefe, Bruyette deemed to be relevant; (6) compared the
respective results of operations of First Guaranty and Hibernia with those of
certain companies which Keefe, Bruyette deemed to be relevant; (7) compared the
proposed financial terms of the Merger contemplated by the Merger Agreement with
the financial terms of certain other mergers and acquisitions which Keefe,
Bruyette deemed to be relevant; (8) considered, based upon information provided
by Hibernia's senior management, the pro forma impact of the Merger on the
earnings and book value per share, consolidated capitalization and certain
balance sheet and profitability ratios of Hibernia; (9) reviewed the Merger
Agreement; and (10) reviewed such other financial studies and analyses and
performed such other investigations and took into account such other matters as
Keefe, Bruyette deemed necessary.
In preparing its opinion, Keefe, Bruyette, with First Guaranty's
consent, assumed and relied on the accuracy and completeness of all financial
and other information supplied or otherwise made available to it by First
Guaranty and Hibernia, including that contemplated in the numbered items above,
and Keefe, Bruyette has not assumed responsibility for independently verifying
such information or undertaken an independent evaluation or appraisal of the
assets or liabilities, contingent or otherwise, of First Guaranty or Hibernia or
any of their subsidiaries, nor has it been furnished any such evaluation or
appraisal. Keefe, Bruyette is not an expert in the evaluation of allowances for
loan losses, and, with First Guaranty's consent, it has not made an independent
evaluation of the adequacy of the allowance for loan losses of First Guaranty or
Hibernia, nor has it reviewed any individual credit files relating to First
Guaranty or Hibernia, and, with First Guaranty's consent, it assumed that the
respective aggregate allowances for loan losses for both First Guaranty and
Hibernia are adequate to cover such losses and will be adequate on a pro forma
basis for the combined entity. In addition, it has not conducted any physical
inspection of the properties or facilities of First Guaranty or Hibernia. With
First Guaranty's consent, Keefe, Bruyette also assumed and relied upon the
senior management of First Guaranty and Hibernia as to the reasonableness and
achievability of the financial budgets and the assumptions and bases of the
budgets provided to, and discussed with, Keefe, Bruyette. In that regard, Keefe,
Bruyette has assumed with First Guaranty's consent that such forecasts,
including without limitation, financial forecasts, evaluations of contingencies
and operating synergies resulting from the Merger and projections regarding
under-performing and nonperforming assets, net charge-offs, adequacy of
reserves, future economic conditions and results of operations reflect the best
currently available estimates and judgments of the senior management of First
Guaranty and Hibernia and/or the combined entity, as the case may be. Keefe,
Bruyette's opinion is predicated on the Merger receiving the tax and accounting
treatment contemplated in the Merger Agreement. Keefe, Bruyette's opinion was
necessarily based on economic, market and other conditions as in effect on, and
the information made available to it as of, the date of its opinion.
Keefe, Bruyette's opinion was rendered without regard to the necessity
for, or level of, any restrictions, obligations, undertakings or divestitures
which may be imposed or required in the course of obtaining regulatory approval
for the Merger.
In connection with rendering its opinion dated December 28, 1998,
Keefe, Bruyette performed a variety of financial analyses, consisting of those
summarized below. The summary set forth below does not purport to be a complete
description of the analyses performed by Keefe, Bruyette in this regard,
although it describes all material analyses performed by Keefe, Bruyette. The
preparation of a fairness opinion involves various determinations as to the most
appropriate and relevant methods of financial analysis and the application of
these methods to the particular circumstances and, therefore, such an opinion is
not readily susceptible to a partial analysis or summary description.
Accordingly, notwithstanding the separate factors summarized below, Keefe,
Bruyette believes that its analyses must be considered as a whole and that
selecting portions of its analyses and factors considered by it, without
considering all analyses and factors, or attempting to ascribe relative weights
to some or all such analyses and factors, could create an incomplete view of the
evaluation process underlying Keefe, Bruyette's opinion.
In performing its analyses, Keefe, Bruyette made numerous assumptions
with respect to industry performance, general business and economic conditions
and other matters, many of which are beyond the control of Hibernia, First
Guaranty and Keefe, Bruyette. The analyses performed by Keefe, Bruyette are not
necessarily indicative of actual values or future results, which may be
significantly more or less favorable than suggested by such analyses. Such
analyses were prepared solely as part of Keefe, Bruyette's analysis of the
fairness to the stockholders of First Guaranty of the Exchange Ratio and were
provided to the First Guaranty Board in connection with the delivery of Keefe,
Bruyette's opinion. Keefe, Bruyette gave the various analyses described below
approximately similar weight and did not draw any specific conclusions from or
with regard to any one method of analysis. With respect to the comparison of
selected companies analysis and the analysis of selected merger transactions
summarized below, no company utilized as a comparison is identical to First
Guaranty or Hibernia. Accordingly, an analysis of comparable companies and
comparable business combinations is not mathematical; rather it involves complex
considerations and judgments concerning the differences in financial and
operating characteristics of the companies and other factors that could affect
the public trading values or announced merger transaction values, as the case
may be, of the companies concerned. The analyses do not purport to be appraisals
or to reflect the process at which First Guaranty and Hibernia might actually be
sold or the prices at which any securities may trade at the present time or at
any time in the future. In addition, as described above, Keefe, Bruyette's
opinion is just one of many factors taken into consideration by the First
Guaranty Board.
The projections furnished to Keefe, Bruyette and used by it in certain
of its analyses were generated by a number of sources including the senior
management of First Guaranty and Hibernia, and by research equity analysts
estimating Hibernia's future earnings. First Guaranty and Hibernia do not
publicly disclose internal management projections of the type provided to Keefe,
Bruyette in connection with its review of the Merger, and as a result, such
projections were not prepared with a view towards public disclosure. The
projections were based on numerous variables and assumptions which are
inherently uncertain, including, without limitation, factors related to general
economic and competitive conditions, and accordingly, actual results could vary
significantly from those set forth in such projections.
The following is a summary of the material analyses presented by Keefe,
Bruyette to the First Guaranty Board on January 6, 1999 in connection with
Keefe, Bruyette's opinion.
Summary of Proposal. Keefe, Bruyette calculated the purchase price
multiples on two dates: at the announcement of the transaction and at year-end
1998. At announcement on July 29, 1998, the assumed per share purchase price was
$25.35, which was derived by multiplying the Exchange Rate of 1.33 by $19.06 for
Hibernia Common before the public announcement of the execution of the Merger
Agreement, and at year-end 1998, the price per share was $23.11, which was
derived by multiplying the Exchange Rate of 1.33 by $17.38, the last reported
sale price for Hibernia Common on December 31, 1998. The announcement and
current aggregate deal values to holders of First Guaranty Common were $77.50
million and $70.64 million, respectively. The announcement and year-end price to
stated book value multiples were 4.69 times and 4.27 times, respectively, the
announcement and year-end price to stated tangible book value multiples were
4.69 times and 4.27 times, respectively, the announcement and year-end price to
last twelve months earnings multiples were 22.55 times and 20.55 times,
respectively, the announcement and year-end price to estimated 1999 earnings
multiples were 20.39 times and 18.59 times, respectively, the announcement and
year-end price to asset ratios were 31.95% and 29.12%, respectively, and the
announcement and year-end core deposit premium ratios were 38.24% and 33.94%,
respectively.
Analysis of Selected Merger Transactions. Keefe, Bruyette reviewed
certain financial data related to acquisitions of bank holding companies
announced after January 1, 1998 with announced deal values between $50 million
to $250 million. The first set (Group 1) was comprised of transactions where the
selling institution was based in the Southeast or Southwest and had less than $1
billion in total assets. Group 1 transactions included Southwest Bancorp of
Texas/Fort Bend Holding Co., Union Planters Corp./Ready State Bank, Regions
Financial/Arkansas Banking Co., Hibernia Corporation/MarTex Bancshares, First
American Corp./Middle Tennessee Bk., First Charter Corp./HFNC Financial Corp.,
BancFirst Corp./AmQuest Financial Corp., BancorpSouth Inc./Merchants Capital,
Colonial BancGroup/First Macon B&T, Synovus Financial/Community BK Cap Crp,
Regions Financial/Village Bankshares, Union Planters Corp./Transflorida Bank,
Regions Financial/Jacobs Bank, SouthTrust Corp./American Banks of Florida,
Hibernia Corporation/Peoples Holding Corp., Union Planters Corp./Merchant
Bcshs., Regions Financial/Etowah Bank, and Union Planters Corp./CB&T Inc.,
The second set (Group 2) was comprised of transactions where the
selling institution was based in the Southeast or Southwest and had a return on
average assets above 1.50%. Group 2 transactions included Fifth Third
Bancorp/South Florida BHC, Union Planters Corp./FSB Inc., Norwest Corp./First
National Bank, Alabama National/Community Finl Corp., One Valley Bcp of
WV/Summit Bankshares, Colonial BancGroup/FirstBank, Colonial BancGroup/First
Macon B&T, First American Corp./Peoples Bank, Synovus Financial/Georgia Bank &
Trust, National Commerce Bncp/First Community Bncp, Colonial BancGroup/CNB
Holding Co., Union Planters Corp./Transflorida Bank, First Liberty
Finl/Southland Bank Corp., Hibernia/Peoples Holding Corp., Premier
Bancshares/Button Gwinnett Finl and Union Planters Corp./Merchants Bancshares.
Keefe, Bruyette calculated median deal multiples for each of these
groups based on announcement date deal values and year-end deal values adjusted
by percentage change in buyer's stock price.
Hibernia/
First Guaranty Group 1 Group 2
Transaction Median Median
Announcement
Deal Price/Book Value 4.69x 2.73x 3.20x
Deal Price/Tangible Book Value 4.69x 2.92x 3.20x
Deal Price/Last Twelve Months Earnings 22.55x 22.23x 19.81x
Deal Price/Total Assets 31.95% 28.13% 32.65%
Core Deposit Premium 38.24% 25.66% 29.86%
Year-End
Deal Price/Book Value 4.27x 2.44x 2.69x
Deal Price/Tangible Book Value 4.27x 2.66x 2.69x
Deal Price/Last Twelve Months Earnings 20.55x 18.77x 16.01x
Deal Price/Total Assets 29.12% 23.78% 28.29%
Core Deposit Premium 33.94% 21.46% 24.37%
No company or transaction used as a comparison in the above analysis is
identical to First Guaranty, Hibernia or the Merger. Accordingly, an analysis of
the results of the foregoing is not mathematical; rather, it involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the companies and other factors that could affect the public
trading value of the companies to which they are being compared.
Selected Peer Group Analyses. Keefe, Bruyette compared the operating
performance and market performance of Hibernia based on various financial
measures of earnings performance, operating efficiency, capital adequacy and
asset quality and various measures of market performance, including market/book
values, price to earnings and dividend yields to those of a group of comparable
Southeast and Southwest bank holding companies. For purposes of such analysis,
the financial information used by Keefe, Bruyette was as of and for the quarter
ended September 30, 1998. Capital ratios, book value multiples and tangible book
value multiples were pro forma for recent acquisitions. Stock price information
was as of December 31, 1998. The operating and market performance peer group for
Hibernia consisted of SouthTrust Corp., Regions Financial Corp., Union Planters
Corp., AmSouth BanCorp., First American Corp., Compass Bancshares, Inc.,
Colonial BancGroup, Inc., Cullen/Frost Bankers, Inc., Trustmark Corp., Whitney
Holding Corp., BancorpSouth, Inc., and Hancock Holding Company. For purposes of
the earnings multiple calculations, all earnings estimates were consensus
estimates published by a nationally recognized earnings consolidator.
Hibernia Peer Group Median
Return on Average Assets 1.44% 1.24%
Return on Average Equity 14.63% 14.57%
Net Interest Margin 4.45% 4.22%
Efficiency Ratio 53.23% 56.78%
Equity/Assets 9.86% 8.45%
Tangible Equity/Tangible Assets 8.72% 7.24%
Loan Loss Reserve/Nonperforming Loans 410.00% 291.00%
Net Charge Offs/Average Loans 0.18% 0.24%
Nonperforming Assets/Loans + OREO 0.41% 0.65%
Price Change Since 7/29/98 -8.85% -8.03%
Beta vs. S&P 500 0.98 0.96
Market/Book 2.21x 2.35x
Market/Tangible Book 2.53x 2.65x
Price/1998 Earnings per Share 15.65x 16.08x
Price/1999 Earnings per Share 14.24x 14.48x
Dividend Yield 2.42% 2.27%
Keefe, Bruyette also compared the operating performance of First
Guaranty based on various financial measures of earnings performance, operating
efficiency, capital adequacy and asset quality to a group of bank holding
companies that Keefe, Bruyette selected as comparable. The First Guaranty peer
group included Louisiana, Texas, Mississippi and Arkansas bank holding companies
with between $200 million and $1 billion in total assets. Keefe, Bruyette also
compared First Guaranty to the Keefe, Bruyette BankBook Peer Group of 66 banks
covered by the Keefe, Bruyette Equity Research Department with total assets of
less than $2 billion and to the Keefe, Bruyette BankBook Composite Average for
all 187 banks included in the Keefe, Bruyette BankBook publication. For purposes
of such analysis, the financial information used by Keefe, Bruyette was as of
and for the quarter ended September 30, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Keefe, Bruyette Keefe, Bruyette
First Guaranty BankBook Peer BankBook Peer
First Guaranty Peer Group Group - Less Than Group - Composite
$2B
Return on Average Assets 1.50% 1.18% 1.23% 1.28%
Return on Average Equity 19.47% 14.00% 13.92% 14.76%
Net Interest Margin 4.84% 4.48% 4.44% 4.30%
Efficiency Ratio 54.97% 62.41% 60.08% 59.20%
Equity/Assets 7.69% 8.41% 8.84% 8.67%
Tangible Equity/Tangible Assets 7.69% 7.87% 8.12% 7.58%
Loan Loss Reserve/Nonperforming 356.00% 393.00% 234.00% 296.00%
Loans
Net Charge Offs/Average Loans 0.10% 0.15% 0.17% 0.27%
Nonperforming Assets/Loans + OREO 0.54% 0.62% 0.71% 0.64%
</TABLE>
Contribution Analysis. Keefe, Bruyette analyzed the relative
contribution of each of First Guaranty and Hibernia to the pro forma balance
sheet and income statement items of the combined entity, including assets, gross
loans, loan loss reserve, nonperforming assets, common equity, total equity,
deposits, quarter ended June 30, 1998 annualized net interest income, non
interest income, non interest expense, net income and estimated 1999 net income.
Keefe, Bruyette compared the relative contribution of such balance sheet and
income statement items with the estimated pro forma ownership of 2.5% for First
Guaranty based on an Exchange Rate of 1.33. The contribution showed that First
Guaranty would contribute approximately 1.8% of the combined assets, 1.5% of the
gross loans, 1.4% of the loan loss reserve, 2.2% of the nonperforming assets,
2.1% of the deposits, 1.4% of common equity, 1.3% of the total equity, 2.0% of
annualized quarter ended June 30, 1998 net interest income, 1.3% of annualized
quarter ended June 30, 1998 non interest income, 1.8% of annualized quarter
ended June 30, 1998 non interest expense, 1.9% of annualized quarter ended June
30, 1998 net income and 1.9% of estimated 1999 net income.
Discounted Cash Flow Analysis. Keefe, Bruyette estimated the present
value of the future cash flows that would accrue to a holder of a share of First
Guaranty common stock assuming the stockholder held the stock through the year
2003 and then sold it at the end of year 2003. This stand-alone analysis was
based on several assumptions, including earnings per share of $1.24 in 1999 and
7% - 15% earnings per share growth rate thereafter. A 37% dividend payout ratio
was assumed for First Guaranty through the year 2003. A terminal value was
calculated for 2003 by multiplying First Guaranty's projected 2003 earnings by a
price/earnings multiple of 17 to 21 times trailing earnings. The terminal
valuation and the estimated dividends were discounted at a rate of 12%,
producing a range of prices from $18 to $26 per share.
Keefe, Bruyette advised the Board of Directors of First Guaranty that
the discounted cash flow analysis is a widely-used valuation methodology but
noted that it relies on numerous assumptions, including asset and earnings
growth rates, dividend payout rates, terminal values and discount rates. The
analysis did not purport to be indicative of the actual values or expected
values of First Guaranty common stock.
Keefe, Bruyette has been retained by the Board of Directors of First
Guaranty as an independent contractor to act as financial adviser to First
Guaranty with respect to the Merger. Keefe, Bruyette as part of its investment
banking business, is continually engaged in the valuation of banking businesses
and their securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes. As specialists in the securities of banking companies, Keefe,
Bruyette has experience in, and knowledge of, the valuation of banking
enterprises. In the ordinary course of its business as a broker-dealer, Keefe,
Bruyette may, from time to time, purchase securities from, and sell securities
to, First Guaranty and Hibernia and as a market maker in securities Keefe,
Bruyette may from time to time have a long or short position in, and buy or
sell, debt or equity securities of Hibernia for Keefe, Bruyette's own account
and for the accounts of its customers.
First Guaranty, Hibernia and Keefe, Bruyette negotiated a letter
agreement dated December 22, 1998 between First Guaranty and Keefe, Bruyette
relating to the services to be provided by Keefe, Bruyette in connection with
the Merger. Under the agreement, First Guaranty agreed to pay Keefe, Bruyette a
fee on a basis that was in part contingent on whether it delivered a favorable
fairness opinion and whether the Merger is consummated: (1) $100,000 upon
mailing of this proxy statement/prospectus with a favorable fairness opinion and
(2) $100,000 if and when the Merger closes. Otherwise, it would be compensated
only on the basis of its time at its standard hourly rates. In addition, First
Guaranty also agreed to reimburse Keefe, Bruyette for reasonable out-of-pocket
expenses and disbursements incurred in connection with its retention and to
indemnify Keefe, Bruyette against certain liabilities, including liabilities
under the federal securities laws. Hibernia agreed in the Settlement Agreement
to reimburse First Guaranty to all costs and expenses billed to First Guaranty
by Keefe, Bruyette.
The Keefe, Bruyette Fairness Opinion is directed only to the questions
of whether the Merger Consideration is fair from a financial perspective and
does not constitute a recommendation to any First Guaranty shareholder to vote
in favor of the Merger. No limitations were imposed on Keefe, Bruyette regarding
the scope of its investigation, or otherwise, by First Guaranty.
Based on the results of the various analyses described above, Keefe,
Bruyette concluded that the Merger Consideration to be received by the holders
of First Guaranty common stock pursuant to the Merger is fair, from a financial
point of view, to the holders of First Guaranty common stock.
National Capital
Hibernia retained the services of National Capital initially to assist
Hibernia in connection with the Litigation and thereafter for the purpose of
rendering a fairness opinion with respect to the Merger based on the experience
of National Capital as a financial advisor in mergers and acquisitions of
financial institutions and its knowledge of financial institutions. On December
28, 1998, National Capital rendered a report to the First Guaranty Board of
Directors concerning the fairness of the Merger Consideration to the holders of
First Guaranty common stock.
On January 6, 1999, National Capital attended a meeting of the Board of
Directors of First Guaranty and rendered its fairness opinion (the "National
Capital Fairness Opinion") to the Board of Directors. The full text of National
Capital's written opinion is attached as Appendix E to this proxy
statement/prospectus and sets forth, among other things, assumptions made,
procedures followed and limitations on the review undertaken. First Guaranty
shareholders are urged to read the National Capital Fairness Opinion carefully
and its entirety. The National Capital Fairness Opinion is addressed to the
First Guaranty Board of Directors and may be relied upon by First Guaranty
shareholders but does not constitute a recommendation to any First Guaranty
shareholder as to how such shareholder should vote at the First Guaranty Special
Meeting.
Analysis of Selected bank merger transactions. National Capital
reviewed the consideration paid in recently announced transactions whereby
certain banks were acquired. Specifically, National Capital reviewed
transactions involving acquisitions of banks in the United States announced
between September 20, 1997 and December 8, 1998 which were not subsequently
terminated with seller total assets between $125 million and $400 million as of
the date of announcement, with equity capital to total asset ratio between 6.25%
and 10.00%, with year to date return on average assets between 1.20% and 2.00%;
and with non performing assets to total assets between 0% and 1.50%. This
criteria was developed and utilized in order to create a relatively large number
of comparable transactions with financial performance characteristics similar to
First Guaranty. It is National Capital's opinion that a significant number of
transactions are necessary in order to draw appropriate market inferences from
the data.
Five-year historical balance sheets, profit and loss statements and
performance ratios of each comparable transaction were then prepared and
synopsis tables were prepared for each financial measure containing each
comparable bank or bank holding company and First Guaranty. These tables were
then sorted in order to determine First Guaranty's rank within the comparable
transactions on each financial performance measure.
First Guaranty ranked 11th of 21 in total assets. First Guaranty ranked
10th of 21 in equity capital. First Guaranty ranked 13th of 21 in 1996-1997
total asset growth rate. First Guaranty ranked 16th of 20 in 1996-1997 earnings
growth rate. First Guaranty ranked 16th of 21 in 1993 - 1997 compound total
asset growth rate. First Guaranty ranked 16th of 21 in 1993 - 1997 total asset
growth in dollars. First Guaranty ranked 8th of 21 in 1993 - 1997 compound
growth rate of equity capital. First Guaranty ranked 8th of 21 in 1993 - 1997
growth of equity capital in dollars. First Guaranty ranked 12th of 21 in 1993 -
1997 compound earnings growth rate. First Guaranty ranked 4th of 21 in 1997
return on assets. First Guaranty ranked 3rd of 21 in 1997 return on equity.
First Guaranty ranked 13th of 21 in 1993 - 1997 average return on assets. First
Guaranty ranked 3rd of 21 in 1993 - 1997 average return on equity.
The composite rank for the financial performance measures of First
Guaranty were then computed on unweighted and weighted bases as summarized in
the table below:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
First Total Weighted
Measurement Guaranty Bank Observations Percentile Weight Average
--------------------------------- ------------- ------------ ---------- ------ -------
12/31/97 Total Assets 11 21 52% 8.0% 4%
12/31/97 Total Equity Capital 10 21 48% 8.0% 4%
96-97 Asset Growth Rate 13 21 62% 5.0% 3%
96-97 Earnings Growth Rate 16 20 80% 5.0% 4%
5 Year Asset Growth Rate 16 21 76% 9.0% 7%
5 Year Capital Growth Rate 8 21 38% 8.0% 3%
5 Year Compound Earnings
Growth Rate 12 21 57% 9.0% 5%
1997 ROA 4 21 19% 12.0% 2%
1997 ROE 4 21 19% 12.0% 2%
5 Year Average ROA 4 20 20% 12.0% 2%
5 Year Average ROE 4 20 20% 12.0% 2%
Total Weights 100%
Raw Percentile Weighted Weighted
Raw Rank Rank Percentile
Average of Rankings 9/21 45% 8/21 40%
</TABLE>
First Guaranty is ranked 8th of 21 on the weighted composite financial
measures ranking and 9th of 21 on the unweighted composite financial measures
ranking. These weightings reflect that there are approximately an equal number
of comparable banks which rank above and below the financial performance rank of
First Guaranty.
National Capital compiled figures illustrating measures of value which
included the total consideration to be received by all holders of First Guaranty
Stock (the "deal price") to tangible book percentage, the deal price to annual
earnings multiple, the deal price to deposits percentage, the deal price to
assets percentage, and the premium over tangible book to core deposits
percentage for each comparable bank or bank holding company and First Guaranty.
Tables were then prepared for each measure of value containing each comparable
bank or bank holding company and First Guaranty using consideration for First
Guaranty calculated on the basis of Hibernia common stock at $16.00 per share.
These tables were then sorted on each measure of value and First Guaranty's rank
was determined.
The following rankings reflect the measures of value for First Guaranty
using financial data for First Guaranty at September 30, 1998 and the price of
Hibernia common stock at $16.00 per share. Each comparable transaction measure
of value is calculated using seller financial information as of the announcement
date of each transaction and the closing price of each respective buyer's stock
as of the announcement date of each transaction.
The First Guaranty transaction ranked 7th of 21 in deal price to
tangible book percentage. The First Guaranty transaction ranked 14th of 21 in
deal price to annual earnings multiple. The First Guaranty transaction ranked
12th of 21 in deal price to deposits. The First Guaranty transaction ranked 11th
of 21 in deal price to assets percentage. The First Guaranty transaction ranked
8th of 21 in tangible book premium to core deposits percentage.
The composite rank for First Guaranty at a value determined with
Hibernia common stock at $16.00 per share was then computed on an unweighted and
weighted basis as summarized in the table below:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
First Total Weighted
Measurement Guaranty Bank Observations Percentile Weight Average
----------------------------- ------------- ------------ ---------- ------ -------
Deal Price / Tangible Book 7 21 33% 30.00% 10%
Deal Price / Earnings 14 21 67% 30.00% 20%
Deal Price / Deposits 12 21 57% 15.00% 9%
Deal Price / Assets 11 21 52% 15.00% 8%
Premium / Core Deposits 8 21 38% 10.00% 4%
Total Weights 100.00%
Raw Weighted Weighted
Raw Rank Percentile Rank Percentile
Average of Rankings 10/21 50% 10/21 50%
</TABLE>
First Guaranty is ranked 10th of 21 on the weighted and unweighted
composite measures of value ranking. This analysis reflects that there is
approximately an equal number of comparable banks which rank above and below the
composite measure of value rank of First Guaranty.
Tables were then prepared for each measure of value containing each
comparable bank or bank holding company and First Guaranty using consideration
for First Guaranty calculated on the basis of Hibernia common stock at $15.00
per share. These tables were then sorted on each measure of value and First
Guaranty's rank was determined.
The following rankings reflect the measures of value for First Guaranty
using financial data for First Guaranty as of September 30, 1998 and the price
of Hibernia common stock at $15.00 per share. Each comparable transaction
measure of value is calculated using seller financial information as of the
announcement date of each transaction and the closing price of each respective
buyer's stock as of the announcement date of each transaction.
The First Guaranty transaction ranked 10th of 21 in deal price to
tangible book percentage. The First Guaranty transaction ranked 16th of 21 in
deal price to annual earnings multiple. The First Guaranty transaction ranked
12th of 21 in deal price to deposits. The First Guaranty transaction ranked 12th
of 21 in deal price to assets percentage. The First Guaranty transaction ranked
8th of 21 in tangible book premium to core deposits percentage.
The composite rank for First Guaranty at a value determined with
Hibernia stock at $15.00 per share was then computed on an unweighted and
weighted basis as summarized in the table below:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
First Total Weighted
Measurement Guaranty Bank Observations Percentile Weight Average
------------ ------------- ------------ ---------- ------ -------
Deal Price / Tangible Book 10 21 48 30.00% 14%
Deal Price / Earnings 16 21 76 30.00% 23%
Deal Price / Deposits 12 21 57 15.00% 9%
Deal Price / Assets 12 21 57 15.00% 9%
Premium / Core Deposits 8 21 38 10.00% 4%
Total Weights 100.00%
Raw Weighted Weighted
Raw Rank Percentile Rank Percentile
Average of Rankings 11/21 55% 12/21 58%
</TABLE>
First Guaranty is ranked 12th of 21 on the weighted composite rank and
ranked 11th of 21 on the unweighted composite measure of value ranking. This
analysis reflects that there is approximately an equal number of comparable
banks which rank above and below the measure of value rank of First Guaranty.
In summary, National Capital ranked the First Guaranty transaction
measures of value at Hibernia common stock share prices of $16.00 per share and
$15.00 per share and developed composite rankings at each share price. The table
below summarizes the National Capital's findings of this analysis.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
First Guaranty Total
Measurement Weighted Composite Rank Observations Percentile
Financial Measures 9 21 43%
Hibernia common stock share price of
$16.00 per share 10 21 48%
Hibernia common stock share price of
$15.00 per share 12 21 57%
</TABLE>
Our analysis reflects that First Guaranty ranks 9th of 21 in financial
measures, 10th of 21 at a Hibernia common stock share price of $16.00 per share,
12th of 21 at a Hibernia common stock share price of $15.00 per share.
Investment Valuation Method. National Capital then performed a
valuation using the investment valuation method. The investment valuation method
involves determining a stream of future financial benefits which accrue to the
common stock shareholders of the bank. This future stream of projected dividends
are then discounted using an appropriate discount rate to a present value. A
terminal sales value of the bank is then determined at some end point in the
future and that terminal value is also discounted to present value. The sum of
the present value of the dividend stream and the present value of the terminal
sales value then represent the value in today's dollars of the future stream of
financial benefits.
The future earnings and dividends of First Guaranty were developed
according to the assumptions based on analysis of the recent earnings and
dividends performance of First Guaranty. While these projections are the work
product of National Capital, the general assumptions incorporated into this
projection were discussed with the Chief Financial Officer of First Guaranty and
determined by the Chief Financial Officer to be a reasonable basis for the
projections.
National Capital determined that 12.99% is the appropriate mid-point
discount rate to use in these calculations.
<PAGE>
The common stock dividend of First Guaranty per year was determined on
the basis of paying approximately 40% of current earnings each year in the form
of dividends. The table below is a summary of earnings net of preferred stock
dividend and common dividends of First Guaranty.
Common Dividends
Year Earnings (000) (000)
---- -------------- -----
1998 $ 3,279 $ 1,192
1999 $ 3,952 $ 1,461
2000 $ 4,418 $ 1,647
2001 $ 4,934 $ 1,854
2002 $ 5,569 $ 2,108
The terminal sales value of First Guaranty at the end of 2002 was
determined by preparing the pricing matrix set forth below. The National Average
measurements of value were computed from the 21 comparable transactions selected
for the market valuation method discussed previously. An average of the 21
comparable transactions was computed and is displayed below. The relevant factor
represents projected balance sheet and income statement values for First
Guaranty at the end of the year 2002. The projected market value was computed by
multiplying the measure of value times the relevant factor for First Guaranty.
This method resulted in a range of terminal values of $85.8 million to $111.6
million. This range was reconciled by means of assigning weights to each method
and then computing a weighted average result.
<TABLE>
<CAPTION>
Terminal Sales Value
Market Valuation Record
<S> <C> <C> <C> <C> <C>
National Average Relevant Factor Terminal Value
(000) (000) Weight (000)
----- ----- ------ -----
Book Value Multiple 329.28 $ 29,305 $ 96,496 20% $ 19,299
Earnings Multiple 20.04 $ 5,569 $ 111,603 35% $ 39,061
Price to Deposits 28.66 $ 334,059 $ 95,741 20% $ 19,148
Price to Assets 25.16 $ 372,473 $ 93,714 20% $ 18,743
Premium Core Deposits 23.71 $ 238,435 $ 85,838 5% $ 4,292
Terminal Sales Value $100,543
</TABLE>
The table below summarizes the calculation of the present value of the
stream of dividends and the terminal sales value computed in the table above.
The assumed discount rate is 12.99%. Present value factors are then calculated
for each year. The dividend stream is discounted each year by that year's
present value factor and then totaled for the five years. The sum of the present
value of the dividend stream ($5,623,000) plus the present value of the terminal
sales value ($54,595,000) equal an investment value of First Guaranty of
$60,218,000.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Discount Rate 12.99% Dividends Dividends
Present Value Factor Future Value Present Value Sale Future Sale Present
Year (000) (000) Value (000) Value (000)
1998 88.5034% $ 1,192 $ 1,055
1999 78.3285% $ 1,461 $ 1,144
2000 69.3234% $ 1,647 $ 1,142
2001 61.3536% $ 1,854 $ 1,137
2002 54.3000% $ 2,108 $ 1,145 $ 100,543 $ 54,595
$ 5,623 $ 54,595
Sum of Present Values $ 60,218
</TABLE>
In summary, National Capital analyzed the First Guaranty transaction
using the market value method at two different price points for a share of
Hibernia common stock and developed a value using the investment value method.
The table below summarizes the value of First Guaranty of each method.
Measurement Value (000)
Investment Value Method Value $ 60,218
Market Value Method at a per share price
of Hibernia common stock = $15 $ 63,980
Market Value Method at a per share price
of Hibernia common stock = $16 $ 67,045
National Capital concluded that the First Guaranty transaction is fair
to the shareholders of First Guaranty at a Hibernia common stock share price of
$15.00 and above.
Pursuant to an engagement letter dated October 8, 1998, between
Hibernia and National Capital, Hibernia agreed to pay National Capital a fee
based on the time expended by employees of National Capital on the engagement
and the hourly rate charged by those employees. Total fees payable to National
Capital in this matter are estimated to be approximately $40,000. Hibernia also
agreed to indemnify and hold harmless National Capital and its officers, agents
and employees against certain liabilities in connection with its services under
the engagement letter, except for liabilities resulting from the negligence of
National Capital.
The National Capital Fairness Opinion is directed only to the question
of whether the Merger Consideration is fair from a financial perspective and
does not constitute a recommendation to any First Guaranty shareholder to vote
in favor of the Merger. No limitations were imposed on National Capital
regarding the scope of its investigation, or otherwise, by First Guaranty or
Hibernia.
Based on the results of the various analyses described above, National
Capital concluded that the Merger Consideration to be received by the holders of
First Guaranty common stock pursuant to the Merger is fair, from a financial
point of view, to the holders of First Guaranty common stock.
CLOSING DATE AND EFFECTIVE DATE OF THE MERGER
If the holders of First Guaranty common stock approve the Merger at the
Special Meeting, then Hibernia will select the closing date (the "Closing Date")
which shall be within five business days of the date of the Special Meeting.
After the Closing Date, the parties will choose an Effective Date on which the
Merger will be effective. The Effective Date will be set forth in the
Certificate of Merger issued by the OCC relating to the Merger. If the Merger is
approved, the parties currently anticipate an Effective Date in May, 1999.
Regulatory approval of the Merger was obtained on November 12, 1998 and
will expire on November 11, 1999, unless the OCC grants an extension of its
approval. The necessary shareholder approval may not be obtained. Other
conditions precedent to the Merger also may not be satisfied. These conditions
are not all within the control of Hibernia and/or First Guaranty, and the
parties cannot assure that they will be obtained.
Hibernia and First Guaranty anticipate that all conditions to
completing the Merger will be satisfied so that the Merger can be completed in
May, 1999. However, delays in the completion of the Merger could occur.
The Board of Directors of either Hibernia or First Guaranty may
terminate the Merger Agreement if the Merger is not completed by the later to
occur of either March 31, 1999 or the "Extended Closing Date" or any condition
to completing the Merger cannot be satisfied by the later to occur of March 31,
1999 or the "Extended Closing Date" and will not be waived by the party or
parties entitled to waive it. The "Extended Closing Date" means a day which
occurs after March 31, 1999 and is calculated by extending the date of March 31
a sufficient number of days to provide for a period of 50 calendar days from the
date of this proxy statement/prospectus to the date of the Special Meeting plus
five business days after the date of the Special Meeting, provided that the
Extended Closing Date shall not be extended to a date later than May 31, 1999.
See "PROPOSED MERGER - Conditions to Consummation of the Merger" and "PROPOSED
MERGER - Waiver, Amendment, and Termination of the Merger Agreement".
EMPLOYEE BENEFITS
Former employees of First Guaranty who become employed by Hibernia or
its subsidiaries as of the Effective Date will be entitled to the same employee
benefits as those offered by Hibernia and HNB to their employees. However,
employees of First Guaranty will not be required to wait for any period in order
to be eligible to participate in Hibernia's Flex Plan (including its medical and
dental coverage). Hibernia also will give First Guaranty's employees full credit
for their years of service (for both eligibility and vesting) with First
Guaranty for purposes of Hibernia's 401(k) plan and its Employee Stock Ownership
Plan (to the extent permitted under the terms of those plans). If, however,
Hibernia decides that it cannot merge any benefit plan of First Guaranty into a
comparable benefit plan of Hibernia or HNB without creating material potential
liability for Hibernia's or HNB's plans, then Hibernia may freeze the existing
plan of First Guaranty and prohibit participation by former employees of First
Guaranty in Hibernia's or HNB's plans for the period of time required by
applicable law to ensure that Hibernia's and HNB's plans are not deemed to be
successor plans of the First Guaranty plan in question.
SURRENDER AND EXCHANGE OF STOCK CERTIFICATES
Chase Mellon Shareholder Services will act as exchange agent (the
"Exchange Agent") for purposes of the exchange of First Guaranty common stock
for Hibernia common stock. Shortly after the Effective Date, a letter of
transmittal will be mailed to all non-dissenting holders of First Guaranty
common stock. This letter of transmittal will include instructions for the
exchange of their First Guaranty common stock certificates for certificates
representing Hibernia common stock. Each certificate representing First Guaranty
common stock outstanding immediately prior to the Effective Date will be deemed
for all purposes to evidence ownership of the number of shares of Hibernia
common stock into which such shares have been converted on the Effective Date,
regardless of when they actually are exchanged.
FIRST GUARANTY SHAREHOLDERS SHOULD NOT SEND IN THEIR STOCK CERTIFICATES
UNTIL THEY RECEIVE THE LETTER OF TRANSMITTAL AND INSTRUCTIONS.
When the Exchange Agent receives certificates for First Guaranty common
stock, together with a properly completed letter of transmittal, it will issue
and mail to each holder of First Guaranty common stock who surrendered those
items a certificate representing the number of shares of Hibernia common stock
to which such holder is entitled. If the holder would otherwise be entitled to
receive a fraction of a share of Hibernia Stock, the Exchange Agent will mail
the holder a check representing cash paid instead of the fractional share.
Holders of record of First Guaranty common stock on the Effective Date
will be entitled to vote at any meeting of Hibernia shareholders if the record
date for the Hibernia meeting is after the Effective Date of the Merger. In that
case, holders of First Guaranty common stock would be able to vote the number of
shares of Hibernia common stock into which their First Guaranty common stock has
been converted regardless of whether they have surrendered their stock
certificates. Dividends or other distributions payable after the Effective Date
on Hibernia common stock will be paid only after you surrender your certificates
for First Guaranty common stock. When you surrender your First Guaranty common
stock certificate for exchange, the Exchange Agent will send to you all
undelivered dividends and other distributions on your Hibernia stock. You will
not receive interest on those distributions for any period during which Hibernia
holds them awaiting the exchange of your First Guaranty stock. Also, taxes may
be deducted from those distributions.
If you cannot locate your First Guaranty common stock certificate(s),
please contact Michael D. Landry, Chief Financial Officer of First Guaranty,
prior to the Special Meeting. First Guaranty will issue new certificates to
shareholders who have misplaced their certificates only if (1) the shareholders
sign an affidavit certifying that the certificate(s) cannot be located, and (2)
shareholders agree to indemnify First Guaranty and Hibernia against any claim
that may be made against either of them by the owner of the lost certificate(s).
First Guaranty or Hibernia may require a shareholder to post a bond in an amount
sufficient to support the shareholder's indemnification obligation. If you have
misplaced your stock certificate or if you hold certificates in names other than
your own, we encourage you to resolve those matters before the Effective Date of
the Merger. This will help to avoid delays in exchanging your First Guaranty
common stock.
EXPENSES
Hibernia will pay all expenses of printing and distributing this proxy
statement/prospectus and will reimburse First Guaranty for all costs and
expenses billed to First Guaranty by Keefe, Bruyette, including any
indemnification obligation of First Guaranty to Keefe, Bruyette. The parties
otherwise will pay all of their own expenses related to negotiating and
completing the Merger.
REPRESENTATIONS AND WARRANTIES
First Guaranty and Hibernia have made certain representations and
warranties to each other as part of the Merger Agreement. First Guaranty's
representations and warranties relate to, among other things:
. its organization and authority to enter into the Merger
Agreement;
. its capitalization, properties, and financial statements;
. pending and threatened litigation against First Guaranty; and
. First Guaranty contractual obligations and contingent liabilities.
First Guaranty's representations and warranties are generally contained
in Section 7 of the Merger Agreement.
Hibernia's representations and warranties relate to, among other
things:
its organization and authority to enter into the Merger
Agreement; its capitalization; its financial statements;
and its public reports.
Hibernia's representations and warranties are generally contained in
Section 8 of the Merger Agreement.
The representations and warranties of the parties generally will not
survive the Effective Date. Consequently, the parties' only recourse in the
event of a breach of a representation or warranty by the other party is to
re-negotiate the Merger or to terminate the Merger Agreement. Once the Merger is
completed, the parties will have no basis for litigation against each other
based on the Merger Agreement.
CONDITIONS TO THE MERGER; WAIVER
The Merger Agreement contains a number of conditions to completing the
Merger. The conditions must either be met or waived (if they are waivable) in
order for the Merger to occur. The conditions to completing the Merger include,
among other things:
. the Merger Agreement and Merger must be approved by First
Guaranty shareholders;
. necessary regulatory approvals must be obtained, particularly the
approval of the OCC which was obtained on November 12, 1998
and will expire on November 11, 1999 unless the OCC grants
an extension of its approval;
. Ernst & Young LLP must issue its opinion (the "Tax Opinion")
regarding the tax consequences of the Merger;
. the Registration Statement must become effective under the
Securities Act of 1933, as amended (the "Securities Act") and
there must not be a stop order suspending its effectiveness;
. there may not be an order, decree or injunction enjoining or
prohibiting completion of the Merger;
. the representations and warranties set forth in the Merger
Agreement must be accurate as of the Closing Date;
. the Hibernia common stock to be issued in the Merger must be
approved for listing on the New York Stock Exchange ("NYSE");
. the Merger must qualify for pooling-of-interests accounting
treatment;
. certain opinions of counsel must be received by the parties;
. loan participations selected by Hibernia that previously were
sold by First Guaranty must be repurchased by First Guaranty;
. loan participations owned by First Guaranty and selected by
Hibernia must be sold by First Guaranty; and
. First Guaranty must have received an updated Keefe, Bruyette
Fairness Opinion within five days of the scheduled mailing of
this proxy statement/prospectus and an updated Chaffe &
Associates Fairness Opinion from Chaffe & Associates within five
days of the Closing Date or if Chaffe & Associates is unable or
unwilling to update its opinion, an updated Keefe, Bruyette
Fairness Opinion from Keefe, Bruyette within five days of the
Closing Date.
Most of the conditions to completing the Merger may be waived at any
time by the party for whose benefit they were created. Regulatory and
shareholder approvals may not be waived, however. Also, the Merger Agreement may
be amended or supplemented at any time by written agreement of the parties.
Nevertheless, no waiver, amendment or supplement executed after the Merger
Agreement has been approved by First Guaranty shareholders may reduce the
Exchange Rate. Also, any material change in the terms of the Merger after the
Special Meeting would require a resolicitation of votes from First Guaranty
shareholders.
REGULATORY AND OTHER APPROVALS
Hibernia is a registered bank holding company and is regulated by the
Federal Reserve Board. HNB, as a national bank, is regulated by the OCC. The
Merger of First Guaranty with and into HNB must be approved by the OCC before it
may be completed. The OCC approved the Merger on November 12, 1998 and the
approval will expire on November 11, 1999, unless the OCC grants an extension of
its approval. The 15-day period during which the Department of Justice may
object to the Merger on antitrust grounds has expired.
The exchange of shares of Hibernia common stock for First Guaranty
common stock in the Merger has been registered with the SEC. The transaction
will not be registered in any state due to an exemption from state regulation.
BUSINESS PENDING THE MERGER
The Merger Agreement requires First Guaranty to continue to operate its
business in the ordinary course pending the Merger. Among other things, First
Guaranty may not, without Hibernia's consent:
. create or issue any additional shares of capital stock or any
options or other rights to purchase or acquire shares of capital
stock;
. enter into employment contracts with directors, officers or
employees or otherwise agree to increase the compensation of such
persons, except in accordance with existing policy and past
practice in the preceding two years;
. pay or agree to pay any bonus or severance payment to directors,
officers or employees, except in accordance with existing
agreements or past practice, and further except that First
Guaranty may pay pro-rated bonuses to employees and make a
contribution to the 401(k) plan of First Guaranty at times and in
amounts consistent with existing policy and past practice in the
preceding two years;
. enter into or substantially modify any employee benefit plans,
except as may be required by applicable law;
. amend its Articles of Incorporation or Bylaws;
. establish or add additional automatic teller machines or branches
or other banking offices, other than installation of certain
automated teller machines previously agreed to by Hibernia;
. make any capital expenditure(s) in excess of $25,000, except in
the ordinary course of business consistent with past practices,
with certain exceptions previously agreed to by Hibernia;
. merge with any other company or bank or liquidate or otherwise
dispose of its assets;
. acquire another company or bank, except in connection with
foreclosures of bona fide loan transactions;
. make, declare, set aside or pay any dividend or make any
distribution on, or directly or indirectly combine, redeem,
purchase or otherwise acquire,any shares of First Guaranty common
stock, other than in a fiduciary capacity, except that First
Guaranty may pay any and all dividends required to be paid with
respect to the First Guaranty preferred stock and may pay regular
quarterly dividends not to exceed $.10 per share of First
Guaranty common stock per calendar quarter pro-rated through
the Closing Date; or
. dispose of a specified undeveloped parcel of land in Denham
Springs, Louisiana or take any action to develop a branch office
at that site.
First Guaranty may not solicit bids or other transactions that would result in a
merger of First Guaranty with an entity other than HNB except in very limited
circumstances.
TERMINATION
Either party may terminate the Merger Agreement prior to the Effective
Date for certain reasons. A party may terminate the Merger Agreement for these
reasons even after the Merger Agreement and the Merger is approved by First
Guaranty shareholders. These reasons include, among others:
. a breach by the other party of any covenant, representation or
warranty in the Merger Agreement which cannot be or is not cured
within 60 days after written notice of such breach is given to
the party committing the breach;
. any application for any required federal or state regulatory
approval is denied,and the time for all appeals of the denial has
expired;
. the holders of First Guaranty common stock fail to approve the
Merger at the Special Meeting;
. the Merger is not consummated by the later to occur of March 31,
1999 or the Extended Closing Date or any condition to the Merger
cannot be satisfied by that date and will not be waived by the
party entitled to waive it;
. at any time by the mutual consent of the parties;
. by Hibernia, if the holders of more than 8.9% of the outstanding
First Guaranty Stock exercise statutory rights of dissent and
appraisal;
. by First Guaranty, if after March 31, 1998, a material adverse
change occurs in the financial conditions, results of operation,
business or prospect of Hibernia or HNB (excluding changes in law
or regulations affecting banking institutions generally);
. by Hibernia, if after March 31, 1998 a material adverse change
occurs in the financial condition, results of operation, business
or prospects of First Guaranty (excluding changes in laws or
regulations affecting banking institutions generally);
. by Hibernia, if it shall determine in good faith that the Merger
does not qualify as a pooling-of-interests for accounting
purposes; or
. by First Guaranty, if First Guaranty does not receive an updated
Keefe, Bruyette Fairness Opinion dated within five days of the
date of scheduled mailing of this proxy statement/prospectus to
its shareholders, and an updated Chaffe & Associates Fairness
Opinion from Chaffe & Associates within five days of the Closing
Date or if Chaffe & Associates is unable or unwilling to update
its opinion, an updated Keefe, Bruyette Fairness Opinion from
Keefe, Bruyette within five days of the Closing Date.
Certain provisions of the Merger Agreement, including provisions relating to
indemnification and confidentiality survive both the Merger and a termination of
the Merger Agreement without the Merger having been completed.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
If the conditions to the Merger are met or waived, First Guaranty will
be merged with and into HNB on the Effective Date. At that time, First Guaranty
will cease to exist as a separate company. HNB will continue to operate as a
wholly-owned subsidiary of Hibernia after the Merger and will offer banking
services similar to those offered prior to the Merger.
The Boards of Directors of Hibernia and HNB will not change as a result
of the Merger. If you would like more information about the directors of
Hibernia, you may request a copy of Hibernia's Annual Report to Shareholders for
1997 and/or its proxy statement for its 1998 annual meeting of shareholders.
Both of these documents are incorporated herein by reference. See "AVAILABLE
INFORMATION".
CERTAIN DIFFERENCES IN RIGHTS OF SHAREHOLDERS
If the Merger is completed, all holders of First Guaranty common stock,
other than those who exercise and perfect dissenters' rights, will become
shareholders of Hibernia. Their rights as shareholders will then be governed by
Hibernia's Articles of Incorporation or Bylaws rather than First Guaranty's
Articles of Incorporation and Bylaws. The following is a summary of the
significant differences between the rights of the First Guaranty shareholders
and Hibernia shareholders not described elsewhere in this proxy
statement/prospectus.
Stock. The total number of shares of all classes of stock which
Hibernia has authority to issue is four hundred million. Three hundred million
shares are designated as Class A Common Stock of no par value and one hundred
million shares are designated as Preferred Stock, without par value. The rights,
preferences and privileges with respect to shares of preferred stock may be
determined by the Hibernia Board of Directors. Consequently, shares of preferred
stock could be issued in circumstances in which it would make an attempted
acquisition of Hibernia more difficult. Hibernia currently has 2,000,000 shares
of preferred stock outstanding. The holders of those preferred shares are
entitled to receive dividends on a quarterly basis and would have limited voting
rights if the dividends on their stock were not paid for a certain period of
time. If those voting rights were triggered, the preferred shareholders may be
able to elect a director to the Board of Directors of Hibernia. The total number
of shares of all classes of stock which First Guaranty has authority to issue is
one hundred million seven hundred thousand. One hundred million shares are
designated common stock, $1.00 par value, six hundred thousand shares are
designated common stock, $5.00 par value, and one hundred thousand shares are
designated preferred stock, $1,000 par value. Of the one hundred thousand shares
of preferred stock, 5,000 shares are designated convertible Preferred Stock,
Series A, 5,000 shares are designated Preferred Stock, Series B, and the balance
of the preferred shares have not been designated by the Board of First Guaranty.
