SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998 Commission file No. 1-10294
HIBERNIA CORPORATION
(Exact name of registrant as specified in its charter)
LOUISIANA 72-0724532
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
313 CARONDELET STREET, NEW ORLEANS, LOUISIANA 70130
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (504) 533-5332
Securities registered pursuant to Section 12 (b) of the Act:
CLASS A COMMON STOCK, NO PAR VALUE
(Title of class)
NEW YORK STOCK EXCHANGE
(Name of each exchange on which registered)
Securities registered pursuant to Section 12 (g) of the Act: NONE
Indicated by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO ____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
State the aggregate market value of the voting stock held by
non-affiliates of the Registrant as of February 26, 1999.
Class A Common Stock, no par value $2,417,163,003
State the aggregate number of shares outstanding of each of
the Registrant's classes of common stock as of February 26, 1999.
Class A Common Stock, no par value - 156,527,049
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's annual report to shareholders for the year ended
December 31, 1998 are incorporated by reference into Parts I and II of this
Report.
Portions of the Registrant's definitive proxy statement, which will be filed
within 120 days of December 31, 1998, are incorporated by reference into Part
III of this Report.
<PAGE>
INDEX TO FORM 10-K
Certain information required by Form 10-K is incorporated by reference from
the Annual Report as indicated below. Only that information expressly
incorporated by reference is deemed filed with the Commission.
PART I
Item 1 Business *
Item 2 Properties *
Item 3 Legal Proceedings *
Item 4 Submission of Matters to a Vote of Security Holders None
Item X Identification of Executive Officers *
PART II
Item 5 Market of the Registrant's Common Equity and Related
Stockholder Matters ***
Item 6 Selected Financial Data ***
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations ***
Item 7a Qualitative and Quantitative Disclosures About Market Risk ***
Item 8 Financial Statements and Supplementary Data ***
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure None
PART III (1)
Item 10 Directors and Executive Officers of the Registrant
Item 11 Executive Compensation
Item 12 Security Ownership of Certain Beneficial Owners and Management
Item 13 Certain Relationships and Related Transactions
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Financial Statements
Report of Independent Auditors ***
Hibernia Corporation and Subsidiaries:
Consolidated Balance Sheets - December 31,
1998 and 1997 ***
Consolidated Income Statements - Years
Ended December 31, 1998, 1997 and 1996 ***
Consolidated Statements of Changes in
Shareholders' Equity - Years Ended
December 31, 1998, 1997 and 1996 ***
Consolidated Statements of Cash Flows - Years
Ended December 31, 1998, 1997 and 1996 ***
Notes to Consolidated Financial Statements ***
(b) Reports on Form 8-K **
Item 5 Other Event December 1, 1998
Item 5 Other Event December 4, 1998
Item 5 Other Event March 11, 1999
(c) Exhibits **
* This information is included in the Form 10-K and is not incorporated by
reference to the Annual Report.
** Reports on Form 8-K and Exhibits have been separately filed with the
Commission.
(1) The material required by Items 10 through 13 is incorporated by reference to
the Company's definitive Proxy Statement which will be filed with the Commission
within 120 days of December 31, 1998; however, the "Report of Executive
Compensation Committee" and the "Performance Graph" contained therein are not
incorporated herein by reference.
<PAGE>
PART I
ITEM 1. BUSINESS
Hibernia Corporation (Company or Hibernia) is a bank holding company
organized in 1972 and, as of December 31, 1998, was the largest publicly traded
bank holding company headquartered in Louisiana with assets of $14.0 billion and
deposits of $10.6 billion. In 1998, the Company operated two wholly owned bank
subsidiaries: Hibernia National Bank and Hibernia National Bank of Texas.
Hibernia National Bank was chartered in Louisiana in 1933 and Hibernia National
Bank of Texas, formerly The Texarkana National Bank, was chartered in 1887.
Effective January 1, 1999, Hibernia National Bank of Texas was merged with and
into Hibernia National Bank (the Bank) resulting in one bank in all markets. In
addition to the bank subsidiary, the Company also owns two nonbank subsidiaries,
Hibernia Capital Corporation (HCC) and Zachary Taylor Life Insurance Company
(Zachary Taylor). HCC is a licensed Small Business Investment Company formed in
1995 to provide equity capital and long-term loans to small businesses. Zachary
Taylor is currently inactive, and the Company has an agreement with the Federal
Reserve Bank of Atlanta whereby the Company will not actively operate this
subsidiary as an insurance company without Federal Reserve Board approval.
As of December 31, 1998 the Company operated 238 banking locations in 33
Louisiana parishes and nine Texas counties and a mortgage loan introduction and
brokerage services office in the southwestern part of Mississippi. During 1998,
the Company completed mergers with four financial institutions with combined
assets of $1.4 billion and 37 offices. Since the beginning of 1994, 21 mergers
have been completed involving 23 banks with combined assets of $5.1 billion and
158 offices. Four mergers completed in 1998, two mergers in 1997, three mergers
in 1996 and all mergers completed in 1995 and 1994 were accounted for as
poolings of interests. Two additional mergers completed in 1996 were accounted
for as purchase transactions.
The Company offers a broad array of financial products and services,
including consumer, small business, commercial, international, mortgage and
private banking; leasing; venture capital; corporate finance; treasury
management; trust and investment management; brokerage; and insurance.
The Company also provides financial risk management products and advisory
services to customers. These products are designed to assist customers in
managing their exposure in the areas of interest rate, currency and commodity
risks. The Company offers repurchase agreements, bankers acceptances, Eurodollar
deposits, safekeeping of securities, U.S. Government and Government agency
obligations, tax-free municipal obligations, reverse repurchase agreements,
letters of credit, and collection and foreign exchange transactions. At December
31, 1998, the Company performed mortgage servicing, which includes acceptance
and application of mortgage loan and escrow payments, for over 54,000
residential loans.
In addition, the Company offers a variety of agency, fiduciary, investment
advisory, employee benefit and custodial services. Hibernia National Bank
through Hibernia Insurance Agency, L.L.C. sells fixed annuities and life,
health, disability, automobile, homeowner and commercial property and casualty
insurance in retail markets. The Company also provides retail and discount
brokerage services through a wholly owned subsidiary of Hibernia National Bank,
Hibernia Investment Securities, Inc. (HISI). HISI is a registered broker-dealer
and member of the National Association of Securities Dealers, Inc.
The reserve for possible loan losses is comprised of specific reserves
(assessed for each loan that is impaired or for which a probable loss has been
identified), general reserves and an unallocated reserve. The Company evaluates
its reserve for possible loan losses to establish the reserve at a level that is
adequate to absorb loan losses inherent in the loan portfolio. Reserves on
impaired loans are based on discounted cash flows using the loan's initial
effective interest rate or the fair value of the collateral for certain
collateral-dependent loans. Factors contributing to the determination of
specific reserves include the financial condition of the borrower, changes in
the value of pledged collateral and general economic conditions. General
reserves are established based on historical charge-offs considering factors
such as risk rating, industry concentration and loan type, with the most recent
charge-off experience weighted more heavily. The unallocated reserve generally
serves to compensate for the uncertainty in estimating loan losses, including
the possibility of improper risk ratings and specific reserve allocations. The
reserve also considers trends in delinquencies and nonaccrual loans as well as
the evolving portfolio mix in terms of collateral, relative loan size and the
degree of seasoning in the various loan products.
The methodology used to perform the review of reserve adequacy, which is
performed at least quarterly, is designed to be dynamic and responsive to
changes in actual credit losses. These changes are reflected in both the
allocated and the unallocated reserves. The historical loss ratios, which are
one of the key factors in this analysis, are updated quarterly and are weighted
more heavily for recent charge-off experience. See "Reserve and Provision for
Possible Loan Losses" in Management's Discussion and Analysis of Financial
Condition and Results of Operations in the Company's Annual Report for a further
discussion of the reserve for possible loan losses.
COMPETITION
The financial services industry in which the Company operates is highly
competitive. The Bank competes with national and state banks for deposits,
loans, and trust accounts and with savings and loan associations and credit
unions for loans and deposits. In addition, the Bank competes with other
providers of financial services, from both inside and outside Louisiana and
Texas, including finance companies, institutional buyers of commercial paper,
money market funds, brokerage firms, investment companies, insurance companies
and governmental agencies. These competitors are actively engaged in marketing
various types of loans, commercial paper, short-term obligations, investments
and other services.
SUPERVISION AND REGULATION
The banking industry is extensively regulated under both federal and state
law. The Company is subject to regulation under the Bank Holding Company Act of
1956 (BHCA) and to supervision by the Board of Governors of the Federal Reserve
System (FRB). The BHCA requires the Company to obtain the prior approval of the
FRB for bank and non-bank acquisitions and prescribes certain limitations in
connection with acquisitions and the non-banking activities of the Company. The
Bank is subject to regulation and examination by the Office of the Comptroller
of the Currency (OCC).
The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA)
further expanded the regulatory and enforcement powers of bank regulatory
agencies. Among the significant provisions of FDICIA is the requirement that
bank regulatory agencies prescribe standards relating to internal controls,
information systems, loan documentation, credit underwriting, interest rate
exposure, asset growth, compensation, fees and benefits. FDICIA mandates annual
examinations of banks by their primary regulators.
The banking industry is affected by the monetary and fiscal policies of the
FRB. An important function of the FRB is to regulate the national supply of bank
credit to moderate recessions and to curb inflation. Among the instruments of
monetary policy used by the FRB to implement its objectives are: open-market
operations in U.S. Government securities, changes in the discount rate and the
federal funds rate (which is the rate banks charge each other for overnight
borrowings) and changes in reserve requirements on bank deposits.
HISI is regulated by the Securities and Exchange Commission, the National
Association of Securities Dealers, Inc., and the Louisiana Office of Financial
Institutions through the Deputy Commissioner of Securities. HCC is regulated by
the Small Business Administration. Zachary Taylor is regulated by the Louisiana
Commissioner of Insurance. The Louisiana Commissioner of Insurance also
regulates the licensing of Hibernia Insurance Agency, L.L.C. and those persons
engaged in the sale of insurance products. The Texas Commissioner of Insurance
performs a similar function in Texas, although the Bank is not currently engaged
in the types of activities regulated by the Texas Commissioner of Insurance
other than the sale of credit life insurance.
<PAGE>
LOAN PORTFOLIO
The amounts and percentages of loans outstanding by type are as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
($ in thousands) 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
% of % of % of % of % of
Amount Total Amount Total Amount Total Amount Total Amount Total
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial, financial
and agricultural $ 3,189,806 32% $2,503,807 30% $1,841,275 28% $1,380,517 26% $1,024,586 24%
Real estate - construction 167,542 2 110,203 1 85,809 1 48,767 1 60,953 1
Real estate - mortgage 4,508,621 45 3,853,570 47 3,105,126 46 2,503,025 47 2,154,577 50
Consumer 1,590,501 16 1,466,220 18 1,476,349 22 1,242,293 24 944,658 22
Lease financing 32,869 - 31,031 - 16,162 - - - - -
All other 516,843 5 321,661 4 213,659 3 110,440 2 105,017 3
- -----------------------------------------------------------------------------------------------------------------------
$10,006,182 100% $8,286,492 100% $6,738,380 100% $5,285,042 100% $4,289,791 100%
=======================================================================================================================
</TABLE>
SELECTED LOAN MATURITIES
The following table shows selected categories of loans outstanding as of
December 31, 1998, which, based on remaining scheduled repayments of principal,
are due in the periods indicated. In addition, the amounts contractually due
after one year are summarized according to their interest sensitivity.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Maturing
- ----------------------------------------------------------------------------------------
After One
Within But Within After
$ in thousands) One Year Five Years Five Years Total
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial, financial and
agricultural $1,016,184 $1,706,073 $467,549 $3,189,806
Real estate - construction 93,811 51,458 22,273 167,542
- ----------------------------------------------------------------------------------------
$1,109,995 $1,757,531 $489,822 $3,357,348
========================================================================================
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Interest Sensitivity
- ----------------------------------------------------------------------------------------
Fixed Variable
Rate Rate
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Due after one but within five years $359,853 $1,397,678
Due after five years 141,787 348,035
- ----------------------------------------------------------------------------------------
$501,640 $1,745,713
========================================================================================
</TABLE>
<PAGE>
SUMMARY OF LOAN LOSS EXPERIENCE
The following is a summary of activity in the reserve for possible loan
losses:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31
- -----------------------------------------------------------------------------------------------------------------------------------
($ in thousands) 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance of reserve for
possible loan losses
at beginning of period $124,381 $143,566 $165,099 $171,454 $203,202
Addition due to purchase
transactions - 479 6,214 - -
Loans charged off:
Commercial, financial,
and agricultural (10,922) (11,107) (5,987) (6,103) (7,695)
Real estate - construction (151) (50) (76) (14) (54)
Real estate - mortgage (4,050) (5,304) (2,686) (5,159) (11,926)
Consumer (24,425) (28,874) (27,140) (14,659) (12,601)
All other (154) (261) (339) (72) (52)
- -----------------------------------------------------------------------------------------------------------------------------------
Total loans charged off (39,702) (45,596) (36,228) (26,007) (32,328)
Recoveries of loans
previously charged off:
Commercial, financial,
and agricultural 2,974 3,702 6,833 7,927 7,685
Real estate - construction 470 103 138 235 97
Real estate - mortgage 6,542 8,647 5,357 5,738 7,912
Consumer 7,022 10,089 7,854 5,222 4,612
All other 289 243 426 114 84
- -----------------------------------------------------------------------------------------------------------------------------------
Total recoveries 17,297 22,784 20,608 19,236 20,390
- -----------------------------------------------------------------------------------------------------------------------------------
Net loans charged off (22,405) (22,812) (15,620) (6,771) (11,938)
Additions to reserve
charged to operating
expense 26,000 3,148 (12,127) 416 (19,810)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at end of period $127,976 $124,381 $143,566 $165,099 $171,454
===================================================================================================================================
Ratio of net charge-offs
to average loans outstanding 0.25% 0.31% 0.26% 0.14% 0.30%
===================================================================================================================================
</TABLE>
<PAGE>
ALLOCATION OF RESERVE FOR POSSIBLE LOAN LOSSES
The reserve for possible loan losses has been allocated according to the
amount deemed to be reasonably necessary to provide for the possibility of
losses being incurred within the categories of loans set forth in the table
below. See "Reserve and Provision for Possible Loan Losses" in Management's
Discussion and Analysis of Financial Condition and Results of Operations in the
Company's Annual Report to Shareholders for a discussion of the factors which
influence management's judgment in determining the adequacy of the reserve for
possible loan losses.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
($ in thousands) 1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Reserve at end of period:
Commercial, financial and
agricultural $ 27,466 $ 18,772 $ 18,508 $ 32,871 $ 43,735
Real estate - construction 839 627 626 632 1,239
Real estate - mortgage 12,653 17,526 21,170 42,441 57,729
Consumer 49,818 53,051 63,118 36,128 22,278
Not allocated 37,200 34,405 40,144 53,027 46,473
- ----------------------------------------------------------------------------------------------
$127,976 $124,381 $143,566 $165,099 $171,454
==============================================================================================
</TABLE>
MATURITIES OF LARGE-DENOMINATION CERTIFICATES OF DEPOSIT
The following table shows large-denomination certificates of deposit as of
December 31, 1998 by remaining maturity.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
($ in thousands) Domestic Foreign
- ------------------------------------------------------------------
<S> <C> <C>
3 months or less $ 963,507 $321,537
Over 3 months through 6 months 336,130 -
Over 6 months through 12 months 271,913 -
Over 12 months through 5 years 116,304 -
Over 5 years 21,901 -
- ------------------------------------------------------------------
Total $1,709,755 $321,537
==================================================================
</TABLE>
RECENT DEVELOPMENTS
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 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 approximately 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.
FORWARD-LOOKING STATEMENTS
Statements in this Report Form 10-K that are not historical facts should be
considered forward-looking statements with respect to the Company.
Forward-looking statements of this type speak only as of the date of this 10-K.
By nature, forward-looking statements involve inherent risk and uncertainties.
Various factors, including, but not limited to, economic conditions, credit
quality, interest rates, loan demand and changes in the assumptions used in
making the forward-looking statements, could cause actual results to differ
materially from those contemplated by the forward-looking statements.
<PAGE>
ITEM 2. PROPERTIES
The Company's executive offices are located in downtown New Orleans,
Louisiana, in the downtown banking office of Hibernia National Bank. The Company
leases its main office building and operations center under the terms of
sale/leaseback agreements. The Company and the Bank consider all properties
owned or leased to be suitable and adequate for their intended purposes and
consider the terms of existing leases to be fair and reasonable.
On December 31, 1998 the Company reported miscellaneous property with a net
book value of $12,266,000. These properties include $9,618,000 of properties
acquired from borrowers either as a result of foreclosures or voluntarily in
full or partial satisfaction of indebtedness previously contracted and
$2,648,000 of duplicate or excess bank-owned premises. See "Asset Quality" in
Management's Discussion and Analysis of Financial Condition and Results of
Operations in the Company's Annual Report for a further discussion of these
properties.
ITEM 3. LEGAL PROCEEDINGS
The Company and the Bank are parties to certain pending legal proceedings
arising from matters incidental to their business. Management is of the opinion
that these actions will not have a material effect on the financial condition,
results of operations, or liquidity of the Company.
<PAGE>
ITEM X. IDENTIFICATION OF EXECUTIVE OFFICERS
Each executive officer of the Company holds his or her position until the
earlier of (a) their removal or resignation from office, (b) their successor is
appointed by the Board of Directors, or (c) such time that the Board no longer
deems their position to be that of an executive officer.
J. HERBERT BOYDSTUN, 53, Chairman of the Southwest Region of the Company
and Hibernia National Bank, assumed those responsibilities in 1996. Mr. Boydstun
is also responsible for the Company's operations in Southeast Texas. Mr.
Boydstun served as Southcentral/Northeast Regional Chairman from 1995 to 1996
and as Northeast Regional Chairman from August 1994 until 1995. Mr. Boydstun
joined the Company in August 1994 following the merger of First Bancorp of
Louisiana, Inc., a bank holding company headquartered in West Monroe, Louisiana,
with and into the Company. Mr. Boydstun served as President of First Bancorp and
as Chairman and Chief Executive Officer of First National Bank of West Monroe,
the primary national banking subsidiary of First Bancorp, from 1982 to 1994. Mr.
Boydstun also serves on the Boards of Directors of the Company and Hibernia
National Bank.
E.R. "BO" CAMPBELL, 57, is Vice Chairman of the Board of Directors of the
Company and Hibernia National Bank. Mr. Campbell also served on the Board of
Directors of Hibernia National Bank of Texas, and as its Chairman during a
portion of 1998, until that bank was merged into Hibernia National Bank. Mr.
Campbell served as Northern Regional Chairman of the Company and Hibernia
National Bank from January 1995 until 1997. Mr. Campbell joined Hibernia in that
position following the merger of Pioneer Bancshares Corporation, a bank holding
company headquartered in Shreveport, Louisiana, with and into the Company. Mr.
Campbell served from 1992 to 1994 as Chairman of the Board of Pioneer Bancshares
and its Louisiana banking subsidiary, Pioneer Bank & Trust Company, and served
as President of Pioneer Bancshares from 1977 to 1992.
K. KIRK DOMINGOS III, 57, Senior Executive Vice President/Retail Arena and
Technology of the Company and Hibernia National Bank, assumed those
responsibilities in September 1997. Mr. Domingos is responsible for various
retail lines of business and the overall administrative functions of the
Company. Mr. Domingos has been employed by the Company and/or its subsidiaries
since August 1975 and assumed the position of Senior Executive Vice President
responsible for Support Services in August 1994 and the position of Executive
Vice President and Administrative Executive of Hibernia National Bank in August
1991.
B.D. FLURRY, 57, serves as Chairman of the Northern Region for the Company
and Hibernia National Bank, a position he assumed in 1997 and which includes
responsibility for the Company's operations in Northeast Texas. Mr. Flurry also
served on the Board of Directors of Hibernia National Bank of Texas until that
bank was merged into Hibernia National Bank. From January 1995 until 1997, Mr.
Flurry served as the president of the Northern Region for the Company and
Hibernia National Bank. Prior to joining Hibernia, Mr. Flurry served as
President (from 1991 through 1994) of Pioneer Bank & Trust Company, a subsidiary
of Pioneer Bancshares Corporation, a bank holding company headquartered in
Shreveport, Louisiana that merged with and into Hibernia in January 1995. Mr.
Flurry assumed primary responsibility for oversight of the Northeast Texas
market at year-end 1996.
MARSHA M. GASSAN, 46, serves as Senior Executive Vice President, Chief
Financial Officer and Treasurer of the Company and Hibernia National Bank,
positions which she assumed in April 1996 (except for Treasurer, which she
assumed during 1998). Prior to April 1996, Ms. Gassan served as Executive Vice
President, General Auditor and manager of Credit Risk Management of the Company
and Hibernia National Bank (from 1994 to 1996), and as Senior Vice President and
manager of Credit Risk Management (from 1992 to 1994).
STEPHEN A. HANSEL, 51, serves as President and Chief Executive Officer of
the Company and Hibernia National Bank, positions which he assumed in March
1992. Mr. Hansel also serves on the Boards of Directors of the Company and
Hibernia National Bank.
RUSSELL S. HOADLEY, 54, serves as Executive Vice President/Employee and
Public Relations for the Company and Hibernia National Bank, a position he
assumed in 1994. From the time he joined the Company in July 1993 until his
promotion in 1994, Mr. Hoadley served as Senior Vice President/Public Affairs
and Marketing for the Company. Prior to joining the Company, Mr. Hoadley served
as Vice President/Director of Corporate Communications for Barnett Banks, Inc.,
a bank holding company based in Jacksonville, Florida, which position he held
from 1988 to June 1993.
RANDALL E. HOWARD, 51, serves as Chairman of the Southeast Region for the
Company and Hibernia National Bank. Mr. Howard has served in that position since
February 1998. Prior to that time, from 1987 to February 1998, Mr. Howard served
as President and Chief Executive Officer of ArgentBank, a Louisiana banking
association headquartered in Thibodaux, Louisiana, which was merged with and
into the Company in early 1998.
SCOTT P. HOWARD, 51, serves as Senior Executive Vice President/Commercial
Arena for the Company and Hibernia National Bank and has served in that position
since March 1996. From May 1992 until March 1996, Mr. Howard served as Executive
Vice President/Corporate and International Banking for Hibernia National Bank.
RONALD E. SAMFORD, JR., 46, serves as Executive Vice President and
Controller of the Company and Hibernia National Bank and Chief Accounting
Officer of the Company, which positions he has held since November 1992. Prior
to joining Hibernia, Mr. Samford served as Senior Vice President and Chief
Accounting Officer of TeamBank, a bank headquartered in Forth Worth, Texas from
August 1990 to November 1992.
RICHARD G. WRIGHT, 49, serves as Senior Executive Vice President and Chief
Credit Officer of the Company, a position which he assumed in March 1996. From
August 1994 until March 1996, Mr. Wright served as Executive Vice
President/Credit Policy and Analysis of Hibernia National Bank, and from the
time he joined the Company in May 1992 until August 1994, he served as Senior
Vice President in the Credit and Asset Quality area of Hibernia National Bank.
PART IV
ITEM 14. EXHIBITS
EXHIBIT DESCRIPTION
3.1 Exhibit 3.1 to the Quarterly Report on Form 10-Q (as amended) 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 the Registrant, as amended to date)
10.13 Deferred Compensation Plan for Outside Directors of Hibernia
Corporation and its Subsidiaries, as amended to date
10.14 Exhibit 10.14 to the Annual Report on Form 10-K for the fiscal year
ended December 31, 1990, filed with the Commission by the Registrant
(Commission File No. 0-7220) is hereby incorporated by reference
(Hibernia Corporation Executive Life Insurance Plan)
10.16 Exhibit 4.7 to the Registration Statement on Form S-8 filed with the
Commission by the Registrant (Registration No. 33-26871) is hereby
incorporated by reference (Hibernia Corporation 1987 Stock Option
Plan, as amended to date)
10.34 Exhibit C to the Registrant's definitive proxy statement dated August
17, 1992 relating to its 1992 Annual Meeting of Shareholders filed by
the Registrant with the Commission is hereby incorporated by reference
(Long-Term Incentive Plan of Hibernia Corporation)
10.35 Exhibit A to the Registrant's definitive proxy statement dated March
23, 1993 relating to its 1993 Annual Meeting of Shareholders filed by
the Registrant with the Commission is hereby incorporated by reference
(1993 Director Stock Option Plan of Hibernia Corporation)
10.36 Exhibit 10.36 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993 filed with the Commission
(Commission file no. 0-7220) is hereby incorporated by reference
(Employment agreement between Stephen A. Hansel and Hibernia
Corporation)
10.38 Exhibit 10.38 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993 filed with the Commission
(Commission File No. 0-7220) is hereby incorporated by reference
(Employment Agreement between E.R. "Bo" Campbell and Hibernia
Corporation)
10.39 Exhibit 10.39 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996 filed with the Commission
(Commission File No. 0-7220) is hereby incorporated by reference
(Employment Agreement between B.D. Flurry and Hibernia Corporation)
10.40 Exhibit 10.40 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996 filed with the Commission
(Commission File No. 0-7220) is hereby incorporated by reference
(Split-Dollar Life Insurance Plan of Hibernia Corporation effective as
of July 1996)
10.41 Exhibit 10.41 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996 filed with the Commission
(Commission File No. 0-7220) is hereby incorporated by reference
(Nonqualified Deferred Compensation Plan for Key Management Employees
of Hibernia Corporation effective as of July 1996)
10.42 Exhibit 10.42 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996 filed with the Commission
(Commission File No. 0-7220) is hereby incorporated by reference
(Supplemental Stock Compensation Plan for Key Management Employees
effective as of July 1996)
10.43 Exhibit 10.43 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996 filed with the Commission
(Commission No. 0-7220) is hereby incorporated by reference
(Nonqualified Target Benefit (Deferred Award) Plan of Hibernia
Corporation effective as of July 1996))
10.44 Exhibit 10.44 to the Registrant's Annual Report on Form 10-K (as
amended) for the fiscal year ended December 31, 1997 filed with the
Commission (Commission No. 0-7220) is hereby incorporated by reference
(Form of Change of Control Employment Agreement for Executive and
Senior Officers of the Registrant)
10.45 Exhibit 10.45 to the Registrant's Annual Report on Form 10-K (as
amended) for the fiscal year ended December 31, 1997 filed with the
Commission (Commission No. 0-7220) is hereby incorporated by reference
(Employment Agreement between Randall A. Howard and Hibernia
Corporation)
13 Exhibit 13 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998 (1998 Annual Report to security
holders of Hibernia Corporation).
21 Subsidiaries of the Registrant
23 Consent of Independent Auditors
24 Powers of Attorney
27 Financial Data Schedule
99.1 Exhibit 99.1 to the Annual Report on Form 10-K dated June 24, 1998
filed with the Commission is hereby incorporated by reference (Annual
Report of the Retirement Security Plan for the fiscal year ended
December 31, 1997)
99.2 Exhibit 99.2 to the Annual Report on Form 10-K dated June 24, 1998
filed with the Commission is hereby incorporated by reference (Annual
Report of the Employee Stock Ownership Plan and Trust for the fiscal
year ended December 31, 1997)
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
HIBERNIA CORPORATION
(Registrant)
/s/ Stephen A. Hansel
Stephen A. Hansel, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed on March 17, 1999, by the following persons on behalf of
the Registrant and in the capacities indicated.
/s/ Marsha M. Gassan /s/ Ronald E. Samford, Jr.
Marsha M. Gassan Ronald E. Samford, Jr.
Senior Executive Vice President Executive Vice President & Controller
Chief Financial Officer Chief Accounting Officer
Robert H. Boh*, Director Donald J. Nalty*, Director
J. Herbert Boydstun*, Director Ray B. Nesbitt*, Director
E.R. "Bo" Campbell*, Director William C. O'Malley*, Director
Richard W. Freeman, Jr.*, Director James R. Peltier*, Director
Stephen A. Hansel*, Director Robert T. Ratcliff*, Director
Dick H. Hearin*, Director Janee M. Tucker*, Director
Robert T. Holleman*, Director Virginia E. Weinmann*, Director
Elton R. King*, Director Robert E. Zetzmann*, Director
Sidney W. Lassen*, Director
*By: /s/ Gary L. Ryan
Gary L. Ryan
Attorney-in-fact
EXHIBIT 10.13
DEFERRED COMPENSATION PLAN FOR
OUTSIDE DIRECTORS OF HIBERNIA CORPORATION
AND ITS SUBSIDIARIES
(as amended through April 1, 1998)
ARTICLE I
PURPOSE
The purpose of this Deferred Compensation Plan for Outside Directors of
Hibernia Corporation and its Subsidiaries (this "Plan") is to provide a means
for the deferral by non-employee directors of Hibernia Corporation, its
subsidiaries and the City or Advisory Boards of its banking subsidiaries
(collectively the "Corporation") of annual retainer fees, fees for attendance at
meetings of the Board of Directors of the Corporation, Committees of the Board
of Directors of the Corporation and City or Advisory Boards and other
compensation payable (hereinafter in the aggregate "Compensation") to members of
the Board of Directors of the Corporation, its subsidiaries and the City or
Advisory Boards of its banking subsidiaries who are not full-time employees of
the Corporation or any such subsidiary (individually a "Director" and
collectively the "Directors").
ARTICLE II
ADMINISTRATION
The Plan will be administered by a Plan Administrator appointed by the
Chairman of the Board of Directors of Hibernia Corporation. The Plan
Administrator will have the sole authority to interpret the Plan, to prescribe,
amend and rescind rules and regulations relating to the Plan and the
administration thereof and, in general, to make all other determinations
necessary or advisable for the administration of the Plan. All decisions of the
Plan Administrator concerning the administration, construction and
interpretation of the Plan shall be final, conclusive and binding upon all
parties and interests.
ARTICLE III
PARTICIPATION
Eligibility for participation in the Plan is limited to Directors who are
not full-time employees of the Corporation or any subsidiary of the Corporation.
Upon his or her election to defer Compensation hereunder, a Director shall
become a Participant in this Plan. A Participant's participation in the Plan
shall cease (a) upon such Director's ceasing to serve as a Director or (b) upon
such Director's advising the Corporation, as provided herein, that he or she
chooses to terminate his or her participation in the Plan; provided, however,
that termination of a Participant's participation in the Plan shall not affect
the receipt by such Participant or his or her heirs, executors or
administrators, of amounts previously deferred hereunder in accordance with the
terms hereof.
ARTICLE IV
COMPENSATION ELECTIONS
4.1 Payment Election. For each calendar year commencing with 1984, any
Director may elect to forego the receipt of Compensation otherwise payable to
him or her for services performed during such year, in which event the
Corporation shall establish an Account for such Director, as hereinafter
described, and shall credit such Account and disburse amounts therein in
accordance with other terms of this Plan. With respect to calendar years
commencing on or after December 31, 1989, an election by a Director to defer
receipt of Compensation in accordance with this Section 4.1 shall remain in
effect so long as the Director is eligible to participate in the Plan unless
before the beginning of any such calendar year, the Director elects to terminate
participation in the Plan as provided in section 4.5 hereof; provided, however,
that termination of participation in the Plan shall not accelerate or otherwise
affect distribution of Compensation previously deferred hereunder. In the event
that a Director has been a Participant in the Plan for one or more calendar
years and subsequently elects to discontinue deferrals, he or she may
nonetheless become a Participant for subsequent calendar years by delivery of a
notice in accordance with Section 4.2 hereof on or prior to the December 31
preceding the calendar year with respect to which such deferral is sought
4.2 Deferred Compensation Election. Each director electing to defer
Compensation shall advise the Corporation pursuant to a signed notice
substantially in the form attached as Exhibit A hereto of his or her election to
defer compensation hereunder.
In order for an election to be effective for a calendar year, the Director
shall deliver such notice to the Plan Administrator, or such person as has been
designated by the Plan Administrator (the "Representative") no later than
December 31 of the year preceding the year for which the election is to be
effective. When a person initially becomes a Director during a calendar year,
such notice shall be delivered to the Plan Administrator or the Representative
no later than such person's election or appointment in order to be effective for
the remainder of such calendar year.
4.3 Irrevocability of Election. An election to defer Compensation may not
be revoked during any calendar year for which the deferral has been made.
4.4 Deferral Amount. An election to defer Compensation may only be made
with respect to all Compensation payable by the Corporation to a Director.
4.5 Election to Cease Deferral. Commencing for calendar years after 1989, a
Participant shall be deemed to continue his or her election to defer
Compensation unless on or prior to the preceding December 31, the Participant
shall have advised the Plan Administrator or the Representative by delivery of a
notice that such Participant elects to discontinue deferral of his or her
Compensation for subsequent calendar years. An election to discontinue deferral
shall not affect either such Director's ability to participate in the Plan for
calendar years following the calendar year for which an election to discontinue
deferral has been made or the payment of deferred amounts as provided in Article
VII hereof.
