SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) January 26, 2000
----------------
January 26, 2000
HIBERNIA CORPORATION
(Exact name of registrant as specified in its charter)
Louisiana 1-10294 72-0724532
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification Number)
313 Carondelet Street, New Orleans, Louisiana 70130
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code (504) 533-5333
Item 5. Other Events
The Company plans to furnish the following information to analysts and
members of the investment community on or about January 27, 2000 and is filing
this report in order that all investors will have this information on or before
the time it is given to analysts.
EXHIBIT INDEX
Exhibit
Number Description
23 Consent of independent auditors
99.3 Hibernia Corporation 1999 Financial Results
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HIBERNIA CORPORATION
(Registrant)
Date: January 26, 2000 By: /s/ Ron E. Samford, Jr.
Ron E. Samford, Jr.
Executive Vice President and Controller
Chief Accounting Officer
(in his capacity as a duly authorized officer
of the Registrant and in his capacity as
Chief Accounting Officer)
EXHIBIT 23
Consent of Independent Auditors
We 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)
Form S-8 No. 333-83611 (dated July 23, 1999)
of our report dated January 17, 2000, with respect to the consolidated financial
statements of Hibernia Corporation for the year ended December 31, 1999 included
in this Current Report on Form 8-K dated January 26, 2000 filed with the
Securities and Exchange Commission.
/s/ Ernst & Young LLP
New Orleans, Louisiana
January 26, 2000
EXHIBIT 99.3
<TABLE>
<CAPTION>
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Financial Highlights
Hibernia Corporation and Subsidiaries
($ in thousands, except per-share data) 1999 1998 Change
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE YEAR
Net income .................................... $ 175,103 $ 180,956 (3.23)%
Provision for loan losses ..................... $ 87,800 $ 27,226 222.49 %
Efficiency ratio .............................. 54.40% 57.93% (353)bp
- ----------------------------------------------------------------------------------------------------
PER COMMON SHARE
Net income .................................... $ 1.07 $ 1.11 (3.60)%
Net income - assuming dilution ................ $ 1.06 $ 1.09 (2.75)%
Cash-basis net income ......................... $ 1.16 $ 1.18 (1.69)%
Cash-basis net income - assuming dilution ..... $ 1.15 $ 1.16 (.86)%
Shareholders' equity (book value) ............. $ 8.09 $ 7.94 1.89 %
Market value .................................. $ 10.625 $ 17.375 (38.85)%
Cash dividends declared ....................... $ .435 $ .375 16.00 %
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AT YEAR END
Assets ........................................ $15,314,179 $14,329,884 6.87 %
Earning assets ................................ $14,166,875 $13,328,293 6.29 %
Loans ......................................... $10,856,676 $ 9,907,194 9.58 %
Nonperforming loans ........................... $ 76,461 $ 40,940 86.76 %
Reserves as a percentage of nonperforming loans 204.12% 318.39% N/M
Deposits ...................................... $11,855,903 $10,892,573 8.84 %
Debt .......................................... $ 844,849 $ 806,337 4.78 %
Shareholders' equity .......................... $ 1,375,515 $ 1,344,602 2.30 %
Leverage ratio ................................ 8.11% 8.55% (44)bp
Common shares outstanding (000s) .............. 160,325 159,850 .30 %
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AVERAGE BALANCES
Assets ........................................ $14,636,956 $13,212,785 10.78 %
Earning assets ................................ $13,628,134 $12,298,261 10.81 %
Loans ......................................... $10,455,733 $ 9,121,587 14.63 %
Deposits ...................................... $11,177,213 $10,218,221 9.39 %
Debt .......................................... $ 840,533 $ 711,627 18.11 %
Shareholders' equity .......................... $ 1,359,726 $ 1,286,395 5.70 %
Common shares outstanding (000s) .............. 157,253 157,169 .05 %
====================================================================================================
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<FN>
N/M = not meaningful
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. Dividends per
common share are historical amounts. For discussion of net income per common
share, refer to the consolidated financial statements footnote "Net Income Per
Common Share Data." Cash-basis net income excludes the amortization of purchase
accounting intangibles.