Liquidity of Stock. First Guaranty's shares of common stock are not
traded on a stock exchange or in any established over-the-counter market. Trades
occur primarily between individuals at a price mutually agreed upon by the buyer
and the seller. Trading in First Guaranty's common stock has been infrequent,
and such trades cannot be characterized as constituting an active trading
market. The shares of Hibernia common stock, if issued in the Merger, will be
registered under applicable securities laws and may therefore be freely resold
by persons who are not "affiliates" of First Guaranty of Hibernia. See "PROPOSED
MERGER -- Resale of Hibernia common stock." The Hibernia common stock also is
listed on the NYSE and actively traded on that exchange. Current quotes of the
market price of Hibernia common stock are available from brokerage firms and
other securities professionals, as well as other sources, and are published in
major newspapers on a daily basis.
Directors' Qualifications.
Hibernia maintains certain qualifications for its directors:
. must be no more than 71 years old at the time they are elected,
and must retire at the annual meeting following their having
reached that age;
. they must own at least $1,000 of Hibernia Stock at the time
they are first elected as a director; and
. they may not be affiliated with any business competitor of
Hibernia.
First Guaranty has the following qualifications for its directors:
. they must own First Guaranty Stock with an aggregate book value
of $5,000 or an aggregate par value of $1,000, unless waived by
. the Louisiana Commissioner of Financial Institutions; and
. a majority of the directors must be citizens of domiciliaries of
the State of Louisiana.
Removal of Directors. Shareholders of Hibernia may remove a director
for gross negligence or willful misconduct by the vote of a majority of the
total voting power and may remove a director without cause by a vote of
two-thirds of the total voting power. Directors of First Guaranty may be removed
at any time, with or without cause, at any meeting of the shareholders called
expressly for that purpose. The affirmative vote of a majority of the issued and
outstanding shares of First Guaranty entitled to vote on the matter is required
to remove directors of First Guaranty.
Amendment of Articles and Bylaws. Hibernia's Articles of Incorporation
may be amended by a vote of the majority of the voting power present at any
meeting called for that purpose. First Guaranty's Articles of Incorporation do
not have similar provisions; however, Louisiana law requires the affirmative
vote of two-thirds of the voting power present at the meeting at which the
amendment is considered.
The Bylaws of Hibernia may be amended or repealed by a vote of
two-thirds of the total voting power outstanding or by a vote of two-thirds of
the "continuing directors" of Hibernia, as defined in the Bylaws. A "continuing
director" for this purpose is generally a director who was nominated for
election by a majority of the existing directors. First Guaranty's Bylaws may be
altered, amended, or repealed and new Bylaws may be adopted by the Board, at any
meeting of the board at which a quorum is present, by the affirmative vote of a
majority of the directors present. Bylaws adopted by the First Guaranty Board
will be subject to repeal or change by action of the shareholders at any meeting
of the shareholders at which a quorum is present, by the affirmative vote of a
majority of the shareholders present.
Special Meetings of Shareholders. Special meetings of the shareholders
of Hibernia may be called by the Chairman of the Board, the President, the Chief
Executive Officer, the Treasurer, or the Board of Directors. In addition,
shareholders holding one-fifth or more of the total voting power of Hibernia may
request a special meeting of the shareholders and, upon receipt of such request,
the Secretary of Hibernia is required to call a special meeting of the
shareholders. A special meeting of shareholders of First Guaranty may be called
at any time by the Chairman of the Board, the President, the Board of Directors,
or the holders of one-fifth or more of the total voting power of First Guaranty.
Shareholder Proposals. Hibernia's Bylaws contain certain provisions
expressly allowing shareholders to submit shareholder proposals and to nominate
individuals for election as directors under certain circumstances and provided
the shareholder complies with all of the conditions set forth in those
provisions. First Guaranty's Bylaws contain provisions requiring that
shareholders submit shareholder proposals a specified number of days in advance
of an annual meeting.
Vacancy on Board of Directors. Hibernia's Bylaws permit the Board to
fill any vacancy on the Board, however created. First Guaranty's Bylaws allow
the Board to fill vacancies, however created (including any vacancy resulting
from an increase in the size of the Board), subject to the right of the
shareholders to fill any vacancy.
Merger or Consolidation. Hibernia's Articles allow an agreement of
merger or consolidation to be approved by a majority vote of the voting shares
issued and outstanding, taken at a meeting called for the purpose of such
approval. A merger of First Guaranty may be approved by two-thirds of the shares
present at the meeting, as long as a quorum is present.
Dissenting Shareholder's Rights. Louisiana law provides that the
shareholders of First Guaranty who object to a merger are entitled to the rights
and remedies of dissenting shareholders provided by Louisiana law if a merger is
approved by less than 80% of the total shares of First Guaranty Stock
outstanding. Louisiana law provides that a shareholders' right to dissent does
not exist in the case of shareholders holding shares of any class of stock that
are listed on a national securities exchange, such as Hibernia common stock,
unless the articles of incorporation of the issuing corporation provide
otherwise or the shares of such shareholders are not converted by the merger or
consolidation solely into shares of the surviving or new corporation. In that
event, a shareholder who votes against a merger would have the right to dissent
only if the shareholders authorize the merger by less than 80% of the total
voting power.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
As part of the settlement of the Litigation, under the terms of the
Settlement Agreement, Mr. Reynolds, among other things, (1) agreed to recommend
in this proxy statement/prospectus that the holders of First Guaranty common
stock vote in favor of the Merger Agreement and Merger and (2) signed and
delivered a non-competition and lock-up agreement in which he agreed to vote his
shares of First Guaranty common stock in favor of the Merger Agreement, subject
in both cases to Keefe, Bruyette's first issuing and not withdrawing the Keefe,
Bruyette Fairness Opinion. Generally, the Litigation against Mr. Reynolds and
First Guaranty will be dismissed by Hibernia with prejudice and Hibernia, HNB,
Mr. Reynolds and First Guaranty will be prohibited from suing or sponsoring suit
against each other and their respective officers, directors, shareholders,
investment bankers and agents following the shareholder vote in the Merger.
In the Merger Agreement, Hibernia has agreed to indemnify officers,
directors and employees of First Guaranty for actions arising while they served
as officers and/or directors of First Guaranty to the same extent as they would
have been indemnified under the Articles of Incorporation and Bylaws of HNB in
effect on the Effective Date. Hibernia's aggregate liability for indemnification
to those people is limited to $10 million. Also, each officer and director
eligible for such indemnification must execute a joinder agreement in which he
or she agrees to cooperate with Hibernia in any litigation or proceeding giving
rise to a claim of indemnification.
Hibernia also has agreed to indemnify First Guaranty's officers,
directors and certain affiliates against liability under the Securities Act. In
particular, Hibernia will provide indemnification if any liability is based on
an actual or alleged untrue statement of a material fact (or the actual or
alleged omission of a material fact) contained in this proxy
statement/prospectus. This indemnification does not apply to statements in the
Registration Statement on which Hibernia relied upon information furnished by
First Guaranty.
Stanley Dameron and Hibernia have agreed to an eighteen-month
employment agreement at Mr. Dameron's current salary. The agreement also
provides for the payment of a bonus to Mr. Dameron to induce him to remain with
Hibernia and in partial consideration of his agreement to forego any rights he
may have under this change of control employment with First Guaranty.
Under an agreement between Don W. Ayres, the President and Chief
Executive Officer and a Director of First Guaranty, and First Guaranty, Mr.
Ayres will be entitled to be paid $250,000 following the Merger if either (1)
Hibernia does not continue the employment of Mr. Ayres or (2) Mr. Ayres elects,
within 90 days after the Merger, not to continue his employment with Hibernia or
HNB.
Mr. Reynolds has agreed from and after the Effective Date to indemnify
Hibernia, HNB and each of their respective subsidiaries, officer, directors and
employees against certain liability and payments. Mr. Reynolds' aggregate
liability for such indemnification is limited to $1 million.
MATERIAL TAX CONSEQUENCES
The following is a summary description of the material income tax
consequences of the Merger. It is not intended to be a complete description of
the federal income tax consequences of the Merger. Tax laws are complex and your
individual circumstances may affect the tax consequences to you. In addition, we
have not included information about the tax consequences of the Merger under
state, local or other tax law. We urge you to consult a tax advisor regarding
the tax consequences of the Merger to you.
The parties must receive the Tax Opinion in order to complete the
Merger. The Tax Opinion is included as Appendix G. to this proxy
statement/prospectus. We urge you to read the Tax Opinion and to discuss it with
your tax and financial advisors so that you will understand the tax consequences
of the Merger to your situation.
The Tax Opinion is based upon representations made by Hibernia and
First Guaranty about the terms of the Merger and certain other matters. Based
upon the accuracy of those representations and certain other matters described
in the Tax Opinion, it concludes that:
. the Merger will constitute a reorganization within the meaning of
Section 368 of the Code; and
. First Guaranty's shareholders who exchange First Guaranty common
stock for Hibernia common stock in the Merger will not recognize
gain or loss for federal income tax purposes in that exchange to
the extent they receive Hibernia common stock.
See "PROPOSED MERGER - Representations and Warranties; Conditions to the Merger;
Waiver".
If the Merger constitutes a reorganization within the meaning of
Section 368 of the Code, then:
. none of First Guaranty, Hibernia or HNB will recognize any gain
or loss by reason of the Merger;
. First Guaranty's shareholders will not recognize any gain or loss
for federal income tax purposes to the extent they receive
Hibernia common stock in exchange for First Guaranty common stock
in the Merger;
. the tax basis in the Hibernia common stock received in the Merger
will be the same as the tax basis in the First Guaranty common
stock surrendered in exchange therefor; and
. the holding period, for federal income tax purposes, for Hibernia
common stock received in exchange for First Guaranty common stock
will include the period during which the shareholder held the
First Guaranty common stock surrendered in the exchange, as long
as the First Guaranty common stock was held as a capital asset at
the Effective Date.
Tax laws are complex and the tax consequences to you may be affected by
matters that are not discussed in the Tax Opinion. For these reasons, we
recommend that you consult your own tax advisor concerning the applicable
federal, state and local tax consequences of the Merger to you.
RESALE OF HIBERNIA COMMON STOCK
The shares of Hibernia common stock that will be exchanged for First
Guaranty common stock in the Merger have been registered under the Securities
Act. Those shares also must be approved for listing, upon official notice of
issuance, on the NYSE as a condition to completing the Merger. Once those shares
are listed on the NYSE, shareholders who are not "affiliates" for First Guaranty
may freely trade them. The term "affiliate" generally means each person who was
an executive officer, director or a 10% shareholder of First Guaranty prior to
the Merger.
Those shareholders who are deemed to be affiliates of First Guaranty
may sell their Hibernia common stock only as provided by Rule 145 of the
Securities Act, or as otherwise permitted under the Securities Act. Those
shareholders may publicly resell Hibernia common stock received by them in the
Merger if they register the resale of those shares or they comply with the
restrictions of Rule 145, unless they are "affiliates" of Hibernia. If you are
or may be an affiliate of First Guaranty, you should carefully consider the
resale restrictions imposed by Rule 145 before you attempt to transfer any
shares of Hibernia common stock after the Merger. In addition, shares of
Hibernia common stock issued to affiliates of First Guaranty in the Merger will
not be transferable until financial results that include at least 30 days of
post-Merger combined operations of Hibernia and First Guaranty have been
published. This restriction is necessary in order to satisfy certain
requirements for pooling-of-interests accounting treatment.
First Guaranty must identify those persons who may be deemed to be
affiliates. Also, First Guaranty must use it best efforts to have each person it
identifies as an affiliate deliver to Hibernia a written agreement relating to
the transfer restrictions on their Hibernia common stock. In addition, Hibernia
will place stop transfer instructions with its transfer agent regarding Hibernia
common stock issued to affiliates of First Guaranty to ensure that transfers by
those persons comply with Rule 145 and the terms of any applicable affiliate
resale agreement with Hibernia.
RIGHTS OF DISSENTING SHAREHOLDERS
IF YOU OBJECT TO THE MERGER AND DESIRE TO PERFECT DISSENTERS' RIGHTS,
YOU WILL LOSE THE RIGHT TO DISSENT FROM THE MERGER IF YOU DO NOT TAKE THE
FOLLOWING STEPS TIMELY. IF YOU LOSE YOUR RIGHT TO DISSENT, THE SHARES OF FIRST
GUARANTY COMMON STOCK YOU OWN WILL BE CONVERTED INTO THE RIGHT TO RECEIVE
HIBERNIA COMMON STOCK AND CASH FOR FRACTIONAL SHARES IN ACCORDANCE WITH THE
TERMS OF THE MERGER AGREEMENT.
Because First Guaranty is merging with and into a national bank, each
holder of First Guaranty common stock who objects to the Merger is entitled to
the rights and remedies of dissenting shareholders under federal banking law
provided in 12 U.S.C. ss.215a and Louisiana law provided in La. R.S. 6:376,
copies of the relevant portions of which are set forth as Appendix F hereto and
should be read in their entirety. Section 215a provides that holders of First
Guaranty common stock who vote against the Merger or otherwise give notice in
writing at or prior to the Special Meeting that they dissent from the Merger
shall be entitled to receive the fair value of their shares held at the
Effective Date upon written request at any time before thirty days after the
Effective Date. Prior to the Effective Date, dissenting shareholders of First
Guaranty should send their written notice to First Guaranty, 400 East Thomas
Street, Hammond Louisiana 70401-3320, Attention: Chief Financial Officer. On or
within 30 days after the Effective Date, dissenting shareholders of First
Guaranty should send such written request to Secretary, Hibernia National Bank,
at 313 Carondelet Street, New Orleans, Louisiana, 70130. All such communications
should be signed by or on behalf of the dissenting First Guaranty shareholders
in the form appearing on their stock certificates.
Section 215a provides if the Merger is approved by the shareholders and
the OCC the value of the shares of any dissenting shareholder will be
ascertained, as of the Effective Date, under applicable state law, which in this
instance is set forth under Louisiana law in La. R.S. 6:376. If First Guaranty
or HNB receive the written requests described in the preceding paragraph from
dissenting holders of First Guaranty common stock, HNB will send a notice by
registered mail to the dissenting shareholder advising them that the Merger has
been completed. If you receive this notice and wish to perfect your dissenters'
rights, you must send HNB a written demand for payment of the fair value of your
First Guaranty common stock. The demand must be received by HNB within 20 days
after the date on which HNB's notice was mailed to you. This demand must state
the amount that you are demanding for your shares and a post office address to
which HNB may reply to you. You must also deposit the certificate(s)
representing your shares of First Guaranty common stock in escrow with a bank or
trust company located in Tangipahoa Parish, Louisiana. You must also include
with your demand to HNB the written acknowledgement of the bank or trust company
that holds your certificate(s) that it is holding the certificate(s) on the sole
condition that the certificate(s) will be delivered to HNB upon payment of the
value of the shares in accordance with ss.376. The certificate(s) also must be
duly endorsed and transferred to HNB.
YOU MUST DO ALL OF THE THINGS DESCRIBED ABOVE IN ORDER TO PRESERVE YOUR
RIGHT TO DISSENT AND TO RECEIVE THE FAIR VALUE OF YOUR SHARES IN CASH. IF YOU DO
NOT FOLLOW EACH OF THESE STEPS AS DESCRIBED, YOU WILL HAVE NO RIGHT TO RECEIVE
CASH FOR YOUR SHARES.
If HNB does not agree with the fair value that you demand, or does not
agree that payment is due, HNB will notify you within 20 days after it receives
your demand and acknowledgement. In that case, HNB's notice to you will include
the value HNB is willing to pay for the shares or its belief that no payment is
due. If you do not accept the amount offered by HNB, you must file suit against
HNB in the state district court for the Parish of Tangipahoa for a judicial
determination of the fair cash value of the shares. This suit must be filed
within 60 days after you receive HNB's notice. Any shareholder who is entitled
to file such a suit may intervene as a plaintiff in any suit filed against HNB
by any other former First Guaranty shareholder for a judicial determination of
the fair cash value of his shares. This intervention must occur within the
60-day period allowed to the initial shareholder to bring his suit and
intervention may not occur thereafter. If you fail to bring or to intervene in
such a suit within the applicable 60-day period, you will be deemed to have
consented to accept HNB's position in its notice (either that no payment is due
or that HNB owes you only the amount specified).
If a suit is filed and HNB deposits with the court the amount, if any,
that it specified in its notice of disagreement, then the costs, excluding legal
fees, of the suit will be taxed against the shareholder if the amount finally
awarded to him, exclusive of interest or costs, is equal to or less than the
amount deposited by HNB. Otherwise, the costs, excluding legal fees, will be
taxed against HNB. The same rules apply to interventions in this instance as to
the filing of the suit itself.
If you file a demand for the value of your shares, you will cease to
have any rights as a shareholder of First Guaranty or HNB except the rights
created by ss.376. You may voluntarily withdraw your demand at any time before
HNB gives it notice of disagreement. If you wish to withdraw your demand after
that time, you may only do so with the written consent of HNB. If you withdraw
your demand or otherwise lose your dissenters' rights under ss.376, your rights
as a shareholder will be restored as of the time you filed your demand for fair
cash value.
The amount received by a dissenting shareholder may be more or less
than or equal to, the value of the Hibernia common stock received by other First
Guaranty shareholders in the Merger.
A holder of First Guaranty common stock must follow the exact procedure
provided in 12 U.S.C. ss.215a and La. R.S. 6:376 in order to properly exercise
his or her dissenters' rights and rights of appraisal and avoid waiver of those
rights.
THE FOREGOING SUMMARY OF THE PROVISIONS OF 12 U.S.C. ss.215a AND LA. R.S.
6:376 RELATING TO DISSENTERS' RIGHTS IS NECESSARILY INCOMPLETE AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO THE EXCERPTS OF SUCH PROVISIONS SET FORTH HEREIN
AS APPENDIX F.
Holders of First Guaranty common stock who exercise and perfect
dissenters' rights and who receive cash for their shares generally will be
subject to federal and state income tax on all or a portion of the amount of
cash received. The receipt of cash for shares generally will be treated as a
distribution in redemption of the shareholders' stock and, depending on the
individual shareholder's circumstances, may be deemed to be a complete
termination of interest, resulting in a capital gain or loss to the shareholder.
The Tax Opinion attached hereto as Appendix G states that cash payments to
dissenting shareholders are not exempt from federal or state income tax.
Shareholders desiring to dissent from the Merger are urged to consult their tax
advisors with regard to the tax implications to them of exercising dissenters'
rights.
Hibernia has the right to terminate the Merger Agreement if the number
of shares of First Guaranty common stock as to which holders are legally
entitled to assert dissenters' rights constitutes 8.9% or more of the
outstanding shares of First Guaranty Stock. See "THE PROPOSED MERGER -
Amendment; Termination".
ACCOUNTING TREATMENT
Hibernia intends to account for the Merger as a pooling-of-interests.
In order for the Merger to qualify for pooling-of-interests accounting
treatment, among other things, 91.1% or more of the outstanding First Guaranty
common stock must be exchanged for Hibernia common stock. Also, in order for the
pooling-of-interests accounting method to apply, "affiliates" of First Guaranty
cannot sell, transfer, pledge or otherwise alienate or encumber any shares of
Hibernia common stock received in the Merger until the results of at least 30
days of post-Merger combined operations of First Guaranty and Hibernia have been
published. Persons believed by First Guaranty to be "affiliates" have agreed to
comply with these restrictions.
First Guaranty has agreed to use its best efforts to permit the
transaction to be accounted for as a pooling-of-interests. Hibernia is not
obligated to consummate the Merger if the Merger does not qualify for
pooling-of-interests accounting treatment under these circumstances.
CERTAIN REGULATORY CONSIDERATIONS
GENERAL
Hibernia is regulated and supervised by the Federal Reserve Board.
Under the BHCA, bank holding companies may not directly or indirectly acquire
the ownership or control of more than 5% of the voting shares of substantially
all of the assets of any company, including a bank, without the prior approval
of the Federal Reserve Board. Bank holding companies also generally are
prohibited under the BHCA from engaging in non-banking activities, with specific
exceptions.
Hibernia's national banking subsidiary is regulated, supervised and
examined by the OCC. Hibernia's banking subsidiary also is subject to various
requirements and restrictions under federal and state law, including:
. requirements to maintain reserves against deposits;
. restrictions on the types and amounts of loans that may be made;
. restrictions on the interest that may be charged on loans; and
limitations on the types of investment that may be made and the
types of services that may be offered.
Various consumer laws and regulations also affect the operations of
HNB. Commercial banks such as HNB also are affected by the Federal Reserve
Board's attempts to control the money supply and credit availability in order to
influence the economy.
PAYMENT OF DIVIDENDS
Hibernia derives substantially all of its income from the payment of
dividends by its banking subsidiary. The ability of its banking subsidiary to
pay dividends affects Hibernia's ability to pay dividends to its shareholders.
Various statutory restrictions apply to HNB's ability to pay dividends to
Hibernia. As of December 31, 1998, Hibernia's banking subsidiary had
approximately $212 million, plus retained earnings through the dividend
declaration date, available to pay dividends to Hibernia.
The OCC may prohibit a national bank from engaging in an unsafe or
unsound practice. The OCC has indicated that it generally would be an unsafe and
unsound practice to pay dividends if the payment of the dividend would deplete a
bank's capital to an inadequate level. HNB's ability to pay dividends in the
future is influenced by bank regulatory policies or agreements and by capital
guidelines. The level of this influence could increase in the future. Additional
information on this topic is available in some of the documents that are
incorporated by reference herein. See "AVAILABLE INFORMATION".
The Federal Reserve Board maintains a policy that requires bank holding
companies to serve as a source of strength for their subsidiary banks. In
furtherance of this policy, the Federal Reserve has stated that a bank holding
company generally should not maintain a rate of cash dividends unless its net
income available to common stockholders has been sufficient to fully fund the
dividends, and the prospective rate of earnings retention appears to be
consistent with the holding company's capital needs, asset quality and overall
financial condition.
RESTRICTIONS ON EXTENSIONS OF CREDIT
Federal law restricts HNB's ability to:
. extend credit to affiliates, including Hibernia;
. purchase assets of its affiliates;
. issue a guarantee, acceptance or letter of credit on behalf
of its affiliates, including an endorsement or standby letter of
credit; or
. purchase or invest in the stock or securities of an affiliate
or to take that stock or securities as collateral for loans to
any borrower.
Extensions of credit and issuances to affiliates generally must be
secured by eligible collateral. In addition, all such transactions with a single
affiliate generally are limited to 10% of HNB's capital and surplus and all such
transactions with affiliates may not exceed 20% of HNB's capital and surplus.
Hibernia's banking subsidiary also is limited in the aggregate amount
that may be loaned to a single borrower or a group of borrowers that are deemed
to be affiliated with each other for purposes of these rules.
These loans are limited to 15% of HNB's capital and surplus.
The limitations described above in this section apply to all national
banks.
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma combined balance sheet of Hibernia as
of December 31, 1998 and income statements of Hibernia for the years ended
December 31, 1998, 1997 and 1996 give effect to the pending merger with First
Guaranty. The statements also assume that the Merger is accounted for as a
pooling-of-interests. The pro forma combined balance sheet treats the Merger as
if it occurred on December 31, 1998; the pro forma combined income statements
treat the Merger as if it had occurred on January 1, 1996.
The information for the years ended December 31, 1998, 1997 and 1996,
in the column entitled "Hibernia Corporation" is summarized from the
consolidated financial statements of Hibernia contained in Hibernia's Annual
Report on From 10-K for the year ended December 31, 1998.
The information contained in the column entitled "First Guaranty" is
based on the financial statements and related notes, and Management's Discussion
and Analysis of Financial Condition and Results of Operations of First Guaranty
contained elsewhere in this proxy statement/prospectus. We encourage you to read
this column in conjunction with the other financial information about First
Guaranty contained in this proxy statement/prospectus.
The Pro Forma Financial Statements are presented for information
purposes only. The results shown in them are not necessarily indicative of the
actual results that might have occurred if the Merger had been completed on
January 1, 1996. Also, they are not necessarily indicative of results that might
be achieved in the future if the Merger is completed.
PRO FORMA COMBINED BALANCE SHEET (UNAUDITED)
The following unaudited combined balance sheet combines the balance
sheets of Hibernia and First Guaranty as if the Merger had been effective on
December 31, 1998. You should read this balance sheet in conjunction with the
financial statements and related notes of Hibernia, which are contained in
Hibernia's Annual Report on Form 10-K for the year ended December 31, 1998 and
incorporated herein by reference, and the December 31, 1998 financial statements
and related notes of First Guaranty, which are included elsewhere in this proxy
statement/prospectus.
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA COMBINED BALANCE SHEET
Hibernia Corporation and Subsidiaries
December 31, 1998
- -------------------------------------------------------------------------------------------------------------------------
FIRST PRO PRO FORMA
HIBERNIA GUARANTY FORMA HIBERNIA
Unaudited ($ in thousands) CORPORATION BANK ADJUSTMENTS CORPORATION
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks $ 555,756 $ 19,895 $ 575,651
Short-term investments 350,132 - ($2,060) (A) 348,072
Securities available for sa 2,676,311 2,714 64,280 (B) 2,743,305
Securities held to maturity - 64,192 (64,192) (B) -
Loans, net of unearned inco 10,006,182 153,324 10,159,506
Reserve for possible loan losses (127,976) (1,869) (129,845)
- -------------------------------------------------------------------------------------------------------------------------
Loans, net 9,878,206 151,455 - 10,029,661
- -------------------------------------------------------------------------------------------------------------------------
Bank premises and equipment 187,978 4,647 192,625
Customers' acceptance liability 331 - 331
Goodwill 138,393 - 138,393
Other intangible assets 40,761 - 40,761
Other assets 183,663 2,426 (31) (B) 186,058
- -------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $14,011,531 $245,329 ($2,003) $14,254,857
=========================================================================================================================
LIABILITIES
Deposits:
Demand, noninterest-bearing $ 2,026,219 $ 42,603 $ 2,068,822
Interest-bearing 8,576,787 181,104 8,757,891
- -------------------------------------------------------------------------------------------------------------------------
Total Deposits 10,603,006 223,707 10,826,713
- -------------------------------------------------------------------------------------------------------------------------
Short-term borrowings 1,134,136 - 1,134,136
Liability on acceptances 331 - 331
Other liabilities 150,268 2,246 152,514
Debt 805,689 - 805,689
- -------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 12,693,430 225,953 - 12,919,383
- -------------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Preferred Stock 100,000 2,000 ($2,000) (A) 100,000
Common Stock 300,289 4,989 2,732 (C) 308,010
Surplus 407,436 9,270 (2,732) (C) 413,974
Retained earnings 521,016 3,125 (60) (A) 524,081
Unrealized gains (losses) on
securities available for sale 27,111 (8) 57 (B) 27,160
Unearned compensation (37,751) - (37,751)
- -------------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 1,318,101 19,376 (2,003) 1,335,474
- -------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $14,011,531 $245,329 ($2,003) $14,254,857
=========================================================================================================================
- ----------
See notes to Pro Forma Combined Balance Sheet.
</TABLE>
<PAGE>
HIBERNIA CORPORATION
NOTES TO PRO FORMA COMBINED BALANCE SHEET
September 30, 1998
A. Hibernia plans to redeem all outstanding First Guaranty
preferred stock, with a par value of $1,000 per share, at a
redemption price of $1,030 per share plus any accrued and
unpaid dividends thereon. Based upon the 2,000 shares of First
Guaranty preferred stock outstanding, Hibernia's total cash
payment would be $2,060,000.
B. In accordance with Hibernia's investment policies, securities
of $64,192,000 with a market value of $64,280,000 classified
as held to maturity by First Guaranty, will be reclassified by
Hibernia as securities available for sale. The impact on
equity of this mark-to-market, net of tax, is $57,000.
C. Based upon an assumed Exchange Rate of 1.33 shares of Hibernia
common stock for each share of First Guaranty common stock,
Hibernia plans to issue approximately 4,021,500 shares of
Hibernia common stock in the Merger. At an assumed market
value of $16.00, this results in an aggregate market value for
the shares to be issued in the Merger of approximately
$64,344,000. The stated value of the Hibernia common stock is
$1.92 per share.
In accordance with the pooling-of-interests accounting method, the historical
equities of the merged companies are combined for purposes of this pro forma
combined balance sheet.
PRO FORMA COMBINED INCOME STATEMENTS (UNAUDITED)
The following unaudited pro forma combined income statements for the
years ended December 31, 1998, 1997 and 1996 combine the income statements of
Hibernia and First Guaranty as if the Merger had occurred on January 1, 1996. We
encourage you to read the pro forma income statements in conjunction with
Hibernia's consolidated financial statements and notes contained in its Annual
Report for 1998, which is incorporated by reference into this proxy
statement/prospectus, and the financial statements and related notes for the
years ended December 31, 1998 and 1997 for First Guaranty contained elsewhere
herein. The costs associated with the Merger, estimated to be $831,000, will be
accounted for as a current period expense when incurred.
<PAGE>
<TABLE>
<CAPTION>
HIBERNIA CORPORATION
PRO FORMA COMBINED INCOME STATEMENT
December 31, 1998
- ------------------------------------------------------------------------------------------------------
FIRST PRO FORMA
HIBERNIA GUARANTY HIBERNIA
Unaudited ($ in thousands, except per share data) CORPORATION BANK CORPORATION
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income
Interest and fees on loans $ 779,401 $ 14,746 $ 794,147
Interest on securities available for sale 160,379 4,079 164,458
Interest on securities held to maturity - - -
Interest on short-term investments 13,942 353 14,295
- ------------------------------------------------------------------------------------------------------
Total interest income 953,722 19,178 972,900
- ------------------------------------------------------------------------------------------------------
Interest expense
Interest on deposits 343,174 7,905 351,079
Interest on short-term borrowings 40,238 91 40,329
Interest on debt 39,776 - 39,776
- ------------------------------------------------------------------------------------------------------
Total interest expense 423,188 7,996 431,184
- ------------------------------------------------------------------------------------------------------
Net interest income 530,534 11,182 541,716
Provision for possible loan losses 26,000 475 26,475
- ------------------------------------------------------------------------------------------------------
Net interest income after provision
for possible loan losses 504,534 10,707 515,241
- ------------------------------------------------------------------------------------------------------
Noninterest income
Service charges on deposits 85,567 1,707 87,274
Trust fees 16,678 3 16,681
Retail investment service fees 17,231 - 17,231
Mortgage loan origination and servicing fees 15,235 - 15,235
Other service, collection and exchange charges 28,446 498 28,944
Other operating income 16,100 249 16,349
Securities gains (losses), net 5,678 (3) 5,675
- ------------------------------------------------------------------------------------------------------
Total noninterest income 184,935 2,454 187,389
- ------------------------------------------------------------------------------------------------------
Noninterest expense
Salaries and employee benefits 207,132 3,223 210,355
Occupancy expense, net 33,923 757 34,680
Equipment expense 30,584 683 31,267
Data processing expense 28,808 21 28,829
Advertising and promotional expense 14,991 111 15,102
Foreclosed property expense, net (999) 93 (906)
Amortization of intangibles 16,715 - 16,715
Other operating expense 85,430 3,122 88,552
- ------------------------------------------------------------------------------------------------------
Total noninterest expense 416,584 8,010 424,594
- ------------------------------------------------------------------------------------------------------
Income before income taxes 272,885 5,151 278,036
Income tax expense 94,256 1,750 96,006
- ------------------------------------------------------------------------------------------------------
Income from continuing operations $ 178,629 $ 3,401 $ 182,030
======================================================================================================
Income from continuing operations
applicable to common shareholders $ 171,729 $ 3,401 $ 175,130
======================================================================================================
Pro forma weighted average common shares 153,718,782 4,021,517 157,740,299
======================================================================================================
Pro forma weighted average common
shares - assuming dilution 156,165,470 4,021,517 160,186,987
======================================================================================================
Pro forma income per common share from
continuing operations (A) $ 1.12 $ 1.11
======================================================================================================
Pro forma income per common share from
continuing operations - assuming dilution $ 1.10 $ 1.09
======================================================================================================
- ----------
See notes to Pro Forma Combined Income Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HIBERNIA CORPORATION
PRO FORMA COMBINED INCOME STATEMENT
December 31, 1997
- ------------------------------------------------------------------------------------------------------
FIRST PRO FORMA
HIBERNIA GUARANTY HIBERNIA
Unaudited ($ in thousands, except per share data) CORPORATION BANK CORPORATION
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income
Interest and fees on loans $ 653,260 $ 13,474 $ 666,734
Interest on securities available for sale 171,667 3,478 175,145
Interest on securities held to maturity - - -
Interest on short-term investments 17,131 409 17,540
- ------------------------------------------------------------------------------------------------------
Total interest income 842,058 17,361 859,419
- ------------------------------------------------------------------------------------------------------
Interest expense
Interest on deposits 323,247 6,799 330,046
Interest on short-term borrowings 31,189 134 31,323
Interest on debt 5,586 - 5,586
- ------------------------------------------------------------------------------------------------------
Total interest expense 360,022 6,933 366,955
- ------------------------------------------------------------------------------------------------------
Net interest income 482,036 10,428 492,464
Provision for possible loan losses 3,148 300 3,448
- ------------------------------------------------------------------------------------------------------
Net interest income after provision
for possible loan losses 478,888 10,128 489,016
- ------------------------------------------------------------------------------------------------------
Noninterest income
Service charges on deposits 78,132 1,732 79,864
Trust fees 15,519 13 15,532
Retail investment service fees 12,070 -
Mortgage loan origination and servicing fees 9,642 -
Other service, collection and exchange charges 22,636 461 23,097
Other operating income 13,273 256 13,529
Securities gains (losses), net 2,725 - 2,725
- ------------------------------------------------------------------------------------------------------
Total noninterest income 153,997 2,462 134,747
- ------------------------------------------------------------------------------------------------------
Noninterest expense
Salaries and employee benefits 203,044 3,315 206,359
Occupancy expense, net 33,956 795 34,751
Equipment expense 30,808 706 31,514
Data processing expense 26,181 23 26,204
Advertising and promotional expense 15,634 122
Foreclosed property expense, net (3,235) 132 (3,103)
Amortization of intangibles 14,593 - 14,593
Other operating expense 88,273 2,744 91,017
- ------------------------------------------------------------------------------------------------------
Total noninterest expense 409,254 7,837 401,335
- ------------------------------------------------------------------------------------------------------
Income before income taxes 223,631 4,753 222,428
Income tax expense 78,835 1,387 80,222
- ------------------------------------------------------------------------------------------------------
Income from continuing operations $ 144,796 $ 3,366 $ 142,206
======================================================================================================
Income from continuing operations
applicable to common shareholders $ 137,896 $ 3,366 $ 141,262
=======================================================================================================
Pro forma weighted average common shares 152,873,513 4,021,517 156,895,030
=======================================================================================================
Pro forma weighted average common
shares - assuming dilution 155,403,644 4,021,517 159,425,161
=======================================================================================================
Pro forma income per common share from
continuing operations (A) $ 0.90 $ 0.90
=======================================================================================================
Pro forma income per common share from
continuing operations - assuming dilution $ 0.89 $ 0.89
=======================================================================================================
- ----------
See notes to Pro Forma Combined Income Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HIBERNIA CORPORATION
PRO FORMA COMBINED INCOME STATEMENT
December 31, 1996
- ------------------------------------------------------------------------------------------------------
FIRST PRO FORMA
HIBERNIA GUARANTY HIBERNIA
Unaudited ($ in thousands, except per share data) CORPORATION BANK CORPORATION
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income
Interest and fees on loans $ 535,016 $ 12,601 $ 547,617
Interest on securities available for sale 173,601 2,610 176,211
Interest on securities held to maturity - - -
Interest on short-term investments 13,481 742 14,223
- ------------------------------------------------------------------------------------------------------
Total interest income 722,098 15,953 738,051
- ------------------------------------------------------------------------------------------------------
Interest expense
Interest on deposits 281,973 6,125 288,098
Interest on short-term borrowings 15,887 1 15,888
Interest on debt 1,969 - 1,969
- ------------------------------------------------------------------------------------------------------
Total interest expense 299,829 6,126 305,955
- ------------------------------------------------------------------------------------------------------
Net interest income 422,269 9,827 432,096
Provision for possible loan losses (12,127) 325 (11,802)
- ------------------------------------------------------------------------------------------------------
Net interest income after provision
for possible loan losses 434,396 9,502 443,898
- ------------------------------------------------------------------------------------------------------
Noninterest income
Service charges on deposits 64,982 1,646 66,628
Trust fees 14,055 6 14,061
Retail investment service fees 8,659 - 8,659
Mortgage loan origination and servicing fees 8,131 - 8,131
Other service, collection and exchange charges 18,898 569 19,467
Gain on sale of business lines 517 - 517
Other operating income 10,611 272 10,883
Securities gains (losses), net (5,152) - (5,152)
- ------------------------------------------------------------------------------------------------------
Total noninterest income 120,701 2,493 123,194
- ------------------------------------------------------------------------------------------------------
Noninterest expense
Salaries and employee benefits 181,138 3,016 184,154
Occupancy expense, net 30,244 725 30,969
Equipment expense 31,723 533 32,256
Data processing expense 22,813 61 22,874
Advertising and promotional expense 10,907 124 11,031
Foreclosed property expense, net (1,786) 184 (1,602)
Amortization of intangibles 7,791 - 7,791
Other operating expense 76,985 2,723 79,708
- ------------------------------------------------------------------------------------------------------
Total noninterest expense 359,815 7,366 367,181
- ------------------------------------------------------------------------------------------------------
Income before income taxes 195,282 4,629 199,911
Income tax expense 67,389 1,328 68,717
- ------------------------------------------------------------------------------------------------------
Income from continuing operations $ 127,893 $ 3,301 $ 131,194
======================================================================================================
Income from continuing operations
applicable to common shareholders $ 126,153 $ 3,301 $ 129,454
======================================================================================================
Pro forma weighted average common shares 152,238,818 4,021,517 156,260,335
======================================================================================================
Pro forma income per common share
assuming dilution 153,736,922 4,021,517 157,758,439
======================================================================================================
Pro forma income per common share from
continuing operations (A) $ 0.83 $ 0.83
======================================================================================================
Pro forma income per common share from
continuing operations - assuming dilution $ 0.82 $ 0.82
======================================================================================================
- ----------
See notes to Pro Forma Combined Income Statements.
</TABLE>
<PAGE>
HIBERNIA CORPORATION
NOTES TO PRO FORMA COMBINED INCOME STATEMENTS
A. Hibernia expects to achieve savings in the Merger by reducing
operating costs. Most of these savings will occur when certain
operations of the two companies are consolidated. The extent
of any savings will depend, among other things, on the
regulatory environment and economic conditions, and may be
affected by unanticipated changes in business activities,
inflation and other external factors. There can be no
assurance that any such savings will be realized. We have not
adjusted the unaudited pro forma financial statement to
reflect any anticipated costs savings.
<PAGE>
CERTAIN INFORMATION CONCERNING FIRST GUARANTY
PRINCIPAL BUSINESS
First Guaranty was organized on March 6, 1934 as a Louisiana banking
corporation. Although its deposits are insured by the FDIC, First Guaranty is
not a member of the Federal Reserve. At December 31, 1998, First Guaranty had
total assets of approximately $245 million, total deposits of approximately $224
million and total shareholders' equity of approximately $19.3 million. First
Guaranty is domiciled in Hammond, Louisiana and its principal executive offices
are located at 400 East Thomas Street, Hammond, Louisiana 70401-3320 and its
telephone number is (504) 375-0300. First Guaranty currently operates two
full-service facilities in Hammond, Louisiana and four additional banking
centers in Amite, Independence, Kentwood and Ponchatoula, Louisiana.
First Guaranty conducts general commercial banking business throughout
Tangipahoa Parish. Its services include furnishing deposit products, including
demand deposits, time deposits, and savings accounts; consumer and commercial
lending; mortgage loan origination; issuance of credit cards; and retail banking
services.
The deposit services are delivered through six banking centers that
provide walk-in and drive-through teller services and also through twelve
automated proprietary teller machines (ATM's), as well as regional and national
ATM networks. Loan products are delivered through all six banking centers.
First Guaranty is extensively regulated under both federal and state
laws. To the extent the following information describes particular statutory
provisions, it is qualified in its entirety by reference to the particular
statutory and regulatory provisions. Any change in applicable law or regulation
could have a material effect on the business and prospects of First Guaranty.
Both federal and state laws extensively regulate various aspects of the
banking industry, including requirements regarding the maintenance of reserve
against deposits, limitations on the rates that can be charged on loans and
restrictions on the nature and amounts of loans and investments that can be
made.
As a state bank, First Guaranty is subject to the supervisory authority
of the Louisiana Commissioner of Financial Institutions, whose office conducts
periodic examinations of First Guaranty. As a federally-insured bank First
Guaranty also is subject to supervision and regulation by the Federal Deposit
Insurance Corporation. This regulation is intended primarily to protect First
Guaranty's creditors and depositors rather than First Guaranty's shareholders.
COMPETITION
First Guaranty has a main office and one banking center in Hammond and
banking centers elsewhere in Tangipahoa Parish. Its main competitors are Deposit
Guaranty, Hancock Bank and Central Progressive Bank.
First Guaranty competes actively with national and state banks in
southeastern Louisiana for all types of loans and deposits. In addition, First
Guaranty competes for funds with savings and loan associations, the U.S.
Government, credit unions, and other financial service companies. It competes
for loans with other financial service institutions, such as savings and loan
associations, insurance companies, small loan companies, credit union, mortgage
companies and certain government agencies.
SEASONALITY OF BUSINESS AND CUSTOMERS
First Guaranty's deposits represent a cross-section of the area's
economy. There is no material concentration of deposits from any single customer
or group of customers except that deposits held for public entities constitute
approximately 30% of First Guaranty's depositors. No significant portion of
First Guaranty's loans is concentrated within a single industry or group of
related industries.
Historically, the business of First Guaranty has not been seasonal in
nature and management of First Guaranty does not anticipate any seasonal trends
in the future. First Guaranty does not rely on foreign sources of funds or
income.
EMPLOYEES
First Guaranty has approximately 98 full-time equivalent employees.
PROPERTIES
The principal properties of First Guaranty are its main office located
at 400 East Thomas Street, Hammond, Louisiana 70401-3320, and five additional
banking centers in Amite, Hammond, Independence, Kentwood and Ponchatoula,
Louisiana - all of which are owned and occupied exclusively by First Guaranty.
Management believes its buildings and premises, taken as a whole, are in good
condition in all material respects, subject to ordinary wear and tear.
LITIGATION AND SETTLEMENT AGREEMENT
On September 22, 1998, Hibernia and HNB initiated the Litigation
against First Guaranty and Mr. Reynolds alleging that First Guaranty had engaged
in actions constituting an anticipatory breach of the Merger Agreement and
alleging that Mr. Reynolds had engaged in actions constituting tortious
interference with contractual relations. Hibernia and HNB requested that the
court issue a preliminary and permanent injunction requiring First Guaranty and
Mr. Reynolds (1) to perform specifically First Guaranty's obligations under the
Merger Agreement, (2) to cease and desist further conduct undermining or likely
to undermine the completion of the Merger, and (3) to employ their best efforts
to assure that all actions necessary to complete the Merger were conducted in a
timely fashion. First Guaranty and Mr. Reynolds filed an answer denying the
allegations of Hibernia and HNB.
On December 30, 1998, Hibernia, HNB, First Guaranty and Mr. Reynolds
signed the Settlement Agreement, a copy of which is attached to this proxy
statement/prospectus as Appendix B. In the Settlement Agreement, the parties
agreed, among other things, as follows:
First Guaranty agreed to retain Keefe, Bruyette, at Hibernia's
expense, to undertake to provide to the Board of Directors and
shareholders of First Guaranty an opinion as to whether the Merger
Consideration is fair, from a financial point of view, to the
holders of First Guaranty common stock. A copy of the Keefe,
Bruyette Fairness Opinion to the effect that the Merger
Consideration is fair, from a financial point of view, to the
holders of First Guaranty common stock is attached to this proxy
statement/prospectus as Appendix D. See "PROPOSED MERGER -
Opinions of Other Financial Advisors".
Hibernia agreed to reimburse First Guaranty for all costs and
expenses billed to it by Keefe, Bruyette, including (without
limitation) any indemnification obligations of First Guaranty to
Keefe, Bruyette, other than indemnity obligations resulting from
claims or lawsuits against Keefe, Bruyette brought or funded by
First Guaranty or any of its officers or directors.
First Guaranty agreed to allow National Capital to determine
whether it could deliver an opinion that the Merger Consideration
is fair, from a financial point of view, to the holders of First
Guaranty common stock. A copy of the National Capital Fairness
Opinion to the effect that the Merger Consideration is fair, from
a financial point of view, to the holders of First Guaranty common
stock is attached to this proxy statement/prospectus as Appendix
E. See "PROPOSED MERGER - Opinions of Other Financial Advisors".
First Guaranty agreed to invite Keefe, Bruyette and National
Capital to make a presentation to its Board of Directors with
respect to the fairness of the Merger Consideration, from a
financial point of view, to the holders of First Guaranty common
stock and to invite Stephen A. Hansel, President and Chief
Executive Officer of Hibernia, to that meeting to address the
Board of Directors of First Guaranty regarding the Merger.
First Guaranty waived compliance with the condition to completion
of the Merger that First Guaranty receive a letter from Chaffe &
Associates dated within five days of the date of this proxy
statement/prospectus to the effect that the terms of the Merger
are fair to its shareholders, from a financial point of view, and
agreed to accept the opinion of Keefe, Bruyette dated within five
days of the date of this proxy statement/prospectus to the effect
that the Merger Consideration is fair, from a financial point of
view, to the holders of First Guaranty common stock.
The parties agreed to include the Chaffe & Associates Fairness
Opinion, the Keefe, Bruyette Fairness Opinion and the National
Capital Fairness Opinion in this proxy statement/prospectus.
First Guaranty agreed that if Chaffe & Associates is unable or
unwilling to update the Chaffe & Associates Fairness Opinion to a
date within five days of the Closing Date, then First Guaranty
will accept an update by Keefe, Bruyette of the Keefe, Bruyette
Fairness Opinion in satisfaction of the requirement in the Merger
Agreement that First Guaranty receive an update of the Chaffe &
Associates Fairness Opinion as of a date within five days of the
Closing Date.
If the First Guaranty shareholders approve the Merger Agreement
at the Special Meeting, Hibernia promptly will dismiss the
Litigation with prejudice, and the parties agreed not to make a
claim against or sue or sponsor any claim or lawsuit against each
other and their officers, directors, investment bankers,
shareholders or agents except for (1) claims against Hibernia
arising out of Hibernia's indemnification and expense advancement
obligations under the Merger Agreement or (2) claims against Mr.
Reynolds arising under his indemnification obligations in favor of
Hibernia under the Merger Agreement or (3) claims against First
Guaranty or Hibernia for breach of their respective obligation to
complete the Merger upon satisfaction or waiver, as provided in
the Merger Agreement, of all conditions to that obligation.
If the First Guaranty shareholders fail to approve the Merger
Agreement by the later to occur of March 31, 1999 or the Extended
Shareholder Meeting Date, then First Guaranty may terminate the
Merger Agreement, Hibernia will dismiss the Litigation with
prejudice upon the termination of the Merger Agreement and the
parties agree not to make a claim against or sue or sponsor any
claims or lawsuit against each other or their officers, directors,
investment bankers, shareholders or agents except for (1) claims
against Hibernia under its indemnification obligation under
Section 11.2 of the Merger Agreement or (2) claims for breaches of
the confidentiality provision of the Merger Agreement or (3)
claims for the violation of the federal proxy rules applicable to
the solicitation of proxies in connection with the Special
Meeting.
Mr. Reynolds agreed that if Keefe, Bruyette does not withdraw the
Keefe, Bruyette Fairness Opinion before the Special Meeting, then
Mr. Reynolds will (1) vote 966,096 shares of First Guaranty common
stock (31.6% of the issued and outstanding shares of First
Guaranty common stock) owned by him at the Special Meeting in
favor of the Merger Agreement and the Merger and (2) recommend in
this proxy statement/prospectus that the other holders of First
Guaranty common stock vote at the Special Meeting in favor of the
Merger Agreement and the Merger.
All directors and shareholders of First Guaranty, other than Mr.
Reynolds, are free to vote their shares and communicate their
views with respect to the Merger Agreement, as they see fit.
First Guaranty agreed to send a letter to the directors of First
Guaranty, other than Mr. Reynolds, requesting that such directors
contractually obligate themselves to vote in favor of the Merger
Agreement and Merger. As of the date of this proxy
statement/prospectus, all 13 other directors owning an aggregate
of 501,691 shares of First Guaranty common stock, 16.4% of the
issued and outstanding shares) have declined to do so and have
indicated to First Guaranty their intention to vote their shares
against the Merger Agreement and the Merger.
First Guaranty and Hibernia agreed to extend the date for the
completion of the Merger to the later to occur of March 31, 1999
or the Extended Closing Date and further agreed that either First
Guaranty or Hibernia may terminate the Merger Agreement after such
date.