ARTICLE V
PARTICIPANT ACCOUNT
5.1 Establishment of Participant Account. For each Participant the
Corporation shall establish an account on its books (an "Account") to which the
Corporation shall credit Compensation which such Director has elected to defer.
The Corporation shall credit such Account quarterly at the end of each calendar
quarter with the Compensation which would otherwise have been payable to the
Participant had such Participant not elected to defer Compensation under the
Plan.
5.2 Interest Accruals. The Corporation shall credit all amounts in the
Account with interest calculated and compounded quarterly at a rate equal to the
one-year Treasury rate less 25 basis points as of the first business day of each
calendar quarter. The rate will be adjusted annually, on April 1 of each year,
to reflect the one-year Treasury rate at that time, and interest will accrue at
the new rate until adjusted the following year. Amounts in the Account shall
continue to accrue interest at such rate until the entire balance in the Account
has been distributed in accordance with Article VII hereof.
ARTICLE VI
LIABILITY OF CORPORATION AND RIGHTS OF DIRECTORS
6.1 Liability of the Corporation for Accounts. Amounts credited to the
Accounts shall represent entries made on the books of the Corporation solely for
record-keeping purposes under the Plan. All amounts so credited shall at all
times constitute general, unsecured liabilities of the Corporation payable
exclusively out of its general assets, and in no event and under no circumstance
shall the Corporation be obligated or required to segregate from its general
assets (whether by trust or otherwise) funds sufficient to pay amounts credited
to the Accounts.
6.2 Rights of Directors in Accounts. A Participant shall have no right,
title or vested interest in and to Accounts or the amounts from time to time
credited thereto. By electing to defer Compensation payments pursuant to the
Plan, each director acknowledges and confirms that: (a) the obligation of the
Corporation to make deferred Compensation payments and accruals with respect
thereto does not confer upon the Participant any greater right than that of any
unsecured creditor of the Corporation generally; and (b) all payments of
Compensation deferred in accordance with the Plan shall be payable only as
provided in Article VII hereof.
ARTICLE VII
TIME AND METHOD OF DISTRIBUTION
7.1 Distribution Election. The deferred compensation election notice
delivered by a Director pursuant to Section 4.2 hereof shall include such
person's election as to the timing and manner in which compensation deferred in
accordance with this Plan shall be paid (the "Distribution Election"). Such
Distribution Election shall be one of the following:
a) Payment of the entire balance in the Participant's Account on the first
banking day of the month following the month in which such Participant's service
as a Director of the Corporation ceases;
b) Payment of the entire balance in the Participant's Account on the first
banking day of January in the year following the year in which such
Participant's service as a Director of the Corporation ceases;
c) Payment of the entire balance in the Participant's Account on the first
banking day of January in the year following the year in which such Participant
attains the age of seventy-one (71);
d) Payment of the balance in the Participant's Account in up to ten annual
installments commencing on the first banking day of January in the year
following the year in which such Participant's service as a Director of the
Corporation ceases, each installment to be in an amount equal to the balance in
such Account divided by the number of installments remaining (including the one
being calculated and paid); or
e) Payment of the balance in the Participant's Account in up to ten annual
installments commencing on the first banking day of January in the year
following the year in which such Participant attains the age of seventy-one,
each installment to be in an amount equal to the balance in such Account divided
by the number of installments remaining (including the one being calculated and
paid).
In the event that the deferred compensation election notice does not
contain a Distribution Election, the Participant shall be deemed to have made
the election described in paragraph (b) above. A Distribution Election once made
shall be irrevocable unless, in the event a Participant requests that his or her
Distribution Election be changed, the Plan Administrator or the Representative
shall have received an opinion of counsel to the effect that such requested
change will not adversely affect the tax status of Compensation deferred
pursuant to this Plan for such Participant or for Participants or Directors
generally.
7.2 Hardship. In the case of Hardship, as hereinafter defined, a
Participant may request that the Plan Administrator immediately distribute all
or any amount in such Participant's Account. Hardship shall include unusual
financial need arising from:
a) Expenses or debts incurred or assumed by such Participant which: (i) are
not covered by insurance; (ii) arise out of or are incident to an accident to or
the illness or disability of such Participant, a member of such Participant's
immediate family, or a dependent of such Participant; or (iii) occur as a result
of divorce or separation, or the divorce, separation or death of a member of
such Participant's immediate family;
(b) Sudden, unexpected losses, not covered by insurance, arising out of:
(i) a casualty occurrence; (ii) a theft of personal property; or (iii) a legal
judgment against such Participant, a member of such Participant's immediate
family, or a dependent of such Participant;
c) Educational expenses which relate to: (i) education of a member of such
Participant's immediate family; or (ii) education for a dependent of such
Participant;
d) Severe curtailment of such Participant's personal income due to reasons
beyond such Participant's control; or
e) Expenses resulting from the purchase of a primary residence by such
Participant.
7.3 Designation of Beneficiary. Each Participant shall designate a
beneficiary or beneficiaries to receive payments of Compensation deferred under
this Plan if such Participant dies prior to complete distribution to such
Participant of amounts due him or her under this Plan. Any beneficiary
designation, or change in beneficiary designation, shall be made in writing to
the Plan Administrator and shall be effective when received by the Plan
Administrator or the Representative. A designation of beneficiary received by
the Plan Administrator or the Representative shall revoke all prior designations
and shall be controlling over any testamentary or other purported disposition by
a Participant which is inconsistent with such designation; provided, however,
that no designation, or change of designation shall be effective unless received
by the Plan Administrator or the Representative prior to the death of the
Participant. The receipt of a new beneficiary designation will cancel all
beneficiary designations. If a Participant fails to designate a beneficiary or
if all beneficiaries predecease the Participant, then the Participant's
designated beneficiary shall be deemed to be the Participant's personal
representative, executor or administrator. In the event that a designated
beneficiary who has begun to receive payments hereunder shall die prior to
complete distribution of the Compensation deferred under this Plan, the balance
of any payment payable under this Plan to such person shall be paid to the
estate of such beneficiary within twelve (12) months following the date of death
of such beneficiary.
ARTICLE VIII
REQUESTS FOR DISTRIBUTION
8.1 Requests Under the Plan. A Participant or any person or entity claiming
on behalf of a Participant, may request the Plan Administrator of the
Representative in writing for distribution of any amounts accrued in the Account
of such Participant, whether pursuant to Section 7.1, Section 7.2 or Section 7.3
hereof. Within thirty (30) days following receipt of such request, the Plan
Administrator or the Representative shall advise such Participant or such other
person or entity in writing of the amounts payable to such person and the method
of distribution of such amounts or that such requested distribution may not be
made.
8.2 Review of Requests. If a request for distribution under this Plan is
denied, the Plan Administrator or the Representative shall set forth in writing
in a manner calculated to be understood by the Participant or other person or
entity:
(a) the specific reason or reasons for such denial;
(b) specific reference to the pertinent provisions of this Plan upon which
such denial was based;
(c) a description of any additional material or information necessary to
have such request reconsidered and an explanation of why such material or
information is necessary;
(d) an explanation of the Plan Administrator's review procedure. The Plan
Administrator shall afford the Participant or other person or entity a
reasonable opportunity for a full and fair review by the Plan Administrator of
action taken if requested to do so within thirty (30) days after receipt of the
written statement of the Plan Administrator's action.
ARTICLE IX
MISCELLANEOUS
9.1 Effective Date. This Plan shall be effective as of the beginning of the
first fiscal quarter of the Corporation after initial adoption of this Plan, and
shall continue for succeeding fiscal years of the Corporation unless amended or
terminated by the Board of Directors of the Corporation.
9.2 Effect of Plan. The establishment and continuance of this Plan by the
Corporation shall not constitute a contract of service between the Corporation
and any Director, and shall not be deemed to be consideration for, inducement
to, or a condition of service of any person. The deferral of any Compensation
payments pursuant to the provisions of this Plan shall not limit the rights of
the shareholders or Directors of the Corporation to remove a Director as
permitted by the Certificate of Incorporation or By-Laws of the Corporation or
applicable law. No trust or other fiduciary relationships shall be created or
deemed to arise from any deferrals under this Plan.
9.3 Prohibition Against Assignment. The right of any Participant (or his or
her designated beneficiary) to receive any payment or installment under this
Plan shall not be subject in any manner to attachment or other legal process or
proceedings for discharge of the debts of such Participant or beneficiary, and
any such payment or installment shall not be subject to anticipation,
alienation, sale, transfer, assignment, pledge, mortgage or encumbrance.
9.4 Amendment or Termination.
(a) The Board of Directors of Hibernia Corporation intends to continue this
Plan indefinitely but reserves the right to modify this Plan from time to time,
or to repeal this Plan entirely, or to direct the permanent discontinuance or
temporary suspension of payments under this Plan; provided, however, that no
such modification, repeal, discontinuance or suspension shall affect or
otherwise deprive any Participant of any payment to which he or she may be
entitled under this Plan at the time thereof;
(b) no amendment or termination of this Plan shall, without the consent of
the Participants or beneficiaries hereunder change the amount of Compensation
owed to such person under this Plan; and
(c) upon termination of this Plan, or upon dissolution or liquidation of
the Corporation, or any merger or consolidation in which the Corporation is not
the surviving corporation, each Participant or designated beneficiary hereunder
who is entitled to receive or is receiving payments hereunder shall receive in a
lump sum all Compensation deferred pursuant hereto which is owed to such
Participant or beneficiary and which is, as of the date immediately preceding
such termination, dissolution, liquidation, merger or consolidation, reflected
in the Account of such Participant or in the Account of the Participant who has
selected such beneficiary.
9.5 Governing Law. Except to the extent preempted or superseded by the
Federal laws of the United States of America, the substantive local law of the
State of Louisiana will govern this Plan.
9.6 Notices. All notices, reports, statements, distributions or payments
given, made, delivered or transmitted to a Participant or his or her designated
beneficiary shall be deemed to be duly given, made, delivered or transmitted
when mailed, by first class mail, postage prepaid, addressed to such Participant
or beneficiary at the address appearing on the books of the Plan Administrator.
Written directions, notices, and other communications to the Corporation, the
Plan Administrator or the Representative, shall be deemed to be duly given, made
or delivered when received by the Plan Administrator or the Representative at
such location as may from time to time be specified.
Exhibit A
HIBERNIA CORPORATION
DEFERRED COMPENSATION PLAN FOR OUTSIDE DIRECTORS
DEFERRAL ELECTION
The undersigned Director of Hibernia Corporation and/or one or more of its
subsidiaries or member of a City Board of a subsidiary of Hibernia Corporation,
does hereby make the following election under the Hibernia Corporation Deferred
Compensation Plan for Outside Directors (the "Plan"). (All capitalized terms
used herein and not defined shall have the respective meanings attributed to
them under the Plan):
1. Effective [January 1, 19__/immediately], I hereby elect to defer the
receipt of all Compensation otherwise payable to me for services to be performed
by me for Hibernia Corporation and/or any of its corporate affiliates on and
after such date.
2. This election may only be changed by me with respect to a calendar year
subsequent to the year in which deferral is effective in accordance with
Paragraph 1 above by my giving notice prior to the commencement of such calendar
year of my election to discontinue participation in the Plan.
3. I hereby elect the following method of distribution of Compensation
deferred pursuant to the Plan [PLEASE CHECK ONLY ONE]:
_____(a) Payment of the entire balance in my Account on the first banking day
of the month following the month in which my service with the Corporation
ceases.
_____(b) Payment of the entire balance in my Account on the first banking day
of January in the year following the year in which my service with the
Corporation ceases.
_____(c) Payment of the entire balance in my Account on the first banking day
of January in the year following the year in which I attain age 71.
_____(d) Payment of the balance in my Account in ______ [insert number between
2 and 10] annual installments commencing on the first banking day of
January in the year following the year in which my service with the
Corporation ceases.
_____(e) Payment of the balance in my Account in ______ [insert number between
2 and 10] annual installments commencing on the first banking day of
January in the year following the year in which I attain age 71.
[NOTE: IF NO ELECTION IS INDICATED, CHOICE (B) WILL BE DEEMED TO HAVE BEEN
MADE.]
4. I hereby designate the following beneficiary or beneficiaries:
Name(s) Relationship
________________________________ _______________________________
________________________________ _______________________________
________________________________ _______________________________
________________________________ _______________________________
[NOTE: IF NO BENEFICIARY DESIGNATION IS MADE, THE DESIGNATED BENEFICIARY
SHALL BE THE PERSONAL REPRESENTATIVE, EXECUTOR OR ADMINISTRATOR OF THE
UNDERSIGNED.]
5. I have read and agree for myself and all persons claiming through me to
be bound by all the provisions and interpretations of and all rulings pursuant
to the Plan. I further agree that any change in this election, my selected
payment option or beneficiary designation shall be upon such terms and in such
form as the Plan Administrator or the Representative, in his or her sole
discretion, shall prescribe.
Name: _______________________________
Date: ________________________________
Receipt acknowledged:
HIBERNIA CORPORATION
By: _________________________________
Date: ________________________________
Exhibit B
HIBERNIA CORPORATION
DEFERRED COMPENSATION PLAN FOR OUTSIDE DIRECTORS
PAYOUT ELECTION
1. I hereby elect the following method of distribution of Compensation
deferred pursuant to the Plan [PLEASE CHECK ONLY ONE]:
_____(a) Payment of the entire balance in my Account on the first banking day
of January in the year following the year in which my service with the
Corporation Ceases.
_____(b) Payment of the balance in my Account in ______ [insert number between
2 and 10] annual installments commencing on the first banking day of
January in the year following the year in which my service with the
Corporation ceases.
_____(c) Payment of the entire balance in my Account on the first banking day of
the month following the month in which my service with the Corporation
ceases.
[NOTE: IF NO ELECTION IS INDICATED, CHOICE (A) WILL BE DEEMED TO HAVE BEEN
MADE.]
2. I hereby designate the following beneficiary or beneficiaries:
Name(s Relationship
________________________________ _______________________________
________________________________ _______________________________
________________________________ _______________________________
________________________________ _______________________________
[NOTE: IF NO BENEFICIARY DESIGNATION IS MADE, THE DESIGNATED BENEFICIARY
SHALL BE THE PERSONAL REPRESENTATIVE, EXECUTOR OR ADMINISTRATOR OF THE
UNDERSIGNED.]
<PAGE>
HIBERNIA CORPORATION
Corporate Offices
313 Carondelet St., New Orleans, LA 70130
504-533-3333
Mailing Address
P.O. Box 61540
New Orleans, LA 70161
Electronic Address
Internet: www.hiberniabank.com
E-mail: [email protected]
At December 31, 1998 -- Shareholders of record: 17,179/Full-time equivalent
employees: 5,012
Stock Listing
The common stock of Hibernia Corporation is listed on the New York Stock
Exchange (NYSE) under the ticker symbol "HIB." Price and volume information are
listed under "Hibernia" and "HIB" in The Wall Street Journal and under similar
designations in other daily newspapers.
Shareholder Assistance
Shareholders requesting a change of address, records or information about lost
certificates or wanting to have dividends deposited directly into checking or
savings accounts should contact:
ChaseMellon Shareholder Services
Securityholder Relations Department
85 Challenger Road, Overpeck Centre
Ridgefield Park, NJ 07660
Toll free: 800-814-0305
Dividend Reinvestment and Stock Purchase Plan
Hibernia's Dividend Reinvestment and Stock Purchase Plan is an economical,
convenient way for shareholders to increase their holdings of the Company's
stock. Once enrolled in the plan, shareholders may purchase new shares directly
from the Company by reinvesting cash dividends, making optional cash purchases
or both.
Direct Deposit of Dividends
By depositing dividends directly to checking or savings accounts, shareholders
can receive their funds faster. To sign up or receive information, call
toll-free 800-814-0305.
For Information
Shareholders, media representatives and other individuals seeking copies of the
annual report, Form 10-K and Form 10-Q, as well as general information, should
contact Jim Lestelle, Senior Vice President and Manager of Corporate
Communications, at 504-533-5482 or toll free at 800-245-4388. Analysts and
others seeking financial data or a prospectus on the Dividend Reinvestment and
Stock Purchase Plan should contact Trisha Voltz, Vice President and Manager of
Investor Relations, at 504-533-2180 or toll free at 800-245-4388.
For fax access to news releases, quarterly reports, analyst reports and dividend
reinvestment details, call toll free 800-207-9063.
Duplicate Mailings
The Company is required to mail information to each name on its shareholder
list, even if it means sending duplicates. Shareholders wishing to eliminate
duplicate mailings should write to ChaseMellon Shareholder Services at the
address on this page indicating which names should be removed. This will not
affect dividend or proxy mailings.
<TABLE>
<CAPTION>
Hibernia Stock Price And Dividend Information
- -------------------------------------------------------------------------------
1998 1997
- -------------------------------------------------------------------------------
Cash Cash
Market Price(1) Dividends Market Price(1) Dividends
High Low Declared High Low Declared
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1st quarter $21.63 $17.25 $ .09 $14.75 $12.75 $.08
2nd quarter $21.94 $19.56 $ .09 $14.50 $12.38 $.08
3rd quarter $20.31 $13.50 $ .09 $17.19 $13.81 $.08
4th quarter $17.75 $13.06 $ .105 $19.38 $16.63 $.09
- -------------------------------------------------------------------------------
- ----------
(1) NYSE closing price.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Five-Year Consolidated Summary of Income and Selected Financial Data (1)
Hibernia Corporation and Subsidiaries
- ---------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31
($ in thousands, except per-share data) 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income ..................................... $ 953,722 $ 842,058 $ 722,098 $ 647,920 $ 554,466
Interest expense .................................... 423,188 360,022 299,829 276,560 205,752
- ---------------------------------------------------------------------------------------------------------------------------------
Net interest income ................................. 530,534 482,036 422,269 371,360 348,714
Provision for possible loan losses .................. 26,000 3,148 (12,127) 416 (19,810)
- ---------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision
for possible loan losses ........................ 504,534 478,888 434,396 370,944 368,524
- ---------------------------------------------------------------------------------------------------------------------------------
Noninterest income:
Noninterest income ............................... 179,257 151,272 125,853 112,247 102,538
Securities gains (losses), net ................... 5,678 2,725 (5,152) 958 (1,183)
- ---------------------------------------------------------------------------------------------------------------------------------
Noninterest income .................................. 184,935 153,997 120,701 113,205 101,355
Noninterest expense ................................. 416,584 409,254 359,815 319,856 338,651
- ---------------------------------------------------------------------------------------------------------------------------------
Income before taxes ................................. 272,885 223,631 195,282 164,293 131,228
Income tax expense .................................. 94,256 78,835 67,389 18,087 14,156
- ---------------------------------------------------------------------------------------------------------------------------------
Net income .......................................... $ 178,629 $ 144,796 $ 127,893 $ 146,206 $ 117,072
- ---------------------------------------------------------------------------------------------------------------------------------
Net income applicable to common shareholders ........ $ 171,729 $ 137,896 $ 126,153 $ 146,206 $ 117,072
=================================================================================================================================
Per common share information: (2)
Net income ....................................... $ 1.12 $ 0.90 $ 0.83 $ 0.96 $ 0.76
Net income - assuming dilution ................... $ 1.10 $ 0.89 $ 0.82 $ 0.95 $ 0.76
Tax-effected net income (3) ...................... $ 1.12 $ 0.90 $ 0.83 $ 0.70 $ 0.56
Cash dividends declared .......................... $ 0.375 $ 0.33 $ 0.29 $ 0.25 $ 0.19
Average shares outstanding (000s) ................... 153,719 152,874 152,239 152,354 153,069
Average shares outstanding - assuming dilution (000s) 156,165 155,404 153,737 153,280 154,149
Dividend payout ratio ............................... 33.48% 36.67% 34.94% 26.04% 25.00%
=================================================================================================================================
Selected year-end balances (in millions)
Loans ............................................... $ 10,006.2 $ 8,286.5 $ 6,738.4 $ 5,285.0 $ 4,289.8
Deposits ............................................ 10,603.0 9,814.4 9,073.3 7,669.0 7,412.2
Debt ................................................ 805.7 506.5 57.2 36.7 23.5
Equity .............................................. 1,318.1 1,196.1 1,078.9 900.8 754.7
Total assets ........................................ 14,011.5 12,388.2 10,730.9 9,017.6 8,502.3
=================================================================================================================================
Selected average balances (in millions)
Loans ............................................... $ 9,142.2 $ 7,395.4 $ 5,921.6 $ 4,767.2 $ 4,002.6
Deposits ............................................ 9,926.2 9,242.8 8,083.6 7,440.7 7,256.1
Debt ................................................ 710.7 94.1 32.2 29.6 35.8
Equity .............................................. 1,260.7 1,132.5 950.7 817.1 730.6
Total assets ........................................ 12,892.4 11,247.8 9,562.3 8,694.5 8,381.9
=================================================================================================================================
Selected ratios
Net interest margin (taxable-equivalent) ............ 4.51% 4.74% 4.83% 4.66% 4.55%
Return on assets .................................... 1.39% 1.29% 1.34% 1.68% 1.40%
Return on common equity ............................. 14.80% 13.36% 13.63% 17.89% 16.02%
Return on total equity .............................. 14.17% 12.79% 13.45% 17.89% 16.02%
Efficiency ratio .................................... 57.79% 63.57% 64.76% 65.07% 73.77%
Average equity/average assets ....................... 9.78% 10.07% 9.94% 9.40% 8.72%
Tier 1 risk-based capital ratio ..................... 10.76% 11.26% 12.68% 15.25% 16.21%
Total risk-based capital ratio ...................... 11.96% 12.51% 13.94% 16.52% 17.49%
Leverage ratio ...................................... 8.58% 8.65% 8.92% 9.81% 9.09%
=================================================================================================================================
Tax-effected net income and ratios excluding
purchase accounting intangible amortization
and balances (3) (4)
Net income applicable to common shareholders ........ $ 182,398 $ 149,432 $ 133,162 $ 109,994 $ 107,698
Net income per common share (2) ..................... $ 1.19 $ 0.98 $ 0.87 $ 0.72 $ 0.70
Net income per common share - assuming dilution (2).. $ 1.17 $ 0.96 $ 0.87 $ 0.72 $ 0.70
Return on assets .................................... 1.49% 1.41% 1.43% 1.27% 1.29%
Return on common equity ............................. 18.04% 16.99% 17.20% 13.83% 15.57%
Efficiency ratio .................................... 56.13% 61.51% 63.50% 64.42% 68.89%
=================================================================================================================================
- ----------------
(1)All financial information has been restated for mergers accounted for as
poolings of interests. The effects of mergers accounted for as purchase
transactions have been included from the date of consummation. Prior periods
have been conformed to current-period presentation.
(2)Dividends per common share are historical amounts. For a discussion of net
income per common share computations refer to Note 18 of the consolidated
financial statements - "Net Income Per Common Share Data."
(3)Adjusted to reflect a 35% effective tax rate for years prior to 1996.
(4)Amortization and balances of core deposit intangibles are net of applicable
taxes. Goodwill amortization and balances are not tax effected.
</TABLE>
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Management's Discussion presents a review of the major factors and trends
affecting the performance of Hibernia Corporation (the "Company" or "Hibernia")
and its subsidiaries, principally Hibernia National Bank and Hibernia National
Bank of Texas, collectively referred to as the "Banks." Effective January 1,
1999, Hibernia National Bank of Texas was merged with and into Hibernia National
Bank. This discussion should be read in conjunction with the accompanying tables
and consolidated financial statements.
1998 Highlights
- -- Net income for 1998 totaled $178.6 million, a 23% increase compared to
$144.8 million for 1997. Net income per common share for 1998 of $1.12
increased 24% compared to $.90 for 1997, and net income per common share -
assuming dilution was $1.10 for 1998, an increase of 24% compared to $.89
for 1997.
- -- Pre-tax, pre-provision earnings in 1998 were $298.9 million, a 32%
increase compared to $226.8 million in 1997 and a 63% increase compared to
$183.2 million in 1996. The provision for possible loan losses in 1998
totaled $26.0 million.
- -- Tangible returns on assets (ROA) and common equity (ROCE) were 1.49% and
18.04%, respectively, in 1998 compared to 1.41% and 16.99% in 1997.
- -- Profitability, loans and deposits continued to increase; asset quality
remained sound; and the Company's franchise was further enhanced by the
expansion of its market coverage through four completed mergers during 1998
and three pending transactions at December 31, 1998.
- -- Loans grew 21% to $10.0 billion at December 31, 1998, with commercial
loans up 25%, small business loans up 6% and consumer loans up 24% from a
year earlier.
- -- The nonperforming asset ratio was 0.52% at December 31, 1998 compared to
0.33% at year-end 1997. The year-end 1998 reserve coverage of nonperforming
loans was 319% compared to 550% at the end of 1997. Although there has been
a decline in these measures, overall asset quality remains sound.
- -- Deposits increased to $10.6 billion at December 31, 1998, a $788.6 million
(8%) increase from year-end 1997.
- -- Net interest income increased $48.5 million in 1998 compared to 1997,
primarily due to a $1.7 billion increase in average loans. The change in
the mix of earning assets, due to average loans increasing at a faster rate
than lower-yielding securities, was more than offset by the negative impact
of declining loan yields, the increased use of market-rate funds and the
decline in the percentage of noninterest-bearing funds supporting earning
assets, resulting in a 23-basis-point decline in the net interest margin to
4.51% for 1998 from 4.74% for 1997.
- -- Operating efficiency and productivity continued to improve. In 1998 the
efficiency ratio was 57.79% compared to 63.57% in 1997 and 64.76% in 1996.
The tangible efficiency ratio, which excludes the impact of amortization of
purchase accounting intangibles, was 56.13% in 1998 compared to 61.51% in
1997 and 63.50% in 1996. Revenue per full-time equivalent employee for 1998
increased 10% compared to 1997.
- -- Cash dividends per common share for 1998 increased to $.375, or 14% higher
than the 1997 cash dividend of $.33 per common share and 29% higher than
the 1996 cash dividend of $.29 per common share. The dividend payout ratios
for 1998, 1997 and 1996 were 33.5%, 36.7% and 34.9%, respectively.
- -- Hibernia completed mergers in 1998 with four institutions that had
combined assets of $1.4 billion and 37 offices. Since the beginning of
1994, Hibernia has completed mergers with 21 institutions (comprising 23
banks) with combined assets of $5.1 billion and 158 offices. At December
31, 1998 transactions were pending with three institutions with combined
assets of $1.1 billion and 19 offices.
Merger Activity
In 1998 the Company completed four mergers, three in Louisiana and one in
East Texas which were accounted for as poolings of interests. In 1997 the
Company completed two mergers with East Texas financial institutions which were
accounted for as poolings of interests. The Company completed five mergers in
1996, two in Louisiana and one in East Texas which were accounted for as
poolings of interests, and two in Louisiana which were accounted for as purchase
transactions.
The institutions with which the Company merged are collectively referred to
as the "merged companies." The merged companies that were acquired in
transactions accounted for as poolings of interests are referred to as the
"pooled companies," and institutions that were acquired in transactions
accounted for as purchases are referred to as the "purchased companies."
All prior-year information has been restated to reflect the effect of
mergers accounted for as poolings of interests. For all purchase transactions,
the financial information of those institutions is combined with Hibernia as of
and subsequent to consummation; therefore, certain items contained in this
discussion are only comparable after excluding the effect of the purchased
companies.
Measures of financial performance subsequent to the purchase transactions
are more relevant when comparing "tangible" results (i.e., before amortization
of purchase accounting intangibles) because they are more indicative of cash
flows, and thus the Company's ability to support growth and pay dividends. The
tangible measures of financial performance are presented in the Five-Year and
Quarterly Consolidated Summary of Income and Selected Financial Data on pages 28
and 51.
Financial Condition
Earning Assets
Interest income from earning assets (including loans, securities and
short-term investments) is the Company's main source of income. Average earning
assets totaled $12.0 billion in 1998, compared to $10.4 billion in 1997 and $8.9
billion in 1996. The increase in average earning assets of $1.6 billion in 1998
and $1.5 billion in 1997 was primarily due to growth in the loan portfolio.
Loan demand remained strong throughout 1998. Loans as a percentage of
average earning assets increased to 76.2% in 1998 compared to 71.1% in 1997 and
66.6% in 1996. Average securities decreased to 21.8% of average earning assets
in 1998 from 25.9% in 1997 and 30.5% in 1996. The Company funded the 1998
increase in earning assets through the growth in interest-bearing deposits of
$513.2 million, other interest-bearing liabilities of $801.4 million,
noninterest-bearing liabilities of $201.8 million and shareholders' equity of
$128.2 million.
Total earning assets at December 31, 1998 were $13.0 billion, up $1.6
billion from a year earlier primarily due to a $1.7 billion (21%) increase in
loans.
LOANS. The Company's lending activities are subject to both prudent
underwriting standards and liquidity considerations. Loans allow Hibernia to
meet customer credit needs and at the same time achieve yields that are
generally higher than those available on other earning assets. Lending
relationships are one way Hibernia meets its goal of providing for all the
financial needs of its customers.
Hibernia engages in commercial, small business and consumer lending. The
specific underwriting criteria for each major loan category are outlined in a
credit policy that is approved by the Board of Directors. In general, commercial
loans are evaluated based on cash flow, collateral, market conditions,
prevailing economic trends, character and leverage capacity of the borrower, and
capital and investment in a particular property, if applicable. Most small
business and consumer loans are underwritten using credit scoring models which
consider factors such as payment capacity, credit history and collateral. In
addition, market conditions, economic trends and the character of the borrower
are considered. The credit policy, including the underwriting criteria for major
loan categories, is reviewed on a regular basis and adjusted when warranted.
Average loans increased $1.7 billion in 1998 and $1.5 billion in 1997 as
all segments experienced strong growth. Hibernia's efforts to achieve its goal
of becoming the best financial services company in each of its markets by
building the most comprehensive and convenient banking network, and delivering
top-quality service across a broad range of financial products and services,
enabled the Company to increase loans by deepening relationships with existing
customers and by attracting new customers from competitors.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
TABLE 1 - COMPOSITION OF LOAN PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------
December 31 ($ in millions) 1998 1997
- -----------------------------------------------------------------------------------------------------------------
Balance Percent Balance Percent
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial:
Commercial and industrial .................. $ 1,371.2 13.7% $ 1,089.2 13.1%
Services industry .......................... 1,055.6 10.5 719.6 8.7
Real estate ................................ 457.4 4.6 444.2 5.4
Health care ................................ 306.5 3.1 251.7 3.0
Transportation, communications and utilities 212.0 2.1 253.6 3.1
Energy ..................................... 422.0 4.2 279.0 3.4
Other ...................................... 55.1 0.6 54.2 0.6
- -----------------------------------------------------------------------------------------------------------------
Total commercial ..................... 3,879.8 38.8 3,091.5 37.3
- -----------------------------------------------------------------------------------------------------------------
Small Business:
Commercial and industrial .................. 678.7 6.8 981.3 11.8
Services industry .......................... 440.2 4.4 309.9 3.7
Real estate ................................ 274.6 2.7 179.0 2.2
Health care ................................ 107.6 1.1 74.1 0.9
Transportation, communications and utilities 82.2 0.8 38.0 0.5
Energy ..................................... 46.3 0.5 17.3 0.2
Other ...................................... 348.0 3.5 259.6 3.1
- -----------------------------------------------------------------------------------------------------------------
Total small business ................. 1,977.6 19.8 1,859.2 22.4
- -----------------------------------------------------------------------------------------------------------------
Consumer:
Residential mortgages:
First mortgages ........................ 2,195.9 21.9 1,591.2 19.2
Junior liens ........................... 190.1 1.9 129.4 1.6
Indirect ................................... 850.5 8.5 748.4 9.0
Revolving credit ........................... 325.8 3.2 282.9 3.4
Other ...................................... 586.5 5.9 583.9 7.1
- -----------------------------------------------------------------------------------------------------------------
Total consumer ....................... 4,148.8 41.4 3,335.8 40.3
- -----------------------------------------------------------------------------------------------------------------
Total loans .................................... $ 10,006.2 100.0% $ 8,286.5 100.0%
=================================================================================================================
</TABLE>
Table 1 details Hibernia's commercial and small business loans classified
by repayment source and consumer loans classified by type. In 1998 commercial
loans grew $788.3 million (25%), small business loans were up $118.4 million
(6%) and consumer loans increased $813.0 million (24%). The portfolio mix was
39% commercial, 20% small business and 41% consumer at year-end 1998 compared to
37%, 23% and 40%, respectively, at year-end 1997. Hibernia's lending strategy
includes maintaining an appropriately balanced portfolio.
Commercial Loans. The growth in the commercial portfolio was distributed
among the services industry, up $336.0 million (47%); commercial and industrial,
up $282.0 million (26%); energy, up $143.0 million (51%); health care, up $54.8
million (22%); and commercial real estate, up $13.2 million (3%). These
increases were partially offset by a decrease of $41.6 million (16%) in the
transportation, communications and utilities industry. Despite significant
growth in several industries, Hibernia's loan portfolio is still well
diversified, as evidenced by the portfolio percentages presented in Table 1.