</FN>
</TABLE>
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, 1999 and 1998, 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, 1999. 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 auditing standards generally accepted
in the United States. 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, 1999 and 1998, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States.
/s/ Ernst & Young, LLP
New Orleans, Louisiana
January 17, 2000
<PAGE>
<TABLE>
<CAPTION>
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Consolidated Balance Sheets
Hibernia Corporation and Subsidiaries
December 31 ($ in thousands) 1999 1998
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and cash equivalents .................................................... $ 827,699 $ 945,021
Securities available for sale ................................................ 2,660,322 2,761,701
Securities held to maturity (estimated fair value of $297,072
at December 31, 1999) ..................................................... 300,525 -
Mortgage loans held for sale ................................................. 92,704 281,434
Loans, net of unearned income ................................................ 10,856,676 9,907,194
Reserve for loan losses .................................................. (156,072) (130,347)
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Loans, net ........................................................... 10,700,604 9,776,847
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Bank premises and equipment .................................................. 205,165 194,723
Customers' acceptance liability .............................................. 108 331
Other assets ................................................................. 527,052 369,827
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Total assets ......................................................... $ 15,314,179 $ 14,329,884
========================================================================================================================
Liabilities
Deposits:
Noninterest-bearing ...................................................... $ 2,085,322 $ 2,065,770
Interest-bearing ......................................................... 9,770,581 8,826,803
- ------------------------------------------------------------------------------------------------------------------------
Total deposits ....................................................... 11,855,903 10,892,573
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Short-term borrowings ........................................................ 1,102,690 1,134,136
Liability on acceptances ..................................................... 108 331
Other liabilities ............................................................ 135,114 151,905
Debt ......................................................................... 844,849 806,337
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Total liabilities .................................................... 13,938,664 12,985,282
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Shareholders' equity
Preferred Stock, no par value:
Authorized - 100,000,000 shares; 2,000,000 Series A issued and outstanding
at December 31, 1999
and 1998, respectively .................................................... 100,000 100,000
Class A Common Stock, no par value:
Authorized - 300,000,000 shares; issued and outstanding - 160,324,729 and
159,850,398 at December 31, 1999 and
1998, respectively ........................................................ 307,824 306,913
Surplus ...................................................................... 425,185 416,269
Retained earnings ............................................................ 631,314 531,233
Accumulated other comprehensive income ....................................... (54,122) 27,938
Unearned compensation ........................................................ (34,686) (37,751)
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Total shareholders' equity ........................................... 1,375,515 1,344,602
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Total liabilities and shareholders' equity ........................... $ 15,314,179 $ 14,329,884
========================================================================================================================
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<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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Consolidated Income Statements
Hibernia Corporation and Subsidiaries
Year Ended December 31 ($ in thousands, except per-share data) 1999 1998 1997
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income
Interest and fees on loans ...................... $ 862,310 $ 782,939 $ 665,017
Interest on securities available for sale ....... 168,217 166,480 177,703
Interest on securities held to maturity ......... 1,908 - -
Interest on short-term investments .............. 11,928 15,036 17,703
Interest and fees on mortgage loans held for sale 10,962 13,273 4,281
- ----------------------------------------------------------------------------------------------------
Total interest income ....................... 1,055,325 977,728 864,704
- ----------------------------------------------------------------------------------------------------
Interest expense