OTHER LEGAL PROCEEDINGS
The FDIC issued on April 30, 1996, under Section 8(e) of the Federal
Deposit Insurance Act, a Notice of Intention to Remove and Prohibit from Further
Participation (the "Notice") naming among the respondents the chief financial
officer of First Guaranty and certain of its former officers (the "Section 8
Proceedings"). The Notice alleges a variety of acts of the respondents during
1991 and 1992 alleged to constitute violations of law and of safe and sound
banking practices and seeks the removal from office of First Guaranty's chief
financial officer and prohibition of all respondents from further participation
in the affairs of First Guaranty and any other insured depository institution.
Allegations include causing First Guaranty to expend funds on speculative
enterprises, improperly exposing First Guaranty to potential liability, causing
or permitting First Guaranty to make speculative extensions of credit, filing
incomplete or misleading Quarterly Reports and otherwise misleading the FDIC. An
evidentiary hearing before an administrative law judge was held in October 1997.
In August 1998, the presiding administrative law judge issued a recommended
decision against the respondents. First Guaranty itself is not a party to these
proceedings, but it would be obligated to indemnify certain of the respondents
against reasonable expenses incurred by them in successfully defending
themselves in those proceedings.
Under applicable law and its Articles of Incorporation and Bylaws,
First Guaranty is obligated to indemnify its current and former officers and
directors against reasonable expenses incurred by them in defense of proceedings
to which they are parties by reason of having been officers or directors of
First Guaranty if they are successful in defense of such proceedings. In
addition, First Guaranty has discretionary authority in certain other
circumstances to indemnify its officers and directors and to advance them their
reasonable expenses in defending such proceedings before a final determination
is made as to their entitlement to indemnification. First Guaranty has not been
advised as to the likelihood of success of the respondents in the Section 8
Proceedings and also is unable to estimate with any precision the likely total
of potentially indemnifiable expenses in connection with those Section 8
Proceedings, but is advised that they currently total in excess of $500,000.
First Guaranty also is subject to various other legal proceedings in
the normal course of business. It is management's belief that the ultimate
resolution for such other claims arising in the normal course of business will
not have a material adverse effect on First Guaranty's financial position or
results of operations.
STOCK PRICES AND DIVIDENDS
First Guaranty's shares of common stock are not traded on a stock
exchange or in any established over-the-counter market. Trades occur primarily
between individuals at a price mutually agreed upon by the buyer and seller.
Trading in First Guaranty's common stock has been infrequent, and such trades
cannot be characterized as constituting an active trading market. Based on
information recorded in First Guaranty's Stock Transfer Agent records,
management believes that approximately 385,322 shares of First Guaranty's common
stock were traded during the 12-month period ended December 31, 1998. However, a
majority of the outstanding shares of common stock currently are controlled by
First Guaranty's directors, officer and their affiliates. No assurance can be
given that an active trading market for the common stock will develop. First
Guaranty has no present intention to list its common stock on NASDAQ or any
other exchange.
The following table presents information regarding the trading range of
First Guaranty's shares of common stock for the previous eleven fiscal quarters,
as reflected in the stock transfer agent records maintained by First Guaranty,
and dividends paid on those shares for those same periods. Transactions not
reflected on the stock transfer agent records, if any, are not included in the
table below.
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
High Low Dividends High Low Dividends High Low Dividends
- -------------------- ------------------------------ -------------------------------- --------------------------------
March 31 $11.00 $11.00 $ .10 $12.50 $ 8.50 $ .10 $ 8.33 $8.33 $ .07
June 30 -- -- .10 10.50 8.50 .10 8.33 8.33 .07
September 30 -- -- .10 11.00 10.50 .10 8.67 8.33 .10
December 31 -- -- .10 11.00 10.50 .10 8.67 8.67 .10
- -------------------- ------------------------------ -------------------------------- --------------------------------
</TABLE>
On the Record Date, there were ____ shareholders of record of First
Guaranty's Common Stock.
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table sets forth as of the Record Date certain
information with respect to the beneficial ownership as defined in Rule 13d-3 of
the Exchange Act for each person who is the beneficial owner of more than five
percent of the First Guaranty common stock.
- -------------------------- -------------------------------- --------------------
NAME AND ADDRESS AMOUNT OF BENEFICIAL OWNERSHIP PERCENT OF CLASS
- -------------------------- -------------------------------- --------------------
Douglas V. Reynolds
2450 First Avenue 225,000 7.4%
Huntington, WV 25703
Marshall T. Reynolds
2450 First Avenue 966,096 31.6%
Huntington, WV 25703
Robert L. Shell, Jr.
5 Nichols Drive 293,748 (*) 9.6%
Barboursville, WV 25504
- --------------------------------------------------------------------------------
(*) Includes 14,000 shares owned by Mr. Shell's wife, who exercises
sole voting and investment power over such shares; 124,474 shares
held in trust for his father and 8,600 shares held by Mr. Shell as
custodian for certain of his grandchildren, as to all of which Mr.
Shell exercises sole voting and investment power.
The following table shows the number of shares of First Guaranty common
stock beneficially owned by each director and named executive officer, and all
of the directors and executive officers of First Guaranty as a group, as of the
Record Date. Except as otherwise indicated, all shares indicated as beneficially
owned are held with sole voting and investment power.
- -------------------------- ---------------------------------- ------------------
NAME AMOUNT OF BENEFICIAL OWNERSHIP PERCENT OF CLASS
- -------------------------- ---------------------------------- ------------------
Directors:
F. Fanancy Anzalone, M.D. 333 *
Don W. Ayres 300 *
Anthony J. Berner, Jr. 1,500 *
Robert H. Beymer 93,629 (1) 3.0%
R. Collins Bonicard 27,000 *
Charles Brister 3,000 (2) *
Mary Ann Cefalu 26,325 *
Andrew Gasaway, Jr. 6,939 *
William K. Hood 29,115 (3) *
Edwin L. Hoover, Jr. 1,277 *
Marshall T. Reynolds 966,096 31.6%
Nicholas A. Saladino 7,500 *
Sam P. Scelfo, Jr. 1,800 *
Robert L. Shell, Jr. 293,748 (4) 9.6%
NAMED EXECUTIVE OFFICERS:
Stanley M. Dameron 525 *
Michael D. Landry 8,250 *
ALL DIRECTORS AND EXECUTIVE OFFICERS
AS A GROUP 1,467,787 48.0%
(16 PERSONS)
- --------------------------------------------------------------------------------
* Less than one percent.
(1) Includes 8,000 shares owned by Mr. Beymer's wife, who exercises sole
voting and investment power over such shares.
(2) Includes 1,500 shares owned by Mr. Brister's wife, who exercises sole
voting and investment power over such shares.
(3) Includes 240 shares owned by Mr. Hood's daughters who exercise sole
voting and investment power over such shares; and 7,376 shares owned by
WKH Management, Inc., as to which Mr. Hood exercises sole voting and
investment power.
(4) Includes 14,000 shares owned by Mr. Shell's wife, who exercises sole
voting and investment power over such shares; 124,474 shares held in
trust for his father and 8,600 shares held by Mr. Shell as custodian
for certain of his grandchildren, as to all of which Mr. Shell
exercises sole voting and investment power.
<PAGE>
FIRST GUARANTY FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 1998 AND 1997 (AUDITED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
FIRST GUARANTY BANK
STATEMENTS OF CONDITION
(in thousands, except share data)
- ----------------------------------------------------------------------------------------------------
December 31,
- ----------------------------------------------------------------------------------------------------
1998 1997
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Cash and cash equivalents:
Cash and due from banks ................................................ $ 16,724 $ 12,113
Interest-bearing deposits with banks ..................................... 3,171 2,976
Securities available for sale (amortized cost of $2,722 and $3,135
at December 31, 1998 and 1997, respectively) ........................... 2,714 3,132
Securities held to maturity (fair value of $64,280 and $59,099
at December 31, 1998 and 1997, respectively) ........................... 64,192 59,091
Loans .................................................................... 153,324 140,078
Less: allowance for loan loss ............................................ 1,869 1,688
- ----------------------------------------------------------------------------------------------------
Net loans ............................................................ 151,455 138,390
- ----------------------------------------------------------------------------------------------------
Premises and equipment, net .............................................. 4,647 5,023
Other real estate ........................................................ 282 399
Accrued interest receivable .............................................. 1,622 1,698
Other assets ............................................................. 522 715
- ----------------------------------------------------------------------------------------------------
TOTAL ASSETS ....................................................... $ 245,329 $ 223,537
====================================================================================================
Liabilities and Stockholders' Equity:
Deposits:
Noninterest-bearing demand ............................................. $ 42,603 $ 36,670
Interest-bearing demand ................................................ 43,973 43,738
Savings ................................................................ 20,775 20,371
Time deposits less than $100,000 ....................................... 59,858 57,055
Time deposits of $100,000 and over ..................................... 56,498 39,675
- ----------------------------------------------------------------------------------------------------
Total deposits ....................................................... 223,707 197,509
- ----------------------------------------------------------------------------------------------------
Federal funds purchased .................................................. - 6,150
Accrued interest payable ................................................. 1,477 1,441
Other liabilities ........................................................ 769 1,023
- ----------------------------------------------------------------------------------------------------
TOTAL LIABILITIES .................................................. 225,953 206,123
- ----------------------------------------------------------------------------------------------------
Commitments and contingencies
Stockholders' equity:
Preferred stock:
$1,000 par value, Series B - nonconvertible - authorized 5,000 shares
issued and outstanding 2,000 shares ................................. 2,000 2,000
Common stock:
$1 par value- authorized 100,000,000 shares,
issued and outstanding 2,573,351 .................................... 2,573 2,573
$5 par value- authorized 600,000 shares,
issued and outstanding 483,290 shares ............................... 2,416 2,416
Surplus .................................................................. 9,270 9,270
Retained earnings ........................................................ 3,125 1,157
Accumulated other comprehensive income ................................... (8) (2)
- ----------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY ......................................... 19,376 17,414
- ----------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ......................... $ 245,329 $ 223,537
====================================================================================================
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
FIRST GUARANTY BANK
STATEMENTS OF INCOME
(in thousands, except per share information)
- ----------------------------------------------------------------------------------------------------
Years Ended December 31,
- ----------------------------------------------------------------------------------------------------
1998 1997 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income:
Loans (including fees) ................................ $ 14,746 $ 13,474 $ 12,601
Deposits with other banks ............................. 227 240 263
Securities ............................................ 4,079 3,478 2,610
Federal funds sold .................................... 126 169 479
- ----------------------------------------------------------------------------------------------------
TOTAL INTEREST INCOME ............................... 19,178 17,361 15,953
- ----------------------------------------------------------------------------------------------------
Interest expense:
Demand deposits ....................................... 1,134 1,219 1,168
Savings deposits ...................................... 474 504 507
Time deposits ......................................... 6,297 5,076 4,450
Federal funds purchased and other obligations ......... 91 134 1
- ----------------------------------------------------------------------------------------------------
TOTAL INTEREST EXPENSE .............................. 7,996 6,933 6,126
- ----------------------------------------------------------------------------------------------------
Net interest income ..................................... 11,182 10,428 9,827
Provision for loan losses ............................. 475 300 325
- ----------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses ..... 10,707 10,128 9,502
- ----------------------------------------------------------------------------------------------------
Noninterest income:
Service charges on deposit accounts ................... 1,707 1,732 1,646
Other service charges, commissions and fees ........... 431 474 575
Securities losses ..................................... (3) - -
Other ................................................. 319 256 272
- ----------------------------------------------------------------------------------------------------
TOTAL NONINTEREST INCOME ............................ 2,454 2,462 2,493
- ----------------------------------------------------------------------------------------------------
Noninterest expense:
Salaries and employee benefits ........................ 3,223 3,315 3,016
Occupancy expense ..................................... 757 795 725
Equipment expense ..................................... 683 706 533
Other ................................................. 3,347 3,021 3,092
- ----------------------------------------------------------------------------------------------------
TOTAL NONINTEREST EXPENSE ........................... 8,010 7,837 7,366
- ----------------------------------------------------------------------------------------------------
Income before income taxes ............................ 5,151 4,753 4,629
Provision for income taxes ............................ 1,750 1,387 1,328
- ----------------------------------------------------------------------------------------------------
Net income .............................................. 3,401 3,366 3,301
- ----------------------------------------------------------------------------------------------------
Preferred dividend requirements ......................... 210 212 209
- ----------------------------------------------------------------------------------------------------
Income applicable to common shares ...................... $ 3,191 $ 3,154 $ 3,092
- ----------------------------------------------------------------------------------------------------
Per common share:
Earnings .............................................. $ 1.04 $ 1.03 $ 1.01
Cash dividends paid ................................... $ 0.40 $ 0.40 $ 0.34
Average common shares outstanding ....................... 3,056,641 3,056,641 3,056,641
====================================================================================================
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
FIRST GUARANTY BANK
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands, except per share information)
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated
Preferred Preferred Common Common Other
Stock Stock Stock Stock Retained
Comprehensive
Series A Series B $1 Par $5 Par Surplus Earnings
Income Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1995 .............. $ 1,000 $ 1,000 $ 2,573 $ 2,416 $ 9,284 $(2,796) $- $ 13,477
Net income ........................... - - - - - 3,301 - 3,301
Comprehensive income ............... - - - - - - - 3,301
Redemption of Series A
preferred stock .................... (1,000) - - - - (50) - (1,050)
Issuance of Series B
preferred stock .................... - 1,000 - - (14) - - 986
Cash dividends paid:
Common stock ($0.34 per share) ..... - - - - - (1,020) - (1,020)
Preferred stock:
Series A ($8.18 per share) ........ - - - - - (8) - (8)
Series B ($99.79 per share) ....... - - - - - (201) - (201)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1996 .............. - 2,000 2,573 2,416 9,270 (774) - 15,485
Net income ........................... - - - - - 3,366 - 3,366
Net change in unrealized loss on
available for sale securities ....... - - - - - - (2) (2)
Comprehensive income ............... - - - - - - - 3,364
Cash dividends paid:
Common stock ($0.40 per share) ..... - - - - - (1,223) - (1,223)
Preferred stock:
Series B ($105.83 per share) ...... - - - - - (212) - (212)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1997 .............. - 2,000 2,573 2,416 9,270 1,157 (2) 17,414
Net income ........................... - - - - - 3,401 - 3,401
Net change in unrealized loss on
available for sale securities ....... - - - - - - (9) (9)
Reclassification adjustment for
losses included in net income ....... - - - - - - 3 3
Comprehensive income ............... - - - - - - - 3,395
Cash dividends paid:
Common stock ($0.40 per share) ......... - - - - - (1,223) - (1,223)
Preferred stock:
Series B ($104.54 per share) ...... - - - - - (210) - (210)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1998 .............. $ - $ 2,000 $ 2,573 $ 2,416 $ 9,270 $ 3,125 $(8) $ 19,376
====================================================================================================================================
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
FIRST GUARANTY BANK
STATEMENTS OF CASH FLOWS
(in thousands)
- ----------------------------------------------------------------------------------------------------
Years Ended December 31,
- ----------------------------------------------------------------------------------------------------
1998 1997 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Increase (decrease) in cash and cash equivalents:
Cash flows from operating activities:
Interest received ....................................... $ 18,451 $ 16,454 $ 15,157
Other operating cash receipts ........................... 3,311 3,168 3,238
Interest paid ........................................... (7,960) (6,869) (6,208)
Cash payments for salaries and benefits ................. (3,371) (3,258) (3,016)
Income taxes paid ....................................... (2,018) (1,629) (1,971)
Other operating cash payments ........................... (3,795) (4,070) (3,119)
- ----------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES ............. 4,618 3,796 4,081
- ----------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Maturities of interest-bearing deposits with banks ...... 3,669 5,863 5,456
Funds invested in interest-bearing deposits with banks .. (3,864) (4,171) (5,961)
Maturities of securities ................................ 72,435 40,744 49,234
Proceeds from sales of securities ....................... 8,990 - -
Funds invested in securities ............................ (86,251) (52,432) (65,272)
Principal collected on loans ............................ 100,255 80,041 76,687
Loans made to customers ................................. (114,114) (95,156) (85,966)
Recoveries of loans previously charged against
the allowance for loan losses ......................... 61 167 149
Expenditures for premises and equipment ................. (214) (737) (834)
Proceeds from sales of premises and equipment ........... 3 - 17
Proceeds from sales of other real estate ................ 392 688 333
Other, net .............................................. 16 34 68
- ----------------------------------------------------------------------------------------------------
NET CASH USED BY INVESTING ACTIVITIES ................. (18,622) (24,959) (26,089)
- ----------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net increase in deposits ................................ 26,198 18,233 11,407
Net increase (decrease) in federal funds purchased ...... (6,150) 6,150 -
Proceeds from issuance of preferred stock ............... - - 986
Redemption of preferred stock ........................... - - (1,050)
Dividends paid .......................................... (1,433) (1,435) (1,229)
- ----------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES ............. 18,615 22,948 10,114
- ----------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents ........ 4,611 1,785 (11,894)
Cash and cash equivalents at the beginning of the year ...... 12,113 10,328 22,222
- ----------------------------------------------------------------------------------------------------
Cash and cash equivalents at the end of the year ............ $ 16,724 $ 12,113 $ 10,328
====================================================================================================
Reconciliation of net income to net cash
provided by operating activities:
Net income .................................................. $ 3,401 $ 3,366 $ 3,301
Adjustments:
Provision for loan losses ................................. 475 300 325
Provision for deferred taxes .............................. 62 116 (471)
Depreciation and amortization ............................. 775 691 724
Provision for other real estate writedowns ................ - 22 124
Loss on sales of securities ............................... 3 - -
(Gain) loss on sales of assets ............................ (20) 36 (18)
Change in prepaid expense and interest receivable ......... 171 (219) (193)
Change in accrued expenses and interest payable ........... (249) (516) 289
- ----------------------------------------------------------------------------------------------------
TOTAL ADJUSTMENTS ....................................... 1,217 430 780
- ----------------------------------------------------------------------------------------------------
Net cash provided by operating activities ................... $ 4,618 $ 3,796 $ 4,081
====================================================================================================
See notes to financial statements
</TABLE>
<PAGE>
FIRST GUARANTY BANK
NOTES TO FINANCIAL STATEMENTS
1. Business and Summary of Significant Accounting Policies
Business
FIRST GUARANTY BANK (the Bank) is a Louisiana state-chartered commercial
bank which provides a diversified range of financial services to consumers and
businesses in the communities in which it operates. These services include
consumer and commercial lending; mortgage loan origination; the issuance of
credit cards; and retail banking services. The Bank is subject to the regulation
of certain federal and state agencies and undergoes periodic examinations by
those regulatory authorities. The Bank has six banking offices and twelve
automated teller machines (ATMs) located throughout Tangipahoa Parish,
Louisiana.
Summary of Significant Accounting Policies
The accounting and reporting policies of the Bank conform to generally
accepted accounting principles and to predominant accounting practices within
the banking industry. The more significant of its accounting and reporting
policies are as follows:
Management's estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenue and expense during the reporting
periods. Actual results could differ from those estimates.
Material estimates that are particularly susceptible to significant change
in the near-term economic environment and market conditions relate to the
determination of the allowance for loan losses and the valuation of real estate
acquired in connection with foreclosures or in satisfaction of loans. In
connection with the determination of the allowance for loan losses and real
estate owned, the Bank obtains independent appraisals for significant
properties.
Securities
The Bank reviews its financial position, liquidity and future plans in
evaluating the criteria for classifying investment securities.
Securities available for sale are stated at fair value. The unrealized
difference, if any, between amortized cost and fair value of these securities is
excluded from income and is reported, net of deferred taxes, as a component of
stockholders' equity. Securities held to maturity are stated at cost, which is
adjusted for amortization of premiums and accretion of discounts, both computed
by the interest method. Most of the Bank's securities are classified as held to
maturity since it has both the positive intent and ability to hold these
investments to maturity. Realized gains and losses on securities, if any, are
computed based on the specific identification method and are reported as a
separate component of other income.
Loans
Loans are stated at the principal amounts outstanding, net of unearned
income and deferred loan fees. Interest income on all classifications of loans
is calculated using the simple interest method on daily balances of the
principal amount outstanding.
Accrual of interest is discontinued on a loan when management believes,
after considering economic and business conditions and collection efforts, that
the borrower's financial condition is such that reasonable doubt exists as to
the full and timely collection of principal and interest. When a loan is placed
in nonaccrual status, all interest previously accrued but not collected is
reversed against current period interest income. Income on such loans is then
recognized only to the extent that cash is received and where the future
collection of interest and principal is probable. Loans are returned to accrual
status when, in the judgment of management, all principal and interest amounts
contractually due are reasonably assured of repayment within a reasonable time
frame and when the borrower has demonstrated payment performance of cash or cash
equivalents for a minimum of six months.
The Bank classifies loans as impaired if, based on current information and
events, it is probable that the Bank will be unable to collect the scheduled
payments of principal and interest when due according to the contractual terms
of the loan agreement. The measurement of impaired loans is based on the present
value of the expected future cash flows discounted at the loan's effective
interest rate or the loan's observable market price or based on the fair value
of the collateral if the loan is collateral-dependent.
Loans held for sale
Mortgage loans originated and intended for sale in the secondary market are
carried at the lower of cost or estimated fair value in the aggregate. Net
unrealized losses are recognized in a valuation allowance by charges to income.
Gains on sales of loans are recognized when the proceeds from the loan sales are
received by the Bank.
Loan fees and costs
Nonrefundable loan origination and commitment fees and direct costs
associated with originating loans are deferred and recognized over the lives of
the related loans as an adjustment to the loans' yield using the level yield
method.
Allowance for loan losses
The allowance for loan losses is established through a provision for loan
losses charged to expense. Loans are charged against the allowance for loan
losses when management believes that the collectibility of the principal is
unlikely. The allowance, which is based on evaluation of the collectibility of
loans and prior loan loss experience, is an amount that management believes will
be adequate to reflect the risks inherent in the existing loan portfolio and
commitments to extend credit which exist at the reporting date. The evaluations
take into consideration a number of subjective factors including changes in the
nature and volume of the loan portfolio, overall portfolio quality, review of
specific problem loans, current economic conditions that may affect a borrower's
ability to pay, adequacy of loan collateral, and other relevant factors. In
addition, regulatory agencies, as an integral part of their examination process,
periodically review the estimated losses on loans. Such agencies may require the
Bank to recognize additional losses based on their judgments about information
available to them at the time of their examination.
Although management uses available information to recognize losses on
loans, because of uncertainties associated with local economic conditions,
collateral values, and future cash flows on impaired loans, it is reasonably
possible that a material change could occur in the allowance for loan losses in
the near term. However, the amount of the change that is reasonably possible
cannot be estimated.
The evaluation of the adequacy of loan collateral is often based upon
estimates and appraisals. Because of changing economic conditions, the
valuations determined from such estimates and appraisals may also change.
Accordingly, the Bank may ultimately incur losses which vary from management's
current estimates. Adjustments to the allowance for loan losses will be reported
in the period such adjustments become known or are reasonably estimable. All
loan losses are charged to the allowance for loan losses when the loss actually
occurs or when management believes that the collectibility of the principal is
unlikely. Recoveries are credited to the allowance at the time of recovery.
Premises and equipment
Premises and equipment are stated at cost, less accumulated depreciation.
Depreciation is computed for financial reporting purposes using the
straight-line method over the estimated useful lives of the respective assets as
follows:
Buildings and improvements 10-40 years
Equipment, fixtures, and automobiles 3-10 years
Expenditures for renewals and betterments are capitalized and depreciated
over their estimated useful lives. Repairs, maintenance and minor improvements
are charged to operating expense as incurred. Gains or losses on disposition, if
any, are recorded in the statements of income.
Other real estate
Other real estate includes properties acquired through foreclosure or
acceptance of deeds in lieu of foreclosure. These properties are recorded at the
lower of the recorded investment in the property or its fair value less the
estimated cost of disposition. Any valuation adjustments required prior to
foreclosure are charged to the allowance for loan losses. Subsequent to
foreclosure, losses on the periodic revaluation of the property are charged to
current period earnings as other real estate expenses. Costs of operating and
maintaining the properties, net of related income, are charged to other real
estate expense as incurred. Any subsequent gains or losses on dispositions are
credited or charged to income in the period of disposition.
Income taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which the deferred tax
assets or liabilities are expected to be settled or realized. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be utilized.
Comprehensive income
The Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income,"
which the Bank adopted in 1998. This statement establishes standards for
reporting and display of comprehensive income and its components, which include
revenues, expenses, gains, and losses, in a full set of general-purpose
financial statements. This statement requires that an enterprise classify items
of other comprehensive income by their nature in a financial statement and
display the accumulated balance of other comprehensive income as a separate
component in the stockholders' equity section of the statements of condition.
The components of comprehensive income are disclosed in the statements of
changes in stockholders' equity.
Earnings per common share
In 1998, the Bank adopted SFAS No. 128, "Earnings Per Share," which
establishes standards for computing and presenting earnings per share. This
statement simplifies the standards for computing earnings per share and requires
dual presentation of basic and diluted earnings per share on the face of the
income statements for all entities with complex capital structures. The Bank has
no outstanding convertible shares or other contracts to issue common stock.
Shares of the Bank's common stock, both $1 par and $5 par, have the same
privileges, restrictions, and rights, including voting and dividend rights. The
adoption of SFAS No. 128 in 1998 had no effect on the financial statements.
Current accounting developments
The FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information," which becomes effective for fiscal years beginning
after December 15, 1997. This statement establishes standards for the reporting
of financial information from operating segments in annual and interim financial
statements. SFAS No. 131 requires that financial information be reported on the
same basis that it is reported internally for evaluating segment performance and
allocating resources to segments. The Bank adopted SFAS No. 131 in 1998 which
had no effect on the financial statements.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits," which becomes effective for
fiscal years beginning after December 15, 1997. SFAS No. 132 revises employers'
disclosures about pension and other postretirement benefit plans. It
standardizes the disclosure requirements for pensions and other postretirement
benefits. The Bank expects to adopt SFAS No. 132 in 1999, which is not expected
to have a material impact on the Bank's financial position or results of
operations.
The FASB issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," which becomes effective for fiscal years beginning after
June 15, 1999. This statement establishes accounting and reporting standards for
derivative instruments and for hedging activities. This statement also
establishes standards for accounting for changes in the fair value of a
derivative. The provisions of this statement will be adopted by the Bank in
1999. Although the adoption of this statement is not expected to have a material
impact on the Bank's financial position or results of operations, the Bank
expects to reclassify a significant portion of its securities portfolio from the
held to maturity category to the available for sale category as provided under
this statement.
Other
For purposes of reporting cash flows, cash and cash equivalents include
cash and due from banks, and federal funds sold. Generally, federal funds are
purchased and sold for one-day periods.
Certain reclassifications have been made to the 1996 and 1997 financial
statements to conform to the 1998 method of presentation.
2. Cash and Due From Banks
The Bank is required to maintain certain reserves at the Federal Reserve
Bank. The requirement approximated $3,871,000 at December 31, 1998 and
$3,436,000 at December 31, 1997.
The Bank's assets included certain interest-bearing deposits in various
other financial institutions which totaled $3,171,000 and $2,976,000 at December
31, 1998 and 1997, respectively. Such deposits are maintained at levels which
afford the Bank coverage under the Federal Deposit Insurance Act.
3. Securities
The Bank invests primarily in securities of U. S. Government agencies. A
summary comparison of securities available for sale and held to maturity by
type, at December 31, 1998 and 1997, is shown below.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1998 December 31, 1997
- ---------------------------------------------------------------------------------------------------------------------------
Gross Gross Gross Gross
Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
Cost Gains Losses Value Cost Gains Losses Value
- ---------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Securities available for
sale:
Mortgage-backed
securities $ 2,029 $ - $ (8) $ 2,021 $ 3,135 $ - $ (3) $ 3,132
Equity securities 693 - - 693 - - - -
- ---------------------------------------------------------------------------------------------------------------------------
$ 2,722 $ - $ (8) $ 2,714 $ 3,135 $ - $ (3) $3,132
===========================================================================================================================
Securities held to
maturity:
U.S. government and
agencies securities $ 23,450 $ 92 $ (8) $ 23,534 $ 38,650 $ 26 $ (39) $38,637
Mortgage-backed
securities 40,742 162 (158) 40,746 20,441 34 (13) 20,462
- ---------------------------------------------------------------------------------------------------------------------------
$ 64,192 $ 254 $ (166) $ 64,280 $ 59,091 $ 60 $ (52) $59,099
===========================================================================================================================
</TABLE>
The Bank has an investment in Federal Home Loan Bank stock that is included
in equity securities and is carried at cost which approximates fair value. The
cost of these securities, including shares purchased as part of a dividend
reinvestment program, was approximately $693,000.
Included in the category of U.S. government and agencies securities held to
maturity at December 31, 1998 and 1997 are structured notes that have an
amortized cost of $0.3 million and $4.5 million and a fair value of $0.3 million
and $4.5 million, respectively. Structured notes consist of step-up notes and
adjustable rate notes that are subject to interest rate caps. The step-up notes
have interest rates that are scheduled to increase by predetermined amounts at
predetermined dates and are callable at par on each date the interest rate is
scheduled to increase.
The scheduled maturities of securities available for sale (other than
equity securities) and securities held to maturity at December 31, 1998 and
1997, by contractual maturity, is shown below. Expected maturities may differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
December 31, 1998 December 31, 1997
- -------------------------------------------------------------------------------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
- -------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Securities available for sale:
Mortgage-backed securities $ 2,029 $ 2,021 $ 3,135 $ 3,132
- -------------------------------------------------------------------------------------------------
$ 2,029 $ 2,021 $ 3,135 $ 3,132
=================================================================================================
Securities held to maturity:
Due in one year or less $ 12,233 $ 12,355 $ 22,377 $ 22,359
Due after one year through five years 11,217 11,179 16,273 16,278
- -------------------------------------------------------------------------------------------------
23,450 23,534 38,650 38,637
Mortgage-backed securities 40,742 40,746 20,441 20,462
- -------------------------------------------------------------------------------------------------
$ 64,192 $ 64,280 $ 59,091 $ 59,099
=================================================================================================
</TABLE>
Gross realized gains and gross realized losses on sales of available for
sale securities were $100 and $3,000, respectively, in 1998. There were no sales
of securities available for sale or securities held to maturity during 1997 or
1996.
Securities with a carrying value of $65,425,000 (fair value $66,196,000) at
December 31, 1998, and $58,591,000 (fair value $58,598,000) at December 31,
1997, were pledged to secure public deposits and for other purposes required or
permitted by law.
4. Loans and Allowance for Loan Losses
The following table summarizes the components of the Bank's loan portfolio
as of December 31, 1998 and 1997:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
December 31,
- -----------------------------------------------------------------------------
Category 1998 1997
- -----------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Real estate ....................................... $ 96,773 $ 91,477
Agricultural ...................................... 3,511 3,640
Commercial and industrial ......................... 39,298 31,397
Consumer .......................................... 13,771 13,629
Other ............................................. 41 -
- -----------------------------------------------------------------------------
153,394 140,143
Less: unearned income ............................. (70) (65)
- -----------------------------------------------------------------------------
Total loans ..................................... $ 153,324 $ 140,078
=============================================================================
</TABLE>
Changes in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
Years ended December 31,
- ------------------------------------------------------------------
1998 1997 1996
- ------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Balance at beginning of year.... $ 1,688 $ 1,649 $ 1,513
Provision charged to expense.... 475 300 325
Loans charged off .............. (355) (428) (338)
Recoveries ..................... 61 167 149
- ------------------------------------------------------------------
Balance at end of year ......... $ 1,869 $ 1,688 $ 1,649
==================================================================
</TABLE>
The allowance for loan losses is reviewed by management on a monthly basis
and additions thereto are recorded in order to maintain the allowance at an
adequate level. In assessing the adequacy of the allowance, management considers
a variety of internal and external factors which might impact the performance of
individual loans. These factors include, but are not limited to, economic
conditions and their impact upon borrowers' ability to repay loans, respective
industry trends, borrower estimates, and independent appraisals. Periodic
changes in these factors impact management's assessment as to the adequacy of
the allowance for loan losses.
Impaired loans having recorded investments of $0.4 million at December 31,
1998 have been recognized in accordance with SFAS No. 114 as amended by SFAS No.
118. Impaired loans at December 31, 1997 were $0.8 million. The allowance for
loan losses related to these loans was $49,000 at December 31, 1998 and $84,000
at December 31, 1997. All nonaccrual loans were considered impaired at December
31, 1998 and 1997.
As of December 31, 1998 and 1997, the Bank had loans totaling $436,000 and
$753,000, respectively, on which the accrual of interest had been discontinued.
Had these nonaccrual loans performed in accordance with their original terms,
the Bank's interest income would have been increased by approximately $53,000,
$60,000, and $123,000, in 1998, 1997, and 1996, respectively.
5. Premises and Equipment, Owned and Leased
The major categories comprising premises and equipment at December 31, 1998
and 1997 are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------
December 31,
- --------------------------------------------------------
1998 1997
- --------------------------------------------------------
(in thousands)
<S> <C> <C>
Land .......................... $ 1,090 $ 1,082
Bank premises ................. 5,740 5,696
Furniture and equipment ....... 7,168 7,054
- --------------------------------------------------------
13,998 13,832
Less accumulated depreciation
and amortization ............ (9,351) (8,809)
- --------------------------------------------------------
Net book value ............. $ 4,647 $ 5,023
========================================================
</TABLE>
Included in occupancy and equipment expense are charges for depreciation of
$634,000, $734,000, and $586,000 in 1998, 1997, and 1996, respectively.
Future minimum lease payments under all operating leases with initial or
remaining noncancellable lease terms at December 31, 1998 are as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------
Operating
Year Leases
- -----------------------------------------------
(in thousands)
<S> <C>
1999........................... $ 131
2000........................... 127
2001........................... 124
2002........................... 91
2003........................... 17
Remaining Years................ 3
- -----------------------------------------------
Total minimum lease payments... $ 493
===============================================
</TABLE>
Included in occupancy, equipment, and other expenses are rents of $146,000,
$136,000, and $126,000 in 1998, 1997, and 1996, respectively.
6. Other Real Estate
Real estate under lease or subject to contract of sale totaling $329,000
and $118,000, at December 31, 1998 and 1997, respectively, is included in other
real estate.
The allowance for other real estate losses is established through a
provision charged to other expense. Changes in the allowance for other real
estate losses are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Years ended December 31,
- --------------------------------------------------------------------------------
1998 1997 1996
- --------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Balance at beginning of year $ 76 $ 150 $ 100
Provision charged to expense 5 22 124
Writedowns - (96) (74)
- --------------------------------------------------------------------------------
Balance at end of year $ 81 $ 76 $ 150
================================================================================
</TABLE>
7. Deposits
The aggregate amount of short-term jumbo certificates of deposit, each with
a minimum denomination of $100,000, was approximately $56,498,000 and
$39,675,000 at December 31, 1998 and 1997, respectively.
At December 31, 1998, the scheduled maturities of certificates of deposit
are as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------
Year December 31, 1998
- ---------------------------------------------------
(in thousands)
<S> <C>
1999 $ 85,228
2000 20,189
2001 4,528
2002 2,050
2003 and Thereafter 4,360
- ---------------------------------------------------
$ 116,356
===================================================
</TABLE>
8. Preferred Stock
On February 1, 1996, the Bank redeemed all outstanding shares (1,000
shares) of $1,000 par value convertible preferred stock, Series A (Series A
Preferred Stock), at a redemption price of $1,050 per share plus accrued
dividends, and sold 1,000 shares of $1,000 par value nonconvertible preferred
stock, Series B (Series B Preferred Stock) to Premier Financial Bancorp, Inc.
(Premier), the holder of the redeemed Series A Preferred Stock, in a private
placement transaction. These preferred stock transactions resulted in a net
decrease in stockholders' equity of approximately $72,000.
Premier is a Kentucky based bank holding company. Mr. Marshall T. Reynolds
is the Chairman of the Board of Directors of Premier and the beneficial owner of
10.7% of Premier's outstanding common stock. Additionally, the Bank is advised
that the directors and stockholders of Premier include Mr. Reynolds' son, Mr.
Jack M. Reynolds, and Mr. Toney K. Adkins, an officer of Champion Industries,
Inc., of which Mr. Marshall T. Reynolds is President, Chief Executive Officer,
Chairman of the Board and holder of a majority of the capital stock. None of
these individuals participated in the negotiations of this transaction.
Each share of Series A Preferred Stock has a liquidation preference of
$1,000 per preferred share. Shares of Series A Preferred Stock have no
preemptive rights or general voting rights. Shares of Series A Preferred Stock
are convertible into shares of the Bank's $1 par value common stock in
accordance with a formula based upon the estimated market price of the $1 par
value common stock at the time of issuance of the Series A Preferred Stock. On
or after the second anniversary of the date of their respective original
issuance, shares of the Series A Preferred Stock may be redeemed by the Bank at
$1,050 per share plus dividends accrued and unpaid at the respective redemption
date. Dividends on Series A Preferred Stock are noncumulative and, when
declared, are paid quarterly. The dividend rate, which is adjusted daily, is
determined by adding one percent (1.0%) to the Wall Street Journal prime rate.
Dividend payments on the Series A Preferred Stock totaled $8,000 in 1996. There
were no dividend payments on Series A Preferred Stock during 1997 or 1998. There
are no outstanding shares of Series A Preferred Stock.
Each share of Series B Preferred Stock has a liquidation preference of
$1,000 per preferred share. Shares of Series B Preferred Stock have no
preemptive rights or general voting rights. Shares of Series B Preferred Stock
are not convertible into shares of the Bank's common stock. Shares of the Series
B Preferred Stock may be redeemed by the Bank at $1,030 per share plus dividends
accrued and unpaid at the respective redemption date. Dividends on Series B
Preferred Stock are noncumulative and, when declared, are paid quarterly. The
dividend rate, which is adjusted daily, is determined by adding two percent
(2.0%) to the Wall Street Journal prime rate. Dividend payments on the Series B
Preferred Stock totaled $210,000, $212,000 and $201,000 in 1998, 1997 and 1996,
respectively. There were 2,000 outstanding shares of Series B Preferred Stock at
December 31, 1998 and 1997.
9. Minimum Capital Requirements
The Bank is subject to regulatory capital requirements administered by
federal and state banking agencies. Failure to meet minimum capital requirements
can initiate actions by regulators that, if undertaken, could have an effect on
the Bank's financial statements. Under the framework for prompt corrective
action, the Bank must meet capital guidelines that involve quantitative measures
of the Bank's assets, liabilities, and certain off-balance-sheet items. The
Bank's capital amounts and classification are also subject to qualitative
judgments by the regulators. Capital adequacy guidelines require minimum ratios
of 4.00% for tier 1 risk-based capital, 8.00% for total risk-based capital and
4.00% for tier 1 leverage capital. To be considered, "well capitalized," the
ratios are 6.00%, 10.00% and 5.00%, respectively.
At December 31, 1998, the Bank is considered to be "well capitalized" under
the regulatory framework. There are no conditions or events since that time that
management believes have changed the Bank's category. Management believes, as of
December 31, 1998, that the Bank meets all capital adequacy requirements to
which it is subject.
The Bank's actual capital amounts and ratios are presented below:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Capital Levels
- ------------------------------------------------------------------------------
Adequately
Actual Capitalized Well Capitalized
-------------------- --------------------------- -------------------------
Amount Ratio Amount Ratio Amount Ratio
-------------------- --------------------------- -------------------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1998
Total risk-based capital
(to risk weighted assets(1) $ 21,137 12.67% $ 13,344 8.00% $ 16,680 10.00%
Tier 1 capital (to risk weighted assets)(1) 19,268 11.55% 6,672 4.00% 10,008 6.00%
Tier 1 leverage capital (1) 19,268 7.69% 10,021 4.00% 12,527 5.00%
As of December 31, 1997
Total risk-based capital
(to risk weighted assets)(1) $ 18,986 12.65% $ 12,003 8.00% $ 15,004 10.00%
Tier 1 capital (to risk weighted assets)(1) 17,298 11.53% 6,002 4.00% 9,002 6.00%
Tier 1 leverage capital (1) 17,298 7.86% 8,806 4.00% 11,007 5.00%
==================================================================================================================================
(1) As defined by the regulations. Generally, tier 1 leverage capital or core
capital consists of common stockholders' equity, noncumulative perpetual
preferred stock, and minority interests in consolidated subsidiaries. Total
capital represents both tier 1 and tier 2 capital. Tier 2 capital may include,
among other supplementary capital elements, limited-life preferred stock,
subordinated debt, and allowance for loan losses, subject to certain limits.
</TABLE>
10. Dividend Restrictions
Bank regulations require the approval of bank regulatory authorities if the
dividends declared by a bank exceed certain prescribed limits. For 1999, the
aggregate dividend declarations by the Bank without prior regulatory approval
are limited to approximately $2.0 million of the Bank's undistributed earnings
at December 31, 1998, plus an additional amount equal to the 1999 net profits,
as defined, up to the date of any dividend declaration. However, for any
dividend declaration, the Bank must consider additional factors such as: the
amount of current period net income, liquidity, asset quality, capital adequacy
and economic conditions. In addition, banking regulators have authority to
prohibit banks from paying dividends if they deem such payment to be an unsafe
or unsound practice.
11. Related Party Transactions
In the normal course of business, the Bank has loans, deposits, and other
transactions with its executive officers, directors and certain business
organizations and individuals with which such persons are associated. An
analysis of the activity of loans made to such borrowers during the years ended
December 31, 1998 and 1997 follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Years ended December 31,
- --------------------------------------------------------------------------------
1998 1997
- --------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Balance at beginning of year $ 5,832 $ 2,421
New loans 1,767 6,269
Repayments (2,379) (2,858)
Other reductions (1,553) -
- --------------------------------------------------------------------------------
Balance at end of year $ 3,667 $ 5,832
================================================================================
</TABLE>
The other reductions in 1998 represent the outstanding loans of two
directors who resigned in 1998.
Additionally, included in the Bank's loan portfolio are participations in
individual loans totaling $5,472,000 and $5,748,000 at December 31, 1998 and
1997, respectively, which were purchased from affiliated financial institutions.
The Bank paid approximately $224,000, $295,000, and $220,000 in 1998, 1997,
and 1996, respectively, for printing supplies and office furniture and equipment
to Champion Industries, Inc. (or subsidiary companies of Champion Industries,
Inc.), of which Mr. Marshall T. Reynolds, a director of the Bank, is President,
Chief Executive Officer, Chairman of the Board of Directors, and holder of a
majority of the capital stock, and of which Mr. Robert H. Beymer, a director and
Vice Chairman of the Board of Directors of the Bank, is a director and a holder
of less than 1% of such stock. The Bank also paid approximately $261,000,
$251,000, and $236,000, in 1998, 1997, and 1996, respectively, to Champion
Industries, Inc. to permit the Bank's employees to participate in the Champion
Industries, Inc. employee medical benefit plan.
12. Employee Benefit Plans
The Bank has an employee savings plan to which employees, who meet certain
service requirements, may defer one to fifteen percent of their base salaries,
6% of which may be matched up to 100% by the Bank, at its sole discretion. Bank
contributions to the savings plan were $73,000, $64,000, and $51,000 in 1998,
1997, and 1996, respectively.
The Bank has an Incentive Stock Option Plan under which certain key
officers and employees can be granted options, for an aggregate of 50,000 shares
of the Bank's $5 par value common stock, at the greater of (1) 100% of fair
market value of the stock on the date the option is granted; or (2) the par
value per share of common stock. The Incentive Stock Option Committee determines
the expiration dates of the options which may not be later than ten years from
the date of the grant. Options are eligible for exercise on an equal pro rata
basis over a three-year period beginning on the date of the grant. No option may
be granted under the Incentive Stock Option Plan after March 10, 1998. No
options were granted or exercised under the Incentive Stock Option Plan during
1998 and 1997. No options are outstanding under the Incentive Stock Option Plan
as of December 31, 1998.
13. Other Expense
The following is a summary of the significant components of other expense:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Years ended December 31,
- ---------------------------------------------------------------------------------
1998 1997 1996
- ---------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Other expense:
Legal and other professional fees ........ $1,161 $ 692 $ 919
Operating supplies ....................... 292 360 289
Marketing and public relations ........... 238 270 229
Insurance ................................ 197 153 104
Software ................................. 177 215 204
Taxes .................................... 169 160 198
Telephone ................................ 146 136 120
Postage .................................. 158 164 164
Travel ................................... 153 136 164
Other .................................... 656 735 701
- ---------------------------------------------------------------------------------
Total other expense .................... $3,347 $3,021 $3,092
=================================================================================
</TABLE>
14. Income Taxes
The following is a summary of the provision for income taxes included in
the statements of income:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Years ended December 31,
- ---------------------------------------------------------------------------------
1998 1997 1996
- ---------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Current ..................................... $ 1,712 $ 1,271 $ 1,799
Deferred .................................... 62 140 (447)
Benefit of operating loss carryforward ...... (24) (24) (24)
- ---------------------------------------------------------------------------------
Total ..................................... $ 1,750 $ 1,387 $ 1,328
=================================================================================
</TABLE>
The income tax provision included no amounts resulting from securities
transactions.
The difference between income taxes computed by applying the statutory
federal income tax rate and the provision for income taxes in the financial
statements is reconciled as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Years ended December 31,
- ---------------------------------------------------------------------------------
1998 1997 1996
- ---------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Statutory tax rate .......................... 34.0% 34.0% 34.0%
Federal income taxes at statutory rate ...... $ 1,751 $ 1,616 $ 1,574
Change in valuation allowance ............... (24) (24) (23)
Tax benefit of previously unrecognized
deferred tax assets ........................ - (247) (231)
Other ....................................... 23 42 8
- ---------------------------------------------------------------------------------
$ 1,750 $ 1,387 $ 1,328
=================================================================================
</TABLE>
Deferred taxes are recorded based upon differences between the financial
statement and tax bases of assets and liabilities, and available tax credit
carryforwards. Temporary differences between the financial statement and tax
values of assets and liabilities give rise to deferred tax assets (liabilities).
The significant components of the Bank's deferred tax assets and liabilities at
December 31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
December 31,
- ---------------------------------------------------------------------------------
Category 1998 1997
- ---------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards ......................... $ 211 $ 235
Allowance for other real estate losses ................... 49 134
Interest on nonaccrual loans ............................. 32 32
- ---------------------------------------------------------------------------------
Gross deferred tax assets ............................... 292 401
Less: Valuation allowance for deferred tax assets ........ (71) (94)
- ---------------------------------------------------------------------------------
Deferred tax assets ..................................... 221 307
- ---------------------------------------------------------------------------------
Deferred tax liabilities:
Allowance for loan losses ............................... (186) (248)
Depreciation and amortization ........................... (78) (67)
Other ................................................... (27) -
- ---------------------------------------------------------------------------------
Gross deferred tax liabilities ........................ (291) (315)
- ---------------------------------------------------------------------------------
Net deferred tax liability ................................ $ (70) $ (8)
=================================================================================
</TABLE>
The valuation allowance was established to reserve against the future
temporary differences related to the net operating loss carryforwards. Based on
recent earning trends and projections, the Bank reduced the valuation allowance
during 1998 and 1997 by approximately $23,000 and $24,000, respectively, which
reduced the corresponding provisions for income taxes.
As of December 31, 1998, the Bank has net operating loss carryforwards of
$623,000, for income tax purposes, which are available to offset future taxable
income. These carryforwards expire from 2001 to 2007.
15. Federal Funds Purchase Agreement and Other Short-term Borrowings
The Bank has entered into formal and informal agreements whereby it may
purchase federal funds from correspondent banks. At December 31, 1998, the
aggregate amount of such borrowings under these agreements is not to exceed
$13.5 million. Certain agreements require borrowings to be collateralized by
marketable securities with current values equal to 125% of the borrowed amounts.
Borrowings under such agreements bear interest at the current federal funds
rate. At December 31, 1998, there were no outstanding borrowings under such
agreements.
The Bank also maintains an open line of credit with the Federal Home Loan
Bank of Dallas, which originated in June, 1998. The total line of credit
available with the Federal Home Loan Bank amounts to approximately $13.8 million
at December 31, 1998. This amount is computed based on the Bank's stock position
less current advances. This line of credit is collateralized by a blanket lien
on 1-4 family residential mortgage loans. Generally, the available credit under
this line should not exceed 65% of the Bank's outstanding 1-4 family residential
mortgage loans, unless the Bank provides additional collateral. The agreement
provides for interest based upon the federal funds rate. At December 31, 1998,
there were no outstanding borrowings under the Federal Home Loan Bank line of
credit. The following schedule provides certain information about the advances
from the Federal Home Loan Bank during 1998.
<TABLE>
<CAPTION>
- -------------------------------------------------------
1998
- -------------------------------------------------------
(dollars in thousands)
<S> <C>
Advances outstanding at end of year ......... -
Rate at end of year ......................... -
Maximum borrowing during year ............... 4,500
Average borrowing during year ............... 239
Weighted average rate ....................... 5.55%
=======================================================
</TABLE>
16. Financial Instruments
The Bank is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers and
to reduce its own exposure to fluctuations in interest rates. These financial
instruments include commitments to extend credit and standby and commercial
letters of credit. Those instruments involve, to varying degrees, elements of
credit and interest rate risk in excess of the amount recognized in the
statements of financial condition. The contract or notional amounts of those
instruments reflect the extent of the Bank's involvement in particular classes
of financial instruments.