Hibernia's experienced relationship managers, including experts in
specialized industries such as health care, commercial real estate, energy and
maritime, allowed Hibernia to increase the commercial portfolio. Part of that
increase is a result of the identification of niches such as asset-based lending
and equipment leasing, where Hibernia offers products and services and is
meeting customer needs efficiently and profitably. In addition, the skills and
market knowledge of lenders who have joined the Company through mergers enabled
Hibernia to capitalize on opportunities in new markets.
The energy industry experienced a decline in 1998 as oil prices decreased
worldwide. The Company's experienced energy/maritime management team reviews the
energy portfolio for potential adverse developments and proactively manages
Hibernia's exposure to risk. The Company does not have significant risk
associated with the energy industry as its energy portfolio represents
approximately 10.9% of the commercial loan portfolio and only 4.7% of total
loans as of December 31, 1998. In addition, more than two-thirds of Hibernia's
energy portfolio is composed of customers which are well-capitalized public
companies with decades of experience in the energy industry.
Hibernia's commercial loan portfolio does not contain significant exposure
to foreign countries and has no hedge-fund exposure.
Small Business Loans. The small business portfolio showed increases in the
services industry, up $130.3 million (42%); real estate, up $95.6 million (53%);
transportation, communications and utilities, up $44.2 million (116%); health
care, up $33.5 million (45%); energy, up $29.0 million (168%); and other, up
$88.4 million (34%). These increases were partially offset by a decrease of
$302.6 million (31%) in the commercial and industrial category. This decrease
and the increase in the "other" category primarily resulted from the
reclassification of merger bank loans to their appropriate category after
converting to Hibernia's loan system.
Centralized underwriting, utilization of sophisticated credit scoring
models and Hibernia's shortened application form, QuickApp, have made the
underwriting process more efficient while maintaining credit quality. This
allows the experienced business bankers located in each market to concentrate on
serving the credit and other financial needs of small business customers.
Consumer Loans. The increase in consumer loans to $4.1 billion at December
31, 1998 from $3.3 billion at December 31, 1997 resulted primarily from growth
in the residential mortgage portfolio. Increased marketing efforts, new
products, shortened application and approval processes, and extended service
hours were the major factors in the growth.
Residential mortgage loans increased $665.4 million (39%) in 1998 and
comprise more than half of the consumer loan portfolio. Generally, Hibernia
retains adjustable-rate mortgage loans and sells fixed-rate mortgage loans,
while retaining the associated servicing rights. At December 31, 1998 Hibernia
serviced approximately $4.0 billion in residential mortgage loans.
Technology-driven enhancements helped streamline the mortgage application,
approval and closing processes, thereby improving customer service. This
improvement as well as Hibernia's increased focus on mortgage lending resulted
in over $2.4 billion in loan originations during 1998, a 125% increase from
1997.
In addition to loans for the purchase of homes, Hibernia offers customers a
broad assortment of loans secured by residential mortgages, including the Equity
PrimeLine(R), an attractively priced line of credit secured by the customer's
residence.
SECURITIES. At the end of 1998, securities totaled $2.7 billion, an
increase of $48.1 million, or 1.8%, from the end of 1997. Of total securities at
December 31, 1998, 88% are debt securities of the U.S. government or its
agencies. Most securities held by the Company qualify as pledgeable securities
and are used to collateralize repurchase agreements and public fund deposits.
The composition of the securities portfolio is shown in Table 2.
During 1998, as a result of the interest rate environment, Hibernia
restructured its securities portfolio. This restructuring resulted in the sale
of $30.0 million of U.S. Treasuries and the purchase of a similar amount of U.S.
government agencies. In connection with these transactions, the Company
recognized a gain on the sale of securities of $1.3 million, while enhancing
future interest income.
The Company held no trading securities at December 31, 1998. The Company
held $35.9 million in securities as trading account assets at December 31, 1997.
These trading account assets, purchased in late 1997, related to a single
transaction associated with a tax planning strategy and were sold in early 1998
for slightly more than their carrying value at year-end 1997. The Company held
no trading account assets at December 31, 1996, and there was no significant
trading activity during 1996. Hibernia classifies its trading account assets
as short-term investments.
Average securities available for sale decreased $74.0 million (3%) to $2.6
billion in 1998 as a result of the reinvestment of maturing securities into
higher-yielding loans during 1997. Average securities available for sale
decreased $22.0 million from 1996 to 1997 primarily due to a reduction in
mortgage-backed securities as a result of contractual payments and prepayments
of principal. The proceeds from these principal reductions were used to fund
loans.
Maturities and yields of securities at year-end 1998 are detailed in Table
3. Mortgage-backed securities are classified according to contractual maturity
without consideration of principal amortization, projected prepayments or call
options.
At December 31, 1998 the available for sale portfolio included $209.6
million of adjustable-rate securities. In much the same manner as Hibernia's
cost of funds adjusts to new market rates over a period of time, the rates on
these securities may not fully reflect a change in market interest rates for
more than a year.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
TABLE 2 - COMPOSITION OF SECURITIES AVAILABLE FOR SALE
- -------------------------------------------------------------------------------------
December 31 ($ in millions) 1998 1997 1996
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasuries ................. $ 254.5 $ 433.8 $ 512.8
U.S. government agencies:
Mortgage-backed securities.. 971.1 1,296.9 1,507.2
Bonds ...................... 1,134.2 582.0 455.2
States and political subdivisions 241.1 248.9 181.2
Other ........................... 75.4 66.6 61.6
Derivative financial instruments - - 1.8
- -------------------------------------------------------------------------------------
Total ................. $ 2,676.3 $ 2,628.2 $ 2,719.8
- -------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TABLE 3 - MATURITIES AND YIELDS OF SECURITIES AVAILABLE FOR SALE(1)
- ------------------------------------------------------------------------------------------------------------------------------------
Due after 1 Due after 5
Due in 1 year year through years through Due after
December 31, 1998 ($ in millions) or less 5 years 10 years 10 years Total
- ------------------------------------------------------------------------------------------------------------------------------------
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasuries .................. $ 56.6 6.46% $ 197.9 5.63% $ - -% $ - -% $ 254.5 5.82%
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. government agencies:
Mortgage-backed securities (2) 1.3 4.93 60.5 6.51 192.5 7.13 716.8 6.47 971.1 6.60
- ------------------------------------------------------------------------------------------------------------------------------------
Bonds ........................ 36.5 6.19 165.7 5.68 806.9 6.30 125.1 6.19 1,134.2 6.20
- ------------------------------------------------------------------------------------------------------------------------------------
States and political subdivisions 14.5 7.68 44.1 7.71 55.4 7.51 127.1 8.07 241.1 7.46
- ------------------------------------------------------------------------------------------------------------------------------------
Other ............................ 72.4 4.53 1.8 5.03 1.2 5.03 - - 75.4 4.55
- ------------------------------------------------------------------------------------------------------------------------------------
Total ..................... $ 181.3 5.72% $ 470.0 5.96 1056.0 6.51% $ 969.0 6.64% $2,676.3 6.37%
====================================================================================================================================
- ----------------
(1)Yield computations are presented on a taxable-equivalent basis using market
values and a statutory income tax rate of 35%.
(2)Mortgage-backed securities are classified according to contractual maturity
without consideration of principal amortization, projected prepayments or
call options.
</TABLE>
The average repricing period of total securities at December 31, 1998 was
5.5 years compared to 3.9 years at December 31, 1997. The repricing period
increased due to a movement toward longer maturity agency bonds which have call
features. These call features are not considered in the calculation of the
average repricing period. Carrying securities available for sale at market value
has the effect of recognizing a yield on the securities equal to the current
market yield.
Asset Quality
Nonperforming assets consist of nonaccrual loans (loans on which interest income
is not currently recognized), restructured loans (loans with below-market
interest rates or other concessions due to the deteriorated financial condition
of the borrower), foreclosed assets (assets to which title has been assumed in
satisfaction of debt) and excess bank-owned property. Nonperforming assets
totaled $52.4 million at year-end 1998, a $24.9 million (90%) increase from the
prior year. Nonperforming assets totaling $27.5 million at December 31, 1997
were up $1.2 million (5%) from December 31, 1996. Approximately 50% of the
increase in nonperforming assets is the result of one large non-energy-related
commercial loan. The composition of nonperforming assets and certain key asset
quality ratios for the past five years are illustrated in Table 4.
Interest payments received on nonperforming loans are applied to reduce
principal if there is doubt as to the collectibility of the principal;
otherwise, these receipts are recorded as interest income. Certain nonperforming
loans are current as to principal and interest payments but are classified as
nonperforming because there is doubt concerning full collectibility of both
principal and interest.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
TABLE 4 - NONPERFORMING ASSETS
- -------------------------------------------------------------------------------------------------------------
December 31 ($ in thousands) 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans ...................... $ 40,152 $ 22,598 $ 17,109 $ 18,515 $ 23,610
Restructured loans .................... - - - - 6,024
- -------------------------------------------------------------------------------------------------------------
Nonperforming loans ............... 40,152 22,598 17,109 18,515 29,634
Foreclosed assets ..................... 9,618 2,577 5,533 6,654 11,156
Excess bank-owned property ............ 2,648 2,360 3,670 2,946 -
- -------------------------------------------------------------------------------------------------------------
Total nonperforming assets ........ $ 52,418 $ 27,535 $ 26,312 $ 28,115 $ 40,790
- -------------------------------------------------------------------------------------------------------------
Accruing loans past due 90 days or more $ 7,054 $ 5,767 $ 5,918 $ 3,201 $ 5,581
Reserve for possible loan losses ...... $127,976 $124,381 $143,566 $165,099 $171,454
Nonperforming assets/loans plus
foreclosed assets and excess
bank-owned property ............... 0.52% 0.33% 0.39% 0.53% 0.95%
Reserve for possible loan losses/loans 1.28% 1.50% 2.13% 3.12% 4.00%
Reserve for possible loan losses/
nonperforming loans ............... 318.7% 550.4% 839.1% 891.7% 578.6%
Net loans charged off/average loans ... 0.25% 0.31% 0.26% 0.14% 0.30%
=============================================================================================================
</TABLE>
Loans are considered to be impaired when it is probable that all amounts
due in accordance with the contractual terms will not be collected. Included in
nonaccrual loans are loans that are considered to be impaired which totaled
$36.5 million at December 31, 1998 and $17.2 million at December 31, 1997. The
reserve for possible loan losses related to these loans was $9.8 million and
$2.6 million at December 31, 1998 and 1997, respectively.
In addition to the nonperforming loans discussed above, there are $20.7
million of loans which, in management's opinion, are subject to potential future
classification as nonperforming.
Foreclosed assets and excess bank-owned property, which are recorded at
fair value less estimated selling cost, totaled $12.3 million at year-end 1998,
$4.9 million at year-end 1997 and $9.2 million at year-end 1996.
Table 5 details nonperforming loan activity during 1998 by loan type
(commercial real estate, other commercial, small business and consumer).
Payments and loans returned to performing status accounted for a $21.2 million
reduction in nonperforming loans. Charge-offs of nonperforming loans and
transfers to foreclosed assets totaled $13.7 million, while $52.4 million in
loans were transferred to nonperforming status in 1998.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
TABLE 5 - SUMMARY OF NONPERFORMING LOAN ACTIVITY
- ---------------------------------------------------------------------------------------------------------------------
Commercial Other Small
($ in thousands) Real Estate Commercial Business Consumer Total
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonperforming loans at December 31, 1997 $ 199 $ 5,083 $ 11,306 $ 6,010 $ 22,598
Additions .............................. - 25,000 23,201 4,227 52,428
Gross charge-offs ...................... (118) (875) (2,998) (511) (4,502)
Transfers to foreclosed assets ......... - (7,686) (893) (575) (9,154)
Returned to performing status .......... - - (1,281) (2,069) (3,350)
Payments ............................... - (2,388) (12,291) (3,189) (17,868)
- ---------------------------------------------------------------------------------------------------------------------
Nonperforming loans at December 31, 1998 $ 81 $ 19,134 $ 17,044 $ 3,893 $ 40,152
=====================================================================================================================
</TABLE>
Nonperforming assets compared to total loans plus foreclosed assets and
excess bank-owned property (nonperforming asset ratio) is one measure of asset
quality. At December 31, 1998 the Company's nonperforming asset ratio was 0.52%
compared to 0.33% at year-end 1997 and 0.39% at year-end 1996. Another measure
of asset quality is the amount of net charge-offs during the year compared to
average loans. As illustrated in Table 6, net charge-offs in 1998 totaled $22.4
million, a $0.4 million decrease from $22.8 million in 1997. Net charge-offs as
a percentage of average loans were 0.25% in 1998, 0.31% in 1997 and 0.26% in
1996.
The level of accruing, delinquent loans (over 30 days past due) as a
percentage of total loans was 0.6% at December 31, 1998 compared to 0.8% at
year-end 1997 and 1.3% at year-end 1996. The commercial loan delinquency ratio
increased in 1998 to 0.3% from 0.2% at the end of 1997. The small business loan
delinquency ratio declined in 1998 to 0.5% from 0.8% at the end of 1997, and the
consumer loan delinquency ratio decreased to 0.9% from 1.4%. The improvement in
consumer delinquencies from 1997 is primarily due to a change in the reporting
methodology from number of days to payment cycle dates for mortgage loans, a
methodology utilized in the banking industry.
Reserve and Provision for Possible Loan Losses
The reserve for possible loan losses is comprised of specific reserves
(assessed for each loan that is impaired or for which a probable loss has been
identified), general reserves and an unallocated reserve.
Management continuously evaluates the reserve for possible loan losses to
ensure the level is adequate to absorb loan losses inherent in the loan
portfolio. Reserves on impaired loans are based on discounted cash flows using
the loan's initial effective interest rate or the fair value of the collateral
for certain collateral-dependent loans. Factors contributing to the
determination of specific reserves include the financial condition of the
borrower, changes in the value of pledged collateral and general economic
conditions. General reserves are established based on historical charge-offs
considering factors such as risk rating, industry concentration and loan type,
with the most recent charge-off experience weighted more heavily. The
unallocated reserve generally serves to compensate for the uncertainty in
estimating loan losses, including the possibility of improper risk ratings
and specific reserve allocations. The reserve also considers trends in
delinquencies and nonaccrual loans as well as the evolving portfolio mix in
terms of collateral, relative loan size and the degree of seasoning in the
various loan products.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
TABLE 6 - LOAN LOSS RESERVE ACTIVITY
- ----------------------------------------------------------------------------
Year Ended December 31
($ in thousands) 1998 1997 1996
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning
of year ............ $ 124,381 $ 143,566 $ 165,099
Loans charged off .. (39,702) (45,596) (36,228)
Recoveries ......... 17,297 22,784 20,608
- ----------------------------------------------------------------------------
Net loans
charged off ........ (22,405) (22,812) (15,620)
- ----------------------------------------------------------------------------
Provision for possible
loan losses ........ 26,000 3,148 (12,127)
Addition due to
purchase
transactions ....... - 479 6,214
- ----------------------------------------------------------------------------
Balance at end
of year ............ $ 127,976 $ 124,381 $ 143,566
============================================================================
</TABLE>
The provision for possible loan losses (a component of earnings) is the
means by which the reserve for possible loan losses is adjusted to establish a
reserve level considered adequate by management to absorb future potential loan
losses.
The Board of Directors reviews the adequacy of the reserve each quarter. As
a result of continued growth in the loan portfolio and increases in nonaccrual
loans, Hibernia recorded a $26.0 million provision for loan losses in 1998,
compared to a $3.1 million provision recorded by certain of the pooled companies
in 1997 and a $12.1 million negative provision recorded in 1996.
The year-end 1998 reserve of $128.0 million provided 319% coverage of
nonperforming loans compared to $124.4 million with 550% coverage at year-end
1997 and $143.6 million with 839% coverage at year-end 1996. As a percentage of
total loans, the reserve for possible loan losses amounted to 1.28% at December
31, 1998 compared to 1.50% and 2.13% at year-end 1997 and 1996, respectively.
While the reserve for possible loan losses as a percentage of loans has declined
over the last five years, the present level is considered adequate to absorb
future potential losses.
During 1999 the Company expects the quarterly provision for possible loan
losses to increase to maintain an adequate reserve level. Factors such as loan
growth, the level of nonperforming loans and the amounts and timing of future
cash flows expected to be received on impaired loans will be considered and will
impact the estimate of the required provision.
The allocation of the December 31, 1998 reserve for possible loan losses is
presented in Table 7.
Allocations to commercial and consumer loans declined slightly as a
percentage of their respective portfolios in 1998 compared to 1997, reflecting
improved loss experience. The unallocated reserve has increased as a prudent
response to potential risk factors including the impact on all three portfolios
of declining oil prices in the economies where Hibernia operates.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
TABLE 7 - ALLOCATION OF RESERVE
FOR POSSIBLE LOAN LOSSES
- ----------------------------------------------------------------
Reserve for % of
December 31, 1998 Possible Total
($ in millions) Loan Losses Reserve
- ----------------------------------------------------------------
<S> <C> <C>
Commercial real estate loans $ 2.2 1.7%
Other commercial loans ..... 23.6 18.5
Small business loans ....... 13.8 10.8
Consumer loans ............. 51.3 40.0
Unallocated reserve ........ 37.1 29.0
- ----------------------------------------------------------------
Total .................. $ 128.0 100.0%
- ----------------------------------------------------------------
</TABLE>
Funding Sources
Deposits
Deposits are the Company's primary source of funding for earning assets.
Hibernia offers a variety of products designed to attract and retain customers,
with the primary focus on core deposits. Summaries of average deposit rates and
deposit composition are presented in Table 8 and Table 9, respectively.
Average deposits totaled $9.9 billion in 1998, a $683.4 million (7%)
increase from 1997. Average core deposits were up $502.1 million (7%) to $8.1
billion or 81.8% of total deposits. This growth resulted from an emphasis on
attracting new deposits and expanding current banking relationships through
outstanding service and the promotion of products such as Tower Super SavingsSM
and Tower GoldSM Services, which offer liquidity, competitive interest rates
and the security of a bank deposit.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
TABLE 8 - AVERAGE DEPOSIT RATES
- --------------------------------------------------------------------------
1998 1997 1996
- --------------------------------------------------------------------------
<S> <C> <C> <C>
NOW accounts ............. 3.33% 2.77% 2.60%
Money market
deposit accounts ....... 2.53 2.57 2.41
Savings accounts ......... 3.22 2.90 2.19
Other consumer
time deposits .......... 5.19 5.23 5.47
Public fund certificates
of deposit of
$100,000 or more ....... 5.35 5.50 5.40
Certificates of deposit
of $100,000 or more .... 5.28 5.21 5.18
Foreign time deposits .... 5.04 5.30 5.41
- --------------------------------------------------------------------------
Total interest-bearing
deposits ........... 4.22% 4.25% 4.24%
==========================================================================
</TABLE>
NOW account average balances for 1998 were down $181.5 million compared to
1997, and money market average deposits were up $224.4 million in 1998 compared
to 1997. NOW account average balances for 1997 were up $13.3 million compared to
1996, and money market average deposits were up $120.6 million in 1997 compared
to 1996. During the fourth quarter of 1995, Hibernia instituted a new product,
the Reserve Money Manager account, in which each NOW account is joined with a
money market deposit account. As needed, funds are moved from the money market
deposit account to cover items presented for payment to the customer's NOW
account up to a maximum of six transfers per statement cycle. As a result of
additional analysis performed in 1997, the Reserve Money Manager account
was enhanced in the first quarter of 1998 to create a more efficient sweep
process. The effect of the Reserve Money Manager account on average balances
was $1,097.0 million in 1998, $743.9 million in 1997 and $533.5 million in 1996
(reducing NOW account average balances and increasing money market deposit
account average balances). Net of this effect, NOW account average balances
were up $171.6 million (14%) in 1998 compared to 1997 and up $223.7 million
(22%) in 1997 compared to 1996, and money market deposit account average
balances were down $128.7 million (13%) in 1998 compared to 1997 and down $89.8
million (8%) in 1997 compared to 1996.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
TABLE 9 - DEPOSIT COMPOSITION
- ---------------------------------------------------------------------------------------------------------------------
1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------
Average % of Average % of Average % of
($ in millions) Balances Deposits Balances Deposits Balances Deposits
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Noninterest-bearing ........... $ 1,803.1 18.2% $ 1,632.9 17.7% $ 1,433.8 17.7%
NOW accounts .................. 323.6 3.3 505.1 5.4 491.8 6.1
Money market deposit accounts.. 1,970.0 19.8 1,745.6 18.9 1,625.0 20.1
Savings accounts .............. 1,104.2 11.1 792.6 8.6 493.1 6.1
Other consumer time deposits .. 2,924.2 29.4 2,946.8 31.9 2,673.1 33.1
- ---------------------------------------------------------------------------------------------------------------------
Total core deposits ... 8,125.1 81.8 7,623.0 82.5 6,716.8 83.1
- ---------------------------------------------------------------------------------------------------------------------
Public fund certificates of
deposit of $100,000 or more 992.1 10.0 1,014.3 11.0 926.9 11.5
Certificates of deposit of
$100,000 or more .......... 582.3 5.9 507.3 5.5 398.1 4.9
Foreign time deposits ......... 226.7 2.3 98.2 1.0 41.8 0.5
- ---------------------------------------------------------------------------------------------------------------------
Total deposits ........ $ 9,926.2 100.0% $ 9,242.8 100.0% $ 8,083.6 100.0%
=====================================================================================================================
</TABLE>
Average noncore deposits increased $181.3 million (11%) to $1.8 billion in
1998 compared to 1997. Public fund certificates of deposit of $100,000 or more
decreased $22.2 million (2%), while other large-denomination certificates of
deposit increased $75.0 million (15%) and foreign deposits increased $128.5
million (131%). The growth in other large-denomination certificates of deposit
was primarily the result of competitive pricing and increased marketing efforts
as the Company funded its growing loan portfolio. Foreign deposits were
positively impacted by a treasury management sweep product which moves
commercial customer funds into higher-yielding Eurodollar deposits. Because of
the nature of these commercial customer funds, they are considered stable and
not subject to the same volatility as other sources of foreign deposits.
Borrowings
Average borrowings - which include federal funds purchased; securities sold
under agreements to repurchase (repurchase agreements); treasury, tax and loan
account; and debt - increased $801.4 million (114%) to $1.5 billion in 1998
compared to 1997.
Average federal funds purchased were $395.2 million during 1998, an
increase of $129.6 million from 1997. Fluctuations in short-term borrowings stem
from differences in the timing of growth in the loan portfolio and growth of
other funding sources (deposits, proceeds from maturing securities and debt).
Average repurchase agreements increased $55.2 million in 1998 compared to 1997.
This increase resulted primarily from treasury management products which sweep
funds from commercial customers' deposit accounts.
The Company's debt at December 31, 1998, which totaled $805.7 million, is
comprised of advances from the Federal Home Loan Bank of Dallas (FHLB). The
average rate on debt during 1998 was 5.60% compared to 5.94% during 1997. Debt
increased $299.1 million from December 31, 1997 as Hibernia locked in attractive
fixed rates to fund its growing loan portfolio. The FHLB may demand payment of
$300 million in callable advances at quarterly intervals, of which $200 million
may not be called before June of 2003. If called prior to maturity, replacement
funding will be offered by the FHLB at a then-current rate. The Company's
reliance on borrowings, while higher than a year ago, continues to be within
parameters determined by management to be prudent in terms of liquidity and
interest rate sensitivity.
Interest Rate Sensitivity
Interest rate risk represents the potential impact of interest rate changes
on net income and capital resulting from mismatches in repricing opportunities
of assets and liabilities over a period of time. A number of tools are used to
monitor and manage interest rate risk, including simulation models and interest
sensitivity (Gap) analyses. Management uses simulation models to estimate the
effects of changing interest rates and various balance sheet strategies on the
level of the Company's net income and capital. As a means of limiting interest
rate risk to an acceptable level, management may alter the mix of floating- and
fixed-rate assets and liabilities, change pricing schedules, adjust maturities
through sales and purchases of securities available for sale, and enter into
derivative contracts.
The simulation models incorporate management's assumptions regarding the
level of interest rates or balance changes for indeterminate maturity deposits
(demand, NOW, savings and money market deposits) for a given level of market
rate changes. These assumptions have been developed through a combination of
historical analysis and future expected pricing behavior. Key assumptions in the
simulation models include the relative timing of prepayments on mortgage-related
assets and cash flows and maturities of derivative and other financial
instruments held for purposes other than trading. In addition, the impact of
planned growth and anticipated new business is factored into the simulation
models. These assumptions are inherently uncertain and, as a result, the models
cannot precisely estimate net interest income or precisely predict the impact of
a change in interest rates on net income or capital. Actual results will differ
from simulated results due to the timing, magnitude and frequency of interest
rate changes and changes in market conditions and management strategies, among
other factors.
Hibernia's policy objective is to limit the impact on net interest income,
from an immediate and sustained change in interest rates of 200 basis points, to
20% of projected 12-month net income. Based on the results of the simulation
models at December 31, 1998, the Company would expect an increase in net
interest income of $2.1 million in the event of an immediate 200-basis-point
increase in interest rates and an increase in net interest income of $3.0
million in the event of an immediate 200-basis-point decrease in interest rates.
In addition, the Company projects an increase in net interest income of $2.0
million and a decrease of $4.9 million if interest rates gradually increase or
decrease, respectively, by 150 basis points over the next year.
Table 10 presents Hibernia's interest rate sensitivity position at December
31, 1998. This Gap analysis is based on a point in time and may not be
meaningful because assets and liabilities must be categorized according to
contractual maturities and repricing periods rather than estimating more
realistic behaviors, as is done in the simulation models. Also, the Gap analysis
does not consider subsequent changes in interest rate levels or spreads between
asset and liability categories.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TABLE 10 - INTEREST RATE SENSITIVITY AND GAP ANALYSIS
- ------------------------------------------------------------------------------------------------------------------------------------
Over 5 Years
December 31, 1998 1-30 31-60 61-90 91-365 1 Year -and Non-
($ in thousands) Days Days Days Days 5 Years Sensitive Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Earning assets:
Loans ......................... $ 4,262,112 $ 186,472 $ 184,804 $1,406,221 $3,272,437 $ 694,136 $10,006,182
Securities available for sale.. 2,676,311 - - - - - 2,676,311
Other earning assets .......... 350,132 - - - - - 350,132
- ------------------------------------------------------------------------------------------------------------------------------------
Total earning assets ...... 7,288,555 186,472 184,804 1,406,221 3,272,437 694,136 13,032,625
- ------------------------------------------------------------------------------------------------------------------------------------
Funding sources:
NOW accounts .................. 295,180 - - - - - 295,180
Money market deposit accounts.. 2,220,112 - - - - - 2,220,112
Savings accounts .............. 1,205,742 - - - - - 1,205,742
Foreign deposits .............. 321,537 - - - - - 321,537
Other interest-bearing deposits 1,480,209 436,771 345,820 1,595,436 620,782 55,198 4,534,216
Short-term borrowings ......... 1,134,136 - - - - - 1,134,136
Debt .......................... 100,070 70 70 100,630 603,037 1,812 805,689
Noninterest-bearing sources ... - - - - - 2,516,013 2,516,013
- ------------------------------------------------------------------------------------------------------------------------------------
Total funding sources ..... 6,756,986 436,841 345,890 1,696,066 1,223,819 2,573,023 13,032,625
- ------------------------------------------------------------------------------------------------------------------------------------
Repricing/maturity gap:
Period ........................ $ 531,569 $(250,369) $(161,086)$ (289,845) $2,048,618 (1,878,887)
Cumulative .................... $ 531,569 $ 281,200 $ 120,114 $ (169,731) $1,878,887 -
- ------------------------------------------------------------------------------------------------------------------------------------
Gap/total earning assets:
Period ........................ 4.1% (1.9)% (1.2)% (2.2)% 15.7% (14.4)%
Cumulative .................... 4.1% 2.2 % 0.9 % (1.3)% 14.4%
====================================================================================================================================
</TABLE>
Although the Gap analysis indicates the Company is liability-sensitive
(interest-bearing liabilities exceed interest-earning assets) up to one year,
this may not be true in practice. The 1-30 days deposit category includes NOW,
money market and savings deposits which have indeterminate maturities. The rates
paid on these core deposits, which account for 35% of interest-bearing
liabilities, do not necessarily reprice in a direct relationship to changes in
market interest rates. In addition, one of Hibernia's deposit products is the
consumer One Way CDSM, which gives the customer a one-time opportunity to adjust
the rate on a certificate of deposit during its two-year term. As of December
31, 1998 these deposits totaled $546.4 million, of which approximately $127.2
million had been repriced. Of the remaining $419.2 million, approximately $388.2
million are included in the 1-30 days deposit category because they may reprice
at any time. However, these deposits adjust to market rates over a much longer
period as depositors choose when to exercise the option to adjust the rate on
their deposits.
In addition to core deposits, which serve to lessen the volatility of net
interest income in changing rate conditions, the Company's loan portfolio
contains mortgage loans that have actual maturities and cash flows that vary
with the level of interest rates. Depending on market interest rates, actual
cash flows from these earning assets will vary from the contractual maturities
due to payoffs and refinancing activity.
On a limited basis, Hibernia uses derivative financial instruments to
manage interest rate exposure. These instruments involve the risk of dealing
with counterparties and their ability to meet contractual terms. These
counterparties must receive appropriate credit approval before the Company
enters into an interest rate contract. Notional principal amounts express the
volume of these transactions, although the amounts potentially subject to credit
and market risk are much smaller. Deposit-related interest rate swaps may be
entered into as hedges against deposits of the same maturity. The differential
to be paid or received is accrued as interest rates change and is recognized as
an adjustment to interest expense on deposits. The notional amount of deposit-
related interest rate swaps totaled $125.0 million at the end of 1998 and $100.0
million at the end of 1997, respectively. There were no deposit-related interest
rate swaps at the end of 1996.
Derivative financial instruments are also held or issued by the Company for
trading purposes to provide customers the ability to manage their own interest
rate sensitivity. In general, matched positions are established to minimize risk
to the Company. The notional value of derivative financial instruments held for
trading totaled $405.0 million at year-end 1998, $224.3 million at year-end 1997
and $209.9 million at year-end 1996. However, Hibernia's credit exposure to
derivative financial instruments held for trading totaled only a fraction of
those amounts: $4.0 million at December 31, 1998, $0.9 million at December 31,
1997 and $0.9 million at December 31, 1996.
Net Interest Margin
The net interest margin is taxable-equivalent net interest income as a
percentage of average earning assets. Net interest income is the difference
between total interest and fee income generated by earning assets and total
interest expense incurred on interest-bearing liabilities and is affected by
the:
o volume, yield and mix of earning assets;
o level of nonperforming loans;
o volume, yield and mix of interest-bearing liabilities;
o amount of noninterest-bearing funds supporting earning assets; and
o interest rate environment.
The net interest margin is comprised of the net interest spread, which
measures the difference between the average yield on earning assets and the
average rate paid on interest-bearing liabilities, and the contribution of
noninterest-bearing funds, which measures the effect of noninterest-bearing
funds (primarily demand deposits and shareholders' equity) on net interest
income. In general, the higher the ratio of noninterest-bearing funds supporting
earning assets, the higher the net interest margin. Hibernia's
noninterest-bearing funds ratio was 19.79% in 1998 compared to 20.09% in 1997
and 21.09% in 1996. Table 11 details the components of the net interest margin
for the past five years.
The net interest margin of 4.51% in 1998 compares to 4.74% in 1997 and
4.83% in 1996. The decline in the net interest margin in 1998 was the result of
a decline in loan yields to 8.57% from 8.89% in 1997, an increased use of
market-rate funds and the decline in the level of noninterest-bearing funds
supporting earning assets. The decline in loan yields results from a lower
interest-rate environment and a change in the mix of the loan portfolio. The
increased use of market-rate funds and the decline in the level of
noninterest-bearing funds are evidenced by the increase in the cost of funds
supporting earning assets to 3.53% in 1998 from 3.46% in 1997. These negative
impacts were partially offset by the change in the mix of earning assets to
proportionately more loans with comparatively higher yields than other earning
assets. In 1998 loans amounted to 76% of average earning assets compared to 71%
in 1997.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
TABLE 11 - NET INTEREST MARGIN (taxable-equivalent)
- -------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Yield on earning assets ........................... 8.04% 8.20% 8.20% 8.06% 7.17%
Rate on interest-bearing liabilities .............. 4.40 4.33 4.27 4.31 3.32
- -------------------------------------------------------------------------------------------------------------------
Net interest spread ........................... 3.64 3.87 3.93 3.75 3.85
Contribution of noninterest-bearing funds ......... 0.87 0.87 0.90 0.91 0.70
- -------------------------------------------------------------------------------------------------------------------
Net interest margin ........................... 4.51% 4.74% 4.83% 4.66% 4.55%
- -------------------------------------------------------------------------------------------------------------------
Noninterest-bearing funds supporting earning assets 19.79% 20.09% 21.09% 21.14% 21.06%
===================================================================================================================
</TABLE>
The net interest margin was negatively impacted (approximately three basis
points) in 1998 due to a $3.0 million adjustment related to revenue-sharing
arrangements with certain automobile dealers brought about by a
higher-than-expected level of consumer automobile prepayments. Borrowers have
increasingly opted to prepay these types of loans, resulting in a decrease in
the reserve established to protect the Company against the impact of
prepayments. This behavior is primarily due to economic and market conditions,
the current interest rate environment and the ability of borrowers to obtain
alternative financing at attractive rates. The Company will actively monitor
future prepayment activity and adjust pricing and the reserve level accordingly.