Interest on deposits ............................ 370,844 354,842 333,681
Interest on short-term borrowings ............... 52,756 40,238 31,189
Interest on debt ................................ 46,920 39,854 5,754
- ----------------------------------------------------------------------------------------------------
Total interest expense ...................... 470,520 434,934 370,624
- ----------------------------------------------------------------------------------------------------
Net interest income ................................. 584,805 542,794 494,080
Provision for loan losses ....................... 87,800 27,226 3,433
- ----------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses . 497,005 515,568 490,647
- ----------------------------------------------------------------------------------------------------
Noninterest income
Service charges on deposits ..................... 97,301 87,222 79,909
Trust fees ...................................... 23,190 16,683 15,535
Retail investment service fees .................. 23,561 17,230 12,070
Mortgage loan origination and servicing fees .... 18,737 15,366 9,739
Other service, collection and exchange charges .. 35,989 28,667 22,860
Other operating income .......................... 15,493 16,362 13,564
Securities gains, net ........................... 432 5,899 2,739
- ----------------------------------------------------------------------------------------------------
Total noninterest income .................... 214,703 187,429 156,416
- ----------------------------------------------------------------------------------------------------
Noninterest expense
Salaries and employee benefits .................. 211,526 212,142 207,718
Occupancy expense, net .......................... 33,388 34,604 34,691
Equipment expense ............................... 33,465 31,167 31,259
Data processing expense ......................... 31,503 29,590 26,891
Advertising and promotional expense ............. 14,258 15,226 15,907
Foreclosed property expense, net ................ (866) (1,019) (3,173)
Amortization of intangibles ..................... 23,763 17,138 15,034
Other operating expense ......................... 93,884 87,307 90,552
- ----------------------------------------------------------------------------------------------------
Total noninterest expense ................... 440,921 426,155 418,879
- ----------------------------------------------------------------------------------------------------
Income before income taxes .......................... 270,787 276,842 228,184
Income tax expense .................................. 95,684 95,886 80,289
- ----------------------------------------------------------------------------------------------------
Net income .......................................... $ 175,103 $ 180,956 $ 147,895
====================================================================================================
Net income applicable to common shareholders ........ $ 168,203 $ 174,056 $ 140,995
====================================================================================================
Net income per common share ......................... $ 1.07 $ 1.11 $ .90
====================================================================================================
Net income per common share - assuming dilution ..... $ 1.06 $ 1.09 $ .89
====================================================================================================
- ----------
<FN>
See notes to consolidated financial statements.
</FN>
</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, 1996 ................. $100,000 $ 302,839 $ 380,875 $ 322,158 $ 8,034 $ (13,887)
Net income for 1997 ........................... - - - 147,895 - - $ 147,895
Unrealized gains (losses) on securities,
net of reclassification adjustments ......... - - - - 7,388 - 7,388
- ------------------------------------------------------------------------------------------------------------------------------------
Comprehensive income .......................... $ 155,283
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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 ........ - - 13,963 - - -
Cash dividends declared:
Preferred ($3.45 per share) ................ - - - (6,900) - -
Common ($.33 per share) .................... - - - (42,109) - -
By pooled companies prior to merger ........ - - - (6,339) - -
Acquisition of treasury stock ................. - - - - - (299)
Purchase of common shares by ESOP ............. - - - - - (5,021)
Allocation of ESOP shares ..................... - - 920 - - 952
- ------------------------------------------------------------------------------------------------------------------------------------
Balances at December 31, 1997 ................. 100,000 304,376 403,250 414,705 15,422 (17,387)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income for 1998 ........................... - - - 180,956 - - $ 180,956
Unrealized gains (losses) on securities,
net of reclassification adjustments ......... - - - - 12,516 - 12,516
- ------------------------------------------------------------------------------------------------------------------------------------
Comprehensive income .......................... $ 193,472
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Issuance of common stock:
Stock Option Plan .......................... - 949 4,189 - - -