The Bank's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
standby and commercial letters of credit is represented by the contractual
notional amount of those instruments. The Bank uses the same credit policies in
making commitments and conditional obligations as it does for on-balance-sheet
instruments.
Unless otherwise noted, the Bank does not require collateral or other
security to support financial instruments with credit risk.
Commitments to Extend Credit and Letters of Credit. Commitments to extend
credit are agreements to lend to a customer as long as there is no
violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since commitments may expire without being drawn
upon, the total commitment amounts do not necessarily represent future cash
requirements. The Bank evaluates each customer's creditworthiness on a
case-by-case basis. The amount of collateral obtained, if deemed necessary
by the Bank upon extension of credit, is based on management's credit
evaluation of the counterparty. Collateral requirements vary but may
include accounts receivable, inventory, property, plant, and equipment,
residential real estate, and commercial properties.
Standby and commercial letters of credit are conditional commitments issued
by the Bank to guarantee the performance of a customer to a third party.
These guarantees are primarily issued to support public and private
borrowing arrangements, including commercial paper, bond financing, and
similar transactions. The majority of these guarantees are short-term,
one-year or less; however, some guarantees extend for up to three years.
The credit risk involved in issuing letters of credit is essentially the
same as that involved in extending loan facilities to customers. Collateral
requirements are the same as on-balance-sheet instruments and commitments
to extend credit.
The Bank has not incurred any losses on its commitments in either 1998 or
1997.
Fair value estimates are generally subjective in nature and are dependent
upon a number of significant assumptions associated with each instrument or
group of similar instruments, including estimates of discount rates, risks
associated with specific financial instruments, estimates of future cash flows
and relevant available market information. Fair value information is intended to
represent an estimate of an amount at which a financial instrument could be
exchanged in a current transaction between a willing buyer and seller engaging
in an exchange transaction. However, since there are no established trading
markets for a significant portion of the Bank's financial instruments, the Bank
may not be able to immediately settle its financial instruments; as such, the
fair values are not necessarily indicative of the amounts that could be realized
through immediate settlement. In addition, the majority of the Bank's financial
instruments, such as loans and deposits, are held to maturity and are realized
or paid according to the contractual agreement with the customer.
Where available, quoted market prices are used to estimate fair values.
However, due to the nature of the Bank's financial instruments, in many
instances quoted market prices are not available. Accordingly, the Bank has
estimated fair values based on other valuation techniques, such as discounting
estimated future cash flows using a rate commensurate with the risks involved or
other acceptable methods. Fair values are estimated without regard to any
premium or discount that may result from concentrations of ownership of
financial instruments, possible income tax ramifications, or estimated
transaction costs. The fair value estimates are subjective in nature and involve
matters of significant judgment and therefore cannot be determined with
precision. Fair values are also estimated at a specific point in time and are
based on interest rates and other assumptions at that date. As events change the
assumptions underlying these estimates, the fair values of financial instruments
will change.
Disclosure of fair values is not required for certain items such as lease
financing, investments accounted for under the equity method of accounting,
obligations of pension and other postretirement benefits, premises and
equipment, other real estate, prepaid expenses, the value of long-term
relationships with depositors (core deposit intangibles) and other customer
relationships, other intangible assets and income tax assets and liabilities.
Fair value estimates are presented for existing on- and off-balance sheet
financial instruments without attempting to estimate the value of anticipated
future business and the value of assets and liabilities that are not considered
financial instruments. In addition, the tax ramifications related to the
realization of the unrealized gains and losses have not been considered in the
estimates. Accordingly, the aggregate fair value amounts presented do not
purport to represent and should not be considered representative of the
underlying "market" or franchise value of the Bank.
Because the standard permits many alternative calculation techniques and
because numerous assumptions have been used to estimate the Bank's fair values,
reasonable comparison of the Bank's fair value information with other financial
institutions' fair value information cannot necessarily be made.
The methods and assumptions used to estimate the fair values of each class
of financial instruments are as follows:
Cash and due from banks, interest-bearing deposits with banks, federal
funds sold, and federal funds purchased. These items are generally
short-term in nature and, accordingly, the carrying amounts reported in the
statements of condition are reasonable approximations of their fair values.
Securities. Fair values are principally based on quoted market prices. If
quoted market prices are not available, fair values are based on quoted
market prices of comparable instruments.
Loans. The fair value of loans is estimated for segments of the loan
portfolio with similar financial characteristics. For variable rate loans
that reprice frequently with no significant change in credit risk, the
carrying amounts reported in the statements of condition are reasonable
approximations of their fair values. The fair values of other types of
loans are estimated by discounting the future cash flows using interest
rates that consider the credit and interest rate risks inherent in the
loans, and current economic and lending conditions.
The fair value of nonaccrual loans is either estimated by discounting
management's estimate of future cash flows using a rate commensurate with
the risks involved or based upon recent internal or external appraisals.
Accrued interest receivable. The carrying amount of accrued interest
receivable approximates its fair value.
Deposits. The fair values of deposits subject to immediate withdrawal such
as interest and noninterest bearing demand deposits and savings deposits
are equal to their carrying amounts. The carrying amounts for variable-rate
certificates of deposit and other time deposits approximate their fair
values at the reporting date. Fair values for fixed-rate certificates of
deposit are estimated by discounting future cash flows using interest rates
currently offered on time deposits with similar remaining maturities.
Accrued interest payable. The carrying amount of accrued interest payable
approximates its fair value.
Other unrecognized financial instruments. The fair value of commitments to
extend credit is estimated using the fees charged to enter into similar
legally binding agreements, taking into account the remaining terms of the
agreements and customers' credit ratings. For fixed-rate loan commitments,
fair value also considers the difference between current levels of interest
rates and the committed rates. The fair values of letters of credit are
based on fees charged for similar agreements or on estimated cost to
terminate them or otherwise settle the obligations with the counterparties
at the reporting date.
The estimated fair values of the Bank's financial instruments at December
31, 1998 and 1997 are presented in the following table.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
December 31,
- -----------------------------------------------------------------------------------------------------
1998 1997
- -----------------------------------------------------------------------------------------------------
Estimated Estimated
Carrying Fair Carrying Fair
Value Value Value Value
- -----------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
ASSETS:
Cash and due from banks ....................... $ 16,724 $ 16,724 $ 12,113 $ 12,113
Interest-bearing deposits with banks .......... 3,171 3,171 2,976 2,976
Securities:
Available for sale ........................... 2,714 2,714 3,132 3,132
Held to maturity ............................. 64,192 64,280 59,091 59,099
Loans ......................................... 151,455 153,592 138,390 140,010
Accrued interest receivable .................... 1,622 1,622 1,698 1,698
LIABILITIES
Deposits ...................................... 223,707 224,977 197,509 197,688
Federal funds purchased ....................... - - 6,150 6,150
Accrued interest payable ...................... 1,477 1,477 1,441 1,441
=====================================================================================================
</TABLE>
A summary of the notional amounts of the Bank's financial instruments with
off-balance sheet risk at December 31, 1998 and 1997, follow:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
Contract Amount
December 31,
- -----------------------------------------------------------------
1998 1997
- -----------------------------------------------------------------
(in thousands)
<S> <C> <C>
Financial instruments whose contract amounts
represent credit risk:
Commitments to extend credit .............. $28,538 $28,795
StandBy and commercial letters of credit ... 1,681 1,149
=================================================================
</TABLE>
There is no material difference between the contract amount and the
estimated fair value of off-balance sheet items which are primarily comprised of
short-term unfunded loan commitments which are generally priced at market.
17. Concentrations of Credit and Other Risks
The Bank grants personal, commercial, and residential loans to customers,
most of whom reside in Tangipahoa Parish and the surrounding areas. Although the
Bank has a diversified loan portfolio, a significant portion of the loans are
collateralized by real estate located in Tangipahoa Parish and surrounding
parishes in southeast Louisiana. Declines in the Louisiana economy could result
in lower real estate values which could, under certain circumstances, result in
losses to the Bank.
The distribution of commitments to extend credit approximates the
distribution of loans outstanding. Commercial and standby letters of credit were
granted primarily to commercial borrowers. The Bank, generally, does not extend
credit in excess of $3,000,000 to any single borrower or group of related
borrowers.
A significant portion of the Bank's deposits (approximately 27%) are
derived from local governmental agencies. These governmental depositing
authorities are generally long-term customers of the Bank. A number of the
depositing authorities are under contractual obligation to maintain their
operating funds exclusively with the Bank. In most cases, the Bank is required
to pledge securities to the depositing authorities to collateralize their
deposits. Under certain circumstances, the withdrawal of all of, or a
significant portion of, the deposits of one or more of the depositing
authorities may result in a temporary reduction in the Bank's liquidity,
depending primarily on the maturities and/or classifications of the securities
pledged against such deposits and the Bank's ability to replace such deposits
with either new deposits or other borrowings.
18. Merger Agreement
On July 30, 1998, the Bank entered into a definitive merger agreement with
Hibernia Corporation which is pending stockholder and regulatory approval. The
agreement provides for stockholders of the Bank's common stock, both $1 par
value and $5 par value, to receive 1.33 shares of Hibernia Corporation common
stock for each share of the Bank's common stock outstanding on the date of the
merger.
19. Litigation
On September 22, 1998, Hibernia Corporation (Hibernia) filed suit in the
21st Judicial District Court, Parish of Tangipahoa, State of Louisiana, against
the Bank and Marshall T. Reynolds, its Chairman (the "Hibernia Litigation"),
alleging that the Bank had engaged in actions constituting an anticipatory
breach of the definitive merger agreement (the Agreement) discussed in Note 17
and alleging that Mr. Reynolds had engaged in actions constituting tortious
interference with contractual relations. Hibernia requested that the court issue
a preliminary and permanent injunction requiring the Bank and Mr. Reynolds (a)
to perform specifically the Bank's obligations under the Agreement, (b) to cease
and desist further conduct undermining or likely to undermine the completion of
the merger, and (c) to employ their best efforts to assure that all actions
necessary to complete the merger were conducted in a timely fashion. The Bank
and Mr. Reynolds filed an answer denying the allegations of Hibernia.
On December 23, 1998, Hibernia, the Bank, and Mr. Reynolds executed a
settlement agreement regarding the Hibernia Litigation. In the settlement
agreement, the parties agreed, among other things, as follows:
-- The Bank agreed to retain Keefe, Bruyette & Woods, Inc., at Hibernia's
expense, to undertake to provide to the Board of Directors and stockholders
of the Bank an opinion as to whether the merger consideration is fair, from
a financial point of view, to the holders of the Bank's common stock.
-- If the Bank's stockholders approve the Agreement at a special meeting of
stockholders called specifically to vote on the Agreement, Hibernia will
promptly dismiss the Hibernia Litigation with prejudice, and the parties
agreed not to make a claim against or sue or sponsor any claim or lawsuit
against each other, or their officers, directors, investment bankers,
stockholders, or agents, except for (a) claims against Hibernia arising out
of Hibernia's indemnification and expense advancement obligations under the
Agreement, or (b) claims against Mr. Reynolds arising under his
indemnification obligations in favor of Hibernia under the Agreement, or
(c) claims against the Bank or Hibernia for breach of their respective
obligation to complete the merger upon satisfaction or waiver, as provided
in the Agreement, of all conditions to that obligation.
-- If the Bank's stockholders fail to approve the Agreement by the later of
March 31, 1999 or the Extended Stockholder Meeting Date (defined in the
settlement agreement as no later than May 24, 1999), then the Bank may
terminate the Agreement, Hibernia will dismiss the Hibernia Litigation with
prejudice upon the termination of the Agreement and the parties agree not
to make a claim against or sue or sponsor any claims or lawsuit against
each other or their officers, directors, investment bankers, stockholders,
or agents, except for (a) claims against Hibernia arising out of Hibernia's
indemnification obligations under the Agreement, or (b) claims for breaches
of the confidentiality provision of the Agreement, or (c) claims for
violation of the federal proxy rules applicable to the solicitation of
proxies in connection with the special meeting of stockholders to be held
to vote on the Agreement.
The FDIC issued on April 30, 1996 under Section 8(e) of the Federal Deposit
Insurance Act a Notice of Intention to Remove and Prohibit from Further
Participation (the "Notice") naming among the respondents the chief financial
officer of the Bank and certain of its former officers. The Notice alleges a
variety of acts of the respondents during 1991 and 1992 alleged to constitute
violations of law and of safe and sound banking practices and seeks the removal
from office of the Bank's chief financial officer and prohibition of all
respondents from further participation in the affairs of the Bank and any other
insured depository institution. Allegations include causing the Bank to expend
funds on speculative enterprises, improperly exposing the Bank to potential
liability, causing or permitting the Bank to make speculative extensions of
credit, filing incomplete or misleading Quarterly Reports and otherwise
misleading the FDIC. An evidentiary hearing before an administrative law judge
was held in October 1997. The Bank itself is not a party to the Section 8
Proceedings, but it would be obligated to indemnify certain of the respondents
against reasonable expenses incurred by them in successfully defending
themselves in those proceedings.
Under applicable law and its articles of incorporation and by-laws, the
Bank is obligated to indemnify its current and former officers and directors
against reasonable expenses incurred by them in defense of proceedings to which
they are parties by reason of having been officers or directors of the Bank if
they are successful in defense of such proceedings. In addition, the Bank has
discretionary authority in certain other circumstances to indemnify its officers
and directors and to advance them their reasonable expenses in defending such
proceedings before a final determination is made as to their entitlement to
indemnification. The Bank has not been advised as to the likelihood of success
of the respondents in the Section 8 Proceedings and is also unable to estimate
with any precision the likely total of potentially indemnifiable expenses in
connection with the Section 8 Proceedings, but is advised that they may
currently total in excess of $350,000 and could, in the end, total in excess of
$500,000. In addition, in connection with other proceedings described above, the
Bank has incurred charges in connection with advance of, or indemnification
against, expenses of officers and directors in defending certain of the
proceedings and anticipates that it may incur additional charges for such items
in connection with certain of these proceedings.
The Bank is also subject to various other legal proceedings in the normal
course of business. It is management's belief that the ultimate resolution of
such other claims arising in the normal course of business will not have a
material adverse effect on the Bank's financial position or results of
operations.
20. Commitments and Contingencies
In the ordinary course of business, the Bank has various outstanding
commitments and contingent liabilities that are not reflected in the
accompanying financial statements. Included among these contingent liabilities
are certain provisions in agreements, entered into with outside third parties to
sell loans that are originated by the Bank, that may require the Bank to
repurchase a loan if it becomes delinquent within a specified period of time.
<PAGE>
HANNIS T. BOURGEOIS, L.L.P. AUDIT REPORT
To the Stockholders and Board of Directors of First Guaranty Bank:
We have audited the statement of condition of First Guaranty Bank as of
December 31, 1998 and 1997, and the related statements of income, changes in
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Bank's management. Our responsibility
is to express an opinion on these financial statemetns based on our audits. The
financial statements of First Guaranty Bank as of and for the year ended
December 31, 1996 were audited by other auditors whose report dated February
28, 1997 expressed an unqualified opinion on those statemetns.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
asssessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a resonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of First Guaranty Bank as of
December 31, 1998 and 1997, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
Hannis T. Bourgeois, L.L.P.
Baton Rouge, Louisiana
January 29, 1999
<PAGE>
COOPERS & LYBRAND, L.L.P., AUDIT REPORT
To the Stockholders and Board of Directors of First Guaranty Bank:
We have audited the statements of income, changes in stockholders' equity and
cash flows of First Guaranty Bank for the year ended December 31, 1996. These
financial statements are the responsibility of the Bank's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements of First Guaranty Bank referred to
above present fairly, in all material respects, the results of its operations
and its cash flows for the year ended December 31, 1996, in conformity with
generally accepted accounting principles.
Coopers & Lybrand, L.L.P.
New Orleans, Louisiana
February 28, 1997
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF FIRST GUARANTY FOR THE TWELVE MONTHS ENDED
DECEMBER 31, 1998 AND 1997
The following discussion and analysis is intended to highlight the
significant factors affecting the financial condition and results of operations
of FIRST GUARANTY presented in the financial statements included in this proxy
statement/prospectus. This discussion is designed to provide readers with a more
comprehensive review of the operating results and financial position than would
be obtained from reading the financial statements alone. Reference should be
made to those statements and the selected financial data presented elsewhere in
this report for an understanding of the following review and analysis.
In September 1996, FIRST GUARANTY completed a 3-for-2 stock split. All
historical data used in this report has been restated to reflect the split.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
TABLE 1 - SELECTED FINANCIAL DATA
- ----------------------------------------------------------------------------------------------
(in thousands, except share data and ratios)
- ----------------------------------------------------------------------------------------------
December 31,
1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Earnings:
Net interest income $ 11,182 $ 10,428 $ 9,827 $ 9,355 $ 8,284
Provision for loan losses 475 300 325 185 235
Noninterest income 2,454 2,462 2,493 2,381 2,268
Noninterest expense 8,010 7,837 7,366 8,474 7,983
Provision for income taxes 1,750 1,387 1,328 1,026 605
Net income 3,401 3,366 3,301 2,051 1,729
- ----------------------------------------------------------------------------------------------
Financial Position:
Total assets 245,329 223,537 198,064 184,311 167,990
Loans 153,324 140,078 126,105 117,719 113,613
Allowance for loan losses 1,869 1,688 1,649 1,513 1,502
Securities 66,906 62,223 50,492 34,592 32,289
Deposits 223,707 197,509 179,276 167,869 153,727
Stockholders' equity 19,376 17,414 15,485 13,477 11,071
- ----------------------------------------------------------------------------------------------
Share Data:
Earnings per common share 1.04 1.03 1.01 0.62 0.57
Book value
per common share (year end) 5.68 5.04 4.41 3.75 3.35
Cash dividends on common stock 0.40 0.40 0.34 0.28 0.20
Cash dividends on preferred stock:
Series A - - 8.18 99.07 23.08
Series B $ 104.54 $ 105.83 $ 99.79 $ 54.35 $ -
Common shares outstanding (year end) 3,056,641 3,056,641 3,056,641 3,056,641 3,005,219
Average common shares outstanding 3,056,641 3,056,641 3,056,641 3,052,414 3,005,219
- ----------------------------------------------------------------------------------------------
Ratios:
Return on average assets 1.41% 1.57% 1.67% 1.14% 1.03%
Return on average equity 18.20% 20.39% 22.64% 16.48% 17.21%
Dividend payout 38.46% 38.84% 33.66% 45.16% 35.09%
Efficiency 58.74% 60.80% 59.79% 72.21% 75.65%
Leverage capital 7.69% 7.86% 7.62% 7.27% 6.53%
- ----------------------------------------------------------------------------------------------
Other Significant Measures:
Percent change in common dividend -% 17.6% 21.4% 40.0% 233.3%
Percent change in net income 1.0% 2.0% 60.9% 18.6% -16.9%
Percent change in total assets 9.7% 12.9% 7.5% 9.7% 5.8%
Equity growth 11.3% 12.5% 14.9% 21.7% 22.9%
- ----------------------------------------------------------------------------------------------
</TABLE>
OVERVIEW
FIRST GUARANTY reported earnings of $3.4 million in 1998, compared with
$3.4 million and $3.3 million in 1997 and 1996, respectively. Earnings per
common share increased 1.0%, reflecting solid revenue growth, offset by
increased overhead. Earnings per common share totaled $1.04 in 1998, compared
with $1.03 in 1997 and $1.01 in 1996.
First Guaranty's return on average assets (ROA) decreased slightly to
1.41% in 1998 from 1.57% in 1997. Return on average equity (ROE) declined to
18.20% in 1998 from 20.39% in 1997. In 1996, ROA was 1.67% and ROE was 22.64%
Net interest income was up 7.2% to $11.2 million, due to an increase in
earning assets, partially offset by a 20 basis point reduction in the net
interest margin resulting primarily from an increase in the cost of
interest-bearing deposits. Noninterest income decreased 0.3%, primarily as a
result of a decline in service charges on deposit accounts and other service
charges, commissions and fees. Noninterest expense rose $0.2 million in 1998.
This 2.2% increase was primarily due to increased legal and other professional
fees associated with the proposed merger with Hibernia Corporation and certain
litigation related to the proposed merger.
Total assets were $245.3 million at December 31, 1998, an increase of 9.7%
from the end of 1997. Total loans increased by nearly $13.2 million, or 9.5%.
Total deposits grew by 13.3% from year-end 1997. In terms of the average balance
sheet, total assets increased by 12.3%.
1998 COMPARED TO 1997
RESULTS OF OPERATIONS
Net Interest Income
Net interest income is the largest component of First Guaranty's earnings.
It is calculated by subtracting the cost of interest-bearing liabilities from
the income earned on interest-earning assets, and represents the earnings from
First Guaranty's primary business of gathering deposits and making loans and
investments. First Guaranty's long-term objective is to manage this income to
provide the largest possible amount of income while balancing interest rate,
credit and liquidity risks.
A financial institution's asset and liability structure is substantially
different from that of an industrial company, in that virtually all assets and
liabilities are monetary in nature. Accordingly, changes in interest rates,
which are generally impacted by inflation rates, may have a significant impact
on a financial institution's performance. The impact of interest rate changes
depends on the sensitivity to change of First Guaranty's interest-earning assets
and interest-bearing liabilities. The effects of the changing interest rate
environment in recent years and First Guaranty's interest sensitivity position
are discussed below.
Net interest income for 1998 was $11.2 million, compared to $10.4 million
in 1997. The increase in net interest income from 1997 to 1998 was due
principally to the increase in interest earned due to the increased volume of
securities and loans which were partially offset by increases in costs of
interest-bearing liabilities. The increase in cost of interest-bearing
liabilities was primarily attributable to an increase in volume on time deposits
and increased rate on federal funds purchased.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
TABLE 2 - RATE/VOLUME VARIANCE ANALYSIS
- --------------------------------------------------------------------------------------------------------
(in thousands) Years ended December 31,
- --------------------------------------------------------------------------------------------------------
1998 Compared to 1997 1997 Compared to 1996
Increase (Decrease) Due To Increase (Decrease) Due To
Volume Rate Net Volume Rate Net
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest earned on:
Interest-bearing deposits
with banks $ 8 $ (21) $ (13) $ (28) $ 5 $ (23)
Securities 722 (121) 601 732 136 868
Federal funds sold (49) 6 (43) (330) 20 (310)
Loans 1,469 (197) 1,272 942 (69) 873
- --------------------------------------------------------------------------------------------------------
Total interest income 2,150 (333) 1,817 1,316 92 1,408
- --------------------------------------------------------------------------------------------------------
Interest paid on:
Demand deposits (35) (50) (85) 37 14 51
Savings deposits 2 (32) (30) (2) (1) (3)
Time deposits 1,298 (77) 1,221 607 19 626
Federal funds purchased
and other (46) 3 (43) 132 1 133
- --------------------------------------------------------------------------------------------------------
Total interest expense 1,219 (156) 1,063 774 33 807
- --------------------------------------------------------------------------------------------------------
Change in net
interest income $ 931 $ (177) $ 754 $ 542 $ 59 $ 601
========================================================================================================
- ----------
The increase (decrease) due to changes in average balances reflected in the
above table was calculated by applying the preceding year's rate to the current
year's change in average balance. The increase (decrease) due to changes in
average rates was calculated by applying the current year's change in the
average rates to the prior year's average balance. Using this method of
calculating increases (decreases), any increase or decrease due to both changes
in average balances and rates is reflected proportionately between gross
differences due to changes in average balance and gross differences due to
growth in earning assets.
- -------------------------------------------------------------------------------------------------------
</TABLE>
The net interest margin percentage (margin) is calculated by dividing net
interest income by First Guaranty's average interest-earning assets and is a
measure of the efficiency of the earnings from balance sheet activities. It is
affected by changes in the difference between interest on interest-earning
assets and interest-bearing liabilities, and the percentage of interest-earning
assets funded by interest-bearing liabilities (leverage). The margin for 1998
was 5.0%, compared to 5.3% for 1997. Comparing 1997 to 1998, First Guaranty's
yield on interest-earning assets declined by 0.2% and the rate paid on
interest-bearing liabilities increased 0.1%. Therefore, the interest spread
between these two major components of the balance sheet contracted. This
contraction in the interest spread from 1997 to 1998 was slightly exacerbated by
the decrease in leverage during 1998. Leverage decreased to 123.7% for 1998 from
123.9% in 1997, due primarily to the growth in interest-bearing liabilities
outpacing the growth in earning assets.
Provision and Allowance for Loan Losses
First Guaranty maintains its allowance for loan losses (allowance) at a
level that is considered sufficient to absorb potential losses in the loan
portfolio. The allowance is increased by the provision for loan losses
(provision) as well as recoveries of previously charged-off loans (recoveries),
and is decreased by loan charge-offs (charge-offs). The provision is the
necessary charge to expense to provide for current loan losses and to maintain
the allowance at an adequate level commensurate with management's evaluation of
the risks inherent in the loan portfolio. Various factors are taken into
consideration when First Guaranty determines the amount of the provision and the
adequacy of the allowance. Some of these factors include
-- Past due and nonperforming assets;
-- Specific internal analyses of loans requiring special attention;
-- The current level of regulatorily classified and criticized assets and the
associated risk factors with each;
-- Examinations and reviews by the First Guaranty's independent accountants
and third-party independent loan review personnel; and
-- Examinations of the loan portfolio by federal and state regulatory
agencies.
The data collected from these sources is evaluated with regard to current
national and local economic trends, prior loss history, underlying collateral
values, credit concentrations, and industry risks. An estimate of potential
future loss on specific loans is developed in conjunction with an overall risk
evaluation of the total loan portfolio.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
TABLE 3 - COMPARATIVE AVERAGE BALANCES - YIELDS AND RATES
- ----------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands, except yields/rates)
Years ended December 31,
1998 1997 1996
Average Yield Average Yield Average Yield
Balance Interest /Rate Balance Interest /Rate Balance Interest /Rate
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Interest-earning assets:
Interest-bearing deposits
with banks $ 4,210 $ 227 5.4% $ 4,077 $ 240 5.9% $ 4,559 $ 263 5.8%
Securities 70,875 4,079 5.8% 58,414 3,478 6.0% 45,551 2,610 5.7%
Federal funds sold 2,175 126 5.8% 3,027 169 5.6% 8,950 479 5.4%
Loans, net 144,426 14,746 10.2% 130,064 13,474 10.4% 120,984 12,601 10.4%
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest-
earning assets 221,686 19,178 8.7% 195,582 17,361 8.9% 180,044 15,953 8.9%
- ----------------------------------------------------------------------------------------------------------------------------------
Noninterest-earning assets:
Cash & due from banks 10,036 9,872 9,302
Premises and
equipment, net 5,013 5,301 4,772
Other assets 4,394 3,900 3,269
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL $ 241,129 $19,178 $214,655 $17,361 $197,387 $15,953
- ----------------------------------------------------------------------------------------------------------------------------------
Liabilities and
Stockholders' Equity
Interest-bearing liabilities:
Demand deposits $ 43,246 $ 1,134 2.6% $ 44,565 $ 1,219 2.7% $ 43,205 $ 1,168 2.7%
Savings deposits 20,780 474 2.3% 20,679 504 2.4% 20,746 507 2.4%
Time deposits 113,663 6,297 5.5% 90,255 5,076 5.6% 79,457 4,450 5.6%
Federal funds purchased
and other 1,530 91 5.9% 2,307 134 5.8% 24 1 4.2%
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest-
bearing liabilities 179,219 7,996 4.5% 157,806 6,933 4.4% 143,432 6,126 4.3%
- ----------------------------------------------------------------------------------------------------------------------------------
Noninterest-bearing
liabilities:
Demand deposits 38,682 36,384 35,115
Other 4,542 3,956 4,262
Total liabilities 222,443 7,996 198,146 6,933 182,809 6,126
Stockholders' equity 18,686 16,509 14,578
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL $ 241,129 $ 7,996 $214,655 $ 6,933 $197,387 $ 6,126
- ----------------------------------------------------------------------------------------------------------------------------------
Net interest income $11,182 $10,428 $ 9,827
- ----------------------------------------------------------------------------------------------------------------------------------
Net yield on interest-
earning assets 5.0% 5.3% 5.5%
==================================================================================================================================
</TABLE>
Provisions made pursuant to these processes totaled $475,000 and $300,000
in 1998 and 1997, respectively. These provisions were necessary to maintain the
allowance at an adequate level based on loan risk factors and the levels of net
loan charge-offs. Net charge-offs for 1998 were $294,000, an increase of $33,000
from the 1997 level of $261,000.
The allowance at December 31, 1998, was $1.9 million or 1.2% of total
loans. Management believes that the current level of the allowance is adequate
to cover losses in the loan portfolio given the current economic conditions,
expected net charge-offs and nonperforming asset levels.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
TABLE 4 - SUMMARY OF LOAN LOSS EXPERIENCE
- ---------------------------------------------------------------------------------------
(in thousands, except ratios)
- ---------------------------------------------------------------------------------------
Years ended December 31,
Category 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Loans:
Average outstanding $146,159 $131,791 $123,088 $116,374 $ 107,875
Balance at end of year $153,324 $140,078 $126,105 $117,719 $ 113,613
=======================================================================================
Allowance for loan losses:
Balance at beginning of year $ 1,688 $ 1,649 $ 1,513 $ 1,502 $ 1,511
Provision charged to expense 475 300 325 185 235
Loans charged off (355) (428) (338) (343) (500)
Recoveries 61 167 149 169 256
- ---------------------------------------------------------------------------------------
Balance at end of year $ 1,869 $ 1,688 $ 1,649 $ 1,513 $ 1,502
=======================================================================================
Ratios:
Net loan chargeoffs to
average loans 0.2% 0.2% 0.2% 0.1% 0.2%
Net loan chargeoffs to
loans at end of year 0.2% 0.2% 0.1% 0.1% 0.2%
Allowance for loan losses to
loans at end of year 1.2% 1.2% 1.3% 1.3% 1.3%
Net loan chargeoffs to
allowance for loan losses 17.4% 15.8% 12.5% 11.6% 16.1%
Net loan chargeoffs to
provision charged to expense 61.9% 87.0% 58.2% 94.1% 103.8%
=======================================================================================
</TABLE>
Noninterest Income
Noninterest income is a significant component of First Guaranty's total
income. First Guaranty continues to develop and enhance existing products and to
create new products in order to augment fee income as trends in the financial
services industry and the economic environment continue to put pressure on First
Guaranty's ability to increase its net interest income. Noninterest income
includes deposit service charges, and fees and commissions from many other
corporate and retail products.
Core business revenue, which includes service charges, trust fees, and fees
and commissions from other retail banking operations, totaled $2.14 million in
1998 compared to $2.21 million in 1997. Noninterest income, which includes core
business revenues, securities gains, and other miscellaneous income, totaled
$2.5 million in 1998 compared to $2.5 million in 1997. Other noninterest income
increased by $63,000 in 1998.
Service charges on deposit accounts decreased 1.4% in 1998 after increasing
5.2% in 1997. The decrease from 1997 to 1998 was principally the result of
increased account balances and reduced chargeable activity among First
Guaranty's demand deposit accounts.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TABLE 5 - NONINTEREST INCOME
- --------------------------------------------------------------------------------
(in thousands) Years ended December 31,
- --------------------------------------------------------------------------------
1998 1997 1996
<S> <C> <C> <C>
Service charges on deposit accounts $ 1,707 $ 1,732 $ 1,646
Other service charges, commissions and fees 431 474 575
- --------------------------------------------------------------------------------
Core business revenue 2,138 2,206 2,221
- --------------------------------------------------------------------------------
Securities losses (3) - -
Other 319 256 272
- --------------------------------------------------------------------------------
Other revenue 316 256 272
- --------------------------------------------------------------------------------
Total noninterest income $ 2,454 $ 2,462 $ 2,493
================================================================================
</TABLE>
Noninterest Expense
Noninterest expense totaled $8.01 million in 1998, compared to $7.84
million in 1997. Noninterest expense in 1998 included charges of $544,000
incurred in relation to the merger agreement, which is more fully discussed in
Note 18 to the financial statements, and certain litigation, which is more fully
discussed in Note 19 to the financial statements. Adjusting for these unusual
items, noninterest expense totaled $7.47 million in 1998.
Salaries and benefits is the largest component of noninterest expense.
Salaries and benefits decreased $92,000 in 1998 to $3.22 million. This decrease,
from the 1997 level of $3.32 million, was principally due to reduced levels of
recruiting and relocation expense which were partially offset by increased
levels of bonuses and 401(k) savings plan match. At December 31, 116 employees
represented the full-time equivalent of 98 staff members in 1998, compared to
full-time equivalents of 104 in 1997.
Occupancy expense totaled $757,000 in 1998, a decrease from the 1997 level
of $795,000. The decrease in 1998 was primarily due to a decrease in maintenance
and repairs due to improved building conditions resulting from recent
capitalized improvements. Further improvements are scheduled for First Guaranty
premises in 1999. Equipment expense decreased $23,000 to $683,000 in 1998 as
compared to $706,000 in 1997. The decrease in 1998 is primarily attributable to
the completion of the depreciation cycle for certain electronic data processing
equipment.
Other noninterest expense, which includes legal and other professional
fees, the cost of outside data processing services, provisions for Other Real
Estate writedowns, the cost of carrying foreclosed assets, and general and
administrative expenses, increased by $326,000 from 1997 to 1998. Included in
other noninterest expense are charges of $544,000 [costs associated with a
proposed merger more fully discussed in Note 18 to the financial statements and
litigation more fully discussed in Note 19 to the financial statements] in 1998.
The increase in 1998 was mainly the result of increased legal and professional
fees. There was no provision for Other Real Estate writedowns (provision) in
1998, compared to $22,000 in 1997. Foreclosed assets are independently appraised
annually and, if necessary, a charge to the allowance for Other Real Estate
losses (allowance) is made to record such assets at the lower of their cost or
market value. The allowance is established by a provision charged to other
noninterest expense.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TABLE 6 - NONINTEREST EXPENSE
- --------------------------------------------------------------------------------
(in thousands) Years ended December 31,
1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Salaries and benefits $ 3,223 $ 3,315 $ 3,016
Occupancy expense 757 795 725
Equipment expense 683 706 533
Other:
Legal and other professional fees 1,161 692 919
Outside data processing expense 21 23 61
Other real estate expense 93 114 65
Provision for other real estate writedowns - 22 124
Other expense 2,072 2,170 1,923
- --------------------------------------------------------------------------------
Total other 3,347 3,021 3,092
- --------------------------------------------------------------------------------
Total noninterest expense $ 8,010 $ 7,837 $ 7,366
================================================================================
</TABLE>
Other noninterest expense also included the carrying costs of foreclosed
assets (Other Real Estate expense) which decreased to $93,000 in 1998 from
$114,000 in 1997. This decrease resulted from the overall reduction in the
number of parcels of other real estate held by First Guaranty. Further
reductions in the carrying costs of foreclosed assets will be realized as First
Guaranty disposes of the remaining Other Real Estate properties.
Other noninterest expense includes the cost of FDIC insurance, which
decreased to $24,000 in 1998 after totaling $57,000 in 1997. Although First
Guaranty's actual risk-rated premium for FDIC insurance for 1998 was 0.00% of
gross deposits (subject to a $2,000 minimum annual assessment), legislation
enacted in September, 1996 to recapitalize the Savings Association Insurance
Fund resulted in a special assessment of $22,000.
The overhead ratio was 2.51% in 1998, compared to last year's 2.75%. The
decreased level of overhead is primarily attributable to the growth in average
assets significantly outpacing the growth in net noninterest expense. Details of
noninterest expense over the past three years are shown in Table 6.
As First Guaranty strategically plans for the future, management will
continue to develop and enhance productivity through organizational
reengineering and investments in technology.
Provision for Income Taxes
First Guaranty's provision for income taxes rose to $1.8 million in 1998,
compared with $1.4 million in 1997. The effective tax rate increased slightly
from 1997, as First Guaranty continued to recognize the tax benefit of certain
deferred tax assets that had previously been unrecognized.
INTEREST RATE RISK AND LIQUIDITY MANAGEMENT
Interest Rate Risk Management
The interest spread and liability funding discussed below are directly
related to changes in asset and liability mixes, volumes, maturities and
repricing opportunities of interest-earning assets and interest-bearing
liabilities. Interest-sensitive assets and liabilities are those which are
subject to being repriced in the near term, including both floating or
adjustable rate instruments and instruments approaching maturity. The interest
sensitivity gap is the difference between total interest-sensitive assets and
total interest-sensitive liabilities. Interest rates on First Guaranty's various
asset and liability categories do not respond uniformly to changing market
conditions. Interest rate risk is the degree to which interest rate fluctuations
in the marketplace can affect net interest income.
To maximize its margin, First Guaranty attempts to be somewhat more asset
sensitive during periods of rising rates and more liability sensitive during
periods of falling rates. The need for interest sensitivity gap management is
most critical in times of rapid change in overall interest rates. Although First
Guaranty generally seeks to limit its exposure to interest rate fluctuations by
maintaining a relatively balanced mix of rate sensitive assets and liabilities
on a one-year time horizon, management believes that the rewards of extending
the maturities of securities and other earning assets do not mitigate the risks
given the current interest rate environment. This mix is altered periodically
depending upon management's assessment of current business conditions and the
interest rate outlook. Exposure to interest rate fluctuations is maintained
within prudent levels by the use of varying investment strategies.
One tool which is used to monitor interest rate risk is the interest
sensitivity analysis as shown in Table 7. This analysis reflects the repricing
characteristics of assets and liabilities over various time periods. The gap
indicates whether more assets or liabilities are subject to repricing over a
given time period. First Guaranty's interest sensitivity analysis at December
31, 1998 reflects an asset sensitive position with a positive gap on a
cumulative one-year basis.
Liquidity Management
Liquidity for a financial institution can be expressed in terms of
maintaining sufficient cash flows to meet both existing and unplanned
obligations in a cost effective manner. Adequate liquidity allows First Guaranty
to meet the demands of both the borrower and the depositor on a timely basis, as
well as pursuing other business opportunities as they arise. Thus, liquidity
management embodies both an asset and liability aspect. Liquidity is maintained
through First Guaranty's ability to convert assets into cash, manage the
maturities of liabilities and generate funds on a short-term basis through the
attraction of local deposits.
As part of its liquidity, First Guaranty maintains funding relationships
with other financial institutions. The average amount of those borrowings was
$1,530,000 in 1998 and $2,307,000 in 1997.
Additionally, First Guaranty maintains a sufficient level of liquid assets
(cash and cash equivalents and interest-bearing deposits with banks) which may
be converted to cash to meet its liquidity needs. These liquid assets represent
8.1% of total assets at December 31, 1998 as compared to 6.8% at December 31,
1997.
CREDIT RISK
Credit risk is inherent in each financial institution's loan and investment
portfolios. In an effort to minimize credit risk, First Guaranty utilizes an
extensive credit administration network, including specific lending authorities
for each loan officer, a system of loan committees to review and approve loans,
and an internal loan review and credit quality rating system. This network
assists in the evaluation of the quality of new loans and in the early
identification of problem or potential problem credits and provides information
to aid management in determining the adequacy of the allowance for loan losses.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
TABLE 7 - INTEREST SENSITIVITY AT DECEMBER 31, 1998
- --------------------------------------------------------------------------------------------------------------
(in thousands, except for percentages)
- --------------------------------------------------------------------------------------------------------------
Interest sensitivity within
0-30 31-90 91-180 181-365 Total Over
Days Days Days Days One Year One Year Total
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Earning assets:
Loans, net $ 47,502 $ 13,415 $ 15,507 $ 21,350 $ 97,774 $ 53,681 $ 151,455
Securities 2,990 - 1,504 8,432 12,926 53,980 66,906
Other earning assets(1) 5,988 396 1,091 1,189 8,664 - 8,664
- --------------------------------------------------------------------------------------------------------------
Total earning assets $ 56,480 $ 13,811 $ 18,102 $ 30,971 $119,364 $ 107,661 $ 227,025
- --------------------------------------------------------------------------------------------------------------
Source of funds:
Interest-bearing accounts:
Demand deposits $ 10,970 $ - $ - $ - $ 10,970 $ 33,003 $ 43,973
Savings deposits 5,194 - - - 5,194 15,581 20,775
Time deposits 12,248 22,410 21,766 28,804 85,228 31,128 116,356
Noninterest-bearing, net - - - - - 45,921 45,921
- --------------------------------------------------------------------------------------------------------------
Total source of funds 28,412 22,410 21,766 28,804 101,392 125,633 $ 227,025
- --------------------------------------------------------------------------------------------------------------
Period gap 28,068 (8,599) (3,664) 2,167 17,972 (17,972)
Cumulative gap $ 28,068 $ 19,469 $ 15,805 $ 17,972 $ 17,972 $ -
==============================================================================================================
Cumulative gap as a
percent of earning assets 12.4% 8.6% 7.0% 7.9% 7.9%
==============================================================================================================
- ----------
(1) Includes Due from Bank balances held at the Federal Home Loan Bank of $5,493.
</TABLE>
Nonperforming Assets
Nonperforming assets consist of loans on which interest is no longer
accrued, certain restructured loans where the interest rate or other terms have
been renegotiated, and real estate acquired through foreclosure (Other Real
Estate).
The accrual of interest is discontinued on loans when management believes
there is reasonable uncertainty about the full collection of principal and
interest, or when the loan is contractually past due ninety days or more and not
fully secured. If the principal amount of the loan is adequately secured, then
interest income on such loans is subsequently recognized only in periods in
which actual payments are received.
Nonperforming assets totaled $0.7 million or 0.3% of total assets at
December 31, 1998, compared to $1.2 million or 0.5% of total assets at December
31, 1997. Factors contributing to the decrease in 1998 included reductions in
Other Real Estate of approximately $497,000 from sales of such property. These
reductions were offset by the transfer of approximately $376,000 to Other Real
Estate from nonaccrual as a result of the completion of foreclosure actions.
At December 31, 1998, First Guaranty had approximately $2,789,000 of
outstanding loans which are not considered nonperforming, but whose borrowers
are experiencing financial difficulties severe enough to require close
management supervision. These loans are considered in determining the adequacy
of the allowance.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TABLE 8 - NONPERFORMING ASSETS
- --------------------------------------------------------------------------------
(in thousands) December 31,
1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $ 436 $ 753 $ 1,268 $ 809 $ 601
Restructured loans - - 243 1,750 1,651
Other real estate and
repossessed collateral 282 399 555 495 1,900
- --------------------------------------------------------------------------------
Total nonperforming assets $ 718 $1,152 $ 2,066 $3,054 $4,152
================================================================================
</TABLE>
EARNING ASSETS
Average earning assets increased 13.3% in 1998, primarily reflecting the
investment of financial resources available due to the increase in core funding
sources.
Loans
Loans are First Guaranty's primary use of financial resources and represent
the largest component of earning assets. First Guaranty's loans are made
predominantly within the Tangipahoa Parish area and the portfolio is highly
diversified. There are no significant concentrations of credit to any borrower
or industry, and the portfolio is balanced between wholesale and consumer
lending. A significant portion of the portfolio is secured primarily or
secondarily by real estate.
First Guaranty's loan portfolio at December 31, 1998 totaled $153.3 million
(gross loans), an increase of approximately $13.2 million from the December 31,
1997 level of $140.1 million. Loans represented 68.5% of deposits at December
31, 1998, compared to 70.9% of deposits at December 31, 1997. This decrease was
chiefly the result of increases in deposit acquisitions outpacing new loan
growth. The majority of the loan increases were in the commercial and real
estate loan segments of the portfolio. Loan charge-offs of $355,000 were taken
during 1998. First Guaranty had recoveries of $61,000 on these loan charge-offs
and other loans previously charged off. Although First Guaranty continues to
emphasize serving its core retail customer base consisting of individuals and
small businesses, increased loan volume from larger commercial customers
outpaced the current loan demand from First Guaranty's retail consumer clients.
Securities and Other Earning Assets
The securities portfolio consists of debt securities which provide First
Guaranty with a long-term, relatively stable source of income. Additionally, the
securities portfolio provides a balance to interest rate and credit risks in
other categories of the balance sheet.
The mix of First Guaranty's securities portfolio emphasizes more liquid
short-term investments and variable rate securities in order to limit interest
rate risk. First Guaranty's securities portfolio consists primarily of
obligations of U. S. Government corporations or agencies with maturities ranging
up to four years. At December 31, 1998, the average maturity of the securities
portfolio was 3.2 years.
The majority of First Guaranty's securities are currently classified as
held to maturity. Management periodically assesses the quality of First
Guaranty's investment holdings using procedures similar to those used in
assessing the credit risks inherent in the loan portfolio. At December 31, 1998,
it is management's opinion that First Guaranty holds no investment securities
which bear greater than the normal amount of credit risk for similar investments
and that no securities are recorded at greater than their recoverable value.
Average securities as a percentage of average interest-earning assets were
32.0% in 1998, and 29.9% in 1997, respectively. The increase in this percentage
during 1998 resulted from the growth in securities outpacing the growth in total
earning assets, on an average basis. The current rate environment offers little
reward to offset the risk of longer term investments; therefore, management has
maintained an investment strategy which emphasizes more liquid short-term
instruments such as federal funds sold and interest-bearing deposits with banks.
At December 31, 1998, securities represented 30.2% of interest-earning assets.
The overall yield on taxable securities decreased 0.2% from 1997 to 1998
primarily due to a generally lower interest rate environment.
DEPOSITS
Managing the mix and repricing alternatives of deposit liabilities is an
important factor affecting First Guaranty's ability to maximize its net interest
margin. The strategies used to manage interest-bearing deposit liabilities are
designed to adjust as the interest rate environment changes. In this regard,
management of First Guaranty regularly assesses its funding needs, deposit
pricing, and interest rate outlooks. In recent years, management's assessment
has resulted in a stressing of the servicing of core depositors and growth
funded by increases in core non-public and public deposits.
From December 31, 1997 to December 31, 1998, First Guaranty's
interest-bearing deposits increased by $20.3 million. The mix of
interest-bearing deposits changed in 1998 from December 31, 1997 as the more
expensive time deposits increased by approximately $19.6 million while the lower
cost savings and interest-bearing demand deposits increased by $0.6 million.
Average noninterest-bearing deposits increased to $38.7 million in 1998
from $36.4 million in 1997. Average noninterest-bearing deposits represented
17.8% of average total deposits in 1998, compared to 19.0% in 1997. As First
Guaranty endeavors to maintain a strong interest margin and improve earnings,
attracting core noninterest-bearing deposits will remain a primary emphasis for
First Guaranty. Management will continue to evaluate and update First Guaranty's
product mix in its efforts to attract additional core customers. First Guaranty
currently offers a number of noninterest-bearing deposit products which are
competitively priced.
CAPITAL AND DIVIDENDS
First Guaranty's primary source of additional capital is internally
generated from earnings. Stockholders' equity was $19.4 million at December 31,
1998, an increase of approximately $2.0 from December 31, 1997. This increase is
comprised of 1998 net income of $3,401,000, which was partially offset by the
payment of $1,433,000 in dividends.
As more fully discussed in Note 9 to the financial statements, First
Guaranty is required to maintain certain minimum capital levels as established
by the FDIC in its Rules and Regulations. The regulations require, among other
things, that commercial banks, based on their financial condition, maintain a
minimum leverage capital ratio of not less than four percent (4.0%). At December
31, 1998, First Guaranty's leverage capital ratio was 7.69%. Additionally, the
FDIC has established certain risk-based capital requirements that require banks
to maintain a minimum of 8% total risk-based capital, at least one-half of which
must consist of tier 1 or core capital, including common stockholders' equity,
retained earnings, and perpetual preferred stock. At December 31, 1998, First
Guaranty's tier 1 capital ratio and total risk-based capital ratios were 11.55%
and 12.67%, respectively.
Dividend payments during 1998 of $0.40 per common share totaled $1,223,000.
Additionally, First Guaranty paid dividends on the outstanding shares of Series
B Preferred Stock of $104.54 per share or approximately $210,000.
The capital guidelines will play a crucial role in a banking organization's
plans for business, asset allocations and expansion. Adherence to these capital
guidelines is one of the ongoing challenges that First Guaranty management faces
and that will significantly impact the manner in which business is conducted now
and in the future.
1997 COMPARED TO 1996
First Guaranty earned $3.4 million, or $1.03 per share, in 1997, a 2.0%
increase in per common share earnings from 1996. This increase reflected solid
income growth, primarily due to an increase in net interest income. First
Guaranty's return on average assets declined to 1.57% in 1997, down from 1.67%.
Return on average equity was 20.39% and 22.64% in 1997 and 1996, respectively.
Net interest income increased to $10.4 million in 1997, from $9.8 million
in 1996. This increase was principally due to an increase in interest income due
to increased volume and rate on securities and increased volume on loans.
Noninterest income decreased by $31,000 from 1996 to 1997, primarily due to
declines in other service charges, commissions and fees.
Noninterest expense increased from the 1996 level of $7.4 million to $7.8
million in 1997. Salaries and benefits increased as a result of staff additions,
increased bonuses and increases in the 401(k) match. Occupancy and equipment
expense increased primarily due to increases in depreciation resulting from
renovations to certain fixed asset sites as well as equipment purchased to
effect certain technological upgrades throughout First Guaranty's information
systems and delivery systems.