In addition, the net interest margin was reduced approximately three basis
points in 1998 and one basis point in 1997 by the funding cost of a transaction
designed to utilize capital losses. On a normalized basis, the net interest
margin would have been 4.57% for 1998 compared to 4.75% in 1997.
From 1996 to 1997 the normalized net interest margin decreased eight basis
points. The negative effects of an increased use of market-rate funds, a decline
in loan yields to 8.89% from 9.10% and a six-basis-point increase in total
funding costs were partially offset by the change in the mix of earning assets.
Results of Operations
The Company earned $178.6 million, or $1.12 per common share, in 1998. In
1997 net income was $144.8 million, or $.90 per common share, and 1996 net
income was $127.9 million, or $.83 per common share. Net income per common share
assuming dilution was $1.10, $.89 and $.82 for 1998, 1997 and 1996,
respectively.
Operating results improved in 1998 because of a $49.0 million increase in
taxable-equivalent net interest income resulting from a higher level of earning
assets, a $28.0 million increase in noninterest income (excluding securities
transactions) and a $3.0 million increase in securities gains. These favorable
effects were partially offset by a $26.0 million provision for possible loan
losses in 1998 compared to a $3.1 million provision taken by certain of the
pooled companies in 1997 and a $7.3 million increase in noninterest expense. In
addition, income tax expense increased $15.4 million in 1998 compared to 1997.
The improvement in 1997 from 1996 was due to a $62.7 million increase in
taxable-equivalent net interest income, a $25.4 million improvement in
noninterest income (excluding securities transactions) and $2.7 million in
securities gains in 1997 compared to $5.2 million in securities losses in 1996.
Partially offsetting these favorable effects, 1997 results included a $3.1
million provision for possible loan losses compared to a $12.1 million negative
provision in 1996, an increase in noninterest expense of $49.4 million and an
$11.4 million increase in income tax expense.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
TABLE 12 - INTEREST-EARNING ASSET COMPOSITION
- --------------------------------------------------------------------------------------------
(Percentage of average balances) 1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Loans ....................... 76.2% 71.1% 66.6% 58.6% 51.0%
Securities available for sale 21.8 25.9 30.5 13.1 15.3
Securities held to maturity.. - - - 26.0 30.5
- --------------------------------------------------------------------------------------------
Total securities ............ 21.8 25.9 30.5 39.1 45.8
- --------------------------------------------------------------------------------------------
Short-term investments ...... 2.0 3.0 2.9 2.3 3.2
- --------------------------------------------------------------------------------------------
Total interest-earning assets 100.0% 100.0% 100.0% 100.0% 100.0%
============================================================================================
</TABLE>
Net Interest Income
Net interest income on a taxable-equivalent basis increased $49.0 million,
or 10%, to $541.5 million in 1998 from $492.5 million in 1997.
Taxable-equivalent net interest income in 1996 was $429.8 million.
Taxable-equivalent net interest income increased in 1998 compared to 1997 and in
1997 compared to 1996 primarily as the result of the growth and change in the
mix of earning assets.
As indicated in Table 13, the change in volumes increased
taxable-equivalent net interest income in 1998 by $77.7 million compared to
1997. A $148.7 million increase in taxable-equivalent interest income due to the
growth in loans was partially offset by a $62.1 million increase in interest
expense due to growth in interest-bearing liabilities. The change in interest
rates caused a decline in taxable-equivalent net interest income of $28.6
million. Taxable-equivalent interest income on loans declined $22.2 million due
to changes in yields caused by the competitive lending environment and a change
in the mix of the loan portfolio. Interest expense increased $1.1 million due to
an increase in the rates paid on interest-bearing deposits and a change in the
mix of funding sources toward market-rate funds.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
TABLE 13 - CHANGES IN TAXABLE-EQUIVALENT NET INTEREST INCOME(1)
- --------------------------------------------------------------------------------------------------------------------
1998 Compared to 1997 1997 Compared to 1996
- --------------------------------------------------------------------------------------------------------------------
Increase (Decrease) Due to Change In:
- --------------------------------------------------------------------------------------------------------------------
($ in thousands) Volume Rate Total Volume Rate Total
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Taxable-equivalent interest earned on:
Commercial loans .............. $ 73,169 $ (9,191) $ 63,978 $ 32,540 $ (8,986) $ 23,554
Small business loans .......... 15,852 (3,325) 12,527 57,467 1,039 58,506
Consumer loans ................ 59,726 (9,638) 50,088 43,620 (7,399) 36,221
- --------------------------------------------------------------------------------------------------------------------
Loans ...................... 148,747 (22,154) 126,593 133,627 (15,346) 118,281
- --------------------------------------------------------------------------------------------------------------------
Securities available for sale.. (4,821) (6,391) (11,212) (1,444) 2,439 995
Short-term investments ........ (4,211) 1,022 (3,189) 3,123 527 3,650
- --------------------------------------------------------------------------------------------------------------------
Total ..................... 139,715 (27,523) 112,192 135,306 (12,380) 122,926
- --------------------------------------------------------------------------------------------------------------------
Interest paid on:
NOW accounts .................. (5,676) 2,491 (3,185) 352 828 1,180
Money market deposit accounts.. 5,692 (573) 5,119 3,004 2,644 5,648
Savings accounts .............. 9,824 2,743 12,567 7,946 4,275 12,221
Other consumer time deposits .. (1,176) (1,209) (2,385) 14,510 (6,715) 7,795
Public fund certificates of
deposit of $100,000 or more (1,204) (1,518) (2,722) 4,790 920 5,710
Certificates of deposit
of $100,000 or more ....... 3,953 362 4,315 5,683 94 5,777
Foreign deposits .............. 6,485 (267) 6,218 2,990 (47) 2,943
Federal funds purchased ....... 6,989 (243) 6,746 11,738 177 11,915
Repurchase agreements ......... 2,648 (345) 2,303 2,848 539 3,387
Debt .......................... 34,529 (339) 34,190 3,674 (57) 3,617
- --------------------------------------------------------------------------------------------------------------------
Total ..................... 62,064 1,102 63,166 57,535 2,658 60,193
- --------------------------------------------------------------------------------------------------------------------
Taxable-equivalent
net interest income ........... $ 77,651 $ (28,625) $ 49,026 $ 77,771 $ (15,038) $ 62,733
====================================================================================================================
- --------------
(1)Change due to mix (both volume and rate) has been allocated to volume and
rate changes in proportion to the relationship of the absolute dollar
amounts to the changes in each.
</TABLE>
Net interest income for 1998 was negatively impacted by a $3.0 million
adjustment related to revenue-sharing arrangements with certain automobile
dealers discussed in the Net Interest Margin section. In addition, net interest
income in 1998 and 1997 was reduced by the funding cost of a transaction that
utilized capital loss carryforwards. Income of $3.8 million in 1998 and $2.2
million in 1997 associated with this transaction is recorded as a securities
gain in noninterest income rather than in net interest income.
For 1997 compared to 1996, the change in net volumes increased
taxable-equivalent net interest income by $77.8 million. This increase was
primarily the result of growth in loans adding $133.6 million to
taxable-equivalent interest income, partially offset by an increase in
interest-bearing funds increasing interest expense by $57.5 million.
Taxable-equivalent interest income on loans decreased $15.3 million, and
interest expense increased $2.7 million due to changes in the interest rate
environment.
Noninterest Income
Noninterest income totaled $184.9 million in 1998 compared to $154.0
million in 1997 and $120.7 million in 1996. Excluding securities transactions,
noninterest income was up $28.0 million (19%) in 1998 compared to 1997.
Nonrecurring items in 1997 affect comparisons of noninterest income from
1998 to 1997. In 1997, nonrecurring items included a $1.2 million gain
recognized on the sale of Hibernia's interest in an electronic funds transfer
network and $1.2 million in trading account income resulting from a single
transaction related to a tax planning strategy.
Net of the nonrecurring items and securities transactions, noninterest
income was up $30.4 million (20%). The major categories contributing to the
increase in noninterest income were service charges on deposits, up $7.4
million; mortgage loan origination and servicing fees, up $5.6 million; retail
investment service fees, up $5.2 million; gains on the sale of mortgage loans,
up $4.8 million; debit/credit card fees, up $3.0 million; ATM fees, up $1.3
million; and trust fees, up $1.2 million.
Service charges on deposits increased $7.4 million (10%) to $85.6 million
in 1998 compared to 1997. This change was the result of growth in
transaction-based fees and commercial account analysis fees due to an increase
in the number of accounts.
Trust fees were $16.7 million in 1998, up $1.2 million (7%) compared to
1997, and retail investment service fees were $17.2 million, up $5.2 million
(43%) due to market conditions, the expanded availability of investment and
brokerage services throughout the banking office network and the addition of new
customers from merger banks where these products previously were not offered.
Mortgage loan origination and servicing fees were $15.2 million in 1998, up
$5.6 million (58%) compared to 1997. The increase was primarily due to an
increase in mortgage origination activity brought about by a continued focus on
mortgage banking and the favorable interest rate environment. In 1998 Hibernia
processed $2.4 billion in residential first mortgages compared to $1.0 billion
in 1997.
ATM fees increased $1.3 million (14%) to $10.3 million in 1998 compared
to 1997 due to the continued growth of the ATM network and the expansion of ATM
services.
Debit/credit card fees were $7.9 million in 1998, an increase of $3.0
million (61%) compared to 1997. The increase resulted primarily from fees
generated by Hibernia's CheckMateSM debit card and Capital Access(C) credit card
for small businesses.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
TABLE 14 - NONINTEREST INCOME
- --------------------------------------------------------------------------------------------------------------------
Percent Increase (Decrease)
- --------------------------------------------------------------------------------------------------------------------
1998 1997
($ in thousands) 1998 1997 1996 over 1997 over 1996
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Service charges on deposits ............. $ 85,567 $ 78,132 $ 64,982 9.5% 20.2%
Trust fees .............................. 16,678 15,519 14,055 7.5 10.4
Retail investment service fees .......... 17,231 12,070 8,659 42.8 39.4
Mortgage loan origination
and servicing fees .................. 15,235 9,642 8,131 58.0 18.6
Other service, collection and
exchange charges:
ATM fees ............................ 10,255 8,971 7,034 14.3 27.5
Debit/credit card fees .............. 7,894 4,897 2,606 61.2 87.9
Other ............................... 10,297 8,768 9,258 17.4 (5.3)
- --------------------------------------------------------------------------------------------------------------------
Total other service, collection
and exchange charges ...... 28,446 22,636 18,898 25.7 19.8
- --------------------------------------------------------------------------------------------------------------------
Other operating income:
Gain on sales of mortgage loans ..... 8,607 3,772 2,411 128.2 56.4
Other income ........................ 7,493 9,501 8,717 21.1 9.0
- --------------------------------------------------------------------------------------------------------------------
Total other operating income .. 16,100 13,273 11,128 21.3 19.3
- --------------------------------------------------------------------------------------------------------------------
Securities gains (losses), net .......... 5,678 2,725 (5,152) 108.4 N/M
- --------------------------------------------------------------------------------------------------------------------
Total noninterest income ...... $184,935 $153,997 $ 120,701 20.1% 27.6%
====================================================================================================================
- --------------
N/M = Not meaningful
</TABLE>
Gains on sales of mortgage loans were up $4.8 million in 1998 compared to
1997 due to the significant increase in volume in the mortgage banking
operation.
Securities gains increased $3.0 million (108%) to $5.7 million in 1998
compared to 1997. As previously mentioned in the discussion in the Securities
section, the Company liquidated high-quality securities for a gain and used the
proceeds to buy securities with similar credit quality and a higher yield made
possible by the interest rate environment. This transaction resulted in a $1.3
million securities gain. The remainder of the securities gain in 1998 was
primarily the result of the completion of a transaction designed to utilize
capital losses.
Excluding securities transactions and nonrecurring items in both years,
noninterest income in 1997 increased $24.9 million (20%) compared to 1996. The
nonrecurring items in 1996 included a $1.4 million gain on the settlement of an
acquired loan and a $0.5 million gain related to the sale of Hibernia's
municipal bond administration business. The increase in 1997 noninterest income
was primarily the result of growth in service charges on deposits and retail
investment service fees.
Noninterest Expense
Noninterest expense totaled $416.6 million in 1998 compared to $409.3
million in 1997 and $359.8 million in 1996. Excluding certain merger-related
expenses for both years and a $2.0 million nonrecurring charge in 1998 related
to asset write-downs resulting from activities designed to improve customer
delivery convenience by optimizing an expanding banking office network,
noninterest expense in 1998 would have been $411.5 million, a $16.9 million (4%)
increase from 1997. Merger-related expenses were $3.1 million and $14.6 million
in 1998 and 1997, respectively. The major categories contributing to the
increase in noninterest expense were staff costs, up $4.1 million; state taxes
on equity, up $3.7 million; data processing, up $2.6 million; foreclosed
property expense, up $2.2 million; and amortization of intangibles, up $2.1
million.
<TABLE>
<CAPTION>
TABLE 15 - NONINTEREST EXPENSE
- -------------------------------------------------------------------------------------------------------------------
Percent Increase (Decrease)
- -------------------------------------------------------------------------------------------------------------------
1998 1997
($ in thousands) 1998 1997 1996 over 1997 over 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Salaries ........................... $ 177,867 $ 170,130 $ 149,564 4.5% 13.8%
Benefits ........................... 29,265 32,914 31,574 (11.1) 4.2
- -------------------------------------------------------------------------------------------------------------------
Total staff costs .............. 207,132 203,044 181,138 2.0 12.1
- -------------------------------------------------------------------------------------------------------------------
Occupancy, net ..................... 33,923 33,956 30,244 (0.1) 12.3
Equipment .......................... 30,584 30,808 31,723 (0.7) (2.9)
- -------------------------------------------------------------------------------------------------------------------
Total occupancy and equipment .. 64,507 64,764 61,967 (0.4) 4.5
- -------------------------------------------------------------------------------------------------------------------
Data processing .................... 28,808 26,181 22,813 10.0 14.8
Advertising and promotional expenses 14,991 15,634 10,907 (4.1) 43.3
Foreclosed property expense, net ... (999) (3,235) (1,786) (69.1) 81.1
Amortization of intangibles ........ 16,715 14,593 7,791 14.5 87.3
Telecommunications ................. 11,129 11,314 9,675 (1.6) 16.9
Postage ............................ 6,951 6,916 7,024 0.5 (1.5)
Stationery and supplies ............ 5,501 6,006 6,482 (8.4) (7.3)
Professional fees .................. 6,574 10,170 8,641 (35.4) 17.7
State taxes on equity .............. 11,237 7,578 6,760 48.3 12.1
Regulatory expense ................. 2,761 2,854 1,629 (3.3) 75.2
Loan collection expense ............ 4,771 4,037 2,552 18.2 58.2
Other .............................. 36,506 39,398 34,222 (7.3) 15.1
- -------------------------------------------------------------------------------------------------------------------
Total noninterest expense ...... $ 416,584 $ 409,254 $ 359,815 1.8% 13.7%
- -------------------------------------------------------------------------------------------------------------------
Efficiency ratio (1) ............... 57.79% 63.57% 64.76%
- -------------------------------------------------------------------------------------------------------------------
Tangible efficiency ratio (2) ...... 56.13% 61.51% 63.50%
===================================================================================================================
- --------------
(1)Noninterest expense as a percentage of taxable-equivalent net interest income
plus noninterest income (excluding securities transactions).
(2)Noninterest expense (excluding amortization of purchase accounting
intangibles) as a percentage of taxable-equivalent net interest income plus
noninterest income (excluding securities transactions).
</TABLE>
Staff costs, which represent approximately 50% of noninterest expense,
increased $4.1 million (2%) in 1998 compared to 1997. Excluding the effect of
merger-related expenses, staff costs increased $7.5 million (4%) in 1998
compared to 1997. Higher accruals for performance based incentives and bonuses
and for normal merit increases were major factors contributing to the increase
in staff costs.
Occupancy and equipment expenses in 1998 decreased $0.3 million compared to
1997. However, after adjusting for the effect of merger-related expenses and the
$2.0 million charge discussed above, occupancy and equipment expenses were
virtually unchanged.
Data processing expenses increased $2.6 million (10%) to $28.8 million in
1998. Excluding the effect of merger-related expenses, data processing expenses
increased $4.4 million (18%). The increase in data processing expenses is
primarily due to increased transaction volume related to growth in the Company's
customer base, expenses related to Year 2000 compliance and improvements in
technology which enhance risk-management and sales tools.
Amortization of intangibles, a noncash expense, was $16.7 million in 1998,
an increase of $2.1 million (15%) compared to 1997. This increase is primarily
due to an increase in the amortization of mortgage servicing rights resulting
from the growth in the Company's mortgage banking operations, partially offset
by a decline in the amortization of the core deposit intangibles.
Professional fees in 1998 totaled $6.6 million, a decrease of $3.6 million
(35%) compared to 1997. Excluding the effect of merger-related expenses,
professional fees increased $0.4 million (8%). State taxes on equity expense
increased $3.7 million (48%) to $11.2 million in 1998 due to the growth in
equity and increases in millages used to assess those taxes.
Loan collection expense in 1998 totaled $4.8 million, a $0.7 million (18%)
increase compared to 1997. This increase reflects growth in the loan portfolio
and efforts to more proactively collect problem loans. Foreclosed property
expense increased $2.2 million (69%) in 1998 compared to 1997 primarily as a
result of gains recorded on the sale of several significant properties in 1997.
Noninterest expense increased $49.4 million (14%) in 1997 compared to 1996.
Excluding the effect of the purchased companies, merger-related expenses of
$14.6 million in 1997 and $4.3 million in 1996, and nonrecurring items in 1996,
noninterest expense increased $46.4 million (13%) in 1997. The nonrecurring
items in 1996 included $4.0 million in asset write-downs related to technology
enhancements and a $3.3 million addition to reserves for health care benefits
and other expenses. Other significant increases in noninterest expense,
excluding merger-related expenses, included staff costs, up $24.5 million;
occupancy and equipment, up $6.7 million; advertising and promotional expenses,
up $4.2 million; and data processing, up $1.4 million.
The Company's efficiency ratio, defined as noninterest expense as a
percentage of taxable-equivalent net interest income plus noninterest income
(excluding securities transactions), is one measure of the success of its
efforts to control costs and generate income efficiently. The efficiency ratio
of 57.79% in 1998 compares favorably to 63.57% in 1997 and 64.76% in 1996.
Excluding the merger-related expenses and nonrecurring items discussed
previously, the efficiency ratio would have been 56.85%, 61.52% and 62.88% in
1998, 1997 and 1996, respectively.
The tangible efficiency ratio, which excludes the impact of amortization of
goodwill and core deposit intangibles, was 56.13% in 1998, down 538 basis points
from 61.51% in 1997 and down 737 basis points from 63.50% in 1996. Excluding the
effect of merger-related expenses and nonrecurring items discussed previously,
the tangible efficiency ratio would have been 55.19%, 59.46% and 61.62% in 1998,
1997 and 1996, respectively. The improvements in efficiency reflect higher
revenue growth rates compared to expense growth rates. The Company believes this
ratio will decline further in future periods. The declines are expected to
result from cost efficiencies contemplated in completed and pending mergers,
enhancement of noninterest revenue sources and increased net interest income.
Income Taxes
The Company recorded a $94.3 million provision for income taxes in 1998
compared to $78.8 million in 1997 and $67.4 million in 1996.
Hibernia National Bank is subject to a Louisiana shareholders' tax based
partly on income. The income portion is reported as state income tax. In
addition, certain subsidiaries of the Company and Hibernia National Bank are
subject to Louisiana state income tax. Hibernia National Bank of Texas is
subject to Texas franchise tax. Effective January 1, 1999, Hibernia National
Bank of Texas was merged with and into Hibernia National Bank resulting in one
bank in all markets. The Texas operations of Hibernia National Bank will
continue to be subject to Texas franchise tax.
Net future deductible temporary differences at December 31, 1998 were $77.2
million. The reserve for possible loan losses represents $128.0 million of the
future deductible temporary differences. The provision for possible loan losses
which contributed to the reserve has been recognized as expense for financial
reporting purposes but is not deductible for federal income tax purposes until
the loans are charged off. Valued at the 35% federal statutory tax rate, the net
future deductible amounts, if ultimately recognized, would generate tax benefits
of $27.0 million. These benefits are recorded as a deferred tax asset at
December 31, 1998.
Capital
Capital represents shareholder ownership in the Company - the book value of
assets in excess of liabilities. It provides a base for asset growth while
serving, together with the reserve for possible loan losses, as a cushion
against potential losses. Support for future asset expansion could come from
utilization of existing capital, issuance of debt or new capital and retention
of earnings. Hibernia's common dividend payout ratio (common dividends declared
per share divided by net income per common share) was 33.5 % in 1998, 36.7% in
1997 and 34.9% in 1996.
Shareholders' equity totaled $1,318.1 million at the end of 1998 compared
to $1,196.1 million at the end of 1997 and $1,078.9 million at the end of 1996.
The $122.0 million (10%) increase in 1998 was primarily due to current-year
earnings totaling $178.6 million, issuance of common stock of $15.5 million and
a $12.2 million increase in unrealized gains on securities available for sale,
partially offset by $57.0 million in dividends on common stock, $6.9 million in
dividends on preferred stock and a $20.4 million increase in unearned
compensation. The increase in unearned compensation is related to the purchase
of stock for Hibernia's Employee Stock Ownership Plan (ESOP). During 1998 the
ESOP completed its purchase of the originally authorized $30.0 million of stock
and acquired an additional $15.0 million in stock, the purchase of which was
authorized in 1998. As a result, the ESOP acquired approximately 1,443,000
shares of stock during 1998 and holds a total of approximately 3,874,000
shares at December 31, 1998.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
TABLE 16 - CAPITAL
- --------------------------------------------------------------------------------------------------------------------------
($ in millions) 1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Risk-based capital:
Tier 1 .................... $ 1,142.9 $ 1,021.8 $ 913.8 $ 862.0 $ 761.6
Total ..................... 1,270.9 1,135.4 1,004.5 933.9 821.7
Assets:
Quarterly average assets(1) 13,316.2 11,806.8 10,248.1 8,786.9 8,381.8
Net risk-adjusted assets .. 10,623.9 9,076.5 7,207.1 5,652.3 4,699.1
Ratios:
Tier 1 risk-based capital.. 10.76% 11.26% 12.68% 15.25% 16.21%
Total risk-based capital .. 11.96% 12.51% 13.94% 16.52% 17.49%
Leverage .................. 8.58% 8.65% 8.92% 9.81% 9.09%
==========================================================================================================================
- ---------------
(1)Excluding the adjustment for unrealized gains (losses) on securities
available for sale and disallowed intangibles.
</TABLE>
The $117.2 million (11%) increase in shareholders' equity in 1997 reflected
the Company's $144.8 million in earnings, issuance of common stock of $23.8
million and a $6.9 million increase in unrealized gains on securities available
for sale. These increases were partially offset by common dividends totaling
$48.0 million, preferred dividends totaling $6.9 million and a $4.1 million
increase in unearned compensation.
Regulations applicable to national banks and their holding companies
prescribe minimum capital levels. These levels are based on established
guidelines which relate required capital standards to both risk-weighted assets
(risk-based capital ratios) and total assets (leverage ratio). In accordance
with risk-based guidelines, assets and off-balance-sheet financial instruments
are assigned weights to measure their levels of risk. The total risk-based
capital ratio for the Company was 11.96% at year-end 1998, 12.51% at year-end
1997 and 13.94% at year-end 1996. Leverage ratios were 8.58%, 8.65% and 8.92% at
year-end 1998, 1997 and 1996, respectively. Table 16 shows the calculation of
capital ratios for the Company for the past five years.
A shelf registration statement filed by the Company in July 1996 with the
Securities and Exchange Commission allows the Company to issue up to $250
million of securities, including preferred stock and subordinated debt. The
Company issued $100 million of Fixed/Adjustable Rate Noncumulative Preferred
Stock on September 30, 1996. This issuance, which is nonconvertible and
qualifies as Tier 1 capital, allowed Hibernia to maintain its strong capital
ratios and enhanced its ability to act when future opportunities arise. The
remaining $150 million in securities included in this shelf registration
provides Hibernia with the flexibility to quickly modify its capital
structure to meet competitive and market conditions.
The Company anticipates issuing approximately 7.5 million shares of
Hibernia Class A Common Stock in pending mergers with First Guaranty Bank and
MarTex Bancshares, Inc.
Liquidity
Liquidity is a measure of the ability to fund loan commitments and meet
deposit maturities and withdrawals in a timely and cost-effective way. These
needs can be met by generating profits, attracting new deposits and converting
assets (such as short-term investments and securities available for sale) to
cash. To minimize funding risks, management monitors liquidity through a
periodic review of maturity profiles, yield and rate behaviors, and loan and
deposit forecasts.
Core deposits that are maintained at competitive rates are the Company's
primary source of liquidity. Hibernia's extensive banking office network, aided
by the introduction of new deposit products, provided $8.6 billion in core
deposits at year-end 1998, up $555.4 million (7%) from $8.1 billion a year
earlier.
As previously discussed in the Funding Sources section, Hibernia has a
large base of treasury management-related repurchase agreements and foreign
deposits that are a part of total customer relationships. Because of the nature
of the relationships, these funds are considered stable and not subject to the
same volatility as other sources of noncore funds. Large-denomination
certificates of deposit and public funds were additional sources of liquidity
during the year.
Hibernia's loan-to-deposit ratio at year-end 1998 increased to 94.4%
compared to 84.4% at year-end 1997 and 74.3% at year-end 1996. These increases
resulted primarily from significant growth in loans, which outpaced increases in
the deposit base.
Another indicator of liquidity is the large liability dependence ratio,
which measures reliance on short-term borrowings and other large liabilities
(such as large-denomination and public fund certificates of deposit and foreign
deposits). Based on average balances, 20.0% of Hibernia's loans and securities
were funded by net large liabilities (total liabilities less short-term
investments) at year-end 1998, up approximately 100 basis points from the
prior-year level of 19.0%.
Management believes that the current level of short-term investments and
securities available for sale is adequate to meet the Company's current
liquidity needs. The Company also has $150 million remaining on its shelf
registration previously discussed in the Capital section, and its membership in
the FHLB further augments liquidity by providing a readily accessible source of
funds at competitive rates. In addition, a substantial portion of the Company's
$2.2 billion residential first mortgage portfolio and $850.5 million indirect
consumer portfolio can be sold or securitized and, therefore, provides an added
source of liquidity, if needed.
Hibernia Corporation (the "Parent Company") requires liquidity to fund
operating expenses and investments and to pay dividends. At December 31, 1998
the Parent Company had $134.6 million in available funds. During 1998 the Parent
Company received $50.0 million in dividends from its bank subsidiaries. The
Parent Company paid $57.0 million in dividends to common shareholders and $6.9
million in dividends to preferred shareholders and increased its investment in
two of its subsidiaries by a total of $8.4 million.
The Consolidated Statements of Cash Flows can be used to assess the
Company's ability to generate positive future net cash flows from operations and
its ability to meet future obligations. The Company had a net decrease in cash
and cash equivalents in 1998 of $159.4 million. This decrease was the result of
cash used in investing activities of $1.8 billion, as loans (net of sales) used
cash of $1.8 billion, while the purchase of securities available for sale was
offset by the sale and maturities of securities available for sale. These
activities were partially offset with net cash provided from financing
activities of $1.4 billion, as deposits provided cash of $788.7 million,
short-term borrowings provided $414.2 million and the proceeds from debt
issuance, net of payments, totaled $299.1 million. Net cash provided by
operating activities totaled $239.3 million after adjusting 1998 net income for
noncash items.
Cash and cash equivalents increased $192.3 million in 1997. Cash provided
by financing activities totaled $1.4 billion, as deposits provided cash of
$602.0 million, short-term borrowings provided $376.4 million and debt totaling
$500.0 million was issued. Net cash provided by operating activities totaled
$191.7 million after adjusting 1997 net income for noncash items. These
increases to cash were partially offset by net cash used in investing activities
of $1.4 billion, as loans (net of sales) used cash of $1.5 billion, partially
offset by $99.3 million in net cash provided from activity in securities
available for sale.
Cash and cash equivalents increased $255.5 million in 1996. Cash provided
by financing activities totaled $598.3 million, as deposits provided cash of
$488.7 million and the issuance of preferred stock provided $98.0 million. Net
cash provided by operating activities totaled $194.4 million after adjusting
1996 net income for noncash items. These increases were partially offset by net
cash used in investing activities of $537.2 million, as loans (net of sales)
used cash of $1.0 billion, partially offset by $591.7 million in net cash
provided from activity in securities available for sale.
Year 2000
The Year 2000 issue results from the fact that many computer programs store
and process data using two digits rather than four to define the applicable
year. Any computer programs that have date-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This issue affects
not only Hibernia, but virtually all companies and organizations that use
computer information systems.
A team comprised of Hibernia employees and representatives of the Company's
third party data processor was formed in early 1997 to address Year 2000 issues.
The team's plan is to achieve Year 2000 compliance for all mainframe application
systems, local area network application systems, departmental and vendor
application systems and its infrastructure by the end of the second quarter of
1999. In addition to testing and making appropriate changes to its own internal
systems, the Company continues to discuss Year 2000 issues and their potential
impact on business operations with many customers and suppliers. The status of
these activities is provided to Hibernia's Board of Directors, and the Company's
regulators monitor Year 2000 efforts.
Through the performance of a business-unit impact analysis, the Company
identified 37 mission critical systems or systems identified as vital to core
business activities of the Company. As of December 31, 1998, the Company has
remediated and substantially completed unit testing on 35 mission critical
systems, which represents 95% of all mission critical systems. The mission
critical systems that have been remediated are currently in production. Unit
testing and validations began in the third quarter of 1998 and are scheduled
throughout 1999 to continuously reaffirm the Year 2000 compliance of mission
critical systems.
A small number of mission critical systems are provided by third parties on
a service bureau basis, such as small business credit card processing and
services supporting securities brokerage businesses. Third party providers of
mission critical services are on schedule to certify Year 2000 readiness and
complete testing by March 31, 1999, as required by federal banking regulations.
Non-mission critical systems are expected to be Year 2000 compliant prior to or
during the second quarter of 1999. Date-reliant infrastructure components, which
include items such as ATMs; personal computers; and internal phone, vault and
alarm systems, have been verified to be Year 2000 compliant. The Company and its
data processing vendors and service providers will monitor progress and
implement contingency plans in the event that these procedures fail to achieve
their objectives.
The Company expects to continue incurring charges related to Year 2000
compliance. However, the majority of the costs associated with these efforts are
the responsibility of the Company's third party data processor which also
provides many of the Company's software applications. Contract specifications
require the Company's third party data processor to ensure that all systems meet
Year 2000 compliance and other banking regulations. Hibernia estimates that it
will supplement its vendors' efforts with a total of approximately $1.5 million,
much of which has already been expensed, to upgrade ATMs, hardware, software and
other technology. This investment will be funded through operating cash flows
and will be expensed as incurred.
As of December 31, 1998, the Company has incurred direct expenses amounting
to approximately $1.1 million. Year 2000 expenses were spread throughout a
number of noninterest expense categories and do not include computer equipment
and software that was scheduled to be replaced in the normal course of business.
The Company does not separately track the indirect costs incurred for the Year
2000 project which primarily consist of the related payroll costs of employees
from various departments.
The Company's estimate of Year 2000 investment costs and the estimated time
periods set forth above by which the Company expects to substantially complete
mission critical system programming and testing and implementation are based on
management's best current estimates, which were derived utilizing numerous
assumptions about future events. There can be no guarantee that these estimates
will be achieved, and actual results could differ from those anticipated.
Because of the critical nature of the Year 2000 issues to the Company's business
and to all of the financial services industry, if necessary modifications are
not made, the Company's operations could be materially impacted. Hibernia and
its data processing vendors remain on schedule to ensure achievement of Year
2000 compliance; therefore, an adverse impact on the Company's operations is not
expected.