Restricted stock awards .................... - 870 7,433 - - -
Exercise of purchase warrants .............. - 409 177 - - -
By pooled companies prior to merger ........ - - 62 - - -
Cash dividends declared:
Preferred ($3.45 per share) ................ - - - (6,900) - -
Common ($.375 per share) ................... - - - (56,647) - -
By pooled companies prior to merger ........ - - - (881) - -
Purchase of common shares by ESOP ............. - - - - - (23,630)
Allocation of ESOP shares ..................... - - 943 - - 3,266
Other ......................................... - 309 215 - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Balances at December 31, 1998 ................. 100,000 306,913 416,269 531,233 27,938 (37,751)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income for 1999 ........................... - - - 175,103 - - $ 175,103
Unrealized gains (losses) on securities,
net of reclassification adjustments ......... - - - - (82,060) - (82,060)
- ------------------------------------------------------------------------------------------------------------------------------------
Comprehensive income .......................... $ 93,043
- ------------------------------------------------------------------------------------------------------------------------------------
Issuance of common stock:
Stock Option Plan .......................... - 882 4,083 - - -
Restricted stock awards .................... - 29 172 - - -
By pooled company prior to merger .......... - - 5,387 - - -
Cash dividends declared:
Preferred ($3.45 per share) ................ - - - (6,900) - -
Common ($.435 per share) ................... - - - (67,995) - -
By pooled company prior to merger- ......... - - - (127) - -
Allocation of ESOP shares ..................... - - (480) - - 3,065
Other ......................................... - - (246) - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Balances at December 31, 1999 ................. $100,000 $ 307,824 $ 425,185 $ 631,314 $ (54,122) $(34,686)
====================================================================================================================================
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<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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Consolidated Statements of Cash Flows
Hibernia Corporation and Subsidiaries
Year Ended December 31 ($ in thousands) 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net income ............................................................ $ 175,103 $ 180,956 $ 147,895
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses ...................................... 87,800 27,226 3,433
Amortization of intangibles and deferred charges ............... 23,809 16,739 14,566
Depreciation and amortization .................................. 30,316 30,390 29,336
Non-cash compensation expense .................................. 4,385 62 43
Premium amortization, net of discount accretion ................ 6,493 4,438 2,972
Realized securities gains, net ................................. (432) (5,899) (2,739)
Gains on sales of assets, net .................................. (3,098) (2,418) (3,453)
Provision for losses on foreclosed and other assets ............ 1,254 664 2,377
Decrease (increase) in mortgage loans held for sale ............ 188,730 (211,851) (69,583)
Decrease (increase) in deferred income tax asset ............... (814) 722 12,716
Increase in interest receivable and other assets ............... (17,667) (19,716) (9,314)
(Decrease) increase in interest payable and other liabilities .. (13,806) 9,178 (2,964)
- ------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities ........................ 482,073 30,491 125,285
- ------------------------------------------------------------------------------------------------------------------------
Investing activities
Purchases of securities available for sale ............................ (428,316) (1,833,372) (920,272)
Proceeds from maturities of securities available for sale ............. 391,608 1,058,737 698,527
Proceeds from maturities of securities held to maturity ............... 2,314 - -
Proceeds from sales of securities available for sale .................. 214,315 774,314 295,637
Net increase in loans ................................................. (883,673) (1,354,074) (1,333,356)
Proceeds from sales of loans .......................................... 83,149 7,932 7,682
Purchases of loans .................................................... (564,577) (208,094) (134,642)
Acquisitions, net of cash acquired of $277,702 and $64,095 for the
years ended December 31, 1999 and 1997, respectively ................ 188,552 - 56,563
Purchases of premises, equipment and other assets ..................... (52,504) (46,776) (34,428)
Proceeds from sales of foreclosed assets and excess bank-owned property 11,069 8,190 14,999
Proceeds from sales of premises, equipment and other assets ........... 2,174 1,259 1,151
- ------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities ............................ (1,035,889) (1,591,884) (1,348,139)
- ------------------------------------------------------------------------------------------------------------------------
Financing activities
Net increase in deposits .............................................. 498,483 789,599 632,519
Net increase (decrease) in short-term borrowings ...................... (31,446) 414,175 376,410