Solid growth in First Guaranty's asset base continued in 1997 as total
assets grew by 12.9% to $223.5 million. Loans increased from $126.1 million at
December 31, 1996 to $140.1 million at December 31, 1997. Deposits grew by $18.2
million, totaling $197.5 million at December 31, 1997.
As more fully discussed in Note 8 to the financial statements, on February
1, 1996, First Guaranty redeemed all outstanding shares of Series A Preferred
Stock and issued 1,000 shares of authorized but unissued Series B Preferred
Stock to Premier Financial Bancorp, Inc., the holder of the redeemed Series A
Preferred Stock. The primary purpose of this transaction was to simplify First
Guaranty's capital structure in order to provide First Guaranty with greater
flexibility in achieving and maintaining its capital goals.
Impact of Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 133, "Accounting for Derivative Instruments
and Hedging Activities," which is required to be adopted in years beginning
after June 15, 1999. This Statement permits early adoption as of the beginning
of any fiscal quarter after its issuance. First Guaranty expects to adopt the
new Statement in 1999. The Statement will require First Guaranty to recognize
all derivatives on the balance sheet at fair value. At the time First Guaranty
adopts this Statement, there will be a one-time opportunity to reclassify
securities among the available for sale, trading, and held to maturity
categories. First Guaranty does not anticipate that the adoption of this
Statement will have a significant effect on its results of operations or
financial position; however, First Guaranty does expect to reclassify a
significant portion of its securities portfolio from held to maturity to
available for sale.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
TABLE 9 - SELECTED QUARTERLY FINANCIAL HIGHLIGHTS
- ----------------------------------------------------------------------------------------------------------------------------------
(in thousands, except share data and ratios)
- ----------------------------------------------------------------------------------------------------------------------------------
1998 1997
Fourth Third Second First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Net interest income $ 2,843 $ 2,762 $ 2,861 $ 2,716 $ 2,648 $ 2,707 $2,609 $ 2,464
Provision for loan losses 200 125 75 75 75 75 75 75
Noninterest income 603 631 628 592 609 631 586 636
Noninterest expense 2,282 1,865 2,007 1,856 2,026 1,970 1,987 1,854
Provision for income taxes 328 473 494 455 220 427 350 390
Net income 636 930 912 923 936 866 783 781
- ----------------------------------------------------------------------------------------------------------------------------------
Financial Position:
Total assets 245,329 248,570 242,526 234,400 223,537 221,274 216,877 207,830
Loans 153,324 152,744 145,125 140,230 140,078 135,446 134,608 124,732
Allowance for loan losses 1,869 1,878 1,782 1,719 1,688 1,818 1,757 1,689
Securities 66,906 75,224 76,744 67,297 62,223 60,999 61,209 57,187
Deposits 223,707 226,957 213,737 213,875 197,509 201,262 195,210 189,272
Stockholders' equity 19,376 19,103 18,523 17,968 17,414 16,822 16,333 15,907
- ----------------------------------------------------------------------------------------------------------------------------------
Share Data:
Net income per common share 0.19 0.29 0.28 0.28 0.28 0.27 0.24 0.24
Cash dividends on common stock 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10
Book value per common share (quarter end) $ 5.68 $ 5.60 $ 5.41 $ 5.22 $ 5.04 $ 4.85 $4.69 $ 4.55
Average common shares outstanding 3,056,641 3,056,641 3,056,641 3,056,641 3,056,641 3,056,641 3,056,641 3,056,641
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios:
Return on average assets(1) 1.01% 1.50% 1.54% 1.63% 1.69% 1.59% 1.47% 1.52%
Return on average equity(1) 12.98% 19.74% 19.83% 20.96% 21.76% 20.43% 20.79% 20.49%
Net overhead 2.97% 2.13% 2.52% 2.39% 2.79% 2.69% 2.87% 2.62%
Efficiency 66.22% 54.97% 57.54% 56.09% 62.20% 59.02% 62.19% 59.81%
==================================================================================================================================
(1) Annualized
</TABLE>
Year 2000 Readiness Disclosure
The Y2K Problem
First Guaranty is devoting significant resources throughout its business
operations to minimize the risk of potential disruption from the "Year 2000
(Y2K) problem." This problem is a result of computer programs having been
written using two digits (rather than four) to define the applicable year. Any
information technology (AIT") systems that have time-sensitive software may
recognize a date using A00" as the year 1900 rather than the year 2000, which
could result in miscalculations and system failures. The problem also extends to
many "non-IT" systems; that is, operating and control systems that rely on
embedded chip systems. In addition, like every other business enterprise, First
Guaranty is at risk from Y2K failures on the part of its major business
counterparts, including customers, suppliers, and correspondent banks, as well
as potential failures in public and private infrastructure services, including
electricity, water, gas, transportation and communications.
System failures resulting from the Y2K problem could adversely affect
operations and financial results of First Guaranty. Failures may affect
security, payroll operations, or accounts payable, as well as such routine but
important operations as interest calculations or loan billing and collection.
First Guaranty recognizes the importance of its customers' need to address
Y2K. Relationships considered material to First Guaranty's financial position
have been identified and appropriate documentation from borrowers has been
received. First Guaranty is in the process of reviewing the information obtained
and assessing the risk of repayment impairment.
Addressing the Problem
First Guaranty has developed a six-phase approach to resolving the Y2K
issues that are reasonably within its control. All of these efforts are being
coordinated through a task force chaired by First Guaranty's Senior Vice
President and Chief Financial Officer ("CFO"). The task force includes employees
who are devoting part of their time to Y2K efforts as well as expert consultants
retained to assist with specific potential problems. The CFO reports
periodically to the Board of Directors with respect to First Guaranty's Y2K
efforts.
First Guaranty's approach to and the anticipated timing of each phase are
described below.
Phase 1 - Inventory.
The first phase entails an inventory of all hardware and software
(including business and operational applications, operating systems and third
party products) that may be at risk, and identification of key third-party
businesses whose Y2K failures might most significantly impact First Guaranty.
The IT system inventory process has been completed, and the inventories of key
third-party businesses and of internal non-IT systems are expected to be
completed by March 31, 1999.
Phase 2 - Assessment
Once each at-risk system has been identified, the Y2K task force assesses
how critical the system is to business operations and the potential impact of
failure, in order to establish priorities for repair or replacement. Systems are
classified as "critical", "important" or "non-critical". A "critical" system is
one that, if not operational, would cause the shutdown of all or a portion of
First Guaranty within two days while an "important" system is one that would
cause such a shutdown within two weeks. This process has been completed for all
IT systems, resulting in the identification of 3 business systems that are
"critical" to continued functioning and more than 11 that are either "important"
or are otherwise being monitored. The assessment process for internal non-IT
systems and for key third-party businesses is expected to be completed by
mid-1999. Systems that are known to be critical or important are receiving top
priority in assessment and remediation.
Phase 3 - Strategy
This phase involves the development of appropriate remedial strategies for
both IT and non-IT systems. These strategies may include repairing, testing and
certifying, replacing or abandoning particular systems (as discussed under
Phases 4 and 5 below). Selection of appropriate strategies is based upon such
factors as the assessments made in Phase 2, the type of system, the availability
of a Y2K-compliant replacement and cost. The strategy phase has been completed
for all IT systems. For some non-IT embedded systems, strategy development is
continuing. A strategy for addressing embedded systems in First Guaranty's
buildings is being developed in concert with systems vendors and should be
completed by spring 1999. The process of analysis, certification or replacement
or "workaround" for embedded systems in First Guaranty's buildings is expected
to consume the first half of 1999. Strategies for other embedded systems are
being developed and are also expected to be complete by mid-1999.
Phase 4 - Remediation
The remediation phase involves creating detailed project plans, marshalling
necessary resources and executing the strategies chosen. For IT systems, this
phase is approximately 70% complete for critical and important systems, and is
expected to be completed (including certification) by March 31, 1999. For
non-critical systems, most corrections are expected to be completed by December
31, 1999. For those systems that are not expected to be reliably functional
after January 1, 2000, detailed manual workaround plans will be developed prior
to the end of 1999.
Phase 5 - Testing And Certification
This phase includes establishing a test environment, performing systems
testing (with third parties if necessary), and certifying the results. The
certification process entails having functional experts review test results,
computer screens and printouts against pre-established criteria to ensure system
compliance. First Guaranty expects all critical and important IT systems to be
certified by March 31, 1999. Testing for non-IT systems has been initiated;
however, due to First Guaranty's reliance on many third-party vendors for these
systems, First Guaranty cannot estimate precisely when this phase will be
completed. The majority of embedded systems throughout First Guaranty are
expected to be certified by May 31, 1999. First Guaranty's target for all
critical and important non-IT systems is June 1999.
First Guaranty has initiated written and telephonic communications with key
third-party businesses, as well as public and private providers of
infrastructure services, to ascertain and evaluate their efforts in addressing
Y2K compliance. It is anticipated that the majority of testing and certification
with these entities will occur in 1999.
Phase 6 - Contingency Planning
This phase involves addressing any remaining open issues expected in 1999
and early 2000. As a precautionary measure, First Guaranty is currently
developing contingency plans for all systems that are not expected to be Y2K
compliant by March 1999. A variety of automated as well as manual fallback plans
are under consideration, including the use of electronic spreadsheets, resetting
system dates to 1972, a year in which the calendar coincides with that of 2000,
and manual workarounds. First Guaranty estimates that all of these plans will be
completed by December 1999.
Costs
As of December 31, 1998, First Guaranty had incurred costs of approximately
$70,000 related to its Y2K project. The estimated additional costs to complete
the project are currently expected to be approximately $660,000, of which
$475,000 is expected to be capitalized. First Guaranty does not expect
redeployments necessary to complete the Y2K remediation to have a material
adverse effect on other ongoing business operations of First Guaranty, although
it is possible that certain maintenance and upgrading processes will be delayed
as the result of the priority being given to Y2K remediation. All of the costs
of the Y2K project are being borne out of First Guaranty's operating cash flow.
Based upon its efforts to date, First Guaranty believes that the vast
majority of both its IT and its non-IT systems, including all critical and
important systems, will remain up and running after January 1, 2000.
Accordingly, First Guaranty does not currently anticipate that internal systems
failures will result in any material adverse effect to its operations or
financial condition. During 1999, First Guaranty will also continue and expand
its efforts to ensure that major third-party businesses and public and private
providers of infrastructure services, such as utilities, communications services
and transportation, will also be prepared for the year 2000, and to develop
contingency plans to address any failures on their part to become Y2K compliant.
At this time, First Guaranty is not aware of any third-party Y2K issue that
would materially impact First Guaranty's results of operations, liquidity, or
financial position. However, First Guaranty has no means of ensuring that
third-parties will be Year 2000 ready. First Guaranty believes that the most
likely "worst-case" scenario involves potential disruptions in areas in which
First Guaranty's operations must rely on such third parties whose systems may
not work properly after January 1, 2000. While such failures, if any, are not
expected to affect important operations of First Guaranty, either directly or
indirectly, the inability of third-parties to complete their Y2K remediation
process in a timely fashion could materially impact First Guaranty. First
Guaranty cannot at present estimate either the likelihood or the potential cost
of any noncompliance by third-parties.
The nature and focus of First Guaranty's efforts to address the Year 2000
problem may be revised periodically as interim goals are achieved or new issues
are identified. In addition, it is important to note that the description of
First Guaranty's efforts necessarily involves estimates and projections with
respect to activities required in the future. Estimates on the status of
completion and the expected completion dates are based on costs incurred to date
compared to total expected costs. However, there can be no guarantee that these
estimates will be achieved and actual results could differ materially from those
plans. Specific factors that might cause such material differences include, but
are not limited to, the availability and cost of personnel trained in this area,
the ability to locate and correct all relevant computer codes, and similar
uncertainties.
<PAGE>
GRAPHIC MATERIAL INDEX
GRAPHIC DESCRIPTION CROSS REFERENCE
- ------------------- ---------------
Net Interest Income Bar Graph See Table 1 Selected Financial Data
Noninterest Income Bar Graph See Table 1 Selected Financial Data
Noninterest Expense Bar Graph See Table 1 Selected Financial Data
Nonperforming Assets Bar Graph See Table 8 Nonperforming Assets
Total Loans Bar Graph See Table 1 Selected Financial Data
Total Deposits Bar Graph See Table 1 Selected Financial Data
Leverage Capital Ratio Bar Graph See Table 1 Selected Financial Data
<PAGE>
RELATIONSHIP WITH INDEPENDENT AUDITORS
Hannis T. Bourgeois, LLP, independent auditors, has continuously served
as the independent auditor for First Guaranty from 1997 through the present. A
representative of Hannis T. Bourgeois, LLP is expected to be present at the
Special Meeting. This representative will have an opportunity to make a
statement if he or she desires and will be available to respond to appropriate
questions.
VALIDITY OF SHARES
Patricia C. Meringer, Corporate Counsel of Hibernia, has passed upon
the validity of the shares to be issued by Hibernia in the Merger. As of the
date of this proxy statement/prospectus, Ms. Meringer beneficially owned 22,830
shares of Hibernia common stock (including options to purchase shares of
Hibernia common stock that are currently exercisable.)
EXPERTS
Ernst & Young LLP, independent auditors, have audited consolidated
financial statements of Hibernia included in its Annual Report on From 10-K for
the year ended December 31, 1998, as set forth in their report, which is
incorporated in this Prospectus by reference. The consolidated financial
statements are incorporated by reference in reliance on their report, given on
their authority as experts in accounting and auditing.
Hannis T. Bourgeois, LLP, independent certified public accountants,
have audited the consolidated financial statements of First Guaranty for the
year ended December 31, 1998 and 1997. PricewaterhouseCoopers, LLP, independent
certified public accountants, have audited the consolidated statements of First
Guaranty for the year ended December 31, 1996. Those financial statements are
included in this proxy statement/prospectus in reliance upon the reports of
Hannis T. Bourgeois, LLP and PricewaterhouseCoopers, LLP appearing elsewhere
herein, and upon the authority of said firms as experts in accounting and
auditing.
AVAILABLE INFORMATION
Hibernia is a public company and is required to file certain reports
with the SEC, such as annual reports (Form 10-K), quarterly reports (Form 10-Q)
and current reports (Form 8-K). You may review and copy these reports, proxy
statements and other information at the following places.
. the public reference room of the SEC at Room 1024, 450 Fifth
Street, N.W., Washington, D.C., 20549 (copies may be made at
prescribed rates);
. the SEC's Regional Office, located at 7 World Trade Center, Suite
1300, New York, NY, 10007;
. the SEC's Regional Office, located at 500 West Madison Street,
Suite 1400, Chicago, Illinois, 60661-2511;
. the offices of the New York Stock Exchange, Inc.,20 Broad Street,
New York, NY, 10005.
You may obtain information on the operation of the Public Reference
Room by calling the SEC at 1-800-SEC-0330. The SEC maintains a website on the
Internet that contains reports, proxy and information statements and other
information about public companies. The address of that site is
http:\\www.SEC.gov. Certain recent reports filed with the SEC also are available
at Hibernia's website at http:\\www.Hiberniabank.com. Hibernia's Internet
website also includes news releases and product and service information about
Hibernia.
Hibernia has filed a registration statement on Form S-4 with the SEC
that registers the Hibernia common stock included in this prospectus. This proxy
statement/prospectus does not contain all of the information in the registration
statement. Please refer to the registration statement for further information
about Hibernia, HNB and the Hibernia common stock to be exchanged in the Merger.
Statements contained in this proxy statement/prospectus concerning the
provisions of certain documents included in the registration statement are not
necessarily complete. A complete copy of each document is filed as an exhibit to
the registration statement. You may obtain copies of all or any part of the
registration statement, including exhibits thereto, upon payment of the
prescribed fees, at the offices of the SEC and the NYSE listed above.
All of information contained in this proxy statement/prospectus
relating to Hibernia and its subsidiaries has been supplied by Hibernia. All
information relating to First Guaranty has been supplied by First Guaranty.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Hibernia with the SEC are incorporated
by reference in this proxy statement/prospectus:
. its annual report on Form 10-K for the year ended December 31,
1998
. its definitive Proxy Statement filed with the SEC on March 19,
1999, relating to its 1999 Annual Meeting of Shareholders to be
held on April 20, 1999 (except for the information contained
therein under the headings "Executive Compensation - Report of
the Executive Compensation Committee" and "Executive Compensation
- Stock Performance Graph", which are expressly excluded from
incorporation in this Registration Statement);
. a description of Capital Stock included in its current report on
Form 8-K dated December 4, 1998; and
. a Current Report on Form 8-K dated March 11, 1999.
All documents filed by Hibernia with the SEC pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this proxy
statement/prospectus and prior to the termination of the offering of the
Hibernia common stock made hereby will be deemed to be incorporated by reference
in this proxy statement/prospectus from the date they are filed. Statements made
in this proxy statement/prospectus may be modified or superseded by statements
contained in a document incorporated or deemed to be incorporated by reference.
Any statement so modified or superseded will not be deemed to constitute a part
of this proxy statement/prospectus, except as maybe so modified or superseded.
This proxy statement/prospectus incorporates important business and
financial information about Hibernia that is not included in or delivered with
this proxy statement/prospectus. If you are a beneficial owner of First Guaranty
common stock and would like a copy of any of the information incorporated by
reference in this proxy statement/prospectus other than exhibits to such
information (unless such exhibits are specifically incorporated by reference
into such information), Hibernia will provide it to you without a charge. If you
would like to receive any of that information, please call or write to Hibernia
Corporation, 313 Carondelet Street, New Orleans, Louisiana, 70130, ATTN:
Assistant Secretary, Telephone: 504-533-3411. You should make your request
before _______________, 1999 [no later than five business days before the
Meeting] in order to receive the information before the Meeting.
FORWARD-LOOKING STATEMENTS
Statements in this proxy statement/prospectus and in the documents
incorporated by reference into this proxy statement/prospectus that are not
historical facts should be considered forward-looking statements with respect to
Hibernia, HNB and First Guaranty. These forward-looking statements speak only as
of the date of this proxy statement/prospectus or the documents incorporated
herein by reference, as applicable. By nature, forward-looking statements
involve inherent risks and uncertainties. Various factors, including, but not
limited to, economic conditions, credit quality, interest rates, loan demand,
expected cost savings from the Merger, costs or difficulties related to the
integration of the operation of First Guaranty and Hibernia after the Merger,
regulatory changes adversely affecting the business of Hibernia, HNB or First
Guaranty and changes in the assumptions used in making the forward-looking
statements, may cause actual results to differ materially from those
contemplated by the forward-looking statements. Additional information on
factors that might affect Hibernia's financial results is included in its
filings with the SEC.
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
OF
FIRST GUARANTY BANK
WITH AND INTO
HIBERNIA NATIONAL BANK
AGREEMENT AND PLAN OF MERGER dated and effective as of July 30, 1998
(this "Agreement"), adopted and made between and among First Guaranty Bank
("First Guaranty"), Hibernia National Bank ("HNB") and Hibernia Corporation
("Hibernia").
First Guaranty is a Louisiana banking corporation duly organized and
existing under the laws of the State of Louisiana and has its registered office
at First Guaranty Square, 400 East Thomas Street, Hammond, Louisiana 70401-3320.
The presently authorized capital stock of First Guaranty consists solely of
100,000,000 shares of common stock of the par value of $1.00 each ("$1 par value
Common Stock") and 600,000 shares of common stock of the par value of $5.00 each
("$5 par value Common Stock") (collectively, "First Guaranty Common Stock") and
100,000 shares of Preferred Stock, par value$1,000.00, of which 5,000 shares
constitute a separate series of preferred stock designated as the Convertible
Preferred Stock, Series A (the "Series A Preferred Stock") and 5,000 shares
constitute a separate series of preferred stock designated the Preferred Stock,
Series B (the "Series B Preferred Stock") (the Series A Preferred Stock and the
Series B Preferred Stock are collectively referred to as the "First Guaranty
Preferred Stock"). As of March 31, 1998, 2,573,351 shares of the $1 par value
Common Stock and 483,290 shares of the $5 par value Common Stock were issued and
outstanding, and no shares of First Guaranty Common Stock were held in First
Guaranty's treasury. All outstanding shares of First Guaranty Common Stock have
been duly issued and are validly outstanding, fully paid and, except as provided
in Louisiana Revised Statute (C167) 6: 262, nonassessable. In addition, as of
March 31, 1998, 1,000 shares of Series A Preferred Stock had been issued and no
shares of Series A Preferred Stock were outstanding, and 2,000 shares of Series
B Preferred Stock had been issued and were outstanding. The foregoing are the
only voting securities of First Guaranty authorized, issued, or outstanding, and
there are no existing options, warrants, calls, or commitments of any kind
obligating First Guaranty to issue any share of its capital stock or any other
security of which it is or will be the issuer. None of the shares of First
Guaranty's capital stock has been issued in violation of preemptive rights of
shareholders.
Hibernia is a corporation duly organized and existing under the laws of
the State of Louisiana; has its registered office at 313 Carondelet Street, New
Orleans, Louisiana 70130; and is a bank holding company within the meaning of
the Bank Holding Company Act. Hibernia owns all of the issued and outstanding
shares of capital stock of Hibernia National Bank ("HNB") and Hibernia National
Bank of Texas ("HNBT"). The presently authorized capital stock of Hibernia is
400,000,000 shares, consisting of 100,000,000 shares of preferred stock, no par
value, and 300,000,000 shares of Class A voting common stock, no par value (the
Class A voting common stock being referred to hereinafter as "Hibernia Common
Stock"). As of March 31, 1998, 2,000,000 shares of Hibernia's preferred stock
were issued and outstanding, 152,109,882 shares of Hibernia Common Stock were
outstanding, and no shares of Hibernia Common Stock were held in Hibernia's
treasury. All outstanding shares of Hibernia Common Stock have been duly issued
and are validly outstanding, fully paid and nonassessable. The foregoing
Hibernia Common Stock and (in limited circumstances, the Hibernia Preferred
Stock) are the only voting securities of Hibernia authorized, issued or
outstanding and there are no existing options, warrants, calls or commitments of
any kind obligating Hibernia to issue any share of its capital stock or any
other security of which it is or will be the issuer, except that Hibernia has
authorized or reserved 1,968,750 shares of Hibernia Common Stock for issuance
under its 1987 Stock Option Plan, pursuant to which options covering 1,377,579
shares of Hibernia Common Stock were outstanding as of the date hereof;
9,898,336 (as adjusted) shares of Hibernia Common Stock for issuance under its
1992 Long-Term Incentive Plan, pursuant to which options covering 7,507,271
shares of Hibernia Common Stock were outstanding as of the date hereof;
1,000,000 shares of Hibernia Common Stock for issuance under its 1993 Director
Stock Option Plan, pursuant to which options covering 275,000 shares of Hibernia
Common Stock are outstanding on the date hereof; 24 shares of Hibernia Common
Stock are available for issuance pursuant to Hibernia's Dividend Reinvestment
and Stock Purchase Plan; and warrants covering 213,176 shares of Hibernia Common
Stock are outstanding. None of the shares of Hibernia's capital stock has been
issued in violation of preemptive rights of shareholders. Pending mergers with
Peoples Holding Corporation and MarTex Bancshares, Inc. are expected to result
in the issuance of no more than an additional 7,450,000 shares of Hibernia
Common Stock.
HNB is a national banking association organized and existing under the
laws of the United States of America having its principal registered office at
313 Carondelet Street, New Orleans, Louisiana 70130. All of the issued and
outstanding shares of capital stock of HNB are owned by Hibernia. HNB (i) is an
"insured bank" as defined in the Federal Deposit Insurance Act and applicable
regulations thereunder, and (ii) has been duly organized and is validly existing
as a national bank under the laws of the United States, and has full authority
to conduct its business as and where currently conducted.
The Boards of Directors of First Guaranty, HNB and Hibernia have duly
approved this Agreement and have authorized the execution hereof by their
respective undersigned officers. First Guaranty has directed that this Agreement
be submitted to a vote of its shareholders in accordance with 12 U.S.C. Section
215a and the terms of this Agreement.
In consideration of their mutual promises and obligations, the parties
hereto adopt and make this Agreement for the merger of First Guaranty with and
into HNB and prescribe the terms and conditions of such merger and the mode of
carrying it into effect, which shall be as follows:
1. The Merger. On the Effective Date (as defined in Section 14
hereof), First Guaranty shall be merged with and into HNB under the Articles of
Association of HNB, pursuant to the provisions of, and with the effect provided
in, 12 U.S.C. Section 215a (the "Bank Merger Act") (the "Merger") and the Merger
Agreement in substantially the form of Exhibit 1 hereto (the "Merger
Agreement").
2. Hibernia Capital Stock. The shares of the capital stock of Hibernia
issued and outstanding immediately prior to the Effective Date shall, on the
Effective Date, continue to be issued and outstanding.
3. First Guaranty Common Stock.
3.1. Conversion. On the Effective Date and subject to the
provisions of Section 3.7 hereof,
(a) the transfer books of First Guaranty shall be closed and
all records relating thereto promptly forwarded to Hibernia;
(b) each share of First Guaranty Common Stock issued and
outstanding immediately prior to the Effective Date, other than (i) shares as to
which dissenters' rights have been perfected and not withdrawn or otherwise
forfeited under 12 U.S.C. Section 215a and (ii) shares owned beneficially by
Hibernia or its subsidiaries, shall, by virtue of the Merger automatically and
without any action on the part of the holder thereof, become and be converted
into the number of shares of Hibernia Common Stock that equals the Exchange Rate
set forth in Section 3.8 hereof;
(c) each share of First Guaranty Preferred Stock issued and
outstanding immediately prior to the Effective Date, other than(i) shares as to
which dissenters' rights have been perfected and not withdrawn or otherwise
forfeited under 12 U.S.C. Section 215a and (ii) shares owned beneficially by
Hibernia or its subsidiaries, shall, by virtue of the Merger automatically and
without any action on the part of the holder thereof, become and be converted
into a right to receive cash in the amount equal to $1,030 plus any accrued and
unpaid dividends thereon;
(d) holders of certificates which represent shares of First
Guaranty Common Stock outstanding immediately prior to the Effective Date
(hereinafter called "Old Certificates") shall cease to be, and shall have no
rights as, shareholders of First Guaranty;
(e) each share of First Guaranty Common Stock held in the
treasury of First Guaranty or owned beneficially by Hibernia or any of its
subsidiaries shall be canceled; and
(f) Old Certificates shall be exchangeable by the holders
thereof in the manner provided in the transmittal materials described below for
new certificates for the number of whole shares of Hibernia Common Stock to
which such holders shall be entitled in accordance with the Exchange Rate set
forth in Section 3.8 and a check representing cash paid in lieu of fractional
shares as provided in Section 3.2 hereof.
3.2. Fractional Shares. Each holder of Old Certificates who
would otherwise have been entitled to receive a fraction of a share of Hibernia
Common Stock (after taking into account all shares of First Guaranty Common
Stock represented by the Old Certificates then delivered by such holder) shall
receive, in lieu thereof, cash (without interest) in an amount equal to such
fractional part of a share multiplied by the average of the mean of high and low
prices of one share of Hibernia Common Stock for the five business days
preceding the Effective Date as reported in The Wall Street Journal, or, if such
high and low prices of Hibernia Common Stock are not then so reported, the
average of the fair market values of one share of Hibernia Common Stock on the
five business days preceding the Effective Date determined pursuant to such
reasonable method as the Board of Directors of Hibernia may adopt in good faith
for such purpose, and no such holder shall be entitled to dividends, voting
rights or any other right of shareholders in respect of any fractional share.
3.3. Transmittal Materials. As promptly as practicable after
the Effective Date, Hibernia shall send or cause to be sent to each former
shareholder of record of First Guaranty transmittal materials for use in
exchanging Old Certificates for certificates representing Hibernia Common Stock
and a check representing cash paid in lieu of fractional shares, if any. The
letter of transmittal will contain instructions with respect to the surrender of
Old Certificates and the distribution of certificates representing Hibernia
Common Stock. If any certificate for shares of Hibernia Common Stock is to be
issued in a name other than that in which an Old Certificate surrendered for
exchange is issued, the Old Certificate so surrendered shall be properly
endorsed and otherwise be in proper form for transfer and the person requesting
such exchange shall affix any requisite stock transfer tax stamps to the Old
Certificate surrendered or provide funds for their purchase or establish to the
satisfaction of the exchange agent to be appointed by Hibernia in connection
with such exchange (the "Exchange Agent") that such taxes are not payable.
3.4. Rights as Shareholders. Former shareholders of First
Guaranty will be able to vote after the Effective Date at any meeting of
Hibernia shareholders or pursuant to any written consent procedure the number of
whole shares of Hibernia Common Stock into which their shares of First Guaranty
Common Stock are converted, regardless of whether they have exchanged their Old
Certificates. Whenever a dividend is declared by Hibernia on the Hibernia Common
Stock after the Effective Date, the declaration shall include dividends on all
shares issuable hereunder, but no shareholder will be entitled to receive his
distribution of such dividends until physical exchange of his Old Certificates
shall have been effected. Upon physical exchange of his Old Certificates, any
such person shall be entitled to receive from Hibernia an amount equal to all
dividends (without interest thereon and less the amount of taxes, if any, that
may have been withheld, imposed or paid thereon) declared, and for which the
payment has occurred, on the shares represented thereby.
3.5. Cancellation of Old Certificates. On and after the
Effective Date there shall be no transfers on the stock transfer books of First
Guaranty or Hibernia of the shares of First Guaranty Common Stock which were
issued and outstanding immediately prior to the Effective Date. If, after the
Effective Date, Old Certificates are properly presented to Hibernia, they shall
be canceled and exchanged for certificates representing shares of Hibernia
Common Stock and a check representing cash paid in lieu of fractional shares as
herein provided. Any other provision of this Agreement notwithstanding, neither
the Exchange Agent nor any party hereto shall be liable to a holder of First
Guaranty Common Stock for any amount paid or property delivered in good faith to
a public official pursuant to any applicable abandoned property, escheat, or
similar law.
3.6. Property Transfers. From time to time, as and when
requested by Hibernia and to the extent permitted by Louisiana law, the officers
and directors of First Guaranty last in office shall execute and deliver such
deeds and other instruments and shall take or cause to be taken such further or
other actions as shall be necessary in order to vest or perfect in or to confirm
of record or otherwise to HNB title to, and possession of, all the property,
interests, assets, rights, privileges, immunities, powers, franchises, and
authorities of First Guaranty, and otherwise to carry out the purposes of this
Agreement.
3.7. Dissenters' Shares. Shares of First Guaranty Common Stock
held by any holder having rights of a dissenting shareholder as provided in 12
U.S.C. Section 215a, who shall have properly objected to the Merger and who
shall have properly demanded payment on his stock in accordance with and subject
to the provisions of 12 U.S.C. Section 215a, shall not be converted as provided
in Section 3.1 hereof until such time as such holder shall have failed to
perfect, or shall have effectively lost, his right to appraisal of and payment
for his shares of First Guaranty Common Stock, at which time such shares shall
be converted as provided in Section 3.1 hereof.
3.8. Exchange Rate. The Exchange Rate shall be 1.33 shares
of Hibernia Common Stock to each share of First Guaranty Common Stock.
4. Articles of Incorporation; Bylaws. The Articles of Incorporation
and Bylaws of Hibernia in force immediately prior to the Effective Date shall on
and after the Effective Date continue to be the Articles of Incorporation and
Bylaws of Hibernia, respectively, unless and until altered, amended or repealed
in accordance with applicable law.
5. Employees. Hibernia shall use its best efforts to cause to be
provided as soon as practicable after the Effective Date for the employees of
First Guaranty immediately prior to the Effective Date the employee benefits
then made available to employees of Hibernia and its subsidiaries, subject to
the terms and conditions under which those employee benefits are made available
to such employees; provided, however, that for purposes of determining the
eligibility of an employee of First Guaranty to receive, and the benefits to
which such employee shall be entitled, under Hibernia's benefits plans after the
Effective Date, any period of employment of such employee with First Guaranty
shall be deemed equivalent to having been employed for that same period by
Hibernia and/or its subsidiaries, (and employees of First Guaranty will not be
denied health insurance coverage solely as a result of a preexisting condition
that existed on the Effective Date but did not exist on the date the employee
commenced his or her employment with First Guaranty) and provided, however, that
if Hibernia determines in good faith that it cannot merge any benefit plan of
First Guaranty into a comparable benefit plan of Hibernia or HNB without
creating material potential liability for Hibernia's or HNB's plan, then
Hibernia shall be entitled to freeze the existing benefit plan of First Guaranty
and prohibit participation by former employees of First Guaranty in Hibernia's
plan for the period of time required by applicable law to ensure that Hibernia's
and HNB's benefit plans are not deemed to be successor plans of the First
Guaranty plan in question.
6. Negative Covenants. From the date hereof until the Effective Date,
or until the termination of this Agreement, First Guaranty covenants and agrees
that it will not do, or agree to commit to do, without the prior written consent
of Hibernia, any of the following:
(a) make, declare, set aside or pay any dividend or declare or
make any distribution on, or directly or indirectly combine, redeem, purchase or
otherwise acquire, any shares of First Guaranty Common Stock (other than in a
fiduciary capacity); provided, however, that First Guaranty may, without written
consent of Hibernia, pay any and all dividends required to be paid pursuant to
the terms of the First Guaranty Preferred Stock and pay dividends on the First
Guaranty Common Stock not to exceed $0.10 per share per quarter, pro rated
through the Closing Date;
(b) authorize the creation or issuance of or issue any
additional shares of its capital stock, or any options, calls, warrants, stock
appreciation rights or commitments relating to its capital stock or any
securities or obligations convertible into or exchangeable for, or giving any
person any right to subscribe for or acquire from it, shares of its capital
stock;
(c) enter into any employment contracts with, or except in
accordance with existing policy and past practice in the preceding two years,
increase the rate of compensation of, or pay or agree to pay any bonus to, any
of its directors, officers or employees, provided, however, that First Guaranty
may pay pro-rated bonuses to employees and make a contribution to the 401(k)
plan of First Guaranty, in each instance at times and in amounts consistent with
existing policy and past practice in the preceding two years, and First Guaranty
shall accrue such bonuses and contributions;
(d) enter into or substantially modify (except as may be
required by applicable law) any pension, retirement, stock option, stock
purchase, stock appreciation right, savings, profit sharing, deferred
compensation, consulting, bonus, group insurance or other employee benefit,
incentive or welfare contract, plan or arrangement, or any trust agreement
related thereto, in respect of any of its directors, officers or other
employees;
(e) other than as contemplated hereby and as specified in
Schedule 6(e) annexed hereto, (i) carry on its business other than in the usual,
regular and ordinary course in substantially the same manner as heretofore
conducted, (ii) amend its Articles of Incorporation or Bylaws, (iii) establish
or add any automatic teller machines or branch or other banking offices, (iv)
make any capital expenditures in excess of $25,000 other than those made in the
ordinary course of business consistent with past practices over the past two
years or (v) take any action that would materially and adversely affect the
ability of any party hereto to obtain the approvals necessary for consummation
of the transactions contemplated hereby or that would materially and adversely
affect First Guaranty's ability to perform its covenants and agreements
hereunder;
(f) except with respect to transactions contemplated hereby
(including, without limitation, the actions required to satisfy the conditions
to closing as set forth in Section 12 hereof), merge with any other corporation
or bank or permit any other corporation or bank to merge into it or consolidate
with any other corporation or bank; acquire control over any other firm, bank,
corporation or organization or create any subsidiary (except in a fiduciary
capacity or in connection with foreclosures in bona fide loan transactions);
liquidate; or sell or dispose of any assets or acquire any assets, otherwise
than in the ordinary course of its business consistent with its past practice;
(g) sell, transfer, assign or otherwise dispose of that
certain parcel of undeveloped land located at 2271 South Range Avenue, Denham
Springs, Louisiana or take any action to establish a branch office at this
location in Denham Springs, Louisiana; or
(h) knowingly fail to comply with any laws, regulations,
ordinances, or governmental actions applicable to it and to the conduct of its
business in a manner significant, material and adverse to its business.
7. Representations and Warranties of First Guaranty. First Guaranty
(and not its directors or officers in their personal capacities) hereby
represents and warrants as follows:
7.1. Recitals. The facts set forth in the preamble to this
Agreement with respect to it are true and correct.
7.2. Organization and Qualification. First Guaranty is a
banking corporation duly organized, validly existing, and in good standing under
the laws of the State of Louisiana; has the corporate power and authority to
carry on its business as it is now being conducted and to own, lease and operate
its assets, properties and business; and has all requisite power and authority
to execute and deliver this Agreement and perform its obligations hereunder.
7.3. Ownership of Other Banks and Subsidiaries; Validity of
Stock. First Guaranty does not own, directly or indirectly, 5 percent or more of
the outstanding capital stock or other voting securities of any corporation,
bank, or other organization. First Guaranty has no direct or indirect
subsidiaries. The outstanding shares of capital stock of First Guaranty are
validly issued and outstanding, fully paid and, except as may be affected by
Louisiana Revised Statute Section 6:262, nonassessable.
7.4. Corporate Authorization. The execution, delivery and
performance of this Agreement have been authorized by First Guaranty's Board of
Directors, and, subject to the approval of this Agreement by its shareholders in
accordance with the Bank Merger Act, all corporate acts and other proceedings
required for the due and valid authorization, execution, delivery and
performance by First Guaranty of this Agreement and the consummation of the
Merger have been validly and appropriately taken. Subject to such shareholder
approval and to such regulatory approvals as are required by law, this Agreement
is a legal, valid and binding obligation of First Guaranty, enforceable against
First Guaranty in accordance with its terms, except that enforcement may be
limited by bankruptcy, reorganization, insolvency and other similar laws and
court decisions relating to or affecting the enforcement of creditors' rights
generally and by general equitable principles or principles of Louisiana law
that are similar to equitable principles in jurisdictions that recognize a
distinction between law and equity.
7.5. No Conflicts. Except as disclosed on Schedule 7.5 hereto,
the execution and delivery of this Agreement by First Guaranty does not, and the
consummation of the transactions contemplated hereby by it will not, constitute
(i) a breach or violation of, or a default under, any law, rule or regulation or
any judgment, decree, order, governmental permit or license, or agreement,
indenture or instrument of First Guaranty or to which First Guaranty is subject,
which breach, violation or default would have a material and adverse effect on
the financial condition, properties, businesses or results of operations of
First Guaranty taken as a whole or on the transactions contemplated hereby, (ii)
to the best of the knowledge of First Guaranty's management, a breach or
violation of, or a default under, any law, rule or regulation or any judgment,
decree, order, governmental permit or license, or agreement, indenture or
instrument of First Guaranty or to which First Guaranty is subject, or (iii) a
breach or violation of, or a default under, the Articles of Incorporation or
Bylaws of First Guaranty; and, except as set forth on Schedule 7.5 hereto, the
consummation of the transactions contemplated hereby will not require any
consent or approval under any such law, rule, regulation, judgment, decree,
order, governmental permit or license or the consent or approval of any other
party to any such agreement, indenture or instrument, other than any required
approvals of shareholders and applicable regulatory authorities.
7.6. Financial Statements; Dividend Restrictions. First
Guaranty has delivered to Hibernia prior to the execution of this Agreement true
and correct copies of the following financial statements (collectively referred
to herein as the "First Guaranty Financial Statements"): First Guaranty's
Statements of Condition as of December 31, 1997, 1996 and 1995 (audited) and as
of March 31, 1998 and 1997 (unaudited); Statements of Income and Changes in
Stockholders' Equity and Statements of Cash Flows for the years ended December
31, 1997, 1996 and 1995 (audited) and as of and for the three-month periods
ended March 31, 1998 and 1997 (unaudited). Each of the First Guaranty Financial
Statements (including the related notes) fairly presents the results of
operations of First Guaranty for the respective periods covered thereby and the
financial condition of First Guaranty as of the respective dates thereof
(subject, in the case of unaudited statements, to year-end audit adjustments
that will not be material in amount or effect and provided that such unaudited
statements do not include required statements of cash flows and changes in
stockholder equity and all footnote disclosure otherwise required), in each case
in accordance with generally accepted accounting principles ("GAAP")
consistently applied during the periods involved, except as may be noted
therein. Except as disclosed in the First Guaranty Financial Statements,
including the notes thereto and except as otherwise required by this Agreement,
there are no restrictions in any note, indenture, agreement, statute or
otherwise (except for statutes or regulations applicable to Louisiana
corporations or state banks generally) precluding First Guaranty from paying
dividends, in each case when, as and if declared by its Board of Directors.
7.7. No Material Adverse Change. Since March 31, 1998, there
has been no event or condition of any character (whether actual, or to the
knowledge of First Guaranty, threatened or contemplated) that has had or can
reasonably be anticipated to have, or that, if concluded or sustained adversely
to First Guaranty, would have, a material adverse effect on the financial
condition, results of operations, business or prospects of First Guaranty,
excluding changes in laws or regulations that affect banking institutions
generally.
7.8. Litigation and Proceedings. Except as set forth on
Schedule 7.8 hereto, no litigation, proceeding or controversy before any court
or governmental agency is pending against First Guaranty that in the opinion of
its management may have a material adverse effect on the business, results of
operations or financial condition of First Guaranty, and, to the best of its
knowledge, no such litigation, proceeding or controversy has been threatened or
is contemplated. Except as disclosed on Schedule 7.8 hereto, First Guaranty is
not subject to any written agreement, memorandum, or order with or by any bank
or bank holding company regulatory authority restricting its operations or
requiring any material actions.
7.9. Material Contracts. Except for this Agreement and
arrangements made in the ordinary course of business or disclosed on Schedule
7.9 hereto, First Guaranty is not bound by any material contract to be performed
after the date hereof that is not terminable by First Guaranty without penalty
or liability on thirty days prior notice.
7.10. Brokers' or Finders' Fees. No agent, broker, investment
banker, investment or financial advisor or other person acting on behalf of
First Guaranty or under their authority is entitled to any commission, broker's
or finder's fee from any of the parties hereto in connection with any of the
transactions contemplated by this Agreement except that First Guaranty has
engaged Chaffe & Associates, Inc. in connection with providing a fairness
opinion relating to the Merger and for certain other advisory services and has
agreed to compensate Chaffe & Associates, Inc. for such opinion and services. A
copy of the agreement by which First Guaranty has engaged Chaffe & Associates,
Inc. is attached hereto as Exhibit 7.10 and contains all agreements between
First Guaranty and Chaffe & Associates, Inc. relating to services in connection
with the Merger and compensation therefor.
7.11. Contingent Liabilities. Except as disclosed on Schedule
7.11 hereto or as reflected in the First Guaranty Financial Statements and
except for unfunded loan commitments made in the ordinary course of business
consistent with past practices, as of March 31, 1998, First Guaranty had no
obligation or liability (contingent or otherwise) that was material, or that
when combined with all similar obligations or liabilities would have been
material, to First Guaranty, and there does not exist a set of circumstances
resulting from transactions effected or events occurring prior to, on, or after
March 31,1998, or from any action omitted to be taken during such period that,
to the knowledge of First Guaranty, could reasonably be expected to result in
any such material obligation or liability.
7.12. Tax Liability. The amounts set up as liabilities for
taxes in the First Guaranty Financial Statements are sufficient for the payment
of all respective taxes (including, without limitation, federal, state, local,
and foreign excise, franchise, property, payroll, income, capital stock, and
sales and use taxes) accrued in accordance with GAAP and unpaid at the
respective dates thereof.
7.13. Material Obligations Paid. Since March 31, 1998, First
Guaranty has not incurred or paid any obligation or liability that would be
material to First Guaranty, except for obligations incurred or paid in
connection with transactions by it in the ordinary course of its business
consistent with its past practices.
7.14. Tax Returns; Payment of Taxes. All federal, state,
local, and foreign tax returns (including, without limitation, estimated tax
returns, withholding tax returns with respect to employees, and FICA and FUTA
returns) required to be filed by or on behalf of First Guaranty have been timely
filed or requests for extensions have been timely filed and granted and have not
expired for periods ending on or before December 31, 1992, and all returns filed
are complete and accurate to the best information and belief of management; all
taxes shown on filed returns have been paid. Except as disclosed on Schedule
7.14, as of the date hereof, there is no audit, examination, deficiency or
refund litigation or matter in controversy with respect to any taxes that might
result in a determination materially adverse to First Guaranty except as
reserved against in the First Guaranty Financial Statements. Except as disclosed
on Schedule 7.14, all taxes, interest, additions and penalties due with respect
to completed and settled examinations or concluded litigation have been paid,
and First Guaranty's reserves for bad debts at December 31, 1997, 1996 and 1995
as filed with the Internal Revenue Service, were not greater than the maximum
amounts permitted under the provisions of Section 585 of the Internal Revenue
Code of 1986, as amended (the "Internal Revenue Code").
7.15. Loans. To the best knowledge and belief of management of
First Guaranty, each loan reflected as an asset of First Guaranty in the First
Guaranty Financial Statements, as of March 31, 1998, or acquired since that
date, is the legal, valid, and binding obligation of the obligor named therein,
enforceable in accordance with its terms, and no loan is subject to any asserted
defense, offset or counterclaim, except as specifically disclosed in writing to
Hibernia on or prior to the date hereof.
7.16. Allowance for Loan Losses. The allowances for possible
loan losses shown on the balance sheets of First Guaranty as of March 31, 1998
are adequate in all material respects under the requirements of GAAP to provide
for possible losses, net of recoveries, relating to loans previously charged
off, on loans outstanding (including accrued interest receivable) as of March
31, 1998, and each such allowance has been established in accordance with GAAP.
7.17. Title to Assets; Adequate Insurance Coverage.
(a) As of March 31, 1998, First Guaranty had, and except with
respect to assets disposed of for adequate consideration in the ordinary course
of business since such date, now has, good and merchantable title to all real
property and good and merchantable title to all other properties and assets
reflected in the First Guaranty Financial Statements, free and clear of all
mortgages, liens, pledges, restrictions, security interests, charges and
encumbrances of any nature except for (i) mortgages and encumbrances which
secure indebtedness which is properly reflected in the First Guaranty Financial
Statements or which secure deposits of public funds as required by law; (ii)
liens for taxes accrued but not yet payable; (iii) liens arising as a matter of
law in the ordinary course of business with respect to obligations incurred
after March 31, 1998, provided that the obligations secured by such liens are
not delinquent or are being contested in good faith; (iv) such imperfections of
title and encumbrances, if any, as do not materially detract from the value or
materially interfere with the present use of any of such properties or assets or
the potential sale of any such owned properties or assets; and (v) capital
leases and leases, if any, to third parties for fair and adequate consideration.
First Guaranty owns, or has valid leasehold interests in, all material
properties and assets, tangible or intangible, used in the conduct of its
business. Any real property and other material assets held under lease by First
Guaranty are held under valid, subsisting and enforceable leases with such
exceptions as are not material and do not interfere with the use made by First
Guaranty in such lease of such property.
(b) With respect to each lease of any real property or a
material amount of personal property to which First Guaranty is a party, except
for financing leases in which First Guaranty is lessor and except as disclosed
on Schedule 7.17(b) hereto: (i) such lease is in full force and effect in
accordance with its terms; (ii) all rents and other monetary amounts that have
become due and payable thereunder have been paid; (ii) there exists no default
or event, occurrence, condition or act which with the giving of notice, the
lapse of time or the happening of any further event, occurrence, condition or
act would become a default under such lease; and (iv) the Merger will not
constitute a default or a cause for termination or modification of such lease.
(c) First Guaranty has no legal obligation, absolute or
contingent, to any other person to sell or otherwise dispose of any substantial
part of its assets or to sell or dispose of any of its assets except in the
ordinary course of business consistent with past practices.
(d) to the knowledge and belief of First Guaranty's
management, all policies of fire, theft, liability and other insurance with
respect to the assets or business of First Guaranty provide adequate coverage
against loss.
7.18. Employee Benefit Plans.
(a) Employee Benefit Plans. Schedule 7.19 contains a list
setting forth each current employee benefit plan or arrangement of First
Guaranty, including, but not limited to, employee pension benefit plans, as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), multiemployer plans, as defined in Section 3(37) of ERISA,
employee welfare benefit plans, as defined in Section 3(1) of ERISA, deferred
compensation plans, stock option plans, bonus plans, stock purchase plans,
hospitalization, disability and other insurance plans, severance or termination
pay plans and policies, whether or not described in Section 3(3) of ERISA, in
which employees of First Guaranty and their spouses or dependents participate
and any trust associated with any of the aforementioned plans ("Employee Benefit
Plans").
(b) Compliance with Law. Except as noted in Schedule 7.19,
with respect to each Employee Benefit Plan (i) each has been administered in all
respects in compliance with its terms and with all applicable federal and state
laws and regulations, rulings and guidance promulgated thereunder, including,
but not limited to, ERISA and the Code; (ii) no actions, suits, claims or
disputes are pending or, to the knowledge of First Guaranty, threatened; (iii)
no audits, inquiries, reviews, proceedings, claims or demands are pending with
any governmental or regulatory agency and First Guaranty has not received
notification from any governmental or regulatory agency of any such matters;
(iv) there are no facts which could give rise to any liability in the event of
any such investigation, claim, action, suit, audit, review or other proceeding;
(v) all reports, returns and similar documents required to be filed with any
governmental agency or distributed to any plan participant have been duly or
timely filed or distributed; and (vi) no "prohibited transaction" has ever
occurred within the meaning of the applicable provisions of ERISA or the Code
with respect to an Employee Benefit Plan.