The discussion above entitled "Year 2000," includes certain "forward
looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995 ("PSLRA"). This statement is included for the express purpose
of availing Hibernia of the protections of the safe harbor provisions of the
PSLRA. Management's ability to predict results or effects of Year 2000 issues is
inherently uncertain, and is subject to factors that may cause actual results to
differ materially from those projected. Factors that could affect the actual
results include the possibility that remediation efforts and contingency plans
will not operate as intended, the Company's failure to timely or completely
identify all software and hardware applications requiring remediation,
unexpected costs, and the uncertainty associated with the impact of Year 2000
issues on the banking industry and on the Company's customers, vendors, and
others with whom it conducts business. Readers are cautioned not to place undue
reliance on these forward looking statements.
<PAGE>
<TABLE>
<CAPTION>
Quarterly Consolidated Summary of Income and Selected Financial Data (1)
Hibernia Corporation and Subsidiaries 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
($ in thousands, except per-share data) Fourth Third Second First Fourth Third Second First
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income ..........................$ 245,533 $ 240,742 $ 237,201 $ 230,246 $ 223,384 $ 216,164 $ 205,440 $ 197,070
Interest expense ......................... 108,122 109,085 104,079 101,902 98,639 92,566 86,556 82,261
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income ...................... 137,411 131,657 133,122 128,344 124,745 123,598 118,884 114,809
Provision for possible loan losses ....... 9,000 8,000 5,500 3,500 2,761 191 47 149
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision
for possible loan losses ............. 128,411 123,657 127,622 124,844 121,984 123,407 118,837 114,660
- ------------------------------------------------------------------------------------------------------------------------------------
Noninterest income:
Noninterest income .................... 47,149 45,644 46,046 40,418 39,994 37,792 38,807 34,679
Securities gains (losses), net ........ 2,077 2,687 27 887 2,231 75 404 15
- ------------------------------------------------------------------------------------------------------------------------------------
Noninterest income ....................... 49,226 48,331 46,073 41,305 42,225 37,867 39,211 34,694
Noninterest expense ...................... 104,113 102,293 106,403 103,775 110,557 102,581 100,654 95,462
- ------------------------------------------------------------------------------------------------------------------------------------
Income before taxes ...................... 73,524 69,695 67,292 62,374 53,652 58,693 57,394 53,892
Income tax expense ....................... 25,610 23,032 23,744 21,870 20,149 20,184 20,044 18,458
- ------------------------------------------------------------------------------------------------------------------------------------
Net income ...............................$ 47,914 $ 46,663 $ 43,548 $ 40,504 $ 33,503 $ 38,509 $ 37,350 $ 35,434
- ------------------------------------------------------------------------------------------------------------------------------------
Net income applicable to common
shareholders .............................$ 46,189 $ 44,938 $ 41,823 $ 38,779 $ 31,778 $ 36,784 $ 35,625 $ 33,709
- ------------------------------------------------------------------------------------------------------------------------------------
Per common share information: (2)
Net income ............................$ 0.30 $ 0.29 $ 0.27 $ 0.25 $ 0.21 $ 0.24 $ 0.23 $ 0.22
Net income - assuming dilution ........$ 0.30 $ 0.29 $ 0.27 $ 0.25 $ 0.20 $ 0.24 $ 0.23 $ 0.22
Cash dividends declared ...............$ 0.105 $ 0.09 $ 0.09 $ 0.09 $ 0.09 $ 0.08 $ 0.08 $ 0.08
Average shares outstanding (000s) ........ 153,437 153,892 153,904 153,643 153,182 152,879 152,682 152,746
Average shares outstanding -
assuming dilution (000s) 155,383 156,236 156,791 156,476 156,365 155,153 154,576 154,732
Dividend payout ratio .................... 35.00% 31.03% 33.33% 36.00% 42.86% 33.33% 34.78% 36.36%
- ------------------------------------------------------------------------------------------------------------------------------------
Selected quarter-end balances
(in millions)
Loans ....................................$10,006.2 $ 9,594.7 $ 9,126.7 $ 8,715.3 $ 8,286.5 $ 7,804.3 $ 7,357.9 $ 6,914.7
Deposits ................................. 10,603.0 9,920.1 9,908.8 9,978.3 9,814.4 9,362.7 9,384.8 9,211.3
Debt ..................................... 805.7 705.9 706.1 706.3 506.5 109.8 12.7 13.1
Equity ................................... 1,318.1 1,308.4 1,255.4 1,230.6 1,196.1 1,170.5 1,133.8 1,085.1
Total assets ............................. 14,011.5 13,272.8 12,821.5 12,544.8 12,388.2 11,540.9 11,302.9 10,845.2
- ------------------------------------------------------------------------------------------------------------------------------------
Selected average balances
(in millions)
Loans ....................................$ 9,764.5 $ 9,347.8 $ 8,914.8 $ 8,526.0 $ 8,040.7 $ 7,609.4 $ 7,117.2 $ 6,798.4
Deposits ................................. 10,100.8 9,938.7 9,890.8 9,770.6 9,472.7 9,349.4 9,144.8 8,998.0
Debt ..................................... 799.2 706.0 706.2 629.7 254.4 57.1 12.9 50.1
Equity ................................... 1,306.5 1,275.5 1,243.0 1,216.5 1,186.0 1,153.2 1,100.9 1,088.7
Total assets ............................. 13,499.4 12,938.4 12,623.0 12,497.1 11,980.6 11,384.4 10,903.5 10,707.1
- ------------------------------------------------------------------------------------------------------------------------------------
Selected ratios
Net interest margin(taxable-equivalent)... 4.42% 4.42% 4.63% 4.59% 4.57% 4.78% 4.83% 4.79%
Annualized return on assets .............. 1.42% 1.44% 1.38% 1.30% 1.12% 1.35% 1.37% 1.32%
Annualized return on common equity ....... 15.31% 15.29% 14.64% 13.89% 11.70% 13.97% 14.24% 13.64%
Annualized return on total equity ........ 14.67% 14.63% 14.01% 13.32% 11.30% 13.36% 13.57% 13.02%
Efficiency ratio ......................... 55.58% 56.80% 58.50% 60.51% 66.03% 62.50% 62.80% 62.83%
Average equity/average assets ............ 9.68% 9.86% 9.85% 9.73% 9.90% 10.13% 10.10% 10.17%
Tier 1 risk-based capital ratio .......... 10.76% 11.02% 11.07% 11.29% 11.26% 11.90% 12.25% 12.70%
Total risk-based capital ratio ........... 11.96% 12.27% 12.32% 12.54% 12.51% 13.15% 13.50% 13.96%
Leverage ratio ........................... 8.58% 8.76% 8.70% 8.58% 8.65% 8.88% 8.98% 8.93%
- ------------------------------------------------------------------------------------------------------------------------------------
Tax-effected net income and ratios
excluding purchase accounting
intangible amortization
and balances (3)
Net income applicable to
common shareholders ......................$ 48,796 $ 47,590 44,515 41,495 34,570 $ 39,635 $ 38,526 $ 36,700
Net income per common share (2) ..........$ 0.32 $ 0.31 $ 0.29 $ 0.27 $ 0.23 $ 0.26 $ 0.25 $ 0.24
Net income per common share -
assuming dilution (2) ....................$ 0.31 $ 0.30 $ 0.28 $ 0.27 $ 0.22 $ 0.26 $ 0.25 $ 0.24
Annualized return on assets .............. 1.51% 1.54% 1.48% 1.40% 1.23% 1.47% 1.50% 1.46%
Annualized return on common equity ....... 18.40% 18.54% 17.95% 17.24% 14.87% 17.72% 18.06% 17.50%
Efficiency ratio ......................... 54.02% 55.15% 56.83% 58.71% 64.12% 60.50% 60.72% 60.55%
====================================================================================================================================
- ----------------
(1)All financial information has been restated for mergers accounted for as
poolings of interests. The effects of mergers accounted for as purchase
transactions have been included from the date of consummation. Prior periods
have been conformed to current-period presentation.
(2)Dividends per common share are historical amounts. For a discussion of net
income per common share computations refer to Note 18 of the consolidated
financial statements - "Net Income Per Common Share Data."
(3)Amortization and balances of core deposit intangibles are net of applicable
taxes. Goodwill amortization and balances are not tax effected.
</TABLE>
<PAGE>
Fourth Quarter Results
Hibernia reported net income of $47.9 million in the fourth quarter of
1998, a 43% increase from $33.5 million in the fourth quarter of 1997 and a 3%
increase from $46.7 million in the third quarter of 1998. Net income per common
share of $.30 for the fourth quarter of 1998 increased $.09 from $.21 in the
fourth quarter of 1997 and $.01 from $.29 in the third quarter of 1998. Net
income per common share - assuming dilution was $.30 in the fourth quarter of
1998 compared to $.20 and $.29 for the fourth quarter of 1997 and the third
quarter of 1998, respectively.
Excluding merger-related expenses in all periods and nonrecurring activity
in the fourth quarter of 1997 and third quarter of 1998, net income would have
been $48.3 million in the fourth quarter of 1998, a 20% increase from $40.2
million in the fourth quarter of 1997 and virtually unchanged from $48.9 million
in the third quarter of 1998. Net income per common share would have been $.30
for the fourth quarter of 1998 compared to $.25 for the same period in 1997 and
$.31 for the third quarter of 1998. Fourth quarter 1998 net income per common
share - assuming dilution would have been $.30 compared to $.25 for the fourth
quarter of 1997 and $.30 for the third quarter of 1998.
Net interest income, on a taxable-equivalent basis, totaled $140.2 million
in the fourth quarter of 1998 compared to $127.4 million in the fourth quarter
of 1997 and $134.4 million in the third quarter of 1998. Net interest income was
negatively impacted by the funding cost of transactions designed to utilize an
expiring loss carryforward. The $1.9 million, $1.2 million and $1.1 million in
income associated with these transactions is recorded as securities gains in
noninterest income rather than in net interest income for the fourth quarter of
1998, the fourth quarter of 1997 and the third quarter of 1998, respectively. In
addition, the third quarter of 1998 was negatively impacted by a $3.0 million
charge related to revenue-sharing arrangements with certain automobile dealers
brought about by a higher-than-expected level of consumer automobile loan
prepayments.
The fourth-quarter 1998 increase in net interest income compared to the
fourth quarter of 1997 was primarily the result of the growth in loans both in
total and as a percentage of average earning assets. Average loans increased
$1.7 billion from the fourth quarter of 1997 to $9.8 billion, or 77.4% of
average earning assets compared to 72.4% of average earning assets in the fourth
quarter of 1997. Loans increased $416.7 million in the fourth quarter of 1998
compared to the third quarter of 1998. The net interest spread of 3.55% in the
fourth quarter of 1998 was down 13 basis points from the fourth quarter of 1997
and up two basis points from the third quarter of 1998. The average yield on
earning assets was 7.82%, down 27 basis points compared to the fourth quarter of
1997 and down 18 basis points from the third quarter of 1998. The average rate
paid on interest-bearing liabilities decreased by 14 basis points from the
fourth quarter of 1997 and 20 basis points from the third quarter of 1998 to
4.27% in the fourth quarter of 1998.
The net interest margin decreased 15 basis points from the fourth quarter
of 1997 to 4.42% for the fourth quarter of 1998. A 46-basis-point decline in
loan yields and a 24-basis-point decline in securities yields led to the
27-basis-point decrease in the yield on earning assets. At the same time, the
rate on interest-bearing liabilities decreased 14 basis points, and the
contribution of noninterest-bearing funds decreased two basis points compared to
the fourth quarter of 1997.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
TABLE 17 - NET INTEREST MARGIN (taxable-equivalent)
- -----------------------------------------------------------------------------------------------------------------------------
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>
Yield on earning assets .... 7.82% 8.00% 8.17% 8.19% 8.09% 8.27% 8.28% 8.17%
Rate on interest-bearing
liabilities ............ 4.27 4.47 4.43 4.42 4.41 4.35 4.31 4.25
- -----------------------------------------------------------------------------------------------------------------------------
Net interest spread 3.55 3.53 3.74 3.77 3.68 3.92 3.97 3.92
Contribution of noninterest-
bearing funds .......... 0.87 0.89 0.89 0.82 0.89 0.86 0.86 0.87
- -----------------------------------------------------------------------------------------------------------------------------
Net interest margin 4.42% 4.42% 4.63% 4.59% 4.57% 4.78% 4.83% 4.79%
- -----------------------------------------------------------------------------------------------------------------------------
Noninterest-bearing funds/
earning assets ......... 20.33% 20.01% 19.94% 18.78% 20.09% 19.82% 20.09% 20.38%
=============================================================================================================================
</TABLE>
The net interest margin of 4.42% for the fourth quarter of 1998 remained
unchanged from the third quarter of 1998. The $3.0 million charge discussed in
the Net Interest Margin section negatively impacted the third quarter net
interest margin by ten basis points. A 15-basis-point decrease in loan yields
and a 29-basis-point decrease in securities yields resulted in an 18-basis-point
decrease in the yield on earning assets. These decreases were partially offset
with a 20-basis-point decrease in the cost of funds and a 32-basis-point
increase in the percentage of noninterest-bearing funds (primarily demand
deposits and shareholders' equity) supporting earning assets. Table 17
illustrates the components of the net interest margin on a quarterly basis for
1998 and 1997.
Average earning assets increased $1.5 billion (14%) to $12.6 billion in the
fourth quarter of 1998 from $11.1 billion in the fourth quarter of 1997. Average
earning assets were up $522.8 million (4%) compared to the third quarter of
1998. Average loans increased $1.7 billion (21%) from the fourth quarter of 1997
and increased $416.7 million (4%) from the third quarter of 1998. Period-end
loans grew $411.5 million, 17% on an annualized basis, during the fourth quarter
of 1998. Average securities for the fourth quarter of 1998 totaled $2.7 billion,
virtually unchanged from the fourth quarter of 1997 and up $242.4 million (10%)
from the third quarter of 1998.
Average deposits increased $628.1 million (6%) to $10.1 billion in the
fourth quarter of 1998 from $9.5 billion in the fourth quarter of 1997. Average
deposits were up $162.1 million (2%) from the third quarter of 1998.
Noninterest income, excluding securities transactions, was $47.1 million,
up $7.2 million (18%) from the fourth quarter of 1997 and up $1.5 million (3%)
from the third quarter of 1998. Fourth quarter 1997 noninterest income included
$1.2 million in trading account income resulting from a single transaction
related to a tax planning strategy. Excluding this nonrecurring item,
noninterest income for the fourth quarter of 1998 was up $8.2 million (20%)
compared to the fourth quarter of 1997. Service charges on deposits and income
from mortgage loan origination and servicing fees were the major categories of
noninterest income that increased in the fourth quarter of 1998 compared to the
fourth quarter of 1997 and the third quarter of 1998. The increase in income
from mortgage loan origination and servicing fees is primarily due to an
increase in mortgage origination activity brought about by continued focus on
mortgage banking and the interest rate environment.
Noninterest expense of $104.1 million in the fourth quarter of 1998 was
$6.4 million (6%) lower than $110.6 million in the fourth quarter of 1997 and
$1.8 million (2%) higher than $102.3 million in the third quarter of 1998. The
decrease compared to the fourth quarter of 1997 was primarily due to a decrease
in staff costs as a result of higher accruals for performance based incentives
and bonuses in 1997. Excluding merger-related expenses, noninterest expense
would have been $103.5 million in the fourth quarter of 1998, a $4.9 million
(5%) increase from $98.6 million in the fourth quarter of 1997 and a $1.6
million (2%) increase from $101.9 million in the third quarter of 1998.
In the fourth quarter of 1998 the Company incurred expenses amounting to
approximately $0.1 million related to Year 2000 compliance.
The Company's efficiency ratio was 55.58% in the fourth quarter of 1998
compared to 66.03% and 56.80% in the fourth quarter of 1997 and the third
quarter of 1998, respectively. The tangible efficiency ratio, which excludes the
impact of purchase accounting intangibles, was 54.02% in the fourth quarter of
1998 compared to 64.12% in the fourth quarter of 1997 and 55.15% in the third
quarter of 1998.
Excluding merger-related expenses and nonrecurring items discussed above,
the Company's efficiency ratio would have been 55.23% in the fourth quarter of
1998 compared to 59.29% and 57.53% in the fourth quarter of 1997 and the third
quarter of 1998, respectively. The tangible efficiency ratio would have been
53.68% in the fourth quarter of 1998 compared to 57.37% in the fourth quarter of
1997 and 55.85% in the third quarter of 1998.
<PAGE>
<TABLE>
<CAPTION>
Consolidated Average Balances, Interest and Rates
- ------------------------------------------------------------------------------------------------------------------------------------
Hibernia Corporation and Subsidiaries
Taxable-equivalent basis (1) 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
(Average balance $ in millions, Average Average
interest $ in thousands) Balance Interest Rate Balance Interest Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Commercial loans ........................... $ 3,513.4 $ 297,423 8.47% $ 2,652.6 $ 233,445 8.80%
Small business loans ....................... 1,862.4 174,245 9.36 1,693.6 161,718 9.55
Consumer loans ............................. 3,766.4 312,115 8.29 3,049.2 262,027 8.59
- ------------------------------------------------------------------------------------------------------------------------------------
Total loans (2)......................... 9,142.2 783,783 8.57 7,395.4 657,190 8.89
- ------------------------------------------------------------------------------------------------------------------------------------
Securities available for sale .............. 2,619.6 167,004 6.38 2,693.6 178,216 6.62
Securities held to maturity ................ - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total securities ....................... 2,619.6 167,004 6.38 2,693.6 178,216 6.62
- ------------------------------------------------------------------------------------------------------------------------------------
Short-term investments ..................... 237.3 13,942 5.88 309.9 17,131 5.53
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets .......... 11,999.1 $ 964,729 8.04% 10,398.9 $ 852,537 8.20%
- ------------------------------------------------------------------------------------------------------------------------------------
Reserve for possible loan losses ............... (124.2) (134.2)
Noninterest-earning assets:
Cash and due from banks .................... 442.1 438.1
Other assets ............................... 575.4 545.0
- ------------------------------------------------------------------------------------------------------------------------------------
Total noninterest-earning assets ....... 1,017.5 983.1
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets ........................... $ 12,892.4 $ 11,247.8
====================================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing deposits:
NOW accounts ........................... $ 323.6 $ 10,788 3.33% $ 505.1 $ 13,973 2.77%
Money market deposit accounts .......... 1,970.0 49,907 2.53 1,745.6 44,788 2.57
Savings accounts ....................... 1,104.2 35,583 3.22 792.6 23,016 2.90
Other consumer time deposits ........... 2,924.2 151,690 5.19 2,946.8 154,075 5.23
Public fund certificates of deposit
of $100,000 or more ................ 992.1 53,053 5.35 1,014.3 55,775 5.50
Certificates of deposit
of $100,000 or more ................ 582.3 30,731 5.28 507.3 26,416 5.21
Foreign time deposits .................. 226.7 11,422 5.04 98.2 5,204 5.30
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits .... 8,123.1 343,174 4.22 7,609.9 323,247 4.25
- ------------------------------------------------------------------------------------------------------------------------------------
Short-term borrowings:
Federal funds purchased ................ 395.2 21,304 5.39 265.6 14,558 5.48
Repurchase agreements .................. 395.7 18,934 4.78 340.5 16,631 4.88
Debt ....................................... 710.7 39,776 5.60 94.1 5,586 5.94
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities ..... 9,624.7 $ 423,188 4.40% 8,310.1 $ 360,022 4.33%
- ------------------------------------------------------------------------------------------------------------------------------------
Noninterest-bearing liabilities:
Demand deposits ............................ 1,803.1 1,632.9
Other liabilities .......................... 203.9 172.3
- ------------------------------------------------------------------------------------------------------------------------------------
Total noninterest-bearing liabilities .. 2,007.0 1,805.2
- ------------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity ..................... 1,260.7 1,132.5
====================================================================================================================================
Total liabilities and
shareholders' equity ........... $ 12,892.4 $ 11,247.8
====================================================================================================================================
SPREAD AND NET YIELD
Interest rate spread ........................... 3.64% 3.87%
Cost of funds supporting interest-earning assets 3.53% 3.46%
Net interest income/margin ..................... $ 541,541 4.51% $ 492,515 4.74%
====================================================================================================================================
- ----------------
(1)Based on the statutory income tax rate of 35%.
(2)Yield computations include nonaccrual loans in loans outstanding.
</TABLE>
<TABLE>
<CAPTION>
Consolidated Average Balances, Interest and Rates (Cont.)
- ------------------------------------------------------------------------------------------------------------------------------------
Hibernia Corporation and Subsidiaries
Taxable-equivalent basis (1) 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
(Average balance $ in millions, Average Average
interest $ in thousands) Balance Interest Rate Balance Interest Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Commercial loans ........................... $ 2,286.1 $ 209,891 9.18% $ 1,890.8 $ 182,003 9.63%
Small business loans ....................... 1,091.6 103,212 9.45 889.8 86,718 9.75
Consumer loans ............................. 2,543.9 225,806 8.88 1,986.6 172,697 8.69
- ------------------------------------------------------------------------------------------------------------------------------------
Total loans (2)......................... 5,921.6 538,909 9.10 4,767.2 441,418 9.26
- ------------------------------------------------------------------------------------------------------------------------------------
Securities available for sale .............. 2,715.6 177,221 6.53 1,067.7 69,361 6.50
Securities held to maturity ................ - - - 2,111.4 134,184 6.36
- ------------------------------------------------------------------------------------------------------------------------------------
Total securities ....................... 2,715.6 177,221 6.53 3,179.1 203,545 6.40
- ------------------------------------------------------------------------------------------------------------------------------------
Short-term investments ..................... 253.1 13,481 5.33 185.9 10,928 5.88
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets .......... 8,890.3 $ 729,611 8.20% 8,132.2 $ 655,891 8.06%
- ------------------------------------------------------------------------------------------------------------------------------------
Reserve for possible loan losses ............... (159.5) (170.2)
Noninterest-earning assets:
Cash and due from banks .................... 388.1 369.5
Other assets ............................... 443.4 363.0
- ------------------------------------------------------------------------------------------------------------------------------------
Total noninterest-earning assets ....... 831.5 732.5
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets ........................... $ 9,562.3 $ 8,694.5
====================================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing deposits:
NOW accounts ........................... $ 491.8 $ 12,793 2.60% $ 807.3 $ 17,894 2.22%
Money market deposit accounts .......... 1,625.0 39,140 2.41 1,299.8 34,411 2.65
Savings accounts ....................... 493.1 10,795 2.19 470.9 10,666 2.27
Other consumer time deposits ........... 2,673.1 146,280 5.47 2,432.6 135,420 5.57
Public fund certificates of deposit
of $100,000 or more ................ 926.9 50,065 5.40 756.5 44,555 5.89
Certificates of deposit
of $100,000 or more ................ 398.1 20,639 5.18 310.8 15,317 4.93
Foreign time deposits .................. 41.8 2,261 5.41 35.1 2,018 5.75
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits .... 6,649.8 281,973 4.24 6,113.0 260,281 4.26
- ------------------------------------------------------------------------------------------------------------------------------------
Short-term borrowings:
Federal funds purchased ................ 51.2 2,643 5.16 55.2 3,184 5.77
Repurchase agreements .................. 281.8 13,244 4.70 215.5 11,202 5.20
Debt ....................................... 32.2 1,969 6.11 29.6 1,893 6.40
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities ..... 7,015.0 $ 299,829 4.27% 6,413.3 $ 276,560 4.31%
- ------------------------------------------------------------------------------------------------------------------------------------
Noninterest-bearing liabilities:
Demand deposits ............................ 1,433.8 1,327.7
Other liabilities .......................... 162.8 136.4
- ------------------------------------------------------------------------------------------------------------------------------------
Total noninterest-bearing liabilities .. 1,596.6 1,464.1
- ------------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity ..................... 950.7 817.1
====================================================================================================================================
Total liabilities and
shareholders' equity ........... $ 9,562.3 $ 8,694.5
====================================================================================================================================
SPREAD AND NET YIELD
Interest rate spread ........................... 3.93% 3.75%
Cost of funds supporting interest-earning assets 3.37% 3.40%
Net interest income/margin ..................... $ 429,782 4.83% $ 379,331 4.66%
====================================================================================================================================
- ----------------
(1)Based on the statutory income tax rate of 35%.
(2)Yield computations include nonaccrual loans in loans outstanding.
</TABLE>
<TABLE>
<CAPTION>
Consolidated Average Balances, Interest and Rates (Cont.)
- ----------------------------------------------------------------------------------------------------------
Hibernia Corporation and Subsidiaries
Taxable-equivalent basis (1) 1994
- ----------------------------------------------------------------------------------------------------------
5-Year
Compound
Growth Rate
(Average balance $ in millions, Average For Average
interest $ in thousands) Balance Interest Rate Balances
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Commercial loans
Small business loans
Consumer loans
- ----------------------------------------------------------------------------------------------------------
Total loans (2)......................... $ 4,002.6 $ 349,818 8.74% 20.0%
- ----------------------------------------------------------------------------------------------------------
Securities available for sale .............. 1,198.8 68,682 5.73 21.1
Securities held to maturity ................ 2,391.1 133,609 5.59 (100.0)
- ----------------------------------------------------------------------------------------------------------
Total securities ....................... 3,589.9 202,291 5.63 (5.2)
- ----------------------------------------------------------------------------------------------------------
Short-term investments ..................... 248.9 10,184 4.09 (12.2)
- ----------------------------------------------------------------------------------------------------------
Total interest-earning assets .......... 7,841.4 $ 562,293 7.17% 9.7%
- ----------------------------------------------------------------------------------------------------------
Reserve for possible loan losses ............... (198.0) (11.2)
Noninterest-earning assets:
Cash and due from banks .................... 364.9 5.8
Other assets ............................... 373.6 7.8
- ----------------------------------------------------------------------------------------------------------
Total noninterest-earning assets ....... 738.5 6.9
- ----------------------------------------------------------------------------------------------------------
Total assets ........................... $ 8,381.9 9.9%
==========================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing deposits:
NOW accounts ........................... $ 890.1 16,370 1.84% (17.2)%
Money market deposit accounts .......... 1,379.5 34,226 2.48 7.5
Savings accounts ....................... 511.0 11,261 2.20 17.8
Other consumer time deposits ........... 2,178.9 93,021 4.27 6.7
Public fund certificates of deposit
of $100,000 or more ................ 687.8 28,723 4.18 8.1
Certificates of deposit
of $100,000 or more ................ 306.3 11,642 3.80 9.8
Foreign time deposits .................. 17.1 794 4.64 114.4
- ----------------------------------------------------------------------------------------------------------
Total interest-bearing deposits .... 5,970.7 196,037 3.28 6.8
- ----------------------------------------------------------------------------------------------------------
Short-term borrowings:
Federal funds purchased ................ 39.7 1,602 4.04 61.6
Repurchase agreements .................. 144.1 4,933 3.42 25.8
Debt ....................................... 35.8 3,180 8.87 76.6
- ----------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities ..... 6,190.3 $ 205,752 3.32% 9.7
- ----------------------------------------------------------------------------------------------------------
Noninterest-bearing liabilities:
Demand deposits ............................ 1,285.4 8.9
Other liabilities .......................... 175.6 2.8
- ----------------------------------------------------------------------------------------------------------
Total noninterest-bearing liabilities .. 1,461.0 8.1
- ----------------------------------------------------------------------------------------------------------
Total shareholders' equity ..................... 730.6 14.2
==========================================================================================================
Total liabilities and
shareholders' equity ........... $ 8,381.9 9.9%
==========================================================================================================
SPREAD AND NET YIELD
Interest rate spread ........................... 3.85%
Cost of funds supporting interest-earning assets 2.62%
Net interest income/margin ..................... $ 356,541 4.55%
==========================================================================================================
- -------------
(1)Based on the statutory income tax rate of 35%.
(2)Yield computations include nonaccrual loans in loans outstanding.