Proceeds from issuance of debt ........................................ 240,000 600,000 500,000
Payments on debt ...................................................... (201,488) (301,225) (52,193)
Proceeds from issuance of common stock ................................ 5,967 5,724 9,539
Purchase of common stock by ESOP ...................................... - (23,630) (5,021)
Dividends paid ........................................................ (75,022) (64,428) (55,362)
Acquisition of treasury stock ......................................... - - (299)
- ------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities ........................ 436,494 1,420,215 1,405,593
- ------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents ........................ (117,322) (141,178) 182,739
Cash and cash equivalents at beginning of year ........................ 945,021 1,086,199 903,460
- ------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year ......................... $ 827,699 $ 945,021 $ 1,086,199
========================================================================================================================
Supplemental disclosures
Cash paid during the year for:
Interest expense ..................................................... $ 486,333 $ 437,463 $ 373,076
Income taxes ......................................................... $ 90,566 $ 87,700 $ 64,359
Non-cash investing and financing activities:
Loans and bank premises and equipment transferred to foreclosed
assets and excess bank-owned property ............................. $ 7,923 $ 14,422 $ 8,186
Mortgage loans securitized and retained .............................. $ 511,354 $ - $ -
Acquisitions:
Common stock issued ............................................... $ - $ - $ 13,968
Fair value of assets acquired ..................................... $ 554,567 $ - $ 161,762
Fair value of liabilities assumed ................................. $ 465,417 $ - $ 140,262
========================================================================================================================
- ----------
<FN>
See notes to consolidated financial statements.
</FN>
</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
subsidiary, Hibernia National Bank (the Bank), 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; private equity
investments; corporate finance; treasury management; insurance; and trust and
investment management. The Bank, through wholly owned subsidiaries, also
provides 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-interests 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 Capital Corporation (HCC) and Zachary Taylor Life Insurance Company
(Zachary Taylor). HCC, a licensed Small Business Investment Company, provides
private equity investments 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.
Mortgage Loans Held for Sale
Mortgage loans held for sale are carried at the lower of aggregate cost
or market value. Market adjustments and realized gains and losses are classified
as other operating income.
<PAGE>
Loans
Loans are stated at the principal amounts outstanding, less unearned
income and the reserve for 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. 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 Loan Losses
The reserve for loan losses is maintained to provide for probable
credit losses related to specifically identified loans and for losses inherent
in the loan portfolio that have been incurred as of the balance sheet date. The
reserve related to loans that are identified as impaired is based on discounted
expected future cash flows (using the loan's initial effective interest rate),
the observable market value of the loan, or the estimated fair value of the
collateral for certain collateral dependent loans.
The reserve for loan losses is based on management's estimate of
probable credit losses inherent in the loan portfolio; actual credit losses may
vary from the current estimate. The reserve for loan losses is reviewed
periodically, taking into consideration the risk characteristics of the loan
portfolio, past charge-off experience, general economic conditions and other
factors that warrant current recognition. As adjustments to the reserve for loan
losses become necessary, they are reflected as a provision for loan losses in
current-period earnings. Actual loan charge-offs 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. 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 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.
Mortgage Servicing Rights
Mortgage servicing rights are recorded when purchased or originated
mortgage loans are sold with servicing rights retained. The fair value of
capitalized mortgage servicing rights is based upon the present value of
estimated future cash flows. Based upon current fair values, capitalized
mortgage servicing rights are periodically assessed for impairment. To the
extent that impairment exists, write-downs are recognized in current earnings as
an adjustment to the corresponding valuation allowance. For purposes of
performing its impairment evaluation, the portfolio is stratified on the basis
of certain risk characteristics including origination date, loan type and
interest rate. Capitalized mortgage servicing rights are amortized over the
period of estimated net servicing income, which considers appropriate prepayment
assumptions.