(c) Qualified Plans. With respect to each Employee Benefit
Plan intended to qualify under Code Section 401(a) or 403(a), (i) the Internal
Revenue Service has issued a favorable determination letter that such plans are
qualified and exempt from federal income taxes; (ii) no such determination
letter has been revoked nor, to the knowledge of First Guaranty, has revocation
been threatened, nor has any amendment or other action occurred with respect to
any such plan since the date of its most recent determination letter or
application therefor in any respect which would adversely affect its
qualification; and (iii) all contributions to Employee Benefit Plans for any
period ending before the Closing Date that are not yet, but will be, made are
properly accrued and reflected on the current balance sheet.
First Guaranty has never been obligated to make payments to
any multiemployer plan as described in Section 4001(a)(3) of ERISA.
(d) Welfare Plans. First Guaranty is not obligated under any
employee welfare plan as described in Section 3(1) of ERISA ("Welfare Plan") to
provide medical, disability, death or other welfare benefits with respect to any
employee or former employee after termination of employment, and First Guaranty
has complied with the notice and continuation coverage requirements of Section
4980B of the Code and the regulations thereunder with respect to each Welfare
Plan that is, or was, during any taxable year for which the statute of
limitations on the assessment of federal income taxes remains open, by consent
or otherwise, a group health plan within the meaning Section 5000(b)(1) of the
Code. Except as set forth on Schedule 7.19, the consummation of the transactions
contemplated by this Agreement will not entitle any individual to severance pay,
and, will not accelerate the time of payment, or increase the amount of
compensation due to any individual.
(e) Other Liabilities. (i) Except as noted in Schedule 7.19,
none of the Employee Benefit Plans obligates First Guaranty to pay separation,
severance, termination or similar benefits solely as a result of any transaction
contemplated by this Agreement or solely as a result of a "change of control"
(as such term is defined in Section 280G of the Code) except as specifically
noted on Schedule 7.19; and (ii) all required or discretionary (in accordance
with historical practices) payments, premiums, contributions, reimbursements or
accruals for all periods ending prior to or as of the Closing Date shall have
been made or properly accrued on the current balance sheets or will be properly
accrued on the books and records of First Guaranty as of the Closing Date.
7.19. Copies of Employee Plans. Schedule 7.19 attached hereto
provides a summary of all Employee Benefit Plans, or group insurance contract,
or any other incentive, welfare, or employee benefit plan or agreement
maintained by First Guaranty for its employees or former employees. First
Guaranty has provided to Hibernia true, complete and accurate copies of all of
the plans or agreements disclosed in Schedule 7.19.
7.20. Plan Liability. First Guaranty is aware of no
outstanding liabilities to the Pension Benefit Guaranty Corporation.
Additionally, First Guaranty is aware of no outstanding liabilities to the
Internal Revenue Service in connection with any Employee Benefit Plan.
7.21. No Default. First Guaranty is not in default under any
contract, agreement, commitment, arrangement, lease, insurance policy or other
instrument to which it is a party or by which its assets, business or operations
may be bound or affected or under which it or its assets, business or operations
receive benefits, and there has not occurred any event that with the lapse of
time or the giving of notice or both would constitute such a default.
7.22. Minutes. Prior to the date hereof, First Guaranty has
made available to Hibernia, for inspection pursuant to the terms of Section 9.5
hereof, the minutes of meetings of First Guaranty's Board of Directors and all
committees thereof held prior to the date hereof (other than meetings involving
possible acquisitions of First Guaranty), which minutes are complete and correct
in all respects and fully and fairly present the deliberations and actions of
such Board and committees and accurately reflect the business condition and
operations of First Guaranty as of the dates and for the periods indicated
therein.
7.23. Insurance Policies. Attached hereto as Schedule 7.23 is
a schedule detailing all policies of fire, theft, public liability, and other
insurance (including without limitation fidelity bonds and directors and
officers liability insurance) maintained by First Guaranty at the date hereof.
Except as disclosed on Schedule 7.23 hereto, First Guaranty has not received any
notice of a premium increase or cancellation with respect to any of the
insurance policies or bonds listed on Schedule 7.23, and within the last three
years, First Guaranty has not been refused any insurance coverage sought or
applied for, and it has no reason to believe that existing insurance coverage
cannot be renewed as and when the same shall expire, upon terms and conditions
as favorable as those presently in effect, other than possible increases in
premiums or unavailability of coverage that do not result from any extraordinary
loss experience of First Guaranty.
7.24. Investments. Except for pledges to secure public or
trust deposits, and except as disclosed on Schedule 7.24 hereto, none of the
investments reflected in the First Guaranty Financial Statements under the
heading "Investment Securities," and none of the investments made by First
Guaranty since March 31, 1998, and none of the assets reflected in the First
Guaranty Financial Statements under the heading "Cash and Due From Banks," is
subject to any restriction, whether contractual or statutory, that materially
impairs the ability of First Guaranty freely to dispose of such investment at
any time. With respect to all repurchase agreements to which First Guaranty is a
party, First Guaranty has a valid, perfected first lien or security interest in
the government securities or other collateral securing each such repurchase
agreement which equals or exceeds the amount of the debt secured by such
collateral under such agreement.
7.25 Environmental Matters. Except as disclosed on Schedule
7.25 hereto, neither First Guaranty nor, to the knowledge of First Guaranty, any
previous owner or operator of any properties at any time owned (including any
properties owned as a result of foreclosure of a loan, whether still owned or
subsequently resold) leased, or occupied by First Guaranty or used by First
Guaranty in its business ("First Guaranty Properties") has used, generated,
treated, stored, or disposed of any hazardous waste, toxic substance, or similar
materials on, under, or about First Guaranty Properties except in compliance
with all applicable federal, state, and local laws, rules, and regulations
pertaining to air and water quality, hazardous waste, waste disposal, air
emissions, and other environmental matters ("Environmental Laws"). First
Guaranty has not received any notice of noncompliance with Environmental Laws,
applicable laws, orders, or regulations of any governmental authorities relating
to waste generated by any such party or otherwise or notice that any such party
is liable or responsible for the remediation, removal, or clean-up of any site
relating to First Guaranty Properties. First Guaranty has obtained all material
permits, licenses and other authorizations that are required to be obtained by
it under any applicable Environmental Law in connection with the operation of
its business and ownership of First Guaranty Properties, and except as disclosed
on Schedule 7.25 hereto, is in compliance in all material respects with all
terms and conditions of such permits, licenses, and authorizations.
7.26 Year 2000 Compliance. First Guaranty has developed and
implemented a plan designed to ensure that its computer and other mission
critical systems will be substantially Year 2000 compliant, and all work and
testing required to be performed under that plan as of the date hereof have been
performed.
8. Representations and Warranties of Hibernia. Hibernia (and not its
directors or officers in their personal capacities) hereby represents and
warrants as follows:
8.1. Recitals. The facts set forth in the preamble to this
Agreement with respect to it are true and correct.
8.2. Organization and Qualification. Hibernia is a
corporation, and HNB is a national banking association, duly organized, validly
existing and in good standing under the laws of the State of Louisiana and the
United States of America, respectively. Each of Hibernia and HNB has the
corporate power and authority to carry on its business as it is now being
conducted and to own, lease and operate its assets, properties and business, and
Hibernia has all requisite power and authority to execute and deliver this
Agreement and perform its obligations hereunder.
8.3. Shares Fully Paid and Non Assessable. The outstanding
shares of capital stock of Hibernia Corporation and HNB are validly issued and
outstanding, fully paid and nonassessable (subject, in the case of HNB, to 12
U.S.C. Section 55) and all of such shares of HNB are owned directly or
indirectly by Hibernia free and clear of all liens, claims, and encumbrances.
The shares of Hibernia Common Stock to be issued in connection with the Merger
pursuant to this Agreement will have been duly authorized and, when issued in
accordance with the terms of this Agreement, will be validly issued, fully paid,
and nonassessable.
8.4. Due Authorization. The execution, delivery and
performance of this Agreement have been authorized by Hibernia's Board of
Directors, and, subject to the regulatory and other approvals required by
Section 12 hereof, all corporate acts and other proceedings required for the due
and valid authorization, execution, delivery and performance by Hibernia of this
Agreement and the consummation of the Merger have been validly and appropriately
taken. Subject to receipt of the regulatory and other approvals required by
Section 12 hereof, this Agreement is a legal, valid, and binding obligation of
Hibernia enforceable against Hibernia in accordance with its terms, except that
enforcement may be limited by bankruptcy, insolvency, and other laws of general
applicability relating to or affecting creditors' rights generally and by
general equitable principles or principles of Louisiana law that are similar to
equitable principles in jurisdictions that recognize a distinction between law
and equity.
8.5. No Conflicts. Except as disclosed on Schedule 8.5 hereto,
the execution and delivery of this Agreement by Hibernia does not, and the
consummation of the transactions contemplated hereby by it will not, constitute
(i) a breach or violation of, or a default under, any law, rule, or regulation
or any judgment, decree, order, governmental permit or license, or agreement,
indenture, or instrument of Hibernia or HNB or by which Hibernia or any of HNB
is subject, which breach, violation or default would have a material and adverse
effect on the financial condition, properties, businesses, or results of
operations of Hibernia and HNB taken as a whole or on the transactions
contemplated hereby, (ii) to the best of the knowledge of Hibernia's management,
a breach or violation of, or a default under, any law, rule, or regulation or
any judgment, decree, order, governmental permit or license, or agreement,
indenture, or instrument of Hibernia or HNB or to which Hibernia or HNB is
subject, or (iii) a breach or violation of, or a default under the Articles of
Incorporation or Association or Bylaws of Hibernia, or of HNB, and the
consummation of the transactions contemplated hereby will not require any
consent or approval under any such law, rule, regulation, judgment, decree,
order, governmental permit or license or the consent or approval of any other
party to any such agreement, indenture, or instrument, other than any required
approvals of shareholders and applicable regulatory authorities.
8.6 Reports of Hibernia. As of their respective dates, none of
its Annual Report on Form 10-K for the fiscal year ended December 31, 1997, its
Quarterly Report on Form 10-Q for the period ended March 31, 1998, and its proxy
statement for its 1998 annual meeting of shareholders, each in the form
(including exhibits) filed with the Securities and Exchange Commission (the
"SEC") and its annual report to shareholders for the fiscal year ended December
31, 1997 (collectively, the "Hibernia Reports"), contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading. There is no fact or
circumstance that, individually or in the aggregate, materially and adversely
has affected or is so affecting, or, in the opinion of the executive officers of
Hibernia, may reasonably be expected in the future to so affect, the business,
financial condition, net worth, properties, prospects or results of operations
of Hibernia and HNB, taken as a whole, that has not been disclosed in the
Hibernia Reports. Each of the balance sheets in or incorporated by reference
into the Hibernia Reports (including the related notes) fairly presents the
financial position of the entity or entities to which it relates as of its date
and each of the statements of income and stockholders' equity and statement of
cash flows or equivalent statements in the Hibernia Reports (including any
related notes and schedules) fairly presents the results of operations and
changes in stockholders' equity, as the case may be, of the entity or entities
to which it relates for the periods set forth therein (subject, in the case of
unaudited statements, to year-end audit adjustments that will not be material in
amount or effect), in each case in accordance with GAAP consistently applied
during the periods involved, except as may be noted therein. Copies of the
Hibernia Reports have been furnished to First Guaranty on or before the date
hereof.
8.7 No Material Adverse Change. Since March 31, 1998, there
has been no event or condition of any character (whether actual, or to the
knowledge of Hibernia or HNB, threatened or contemplated) that has had or can
reasonably be anticipated to have, or that, if concluded or sustained adversely
to Hibernia, would reasonably be anticipated to have, a material adverse effect
on the financial condition, results of operations, business or prospects of
Hibernia or HNB, excluding changes in laws or regulations that affect banking
institutions generally, except as may have been disclosed prior to the date of
this Agreement in any press release or report issued publicly by Hibernia.
8.8 Year 2000 Compliance. Hibernia and HNB have developed and
implemented a plan designed to ensure that their computer and other mission
critical systems will be substantially Year 2000 compliant, and all work and
testing required to be performed under that plan as of the date hereof have been
performed.
9. Agreements and Covenants. Hibernia, HNB and First Guaranty each
hereby agrees and covenants to the other that:
9.1. Shareholder Approvals. If required by applicable law,
this Agreement shall be submitted to its respective shareholders at a special
meeting called and held in accordance with applicable provisions of law (to be
scheduled to the extent possible for the date of the shareholders' meeting for
the other party hereto, if any) at which its shareholders shall be asked to
consider and vote upon this Agreement and the transactions contemplated hereby.
9.2. Actions Necessary to Complete Merger. It shall use its
best efforts in good faith to take or cause to be taken all action necessary or
desirable under this Agreement on its part as promptly as practicable so as to
permit the consummation of this Agreement at the earliest possible date
(including obtaining the consent or approval of each governmental authority and
individual, partnership, corporation, association, or any other form of business
or professional entity whose consent or approval is required for the
consummation of the transactions contemplated hereby, requesting the delivery of
appropriate opinions and letters from its counsel and recommending that this
Agreement be approved by its shareholders) and cooperate fully with the other
parties hereto to that end; provided, however, that no party shall be obligated
to take or cause to be taken any action which is or creates a material burden on
such party, except to the extent such actions are reasonably anticipated to be
required in order to effect the Merger.
9.3. Preparation of Registration Statement and Proxy
Statement. It shall prepare as promptly as practicable jointly with the other
parties hereto a proxy statement to be mailed to the shareholders of each party,
the shareholders of which are to vote upon this Agreement in connection with the
transactions contemplated hereby, and to be part of a registration statement
(the "Registration Statement") to be filed by Hibernia with the SEC pursuant to
the Securities Act of 1933, as amended (the "1933 Act"), with respect to the
shares to be issued in the Merger. When the Registration Statement or any
post-effective amendment thereto shall become effective, and at all times
subsequent to such effectiveness, up to and including the time of the last
shareholder meeting with respect to the transactions contemplated hereby, such
Registration Statement and all amendments or supplements thereto, with respect
to all information set forth therein furnished or to be furnished by Hibernia
relating to Hibernia and by First Guaranty relating to First Guaranty, (i) will
comply in all material respects with the provisions of the 1933 Act and the
rules and regulations of the SEC thereunder and (ii) will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements contained therein not
misleading. Hibernia will advise First Guaranty promptly after it receives
notice thereof of the time when the Registration Statement has become effective
or any supplement or amendment has been filed, of the issuance of any stop
order, of the suspension of the qualification of the Hibernia Common Stock
issuable in connection with the Merger for offering or sale in any jurisdiction,
of the initiation or threat of any proceeding for any such purpose, or of any
request by the SEC for the amendment or supplement of the Registration Statement
or for additional information.
9.4. Press Releases and Public Statements. Unless approved by
Hibernia in advance, First Guaranty will not issue any press release, marketing
or advertising material or other written statement for general circulation
relating to the transactions contemplated hereby, except as otherwise required
by law. The parties will cooperate in any public announcements directly related
to the Merger; provided, however, that, in the event Hibernia determines to file
a current report on Form 8-K that discloses only the substantive facts of a
previously released press release, such filing may be made without prior
consultation with First Guaranty so long as First Guaranty is furnished with a
copy of such report within a reasonable time after its filing.
9.5. Material Developments; Access to Information.
(i) In order to afford First Guaranty access to such
information as it may reasonably deem necessary to perform its due diligence
review with respect to Hibernia and HNB and its assets in connection with the
Merger, Hibernia shall (and shall cause HNB to), (A) upon reasonable notice,
afford First Guaranty and its officers, employees, counsel, accountants and
other authorized representatives, during normal business hours throughout the
period prior to the Effective Date and to the extent consistent with applicable
law, access to its premises, properties, books and records, and to furnish
First Guaranty and uch representatives with such financial and operating data
and other information of any kind respecting its business and properties as
First Guaranty shall from time to time reasonably request to perform such
review, (B) furnish First Guaranty with copies of all reports filed by Hibernia
with the Securities and Exchange Commission ("SEC") throughout the period after
the date hereof prior to the Effective Date promptly after such reports are so
filed, and (C) promptly advise First Guaranty of the occurrence before the
Effective Date of any event or condition of any character (whether actual or to
the knowledge of Hibernia, threatened or contemplated) that has had or can
reasonably be anticipated to have, or that, if concluded or sustained adversely
to Hibernia, would reasonably be anticipated to have, a material adverse effect
on the financial condition, results of operations, business or prospects of
its consolidated group as a whole.
(ii) In order to afford Hibernia access to such
information as it may reasonably deem necessary to perform any due diligence
review with respect to the assets of First Guaranty to be acquired as a result
of the Merger, First Guaranty shall, upon reasonable notice, afford Hibernia
and its officers, employees, counsel, accountants, and other authorized
representatives access, during normal business hours throughout the period
prior to the Effective Date, to all of its properties, books, contracts,
commitments, loan files, litigation files, and records (including, but not
limited to, the minutes of the Board of Directors of First Guaranty (other than
meetings involving possible acquisitions of First Guaranty) and all committees
thereof), and it shall , upon reasonable notice and to the extent consistent
with applicable law, furnish promptly to Hibernia such information as Hibernia
may reasonably request to perform such review.
(iii) No investigation pursuant to this Section 9.5
shall affect or be deemed to
modify any representation or warranty made by, or the conditions to the
obligations to consummate the Merger of, either party to this Agreement.
9.6. Prohibited Negotiations. Prior to the Effective Date,
First Guaranty shall not solicit or encourage inquiries or proposals with
respect to, furnish any information relating to, or participate in any
negotiations or discussions concerning, any acquisition or purchase of all or a
substantial portion of the assets of, or of a substantial equity interest in,
First Guaranty or any business combination with First Guaranty other than as
contemplated by this Agreement. First Guaranty shall instruct each officer,
director, agent, or affiliate of it to refrain from doing any of the above, and
First Guaranty will notify Hibernia promptly if any such inquiries or proposals
are received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated with, First Guaranty;
provided, however, that nothing contained in this section shall be deemed to
prohibit any officer or director of First Guaranty from taking any action that,
in the opinion of counsel to First Guaranty, a copy of which opinion shall be
furnished to Hibernia upon its request, is required by applicable law.
9.7. Affiliates. Prior to the Closing Date (as defined in
Section 14 hereof), First Guaranty shall deliver to Hibernia a letter
identifying all persons whom it believes to be "affiliates" of First Guaranty
for purposes of Rule 145(c) or Rule 144 (as applicable) under the 1933 Act
("Affiliates"). First Guaranty shall use its best efforts to cause each person
so identified to deliver to Hibernia prior to the Effective Date a written
agreement in substantially the form of Exhibit 9.7 hereto providing, among other
things, that such person will not dispose of Hibernia Common Stock received in
the Merger except in compliance with the 1933 Act and the rules and regulations
thereunder and except in accordance with Section 201.01 of the SEC's
Codification of Financial Reporting Policies; provided, however, that First
Guaranty shall have no such obligation to use its best efforts to cause any such
identified person to deliver to Hibernia such agreement if such person may not
lawfully execute such agreement.
9.8. Adjustment for Changes in Outstanding Shares. In the
event that prior to the Effective Date the outstanding shares of Hibernia Common
Stock shall have been increased, decreased, or changed into or exchanged for a
different number or kind of shares or securities by reorganization,
recapitalization, reclassification, stock dividend, stock split, or other like
changes in Hibernia's capitalization, then an appropriate and proportionate
adjustment shall be made in the number and kind of shares of Hibernia Common
Stock to be thereafter delivered pursuant to Section 3.1 hereof. It is expressly
understood and agreed, however, that any change in the outstanding shares of
Hibernia resulting from (i) the consummation of a merger of an institution with
and into Hibernia or HNB, whether or not such merger was pending on the date
hereof, (ii) the exercise of stock options granted to employees or directors of
Hibernia or HNB, or (iii) the exercise of any warrant or other right to receive
Hibernia Common Stock described in the recitals to this Agreement, shall not
result in the adjustment of the number of shares of Hibernia Common Stock to be
issued in the Merger pursuant to this Section 9.8.
9.9. Accounting Treatment. It shall use its best efforts to
cause the Merger to qualify for pooling-of-interests accounting treatment to the
extent factors affecting such treatment are within its control.
9.10. Adoption of Accounting and Credit Policies. As soon as
practicable after receipt of all required bank regulatory approvals and in any
event prior to the Effective Date (unless this Agreement is terminated pursuant
to Section 13 hereof), First Guaranty shall take any and all necessary or
appropriate actions to adopt all Hibernia accounting procedures and policies
(including without limitation those policies pertaining to charged-off and
non-accrual assets) and the portions of Hibernia's credit policies listed on
Schedule 9.10 hereto; provided, however, that no such action taken by First
Guaranty at the request of Hibernia or HNB pursuant to this Section shall be
deemed to be, or be deemed to cause, a breach of any representation or warranty
made by First Guaranty herein.
9.11. Indemnification of Directors and Officers of First
Guaranty.
(a) From and after the Effective Date of the Merger, and
except as provided in paragraph (e) of this Section 9.11, Hibernia agrees to
indemnify and hold harmless each person who, as of the date immediately prior to
the Closing Date, served as an officer or director of First Guaranty (an
"Indemnified Person") from and against all damages, liabilities, judgments and
claims (and related expenses including, but not limited to, attorney's fees and
amounts paid in settlement) based upon or arising from his capacity as an
officer or director of First Guaranty, to the same extent as he would have been
indemnified under the Articles of Association and/or Bylaws of HNB, as such
documents were in effect on the date of this Agreement as if he were an officer
or director of HNB at all relevant times; provided, however, that the
indemnification provided by this Section shall not apply to any claim against an
Indemnified Person if such Indemnified Person knew or should have known of the
existence of the claim and failed to make a good faith effort to require First
Guaranty, as the case may be, to notify its director and officer liability
insurance carrier of the existence of such claim prior to the Closing Date.
(b) The rights granted to the Indemnified Persons hereby shall
be contractual rights inuring to the benefit of all Indemnified Persons and
shall survive this Agreement and any merger, consolidation or reorganization of
Hibernia or HNB.
(c) The rights to indemnification granted by this subsection
9.11 are subject to the following limitations: (i) the total aggregate
indemnification to be provided by Hibernia pursuant to subsection 9.11(a) shall
not exceed, as to all of the Indemnified Persons as a group, the sum of
$10,000,000 and Hibernia shall have no responsibility to any Indemnified person
for the manner in which such sum is allocated among that group (but nothing in
this subsection is intended to prohibit the Indemnified Persons from seeking
reallocation among themselves); (ii) a director or officer who would otherwise
be an Indemnified Person under this subsection 9.11 shall not be entitled to the
benefits hereof unless such director or officer has executed a Joinder Agreement
(the "Joinder Agreement") in the form of Exhibit 9.11 hereto; and (iii) amounts
otherwise required to be paid by Hibernia to an Indemnified Person pursuant to
this subsection 9.11 shall be reduced by any amounts that such Indemnified
Person recovers by virtue of the claim for which other employees and officers
indemnification is sought.
(d) Hibernia agrees that the $10,000,000 indemnification limit
set forth in paragraph (c) of this Section 9.11 shall not apply to any damages,
liabilities, judgments and claims (and related expenses, including but not
limited to attorney's fees and amounts paid in settlement) insofar as they arise
out of or are based upon the matters for which indemnification is provided in
Section 11.2 hereof.
(e) Notwithstanding anything contained in this Agreement to
the contrary, Hibernia shall provide no indemnification with respect to the
litigation listed on Schedule 9.11(e) hereto.
9.12 Covenant to Close. At such time as is deemed appropriate
by the parties hereto or as otherwise set forth in this Agreement, and upon
satisfaction or waiver of each of the conditions to Closing of the Merger, the
parties agree to take such actions as are reasonably necessary or appropriate to
effect the Closing and the Merger.
9.13 Conduct of Business in Ordinary Course. First Guaranty
shall conduct its business in the ordinary course as conducted on the date
hereof, consistent with past practices, from the date hereof through the Closing
Date, and shall use its best efforts to preserve its existing relationships with
clients, customers, vendors and employees.
9.14 Additional Actions by First Guaranty. First Guaranty will
take the additional actions specified in Schedule 9.14 attached hereto.
9.15 Continuation of Year 2000 Compliance Efforts. First
Guaranty will continue its efforts to bring its computer systems in compliance
with Year 2000, to comply with its existing plan for such compliance and to test
the systems and the plans for compliance from time to time in accordance with
First Guaranty's plan for Year 2000 compliance.
9.16 Indemnification of Hibernia. In consideration of this
Agreement and Hibernia's agreements and covenants contained herein, the
shareholder of First Guaranty listed on Schedule 9.16 hereto hereby agrees, from
and after the Effective Date, to indemnify and hold harmless Hibernia, HNB and
each of their respective subsidiaries, affiliates, officers, directors and
employees from and against any and all damages, liabilities, judgments and
claims (and related expenses including, but not limited to, attorney's fees and
amounts paid in settlement) or any other costs or expenses of any kind related
to any of the matters listed on Schedule 9.16 hereto; provided, however, that
the determination of whether indemnification shall be made by the shareholder
listed on Schedule 9.16, and the amount thereof, shall be solely within the
discretion of, and determined solely by, Stephen A. Hansel, President and Chief
Executive Officer of Hibernia, or if Mr. Hansel is not the President and Chief
Executive Officer of Hibernia on the date of such determination then such
determination shall be made by the President and Chief Executive Officer of HNB
then in office on the date of such determination; provided, further, however
that the shareholder listed on Schedule 9.16 shall not under any circumstances
be liable to Hibernia in an amount that exceeds, in the aggregate, $1 million.
10. Permits, Consents and Approvals. As promptly as practicable after
the date hereof:
(a) Hibernia shall submit an application to the Comptroller of
the Currency (the "Comptroller") for approval of the transactions contemplated
hereby in accordance with the provisions of the Bank Merger Act and First
Guaranty shall submit an application to the Louisiana Office of Financial
Institutions ("OFI") relating to the transactions contemplated hereby;
(b) First Guaranty shall endeavor to have its Affiliates
execute a written agreement in substantially the form of Exhibit 9.7 hereto;
provided, however, that First Guaranty shall have no such obligation prior to
the receipt by the Board of Directors of First Guaranty of the Fairness Opinion;
and
(c) First Guaranty shall endeavor to have each of the
directors of First Guaranty execute a Non-Competition Agreement in substantially
the form of Exhibit 10(d) hereto; provided, however, that First Guaranty shall
have no such obligation prior to the receipt by the Board of Directors of First
Guaranty of the Fairness Opinion.
11. Confidentiality; Hold Harmless; Restriction on Acquisitions.
11.1. Confidentiality. For a period of five years after the
date hereof, the parties hereto acknowledge that each of them or their
representatives or agents has engaged in, and may continue to engage in, certain
due diligence reviews and examinations with respect to the other and that, in
the course of such reviews and examination, has received or may receive in the
future confidential or proprietary information. Hibernia and First Guaranty
agree, on behalf of themselves, their respective officers, directors, employees,
representatives and agents, that they will not use any information obtained
pursuant to due diligence investigations for any purpose unrelated to the
consummation of the transactions contemplated by this Agreement, and, if the
Merger is not consummated, will hold all such information and documents in
confidence unless and until such time as such information or documents otherwise
become publicly available or as it is advised by counsel that any such
information or document is required by law to be disclosed, in which event the
party required to make such disclosure shall advise and consult with the other
party reasonably in advance of such disclosure regarding the information
proposed to be disclosed. In the event of the termination of this Agreement,
Hibernia and First Guaranty shall, promptly upon request by the other party,
either destroy or return any documents so obtained.
11.2. Hold Harmless. Hibernia will indemnify and hold harmless
First Guaranty, each of its directors and officers and each person, if any, who
controls First Guaranty within the meaning of the 1933 Act against any losses,
claims, damages or liabilities, joint, several or solidary, to which they or any
of them may become subject, under the 1933 Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement, or in any amendment or
supplement thereto, or arising out of or based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse each
such person for any legal or other expenses reasonably incurred by such person
in connection with investigating or defending any such action or claim;
provided, however, that Hibernia shall not be liable in any such case to the
extent that any such loss, claim, damage or liability (or action in respect
thereof) arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in the Registration Statement or
any such amendment or supplement in reliance upon and in conformity with
information furnished to Hibernia by First Guaranty for use therein. Promptly
after receipt by an indemnified party hereunder of notice of the commencement of
any action, such indemnified party shall, if a claim in respect thereof is to be
made against Hibernia under this Section, notify Hibernia in writing of the
commencement thereof. In case any such action shall be brought against any
indemnified party and it shall notify Hibernia of the commencement thereof,
Hibernia shall be entitled to participate therein, and to the extent that it
shall wish, to assume the defense thereof, with counsel satisfactory to such
indemnified party, and, after notice from Hibernia to such indemnified party of
its election to so assume the defense thereof, Hibernia shall not be liable to
such indemnified party under this Section 11.2 for any legal expenses of other
counsel or any other expenses subsequently incurred by such indemnified party.
12. Conditions. The consummation of the Merger is conditioned upon:
12.1. Shareholder Approval; Dissenters. Approval of this
Agreement by the required vote of shareholders of First Guaranty and exercise
and perfection of dissenters' rights pursuant to 12 U.S.C. Section 215a by
holders of First Guaranty Common Stock holding in the aggregate no more than
8.9% of the First Guaranty Common Stock outstanding on the Closing Date.
12.2. OCC Approval and OFI Filing. Procurement by Hibernia of
the approval of the Comptroller of the Merger and any and all other transactions
contemplated hereby and filing of the appropriate applications and fees with the
OFI.
12.3. Other Approvals. Procurement of all other consents and
approvals and satisfaction of all other requirements prescribed by law that are
necessary to the consummation of the transactions contemplated by this
Agreement.
12.4. No Restraining Action. No litigation or proceeding
initiated by any governmental authority shall be pending before any court or
agency that shall present a claim to restrain, prohibit or invalidate the
transactions contemplated hereby and neither Hibernia nor First Guaranty shall
be prohibited by any order of any court or other governmental authority from
consummating the transactions provided for in this Agreement.
12.5. Opinion of Hibernia Counsel. First Guaranty and its
directors shall have received an opinion, dated the Closing Date, of counsel for
Hibernia, in substantially the form of Exhibit 12.5 hereto .
12.6. Opinion of First Guaranty Counsel. Hibernia, its
directors and its officers who sign the Registration Statement shall have
received opinions, dated the Closing Date, of special merger counsel to First
Guaranty in substantially the form of Exhibit 12.6(a) and of local counsel to
First Guaranty in substantially the form of Exhibit 12.6(b).
12.7. Representations, Warranties and Agreements of First
Guaranty. Each of the representations, warranties, and agreements of First
Guaranty contained herein (including but not limited to those listed on Schedule
9.14 hereto) in all material respects shall be true on, or complied with by, the
Closing Date as if made on such date (or on the date when made in the case of
any representation or warranty which specifically relates to an earlier date)
and Hibernia shall have received a certificate signed by the Chairman of the
Board and the President of First Guaranty, dated the Closing Date, to such
effect; First Guaranty shall have furnished to Hibernia such other certificates
as Hibernia shall reasonably request in connection with the Closing (as defined
in Section 14 hereof), evidencing compliance with the terms hereof and its
status, business and financial condition. First Guaranty shall have furnished
Hibernia with such further documents or other materials as Hibernia shall have
reasonably requested in connection with the transactions contemplated hereby.
12.8. Representations, Warranties and Agreements of Hibernia.
Each of the representations, warranties and agreements of Hibernia contained
herein in all material respects shall be true on, or complied with by, the
Closing Date as if made on such date (or the date when made in the case of any
representation or warranty which specifically relates to an earlier date) and
First Guaranty shall have received a certificate signed by the Chief Executive
Officer and the Treasurer of Hibernia, dated the Closing Date, to such effect;
Hibernia shall have furnished to First Guaranty such other certificates as First
Guaranty shall reasonably request in connection with the Closing, evidencing
compliance with the terms hereof and its and HNB's respective statuses,
businesses and consolidated financial condition. Hibernia shall have furnished
First Guaranty with such further documents or other materials as First Guaranty
shall have reasonably requested in connection with the transactions contemplated
hereby.
12.9. Effective Registration Statement. The Registration
Statement shall have become effective and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the SEC
and First Guaranty shall have received a certificate to such effect from the
officer of Hibernia designated as its agent for service on the cover page of the
Registration Statement (which certificate may be to the knowledge of such
officer).
12.10. Fairness Opinion. First Guaranty shall have received a
letter from Chaffe & Associates, Inc. dated within five days of the scheduled
date of mailing of the Proxy Statement to its shareholders, and updated to
within five days of the Closing Date to the effect that the terms of the Merger
are fair to its shareholders from a financial point of view.
12.11. Tax Opinion. Hibernia shall have engaged, and Hibernia
and First Guaranty shall have received an opinion of, a nationally recognized
public accounting firm, which opinion shall be satisfactory in form and
substance to Hibernia and First Guaranty, to the effect that the Merger when
consummated in accordance with the terms hereof will constitute a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code, and that the
exchange of First Guaranty Common Stock to the extent exchanged for Hibernia
Common Stock will not give rise to gain or loss to the shareholders of First
Guaranty with respect to such exchange and that the Louisiana income tax
treatment to the shareholders of First Guaranty will be substantially the same
as the federal income tax treatment to the shareholders of First Guaranty.
12.12. Listing on New York Stock Exchange. The shares of
Hibernia Common Stock issuable to the holders of First Guaranty Common Stock in
the Merger shall have been approved for listing on the New York Stock Exchange,
Inc. on or before the Closing Date, subject to official notice of issuance.
12.13 Participations Purchased and Sold. First Guaranty shall
have sold the loans identified on Schedule 12.13 as "Loan participations to be
Sold by First Guaranty" and shall have purchased the loans identified on
Schedule 12.13 as "Loan participations to be Purchased by First Guaranty."
12.14. Assertion of Conditions. A failure to satisfy any of
the requirements set forth in Section 12.5, 12.8, 12.10 or 12.11 shall only
constitute conditions to consummation of the Merger if asserted by First
Guaranty and a failure to satisfy any of the requirements set forth in Section
12.6, 12.7 or 12.13 shall only constitute conditions to consummation of the
Merger if asserted by Hibernia.
13. Termination. This Agreement may be terminated prior to the Closing
Date, either before or after its approval by the shareholders of the parties
hereto, in any of the following events:
13.1. Mutual Consent. By the mutual consent of the parties
hereto, if the Board of Directors of each party so determines by vote of a
majority of the members of its entire Board.
13.2. Breach of Representation, Warranty or Covenant. By
either party hereto, in the event of a breach by the other party (a) of any
covenant or agreement contained herein or (b) of any representation or warranty
herein, which cannot be or is not cured within 60 days after written notice of
such breach is given to the party committing such breach.
13.3. Passage of Time; Inability to Satisfy Conditions. By
either party hereto, in the event that (i) the Merger is not consummated by
March 31, 1999, or (ii) any condition to Closing cannot be satisfied by March
31, 1999 and will not be waived by the party or parties entitled to waive it.
13.4. Failure to Obtain Regulatory Approval. By either party
hereto, at any time after the Comptroller has denied any application for any
approval or clearance required to be obtained as a condition to the consummation
of the Merger and the time period for all appeals or requests for
reconsideration thereof has run.
13.5. Failure to Obtain Shareholder Approval. By either party
hereto, if the Merger is not approved by the required vote of shareholders of
First Guaranty.
13.6. Dissenters. By Hibernia, if holders of more than 8.9% of
the outstanding First Guaranty Common Stock exercise statutory rights of dissent
and appraisal pursuant to 12 U.S.C. Section 215a.
13.7. Material Adverse Change. By First Guaranty, if a
material adverse change as described in Section 8.7 of this Agreement occurs,
and by Hibernia, if a material adverse change as described in Section 7.7 hereof
occurs, after the date hereof and prior to the Closing.
13.8. Use of Pooling-of-Interests Accounting Treatment. By
Hibernia, in the event it shall determine that the facts and circumstances
surrounding the Merger prohibit or materially jeopardize the treatment of the
Merger as a pooling-of-interests for accounting purposes.
14. Closing and Effective Date. The closing of the Merger (the
"Closing") shall take place at the office of Hibernia at 313 Carondelet Street,
New Orleans, Louisiana, at 11:00 a.m. local time, or at such other place or time
as shall be mutually agreeable to the parties hereto, on the first business day
occurring after the last to occur of: (i) the last day of the fiscal quarter
following the date that falls 30 days after the date of the order of the
Comptroller approving the Merger of First Guaranty with and into HNB pursuant to
the Bank Merger Act; (ii) the last day of the fiscal quarter following the date
that falls 5 days after the date on which the last meeting of shareholders
called to approve this Agreement is held; or (iii) such other date chosen by the
parties (the date and time of the Closing being referred to herein as the
"Closing Date"). Immediately upon consummation of the Closing, or on such other
later date as the parties hereto may agree, the Merger Agreement shall be
certified, executed, acknowledged and delivered to the Office of the Comptroller
for filing pursuant to and in accordance with the provisions of the Bank Merger
Act. The Merger shall become effective as of the date and time of issuance by
the Office of the Comptroller of a certificate of merger relating to the Merger
(such date and time being referred to herein as the "Effective Date").
15. Survival and Termination of Representations, Warranties and
Covenants.
15.1. Except as otherwise provided in this Section 15, the
representations, warranties and covenants contained in this Agreement shall
terminate as of the earlier of the Effective Date or the termination of this
Agreement. Upon termination of such representations, warranties and covenants,
such provisions shall be of no further force or effect, and no party hereto
shall have any legal right to redress, whether for breach of contract or
otherwise, as a result of a breach of any such provision.
15.2. The provisions and agreements set forth in Sections 3,
5, 9.11, 9.12 and 11 and the last sentence of Section 8.3 hereof shall survive
the Closing, if the Closing occurs, for the benefit of the shareholders,
directors and officers of First Guaranty who are the intended beneficiaries of
such provisions.
15.3. The provisions of Section 11 and liabilities for a
breach of the provisions of Sections 9.2 or 9.11 shall survive the termination
of this Agreement if this Agreement terminates without the Closing or the Merger
having occurred, in which event liability for a breach of Section 9.2 or Section
9.11 shall survive the termination of the Agreement for a period of 180 days
following the date on which the Agreement terminates. Nevertheless, no party to
this Agreement shall have a legal right to redress or cause of action for a
breach of Section 9.2 except in those circumstances in which such breach
directly resulted in the termination of the Agreement.
15.4. In consideration of the mutual benefits and agreements
contained in this Agreement, each of the parties hereto, on behalf of itself and
its successors and assigns, hereby irrevocably waives any right or cause of
action which otherwise would survive in the absence of this Section 15.
16. Amendment; Waivers. To the extent permitted under applicable law,
prior to the Closing Date any provision of this Agreement may be amended or
modified at any time, either before or after its approval by the shareholders of
the parties hereto, (i) by an agreement in writing among the parties hereto
approved by their respective Boards of Directors and executed in the same manner
as this Agreement, and (ii) as provided in Section 12:112 of the LBCL. Except
with respect to any required shareholder or regulatory approval, each party
hereto, by written instrument signed by a duly authorized officer of such party,
may at any time (whether before or after approval of this Agreement by the
shareholders of Hibernia or First Guaranty) extend the time for the performance
of any of the obligations or other acts of the other party hereto and may waive
(i) any inaccuracies of the other party in the representations or warranties
contained in this agreement or any document delivered pursuant hereto, (ii)
compliance with any of the covenants, undertakings, or agreements of the other
party, or satisfaction of any of the conditions precedent to its obligations,
contained herein or (iii) the performance by the other party of any of its
obligations set out herein or therein; provided that no such waiver executed
after approval of this Agreement by the shareholders of Hibernia or First
Guaranty shall change the number of shares of Hibernia Common Stock into which
shares of First Guaranty Common Stock will be converted by the Merger.
17. Execution in Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to constitute an original. Each such
counterpart shall become effective when one counterpart has been signed by each
party hereto.
18. Governing Law. This Agreement shall be governed by, and interpreted
in accordance with, the laws of the State of Louisiana applicable to agreements
made and entirely to be performed within such State, except as federal law may
be applicable.
19. Expenses. Each party hereto will bear all expenses incurred by it
in connection with this Agreement and the transactions contemplated hereby,
including the fees, expenses and disbursements of its counsel and auditors,
provided that printing expenses shall be borne by Hibernia.
20. No Assignment. Prior to the Effective Date, neither party hereto
may assign any of its rights or obligations under this Agreement to any other
person without the prior written consent of the other party hereto, including
any transfer or assignment by operation of law.
21. Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally
or sent by registered or certified mail, postage prepaid, to the Chief Executive
Officer of each party hereto at the address of such party set forth in the
preamble to this Agreement and shall be deemed to have been given as of the date
so personally delivered or mailed. A copy of all notices or other communications
directed to Hibernia shall be sent to:
HNB
313 Carondelet Street
New Orleans, Louisiana 70130
Attention: Corporate Law Division
and a copy of all notices or other communications directed to First Guaranty
shall be sent to:
First Guaranty
400 East Thomas Street
Hammond, Louisiana 70401-3320
Attention: Chief Executive Officer
with a copy to:
Correro Fishman Haygood Phelps Weiss
Walmsley & Casteix, L.L.P.
201 St. Charles Avenue
46th Floor
New Orleans, Louisiana 70170
Attention: Paul M. Haygood, Esq.
22. Headings. The headings in this Agreement are inserted for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement.
23. Entire Agreement. This Agreement and the Schedules and Exhibits
hereto supersede any and all oral or written agreements and understandings
heretofore made relating to the subject matter hereof and contain the entire
agreement of the parties relating to the subject matter hereof. The terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the parties hereto, and their respective successors. Nothing in this Agreement
or in the Merger Agreement is intended to or shall be construed to confer upon
or to give any person other than the parties hereto any rights, remedies,
obligation or liabilities under or by reason of this Agreement except as
expressly provided herein.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed in counterparts by their duly authorized officers and their
corporate seals to be hereunto affixed, all as of the day and year first above
written.
Hibernia Corporation
/s/ Stephen A. Hansel
Stephen A. Hansel
President and Chief Executive Officer
Attest:
/s/ Patricia C. Meringer
Patricia C. Meringer
Secretary
Hibernia National Bank
/s/ Stephen A. Hansel
Stephen A. Hansel
President and Chief Executive Officer
Attest:
/s/ Patricia C. Meringer
Patricia C. Meringer
Secretary
First Guaranty Bank
By: /s/ Marshall T. Reynolds
Marshall T. Reynolds
Chairman of the Board
Attest:
/s/ R. Collins Bonicard
Secretary
<PAGE>
APPENDIX B
SETTLEMENT AGREEMENT
AGREEMENT dated and effective as of December 30, 1998 (this
"Agreement"), adopted and made between and among First Guaranty Bank ("FGB"),
Hibernia National Bank ("HNB"), Hibernia Corporation ("HC") and Marshall T.
Reynolds ("MTR").
Whereas, FGB, HNB and HC entered into an Agreement and Plan
of Merger dated as of July 30, 1998(the "APM"); and
Whereas, certain disagreements have developed between HNB and
HC (collectively, "Hibernia") and FGB regarding the APM, and Hibernia contends
that FGB's actions have violated the terms of the APM; and
Whereas, Hibernia has filed a Petition for Preliminary and
Permanent Injunction and, Alternatively, Damages against FGB and MTR, No.
9803061, in the 21st Judicial District Court for the Parish of Tangipahoa, State
of Louisiana (the "Lawsuit"); and
Whereas, the parties wish to settle and resolve their
differences and have agreed to a procedure that will eliminate both now and in
the future the threat and expense of litigation and will result in the
submission of the APM to the shareholders of FGB for their final determination,
and foreclose the possibility of subsequent expensive and time-consuming
litigation over the APM, the outcome of the vote, and related matters.
Now, therefore, in consideration of the premises, the parties
agree as follows:
1. Engagement of Keefe. FGB agrees to retain Keefe Bruyette & Woods
("Keefe") to undertake to provide to the Board of Directors and shareholders of
FGB an opinion as to whether the consideration offered in the Merger is fair to
the common shareholders of FGB from a financial point of view (the "Second
Fairness Opinion"). Hibernia shall, upon written request from FGB, reimburse FGB
for all costs and expenses billed by Keefe, including without limitation any
indemnification obligations of FGB to Keefe, subject to Hibernia's approval of
the terms of the engagement agreement between FGB and Keefe, a copy of which is
attached hereto as Exhibit A and which Hibernia hereby approves. Hibernia's
indemnity reimbursement obligation specifically excludes any indemnity resulting
from claims or lawsuits brought, or funded by, FGB or any of its officers or
directors. Hibernia shall be furnished copies of Keefe's invoices reflecting
payment thereof by FGB.
2. Access to be Granted Keefe and NCC; Presentations to Board. FGB and
Hibernia shall provide Keefe full access, including access to their respective
books, records, and personnel, so as to enable Keefe promptly to determine
whether it can provide the Second Fairness Opinion and, if it determines that it
can provide the Second Fairness Opinion, so as to permit it to deliver the
Second Fairness Opinion. Subject to the receipt of a satisfactory confidential
agreement from National Capital Corporation ("NCC"), FGB shall provide NCC full
access, including access to its books, records, and personnel, so as to enable
NCC promptly to determine whether it can provide a fairness opinion and, if it
determines that it can provide a fairness opinion, so as to permit it to deliver
such fairness opinion. FGB will direct Chaffe & Associates, Inc. ("Chaffe") to
co-operate with Keefe and NCC. FGB will invite (1) Keefe and NCC to make a
presentation to its Board of Directors with respect to the fairness of the terms
of the Merger to the shareholders of FGB from a financial point of view, and (2)
Stephen Hansel to attend such meeting and address the Board of Directors of FGB
regarding the Merger. Hibernia will have its counsel deliver a revised draft of
the joint registration statement/proxy statement being prepared by Hibernia and
FGB (the "Proxy Statement") for use in connection with the special meeting of
FGB shareholders to consider the APM (the "Shareholder Meeting") to counsel for
FGB on or before December 28, 1998.
3. Second Fairness Opinion Rendered. If Keefe renders the Second
Fairness Opinion to the FGB Board of Directors by December 31, 1998 (the
"Opinion Date") (it being understood that Keefe will be deemed to have so
rendered the Second Fairness Opinion by such date if Keefe delivers to FGB on or
before such date an executed copy of such opinion dated on or before such date),
the Second Fairness Opinion, as well as any fairness opinions with respect to
the Merger delivered to FGB by NCC by the Opinion Date, as well as appropriate
descriptions thereof, shall be included in the Proxy Statement. The Proxy
Statement shall also include any fairness opinion delivered by Chaffe to the FGB
Board of Directors for use in the Proxy Statement (the "Chaffe Fairness
Opinion"), as well as appropriate description thereof, or, in the event Chaffe
does not deliver such a fairness opinion, appropriate description of that fact,
the reasons Chaffe is unable to do so, and any written opinion by Chaffe to the
FGB Board of Directors in that regard for use in the Proxy Statement. FGB waives
the condition to consummation of the Merger that FGB shall have received a
letter from Chaffe dated within five days of the scheduled date of mailing of
the Proxy Statement to its shareholders to the effect that the terms of the
Merger are fair to its shareholders from a financial point of view. FGB does not
waive the condition to consummation of the Merger requiring delivery of an
updating of such a letter within five days of the Closing Date or the Extended
Closing Date, as applicable; provided, however, that if Chaffe shall be
unwilling or unable so to update its fairness opinion, such condition to
consummation of the Merger shall be deemed satisfied if Keefe shall have
delivered to FGB a letter dated within five days of the Closing Date or the
Extended Closing Date, as applicable, to the effect that the consideration
offered in the Merger is fair to FGB's common shareholders, from a financial
point of view (the "Closing Fairness Opinion"). In the event that Chaffe shall
be unwilling or unable so to update its fairness opinion, the Closing Date or
Extended Closing Date, as applicable, shall be extended by five business days in
order to permit Keefe to determine whether it can deliver the Closing Fairness
Opinion and, if Keefe determines it can do so, in order to permit Keefe to
deliver the Closing Fairness Opinion.
4. Second Fairness Opinion Not Rendered. If Keefe fails to render the
Second Fairness Opinion by the Opinion Date other than because before that date
Keefe terminates its engagement before advising FGB in writing that it is unable
or unwilling to render such opinion, Hibernia and FGB will promptly terminate
the APM; Hibernia will promptly dismiss the Lawsuit with prejudice; and each of
the parties hereto agrees not to make a claim against or sue, or to sponsor any
claim or lawsuit against, any other party hereto, its directors, its employees,
its investment bankers, its shareholders, or its agents other than claims
arising under Section 11.1 of the APM.
5. Transaction if Shareholders Approve APM. If the FGB shareholders
approve the APM, Hibernia will promptly dismiss the Lawsuit with prejudice and
each of the parties hereto agrees not to make a claim against or sue, or to
sponsor any claim or lawsuit against, any other party hereto, its directors, its
employees, its investment bankers, its shareholders, or its agents other than
(i) claims against Hibernia arising out of Hibernia's indemnification and
expense advancement obligations under the APM or (ii) claims against MTR arising
out of Section 9.16 of the APM or (iii) claims against FGB or Hibernia for
breach of its respective obligation to close the Merger upon satisfaction or
waiver, as provided in the APM, of all conditions to such obligation.