</TABLE>
<PAGE>
GRAPHIC MATERIAL INDEX
GRAPHIC DESCRIPTION CROSS REFERENCE
- ------------------- ---------------
Average Earning Asset Mix Pie Chart See Consolidated Average Balances,
Interest and Rates
Total Loans Bar Graph See Five-Year Consolidated Summary of
Income and Selected Financial Data
Total Deposits Bar Graph See Five-Year Consolidated Summary of
Income and Selected Financial Data
Net Interest Income Bar Graph See Consolidated Average Balances,
Interest and Rates
Efficiency Ratio Bar Graph See Five-Year Consolidated Summary of
Income and Selected Financial Data
Total Shareholders' Equity Bar Graph See Five-Year Consolidated Summary of
Income and Selected Financial Data
Annual Common Dividends Bar Graph See Five-Year Consolidated Summary of
Income and Selected Financial Data
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
The Board of Directors and Shareholders
Hibernia Corporation
We have audited the accompanying consolidated balance sheets of Hibernia
Corporation and Subsidiaries as of December 31, 1998 and 1997, and the related
consolidated statements of income, changes in shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Hibernia
Corporation and Subsidiaries at December 31, 1998 and 1997, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1998, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young, LLP
New Orleans, Louisiana
January 12, 1999
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheets
Hibernia Corporation and Subsidiaries
December 31 ($ in thousands) 1998 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and due from banks ................................. $ 555,756 $ 580,235
Short-term investments .................................. 350,132 485,015
Securities available for sale ........................... 2,676,311 2,628,164
Loans, net of unearned income ........................... 10,006,182 8,286,492
Reserve for possible loan losses .................... (127,976) (124,381)
- ----------------------------------------------------------------------------------------------------------
Loans, net ...................................... 9,878,206 8,162,111
- ----------------------------------------------------------------------------------------------------------
Bank premises and equipment ............................. 187,978 190,020
Customers' acceptance liability ......................... 331 144
Other assets ............................................ 362,817 342,495
- ----------------------------------------------------------------------------------------------------------
Total assets .................................... $ 14,011,531 $ 12,388,184
==========================================================================================================
Liabilities
Deposits:
Noninterest-bearing ................................. $ 2,026,219 $ 1,820,896
Interest-bearing .................................... 8,576,787 7,993,522
- ----------------------------------------------------------------------------------------------------------
Total deposits .................................. 10,603,006 9,814,418
- ----------------------------------------------------------------------------------------------------------
Short-term borrowings ................................... 1,134,136 719,961
Liability on acceptances ................................ 331 144
Other liabilities ....................................... 150,268 151,032
Debt .................................................... 805,689 506,548
- ----------------------------------------------------------------------------------------------------------
Total liabilities ............................... 12,693,430 11,192,103
- ----------------------------------------------------------------------------------------------------------
Shareholders' equity
Preferred Stock, no par value:
Authorized - 100,000,000 shares; 2,000,000 Series A
issued and outstanding at December 31, 1998
and 1997, respectively .................................. 100,000 100,000
Class A Common Stock, no par value:
Authorized - 300,000,000 shares; issued and outstanding -
156,400,398 and 155,079,094 at December 31, 1998 and
1997, respectively ...................................... 300,289 297,752
Surplus ................................................. 407,436 394,479
Retained earnings ....................................... 521,016 406,335
Accumulated other comprehensive income .................. 27,111 14,902
Unearned compensation ................................... (37,751) (17,387)
- ----------------------------------------------------------------------------------------------------------
Total shareholders' equity ...................... 1,318,101 1,196,081
- ----------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity ...... $ 14,011,531 $ 12,388,184
==========================================================================================================
- -------------
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Income Statements
Hibernia Corporation and Subsidiaries
Year Ended December 31 ($ in thousands, except per-share data) 1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income
Interest and fees on loans ............................. $ 779,401 $ 653,260 $ 535,016
Interest on securities available for sale .............. 160,379 171,667 173,601
Interest on short-term investments ..................... 13,942 17,131 13,481
- -----------------------------------------------------------------------------------------------------------------
Total interest income .............................. 953,722 842,058 722,098
- -----------------------------------------------------------------------------------------------------------------
Interest expense
Interest on deposits ................................... 343,174 323,247 281,973
Interest on short-term borrowings ...................... 40,238 31,189 15,887
Interest on debt ....................................... 39,776 5,586 1,969
- -----------------------------------------------------------------------------------------------------------------
Total interest expense ............................. 423,188 360,022 299,829
- -----------------------------------------------------------------------------------------------------------------
Net interest income ........................................ 530,534 482,036 422,269
Provision for possible loan losses ..................... 26,000 3,148 (12,127)
- -----------------------------------------------------------------------------------------------------------------
Net interest income after provision for possible loan losses 504,534 478,888 434,396
- -----------------------------------------------------------------------------------------------------------------
Noninterest income
Service charges on deposits ............................ 85,567 78,132 64,982
Trust fees ............................................. 16,678 15,519 14,055
Retail investment service fees ......................... 17,231 12,070 8,659
Mortgage loan origination and servicing fees ........... 15,235 9,642 8,131
Other service, collection and exchange charges ......... 28,446 22,636 18,898
Other operating income ................................. 16,100 13,273 11,128
Securities gains (losses), net ......................... 5,678 2,725 (5,152)
- -----------------------------------------------------------------------------------------------------------------
Total noninterest income ........................... 184,935 153,997 120,701
- -----------------------------------------------------------------------------------------------------------------
Noninterest expense
Salaries and employee benefits ......................... 207,132 203,044 181,138
Occupancy expense, net ................................. 33,923 33,956 30,244
Equipment expense ...................................... 30,584 30,808 31,723
Data processing expense ................................ 28,808 26,181 22,813
Advertising and promotional expense .................... 14,991 15,634 10,907
Foreclosed property expense, net ....................... (999) (3,235) (1,786)
Amortization of intangibles ............................ 16,715 14,593 7,791
Other operating expense ................................ 85,430 88,273 76,985
- -----------------------------------------------------------------------------------------------------------------
Total noninterest expense .......................... 416,584 409,254 359,815
- -----------------------------------------------------------------------------------------------------------------
Income before income taxes ................................. 272,885 223,631 195,282
Income tax expense ......................................... 94,256 78,835 67,389
- -----------------------------------------------------------------------------------------------------------------
Net income ................................................. $ 178,629 $ 144,796 $ 127,893
=================================================================================================================
Net income applicable to common shareholders ............... $ 171,729 $ 137,896 $ 126,153
=================================================================================================================
Net income per common share ................................ $ 1.12 $ 0.90 $ 0.83
=================================================================================================================
Net income per common share - assuming dilution ............ $ 1.10 $ 0.89 $ 0.82
=================================================================================================================
- --------------
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Changes in Shareholders' Equity
Hibernia Corporation and Subsidiaries
($ in thousands, except per-share data)
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated
Other
Preferred Common Retained Comprehensive Comprehensive
Stock Stock Surplus Earnings Income Other Income
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1995 ................. $ - $295,265 $ 367,269 $ 234,158 $ 18,680 $(14,573)
Net income for 1996 ........................... - - - 127,893 - - $ 127,893
Unrealized gains (losses) on securities,
net of reclassification adjustments ......... - - - - (10,662) - (10,662)
- ------------------------------------------------------------------------------------------------------------------------------------
Comprehensive income .......................... $117,231
- ------------------------------------------------------------------------------------------------------------------------------------
Issuance of preferred stock ................... 100,000 - (2,000) - - -
Issuance of common stock:
Dividend Reinvestment Plan ................. - 276 1,310 - - -
Stock Option Plan .......................... - 282 844 - - 483
Retirement Security Plan ................... - 383 1,862 - - -
Restricted stock awards .................... - 9 44 - - 11
By pooled companies prior to merger ........ - - 2,163 - - -
Cash dividends declared:
Preferred ($.87 per share) ................. - - - (1,740) - -
Common ($.29 per share) .................... - - - (34,916) - -
By pooled companies prior to merger ........ - - - (6,879) - -
Acquisition of treasury stock ................. - - - - - (880)
Purchase of common shares by ESOP ............. - - - - - (306)
Allocation of ESOP shares ..................... - - 774 - - 1,378
Other ......................................... - - (118) (2,103) - -
- ------------------------------------------------------------------------------------------------------------------------------------
Balances at December 31, 1996 ................. 100,000 296,215 372,148 316,413 8,018 (13,887)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income for 1997 ........................... - - - 144,796 - - $ 144,796
Unrealized gains (losses) on securities,
net of reclassification adjustments ......... - - - - 6,884 - 6,884
- ------------------------------------------------------------------------------------------------------------------------------------
Comprehensive income .......................... $151,680
- ------------------------------------------------------------------------------------------------------------------------------------
Issuance of common stock:
Dividend Reinvestment Plan ................. - 418 2,693 - - 477
Stock Option Plan .......................... - 1,068 4,457 - - 166
Retirement Security Plan ................... - 44 265 - - -
Restricted stock awards .................... - 7 45 - - -
Director compensation ...................... - - 32 - - 225
By pooled companies prior to merger ........ - - 13,919 - - -
Cash dividends declared:
Preferred ($3.45 per share) ................ - - - (6,900) - -
Common ($.33 per share) .................... - - - (42,109) - -
By pooled companies prior to merger ........ - - - (5,865) -
Acquisition of treasury stock ................. - - - - - (299)
Purchase of common shares by ESOP ............. - - - - - (5,021)
Allocation of ESOP shares ..................... - - 920 - - 952
- ------------------------------------------------------------------------------------------------------------------------------------
Balances at December 31, 1997 ................. 100,000 297,752 394,479 406,335 14,902 (17,387)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income for 1998 ........................... - - - 178,629 - - $ 178,629
Unrealized gains (losses) on securities,
net of reclassification adjustments ......... - - - - 12,209 - 12,209
Comprehensive income .......................... $190,838
Issuance of common stock:
Stock Option Plan .......................... - 949 4,189 - - -
Restricted stock awards .................... - 870 7,433 - - -
Exercise of purchase warrants .............. - 409 177 - - -
Cash dividends declared:
Preferred ($3.45 per share) ................ - - - (6,900) - -
Common ($.375 per share) ................... - - - (56,647) - -
By pooled companies prior to merger ........ - - - (401) - -
Purchase of common shares by ESOP ............. - - - - - (23,630)
Allocation of ESOP shares ..................... - - 943 - - 3,266
Other ......................................... - 309 215 - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Balances at December 31, 1998 ................. $100,000 $300,289 $ 407,436 $ 521,016 $ 27,111 $(37,751)
- ------------------------------------------------------------------------------------------------------------------------------------
- ----------------
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
Hibernia Corporation and Subsidiaries
Year Ended December 31 ($ in thousands) 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net income ............................................................ $ 178,629 $ 144,796 $ 127,893
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for possible loan losses ............................. 26,000 3,148 (12,127)
Amortization of intangibles and deferred charges ............... 16,317 14,125 7,799
Depreciation and amortization .................................. 27,710 28,869 29,207
Premium amortization, net of discount accretion ................ 4,155 2,747 5,197
Realized securities (gains) losses, net ........................ (5,678) (2,725) 5,152
Gains on sales of assets, net .................................. (122) (3,251) (2,742)
Provision for losses on foreclosed and other assets ............ 622 2,351 1,267
Decrease in deferred income tax asset .......................... 689 12,342 7,487
Increase in interest receivable and other assets ............... (20,586) (8,550) (9,073)
(Decrease) increase in interest payable and other liabilities .. 11,573 (2,187) 34,345
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities ........................ 239,309 191,665 194,405
- ----------------------------------------------------------------------------------------------------------------------------------
Investing activities
Purchases of securities available for sale ............................ (1,815,620) (845,733) (588,869)
Proceeds from maturities of securities available for sale ............. 1,013,375 666,968 775,656
Proceeds from sales of securities available for sale .................. 774,314 278,104 404,902
Net increase in loans ................................................. (2,210,466) (1,677,004) (1,323,109)
Proceeds from sales of loans .......................................... 1,496,851 509,456 310,896
Purchases of loans .................................................... (1,039,977) (347,229) (15,205)
Acquisitions, net of cash acquired of $64,095 and $184,991 for the
years ended December 31, 1997 and 1996, respectively ................ - 56,563 (73,861)
Purchases of premises, equipment and other assets ..................... (45,744) (33,466) (31,606)
Proceeds from sales of foreclosed assets and excess bank-owned property 7,219 14,758 8,083
Proceeds from sales of premises, equipment and other assets ........... 1,259 1,101 (4,062)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities ............................ (1,818,789) (1,376,482) (537,175)
- ----------------------------------------------------------------------------------------------------------------------------------
Financing activities
Net increase in deposits .............................................. 788,656 602,038 488,727
Net increase in short-term borrowings ................................. 414,175 376,410 27,721
Proceeds from issuance of debt ........................................ 600,000 500,000 120,743
Payments on debt ...................................................... (300,859) (50,644) (101,657)
Proceeds from issuance of preferred stock ............................. - - 98,000
Proceeds from issuance of common stock ................................ 5,724 9,539 7,578
Purchase of common stock by ESOP ...................................... (23,630) (5,021) (306)
Dividends paid ........................................................ (63,948) (54,889) (41,650)
Acquisition of treasury stock ......................................... - (299) (880)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities ........................ 1,420,118 1,377,134 598,276
- ----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents ........................ (159,362) 192,317 255,506
Cash and cash equivalents at beginning of year ........................ 1,065,250 872,933 617,427
- ----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year ......................... $ 905,888 $ 1,065,250 $ 872,933
==================================================================================================================================
Supplemental disclosures Cash paid during the year for:
Interest expense ..................................................... $ 425,747 $ 362,670 $ 294,057
Income taxes ......................................................... $ 87,629 $ 62,935 $ 55,588
Non-cash investing and financing activities:
Loans and bank premises and equipment transferred to foreclosed
assets and excess bank-owned property ............................. $ 13,143 $ 7,714 $ 4,761
Acquisitions:
Common stock issued ............................................... $ - $ 13,968 $ -
Fair value of assets acquired ..................................... $ - $ 161,762 $ 1,227,391
Fair value of liabilities assumed ................................. $ - $ 140,262 $ 968,539
==================================================================================================================================
- ----------------
See notes to consolidated financial statements.
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
Hibernia Corporation and Subsidiaries
Note 1
Summary of Significant Accounting Policies
Hibernia Corporation (the Parent Company), through its wholly owned
subsidiaries, Hibernia National Bank and Hibernia National Bank of Texas (the
Banks), provides a broad array of financial products and services throughout
Louisiana and East Texas. The principal products and services offered include
retail, small business, commercial, international, mortgage and private banking;
leasing; venture capital; corporate finance; treasury management and trust. The
Banks, through wholly owned subsidiaries, also provide insurance products,
retail brokerage and alternative investments, including mutual funds and
annuities. Effective January 1, 1999, Hibernia National Bank of Texas was merged
with and into Hibernia National Bank in a transaction that was accounted for at
historical cost in a manner similar to that of a pooling-of-interest
transaction.
The accounting principles followed by Hibernia Corporation and
Subsidiaries (the Company or Hibernia) and the methods of applying those
principles conform with generally accepted accounting principles and those
generally practiced within the banking industry.
Consolidation
The consolidated financial statements include the accounts of the
Parent Company and its wholly owned subsidiaries: Hibernia National Bank,
Hibernia National Bank of Texas, Hibernia Capital Corporation (HCC) and Zachary
Taylor Life Insurance Company (Zachary Taylor). HCC, a licensed Small Business
Investment Company, provides equity capital and long-term loans to small
businesses. Zachary Taylor is currently inactive, and the Parent Company has an
agreement with the Federal Reserve Bank whereby Zachary Taylor will not be
actively operated as an insurance company without Federal Reserve Board
approval.
These consolidated financial statements give retroactive effect to
mergers accounted for as poolings of interests. In addition, the effects of
mergers accounted for as purchase transactions have been included from the date
of consummation (see Note 2).
All significant intercompany transactions and balances have been
eliminated.
Cash and Cash Equivalents
Cash and cash equivalents include cash and due from banks,
interest-bearing time deposits in domestic banks, federal funds sold and
securities purchased under agreements to resell and trading account assets.
Securities
Management determines the appropriate classification of debt securities
(trading, available for sale, or held to maturity) at the time of purchase and
re-evaluates this classification periodically. Securities classified as trading
account assets are held for sale in anticipation of short-term market movements.
Debt securities are classified as held to maturity when the Company has the
positive intent and ability to hold the securities to maturity. Securities not
classified as held to maturity or trading are classified as available for sale.
Securities classified as trading account assets are carried at market
value and are included in short-term investments. Gains and losses, both
realized and unrealized, are reflected in earnings as other operating income.
Securities classified as held to maturity are stated at amortized cost.
Securities classified as available for sale are stated at fair value, with
unrealized gains and losses, net of tax, reported in shareholders' equity and
included in other comprehensive income.
The amortized cost of debt securities classified as held to maturity or
available for sale is adjusted for amortization of premiums and accretion of
discounts to maturity or, in the case of mortgage-backed securities, over the
estimated life of the security. Amortization, accretion and accruing interest
are included in interest income on securities using the level-yield method.
Realized gains and losses, and declines in value judged to be other than
temporary, are included in net securities gains (losses). The cost of securities
sold is determined based on the specific identification method.
Loans
Loans are stated at the principal amounts outstanding, less unearned
income and the reserve for possible loan losses. Interest on loans and accretion
of unearned income are computed by methods which approximate a level rate of
return on recorded principal. Loan origination and commitment fees and certain
direct loan origination costs are deferred, and the net amount is amortized as
an adjustment of the related loan's yield over the life of the loan.
Commercial and small business loans are placed in nonaccrual status
when, in management's opinion, there is doubt concerning full collectibility of
both principal and interest. All commercial and small business nonaccrual loans
are considered to be impaired when it is probable that all amounts due in
accordance with the contractual terms will not be collected. Consumer loans are
generally charged off when any payment of principal or interest is more than 120
days delinquent. Interest payments received on nonaccrual loans are applied to
principal if there is doubt as to the collectibility of the principal;
otherwise, these receipts are recorded as interest income. A loan remains in
nonaccrual status until it is current as to principal and interest and the
borrower demonstrates the ability to fulfill the contractual obligation.
Reserve for Possible Loan Losses
The reserve for possible loan losses is maintained to provide for
possible losses inherent in the loan portfolio. The reserve related to loans
that are identified as impaired is based on discounted cash flows, using the
loan's initial effective interest rate, or the fair value of the collateral for
certain collateral dependent loans.
The reserve is based on management's estimate of future losses; actual
losses may vary from the current estimate. The estimate is reviewed
periodically, taking into consideration the risk characteristics of the loan
portfolio, past loss experience, general economic conditions and other factors
which warrant current recognition. As adjustments to the estimate of future
losses become necessary, they are reflected as a provision for possible loan
losses in current-period earnings. Actual loan losses are deducted from and
subsequent recoveries are added to the reserve.
Bank Premises and Equipment
Bank premises and equipment are stated at cost less accumulated
depreciation and amortization. Depreciation and amortization are computed
primarily using the straight-line method over the estimated useful lives of the
assets, which generally are 10 to 30 years for buildings and 3 to 15 years for
equipment, and over the shorter of the lease terms or the estimated lives of
leasehold improvements.
Foreclosed Assets and Excess Bank-Owned Property
Foreclosed assets include real estate and other collateral acquired
upon the default of loans and loans classified as in-substance foreclosures. A
loan is classified as in-substance foreclosure when the Company has taken
possession of the collateral regardless of whether formal foreclosure
proceedings have taken place. Foreclosed assets and excess bank-owned property
are recorded at the fair value of the assets less estimated selling costs.
Losses arising from the initial reduction of an outstanding loan amount to fair
value are deducted from the reserve for possible loan losses. Losses arising
from the transfer of bank premises and equipment to excess bank-owned property
are charged to expense. A valuation reserve for foreclosed assets and excess
bank-owned property is maintained for subsequent valuation adjustments on a
specific-property basis. Income and expenses associated with foreclosed assets
and excess bank-owned property prior to sale are included in current earnings.
Excess of Cost Over Fair Value of Net Assets Acquired
The excess of cost over the fair value of net assets acquired
(goodwill) is being amortized using the straight-line method over the estimated
periods benefited, generally 25 years.
As events or changes in circumstances warrant, the Company evaluates
the realizability of goodwill by geographic region based on a comparison of the
recorded balance of goodwill to the applicable discounted cumulative net income,
before goodwill amortization expense, over the remaining amortization period of
the associated goodwill. To the extent that impairment exists, write-downs to
realizable value are recorded.
Income Taxes
The Parent Company and its subsidiaries file a consolidated federal
income tax return. The Company accounts for income taxes using the liability
method. Temporary differences occur between the financial reporting and tax
bases of assets and liabilities. Deferred tax assets and liabilities are
recorded for these differences based on enacted tax rates and laws that will be
in effect when the differences are expected to reverse.
Hibernia National Bank is subject to a Louisiana shareholders' tax,
which is based partly on income. The income portion is reported as state income
tax. In addition, certain subsidiaries of the Parent Company and Hibernia
National Bank are subject to Louisiana state income tax. Hibernia National Bank
of Texas is subject to Texas franchise tax.
Derivative Financial Instruments
The Company may enter into derivative financial instruments for
purposes other than trading to assist in the management of its exposure to
interest rate risk. Derivative financial instruments used for asset and
liability hedges are recorded using the accrual method of accounting. Under this
method the expected differential to be paid or received is accrued in the
appropriate income or expense caption on the income statement (i.e., hedge of a
loan in interest income, hedge of a deposit or debt in interest expense). The
fair value of these instruments and the changes in the fair value are not
recognized in the financial statements. In addition, the Company may enter into
derivative financial instruments to manage its exposure to changes in interest
rates on the market value of its securities available for sale portfolio. These
instruments are recorded using the fair value method of accounting. Under this
method, gains and losses are recognized, net of tax, in shareholders' equity and
are included in other comprehensive income.
The Company may also enter into derivative financial instruments for
trading purposes. These instruments are recorded using the fair value method of
accounting. Changes in the fair value of these instruments are recorded in
noninterest income.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
Reclassification
Certain items included in the consolidated financial statements for
1997 and 1996 have been reclassified to conform with the 1998 presentation.
Recent Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,"
which requires impairment losses to be recorded on long-lived assets used in
operations, including related goodwill, when indicators of impairment are
present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amounts. SFAS No. 121 also addresses
the accounting for long-lived assets that are expected to be disposed of. The
adoption of SFAS No. 121 in the first quarter of 1996 did not have a material
effect on the financial condition or operating results of the Company.
In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No.
125 requires an entity to recognize the financial and servicing assets it
controls and the liabilities it has incurred and to cease to recognize financial
and servicing assets when control has been surrendered in accordance with the
criteria provided in SFAS No. 125. Subsequently, the FASB issued SFAS No. 127,
"Deferral of the Effective Date of Certain Provisions of SFAS No. 125," which
deferred until January 1, 1998, the implementation of certain aspects of the
original statement. The adoption of SFAS No. 125 in the first quarter of 1998
did not have a material impact on the financial condition or operating results
of the Company.
In March 1998, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of Position
(SOP) 98-1, "Accounting for the Cost of Computer Software Developed or Obtained
for Internal Use." SOP 98-1 is effective for financial statements for years
beginning after December 15, 1998. The adoption of SOP 98-1 is not expected to
have a material impact on the financial condition or operating results of the
Company.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which is effective for financial statements
for years beginning after June 15, 1999. Because of the limited use of
derivatives, management does not anticipate that the adoption of SFAS No. 133
will have a material impact on the financial condition or operating results of
the Company.
Note 2
Mergers
The Company completed mergers with five financial institutions in
1996, two in Louisiana and one in East Texas which were accounted for as
poolings of interests, and two in Louisiana which were accounted for as
purchase transactions. In 1997, the Company completed mergers with two East
Texas financial institutions which were accounted for as poolings of interests.
In 1998, the Company completed mergers with four financial institutions, three
in Louisiana and one in East Texas, all of which were accounted for as poolings
of interests. The Company completed mergers with FNB Bancshares, Inc.(FNB),
Bunkie Bancshares, Inc. (Bunkie), CM Bank Holding Company, Inc. (Calcasieu),
St. Bernard Bank & Trust Co. (St. Bernard) and Texarkana National Bancshares,
Inc. (Texarkana) in 1996; Executive Bancshares, Inc. (Executive) and Unicorp
Bancshares - Texas, Inc. (Unicorp) in 1997; and Northwest Bancshares of
Louisiana, Inc. (Northwest), ArgentBank (Argent), Firstshares of Texas, Inc.
(Firstshares) and Peoples Holding Corporation (Peoples) in 1998.
The institutions with which the Company merged are collectively
referred to as the "merged companies." The merged companies in transactions
accounted for as poolings of interests are referred to as the "pooled
companies," and institutions in transactions accounted for as purchases are
referred to as the "purchased companies."
The following table shows the merger date, consideration issued,
exchange ratio and accounting method for each merger.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Exchange
Merger Date Consideration(1) Ratio Accounting Method
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FNB ............................ January 1, 1996 889,640 shares 92.00:1 Pooling of interests
Bunkie ......................... January 15, 1996 1,874,760 shares 170.34:1 Pooling of interests
Calcasieu ...................... August 26, 1996 $ 201,700,000 N/A Purchase
St. Bernard .................... October 1, 1996 $ 46,600,000 N/A Purchase
Texarkana ...................... December 31, 1996 6,236,621 shares 8.20:1 Pooling of interests
Executive ...................... August 31, 1997 1,161,680 shares 15.85:1 Pooling of interests
Unicorp ........................ November 7, 1997 2,233,388 shares 1.60:1 Pooling of interests
Northwest ...................... January 1, 1998 1,508,019 shares 3.90:1 Pooling of interests
Argent ......................... February 1, 1998 13,317,236 shares 2.04:1 Pooling of interests
Firstshares .................... March 15, 1998 3,690,615 shares 7.15:1 Pooling of interests
Peoples ........................ July 1, 1998 3,562,367 shares 9.50:1 Pooling of interests
- ------------------------------------------------------------------------------------------------------------------------------------
- ----------------
(1)All shares issued were Hibernia Class A Common Stock.
</TABLE>
The following table shows the key components of the results of
operations of the pooled companies.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Hibernia 1997
(originally Pooled 1998 Pooled Companies
($ in thousands) reported) Companies(1) Northwest Argent Firstshares Peoples Total
- ------------------------------------------------------------------------------------------------------------------------------------
Year ended December 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest income .......... $427,757 $ - $4,252 $29,507 $11,599 $8,921 $482,036
Net income ................... $137,389 $ - $ 851 $ 454 $ 2,291 $3,811 $144,796
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Year ended December 31, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income .......... $366,217 $9,416 $3,852 $24,449 $10,204 $8,131 $422,269
Net income ................... $109,950 $2,868 $1,370 $ 7,738 $ 2,739 $3,228 $127,893
- ------------------------------------------------------------------------------------------------------------------------------------
- ----------------
(1)Results of operations for the year ended December 31, 1997 are included in
Hibernia's results.
</TABLE>
Under the purchase method of accounting, the assets and liabilities of
Calcasieu and St. Bernard were adjusted to their estimated fair values as of
each purchase date. The excess of cost over the fair value of net assets
acquired was $120,126,000 and is being amortized on a straight-line basis over
25 years. In addition, a core deposit intangible of $18,457,000 was recorded and
is being amortized on an accelerated basis over 10 years. On an unaudited pro
forma basis, after giving effect to the purchases of Calcasieu and St. Bernard
as if the transactions had occurred at the beginning of 1996, interest and
noninterest income would have been $888,228,000, net income would have been
$117,108,000, and net income per common share and net income per common share -
assuming dilution would have been $.77 and $.76, respectively. The effect of
anticipated savings resulting from the mergers has not been included in the pro
forma information. Unaudited pro forma information is not necessarily indicative
of future results.
Hibernia is a party to definitive merger agreements with two additional
financial institutions, one in Louisiana and one in East Texas, which are
pending certain regulatory and shareholder approval. The Company anticipates
that these mergers will be consummated in early 1999 and that they will be
accounted for as poolings of interests. In addition, Hibernia has signed an
agreement with Chase Bank of Texas, N.A. to purchase the assets and assume the
liabilities of its Beaumont, Texas operations. This purchase transaction is
expected to be consummated in the second quarter of 1999. The following table
contains information regarding institutions with which Hibernia has entered into
definitive merger agreements and the pending purchase of the Beaumont operations
of the Chase Bank of Texas, N.A.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
($ in thousands) December 31, 1998 Estimated Consideration
- ---------------------------------------------------------------------------------------------------------------------------
Number Total Value of Shares
Institution of Offices Assets Consideration to Be Issued*
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MarTex Bancshares, Inc. ......................... 9 $ 319,579 3,450,000 shares $ 59,944
First Guaranty Bank ............................. 6 276,663 4,021,517 shares 69,874
Beaumont operations of
Chase Bank of Texas, N.A ................... 4 465,405 $ 87,000 N/A
- ---------------------------------------------------------------------------------------------------------------------------
Total .............................. 19 $1,061,647 $129,818
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------
*Based on the December 31, 1998 market value of $17.375 per share
</TABLE>
Note 3
Short-Term Investments
The following is a summary of short-term investments.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
($ in thousands) December 31
1998 1997
- -------------------------------------------------------------------------------------
<S> <C> <C>
Federal funds sold and securities purchased
under agreements to resell ................. $348,991 $446,598
Interest-bearing time deposits in domestic banks 1,141 2,474
Trading account assets ......................... - 35,943
- -------------------------------------------------------------------------------------
Total short-term investments ............... $350,132 $485,015
- -------------------------------------------------------------------------------------
</TABLE>
Note 4
Securities
The following is a summary of securities classified as available for
sale. The Company had no securities classified as held to maturity during the
three-year period ended December 31, 1998.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
($ in thousands) December 31, 1998
- ---------------------------------------------------------------------------------------------------------
Amortized Fair Unrealized Unrealized
Type Cost Value Gains Losses
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasuries .................... $ 250,430 $ 254,538 $ 4,108 $ -
U.S. government agencies:
Mortgage-backed securities ...... 959,765 971,114 14,394 3,045
Bonds ........................... 1,118,077 1,134,231 18,035 1,881
States and political subdivisions.. 231,146 241,056 10,107 197
Other ............................. 75,184 75,372 188 -
- ---------------------------------------------------------------------------------------------------------
Total securities available for sale $2,634,602 $2,676,311 $46,832 $5,123
=========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
($ in thousands) December 31, 1997
- ---------------------------------------------------------------------------------------------------------
Amortized Fair Unrealized Unrealized
Type Cost Value Gains Losses
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasuries .................... $ 430,601 $ 433,802 $ 3,210 $ 9
U.S. government agencies:
Mortgage-backed securities ...... 1,287,369 1,296,852 18,074 8,591
Bonds ........................... 578,669 581,950 4,506 1,225
States and political subdivisions.. 241,816 248,927 7,524 413
Other ............................. 66,659 66,633 318 344
- ---------------------------------------------------------------------------------------------------------
Total securities available for sale $2,605,114 $2,628,164 $33,632 $10,582
=========================================================================================================
</TABLE>
The following is a summary of realized gains and losses from the sale
of securities available for sale.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
($ in thousands) Year Ended December 31
- -------------------------------------------------------------------------------------
1998 1997 1996
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Realized gains ................. $ 6,135 $ 2,840 $ 463
Realized losses ................ (457) (115) (5,615)
- -------------------------------------------------------------------------------------
Net realized gains (losses) $ 5,678 $ 2,725 $(5,152)
=====================================================================================
</TABLE>
Securities with carrying values of $2,541,050,000 and $2,315,582,000
at December 31, 1998 and 1997, respectively, were pledged to secure public
or trust deposits or were sold under repurchase agreements.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
($ in thousands) December 31
- ---------------------------------------------------------------------------
1998 1997
- ---------------------------------------------------------------------------
<S> <C> <C>
U.S. Treasuries ................. $ 254,538 $ 357,511
U.S. government agencies:
Mortgage-backed securities ... 969,468 1,230,599
Bonds ........................ 1,130,546 527,178
States and political subdivisions 185,491 195,766
Other ........................... 1,007 4,528
- ---------------------------------------------------------------------------
Total pledged securities ... $2,541,050 $2,315,582
===========================================================================
</TABLE>
The amortized cost and estimated fair value by maturity of securities
available for sale are shown in the following table. Securities are classified
according to their contractual maturities without consideration of principal
amortization, potential prepayments or call options. Accordingly, actual
maturities may differ from contractual maturities.
<TABLE>
<CAPTION>
($ in thousands) December 31, 1998
- ---------------------------------------------------------------------------------
Amortized Fair
Cost Value
- ---------------------------------------------------------------------------------
<S> <C> <C>
Due in 1 year or less ................. $ 180,286 $ 181,334
Due after 1 year through 5 years ...... 463,687 470,023
Due after 5 years through 10 years .... 1,036,374 1,055,974
Due after 10 years .................... 954,255 968,980
- ---------------------------------------------------------------------------------
Total securities available for sale $2,634,602 $2,676,311
=================================================================================
</TABLE>
Note 5
Loans
The following is a summary of commercial and small business loans
classified by repayment source and consumer loans classified by type. The change
in small business commercial and industrial and small business other balances
from 1997 to 1998 reflects the reclassification of pooled companies' loans to
their appropriate category after converting to Hibernia's loan system.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
($ in thousands) December 31
- -------------------------------------------------------------------------------------------
1998 1997
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Commercial:
Commercial and industrial .................. $ 1,371,174 $1,089,199
Services industry .......................... 1,055,589 719,648
Real estate ................................ 457,427 444,188
Health care ................................ 306,522 251,724
Transportation, communications and utilities 211,986 253,617
Energy ..................................... 421,998 278,988
Other ...................................... 55,140 54,170
- -------------------------------------------------------------------------------------------
Total commercial ....................... 3,879,836 3,091,534
- -------------------------------------------------------------------------------------------
Small Business:
Commercial and industrial .................. 678,700 981,290
Services industry .......................... 440,194 309,916
Real estate ................................ 274,661 178,980
Health care ................................ 107,616 74,134
Transportation, communications and utilities 82,175 38,048
Energy ..................................... 46,312 17,314
Other ...................................... 347,975 259,487
- -------------------------------------------------------------------------------------------
Total small business ................... 1,977,633 1,859,169
- -------------------------------------------------------------------------------------------
Consumer:
Residential mortgages:
First mortgages ........................ 2,195,882 1,591,222
Junior liens ........................... 190,073 129,357
Indirect ................................... 850,501 748,391
Revolving credit ........................... 325,788 282,876
Other ...................................... 586,469 583,943
- -------------------------------------------------------------------------------------------
Total consumer ......................... 4,148,713 3,335,789
- -------------------------------------------------------------------------------------------
Total loans ............................ $10,006,182 $8,286,492
===========================================================================================
</TABLE>
The following is a summary of nonperforming loans, foreclosed assets
and excess bank-owned property.
<TABLE>
<CAPTION>
($ in thousands) December 31
- ------------------------------------------------------------------
1998 1997
- ------------------------------------------------------------------
<S> <C> <C>
Nonaccrual loans ............. $40,152 $22,598
Restructured loans ........... - -
- ------------------------------------------------------------------
Nonperforming loans ....... 40,152 22,598
- ------------------------------------------------------------------
Foreclosed assets ............ 9,618 2,577
Excess bank-owned property ... 2,648 2,360
- ------------------------------------------------------------------
Total nonperforming assets $52,418 $27,535
==================================================================
</TABLE>
At December 31, 1998 and 1997 the recorded investment in loans that
were considered to be impaired was $36,540,000 and $17,168,000, respectively.
Included in the 1998 and 1997 amounts were $33,226,000 and $15,111,000,
respectively, of impaired loans for which the related reserve for possible
loan losses was $9,798,000 and $2,560,000, respectively. At December 31,
1998 and 1997 impaired loans that did not have a reserve for possible loan
losses amounted to $3,314,000 and $2,057,000, respectively. The average
recorded investment in impaired loans during the years ended December 31, 1998,
1997 and 1996 was approximately $26,911,000, $16,466,000 and $15,818,000,
respectively.
Interest payments received on impaired loans are applied to principal
if there is doubt as to the collectibility of the principal; otherwise, these
receipts are recorded as interest income. For the years ended December 31, 1998,
1997 and 1996, the Company recognized interest income on impaired loans of
$1,682,000, $1,199,000 and $2,296,000, respectively.
Interest income in the amount of $3,274,000 for 1998, $2,042,000 for
1997 and $3,242,000 for 1996 would have been recorded on nonperforming loans if
they had been classified as performing. The Company recorded $1,682,000,
$1,199,000 and $2,296,000 of interest income on nonperforming loans during 1998,
1997 and 1996, respectively.
The following is a summary of activity in the reserve for possible loan
losses.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
($ in thousands) Year Ended December 31
- -----------------------------------------------------------------------------------------------------
1998 1997 1996
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year ............ $ 124,381 $ 143,566 $ 165,099
Loans charged off ................... (39,702) (45,596) (36,228)
Recoveries .......................... 17,297 22,784 20,608
- -----------------------------------------------------------------------------------------------------
Net loans charged off ............. (22,405) (22,812) (15,620)
- -----------------------------------------------------------------------------------------------------
Provision for possible loan losses .. 26,000 3,148 (12,127)
Addition due to purchase transactions - 479 6,214
- -----------------------------------------------------------------------------------------------------
Balance at end of year .................. $ 127,976 $ 124,381 $ 143,566
=====================================================================================================
</TABLE>
Note 6
Bank Premises and Equipment
The following tables detail bank premises and equipment and related
depreciation and amortization expense.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
($ in thousands) December 31
- ----------------------------------------------------------------------------------------
1998 1997
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Land ......................................... $ 37,422 $ 37,327
Buildings .................................... 173,843 170,819
Leasehold improvements ....................... 30,660 29,265
Furniture and equipment ...................... 128,249 152,712
- ----------------------------------------------------------------------------------------
370,174 390,123
Less accumulated depreciation and amortization (182,196) (200,103)
- ----------------------------------------------------------------------------------------
Total bank premises and equipment ............ $ 187,978 $ 190,020
========================================================================================
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
($ in thousands) Year Ended December 31
- ----------------------------------------------------------------------------
1998 1997 1996
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Provisions for depreciation
and amortization included in:
Occupancy expense $10,872 $ 9,335 $ 7,658
Equipment expense 16,615 17,700 20,513
- ----------------------------------------------------------------------------
Total depreciation and
amortization expense.. $27,487 $27,035 $28,171
============================================================================
</TABLE>
Note 7
Deposits
At December 31, 1998 time deposits with a remaining maturity of one
year or more amounted to $877,111,000. Maturities of all time deposits are as
follows: 1999 - $3,655,353,000; 2000 - $647,942,000; 2001 - $63,575,000; 2002 -
$50,489,000; 2003 - $31,946,000; and thereafter $83,159,000.
Domestic certificates of deposit of $100,000 or more amounted to
$1,709,755,000 and $1,633,796,000 at December 31, 1998 and 1997, respectively.
Interest on these certificates amounted to $83,784,000, $82,191,000 and
$70,704,000 in 1998, 1997 and 1996, respectively.
Foreign deposits, which are deposit liabilities of the Cayman Island
office of Hibernia National Bank, amounted to $321,537,000 and $187,517,000 at
December 31, 1998 and 1997, respectively. These deposits are comprised primarily
of individual deposits of $100,000 or more. Interest expense on foreign deposits
amounted to $11,422,000, $5,204,000 and $2,261,000 for 1998, 1997 and 1996,
respectively.
Note 8
Short-Term Borrowings
The following is a summary of short-term borrowings.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
($ in thousands) December 31
- -------------------------------------------------------------------------------------
1998 1997
- -------------------------------------------------------------------------------------
<S> <C> <C>
Federal funds purchased ...................... $ 705,320 $317,554
Securities sold under agreements to repurchase 390,743 343,951
Federal Reserve Bank treasury, tax and
loan account ............................... 38,073 58,456
- -------------------------------------------------------------------------------------
Total short-term borrowings .............. $1,134,136 $719,961
=====================================================================================
</TABLE>
Federal funds purchased and securities sold under agreements to
repurchase generally mature within one to 14 days from the transaction date. The
Federal Reserve Bank treasury, tax and loan account is an open-ended note option
with the Federal Reserve Bank of Atlanta. The following is a summary of
pertinent data related to short-term borrowings.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
($ in thousands) December 31
- -----------------------------------------------------------------------------------------
1998 1997 1996
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding at December 31 ... $1,134,136 $719,961 $343,551
Maximum month-end outstandings $1,134,136 $938,716 $377,189
Average daily outstandings ... $ 790,890 $606,102 $332,975
Average rate during the year.. 5.1% 5.2% 4.8%
Average rate at year end ..... 5.0% 5.7% 5.0%
=========================================================================================
</TABLE>
Note 9
Debt
The following is a summary of outstanding debt.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
($ in thousands) December 31
- -------------------------------------------------------------------------------
1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C>
Federal Home Loan Bank callable advances $300,000 $300,000
Federal Home Loan Bank long-term advances 505,689 206,548
- -------------------------------------------------------------------------------
Total debt .......................... $805,689 $506,548
===============================================================================
</TABLE>
The Federal Home Loan Bank (FHLB) advances are secured by the Company's
investment in FHLB stock, which totaled $43,032,000 and $34,897,000 at December
31, 1998 and 1997, respectively, and also by a blanket floating lien on portions
of the Company's residential loan portfolio.
The FHLB callable advances require monthly interest payments and mature
in 2008. Callable advances of $100,000,000 accrue interest at a rate of 4.76%
and $200,000,000 accrue interest at a rate of 5.28%. The FHLB may demand payment
on the callable advances at quarterly intervals which began in December 1998 for
the $100,000,000 advance and which begin in June 2003 for the $200,000,000
advance. If called prior to maturity, replacement funding will be offered by the
FHLB at a then-current rate. The FHLB long-term advances accrue interest at
contractual rates of 4.61% to 8.36%, are due in monthly installments of
approximately $2,539,000, including interest, and are scheduled to amortize
through various dates between 1999 and 2015. However, should the loans for which
the long-term advances were obtained repay at a faster rate than anticipated,
the advances are to be repaid at a correspondingly faster rate.
Maturities of debt are as follows: 1999 - $100,840,000; 2000 -
$100,853,000; 2001 - $301,014,000; 2002 - $741,000; 2003 - $429,000; and
thereafter - $301,812,000.
Note 10
Other Assets and Other Liabilities
The following are summaries of other assets and other liabilities.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
($ in thousands) December 31
- ----------------------------------------------------------------------------
1998 1997
- ----------------------------------------------------------------------------
<S> <C> <C>
Other assets:
Accrued interest receivable ...... $ 91,412 $ 82,750
Foreclosed assets and excess
bank-owned property ............ 12,266 4,937
Deferred income taxes ............ 27,010 34,063
Goodwill, net .................... 138,393 145,870
Core deposit intangibles, net .... 9,650 13,497
Mortgage servicing rights, net ... 31,111 12,029
Other ............................ 52,975 49,349
- ----------------------------------------------------------------------------
Total other assets ............. $362,817 $342,495
- ----------------------------------------------------------------------------
Other liabilities:
Accrued interest payable ......... $ 36,456 $ 39,015
Trade accounts payable and
accrued liabilities ............ 73,867 75,454
Reserve for future rental payments
under sale/leaseback ........... 19,821 20,505
Other ............................ 20,124 16,058
- ----------------------------------------------------------------------------
Total other liabilities ........ $150,268 $151,032
============================================================================
</TABLE>
Amortization expense relating to goodwill totaled $8,168,000,
$8,331,000 and $5,133,000 for the years ended December 31, 1998, 1997 and 1996,
respectively. Accumulated amortization relating to goodwill at December 31, 1998
and 1997 totaled $45,005,000 and $36,837,000, respectively. Amortization expense
relating to core deposit intangibles totaled $3,847,000, $4,931,000 and
$1,877,000 in 1998, 1997 and 1996, respectively. Accumulated amortization
relating to core deposit intangibles totaled $10,655,000 and $6,808,000 at
December 31, 1998 and 1997, respectively.
Note 11
Preferred and Common Stock
The Company has authorized 100,000,000 shares of no par value preferred
stock. At December 31, 1998 and 1997, 2,000,000 shares of Series A
Fixed/Adjustable Rate Noncumulative Preferred Stock (Series A Preferred Stock)
were issued and outstanding. The Series A Preferred Stock is nonconvertible,
with a $50 per share liquidation preference and a 6.9% annual dividend through
October 1, 2001, payable on the first business day of each calendar quarter.
Beginning October 1, 2001 the dividend rate is adjustable but will not be less
than 7.4% nor greater than 13.4% per annum. Proceeds from the September 30, 1996
issuance totaled $98,000,000, which is net of $2,000,000 in issuance costs. The
Series A Preferred Stock qualifies as Tier 1 capital for regulatory purposes and
is redeemable at Hibernia's option (with prior Federal Reserve Board approval)
at any time after October 1, 2001.
In April 1998 shareholders approved an amendment to the Company's
Articles of Incorporation to increase the number of authorized shares of no par
value Class A Common Stock from 200,000,000 to 300,000,000 shares.
Note 12
Employee Benefit Plans
The Company maintains a defined-contribution benefit plan under Section
401(k) of the Internal Revenue Code, the Retirement Security Plan (RSP).
Substantially all employees who have completed one year of service are eligible
to participate in the RSP. Under the RSP, employees contribute a portion of
their compensation, with the Company matching 100% of the first 5% of an
employee's contribution. The matching contributions are invested in Hibernia
Class A Common Stock and are charged to employee benefits expense. At December
31, 1998, the RSP owned approximately 2,602,000 shares of Hibernia Class A
Common Stock. The Company's contributions to the RSP totaled $5,384,000 in 1998,
$4,973,000 in 1997 and $5,135,000 in 1996.
The Company maintains incentive pay and bonus programs for certain
employees. Costs of these programs were $25,412,000, $20,806,000 and $17,550,000
for the years ended December 31, 1998, 1997 and 1996, respectively.
During 1995, the Company established a plan (1995-1997 Plan) for the
grant of performance share awards under its Long-Term Incentive Plan for certain
members of management. Under the 1995-1997 Plan, if the Company achieved certain
predetermined performance goals during the three-year period from January 1,
1995 through December 31, 1997, the Company would award Hibernia Class A Common
Stock to certain members of management who contributed to that achievement. A
total of 425,499 shares of Hibernia Class A Common Stock, net of personal tax
withholding, was issued under the 1995-1997 Plan in the first quarter of 1998.
Compensation expense of $6,390,000 and $3,148,000 was recorded in 1997 and 1996,
respectively, relating to the 1995-1997 Plan.
The Company developed a new performance share awards plan (1998-2000
Plan) for the three-year period from January 1, 1998 through December 31, 2000.
The structure of the 1998-2000 Plan is similar to that of the 1995-1997 Plan.
Compensation expense of $8,000,000 was recorded in 1998 relating to the
1998-2000 Plan.
Note 13
Employee Stock Ownership Plan
During 1995, the Company instituted an employee stock ownership plan
(ESOP) in which substantially all employees participate. The ESOP was authorized
to purchase $30,000,000 of Hibernia Class A Common Stock and to borrow the
needed funds from Hibernia National Bank, with a guarantee from the Parent
Company. The ESOP acquired $30,000,000 of Hibernia Class A Common Stock in
open-market transactions from March 1995 to May 1998. During 1998, the ESOP was
authorized to acquire an additional $15,000,000 of Hibernia Class A Common Stock
which was to be funded by an additional borrowing from Hibernia National Bank,
with a guarantee from the Parent Company. The additional $15,000,000 of Hibernia
Class A Common Stock was purchased on October 22, 1998.
At December 31, 1998 and 1997, the ESOP owned approximately 3,874,000
and 2,431,000 shares of Hibernia Class A Common Stock and had an outstanding
debt obligation of $37,751,000 and $17,387,000, respectively. The Banks make
annual contributions to the ESOP in an amount determined by their Boards of
Directors, but at least equal to the ESOP's minimum debt service less dividends
received by the ESOP. Dividends received by the ESOP in 1998, 1997 and 1996 were
used to pay debt service, and it is anticipated that this practice will continue
in the future. The ESOP shares initially were pledged as collateral for its
debt. As the debt is repaid, shares are released from collateral and allocated
to active employees.
The debt of the ESOP is recorded as debt of the Parent Company and the
shares pledged as collateral are reported as unearned compensation in equity.
Hibernia National Bank's loan asset and the Parent Company's debt liability
eliminate in consolidation. As shares are committed to be released, the Company
reports compensation expense equal to the current market value of the shares,
and the shares become outstanding for net income per common share computations.
Dividends on allocated ESOP shares are recorded as a reduction of retained
earnings; dividends on unallocated ESOP shares are recorded as a reduction of
debt and accrued interest by the Parent Company.
Compensation expense of $4,224,000, $3,014,000 and $2,882,000 relating
to the ESOP was recorded during 1998, 1997 and 1996, respectively. The ESOP held
872,000 and 618,000 allocated shares and 3,002,000 and 1,813,000 suspense shares
at December 31, 1998 and 1997, respectively. The fair value of the suspense
shares at December 31, 1998 and 1997 was $52,168,000 and $34,237,000,
respectively.
Note 14
Stock Options
SFAS No. 123, "Accounting for Stock-Based Compensation," which became
effective January 1, 1996, established financial accounting and reporting
standards for stock-based compensation plans. Those plans include all
arrangements by which employees and directors receive shares of stock or other
equity instruments of the company, or the company incurs liabilities to
employees or directors in amounts based on the price of the stock. SFAS No. 123
defines a fair-value-based method of accounting for stock-based compensation.
However, SFAS No. 123 also allows an entity to continue to measure stock-based
compensation cost using the intrinsic value method of Accounting Principles
Board Opinion No. 25 (APB No. 25), "Accounting for Stock Issued to Employees."
Entities electing to retain the accounting prescribed in APB No. 25 must make
pro forma disclosures of net income, net income per common share and net income
per common share - assuming dilution as if the fair-value-based method of
accounting defined in SFAS No. 123 had been applied. The Company retained the
provisions of APB No. 25 for expense recognition purposes. Under APB No. 25,
because the exercise price of the Company's stock options equals the market
price of the underlying stock on the date of grant, no compensation expense is
recognized.
The Company's stock option plans provide incentive and non-qualified
options to various key employees and non-employee directors. The options are
granted at no less than the fair market value of the stock at the date of grant.
Options granted to directors upon inception of service as a director vest in six
months. Until October 1997 those options were granted under the 1987 Stock
Option Plan; after October 1997 those options are granted under the 1993
Directors' Stock Option Plan. All other options granted under the 1987 Stock
Option Plan, the Long-Term Incentive Plan and the 1993 Directors' Stock Option
Plan become exercisable in the following increments: 50% after the expiration of
two years from the date of grant, an additional 25% three years from the date of
grant and the remaining 25% four years from the date of grant.
Options granted to employees and directors, other than the chief
executive officer, become immediately exercisable if the holder of the option
dies while the option is outstanding. Options granted under the 1987 Stock
Option Plan generally expire 10 years from the date granted. Options granted
under the Long-Term Incentive Plan and the 1993 Directors' Stock Option Plan
generally expire 10 years from the date of grant unless the holder dies,
retires, becomes permanently disabled or leaves the employ of the Company, at
which time the options expire at various times ranging from 30 to 365 days. All
options vest immediately upon a change in control of the Company.
The following summarizes the option activity in the plans during 1998,
1997 and 1996. During 1997, the 1987 Stock Option Plan was terminated;
therefore, there are no shares available for grant under this plan. The
termination did not impact options outstanding under the 1987 Stock Option Plan.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted-
Average
Exercise
Incentive Non-Qualified Total Price
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1987 Stock Option Plan:
Outstanding, December 31, 1995 ...................... 162,428 1,360,986 1,523,414 $ 7.40
Granted (weighted-average fair value $3.47 per share) - 5,000 5,000 11.56
Canceled ............................................ (1,875) - (1,875) 4.38
Exercised ........................................... - (22,398) (22,398) 4.94
- ------------------------------------------------------------------------------------------------------------------------------------
Outstanding, December 31, 1996 ...................... 160,553 1,343,588 1,504,141 7.45
Canceled ............................................ - (67,104) (67,104) 16.37
Exercised ........................................... (18,750) (34,745) (53,495) 5.47
- ------------------------------------------------------------------------------------------------------------------------------------
Outstanding, December 31, 1997 ...................... 141,803 1,241,739 1,383,542 7.10
Canceled ............................................ - (42,625) (42,625) 16.45
Exercised ........................................... (91,640) (19,777) (111,417) 4.61
- ------------------------------------------------------------------------------------------------------------------------------------
Outstanding, December 31, 1998 ...................... 50,163 1,179,337 1,229,500 $ 7.00
- ------------------------------------------------------------------------------------------------------------------------------------
Exercisable, December 31, 1998 ...................... 50,163 1,179,337 1,229,500 $ 7.00
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted-
Average
Exercise
Incentive Non-Qualified Total Price
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long-Term Incentive Plan:
Outstanding, December 31, 1995 ...................... 12,598 3,746,448 3,759,046 $ 7.45
Granted (weighted-average fair value $2.76 per share) - 1,527,800 1,527,800 10.20
Canceled ............................................ - (282,718) (282,718) 8.10
Exercised ........................................... - (149,558) (149,558) 7.53
- ------------------------------------------------------------------------------------------------------------------------------------
Outstanding, December 31, 1996 ...................... 12,598 4,841,972 4,854,570 8.27
Granted (weighted-average fair value $3.99 per share) - 1,540,300 1,540,300 13.43
Canceled ............................................ - (172,488) (172,488) 10.92
Exercised ........................................... - (473,772) (473,772) 7.31
- ------------------------------------------------------------------------------------------------------------------------------------
Outstanding, December 31, 1997 ...................... 12,598 5,736,012 5,748,610 9.65
Granted (weighted-average fair value $5.59 per share) - 1,919,684 1,919,684 18.35
Canceled ............................................ - (222,819) (222,819) 13.81
Exercised ........................................... - (366,728) (366,728) 7.99
- ------------------------------------------------------------------------------------------------------------------------------------
Outstanding, December 31, 1998 ...................... 12,598 7,066,149 7,078,747 $ 11.97
- ------------------------------------------------------------------------------------------------------------------------------------
Exercisable, December 31, 1998 ...................... 12,598 2,918,035 2,930,633 $ 8.15
- ------------------------------------------------------------------------------------------------------------------------------------
Available for Grant, December 31, 1998 .............. 1,047,569
====================================================================================================================================
1993 Directors' Stock Option Plan:
Outstanding, December 31, 1995 ...................... - 232,500 232,500 $ 7.79
Granted (weighted-average fair value $2.89 per share) - 75,000 75,000 10.44
Canceled ............................................ - (22,500) (22,500) 7.56
Exercised ........................................... - (21,250) (21,250) 7.70
- ------------------------------------------------------------------------------------------------------------------------------------
Outstanding, December 31, 1996 ...................... - 263,750 263,750 8.57
Granted (weighted-average fair value $3.90 per share) - 70,000 70,000 13.00
Exercised ........................................... - (43,750) (43,750) 8.11
- ------------------------------------------------------------------------------------------------------------------------------------
Outstanding, December 31, 1997 ...................... - 290,000 290,000 9.70
Granted (weighted-average fair value $7.14 per share) - 75,000 75,000 21.57
Canceled ............................................ - (10,000) (10,000) 17.36
Exercised ........................................... - (20,000) (20,000) 8.44
- ------------------------------------------------------------------------------------------------------------------------------------
Outstanding, December 31, 1998 ...................... - 335,000 335,000 $ 12.21
- ------------------------------------------------------------------------------------------------------------------------------------
Exercisable, December 31, 1998 ...................... - 181,250 181,250 $ 9.34
- ------------------------------------------------------------------------------------------------------------------------------------
Available for Grant, December 31, 1998 .............. 577,500
====================================================================================================================================
</TABLE>
In addition to the above option activity in the plans, 484,915, 7,900
and 5,755 shares of restricted stock were awarded under the Long-Term Incentive
Plan during the years ended December 31, 1998, 1997 and 1996, respectively.
The following table presents the weighted-average remaining life as of
December 31, 1998 for options outstanding for the 1987 Stock Option Plan,
Long-Term Incentive Plan and the 1993 Directors' Stock Option Plan within the
stated exercise price ranges.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Outstanding Exercisable
- ------------------------------------------------------------------------------------------------------------------------
Weighted- Weighted- Weighted-
Number Average Average Number Average
Exercise Price Range Per Share of Options Exercise Price Remaining Life of Options Exercise Price
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1987 Stock Option Plan:
$4.19 to $5.31 ................. 467,958 $ 4.43 3.24 years 467,958 $ 4.43
$7.19 to $8.75 ................. 672,666 $ 7.24 4.30 years 672,666 $ 7.24
$14.94 to $18.80 ............... 88,876 $ 18.71 0.10 years 88,876 $ 18.71
- ------------------------------------------------------------------------------------------------------------------------
Long-Term Incentive Plan:
$6.88 to $8.81 ................. 2,574,733 $ 7.47 5.40 years 2,291,408 $ 7.54
$10.19 to $10.63 ............... 1,260,925 $ 10.20 7.22 years 621,125 $ 10.20
$12.63 to $15.81 ............... 1,419,630 $ 13.45 8.10 years 8,000 $ 13.44
$18.28 to $21.56 ............... 1,823,459 $ 18.38 9.08 years 10,100 $ 18.28
- ------------------------------------------------------------------------------------------------------------------------
1993 Directors' Stock Option Plan:
$7.31 to $8.13 ................. 135,000 $ 7.83 5.47 years 123,750 $ 7.80
$10.44 to $13.00 ............... 130,000 $ 11.72 7.83 years 47,500 $ 10.98
$19.50 to $21.72 ............... 70,000 $ 21.56 9.30 years 10,000 $ 20.61
========================================================================================================================
</TABLE>
The following pro forma information was determined as if the Company
had accounted for stock options issued in 1995 and thereafter using the
fair-value-based method as defined in SFAS No. 123. The fair value of the
options was estimated using a Black-Scholes option valuation model with the
following weighted-average assumptions for 1998, 1997 and 1996, respectively:
risk-free interest rates of 5.66%, 6.67% and 6.44%; expected dividend yields of
1.95%, 2.39% and 2.74%; expected volatility factors of the market price of the
Hibernia Class A Common Stock of 24%, 23% and 23%; and an expected life of the
options of 10 years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions, including the expected stock price
volatility. Because the Company's stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion the existing models do not necessarily provide a reliable
single measure of the fair value of its employee and director stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options granted in 1995 and thereafter is amortized to expense over the options'
vesting period. Since the Company's options generally vest over a four-year
period, the pro forma disclosures are not indicative of future amounts until
SFAS No. 123 is applied to all outstanding, nonvested options.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
($ in thousands, except per-share data) Year Ended December 31
- --------------------------------------------------------------------------------------------------------------------------
1998 1997 1996
- --------------------------------------------------------------------------------------------------------------------------
As Reported Pro Forma As Reported Pro Forma As Reported Pro Forma
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net income ........ $ 178,629 $ 174,941 $ 144,796 $ 142,733 $ 127,893 $ 126,765
Net income per
common share .... $ 1.12 $ 1.09 $ .90 $ .89 $ .83 $ .82
Net income per
common share -
assuming dilution $ 1.10 $ 1.08 $ .89 $ .87 $ .82 $ .81
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note 15
Leases
The Company leases its headquarters, operations center and certain
other bank premises and equipment under non-cancelable operating leases which
expire at various dates through 2035. Certain of the leases have escalation
clauses and renewal options ranging from one to 30 years.
Total rental expense (none of which represents contingent rentals)
included in occupancy and equipment expense was $12,298,000, $12,625,000 and
$11,255,000 in 1998, 1997 and 1996, respectively.
Minimum rental commitments for long-term operating leases are as
follows: 1999 - $10,098,000; 2000 - $10,021,000; 2001 - $9,674,000; 2002 -
$9,488,000; 2003 - $9,253,000; and thereafter - $44,508,000.
Note 16
Other Operating Expense
The following is a summary of other operating expense.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
($ in thousands) Year Ended December 31
- ------------------------------------------------------------------------------------
1998 1997 1996
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
State taxes on equity ........... $11,237 $ 7,578 $ 6,760
Telecommunications .............. 11,129 11,314 9,675
Postage ......................... 6,951 6,916 7,024
Professional fees ............... 6,574 10,170 8,641
Stationery and supplies ......... 5,501 6,006 6,482
Loan collection expense ......... 4,771 4,037 2,552
Regulatory expense .............. 2,761 2,854 1,629
Other ........................... 36,506 39,398 34,222
- ------------------------------------------------------------------------------------
Total other operating expense $85,430 $88,273 $76,985
- ------------------------------------------------------------------------------------
</TABLE>
Note 17
Income Taxes
Income tax expense includes amounts currently payable and amounts
deferred to or from other years as a result of differences in the timing of
recognition of income and expense for financial reporting and federal tax
purposes. The following is a summary of the components of income tax expense.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
($ in thousands) Year Ended December 31
- ---------------------------------------------------------------------------------------------------
1998 1997 1996
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current tax expense:
Federal income tax ..................... $87,472 $ 62,323 $ 58,755
State income tax ....................... 6,181 3,882 3,648
- ---------------------------------------------------------------------------------------------------
Total current tax expense ................... 93,653 66,205 62,403
- ---------------------------------------------------------------------------------------------------
Deferred tax expense (benefit):
Federal income tax ..................... 603 15,947 1,669
Change in deferred tax valuation reserve - (3,317) 3,317
- ---------------------------------------------------------------------------------------------------
Total deferred tax expense .................. 603 12,630 4,986
- ---------------------------------------------------------------------------------------------------
Income tax expense .......................... $94,256 $ 78,835 $ 67,389
- ---------------------------------------------------------------------------------------------------
Shareholders' equity:
Change in accumulated other
comprehensive income ................ $ 6,450 $ 3,566 $ (5,612)
===================================================================================================
</TABLE>
The following is a reconciliation of the federal statutory income tax
rate to the Company's effective rate.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
($ in thousands) Year Ended December 31
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Amount Rate Amount Rate Amount Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Tax expense based on federal statutory rate $ 95,510 35.0% $ 78,271 35.0% $ 68,349 35.0%
Tax-exempt interest ....................... (6,351) (2.3) (6,244) (2.8) (4,361) (2.2)
State income tax, net of federal benefit .. 4,018 1.4 2,523 1.2 2,371 1.2
Goodwill .................................. 2,766 1.0 2,909 1.3 1,734 0.9
Other ..................................... (1,687) (0.6) 1,376 0.6 (704) (0.4)
- ------------------------------------------------------------------------------------------------------------------------------------
Income tax expense ........................ $ 94,256 34.5% $ 78,835 35.3% $ 67,389 34.5%
====================================================================================================================================
</TABLE>
Deferred income taxes are based on differences between the bases of
assets and liabilities for financial statement purposes and tax reporting
purposes and capital loss and net operating loss carryforwards. The tax effects
of the cumulative temporary differences and loss carryforwards which create
deferred tax assets and liabilities are detailed in the following table.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
($ in thousands) December 31
- --------------------------------------------------------------------------
1998 1997
- --------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Reserve for possible loan losses.. $44,792 $43,533
Sale/leaseback ................... 7,024 7,409
Loan fees ........................ 3,443 2,982
Accrued expenses ................. 9,675 9,648
Deferred compensation ............ 3,659 2,226
Other ............................ 8,047 6,351
- --------------------------------------------------------------------------
Total deferred tax assets ............ 76,640 72,149
- --------------------------------------------------------------------------
Deferred tax liabilities:
Net unrealized gains on securities
available for sale ............ 14,598 8,148
Depreciation ..................... 13,729 10,537
Core deposit intangibles ......... 2,601 3,884
Mortgage servicing rights ........ 4,764 2,159
Other ............................ 13,938 13,358
- --------------------------------------------------------------------------
Total deferred tax liabilities ....... 49,630 38,086
- --------------------------------------------------------------------------
Deferred tax assets, net of
deferred tax liabilities ........... $27,010 $34,063
==========================================================================
</TABLE>
Management assesses realizability of the net deferred tax asset based
on the Company's ability to: first, recover taxes previously paid and, second,
generate taxable income and capital gains in the future. A deferred tax
valuation reserve is established, if needed, to limit the net deferred tax asset
to its realizable value.
Note 18
Net Income Per Common Share Data
In February 1997, the FASB issued SFAS No. 128, "Earnings per Share,"
which requires the presentation of both net income per common share and net
income per common share - assuming dilution. The Company adopted the provisions
of SFAS No. 128 effective December 31, 1997. The adoption did not impact the
Company's net income per common share. However, the Company had not previously
been required to present net income per common share - assuming dilution, which
is now presented for all periods.
The following sets forth the computation of net income per common
share and net income per common share - assuming dilution.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
($ in thousands, except per-share data) Year Ended December 31
- ---------------------------------------------------------------------------------------------------------------------
1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Numerator:
Net income .................................... $ 178,629 $ 144,796 $ 127,893
Preferred stock dividends ..................... 6,900 6,900 1,740
- ---------------------------------------------------------------------------------------------------------------------
Numerator for net income per common share ..... 171,729 137,896 126,153
Effect of dilutive securities ................. - - -
- ---------------------------------------------------------------------------------------------------------------------
Numerator for net income per common
share - assuming dilution ................. $ 171,729 $ 137,896 $ 126,153
- ---------------------------------------------------------------------------------------------------------------------
Denominator:
Denominator for net income per common
share (weighted-average shares outstanding) 153,718,782 152,873,513 152,238,818
Effect of dilutive securities:
Stock options ............................. 2,410,838 2,204,500 1,337,904
Purchase warrants ......................... - 174,376 160,200
Restricted stock awards ................... 35,850 151,255 -
- ---------------------------------------------------------------------------------------------------------------------
Denominator for net income per common
share - assuming dilution ................. 156,165,470 155,403,644 153,736,922
- ---------------------------------------------------------------------------------------------------------------------
Net income per common share ....................... $ 1.12 $ 0.90 $ 0.83
- ---------------------------------------------------------------------------------------------------------------------
Net income per common share - assuming dilution ... $ 1.10 $ 0.89 $ 0.82
=====================================================================================================================
</TABLE>
The weighted-average shares outstanding exclude 2,224,254, 1,782,937
and 1,681,835 average common shares in 1998, 1997 and 1996, respectively, held
by the Hibernia ESOP (discussed in Note 13) which have not been committed to be
released. The common shares issued in all mergers accounted for as poolings of
interests consummated in 1998, 1997 and 1996 are considered to be outstanding as
of the beginning of the earliest period presented.
Options with an exercise price greater than the average market price of
the Company's Class A Common Stock for the year are antidilutive and, therefore,
are not included in the computation of net income per common share - assuming
dilution. During 1998 there were 269,076 antidilutive options outstanding with
exercise prices ranging from $18.80 to $21.72, during 1997 there were 129,501
antidilutive options outstanding with exercise prices ranging from $16.30 to
$18.80 and during 1996 there were 203,131 antidilutive options outstanding with
exercise prices ranging from $11.56 to $18.80.
Note 19
Comprehensive Income
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," which requires the presentation of comprehensive income and establishes
standards for reporting its components (revenue, expenses, gains and losses) in
a full set of general-purpose financial statements. The adoption of SFAS No. 130
in 1998 had no impact on the financial condition or operating results of the
Company.
The following is a summary of the components of other comprehensive
income.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Income
Before Tax Expense After
($ in thousands) Income Taxes (Benefit) Income Taxes
- -----------------------------------------------------------------------------------------------
Year ended December 31, 1998
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Unrealized gains (losses) on securities
available for sale, net ............. $ 17,812 $ 6,154 $ 11,658
Reclassification adjustment for net
(gains) losses realized in net income 847 296 551
- -----------------------------------------------------------------------------------------------
Other comprehensive income ............ $ 18,659 $ 6,450 $ 12,209
===============================================================================================
- -----------------------------------------------------------------------------------------------
Year ended December 31, 1997
- -----------------------------------------------------------------------------------------------
Unrealized gains (losses) on securities
available for sale, net ............. $ 10,637 $ 3,631 $ 7,006
Reclassification adjustment for net
(gains) losses realized in net income (187) (65) (122)
- -----------------------------------------------------------------------------------------------
Other comprehensive income ............ $ 10,450 $ 3,566 $ 6,884
===============================================================================================
- -----------------------------------------------------------------------------------------------
Year ended December 31, 1996
- -----------------------------------------------------------------------------------------------
Unrealized gains (losses) on securities
available for sale, net ............. $(17,818) $(6,152) $(11,666)
Reclassification adjustment for net
(gains) losses realized in net income 1,544 540 1,004
- -----------------------------------------------------------------------------------------------
Other comprehensive income ............ $(16,274) $(5,612) $(10,662)
===============================================================================================
</TABLE>
Note 20
Related-Party Transactions
Certain directors and officers of the Company, members of their
immediate families and entities in which they or members of their immediate
families have principal ownership interests are customers of and have other
transactions with the Company in the ordinary course of business. Loans to these
parties are made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable third-party
transactions and do not involve more than normal risks of collectibility or
present other unfavorable features.
Loans outstanding to related parties were $22,008,000 and $45,325,000
at December 31, 1998 and 1997, respectively. The change during 1998 reflects
$72,834,000 in loan advances and $96,151,000 in loan payments. These amounts do
not include loans made in the ordinary course of business to other entities with
which the Company has no relationship, other than a director of the Company
being a director of the other entity, unless that director had the ability to
significantly influence the other entity.
Securities sold to related parties under repurchase agreements amounted
to $7,882,000 and $7,290,000 at December 31, 1998 and 1997, respectively.
Note 21
Financial Instruments and Derivative Financial Instruments
Generally accepted accounting principles require disclosure of fair
value information about financial instruments for which it is practicable to
estimate fair value, whether or not the financial instruments are recognized in
the financial statements. When quoted market prices are not available, fair
values are based on estimates using present value or other valuation techniques.
Those techniques are significantly affected by the assumptions used, including
the discount rate and estimates of future cash flows. The derived fair value
estimates cannot be substantiated through comparison to independent markets and,
in many cases, could not be realized in immediate settlement of the instrument.
Certain financial instruments and all non-financial instruments are excluded
from these disclosure requirements. Further, the disclosures do not include
estimated fair values for items which are not financial instruments but which
represent significant value to the Company, among them: core deposit
intangibles, loan servicing rights, trust operations and other fee-generating
businesses. Accordingly, the aggregate fair value amounts presented do not
represent the underlying value of the Company.