6. Transactions if Shareholders Do Not Approve APM. If the FGB
shareholders fail to approve the APM by March 31, 1999, (or, in the event,
pursuant to Section 10 hereof, the Shareholder Meeting is set for a date
subsequent to March 31, 1999, if the FGB shareholders fail to approve the APM by
the Extended Shareholder Meeting Date (as hereinafter defined)) FGB may
terminate the APM, Hibernia will promptly dismiss the Lawsuit with prejudice,
and each of the parties hereto agrees not to make a claim against or sue, or to
sponsor any claim or lawsuit against, any other party hereto, its directors, its
employees, its investment bankers, its shareholders, or its agents other than
(a) claims against Hibernia arising out of Hibernia's obligations under Section
11.2 of the APM, or (b) claims arising under Section 11.1 of the APM or (c)
claims for violation of the federal proxy solicitation rules.
7. Covenants of MTR. If Keefe renders the Second Fairness Opinion by
the Opinion Date, and provided such Second Fairness Opinion has not been
withdrawn, MTR agrees personally, up to and through March 31, 1999 (or, in the
event pursuant to Section 10 hereof, the Shareholder Meeting is set for a date
subsequent to March 31, 1999, up to and through the Extended Shareholder Meeting
Date (as hereinafter defined)), (a) to vote at the Shareholder Meeting the
966,096 shares of FGB owned by him (being the only shares of FGB that MTR has
the right to vote, whether in a fiduciary capacity or otherwise) in favor of the
APM, (b) to recommend in the Proxy Statement that the other FGB shareholders
vote at the Shareholders Meeting in favor of the APM, and, (c) to execute the
Lock-Up and Non-Competition Agreement in the form annexed hereto as Exhibit B.
All other directors, shareholders, and officers of FGB shall be free to vote
their FGB shares (except to the extent such person shall have executed a Lock-Up
and Non-Competition Agreement), and all other directors and shareholders of FGB
shall be free to communicate their views with respect to the APM, as they see
fit.
8. FGB Letter to Directors. Promptly following the rendering of the
Second Fairness Opinion, FGB agrees to send to each of its directors the letter
attached hereto as Exhibit C. FGB and Hibernia agree that compliance by FGB with
this Section 8 and the fourth sentence of Section 2 of this Agreement satisfies
FGB's obligations under Section 10(c) of the APM.
9. Shareholders Lists. Within two business days of the execution of
this Agreement, FGB will furnish Hibernia with a list of FGB's shareholders of
record as of the effective date of this Agreement. Within two business days of
the date selected by the FGB Board of Directors as the record date for the
Shareholder Meeting in accordance with Section 10, FGB will furnish Hibernia
with a list of FGB's shareholders of record as of said record date and mailing
labels for all shareholders of record. FGB will furnish a copy of its
shareholders list only to shareholders or other persons entitled to such list by
applicable law until the earlier of (a) the Opinion Date (if the Second Fairness
Opinion is not received by such date) or (b) March 31, 1999 (or, in the event,
pursuant to Section 10 hereof, the Shareholder Meeting is set for a date
subsequent to March 31, 1999, the Extended Shareholder Meeting Date [as
hereinafter defined]).
10. Extension of Deadline Date. FGB and Hibernia agree to cooperate
with the objective of having FGB fix a record date for the Shareholder Meeting
as of a day within ten (10) days of the later to occur of the clearance of the
FGB proxy materials for the Shareholder Meeting by (a) the Securities and
Exchange Commission and (b) the Federal Deposit Insurance Corporation. FGB and
Hibernia also agree to cooperate with the objective of affording a fifty (50)
day solicitation period for proxies for use at the Shareholder Meeting plus, if
the FGB shareholders approve the APM by the required vote, an additional five
(5) business days after the Shareholders Meeting to close the Merger; provided,
however, that in no event shall (i) the Shareholder Meeting be required to be
held later than five (5) business days preceding the Extended Closing Date (as
hereinafter defined)(the date of such Shareholder Meeting held after March 31,
1999 being sometimes referred to herein as the "Extended Shareholder Meeting
Date") or (ii) the Closing Date be required to occur later than the Extended
Closing Date (as hereinafter defined). To the extent providing such fifty day
solicitation period plus, if the FGB shareholders approve the APM by the
required vote, an additional five (5) business days after the date of the
Shareholder Meeting to close the Merger would cause the Closing Date to occur
after March 31, 1999 (a "post-March 31, 1999 Closing Date"), the references in
Section 13.3 of the APM to "March 31, 1999" are modified to push back such March
31, 1999 date by the number of days that such post-March 31, 1999 Closing Date
is later than March 31, 1999 but not to a date later than May 31, 1999 (the
"Extended Closing Date"). If the FGB shareholders approve the APM by the
required vote, the closing of the Merger shall take place at the office of
Hibernia at 313 Carondelet Street, New Orleans, Louisiana at a time and on a
date selected by Hibernia by written notice to FGB within five (5) business days
after the Shareholder Meeting, provided that such date selected by Hibernia
occurs on or before the Extended Closing Date. The provisions of this Section 10
of this Agreement shall supercede the provisions in the first sentence of
Section 14 of the APM.
11. For purposes of this Agreement, "sponsor" has the following
exclusive meaning: to fund, transfer any rights to make a claim or to sue, or
derive any economic benefit from.
12. Unless otherwise defined herein, defined terms used herein shall
have the same meaning as specified in the APM.
13. Except as specifically modified herein, the APM shall remain in
full force and effect.
14. This Agreement may not be modified unless in writing executed by
all parties hereto.
15. This Agreement may be executed in counterparts, each of which
shall be deemed to constitute an original. Each such counterpart shall become
effective when one counterpart has been signed by each party hereto.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed in counterparts, all as of the day and year first
above written.
Hibernia Corporation
By: s/ Stephen A. Hansel
Stephen A. Hansel
President and Chief Executive Officer
Attest:
s/ Patricia C. Meringer
Patricia C. Meringer
Secretary
Hibernia National Bank
By: s/ Stephen A. Hansel
Stephen A. Hansel
President and Chief Executive Officer
Attest:
s/ Patricia C. Meringer
Patricia C. Meringer
Secretary
First Guaranty Bank
By: s/ Marshall T. Reynolds
Marshall T. Reynolds
Chairman of the Board
Attest:
________________________
Secretary
/s/ Marshall T. Reynolds
Marshall T. Reynolds
<PAGE>
APPENDIX C
FAIRNESS OPINION OF CHAFFE & ASSOCIATES, INC.
To be filed by Amendment
<PAGE>
APPENDIX D
FAIRNESS OPINION OF KEEFE, BRUYETTE & WOODS, INC.
To be filed by Amendment
<PAGE>
APPENDIX E
FAIRNESS OPINION OF NATIONAL CAPITAL CORPORATION
To be filed by Amendment
<PAGE>
APPENDIX F
CERTAIN PROVISIONS OF FEDERAL LAW
AND STATE LAW RELATING TO
THE RIGHTS OF DISSENTING SHAREHOLDERS
Section 215a Merger of National Banks
or State Banks into National Banks
Dissenting Shareholders
If a merger shall be voted for at the called meetings by the necessary
majorities of the shareholders of each association or State bank participating
in the plan of merger, and thereafter the merger shall be approved by the
Comptroller, any shareholder or any association or State bank to be merged into
the receiving association who has voted against such merger at the meeting of
the association or bank of which he is a stockholder, or has given notice in
writing at or prior to such meeting to the presiding officer that he dissents
from the plan of merger, shall be entitled to receive the value of the shares so
held by him when such merger shall be approved by the Comptroller upon written
request made to the receiving association at any time before thirty days after
the date of completion of the merger, accompanied by the surrender of his stock
certificates.
Valuation of shares
The value of the shares of any dissenting shareholder shall be
ascertained, as of the effective date of the merger, by an appraisal made by a
committee of three persons, composed of (1) one selected by the vote of the
holders of the majority of the stock, the owners of which are entitled to
payment in cash; (2) one selected by the directors of the receiving association;
and (3) one selected by the two so selected. The valuation agreed upon by any
two of the three appraisers shall govern. If the value so fixed shall not be
satisfactory to any dissenting shareholder who has requested payment, that
shareholder may, within five days after being notified of the appraised value of
his shares, appeal to the Comptroller, who shall cause a reappraisal to be made
which shall be final and binding as to the value of the shares of the appellant.
Application to shareholders of merging associations:
appraisal by Comptroller; expenses of receiving association;
sale and resale of shares; State appraisal and merger law
If, within ninety days from the date of completion of the merger, for
any reason one or more of the appraisers is not selected as herein provided, or
the appraisers fail to determine the value of such shares, the Comptroller shall
upon written request of any interested party cause an appraisal to be made which
shall be final and binding on all parties. The expenses of the Comptroller in
making the reappraisal or the appraisal, as the case may be, shall be paid by
the receiving association. The value of the shares ascertained shall be promptly
paid to the dissenting shareholders by the receiving association. The shares of
stock of the receiving association which would have been delivered to such
dissenting shareholders had they not requested payment shall be sold by the
receiving association at an advertised public auction, and the receiving
association shall have the right to purchase any of such shares at such public
auction, if it is the highest bidder therefor, for the purpose of reselling such
shares within thirty days thereafter to such person or persons and at such price
not less than par as its board of directors by resolution may determine. If the
shares are sold at public auction at a price greater than the amount paid to the
dissenting shareholders, the excess in such sale price shall be paid to such
dissenting shareholders. The appraisal of such shares of stock in any State bank
shall be determined in the manner prescribed by the law of the State in such
cases, rather than as provided in this section, if such provision is made in the
State law; and no such merger shall be in contravention of the law of the State
under which such bank is incorporated. The provisions of this subsection shall
apply only to shareholders of (and stock owned by them in) a bank or association
being merged into the receiving association.
Section 376 Rights of a Stockholder
Dissenting from Certain Actions
C. (3) Each such stockholder may, within twenty days after the mailing
of such notice [by the bank surviving the merger] to him but not thereafter,
file with the bank a demand in writing for the fair cash value of his shares as
of the day before such vote was taken, provided that he state in such demand the
value demanded and a post office address to which the reply of the bank may be
sent and at the same time deposit in escrow in a bank or trust company located
in the parish of the domicile of the bank the certificates representing his
shares, duly endorsed and transferred to the escrow bank upon the sole condition
that said certificates shall be delivered to the bank upon payment of the value
of the shares determined in accordance with the provisions of this Section. With
his demand, the stockholder shall deliver to the bank the written
acknowledgement of such escrow bank or trust company with which such
certificates have been deposited that it so holds his certificates of stock.
(4) Unless the objection, demand, and acknowledgement
aforesaid be made and delivered by the stockholder within the period described
in this Subsection, he shall conclusively be presumed to have acquiesced in the
action proposed or taken.
D. If the bank does not agree to the value so stated and demanded or
does not agree that a payment is due, it shall, within twenty days after the
receipt of such demand and acknowledgement, notify in writing the stockholder at
the designated post office address of its disagreement and shall state in such
notice the value it will agree to pay if any payment should be held to be due;
otherwise, it shall be liable for and shall pay to the dissatisfied stockholder
the value demanded by him for his shares.
E. (1) In case of disagreement as to such fair cash value or as to
whether any payment is due after compliance by the parties with the provisions
of Subsections C and D of this Section, the dissatisfied stockholder within
sixty days after receipt of notice in writing of the bank's disagreement but not
thereafter may file suit against the bank or the merged or consolidated bank, as
the case may be, in the district court of the parish in which the bank or the
merged or consolidated bank, as the case may be, is domiciled praying the court
to fix and decree the fair cash value of the dissatisfied stockholder's shares
as of the day before the action complained of was taken, and the court shall, on
such evidence as may be adduced in relation thereto, determine summarily whether
any payment is due and, if so, such cash value, and render judgment accordingly.
(2) Any stockholder entitled to file such a suit may, within
such sixty-day period but not thereafter, intervene as a plaintiff in such a
suit filed by another stockholder and recover therein judgment against the bank
for the fair cash value of his shares. No order or decree shall be made by the
court staying the proposed action, and any such action may be carried to
completion notwithstanding any such suit.
(3) Failure of the stockholder to bring suit or to intervene
in such suit within sixty days after receipt of notice of disagreement by the
bank shall conclusively bind the stockholder:
(a) By the bank's statement that no payment is due; or
(b) If the bank does not contend that no payment is due,
to accept the value of his shares as fixed by the
bank in its notice of disagreement.
F. When the fair value of the shares has been agreed upon between the
stockholder and the bank, or when the bank has become liable for the value
demanded by the stockholder because of failure to give notice of disagreement
and of the value it will pay, or when the stockholder has become bound to accept
the value the bank agrees is due because of his failure to bring suit within
sixty days after receipt of notice of the bank's disagreement, the action of the
stockholder to recover such value must be brought within five years from the
date the value was agreed upon or the liability of the bank became fixed.
G. If the bank or the merged or consolidated bank, as the case may be,
shall, in its notice of disagreement, have offered to pay the dissatisfied
stockholder on demand an amount in cash deemed by it to be fair cash value of
his shares, and if, on the institution of a suit by the dissatisfied stockholder
claiming an amount in excess of the amount offered, the bank or the merged or
consolidated bank, as the case may be, shall deposit in the registry of the
court, there to remain until the final determination of the cause, the amount so
offered; then, if the amount finally awarded such stockholder, exclusive of
interest and costs, be more than the amount offered and deposited as aforesaid,
the costs of the proceeding shall be taxed against the bank or the merged or
consolidated bank, as the case may be, and judicial interest may be awarded
against such bank only on the amount of the award in excess of the amount
deposited in the registry of the court; otherwise, the costs of the proceeding
shall be taxed against such stockholder.
H. Upon filing a demand for the value of his shares, the stockholder
shall cease to have any of the rights of a stockholder except the rights
accorded by this Section. Such a demand may be withdrawn by the stockholder at
any time before the bank gives notice of disagreement as provided in Subsection
D of this Section. After such notice of disagreement is given, withdrawal of a
notice of election shall require the written consent of the bank. If a notice of
election is withdrawn, or the proposed corporate action is abandoned or
rescinded, or a court should determine that the stockholder is not entitled to
receive payment for his shares, or the stockholder should otherwise lose his
dissenters' rights:
(1) He shall not have the right to receive a payment for his
shares;
(2) His share certificates shall be returned to him and, on his
request, new certificates shall be issued to him in exchange
for the old ones endorsed to the bank; and
(3) He shall be reinstated to all his rights as a stockholder as
of the filing of his demand for value, including any
intervening preemptive rights and the right to payment of any
intervening dividend or other distribution, or, if any rights
have expired or any such dividend or distribution other than
in cash has been completed, in lieu thereof, at the election
of the bank he shall receive the fair value thereof in cash as
determined by the board as of the time of such expiration or
completion, but without prejudice otherwise to any proceeding
that may have been taken in the interim.
<PAGE>
APPENDIX G
TAX OPINION OF ERNST & YOUNG, LLP
(date)
Hibernia Corporation
313 Carondelet Street
New Orleans, Louisiana 70130
First Guaranty Bank
400 East Thomas Street
Hammond, Louisiana 70401-3320
Dear Sir or Madam:
This letter is in response to your request that we provide you with our opinion
concerning certain federal income tax consequences which would arise from
consummation of the Proposed Merger of First Guaranty Bank ("First Guaranty")
with and into Hibernia National Bank ("HNB"), a wholly owned subsidiary of
Hibernia Corporation ("Hibernia"). (Hereinafter, referred to as the "Proposed
Merger")
In rendering this opinion, we have relied upon the facts, summarized below, as
they have been presented to us orally by the management of Hibernia and verified
in: the Statements of Facts and Representations dated (date) provided by the
respective managements of First Guaranty, Hibernia, and HNB; the Agreement and
Plan of Merger made and entered into by and among First Guaranty, Hibernia, and
HNB as of July 30, 1998 (the "Agreement"); and the Registration Statement (Form
S-4), as declared effective by the Securities and Exchange Commission on (date)
containing the Proxy Statement - Prospectus of First Guaranty and Hibernia dated
(date) ("Prospectus"). (These are sometimes hereinafter referred to collectively
as "Documents.")
You have represented to us that the facts contained in the Documents provide an
accurate and complete description of the facts and circumstances concerning the
Proposed Merger. We have made no independent investigation of the factual
matters and circumstances and, therefore, have relied upon the facts and
representations in the Documents for purposes of this letter. Any changes to the
facts or Documents may affect the conclusions stated herein.
We understand that reference to Ernst & Young LLP and our opinion is included in
the Prospectus relating to the issuance of Hibernia Common Stock in connection
with the Proposed Merger and the special meeting of the First Guaranty
shareholders with respect thereto. We consent to such reference in the
Prospectus under the captions "Summary," "Proposed Merger; Conditions to the
Merger; Waiver" and "--Material Tax Consequences." We also understand that the
form of this letter is included as an appendix to the Form S-4 Registration
Statement and the Prospectus. We consent to such inclusion.
STATEMENT OF FACTS
First Guaranty is a Louisiana banking corporation duly organized and existing
under the laws of the State of Louisiana, engaged principally in the banking
business. The authorized capital stock of First Guaranty consists solely of
100,000,000 shares of common stock of the par value $1.00 per share ("$1 par
value Common Stock") and 600,000 shares of common stock of the par value of
$5.00 each ("$5 par value Common Stock") (collectively, "First Guaranty Common
Stock") and 100,000 shares of preferred stock, par value $1,000, of which 5,000
shares constitute a separate series of preferred stock designated as the
Convertible Preferred Stock, Series A (the "Series A Preferred Stock") and 5,000
shares constitute a separate series of preferred stock designated as the
Preferred Stock, Series B (the "Series B Preferred Stock") (the Series A
Preferred Stock and the Series B Preferred Stock are collectively referred to as
the "First Guaranty Preferred Stock") (the remaining 90,000 shares of preferred
stock have not been designated). (The First Guaranty Common Stock and the First
Guaranty Preferred Stock are collectively referred to as the "First Guaranty
Stock.") As of December 31, 1998, 2,573,351 shares of the $1 par value Common
Stock and 483,290 shares of $5 par value Common Stock were issued and
outstanding, and no shares of First Guaranty Common Stock were held in First
Guaranty's treasury. As of December 31, 1998, 1,000 shares of Series A Preferred
Stock were issued and had been previously redeemed, and no shares of Series A
Preferred Stock were outstanding, and 2,000 shares of Series B Preferred Stock
had been issued and were outstanding. The shares of First Guaranty Common Stock
and First Guaranty Preferred Stock are held by approximately 940 shareholders.
There are no options, warrants, subordinated rights or other rights to purchase
either First Guaranty Common Stock or First Guaranty Preferred Stock outstanding
as of the date hereof.
Hibernia is a bank holding company organized and existing under the laws of the
State of Louisiana. The presently authorized capital stock of Hibernia is
400,000,000 shares, consisting of 100,000,000 shares of preferred stock, no par
value, and 300,000,000 shares of Class A voting common stock, no par value (the
Class A voting common stock being referred to hereinafter as "Hibernia Common
Stock"). As of December 31, 1998, 2,000,000 shares of Hibernia's preferred stock
were issued and outstanding, 156,400,398 shares of Hibernia Common Stock were
issued and outstanding, and no shares of Hibernia Common Stock were held in
Hibernia's treasury. As of December 31, 1998, Hibernia has the following
existing options, warrants, calls or commitments obligating Hibernia to issue
shares of its capital stock or any other security of which it is or will be the
issuer: Hibernia has options covering 1,229,500 shares of Hibernia Common Stock
outstanding as of December 31, 1998 under its 1987 Stock Option Plan; 8,126,316
(as adjusted) shares of Hibernia Common Stock for issuance under its Long-Term
Incentive Plan, pursuant to which options covering 7,078,747 shares of Hibernia
Common Stock were outstanding as of December 31, 1998; 912,500 shares of
Hibernia Common Stock for issuance under its 1993 Directors' Stock Option Plan,
pursuant to which options covering 335,000 shares of Hibernia Common Stock are
outstanding as of December 31, 1998; 24 shares of Hibernia Common Stock are
available for issuance pursuant to Hibernia's Dividend Reinvestment and Stock
Purchase Plan; and warrants covering 213,176 shares of Hibernia Common Stock are
outstanding. A transaction was consummated on March 8, 1999 in which 3,450,000
shares of Hibernia Common Stock were issued.
HNB is a nationally chartered bank engaged principally in the banking business
in the state of Louisiana. HNB is a wholly owned subsidiary of Hibernia.
BUSINESS PURPOSE
The management of Hibernia has represented to us that Hibernia desires to
consummate the Proposed Merger in order to improve its presence in the Louisiana
market. As discussed in the Prospectus under the caption, "Merger-Background of
and Reasons for Merger," the First Guaranty Board of Directors believes the
shareholders of First Guaranty will benefit from being part of a larger banking
entity, the stock of which is publicly traded.
PROPOSED TRANSACTIONS
In accordance with the above-stated business purpose, the following transactions
have been proposed:
1. After all necessary regulatory and shareholder approvals have been granted,
there will be a merger (i.e., the Proposed Merger) of First Guaranty with
and into HNB in accordance with the provisions of Bank Merger Act, 12
U.S.C. Sections 1828 et. seq. and 12 U.S.C. Section 215a ("Bank Merger
Act").
2. In the Proposed Merger, HNB will acquire all of the assets and assume all
of the liabilities of First Guaranty in exchange for Hibernia Common Stock
and cash. As a result of the Proposed Merger, each share of the issued and
outstanding First Guaranty Common Stock shall be converted into and become
the number of shares of Hibernia Common Stock determined in accordance with
the exchange rate (the "Exchange Rate"). The Exchange Rate shall be 1.33
shares of Hibernia Common Stock for each share of First Guaranty Common
Stock.
3. As a result of the Proposed Merger, each share of issued and outstanding
First Guaranty Preferred Stock shall be automatically and without any
action on the part of the holder thereof, become and be converted into a
right to receive cash in the amount equal to $1,030 plus any accrued and
unpaid dividends thereon.
4. Holders of shares of First Guaranty Common Stock or First Guaranty
Preferred Stock outstanding immediately prior to the effective date of the
Proposed Merger shall cease to be, and shall have no rights as,
shareholders of First Guaranty after the Proposed Merger.
5. No fractional shares will be issued. Each holder of First Guaranty Common
Stock who would otherwise have been entitled to receive a fraction of a
share of Hibernia Common Stock shall receive in lieu thereof, cash (without
interest) in an amount equal to such fractional part of a share multiplied
by the average of the mean of the high and low prices of one share of
Hibernia Common Stock for the five business days preceding the last trading
day immediately prior to the Effective Date as reported in The Wall Street
Journal.
6. If the transaction is approved by shareholders holding less than 80 percent
of the shares of First Guaranty Common Stock, then following certain
statutory procedures, shareholders of First Guaranty Common Stock may
exercise dissenter's rights entitling them to receive in cash the value of
their respective First Guaranty Common Stock in lieu of receiving Hibernia
Common Stock in the Proposed Merger.
REPRESENTATIONS
For purposes of our evaluation, we have received from the respective managements
of First Guaranty, Hibernia and HNB, Statements of Facts and Representations,
dated (date), as set forth below. References to the "Code" are to the Internal
Revenue Code of 1986, as amended.
The following representations have been made in connection with the Proposed
Merger:
(a) The fair market value of Hibernia Common Stock to be received by each
shareholder of First Guaranty Common Stock will be approximately equal
to the fair market value of the First Guaranty Common Stock
surrendered in the exchange.
(b) The cash to be received by each shareholder of First Guaranty
Preferred Stock will be approximately equal to the fair market value
of the First Guaranty Preferred Stock surrendered in the exchange.
(c) Prior to and in connection with the plan of reorganization, neither
First Guaranty nor a related person (as defined in Treas. Reg. section
1.368-1(e)(3) determined without regard to Treas. Reg. section
1.368-1(e)(3)(i)(A)) redeemed or otherwise acquired stock having a
value of more than 50 percent of all of the stock of First Guaranty of
the same date, or made an extraordinary distribution with respect to
the stock of First Guaranty.
(d) Hibernia will issue stock to the shareholders of First Guaranty having
a value, as of the date of the transaction, of at least 50 percent of
all of the formerly outstanding stock of First Guaranty as of the same
date, taking into account any redemptions, acquisitions, or
extraordinary distributions made by First Guaranty. Neither Hibernia
nor a related person (as defined in Treas. Reg. section 1.368-1(e)(3))
has any plan or intention, in connection with the plan of
reorganization, to redeem or otherwise acquire stock of Hibernia
issued in the transaction.
(e) HNB will acquire at least 90 percent of the fair market value of the
net assets and at least 70 percent of the fair market value of the
gross assets held by First Guaranty immediately prior to the Proposed
Merger. For purposes of this representation, amounts paid by First
Guaranty to dissenters, First Guaranty assets used to pay its
reorganization expenses, and all redemptions and distributions (except
for regular, normal dividends) made by First Guaranty immediately
preceding the transfer, will be included as assets of First Guaranty
held immediately prior to the transaction.
(f) Prior to the transaction, Hibernia will be in control of HNB within
the meaning of Section 368(c) of the Code wherein "control" is defined
to mean the ownership of stock possessing at least 80 percent of the
total combined voting power of all classes of stock entitled to vote
and at least 80 percent of the total number of shares of all other
classes of the corporation.
(g) Following the transaction, HNB will not issue additional shares of its
Common Stock that would result in Hibernia losing control of HNB
within the meaning of Section 368(c) of the Code.
(h) Hibernia has no plan or intention to liquidate HNB; to merge HNB into
another corporation; to sell or otherwise dispose of the Common Stock
of HNB; or to cause HNB to sell or otherwise dispose of any of the
assets of First Guaranty acquired in the transaction, except for
dispositions made in the ordinary course of business. As Hibernia
consummates other mergers, it is likely that some or all of the merged
banks will be merged with and into HNB. At this time, the discussion
provided under the caption "Summary - Other Pending Transactions for
Hibernia" in the Prospectus provides a complete list of all pending
mergers that are covered by definitive agreements as of (date).
However, no Common Stock of HNB will be issued as consideration in any
of the pending mergers.
(i) The liabilities of First Guaranty assumed by HNB and the liabilities
to which the transferred assets of First Guaranty are subject were
incurred by First Guaranty in the ordinary course of its business.
(j) Following the transaction, HNB will continue the historic business of
First Guaranty or will use a significant portion of First Guaranty's
historic business assets in its business.
(k) Except for expenses relating to the registration of Hibernia Common
Stock and certain proxy printing and mailing expenses to be paid
solely by Hibernia, which are directly related to the Proposed Merger
in accordance with the guidelines established in Revenue Ruling 73-54,
1973-1 C.B. 187, Hibernia, HNB, First Guaranty and the shareholders of
First Guaranty will pay their respective expenses, if any, incurred in
connection with the transaction.
(l) There is no intercorporate indebtedness existing between Hibernia and
First Guaranty and their affiliates or between HNB and First Guaranty
that was issued, acquired, or will be settled at a discount.
(m) No two parties to the Proposed Merger are investment companies as
defined in Section 368(a)(2)(F)(iii) and (iv) of the Code.
(n) First Guaranty is not under the jurisdiction of a court in a Title 11
or similar case within the meaning of Section 368(a)(3)(A) of the
Code.
(o) The basis and fair market value of the assets of First Guaranty
transferred to HNB will each equal or exceed the sum of the
liabilities assumed by HNB, plus the amount of liabilities, if any, to
which the transferred assets are subject.
(p) The merger of First Guaranty into HNB will qualify as a statutory
merger under the Bank Merger Act.
(q) The payment of cash in lieu of fractional shares of Hibernia Common
Stock is solely for the purpose of avoiding the expense and
inconvenience to Hibernia of issuing fractional shares and does not
represent separately bargained for consideration. The total cash
consideration that will be paid in the transaction to the First
Guaranty Common Stock shareholders instead of issuing fractional
shares of Hibernia will not exceed one percent of the total
consideration that will be issued in the transaction to the First
Guaranty Common Stock shareholders in exchange for their shares of
First Guaranty Common Stock. The fractional share interests of each
holder of First Guaranty Common Stock will be aggregated, and no First
Guaranty Common Stock shareholder will receive cash in an amount equal
to or greater than the value of one full share of Hibernia Common
Stock for its First Guaranty Common Stock.
(r) None of the compensation received by any shareholder-employees of
First Guaranty or its affiliates will be separate consideration for,
or allocable to, any of their shares of First Guaranty Common Stock;
none of the shares of Hibernia Common Stock received by any
shareholder-employees will be separate consideration for, or allocable
to, any employment agreement; and the compensation paid to any
shareholder-employees will be for services actually rendered and will
be commensurate with amounts paid to third parties bargaining at
arm's-length for similar services.
(s) The shareholders of First Guaranty (immediately before the proposed
transaction) receiving shares of Hibernia Common Stock will not own
(immediately after the proposed transaction) more than 50 percent of
the fair market value of Hibernia Common Stock.
(t) The First Guaranty Preferred Stock does not meet the definition of
Section 306 stock as defined in Section 306(c) of the Code.
TECHNICAL ANALYSIS
Section 368(a)(1)(A) of the Code provides that a reorganization (a "Type A"
reorganization) includes a statutory merger or consolidation. Such a
reorganization can only be achieved by strict compliance with the applicable
corporation laws of the United States or a state or territory of the United
States. A statutory merger occurs wherein one party (the surviving corporation)
to the transaction absorbs the other party whose corporate existence ceases. It
has been represented by the management of Hibernia that the merger of First
Guaranty with and into HNB, wherein Hibernia Common Stock is to be exchanged for
First Guaranty Common Stock and Hibernia cash is to be exchanged for First
Guaranty Preferred Stock, is to occur as a statutory merger under applicable
state law.
Section 368(a)(2)(D) of the Code provides that the acquisition by one
corporation in exchange for stock of a corporation which is in control of the
acquiring corporation, of substantially all of the properties of another
corporation, shall not disqualify a transaction under Section 368(a)(1)(A) if
(i) no stock of the acquiring corporation is used in the transaction and (ii)
the transaction would have otherwise qualified as a Type A reorganization had
the merger been into the controlling corporation.
Revenue Procedure 77-37, 1977-2 C.B. 568 (Sec.3.01) provides that, for advance
ruling purposes, the "substantially all" requirement of Section 368(a)(2)(D) is
satisfied if there is a transfer of assets representing at least 90 percent of
the fair market value of the net assets and at least 70 percent of the fair
market value of the gross assets held by the transferor corporation immediately
prior to the transfer. Any payments to dissenters and any redemptions and
distributions (except for regular dividend distributions) made by the
corporation immediately preceding the transfer and which are a part of the
transaction will be considered as assets held by the corporation immediately
prior to the transfer. Additionally, the payment of expenses incurred in
connection with the Proposed Merger is taken into consideration in applying the
"substantially all" test.
In the Proposed Merger, it has been represented by the respective managements of
First Guaranty and HNB that HNB will acquire assets representing at least 90
percent of the fair market value of the net assets and 70 percent of the fair
market value of the gross assets of First Guaranty and that, for this purpose,
the fair market value of the net and gross assets of First Guaranty will be
determined before payment by First Guaranty of any expenses incurred by it in
connection with the Proposed Merger, before payment to any dissenters to the
Proposed Merger, and before any redemptions and distributions (except for
regular, normal dividends) made by First Guaranty immediately preceding the
transfer. Based upon the foregoing representations, the "substantially all"
requirement will be met in the Proposed Merger.
Additional Requirements
Sections 1.368-1(b) and 1.368-2(g) of the Income Tax Regulations (the
"Regulations") provide that the following additional requirements must be met
for a transaction to qualify as a reorganization within the meaning of Section
368 of the Code:
(i) "continuity of interest" must be present,
(ii) "continuity of business enterprise" must exist, and
(iii)the transaction must be undertaken for reasons pertaining to the
continuance of the business of a corporation which is a party to the
transaction.
Continuity of Interest
In general, the continuity of interest test requires the owners of the
reorganized entity to receive and retain a meaningful equity in the surviving
entity. See e.g., Pinellas Ice & Cold Storage Co. v. Comm'r, 287 U.S. 462
(1933); Cortland Specialty Company v. Comm'r, 60 F.2d 937 (2d Cir. 1932), cert.
denied, 288 U.S. 599 (1932); Helvering v. Minnesota Tea Co., 296 U.S. 378
(1935).
The Internal Revenue Service (the "Service") has issued final and temporary
regulations (T.D. 8760 and T.D. 8761) providing rules for satisfying the
continuity of interest requirement. These regulations substantially liberalize
the historic rules, generally providing that continuity of interest is satisfied
if a substantial part of the value of the proprietary interest in the target
corporation is preserved in the reorganization. Generally, continuity of
interest is not preserved to the extent that the acquiring corporation acquires
target stock for consideration other than acquiring stock, or if, in connection
with the plan of reorganization, the acquiring stock is redeemed (or purchased
by a related party). In addition, continuity of interest is not preserved to the
extent that, prior to and in connection with the plan of reorganization, the
target (or a related party) acquires the stock with consideration other than
stock of the target, or makes an extraordinary distribution with respect to the
stock. Generally, a related party includes any member of the same affiliated
group (without regard to the exceptions in section 1504(b)) as the acquiring
corporation, or any other corporation where the purchase of the acquiring stock
by such corporation would result in the purchase being a redemption under
section 304(a)(2). Sales by the target shareholders of stock of the acquirer
received in the transaction to unrelated third parties occurring before or after
a reorganization are disregarded.
Based upon our understanding of the facts presented to us orally and as set
forth in the Statements of Facts and Representations dated (date), the Proposed
Merger will satisfy the continuity of interest requirement. The management of
Hibernia has represented that all of the First Guaranty Common Stock outstanding
immediately prior to the Proposed Merger will be exchanged solely for stock of
Hibernia. Hibernia has represented further that except for the exchange of First
Guaranty Preferred Stock for cash (which represents less than 5 percent of the
value of all of the formerly outstanding First Guaranty Stock), neither Hibernia
nor a related person (as defined in Treas. Reg. Section 1.368-1(e)(3)) has any
plan or intention, in connection with the plan of reorganization, to (i) acquire
a proprietary interest in First Guaranty for consideration other than stock of
Hibernia, or (ii) redeem any of the stock issued in the transaction. In
addition, the management of First Guaranty has represented that neither First
Guaranty, nor a related person (as defined in Treas. Reg. Section 1.368-1(e)(3)
determined without regard to Treas. Reg. Section 1.368-1(e)(3)(i)(A)) has any
plan or intention, prior to and in connection with the plan of reorganization,
to redeem, acquire, or make an extraordinary distribution with respect to the
stock of First Guaranty.
Continuity of Business Enterprise
Section 1.368-1(b) of the Regulations also provides that a continuity of
business enterprise (as described in Section 1.368-1(d) of the Regulations) is a
requisite to a reorganization. Section 1.368-1(d) of the Regulations (and as
modified by T.D. 8760) provides that continuity of business enterprise requires
that the acquiring corporation either continue the acquired corporation's
historic business or use a significant portion of the acquired corporation's
historic assets in a business. The Proposed Merger will meet the continuity of
business enterprise test of Section 1.368-1(d) because, based upon the
representation of the management of HNB, HNB will continue the historic business
of First Guaranty or will use a significant portion of First Guaranty's historic
assets in a business.
Business Purpose
Section 1.368-2(g) of the Regulations provides that a reorganization must be
undertaken for reasons germane to the continuance of the business of a
corporation which is a party to the reorganization. As heretofore indicated in
the "Business Purpose" Section set forth above, there are substantial business
reasons for the Proposed Merger. Accordingly, the Proposed Merger satisfies the
business purpose requirement as set forth in the Regulations.
Other Statutory Provisions
Section 368(b) of the Code defines the term "a party to a reorganization" to
include a corporation resulting from a reorganization, and both corporations, in
the case of a reorganization resulting from the acquisition by one corporation
of stock or properties of another.
Section 361(a) of the Code provides that no gain or loss shall be recognized to
a transferor corporation which is a party to a reorganization on any exchange
pursuant to the plan of reorganization solely for stock or securities in another
corporation which is a party to the reorganization.
Section 1032 of the Code provides that no gain or loss shall be recognized to a
corporation on the receipt of money or other property in exchange for stock of
such corporation. Revenue Ruling 57-278, 1957-1 C.B. 124, provides that a
subsidiary will not recognize gain upon the exchange of its parent's stock for
property in connection with a tax-free reorganization. See also Treasury
Regulations (Treas. Regs.) Section 1.1032-2.
Section 354(a)(1) of the Code provides that no gain or loss shall be recognized
if stock or securities in a corporation which is a party to a reorganization
are, in pursuance of the plan of reorganization, exchanged solely for stock or
securities in such corporation or in another corporation which is a party to the
reorganization.
Section 356(a)(1) of the Code provides that if Section 354 would apply to an
exchange but for the fact that the property received in the exchange consists
not only of property permitted by Section 354 to be received without the
recognition of gain but also of other property or money, then the gain if any,
to the recipient will be recognized, but in an amount not in excess of the sum
of such money and the fair market value of such other property. For purposes of
Section 354, dividend arrearages constitute stock. See PLR 9236007. No loss from
the exchange or distribution will be recognized. Section 356(c) of the Code.
Section 356(a)(2) of the Code provides that if an exchange is described in
Section 356(a)(1) of the Code, but has the effect of the distribution of a
dividend, then the recipient of the other property will recognize ordinary
dividend income to the extent of his ratable share of the accumulated earnings
and profits of the acquired company. The remainder, if any, of the gain
recognized under Section 356(a)(1) of the Code will be treated as gain from the
exchange of property.
In Clark v. CIR, 489 US 726 (1989), the Supreme Court determined whether gain
recognized under Section 356 of the Code on the receipt of "boot" (i.e., other
property or money received in an exchange) should be treated as a dividend
distribution. In applying Section 302 of the Code to determine whether boot
payment had the effect of a dividend distribution, the Court stated that the
treatment of boot under Section 356(a)(2) should be determined "by examining the
effect of the transaction as a whole." Consequently, the Court tested whether
the boot payment had the effect of a dividend by comparing the interest that the
taxpayer actually received in the acquiring corporation with the interest that
taxpayer would have had if solely stock of the acquiring corporation had been
received. If that hypothetical reduction would have passed one of the tests
enumerated in Section 302(b) of the Code, taking into account attribution under
Section 318 of the Code, then exchange treatment would be available. See Revenue
Ruling 93-61, 1993-2 C.B. 118.
Cash received by shareholders of First Guaranty Preferred Stock who hold no
First Guaranty Common Stock, and by shareholders of First Guaranty Common Stock
who dissent, if any, will be treated as received in exchange for his or her
stock subject to the provisions and limitations of Section 302 of the Code. See
Treas. Reg. Sec. 1.354-1(d), Ex. (3). If, as a result of such distribution, a
shareholder owns no First Guaranty Common Stock either directly or indirectly
through the application of Section 318 of the Code, the redemption will be
treated as a complete termination of interest under Section 302(b)(3) of the
Code and such cash will be treated as a distribution in exchange for stock under
Section 302(a) of the Code.
Section 362(b) of the Code generally provides that if property is acquired by a
corporation in connection with the reorganization, then the basis shall be the
same as it would be in the hands of the transferor, increased by the amount of
gain recognized to the transferor on such transfer.
Section 1223(2) of the Code provides that in determining a taxpayer's holding
period for property, there shall be included the period for which such property
was held by another person, if such property has, for the purpose of determining
gain or loss from a sale or exchange, the same basis in whole or in part in such
taxpayer's hands as it would have had in the hands of such other person.
Section 381 of the Code applies to certain transactions, including those
transactions to which Section 361 of the Code applies, where there is a transfer
in connection with a reorganization described in Section 368(a)(1)(A) or in
Section 368(a)(1)(A) and Section 368(a)(2)(D) of the Code.
FEDERAL INCOME TAX CONSEQUENCES
Based solely upon the Statements of Facts and Representations, the Agreement,
and the Plan of Merger, it is our opinion that the following federal income tax
consequences will result:
In the merger of First Guaranty with and into HNB:
(1) Provided the proposed merger of First Guaranty with and into HNB
qualifies as a statutory merger under the Bank Merger Act, the
acquisition by HNB of substantially all of the assets of First
Guaranty solely in exchange for Hibernia Common Stock, cash for
shareholders of First Guaranty Preferred Stock, and the assumption by
HNB of the liabilities of First Guaranty, will qualify as a
reorganization under the provisions of Sections 368(a)(1)(A) and
368(a)(2)(D) of the Code. First Guaranty, Hibernia and HNB will each
be a party to a reorganization within the meaning of Section 368(b) of
the Code.
(2) No gain or loss will be recognized by First Guaranty upon the transfer
of its assets to HNB in exchange solely for Hibernia Common Stock,
cash for dissenters, if any, cash for First Guaranty Preferred Stock,
and the assumption by HNB of the liabilities of First Guaranty, since
any cash for dissenters will be distributed to the shareholders
(Sections 361(a), 361(b), and 357(a) of the Code).
(3) No gain or loss will be recognized by either Hibernia or HNB upon the
acquisition by HNB of substantially all of the assets of First
Guaranty in exchange for Hibernia Common Stock, cash, and the
assumption of First Guaranty's liabilities (Section 1032(a) of the
Code). (See Treas. Regs. Section 1.1032-2 and Rev. Rul. 57-278, 1957-1
C.B. 124.)
(4) The basis of the assets of First Guaranty acquired by HNB will be the
same in the hands of HNB as the basis of such assets in the hands of
First Guaranty immediately prior to the exchange (Section 362(b) of
the Code).
(5) The basis of the HNB Common Stock in the hands of Hibernia will be
increased by an amount equal to the basis of the First Guaranty assets
in the hands of HNB and decreased by the sum of the amount of the
liabilities of First Guaranty assumed by HNB and the amount of
liabilities to which the assets of First Guaranty are subject (Section
1.358-6(c)(1) of Treas. Regs.).
(6) The holding period of the assets of First Guaranty received by HNB
will, in each instance, include the period for which such assets were
held by First Guaranty (Section 1223(2) of the Code).
(7) No gain or loss will be recognized, with respect to the receipt of
Hibernia Common Stock, by the shareholders of First Guaranty Common
Stock who receive solely Hibernia Common Stock and cash for fractional
shares in exchange for their shares of First Guaranty Common Stock
(Section 354(a)(1) of the Code). With respect to the cash received in
lieu of fractional shares, see Item 14 below.
(8) The cash received by a dissenting shareholder of First Guaranty
Common Stock in exchange for his or her First Guaranty Common Stock
and by shareholders of First Guaranty Preferred Stock, who do not hold
any shares of First Guaranty Common Stock either directly or
indirectly through Section 318, in exchange for their shares of First
Guaranty Preferred Stock will be treated as having been received by
such shareholder as a distribution in redemption of his or her stock,
subject to the provisions and limitations of Section 302 of the Code.
If, as a result of such distribution, a shareholder owns no stock
either directly or through the application of Section 318(a) of the
Code, the redemption will be a complete termination of interest within
the meaning of Section 302(b)(3) of the Code and such cash will be
treated as a distribution in full payment in exchange for his or her
stock, as provided by Section 302(a) of the Code.
(9) The gain, if any, realized by the shareholders of First Guaranty
Preferred Stock who own both First Guaranty Preferred Stock and First
Guaranty Common Stock, and who do not dissent, upon the receipt of
cash in exchange for their shares of First Guaranty Preferred Stock
will be recognized, but in an amount not to exceed the amount of the
cash received by the shareholders (Section 356(a)(1) of the Code). If
the exchange has the effect of the distribution of a dividend
(determined with the application of Section 318 of the Code), then the
amount of the gain recognized that is not in excess of the First
Guaranty shareholder's ratable share of undistributed earnings and
profits will be treated as a dividend (Section 356(a)(2) of the Code).
The determination of whether the gain has the effect of the
distribution of a dividend will be made in accordance with the
principles of Clark v. CIR, 489 US 726 (1989) and such gain will
generally be treated as gain from the exchange of property if one of
the tests enumerated in Section 302(b) of the Code is satisfied
(Revenue Ruling 93-61, 1993-2 C.B. 118). No loss will be recognized on
the exchange pursuant to Section 356(c) of the Code.
(10) The basis of Hibernia Common Stock to be received by the shareholders
of First Guaranty Common Stock will be, in each instance, the same as
the basis of their stock surrendered in exchange therefore, decreased
by the amount of cash received, if any, and increased by the amount of
gain, if any, recognized in the exchange. (Section 358(a)(1) of the
Code).
(11) The holding period of Hibernia Common Stock to be received by
the shareholders of First Guaranty Common Stock in the transaction
will include in each instance, the period during which the First
Guaranty Common Stock surrendered in exchange therefor is held as a
capital asset on the date of the surrender (Section 1223(l) of the
Code).
(12) HNB will succeed to and take into account those tax attributes of
First Guaranty described in Section 381(c) of the Code (Section
381(a) of the Code and Section 1.381(a)-1 of the Regulations). These
items will be taken into account by HNB subject to the conditions and
limitations specified in Sections 381, 382, 383 and 384 of the Code
and Regulations thereunder.
(13) As provided by Section 381(c)(2) of the Code and Section 1.381(c)(2)-1
of the Regulations, HNB will succeed to and take into account the
earnings and profits, or deficit in earnings and profits, of First
Guaranty as of the date of transfer. Any deficit in the earnings and
profits of First Guaranty or HNB will be used only to offset the
earnings and profits accumulated after the date of transfer.
(14) The payment of cash in lieu of fractional share interests of
Hibernia Common Stock will be treated as if the fractional shares were
distributed as part of the exchange and then were redeemed by
Hibernia. These cash payments will be treated as distributions in
full payment in exchange for the stock redeemed, subject to the
provisions and limitations of Section 302(a) of the Code (Rev. Rul.
66-365, 1966-2 C.B. 116 and Rev. Proc. 77-41, 1977-2 C.B. 574).
(15) First Guaranty will close its taxable year as of the date of
the distribution or transfer. Hibernia and HNB will not close their
taxable years merely because of the Proposed Merger. (Section 381(b)
of the Code.)
STATE INCOME TAX CONSEQUENCES
(1) The Louisiana income tax treatment to the shareholders of First
Guaranty will be substantially the same as the federal income tax
treatment to the shareholders of First Guaranty.
SCOPE OF OPINION
The scope of this opinion is expressly limited to the federal income tax issues
specifically addressed in (1) through (15) in the section entitled "Federal
Income Tax Consequences" above and (1) in the section entitled "State Income Tax
Consequences" above. Specifically, our opinion has not been requested and none
is expressed with regard to the federal, foreign, state or local income tax
consequences for the shareholders of Hibernia or with regard to the foreign,
state or local income tax consequences (other than those enumerated in (1) above
of "State Income Tax Consequences") for the shareholders of First Guaranty and
HNB. We have made no determination nor expressed any opinion as to any
limitations, including those which may be imposed under Section 382, on the
availability of net operating loss carryovers (or built-in gains or losses), if
any, after the Proposed Merger, the application (if any) of the alternative
minimum tax to this transaction, nor the application of any consolidated return
or employee benefit issues which may arise as a result of the Proposed Merger
unless expressly stated above. Further, we have made no determination as whether
First Guaranty dividend distributions have been sufficient to eliminate any
undistributed personal holding company tax liability, if applicable. We have
made no determination nor expressed any opinion as to the fair market value of
any of the assets being transferred in the Proposed Merger nor the common shares
being exchanged in the Proposed Merger. Furthermore, our opinion has not been
requested and none is expressed with respect to any foreign, state or local tax
consequences to First Guaranty, Hibernia, and HNB.
Our opinion, as stated above, is based upon the analysis of the Code, the
Regulations thereunder, current case law, and published rulings. The foregoing
are subject to change, and such change may be retroactively effective. If so,
our views, as set forth above, may be affected and may not be relied upon.
Further, any variation or differences in the facts or representations recited
herein, for any reason, might affect our conclusions, perhaps in an adverse
manner, and make them inapplicable. In addition, we have undertaken no
obligation to update this opinion for changes in facts or law occurring
subsequent to the date hereof.
This letter represents our opinions as to the interpretation of existing law
and, accordingly, no assurance can be given that the Service or the courts will
agree with the above analysis.
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
The Louisiana Business Corporation Law ("LBCL") contains two provisions
that directly affect the liability of officers and directors of Louisiana
corporations to the corporations and shareholders whom they serve. Section 83
permits Louisiana corporations to indemnify officers and directors, as well as
certain other individuals who act on behalf of such corporations. Sections 92
and 92 set forth the liability of officers and directors of Louisiana
corporations.
Section 91 of the LBCL provides that officers and directors of
Louisiana corporations are fiduciaries with respect to the corporation and its
shareholders and requires that they discharge the duties of their positions as
such in good faith and with the diligence, care, judgment and skill which
ordinarily prudent men would exercise under similar circumstances in like
positions. Section 91 specifically provides that it is not intended to derogate
from any indemnification permitted under Section 83, discussed below.