The carrying amount of cash and short-term investments,
noninterest-bearing deposits and short-term borrowings approximates the
estimated fair value of these financial instruments. The estimated fair value of
securities, interest rate agreements and other off-balance-sheet instruments is
based on quoted market prices, dealer quotes and prices obtained from
independent pricing services. The estimated fair value of loans,
interest-bearing deposits and debt is based on present values using applicable
risk-adjusted spreads to the appropriate yield curve to approximate current
interest rates applicable to each category of these financial instruments.
Interest rates are not adjusted for changes in credit risk of
performing commercial and small business loans for which there are no known
credit concerns. Management segregates loans in appropriate risk categories and
believes the risk factor embedded in the interest rates results in a fair
valuation of these loans on an entry-value basis.
Variances between the carrying amount and the estimated fair value of
loans reflect both credit risk and interest rate risk. The Company is protected
against changes in credit risk by the reserve for possible loan losses which
totaled $127,976,000 and $124,381,000 at December 31, 1998 and 1997,
respectively.
The fair value estimates presented are based on information available
to management as of December 31, 1998 and 1997. Although management is not aware
of any factors that would significantly affect the estimated fair value amounts,
these amounts have not been revalued for purposes of these financial statements
since those dates. Therefore, current estimates of fair value may differ
significantly from the amounts presented. At December 31, 1997, $35,943,000 of
short-term investments included in the following table were held for trading
purposes. There were no trading account assets at December 31, 1998.
<TABLE>
<CAPTION>
($ in thousands) December 31
- ---------------------------------------------------------------------------------------------------------
1998 1997
- ---------------------------------------------------------------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Cash and short-term investments $ 905,888 $ 905,888 $1,065,250 $1,065,250
Securities available for sale.. $2,676,311 $2,676,311 $2,628,164 $2,628,164
Commercial loans .............. $3,879,836 $3,919,242 $3,091,534 $3,103,489
Small business loans .......... $1,977,633 $2,012,818 $1,859,169 $1,866,696
Consumer loans ................ $4,148,713 $4,251,490 $3,335,789 $3,338,008
Liabilities
Noninterest-bearing deposits .. $2,026,219 $2,026,219 $1,820,896 $1,820,896
Interest-bearing deposits ..... $8,576,787 $8,613,593 $7,993,522 $8,013,153
Short-term borrowings ......... $1,134,136 $1,134,136 $ 719,961 $ 719,961
Debt .......................... $ 805,689 $ 814,875 $ 506,548 $ 505,302
- ---------------------------------------------------------------------------------------------------------
</TABLE>
The Company issues financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers and
to reduce exposure to fluctuations in interest rates. These financial
instruments include commitments to extend credit, letters of credit, standby
letters of credit and interest rate contracts and involve, to varying degrees,
elements of credit and interest rate risk in excess of the amount recognized on
the balance sheet.
Commitments to extend credit are legally binding, conditional
agreements generally having fixed expiration or termination dates and specified
interest rates and purposes. These commitments generally require customers to
maintain certain credit standards. Collateral requirements and loan-to-value
ratios are the same as those for funded transactions and are established based
on management's credit assessment of the customer. Commitments may expire
without being drawn upon. Therefore, the total commitment amount does not
necessarily represent future requirements.
The Company issues letters of credit and financial guarantees (standby
letters of credit) whereby it agrees to honor certain financial commitments in
the event its customers are unable to perform. The majority of the standby
letters of credit consist of performance guarantees. Management conducts regular
reviews of all outstanding standby letters of credit, and the results of these
reviews are considered in assessing the adequacy of the Company's reserve for
possible loan losses. Management does not anticipate any material losses related
to these instruments.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
($ in thousands) December 31
- ----------------------------------------------------------------------------------------------
1998 1997
- ----------------------------------------------------------------------------------------------
Contract Fair Contract Fair
Amount Value Amount Value
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commitments
to extend credit ... $3,805,638 $(34,748) $3,092,271 $(28,119)
- ----------------------------------------------------------------------------------------------
Letters of credit and
financial guarantees $ 225,949 $ (1,669) $ 193,479 $ (1,433)
==============================================================================================
</TABLE>
The Company maintains trading positions in a variety of derivative
financial instruments. These trading activities are customer-oriented and,
generally, matched trading positions are established to minimize risk to the
Company. The credit exposure that results from interest rate contracts held for
trading purposes is limited to the current fair value of asset derivative
positions, which at December 31, 1998 and 1997 was $3,993,000 and $885,000,
respectively. The Company manages the potential credit exposure through
evaluation of the counterparty credit standing, collateral agreements and other
contract provisions. The potential credit exposure from future market movements
is estimated by using a statistical model that takes into consideration possible
changes in interest rates over time.
The amounts disclosed in the following table represent the
end-of-period notional and fair value of derivative financial instruments held
or issued for trading purposes and the average aggregate fair value of those
instruments during the year. Net trading gains recognized in earnings on
interest rate contracts outstanding were immaterial for all years presented.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
($ in thousands) Notional Amount Fair Value Average Fair Value
- -------------------------------------------------------------------------------------------------------------------
December 31 December 31 Year Ended December 31
- -------------------------------------------------------------------------------------------------------------------
1998 1997 1998 1997 1998 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest rate swaps:
Assets ..................... $227,180 $124,700 $ 3,993 $ 880 $ 3,284 $ 796
Liabilities ................ $150,580 $ 56,178 $(2,805) $(398) $(2,117) $(434)
Options, caps and floors held .. $ 13,603 $ 21,700 $ - $ 5 $ 3 $ 19
Options, caps and floors written $ 13,603 $ 21,700 $ (1) $ (6) $ (4) $ (22)
===================================================================================================================
</TABLE>
The Company also enters into interest rate contracts in order to manage
interest rate exposure. Interest rate contracts involve the risk of dealing with
counterparties and their ability to meet contractual terms. These counterparties
must receive appropriate credit approval before the Company enters into an
interest-rate contract. Notional principal amounts express the volume of these
transactions, although the amounts potentially subject to credit and market risk
are much smaller.
One interest rate swap with a notional amount of $125,000,000 at
December 31, 1998 was entered into during 1998 as a hedge against a deposit
relationship of the same maturity. The differential to be paid or received is
accrued as interest rates change and is recognized as an adjustment to interest
expense on deposits. The related amount payable or receivable is included in
other assets or other liabilities. This interest rate swap matured on January 4,
1999.
Note 22
Regulatory Matters and Dividend Restrictions
The Company and the Banks are subject to various regulatory capital
requirements administered by the Federal Reserve Bank (FRB) and the Office of
the Comptroller of the Currency (OCC), respectively. Failure to meet minimum
capital requirements can initiate certain mandatory - and possibly additional
discretionary - actions by the FRB and OCC that, if undertaken, could have a
direct material effect on the Company's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Company and the Banks must meet specific capital guidelines that involve
quantitative measures of assets, liabilities and certain off-balance-sheet items
as calculated under regulatory accounting practices. The Company's and the
Banks' capital amounts and classifications are also subject to qualitative
judgments by the FRB and OCC about components, risk weightings and other
factors.
As of December 31, 1998 and 1997, the most recent notifications from
the OCC categorized the Banks as well capitalized under the regulatory framework
for prompt corrective action. For a bank to be designated as well capitalized,
it must have Tier 1 and total risk-based capital ratios of at least 6.0% and
10.0%, respectively, and a leverage ratio of at least 5.0%. There are no
conditions or events since those notifications that management believes have
changed the Banks' categories. On a pro forma basis, after the merger of
Hibernia National Bank of Texas, Hibernia National Bank's December 31, 1998 Tier
1 and total risk-based capital ratios and leverage ratio would be in excess of
the minimum levels required for designation as well capitalized.
The Company's and the Banks' actual capital amounts and ratios are
presented in the following table.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
($ in thousands) Tier 1 Risk-Based Capital Total Risk-Based Capital Leverage
- ----------------------------------------------------------------------------------------------------------------
Amount Ratio Amount Ratio Amount Ratio
- ----------------------------------------------------------------------------------------------------------------
December 31, 1998
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Hibernia Corporation .... $1,142,947 10.76% $1,270,923 11.96% $1,142,947 8.58%
Hibernia National Bank .. $ 929,886 9.12% $1,050,338 10.30% $ 929,886 7.39%
Hibernia National Bank
of Texas .............. $ 87,725 17.81% $ 93,899 19.06% $ 87,725 9.06%
================================================================================================================
- ----------------------------------------------------------------------------------------------------------------
December 31, 1997
- ----------------------------------------------------------------------------------------------------------------
Hibernia Corporation .... $1,021,812 11.26% $1,135,403 12.51% $1,021,812 8.65%
Hibernia National Bank .. $ 802,219 9.34% $ 909,713 10.59% $ 802,219 7.38%
Hibernia National Bank
of Texas .............. $ 78,496 16.55% $ 82,702 17.43% $ 78,496 8.55%
================================================================================================================
</TABLE>
Under current FRB regulations, each of the Banks may lend the Parent
Company up to 10% of their capital and surplus.
The payment of dividends by the Banks to the Parent Company is
restricted by various regulatory and statutory limitations. On a pro forma
basis, after the merger of Hibernia National Bank of Texas, Hibernia National
Bank would have available to pay dividends to the Parent Company, without
approval of the OCC, approximately $212,268,000, plus net retained profits
earned in 1999 prior to the dividend declaration date.
Banks are required to maintain cash on hand or noninterest-bearing
balances with the FRB to meet reserve requirements. Average noninterest-bearing
balances with the FRB were $20,993,000 in 1998 and $19,303,000 in 1997.
Note 23
Hibernia Corporation
The following Balance Sheets, Income Statements and Statements of Cash
Flows reflect the financial position and results of operations for the Parent
Company only.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
Balance Sheets
- -------------------------------------------------------------------------
($ in thousands) December 31
- -------------------------------------------------------------------------
1998 1997
- -------------------------------------------------------------------------
<S> <C> <C>
Investment in bank subsidiaries $1,191,729 $1,053,656
Other assets .................. 165,638 161,727
- -------------------------------------------------------------------------
Total assets .............. $1,357,367 $1,215,383
- -------------------------------------------------------------------------
Other liabilities ............. $ 1,515 $ 1,915
Debt (ESOP guarantee) ......... 37,751 17,387
Shareholders' equity .......... 1,318,101 1,196,081
- -------------------------------------------------------------------------
Total liabilities and
shareholders' equity .... $1,357,367 $1,215,383
=========================================================================
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Income Statements
- --------------------------------------------------------------------------------------
($ in thousands) Year Ended December 31
- --------------------------------------------------------------------------------------
1998 1997 1996
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity in undistributed net income
of subsidiaries ............ $125,366 $ 85,901 $ 85,262
Dividends from bank subsidiaries 50,000 51,130 40,585
Other income ................... 7,582 12,077 6,042
- --------------------------------------------------------------------------------------
Total income ............... 182,948 149,108 131,889
- --------------------------------------------------------------------------------------
Interest expense ............... - 351 418
Other expense .................. 2,748 1,419 2,374
- --------------------------------------------------------------------------------------
Total expense .............. 2,748 1,770 2,792
- --------------------------------------------------------------------------------------
Income before income taxes ..... 180,200 147,338 129,097
Income tax expense ............. 1,571 2,542 1,204
- --------------------------------------------------------------------------------------
Net income ..................... $178,629 $144,796 $127,893
======================================================================================
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Statements of Cash Flows
- --------------------------------------------------------------------------------------------------------------
($ in thousands) Year Ended December 31
- --------------------------------------------------------------------------------------------------------------
1998 1997 1996
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net income ......................................... $ 178,629 $ 144,796 $ 127,893
Non-cash adjustment for equity in
subsidiaries' undistributed net income ........... (125,366) (85,901) (85,262)
Realized securities (gains), net ................... (3,778) (1,305) -
Other adjustments .................................. 1,887 (8,313) 2,210
- --------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities .............. 51,372 49,277 44,841
- --------------------------------------------------------------------------------------------------------------
Investing activities
Investment in subsidiaries ......................... (8,360) (28,000) (16,908)
Purchases of securities available for sale ......... (205,513) (120,000) -
Proceeds from sales of securities available for sale 206,697 121,305 -
Net decrease (increase) in loans ................... (6,430) 834 2,206
- --------------------------------------------------------------------------------------------------------------
Net cash used by investing activities .................. (13,606) (25,861) (14,702)
- --------------------------------------------------------------------------------------------------------------
Financing activities
Issuance of debt ................................... - - 4,776
Payments on debt ................................... - (5,843) (2,578)
Issuance of preferred stock ........................ - - 98,000
Issuance of common stock ........................... 14,027 9,848 7,578
Purchase of treasury stock ......................... - (299) (880)
Dividends paid ..................................... (63,948) (54,889) (41,650)
- --------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities ....... (49,921) (51,183) 65,246
- --------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents ... (12,155) (27,767) 95,385
Cash and cash equivalents at beginning of year ......... 146,756 174,523 79,138
- --------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year ............... $ 134,601 $ 146,756 $ 174,523
==============================================================================================================
</TABLE>
Note 24
Segment Information
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information," which 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 is reported internally for evaluating segment
performance and allocating resources to segments. Because SFAS No. 131 addresses
how supplemental financial information is disclosed in annual and interim
reports, its adoption in 1998 had no impact on the financial condition or
operating results of the Company.
The Company's segment information is presented by line of business.
Each line of business is a strategic unit that serves a particular group of
customers that have certain common characteristics, through various products and
services. The reportable operating segments are Commercial Banking, Small
Business Banking, Consumer Banking, and Investments and Public Funds. The
Commercial Banking and Small Business Banking segments provide business entities
with comprehensive products and services, including loans, deposit accounts,
leasing, treasury management and venture capital. The Commercial Banking segment
provides products and services to larger business entities and the Small
Business Banking segment provides products and services to mid-size and smaller
business entities. The Consumer Banking segment provides individuals with
comprehensive products and services, including mortgage and other loans, deposit
accounts, trust and investment management, brokerage and insurance. The
Investments and Public Funds segment provides a treasury function for the
Company by managing public entity deposits, the investment portfolio,
interest-rate risk, and liquidity and funding positions.
The accounting policies used by each segment are the same as those
discussed in the summary of significant accounting policies, except as described
in the reconciliation of segment totals to consolidated totals. The following is
a summary of certain average balances by segment.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Small Investments
Commercial Business Consumer and Public Segment
($ in thousands) Banking Banking Banking Funds Other Total
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
December 31, 1998
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Average loans ... $3,487,700 $1,685,400 $3,922,400 $ - $ 46,700 $ 9,142,200
Average assets .. $3,550,200 $1,726,100 $6,642,300 $3,187,600 $452,800 $15,559,000
Average deposits $ 711,600 $1,215,700 $6,157,000 $1,527,700 $ 53,200 $ 9,665,200
- ----------------------------------------------------------------------------------------------------------------------------
December 31, 1997
- ----------------------------------------------------------------------------------------------------------------------------
Average loans ... $2,613,300 $1,151,300 $3,573,100 $ - $ 57,700 $ 7,395,400
Average assets .. $2,654,000 $1,216,600 $6,776,800 $2,262,200 $479,700 $13,389,300
Average deposits $ 474,500 $ 888,700 $6,234,000 $1,409,800 $ 28,400 $ 9,035,400
============================================================================================================================
</TABLE>
The following table presents condensed income statements for each
segment.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Small Investments
Commercial Business Consumer and Public Segment
($ in thousands) Banking Banking Banking Funds Other Total
- --------------------------------------------------------------------------------------------------------------------------------
Year ended December 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net interest income ............... $ 120,710 $ 115,582 $ 249,550 $ 59,839 $(10,765) $ 534,916
Provision for possible loan losses 10,450 5,638 9,618 - 294 26,000
- --------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision
for possible loan losses ........ 110,260 109,944 239,932 59,839 (11,059) 508,916
- --------------------------------------------------------------------------------------------------------------------------------
Noninterest income ................ 18,821 17,412 136,687 5,084 11,132 189,136
Noninterest expense ............... 46,967 79,826 282,769 7,216 2,437 419,215
- --------------------------------------------------------------------------------------------------------------------------------
Income before income taxes ........ 82,114 47,530 93,850 57,707 (2,364) 278,837
Income tax expense ................ 28,740 16,636 32,848 20,197 3,190 101,611
- --------------------------------------------------------------------------------------------------------------------------------
Net income ........................ $ 53,374 $ 30,894 $ 61,002 $ 37,510 $ (5,554) $ 177,226
================================================================================================================================
- --------------------------------------------------------------------------------------------------------------------------------
Year ended December 31, 1997
- --------------------------------------------------------------------------------------------------------------------------------
Net interest income ............... $ 95,046 $ 84,393 $ 262,393 $ 48,654 $ (4,520) $ 485,966
Provision for possible loan losses 1,068 577 1,375 - 128 3,148
- --------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision
for possible loan losses ........ 93,978 83,816 261,018 48,654 (4,648) 482,818
- --------------------------------------------------------------------------------------------------------------------------------
Noninterest income ................ 16,193 13,591 114,898 2,064 10,963 157,709
Noninterest expense ............... 41,273 64,960 291,147 6,302 7,943 411,625
- --------------------------------------------------------------------------------------------------------------------------------
Income before income taxes ........ 68,898 32,447 84,769 44,416 (1,628) 228,902
Income tax expense ................ 24,114 11,356 29,669 15,545 3,799 84,483
- --------------------------------------------------------------------------------------------------------------------------------
Net income ........................ $ 44,784 $ 21,091 $ 55,100 $ 28,871 $ (5,427) $ 144,419
================================================================================================================================
- --------------------------------------------------------------------------------------------------------------------------------
Year ended December 31, 1996
- --------------------------------------------------------------------------------------------------------------------------------
Net interest income ............... $ 78,280 $ 61,476 $ 236,764 $ 45,469 $ 4,143 $ 426,132
Provision for possible loan losses (3,609) (1,592) (5,484) - (1,442) (12,127)
- --------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision
for possible loan losses ........ 81,889 63,068 242,248 45,469 5,585 438,259
- --------------------------------------------------------------------------------------------------------------------------------
Noninterest income ................ 14,218 10,360 95,404 (5,183) 7,606 122,405
Noninterest expense ............... 37,707 51,030 258,102 5,598 9,731 362,168
- --------------------------------------------------------------------------------------------------------------------------------
Income before income taxes ........ 58,400 22,398 79,550 34,688 3,460 198,496
Income tax expense ................ 20,440 7,839 27,843 12,141 4,706 72,969
- --------------------------------------------------------------------------------------------------------------------------------
Net income ........................ $ 37,960 $ 14,559 $ 51,707 $ 22,547 $ (1,246) $ 125,527
================================================================================================================================
</TABLE>
Each segment's balance sheet is adjusted to reflect its net funding
position. Assets are increased if excess funds are provided; liabilities are
increased if the funds are needed to support assets. Segment assets and deposits
are decreased for cash items in process of collection, which are reclassified
from assets to deposits.
The Consumer Banking Segment contains an intangible asset related to
certain mortgage servicing rights associated with loans originated and sold
before January 1, 1995 and all loans originated and retained in the Company's
loan portfolio after origination. Noninterest income is adjusted for gains and
fees associated with these mortgage servicing rights and noninterest expense is
adjusted for the amortization of these mortgage servicing rights. Generally
accepted accounting principles does not allow the capitalization of servicing
rights; therefore, they are not currently recorded in these financial
statements.
Each segment's net interest income includes an adjustment for match
funding of the segment's earning assets and liabilities. Match funding is
calculated as the economic spread value attributable to the various products of
the segment and indicates the historical interest-rate risk taken by the entity
as a whole. Interest income for tax-exempt loans is adjusted to a
taxable-equivalent basis. Each segment is charged a provision for possible loan
losses that is determined based on each loan's risk rating or loan type. In
addition, each reportable segment recognizes income tax assuming a 35% income
tax rate. State income tax expense is included in the Other category.
Direct support costs, such as deposit servicing, technology, and loan
servicing and underwriting, are allocated to each segment based on
activity-based cost studies, where appropriate, or on various statistical
information or staff costs. Indirect costs, such as management expenses and
corporate support, are allocated to each segment based on various statistical
information or staff costs. There are no significant intersegment revenues.
The following is a reconciliation of segment totals to consolidated
totals.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Average Average Average
($ in thousands) Loans Assets Deposits
- --------------------------------------------------------------------------------------------------
December 31, 1998
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Segment total ..................... $9,142,200 $ 15,559,000 $9,665,200
Excess funds invested ........... - (2,911,700) -
Mortgage servicing rights ....... - (15,900) -
Reclassification of cash items in
process of collection ......... - 261,000 261,000
- --------------------------------------------------------------------------------------------------
Consolidated total ................ $9,142,200 $ 12,892,400 $9,926,200
==================================================================================================
- --------------------------------------------------------------------------------------------------
December 31, 1997
- --------------------------------------------------------------------------------------------------
Segment total ..................... $7,395,400 $ 13,389,300 $9,035,400
Excess funds invested ........... - (2,334,600) -
Mortgage servicing rights ....... - (14,300) -
Reclassification of cash items in
process of collection ......... - 207,400 207,400
- --------------------------------------------------------------------------------------------------
Consolidated total ................ $7,395,400 $ 11,247,800 $9,242,800
==================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Provision Income Tax
Net Interest for Possible Noninterest Noninterest Expense
($ in thousands) Income Loan Losses Income Expense (Benefit) Net Income
- ------------------------------------------------------------------------------------------------------------------------------
Year ended December 31, 1998
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Segment total ................. $ 534,916 $ 26,000 $ 189,136 $ 419,215 $ 101,611 $ 177,226
Taxable-equivalent adjustment (4,382) - - - (1,534) (2,848)
Mortgage servicing rights ... - - (4,201) (2,631) (550) (1,020)
Income tax expense .......... - - - - (5,271) 5,271
- ------------------------------------------------------------------------------------------------------------------------------
Consolidated total ............ $ 530,534 $ 26,000 $ 184,935 $ 416,584 $ 94,256 $ 178,629
==============================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------
Year ended December 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------
Segment total ................. $ 485,966 $ 3,148 $ 157,709 $ 411,625 $ 84,483 $ 144,419
Taxable-equivalent adjustment (3,930) - - - (1,376) (2,554)
Mortgage servicing rights ... - - (3,712) (2,371) (469) (872)
Income tax expense .......... - - - - (3,803) 3,803
- ------------------------------------------------------------------------------------------------------------------------------
Consolidated total ............ $ 482,036 $ 3,148 $ 153,997 $ 409,254 $ 78,835 $ 144,796
==============================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------
Year ended December 31, 1996
- ------------------------------------------------------------------------------------------------------------------------------
Segment total ................. $ 426,132 $(12,127) $ 122,405 $ 362,168 $ 72,969 $ 125,527
Taxable-equivalent adjustment (3,863) - - - (1,352) (2,511)
Mortgage servicing rights ... - - (1,704) (2,353) 227 422
Income tax expense .......... - - - - (4,455) 4,455
- ------------------------------------------------------------------------------------------------------------------------------
Consolidated total ............ $ 422,269 $(12,127) $ 120,701 $ 359,815 $ 67,389 $ 127,893
==============================================================================================================================
</TABLE>
Note 25
Contingencies
The Company is a party to certain legal proceedings arising from
matters incidental to its business. Management and counsel are of the opinion
that these actions will not have a material effect on the financial condition or
operating results of the Company.
EXHIBIT 21
SUBSIDIARIES OF HIBERNIA CORPORATION
Name of Subsidiary State or Other Jurisdiction of
Incorporation or Organization
Hibernia National Bank United States
Hibernia Capital Corporation Louisiana
Hibernia Investment Securities Louisiana
Inc. (1)
Hibernia Insurance Agency L.L.C. (1) Louisiana
Zachary Taylor Life Insurance
Company, Inc. (1) Louisiana
____________
(1) Subsidiary of Hibernia National Bank
EXHIBIT 23
Consent of Independent Auditors
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Hibernia Corporation of our report dated January 12, 1999, included in the
1998 Annual Report to Shareholders of Hibernia Corporation.
We also consent to the incorporation by reference in the following Hibernia
Corporation Registration Statements
Form S-3 No. 33-26553 (dated February 21, 1989)
Form S-8 No. 2-81353 (dated February 23, 1989)
Form S-8 No. 33-26871 (dated February 23, 1989)
Form S-3 No. 33-37701 (dated January 31, 1991)
Form S-8 No. 2-96194 (dated April 8, 1991)
Form S-3 No. 33-53108 (dated December 28, 1992)
Form S-3 No. 33-55844 (dated December 28, 1992)
Form S-8 No. 33-59743 (dated June 1, 1995)
Form S-3 No. 333-8133 (dated September 19, 1996)
Form S-8 No. 333-07761 (dated July 8, 1996)
Form S-8 No. 333-36017 (dated September 19, 1997)
Form S-8 No. 333-56053 (dated June 4, 1998)
of our report dated January 12, 1999, with respect to the consolidated financial
statements of Hibernia Corporation incorporated by reference in this Annual
Report (Form 10-K) for the year ended December 31, 1998.
/s/Ernst & Young LLP
New Orleans, Louisiana
March 16, 1999
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Chairman and director
of Hibernia Corporation, a Louisiana corporation (the "Corporation"), does
hereby name, constitute and appoint Patricia C. Meringer and Gary L. Ryan, 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 with the Securities and Exchange Commission (or any other governmental
or regulatory authority), the Annual Report of the Corporation on Form 10-K (or
other appropriate form) for the fiscal year ended December 31, 1998, and any and
all amendments thereto, with any and all exhibits and any and all 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 all that 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 on this 16th
day of December, 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 Robert H. Boh, Patricia C. Meringer, Gary L. Ryan, 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 with the Securities and Exchange Commission (or any other governmental
or regulatory authority), the Annual Report of the Corporation on Form 10-K (or
other appropriate form) for the fiscal year ended December 31, 1998, and any and
all amendments thereto, with any and all exhibits and any and all 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 all that 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 on this 16th
day of December, 1998.
/s/ J. Herbert Boydstun
-------------------------
J. Herbert 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 Robert H. Boh, Patricia C. Meringer, Gary L. Ryan, 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 with the Securities and Exchange Commission (or any other governmental
or regulatory authority), the Annual Report of the Corporation on Form 10-K (or
other appropriate form) for the fiscal year ended December 31, 1998, and any and
all amendments thereto, with any and all exhibits and any and all 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 all that 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 on this 16th
day of December, 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 Robert H. Boh, Patricia C. Meringer, Gary L. Ryan, 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 with the Securities and Exchange Commission (or any other governmental
or regulatory authority), the Annual Report of the Corporation on Form 10-K (or
other appropriate form) for the fiscal year ended December 31, 1998, and any and
all amendments thereto, with any and all exhibits and any and all 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 all that 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 on this 16th
day of December, 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 President, Chief
Executive Officer and director of Hibernia Corporation, a Louisiana corporation
(the "Corporation"), does hereby name, constitute and appoint Robert H. Boh,
Patricia C. Meringer, Gary L. Ryan, 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 with the Securities and
Exchange Commission (or any other governmental or regulatory authority), the
Annual Report of the Corporation on Form 10-K (or other appropriate form) for
the fiscal year ended December 31, 1998, and any and all amendments thereto,
with any and all exhibits and any and all 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 all that 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 on this 16th
day of December, 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 Robert H. Boh, Patricia C. Meringer, Gary L. Ryan, 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 with the Securities and Exchange Commission (or any other governmental
or regulatory authority), the Annual Report of the Corporation on Form 10-K (or
other appropriate form) for the fiscal year ended December 31, 1998, and any and
all amendments thereto, with any and all exhibits and any and all 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 all that 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 on this 16th
day of December, 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 Robert H. Boh, Patricia C. Meringer, Gary L. Ryan, 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 with the Securities and Exchange Commission (or any other governmental
or regulatory authority), the Annual Report of the Corporation on Form 10-K (or
other appropriate form) for the fiscal year ended December 31, 1998, and any and
all amendments thereto, with any and all exhibits and any and all 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 all that 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 on this 16th
day of December, 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 Robert H. Boh, Patricia C. Meringer, Gary L. Ryan, 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 with the Securities and Exchange Commission (or any other governmental
or regulatory authority), the Annual Report of the Corporation on Form 10-K (or
other appropriate form) for the fiscal year ended December 31, 1998, and any and
all amendments thereto, with any and all exhibits and any and all 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 all that 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 on this 16th
day of December, 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 Robert H. Boh, Patricia C. Meringer, Gary L. Ryan, 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 with the Securities and Exchange Commission (or any other governmental
or regulatory authority), the Annual Report of the Corporation on Form 10-K (or
other appropriate form) for the fiscal year ended December 31, 1998, and any and
all amendments thereto, with any and all exhibits and any and all 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 all that 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 on this 16th
day of December, 1998.
/s/ Sidney 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 Robert H. Boh, Patricia C. Meringer, Gary L. Ryan, 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 with the Securities and Exchange Commission (or any other governmental
or regulatory authority), the Annual Report of the Corporation on Form 10-K (or
other appropriate form) for the fiscal year ended December 31, 1998, and any and
all amendments thereto, with any and all exhibits and any and all 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 all that 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 on this 16th
day of December, 1998.
/s/ Donald J. Nalty
-------------------------
Donald J. Nalty
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 Robert H. Boh, Patricia C. Meringer, Gary L. Ryan, 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 with the Securities and Exchange Commission (or any other governmental
or regulatory authority), the Annual Report of the Corporation on Form 10-K (or
other appropriate form) for the fiscal year ended December 31, 1998, and any and
all amendments thereto, with any and all exhibits and any and all 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 all that 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 on this 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 Robert H. Boh, Patricia C. Meringer, Gary L. Ryan, 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 with the Securities and Exchange Commission (or any other governmental
or regulatory authority), the Annual Report of the Corporation on Form 10-K (or
other appropriate form) for the fiscal year ended December 31, 1998, and any and
all amendments thereto, with any and all exhibits and any and all 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 all that 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 on this 16th
day of December, 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 Robert H. Boh, Patricia C. Meringer, Gary L. Ryan, 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 with the Securities and Exchange Commission (or any other governmental
or regulatory authority), the Annual Report of the Corporation on Form 10-K (or
other appropriate form) for the fiscal year ended December 31, 1998, and any and
all amendments thereto, with any and all exhibits and any and all 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 all that 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 on this 16th
day of December, 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 Robert H. Boh, Patricia C. Meringer, Gary L. Ryan, 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 with the Securities and Exchange Commission (or any other governmental
or regulatory authority), the Annual Report of the Corporation on Form 10-K (or
other appropriate form) for the fiscal year ended December 31, 1998, and any and
all amendments thereto, with any and all exhibits and any and all 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 all that 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 on this 16th
day of December, 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 Robert H. Boh, Patricia C. Meringer, Gary L. Ryan, 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 with the Securities and Exchange Commission (or any other governmental
or regulatory authority), the Annual Report of the Corporation on Form 10-K (or
other appropriate form) for the fiscal year ended December 31, 1998, and any and
all amendments thereto, with any and all exhibits and any and all 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 all that 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 on this 16th
day of December, 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 Robert H. Boh, Patricia C. Meringer, Gary L. Ryan, 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 with the Securities and Exchange Commission (or any other governmental
or regulatory authority), the Annual Report of the Corporation on Form 10-K (or
other appropriate form) for the fiscal year ended December 31, 1998, and any and
all amendments thereto, with any and all exhibits and any and all 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 all that 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 on this 16th
day of December, 1998.
/s/ Virginia E. Weinmann
-------------------------
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 Robert H. Boh, Patricia C. Meringer, Gary L. Ryan, 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 with the Securities and Exchange Commission (or any other governmental
or regulatory authority), the Annual Report of the Corporation on Form 10-K (or
other appropriate form) for the fiscal year ended December 31, 1998, and any and
all amendments thereto, with any and all exhibits and any and all 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 all that 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 on this 16th
day of December, 1998.
/s/ Robert E. Zetzmann
-------------------------
Robert E. Zetzmann
Director
HIBERNIA CORPORATION
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Controller and Chief
Accounting Officer of Hibernia Corporation, a Louisiana corporation (the
"Corporation"), does hereby name, constitute and appoint Robert H. Boh, Patricia
C. Meringer, Gary L. Ryan, 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 with the Securities and Exchange
Commission (or any other governmental or regulatory authority), the Annual
Report of the Corporation on Form 10-K (or other appropriate form) for the
fiscal year ended December 31, 1998, and any and all amendments thereto, with
any and all exhibits and any and all 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 all that 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 on this 16th
day of December, 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 Chief Financial
Officer of Hibernia Corporation, a Louisiana corporation (the "Corporation"),
does hereby name, constitute and appoint Robert H. Boh, Patricia C. Meringer,
Gary L. Ryan, 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 with the Securities and Exchange Commission (or
any other governmental or regulatory authority), the Annual Report of the
Corporation on Form 10-K (or other appropriate form) for the fiscal year ended
December 31, 1998, and any and all amendments thereto, with any and all exhibits
and any and all 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 all that 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 on this 16th
day of December, 1998.
/s/ Marsha M. Gassan
-------------------------
Marsha M. Gassan
Chief Financial Officer
HIBERNIA CORPORATION
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