Section 92 of the LBCL limits the liability of officers and directors
with respect to certain matters, as well as imposes personal liability for
certain actions, such as the knowing issuance of shares in violation of the
LBCL. Paragraph E of Section 92 permits a directors, in the performance of his
duties, to be fully protected from liability in relying in good faith on the
records of the corporation and upon such information, opinions, reports or
statements presented to the corporation, the board of directors, or any
committee of the board by any of the corporation's officers or employees, or by
any committee of the board of directors, or by any counsel, appraiser, engineer
or independent or certified public accountant selected with reasonable care by
the board of directors or any committee thereof or any officer having the
authority to make such a selection or by any other person as to matters the
directors reasonably believe are within such other person's professional or
expert competence and which person is selected with reasonable care by the board
of directors or any committee thereof or any officer having the authority to
make such selection.
Section 83 of the LBCL permits a Louisiana corporation to indemnify any
person who is or was a party or is threatened to be made a party to any action,
suit or proceeding by reason of the fact that he or she was a director, officer
employee or agent of the corporation, or was serving at the request of the
corporation in one of those capacities for another business. Such persons may be
indemnified against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such persons in
connection with any such action as long as the indemnified party acted in good
faith and in a manner he or she reasonably believed to be in, or not opposed to,
the best interests of the corporation. With respect to criminal actions or
proceedings, the indemnified person must not only have acted in good faith and
in a manner believed to be in or not opposed to the best interest of the
corporation; he or she must also not have had any reasonable cause to believe
that his or her conduct was unlawful.
The LBCL treats suits by or in the right of the corporation, or
derivative suits, differently from other legal actions. Indemnification is not
permitted in a derivative action for any expenses if the individual seeking
indemnification is adjudged liable for negligence or misconduct in the
performance of his or her duty to the corporation unless specifically ordered by
the court. Otherwise, officers and directors may be indemnified in derivative
actions only with respect to expenses (including attorneys' fees) actually and
reasonably incurred in connection with the defense or settlement of the action.
Indemnification of officers and directors may only be made by the
corporation if the corporation has specifically authorized indemnification after
determining that the applicable standard of conduct has been met. This
determination may be made (i) by the board of directors by a majority vote of a
quorum consisting of directors who were not parties to such action, suit or
proceedings, or (ii) if such a quorum is not obtainable or a quorum of
disinterested directors so directs, by independent legal counsel, or (iii) by
the shareholders.
Indemnification of officers and directors against reasonable expenses
is mandatory under Section 83 of the LBCL to the extent the officer or director
is successful on the merits or in the defense of any action or suit against him
giving rise to a claim of indemnification.
Louisiana corporations are permitted to advance the costs of defense to
officers and directors with respect to claim for which they may be indemnified
under Section 83 of the LBCL. In order to advance such costs, however, such
procedure must be approved by the board of directors by a majority of a quorum
consisting of disinterested directors. In addition, a corporation may only
advance defense costs if it has received an undertaking from the officer or
director to repay the amounts advanced unless it is ultimately determined that
he or she is entitled to be indemnified as otherwise authorized by Section 83.
Louisiana corporations are also specifically permitted to procure
insurance on behalf of officers and directors and former officers and directors
for actions taken in their capacities as such. Insurance coverage may be broader
than the limits of indemnification under Section 83. Also, the indemnification
provided for in Section 83 is not exclusive of any other rights to
indemnification, whether arising from contracts or otherwise.
Hibernia Corporation (the "Registrant") has adopted an indemnification
provision in its Articles of Incorporation that provides for indemnification of
officers and directors under the circumstances permitted by Louisiana law. The
Registrant's indemnification provision requires indemnification, except as
prohibited by law, of officers and directors of the Registrant or any of its
wholly-owned subsidiaries against expenses, judgments, fines and amounts paid in
settlement actually and reasonably incurred in connection with any action, suit
or proceeding, whether civil or criminal, administrative or investigative
(including any action by or in the right of the Registrant) by reason of the
fact that the person served as an officer or director of the Registrant or one
of its subsidiaries. Officers and directors may only be indemnified against
expenses in cases brought by the officer or director against the Registrant if
the action is a claim for indemnification, the officer or director prevails in
the action, or indemnification is included in any settlement or is awarded by
the court. The indemnification provision further requires the Registrant to
advance defense costs to officers and directors in such suits and proceedings
upon receipt of an undertaking to repay such expenses unless it is ultimately
determined that the officer or director is entitled to indemnification as
authorized by the Articles of Incorporation.
The Registrant's Articles of Incorporation further provide that no
director or officer of the Registrant will be personally liable to the
Registrant or its shareholders for monetary damages for breach of fiduciary duty
as an officer or director. This provision is limited to those circumstances in
which such a limitation of liability is permitted under applicable law and would
not be operative in any circumstances in which the law prohibits such a
limitation.
<PAGE>
Item 21. Exhibits and Financial Statement Schedules
(a) EXHIBITS
EXHIBIT DESCRIPTION
2 Merger Agreement and Plan of Merger (included as Appendix A to
the proxy statement/prospectus)
3.1 Exhibit 3.1 to the Quarterly Report on Form 10-Q for the fiscal
quarter 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 Registrant, as amended)
5 Opinion of Patricia C. Meringer,Esq.,regarding legality of shares
8 Opinion of Ernst & Young LLP, certified public accountants,
regarding certain tax matters (included as Appendix G to the
proxy statement/prospectus)
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
(Commission File No. 0-7220) is hereby incorporated by reference
(Deferred Compensation Plan for the 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)
10.38 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
(Non-Qualified 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 File 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 for
the fiscal year ended December 31, 1997 filed with the Commission
(Commission File 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 for
the fiscal year ended December 31, 1997 filed with the Commission
(Commission File No. 0-7220) is hereby incorporated by reference
(Employment Agreement between Randall A. Howard and Hibernia
Corporation)
13 Exhibit 13 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998 filed with the Commission
(Commission File No. 0-722)) is hereby incorporated by reference
(1998 Annual Report to Security Holders of Hibernia Corporation
21 Exhibit 21 to the Annual Report on Form 10-K of the Registrant
for the fiscal year ended December 31, 1998 filed with the
Commission (Commission File No. 0-7220) is hereby incorporated by
reference (Subsidiaries of the Registrant)
23(a) Consent of Patricia C. Meringer, Esq. (included with Exhibit 5)
23(b) (i) Consent of Hannis T. Bourgeois, LLP
(ii) Consent of PricewaterhouseCoopers, LLP
(iii) Consent of Ernst & Young, LLP
* (iv) Consent of Chaffe & Associates, Inc.
* (v) Consent of Keefe,Bruyette,Bruyette & Woods,Inc.
* (vi) Consent of National Capital Corporation
24 Powers of Attorney
99 Proxy of First Guaranty
* To be filed by amendment.
(b) FINANCIAL STATEMENT SCHEDULES
N/A
<PAGE>
Item 22. Undertakings.
The undersigned registrant hereby undertakes:
(i) to file, during any period in which offers or sales are being made
pursuant to this Registration Statement, a post-effective amendment to this
Registration Statement:
(a) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933.
(b) to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most
recent post-effective amendment hereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement; and
(c) to include any material information with respect to the plan
of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
(ii) that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment will be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time will be deemed to be the initial bona
fide offering thereof;
(iii) to remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering;
(iv) that, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report pursuant
to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement will be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time will be deemed to be the initial bona
fide offering thereof.
(v) that prior to any public re-offering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such re-offering prospectus
will contain the information called for by the applicable registration form with
respect to re-offerings by persons who may be deemed underwriters, in addition
to information called for by the other items of the applicable form;
(vi) that every prospectus (a) that is filed pursuant to the preceding
paragraph, or (b) that purports to meet the requirement of Section 10(a)(3) of
the Act and is used in connection with an offering of securities subject to Rule
415, will be fled as a part of an amendment to the registration statement and
will not be used until such amendment is effective and that, for purposes of
determining any liability under the Securities Act of 1933, each such
post-effective amendment will be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time will be deemed to be the initial bona fide offering thereof;
(vii) to respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of Form S-4
within one business day of receipt of such request and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request; and
(viii) to supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the registration statement when it became
effective.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New
Orleans, State of Louisiana, on March 23, 1999.
HIBERNIA CORPORATION
By: /s/ Patricia C. Meringer
Patricia C. Meringer
Corporate Counsel
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on March 23, 1999.
SIGNATURES TITLE
* Chairman of the Board
_____________________________
Robert H. Boh
*
_____________________________ President, Chief Executive Officer
Stephen A. Hansel and Director
* Chief Financial Officer
_____________________________
Marsha M. Gassan
* Chief Accounting Officer
_____________________________
Ron E. Samford, Jr.
* Director
_____________________________
J. Herbert Boydstun
* Director
_____________________________
E. R. Campbell
* Director
_____________________________
Richard W. Freeman, Jr.
* Director
_____________________________
Dick H. Hearin
* Director
_____________________________
Robert T. Holleman
* Director
_____________________________
Elton R. King
* Director
_____________________________
Sidney W. Lassen
* Director
_____________________________
Donald J. Nalty
* Director
_____________________________
Ray B. Nesbitt
* Director
_____________________________
William C. O'Malley
* Director
_____________________________
James R. Peltier
* Director
_____________________________
Robert R. Ratcliff
* Director
_____________________________
Janee M. Tucker
* Director
_____________________________
Virginia Eason Weinmann
* Director
_____________________________
Robert E. Zetzmann
* By: /s/ Patricia C. Meringer
Patricia C. Meringer
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
EXHIBIT SEQUENTIAL PAGE NUMBER
5(a) Opinion of Patricia C. Meringer, Esq.
23(a) Consent of Patricia C. Meringer,Esq.(included with Exhibit 5)
23(b) (i) Consent of Hannis T. Bourgeois, LLP
(ii) Consent of PricewaterhouseCoopers, LLP
(iii) Consent of Ernst & Young, LLP
24 Powers of Attorney
99 Form of Proxy of First Guaranty
<PAGE>
EXHIBIT 5(a)
March 23, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
I am Corporate Counsel of Hibernia Corporation (the "Company") and am
delivering this opinion in connection with the registration by the Company of
shares of Class A Common Stock (the "Shares") to be issued by the Company in a
proposed merger (the "Merger") between First Guaranty Bank ("First Guaranty")
and Hibernia National Bank, a wholly-owned subsidiary of the Company, in which
the shareholders of First Guaranty will receive the Shares in exchange for their
shares of common stock of First Guaranty, to which registration statement (the
"Registration Statement") this opinion is attached. The Shares will be reserved
for issuance upon the closing of the Merger. The shares will be issued to
shareholders of First Guaranty upon completion of the Merger pursuant to the
Registration Statement after it has been declared effective by the Securities
and Exchange Commission.
In furnishing this opinion, I have examined such documents and have
made such investigation of matters of fact and law as I have deemed necessary or
appropriate to provide a basis for the opinions set forth herein. In such
examination and investigation, I have assumed the genuineness of all signatures,
the legal capacity of natural persons, the authenticity of all documents
submitted as originals and the conformity to original documents of all documents
submitted as certified or photostatic copies.
In rendering this opinion, I do not express any opinion concerning any
law other than the law of the State of Louisiana and the federal law of the
United States, and I do not express any opinion, either implicitly or otherwise,
on any issue not expressly addressed below.
Based upon and limited by the foregoing, and based upon legal
considerations which I deem relevant and upon laws or regulations in effect as
of the date hereof, I am of the opinion that:
1. The Company has been duly incorporated and is validly existing
and in good standing under the laws of the State of Louisiana.
2. The Shares have been duly authorized and either are, or upon
issuance thereof pursuant to the terms of the offering
thereof, will be, validly issued, fully paid and
non-assessable.
I hereby expressly consent to the inclusion of this Opinion as an
exhibit to the Registration Statement and to the reference to this Opinion
therein.
<PAGE>
This Opinion is being furnished to you pursuant to the filing of the
Registration Statement and may not be relied upon by any other person or used
for any other purpose, except as provided for in the preceding paragraph.
Very truly yours,
/s/ Patricia C. Meringer
Patricia C. Meringer
Corporate Counsel
PCM/gbp
<PAGE>
EXHIBIT 23(b)(i)
Independent Auditor's Consent
We consent to the use of our report dated January 29, 1999 related to
the financial statements of First Guaranty as of and for the year ended December
31, 1998 and 1997 included herein and to the reference to our firm under the
heading "Experts" in this Registration Statement (Form S-4) and related
Prospectus of Hibernia Corporation for the registration of shares of its common
stock to be issued in connection with the proposed merger of First Guaranty with
and into Hibernia National Bank.
/S/ HANNIS T. BOURGEOIS, LLP
Hannis T. Bourgeois, LLP
Baton Rouge, Louisiana
March 31, 1999
<PAGE>
EXHIBIT 23(b)(ii)
Independent Auditor's Consent
We consent to the use of our report dated February 28, 1997 related to the
financial statements of First Guaranty as of and for the year ended December 31,
1996 included herein and to the reference to our firm under the heading
"Experts" in this Registration Statement (Form S-4) and related Prospectus of
Hibernia Corporation for the registration of shares of its common stock to be
issued in connection with the proposed merger of First Guaranty with and into
Hibernia National Bank.
/S/ PRICEWATERHOUSECOOPERS, LLP
PricewaterhouseCoopers, LLP
New Orleans, Louisiana
March 30, 1999
<PAGE>
EXHIBIT 23(b)(iii)
Independent Auditor's Consent
We consent to the reference to our firm under the caption "Experts" in
this Registration Statement (Form S-4) and related Prospectus of Hibernia
Corporation for the registration of 4,021,517 shares of its common stock to be
issued pursuant to the proposed merger of First Guaranty Bank with Hibernia
National Bank and to the incorporation by reference therein of our report dated
January 13, 1999, with respect to the consolidated financial statements of
Hibernia Corporation incorporated by reference in its Annual Report (Form 10-K)
for the year ended December 31, 1998, filed with the Securities and Exchange
Commission.
/S/ ERNST & YOUNG, LLP
Ernst & Young, LLP
New Orleans, Louisiana
March 30, 1999
<PAGE>
EXHIBIT 24
POWERS OF ATTORNEY
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Hibernia Corporation, a Louisiana corporation (the "Corporation"), does hereby
name, constitute and appoint Marsha M. Gassan, Patricia C. Meringer and Ron E.
Samford, Jr. and each of them (with full power to each of them to act alone),
his true and lawful agents and attorneys-in-fact, for him and on his behalf and
in his name, place and stead, in any and all capacities, to sign, execute,
acknowledge, deliver, and file (a) with the Securities and Exchange Commission
(or any other governmental or regulatory authority), a Registration Statement on
Form S-4 (or any other appropriate form) and any and all amendments (including
post-effective amendments) thereto, with any and all exhibits and any and all
other documents required to be filed with respect thereto or in connection
therewith, relating to the registration under the Securities Act of 1933 of
Common Stock of the corporation to be issued in the merger between the Hibernia
National Bank, a wholly-owned subsidiary of the Corporation, and First Guaranty
Bank ("First Guaranty") wherein the Corporation agrees to exchange shares of its
common stock for all of the outstanding shares of common stock of First Guaranty
and merger First Guaranty into Hibernia National Bank, authorized by resolutions
adopted by the Board of Directors on March 26, 1997 and September 15, 1998 and
(b) with the securities agencies or officials of various jurisdictions, all
applications, qualifications, registrations or exemptions relating to such
offering under the laws of any such jurisdiction, including any amendments
thereto or other documents required to be filed with respect thereto or in
connection therewith, granting unto said agents and attorneys, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same as fully to all intents and purposes as the undersigned
might or could do if personally present, and the undersigned hereby ratifies and
confirms that all said agents and attorneys-in-fact, or any of them may lawfully
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the
15th day of September, 1998.
/S/ ROBERT H. BOH
Robert H. Boh
Chairman and Director
HIBERNIA CORPORATION
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Hibernia Corporation, a Louisiana corporation (the "Corporation"), does hereby
name, constitute and appoint Marsha M. Gassan, Patricia C. Meringer and Ron E.
Samford, Jr. and each of them (with full power to each of them to act alone),
his true and lawful agents and attorneys-in-fact, for him and on his behalf and
in his name, place and stead, in any and all capacities, to sign, execute,
acknowledge, deliver, and file (a) with the Securities and Exchange Commission
(or any other governmental or regulatory authority), a Registration Statement on
Form S-4 (or any other appropriate form) and any and all amendments (including
post-effective amendments) thereto, with any and all exhibits and any and all
other documents required to be filed with respect thereto or in connection
therewith, relating to the registration under the Securities Act of 1933 of
Common Stock of the corporation to be issued in the merger between the Hibernia
National Bank, a wholly-owned subsidiary of the Corporation, and First Guaranty
Bank ("First Guaranty") wherein the Corporation agrees to exchange shares of its
common stock for all of the outstanding shares of common stock of First Guaranty
and merger First Guaranty into Hibernia National Bank, authorized by resolutions
adopted by the Board of Directors on March 26, 1997 and September 15, 1998 and
(b) with the securities agencies or officials of various jurisdictions, all
applications, qualifications, registrations or exemptions relating to such
offering under the laws of any such jurisdiction, including any amendments
thereto or other documents required to be filed with respect thereto or in
connection therewith, granting unto said agents and attorneys, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same as fully to all intents and purposes as the undersigned
might or could do if personally present, and the undersigned hereby ratifies and
confirms that all said agents and attorneys-in-fact, or any of them may lawfully
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the
15th day of September, 1998.
/S/ J. HERBERT BOYDSTUN
J. Hebert Boydstun
Director
HIBERNIA CORPORATION
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Hibernia Corporation, a Louisiana corporation (the "Corporation"), does hereby
name, constitute and appoint Marsha M. Gassan, Patricia C. Meringer and Ron E.
Samford, Jr. and each of them (with full power to each of them to act alone),
his true and lawful agents and attorneys-in-fact, for him and on his behalf and
in his name, place and stead, in any and all capacities, to sign, execute,
acknowledge, deliver, and file (a) with the Securities and Exchange Commission
(or any other governmental or regulatory authority), a Registration Statement on
Form S-4 (or any other appropriate form) and any and all amendments (including
post-effective amendments) thereto, with any and all exhibits and any and all
other documents required to be filed with respect thereto or in connection
therewith, relating to the registration under the Securities Act of 1933 of
Common Stock of the corporation to be issued in the merger between the Hibernia
National Bank, a wholly-owned subsidiary of the Corporation, and First Guaranty
Bank ("First Guaranty") wherein the Corporation agrees to exchange shares of its
common stock for all of the outstanding shares of common stock of First Guaranty
and merger First Guaranty into Hibernia National Bank, authorized by resolutions
adopted by the Board of Directors on March 26, 1997 and September 15, 1998 and
(b) with the securities agencies or officials of various jurisdictions, all
applications, qualifications, registrations or exemptions relating to such
offering under the laws of any such jurisdiction, including any amendments
thereto or other documents required to be filed with respect thereto or in
connection therewith, granting unto said agents and attorneys, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same as fully to all intents and purposes as the undersigned
might or could do if personally present, and the undersigned hereby ratifies and
confirms that all said agents and attorneys-in-fact, or any of them may lawfully
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the
15th day of September, 1998.
/S/ E. R. "BO" CAMPBELL
E. R. "Bo" Campbell
Director
HIBERNIA CORPORATION
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Hibernia Corporation, a Louisiana corporation (the "Corporation"), does hereby
name, constitute and appoint Marsha M. Gassan, Patricia C. Meringer and Ron E.
Samford, Jr. and each of them (with full power to each of them to act alone),
his true and lawful agents and attorneys-in-fact, for him and on his behalf and
in his name, place and stead, in any and all capacities, to sign, execute,
acknowledge, deliver, and file (a) with the Securities and Exchange Commission
(or any other governmental or regulatory authority), a Registration Statement on
Form S-4 (or any other appropriate form) and any and all amendments (including
post-effective amendments) thereto, with any and all exhibits and any and all
other documents required to be filed with respect thereto or in connection
therewith, relating to the registration under the Securities Act of 1933 of
Common Stock of the corporation to be issued in the merger between the Hibernia
National Bank, a wholly-owned subsidiary of the Corporation, and First Guaranty
Bank ("First Guaranty") wherein the Corporation agrees to exchange shares of its
common stock for all of the outstanding shares of common stock of First Guaranty
and merger First Guaranty into Hibernia National Bank, authorized by resolutions
adopted by the Board of Directors on March 26, 1997 and September 15, 1998 and
(b) with the securities agencies or officials of various jurisdictions, all
applications, qualifications, registrations or exemptions relating to such
offering under the laws of any such jurisdiction, including any amendments
thereto or other documents required to be filed with respect thereto or in
connection therewith, granting unto said agents and attorneys, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same as fully to all intents and purposes as the undersigned
might or could do if personally present, and the undersigned hereby ratifies and
confirms that all said agents and attorneys-in-fact, or any of them may lawfully
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the
15th day of September, 1998.
/S/ RICHARD W. FREEMAN, JR.
Richard W. Freeman, Jr.
Director
HIBERNIA CORPORATION
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Hibernia Corporation, a Louisiana corporation (the "Corporation"), does hereby
name, constitute and appoint Marsha M. Gassan, Patricia C. Meringer and Ron E.
Samford, Jr. and each of them (with full power to each of them to act alone),
his true and lawful agents and attorneys-in-fact, for him and on his behalf and
in his name, place and stead, in any and all capacities, to sign, execute,
acknowledge, deliver, and file (a) with the Securities and Exchange Commission
(or any other governmental or regulatory authority), a Registration Statement on
Form S-4 (or any other appropriate form) and any and all amendments (including
post-effective amendments) thereto, with any and all exhibits and any and all
other documents required to be filed with respect thereto or in connection
therewith, relating to the registration under the Securities Act of 1933 of
Common Stock of the corporation to be issued in the merger between the Hibernia
National Bank, a wholly-owned subsidiary of the Corporation, and First Guaranty
Bank ("First Guaranty") wherein the Corporation agrees to exchange shares of its
common stock for all of the outstanding shares of common stock of First Guaranty
and merger First Guaranty into Hibernia National Bank, authorized by resolutions
adopted by the Board of Directors on March 26, 1997 and September 15, 1998 and
(b) with the securities agencies or officials of various jurisdictions, all
applications, qualifications, registrations or exemptions relating to such
offering under the laws of any such jurisdiction, including any amendments
thereto or other documents required to be filed with respect thereto or in
connection therewith, granting unto said agents and attorneys, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same as fully to all intents and purposes as the undersigned
might or could do if personally present, and the undersigned hereby ratifies and
confirms that all said agents and attorneys-in-fact, or any of them may lawfully
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the
15th day of September, 1998.
/S/ STEPHEN A. HANSEL
Stephen A. Hansel
President, Chief Executive Officer and
Director
HIBERNIA CORPORATION
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Hibernia Corporation, a Louisiana corporation (the "Corporation"), does hereby
name, constitute and appoint Marsha M. Gassan, Patricia C. Meringer and Ron E.
Samford, Jr. and each of them (with full power to each of them to act alone),
his true and lawful agents and attorneys-in-fact, for him and on his behalf and
in his name, place and stead, in any and all capacities, to sign, execute,
acknowledge, deliver, and file (a) with the Securities and Exchange Commission
(or any other governmental or regulatory authority), a Registration Statement on
Form S-4 (or any other appropriate form) and any and all amendments (including
post-effective amendments) thereto, with any and all exhibits and any and all
other documents required to be filed with respect thereto or in connection
therewith, relating to the registration under the Securities Act of 1933 of
Common Stock of the corporation to be issued in the merger between the Hibernia
National Bank, a wholly-owned subsidiary of the Corporation, and First Guaranty
Bank ("First Guaranty") wherein the Corporation agrees to exchange shares of its
common stock for all of the outstanding shares of common stock of First Guaranty
and merger First Guaranty into Hibernia National Bank, authorized by resolutions
adopted by the Board of Directors on March 26, 1997 and September 15, 1998 and
(b) with the securities agencies or officials of various jurisdictions, all
applications, qualifications, registrations or exemptions relating to such
offering under the laws of any such jurisdiction, including any amendments
thereto or other documents required to be filed with respect thereto or in
connection therewith, granting unto said agents and attorneys, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same as fully to all intents and purposes as the undersigned
might or could do if personally present, and the undersigned hereby ratifies and
confirms that all said agents and attorneys-in-fact, or any of them may lawfully
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the
15th day of September, 1998.
/S/ DICK H. HEARIN
Dick H. Hearin
Director
HIBERNIA CORPORATION
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Hibernia Corporation, a Louisiana corporation (the "Corporation"), does hereby
name, constitute and appoint Marsha M. Gassan, Patricia C. Meringer and Ron E.
Samford, Jr. and each of them (with full power to each of them to act alone),
his true and lawful agents and attorneys-in-fact, for him and on his behalf and
in his name, place and stead, in any and all capacities, to sign, execute,
acknowledge, deliver, and file (a) with the Securities and Exchange Commission
(or any other governmental or regulatory authority), a Registration Statement on
Form S-4 (or any other appropriate form) and any and all amendments (including
post-effective amendments) thereto, with any and all exhibits and any and all
other documents required to be filed with respect thereto or in connection
therewith, relating to the registration under the Securities Act of 1933 of
Common Stock of the corporation to be issued in the merger between the Hibernia
National Bank, a wholly-owned subsidiary of the Corporation, and First Guaranty
Bank ("First Guaranty") wherein the Corporation agrees to exchange shares of its
common stock for all of the outstanding shares of common stock of First Guaranty
and merger First Guaranty into Hibernia National Bank, authorized by resolutions
adopted by the Board of Directors on March 26, 1997 and September 15, 1998 and
(b) with the securities agencies or officials of various jurisdictions, all
applications, qualifications, registrations or exemptions relating to such
offering under the laws of any such jurisdiction, including any amendments
thereto or other documents required to be filed with respect thereto or in
connection therewith, granting unto said agents and attorneys, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same as fully to all intents and purposes as the undersigned
might or could to if personally present, and the undersigned hereby ratifies and
confirms that all said agents and attorneys-in-fact, or any of them may lawfully
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the
15th day of September, 1998.
/S/ ROBERT T. HOLLEMAN
Robert T. Holleman
Director
HIBERNIA CORPORATION
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Hibernia Corporation, a Louisiana corporation (the "Corporation"), does hereby
name, constitute and appoint Marsha M. Gassan, Patricia C. Meringer and Ron E.
Samford, Jr. and each of them (with full power to each of them to act alone),
his true and lawful agents and attorneys-in-fact, for him and on his behalf and
in his name, place and stead, in any and all capacities, to sign, execute,
acknowledge, deliver, and file (a) with the Securities and Exchange Commission
(or any other governmental or regulatory authority), a Registration Statement on
Form S-4 (or any other appropriate form) and any and all amendments (including
post-effective amendments) thereto, with any and all exhibits and any and all
other documents required to be filed with respect thereto or in connection
therewith, relating to the registration under the Securities Act of 1933 of
Common Stock of the corporation to be issued in the merger between the Hibernia
National Bank, a wholly-owned subsidiary of the Corporation, and First Guaranty
Bank ("First Guaranty") wherein the Corporation agrees to exchange shares of its
common stock for all of the outstanding shares of common stock of First Guaranty
and merger First Guaranty into Hibernia National Bank, authorized by resolutions
adopted by the Board of Directors on March 26, 1997 and September 15, 1998 and
(b) with the securities agencies or officials of various jurisdictions, all
applications, qualifications, registrations or exemptions relating to such
offering under the laws of any such jurisdiction, including any amendments
thereto or other documents required to be filed with respect thereto or in
connection therewith, granting unto said agents and attorneys, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same as fully to all intents and purposes as the undersigned
might or could do if personally present, and the undersigned hereby ratifies and
confirms that all said agents and attorneys-in-fact, or any of them may lawfully
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the
15th day of September, 1998.
/S/ ELTON R. KING
Elton R. King
Director
HIBERNIA CORPORATION
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Hibernia Corporation, a Louisiana corporation (the "Corporation"), does hereby
name, constitute and appoint Marsha M. Gassan, Patricia C. Meringer and Ron E.
Samford, Jr. and each of them (with full power to each of them to act alone),
his true and lawful agents and attorneys-in-fact, for him and on his behalf and
in his name, place and stead, in any and all capacities, to sign, execute,
acknowledge, deliver, and file (a) with the Securities and Exchange Commission
(or any other governmental or regulatory authority), a Registration Statement on
Form S-4 (or any other appropriate form) and any and all amendments (including
post-effective amendments) thereto, with any and all exhibits and any and all
other documents required to be filed with respect thereto or in connection
therewith, relating to the registration under the Securities Act of 1933 of
Common Stock of the corporation to be issued in the merger between the Hibernia
National Bank, a wholly-owned subsidiary of the Corporation, and First Guaranty
Bank ("First Guaranty") wherein the Corporation agrees to exchange shares of its
common stock for all of the outstanding shares of common stock of First Guaranty
and merger First Guaranty into Hibernia National Bank, authorized by resolutions
adopted by the Board of Directors on March 26, 1997 and September 15, 1998 and
(b) with the securities agencies or officials of various jurisdictions, all
applications, qualifications, registrations or exemptions relating to such
offering under the laws of any such jurisdiction, including any amendments
thereto or other documents required to be filed with respect thereto or in
connection therewith, granting unto said agents and attorneys, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same as fully to all intents and purposes as the undersigned
might or could do if personally present, and the undersigned hereby ratifies and
confirms that all said agents and attorneys-in-fact, or any of them may lawfully
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the
15th day of September, 1998.
/S/ SYDNEY W. LASSEN
Sidney W. Lassen
Director
HIBERNIA CORPORATION
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Hibernia Corporation, a Louisiana corporation (the "Corporation"), does hereby
name, constitute and appoint Marsha M. Gassan, Patricia C. Meringer and Ron E.
Samford, Jr. and each of them (with full power to each of them to act alone),
his true and lawful agents and attorneys-in-fact, for him and on his behalf and
in his name, place and stead, in any and all capacities, to sign, execute,
acknowledge, deliver, and file (a) with the Securities and Exchange Commission
(or any other governmental or regulatory authority), a Registration Statement on
Form S-4 (or any other appropriate form) and any and all amendments (including
post-effective amendments) thereto, with any and all exhibits and any and all
other documents required to be filed with respect thereto or in connection
therewith, relating to the registration under the Securities Act of 1933 of
Common Stock of the corporation to be issued in the merger between the Hibernia
National Bank, a wholly-owned subsidiary of the Corporation, and First Guaranty
Bank ("First Guaranty") wherein the Corporation agrees to exchange shares of its
common stock for all of the outstanding shares of common stock of First Guaranty
and merger First Guaranty into Hibernia National Bank, authorized by resolutions
adopted by the Board of Directors on March 26, 1997 and September 15, 1998 and
(b) with the securities agencies or officials of various jurisdictions, all
applications, qualifications, registrations or exemptions relating to such
offering under the laws of any such jurisdiction, including any amendments
thereto or other documents required to be filed with respect thereto or in
connection therewith, granting unto said agents and attorneys, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same as fully to all intents and purposes as the undersigned
might or could do if personally present, and the undersigned hereby ratifies and
confirms that all said agents and attorneys-in-fact, or any of them may lawfully
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the
15th day of September, 1998.
/S/ DONALD J. NALTY
Donald J. Nalty
Vice Chairman and Director
HIBERNIA CORPORATION
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Hibernia Corporation, a Louisiana corporation (the "Corporation"), does hereby
name, constitute and appoint Marsha M. Gassan, Patricia C. Meringer and Ron E.
Samford, Jr. and each of them (with full power to each of them to act alone),
his true and lawful agents and attorneys-in-fact, for him and on his behalf and
in his name, place and stead, in any and all capacities, to sign, execute,
acknowledge, deliver, and file (a) with the Securities and Exchange Commission
(or any other governmental or regulatory authority), a Registration Statement on
Form S-4 (or any other appropriate form) and any and all amendments (including
post-effective amendments) thereto, with any and all exhibits and any and all
other documents required to be filed with respect thereto or in connection
therewith, relating to the registration under the Securities Act of 1933 of
Common Stock of the corporation to be issued in the merger between the Hibernia
National Bank, a wholly-owned subsidiary of the Corporation, and First Guaranty
Bank ("First Guaranty") wherein the Corporation agrees to exchange shares of its
common stock for all of the outstanding shares of common stock of First Guaranty
and merger First Guaranty into Hibernia National Bank, authorized by resolutions
adopted by the Board of Directors on March 26, 1997 September 15, 1998 and (b)
with the securities agencies or officials of various jurisdictions, all
applications, qualifications, registrations or exemptions relating to such
offering under the laws of any such jurisdiction, including any amendments
thereto or other documents required to be filed with respect thereto or in
connection therewith, granting unto said agents and attorneys, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same as fully to all intents and purposes as the undersigned
might or could do if personally present, and the undersigned hereby ratifies and
confirms that all said agents and attorneys-in-fact, or any of them may lawfully
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the
27th day of January, 1999.
/S/ RAY B. NESBITT
Ray B. Nesbitt
Director
HIBERNIA CORPORATION
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Hibernia Corporation, a Louisiana corporation (the "Corporation"), does hereby
name, constitute and appoint Marsha M. Gassan, Patricia C. Meringer and Ron E.
Samford, Jr. and each of them (with full power to each of them to act alone),
his true and lawful agents and attorneys-in-fact, for him and on his behalf and
in his name, place and stead, in any and all capacities, to sign, execute,
acknowledge, deliver, and file (a) with the Securities and Exchange Commission
(or any other governmental or regulatory authority), a Registration Statement on
Form S-4 (or any other appropriate form) and any and all amendments (including
post-effective amendments) thereto, with any and all exhibits and any and all
other documents required to be filed with respect thereto or in connection
therewith, relating to the registration under the Securities Act of 1933 of
Common Stock of the corporation to be issued in the merger between the Hibernia
National Bank, a wholly-owned subsidiary of the Corporation, and First Guaranty
Bank ("First Guaranty") wherein the Corporation agrees to exchange shares of its
common stock for all of the outstanding shares of common stock of First Guaranty
and merger First Guaranty into Hibernia National Bank, authorized by resolutions
adopted by the Board of Directors on March 26, 1997 and September 15, 1998 and
(b) with the securities agencies or officials of various jurisdictions, all
applications, qualifications, registrations or exemptions relating to such
offering under the laws of any such jurisdiction, including any amendments
thereto or other documents required to be filed with respect thereto or in
connection therewith, granting unto said agents and attorneys, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same as fully to all intents and purposes as the undersigned
might or could do if personally present, and the undersigned hereby ratifies and
confirms that all said agents and attorneys-in-fact, or any of them may lawfully
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the
15th day of September, 1998.
/S/ WILLIAM C. O'MALLEY
William C. O'Malley
Director
HIBERNIA CORPORATION
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Hibernia Corporation, a Louisiana corporation (the "Corporation"), does hereby
name, constitute and appoint Marsha M. Gassan, Patricia C. Meringer and Ron E.
Samford, Jr. and each of them (with full power to each of them to act alone),
his true and lawful agents and attorneys-in-fact, for him and on his behalf and
in his name, place and stead, in any and all capacities, to sign, execute,
acknowledge, deliver, and file (a) with the Securities and Exchange Commission
(or any other governmental or regulatory authority), a Registration Statement on
Form S-4 (or any other appropriate form) and any and all amendments (including
post-effective amendments) thereto, with any and all exhibits and any and all
other documents required to be filed with respect thereto or in connection
therewith, relating to the registration under the Securities Act of 1933 of
Common Stock of the corporation to be issued in the merger between the Hibernia
National Bank, a wholly-owned subsidiary of the Corporation, and First Guaranty
Bank ("First Guaranty") wherein the Corporation agrees to exchange shares of its
common stock for all of the outstanding shares of common stock of First Guaranty
and merger First Guaranty into Hibernia National Bank, authorized by resolutions
adopted by the Board of Directors on March 26, 1997 and September 15, 1998 and
(b) with the securities agencies or officials of various jurisdictions, all
applications, qualifications, registrations or exemptions relating to such
offering under the laws of any such jurisdiction, including any amendments
thereto or other documents required to be filed with respect thereto or in
connection therewith, granting unto said agents and attorneys, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same as fully to all intents and purposes as the undersigned
might or could do if personally present, and the undersigned hereby ratifies and
confirms that all said agents and attorneys-in-fact, or any of them may lawfully
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the
15th day of September, 1998.
/S/ JAMES R. PELTIER
James R. Peltier
Director
HIBERNIA CORPORATION
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Hibernia Corporation, a Louisiana corporation (the "Corporation"), does hereby
name, constitute and appoint Marsha M. Gassan, Patricia C. Meringer and Ron E.
Samford, Jr. and each of them (with full power to each of them to act alone),
his true and lawful agents and attorneys-in-fact, for him and on his behalf and
in his name, place and stead, in any and all capacities, to sign, execute,
acknowledge, deliver, and file (a) with the Securities and Exchange Commission
(or any other governmental or regulatory authority), a Registration Statement on
Form S-4 (or any other appropriate form) and any and all amendments (including
post-effective amendments) thereto, with any and all exhibits and any and all
other documents required to be filed with respect thereto or in connection
therewith, relating to the registration under the Securities Act of 1933 of
Common Stock of the corporation to be issued in the merger between the Hibernia
National Bank, a wholly-owned subsidiary of the Corporation, and First Guaranty
Bank ("First Guaranty") wherein the Corporation agrees to exchange shares of its
common stock for all of the outstanding shares of common stock of First Guaranty
and merger First Guaranty into Hibernia National Bank, authorized by resolutions
adopted by the Board of Directors on March 26, 1997 and September 15, 1998 and
(b) with the securities agencies or officials of various jurisdictions, all
applications, qualifications, registrations or exemptions relating to such
offering under the laws of any such jurisdiction, including any amendments
thereto or other documents required to be filed with respect thereto or in
connection therewith, granting unto said agents and attorneys, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same as fully to all intents and purposes as the undersigned
might or could do if personally present, and the undersigned hereby ratifies and
confirms that all said agents and attorneys-in-fact, or any of them may lawfully
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the
15th day of September, 1998.
/S/ ROBERT T. RATCLIFF
Robert T. Ratcliff
Director
HIBERNIA CORPORATION
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Hibernia Corporation, a Louisiana corporation (the "Corporation"), does hereby
name, constitute and appoint Marsha M. Gassan, Patricia C. Meringer and Ron E.
Samford, Jr. and each of them (with full power to each of them to act alone),
her true and lawful agents and attorneys-in-fact, for her and on her behalf and
in her name, place and stead, in any and all capacities, to sign, execute,
acknowledge, deliver, and file (a) with the Securities and Exchange Commission
(or any other governmental or regulatory authority), a Registration Statement on
Form S-4 (or any other appropriate form) and any and all amendments (including
post-effective amendments) thereto, with any and all exhibits and any and all
other documents required to be filed with respect thereto or in connection
therewith, relating to the registration under the Securities Act of 1933 of
Common Stock of the corporation to be issued in the merger between the Hibernia
National Bank, a wholly-owned subsidiary of the Corporation, and First Guaranty
Bank ("First Guaranty") wherein the Corporation agrees to exchange shares of its
common stock for all of the outstanding shares of common stock of First Guaranty
and merger First Guaranty into Hibernia National Bank, authorized by resolutions
adopted by the Board of Directors on March 26, 1997 and September 15, 1998 and
(b) with the securities agencies or officials of various jurisdictions, all
applications, qualifications, registrations or exemptions relating to such
offering under the laws of any such jurisdiction, including any amendments
thereto or other documents required to be filed with respect thereto or in
connection therewith, granting unto said agents and attorneys, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same as fully to all intents and purposes as the undersigned
might or could do if personally present, and the undersigned hereby ratifies and
confirms that all said agents and attorneys-in-fact, or any of them may lawfully
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set her hand as of the
15th day of September, 1998.
/S/ JANEE M. "GEE" TUCKER
Janee M. "Gee" Tucker
Director
HIBERNIA CORPORATION
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Hibernia Corporation, a Louisiana corporation (the "Corporation"), does hereby
name, constitute and appoint Marsha M. Gassan, Patricia C. Meringer and Ron E.
Samford, Jr. and each of them (with full power to each of them to act alone),
her true and lawful agents and attorneys-in-fact, for her and on her behalf and
in her name, place and stead, in any and all capacities, to sign, execute,
acknowledge, deliver, and file (a) with the Securities and Exchange Commission
(or any other governmental or regulatory authority), a Registration Statement on
Form S-4 (or any other appropriate form) and any and all amendments (including
post-effective amendments) thereto, with any and all exhibits and any and all
other documents required to be filed with respect thereto or in connection
therewith, relating to the registration under the Securities Act of 1933 of
Common Stock of the corporation to be issued in the merger between the Hibernia
National Bank, a wholly-owned subsidiary of the Corporation, and First Guaranty
Bank ("First Guaranty") wherein the Corporation agrees to exchange shares of its
common stock for all of the outstanding shares of common stock of First Guaranty
and merger First Guaranty into Hibernia National Bank, authorized by resolutions
adopted by the Board of Directors on March 26, 1997 and September 15, 1998 and
(b) with the securities agencies or officials of various jurisdictions, all
applications, qualifications, registrations or exemptions relating to such
offering under the laws of any such jurisdiction, including any amendments
thereto or other documents required to be filed with respect thereto or in
connection therewith, granting unto said agents and attorneys, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same as fully to all intents and purposes as the undersigned
might or could do if personally present, and the undersigned hereby ratifies and
confirms that all said agents and attorneys-in-fact, or any of them may lawfully
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set her hand as of the
15th day of September, 1998.
/S/ VIRGINIA E. WIENMANN
Virginia E. Weinmann
Director
HIBERNIA CORPORATION
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Hibernia Corporation, a Louisiana corporation (the "Corporation"), does hereby
name, constitute and appoint Marsha M. Gassan, Patricia C. Meringer and Ron E.
Samford, Jr. and each of them (with full power to each of them to act alone),
his true and lawful agents and attorneys-in-fact, for him and on his behalf and
in his name, place and stead, in any and all capacities, to sign, execute,
acknowledge, deliver, and file (a) with the Securities and Exchange Commission
(or any other governmental or regulatory authority), a Registration Statement on
Form S-4 (or any other appropriate form) and any and all amendments (including
post-effective amendments) thereto, with any and all exhibits and any and all
other documents required to be filed with respect thereto or in connection
therewith, relating to the registration under the Securities Act of 1933 of
Common Stock of the corporation to be issued in the merger between the Hibernia
National Bank, a wholly-owned subsidiary of the Corporation, and First Guaranty
Bank ("First Guaranty") wherein the Corporation agrees to exchange shares of its
common stock for all of the outstanding shares of common stock of First Guaranty
and merger First Guaranty into Hibernia National Bank, authorized by resolutions
adopted by the Board of Directors on March 26, 1997 and September 15, 1998 and
(b) with the securities agencies or officials of various jurisdictions, all
applications, qualifications, registrations or exemptions relating to such
offering under the laws of any such jurisdiction, including any amendments
thereto or other documents required to be filed with respect thereto or in
connection therewith, granting unto said agents and attorneys, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same as fully to all intents and purposes as the undersigned
might or could do if personally present, and the undersigned hereby ratifies and
confirms that all said agents and attorneys-in-fact, or any of them may lawfully
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the
15th day of September, 1998.
/S/ ROBERT E. ZETZMANN
Robert E. Zetzmann
Director
HIBERNIA CORPORATION
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Hibernia Corporation, a Louisiana corporation (the "Corporation"), does hereby
name, constitute and appoint Marsha M. Gassan, Patricia C. Meringer and Ron E.
Samford, Jr. and each of them (with full power to each of them to act alone),
his true and lawful agents and attorneys-in-fact, for him and on his behalf and
in his name, place and stead, in any and all capacities, to sign, execute,
acknowledge, deliver, and file (a) with the Securities and Exchange Commission
(or any other governmental or regulatory authority), a Registration Statement on
Form S-4 (or any other appropriate form) and any and all amendments (including
post-effective amendments) thereto, with any and all exhibits and any and all
other documents required to be filed with respect thereto or in connection
therewith, relating to the registration under the Securities Act of 1933 of
Common Stock of the corporation to be issued in the merger between the Hibernia
National Bank, a wholly-owned subsidiary of the Corporation, and First Guaranty
Bank ("First Guaranty") wherein the Corporation agrees to exchange shares of its
common stock for all of the outstanding shares of common stock of First Guaranty
and merger First Guaranty into Hibernia National Bank, authorized by resolutions
adopted by the Board of Directors on March 26, 1997 and September 15, 1998 and
(b) with the securities agencies or officials of various jurisdictions, all
applications, qualifications, registrations or exemptions relating to such
offering under the laws of any such jurisdiction, including any amendments
thereto or other documents required to be filed with respect thereto or in
connection therewith, granting unto said agents and attorneys, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same as fully to all intents and purposes as the undersigned
might or could do if personally present, and the undersigned hereby ratifies and
confirms that all said agents and attorneys-in-fact, or any of them may lawfully
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the
15th day of September, 1998.
/S/ RON E. SAMFORD, JR.
Ron E. Samford, Jr.
Controller and Chief Accounting Officer
HIBERNIA CORPORATION
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Hibernia Corporation, a Louisiana corporation (the "Corporation"), does hereby
name, constitute and appoint Marsha M. Gassan, Patricia C. Meringer and Ron E.
Samford, Jr. and each of them (with full power to each of them to act alone),
her true and lawful agents and attorneys-in-fact, for her and on her behalf and
in her name, place and stead, in any and all capacities, to sign, execute,
acknowledge, deliver, and file (a) with the Securities and Exchange Commission
(or any other governmental or regulatory authority), a Registration Statement on
Form S-4 (or any other appropriate form) and any and all amendments (including
post-effective amendments) thereto, with any and all exhibits and any and all
other documents required to be filed with respect thereto or in connection
therewith, relating to the registration under the Securities Act of 1933 of
Common Stock of the corporation to be issued in the merger between the Hibernia
National Bank, a wholly-owned subsidiary of the Corporation, and First Guaranty
Bank ("First Guaranty") wherein the Corporation agrees to exchange shares of its
common stock for all of the outstanding shares of common stock of First Guaranty
and merger First Guaranty into Hibernia National Bank, authorized by resolutions
adopted by the Board of Directors on March 26, 1997 and September 15, 1998 and
(b) with the securities agencies or officials of various jurisdictions, all
applications, qualifications, registrations or exemptions relating to such
offering under the laws of any such jurisdiction, including any amendments
thereto or other documents required to be filed with respect thereto or in
connection therewith, granting unto said agents and attorneys, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same as fully to all intents and purposes as the undersigned
might or could do if personally present, and the undersigned hereby ratifies and
confirms that all said agents and attorneys-in-fact, or any of them may lawfully
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set her hand as of the
15th day of September, 1998.
/S/ MARSHA M. GASSAN
Marsha M. Gassan
Chief Financial Officer
HIBERNIA CORPORATION
<PAGE>
EXHIBIT 99
FIRST GUARANTY PROXY
THIS PROXY IS SOLICIATED ON BEHALF OF
FIRST GUARANTY BANK
The undersigned shareholder of First Guaranty Bank, a Louisiana Corporation
("First Guaranty"), hereby constitutes and appoints ____________________________
and or either of them, proxies with full power of substitution to vote and act
for the undersigned, as designated below, with respect to the number of shares
of common stock, $1.00 par value, and common stock $5.00 par value, of First
Guaranty the undersigned would be entitled to vote if personally present at the
Special Meeting of Shareholders of First Guaranty, which will be held at the
office of First Guaranty, 400 East Thomas Street, Hammond, Louisiana, 70401 on ,
1999 at ______ p.m., and at any adjournments or postponements thereof. In their
discretion, the proxies are authorized to vote upon such other business as may
properly come before the Special Meeting.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED HEREIN
BY THE SHAREHOLDER. IF NO DIRECTION IS SPECIFIED WHEN THE DULY EXECUTED PROXY IS
RETURNED, SUCH SHARES WILL BE VOTED FOR APPROVAL OF THE MERGER AGREEMENT AND THE
MERGER IDENTIFIED ON THE REVERSE OF THIS PROXY OR, IF ANOTHER MATTER IS PROPERLY
BROUGHT BEFORE THE SPECIAL MEETING AS TO WHICH THE BOARD OF DIRECTORS HAS MADE
NO RECOMMENDATION, THE PROXIES WILL VOTE THE SHARES IN THEIR DISCRETION.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE
PLEASE SIGN ON THE REVERSE SIDE
AND RETURN PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE
<PAGE>
PLEASE MARK YOUR CHOICE
LIKE THIS |X|
IN BLUE OR BLACK INK
____________________
COMMON STOCK
Approval of the Merger Agreement and Plan of Merger among First
Guaranty, Hibernia Corporation and Hibernia National Bank dated as of July 30,
1998 and the Merger of First Guaranty with and into Hibernia National Bank.
FOR [_] AGAINST [_] ABSTAIN [_]
Note: If you do not specify how your proxy will be voted, your
shares will be voted "FOR" the Merger Agreement and the Merger.
The undersigned hereby acknowledges receipt of a copy of the
accompanying Notice of Special Meeting of Shareholders and Proxy Statement and
hereby revokes any proxy or proxies heretofore given.
DATE: ____________________________
SIGNATURE: ____________________________
Please mark, date and sign as your account name appears and
return in the enclosed envelope. If acting as executor,
administrator, trustee, guardian or in a similar capacity, you
should so indicate when signing. If the person signing is a
corporation, partnership or other entity, please sign the full
name of the corporation or partnership or other entity by a
duly authorized officer, partner or other person. If the
shares are held jointly, each shareholder named should sign.