<PAGE>
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. 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 are 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
1998 and 1997 have been reclassified to conform with the 1999 presentation.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This statement establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
Subsequently, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133," which defers the effective date of SFAS No. 133 to apply to
all financial statements for years beginning after June 15, 2000. 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.
<PAGE>
Note 2
Mergers
The Company completed mergers with two East Texas financial
institutions in 1997 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. In 1999, the Company completed a merger with one East Texas financial
institution which was accounted for as a pooling of interests. Additionally in
1999, the Company purchased the assets and assumed the liabilities of the
Beaumont branches of Chase Bank of Texas, N.A. Completed mergers include
Executive Bancshares, Inc. (Executive) and Unicorp Bancshares - Texas, Inc.
(Unicorp) in 1997; Northwest Bancshares of Louisiana, Inc. (Northwest),
ArgentBank (Argent), Firstshares of Texas, Inc. (Firstshares) and Peoples
Holding Corporation (Peoples) in 1998; and MarTex Bancshares, Inc. (MarTex) in
1999.
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>
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
MarTex ................................................. March 8, 1999 3,450,000 shares 0.25:1 Pooling of interests
Beaumont branches of
Chase Bank of Texas, N.A .......................... May 21, 1999 $87,000,000 N/A Purchase
- ------------------------------------------------------------------------------------------------------------------------------------
- ----------
<FN>
(1)All shares issued were Hibernia Class A Common Stock.
</FN>
====================================================================================================================================
</TABLE>
The following table shows the key components of the results of
operations of the pooled companies.
<TABLE>
<CAPTION>
================================================================================
Hibernia 1998 1999 Pooled
(originally Pooled Company
($ in thousands) reported) Companies(1) (MarTex) Total
- --------------------------------------------------------------------------------
Year ended December 31, 1998
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net interest income ........ $530,534 $ - $12,260 $542,794
Net income ................. $178,629 $ - $ 2,327 $180,956
================================================================================
- --------------------------------------------------------------------------------
Year ended December 31, 1997
- --------------------------------------------------------------------------------
Net interest income ........ $427,757 $54,279 $12,044 $494,080
Net income ................. $137,389 $ 7,407 $ 3,099 $147,895
- --------------------------------------------------------------------------------
- ----------
<FN>
(1)Results of operations for the year ended December 31, 1998 are included in
Hibernia's results.
</FN>
================================================================================
</TABLE>
<PAGE>
Under the purchase method of accounting, the assets and liabilities of
the Beaumont branches were adjusted to their estimated fair values as of the
purchase date. The excess of cost over the fair value of net assets acquired was
$62.6 million and is being amortized on a straight-line basis over 25 years. In
addition, intangibles of $12.7 million related to core deposits and $17.1
million related to trust business were recorded and are being amortized on an
accelerated basis over approximately seven years. The following table presents
unaudited pro forma information giving effect to the purchase of the Beaumont
branches as if the transaction had occurred at the beginning of each period
presented. The effect of anticipated savings resulting from the merger has not
been included in the pro forma information. Unaudited pro forma information is
not necessarily indicative of future results.
<TABLE>
<CAPTION>
===============================================================================================
($ in thousands, except per-share data) Year Ended December 31
- -----------------------------------------------------------------------------------------------
1999 1998 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net interest and noninterest income ........... $ 810,539 $ 760,325 $ 679,191
Net income .................................... $ 173,565 $ 179,928 $ 146,498
Net income per common share ................... $ 1.06 $ 1.10 $ 0.89
Net income per common share - assuming dilution $ 1.05 $ 1.08 $ 0.88
===============================================================================================
</TABLE>
Hibernia is a party to a definitive merger agreement with Southcoast
Capital, L.L.C. (Southcoast) which is pending regulatory approval. Southcoast is
a full-service investment banking firm providing corporate finance, equity
research, institutional equity sales and trading services. The Company
anticipates that this merger will be consummated in the second quarter of 2000
and that it will be accounted for as a purchase transaction.
Note 3
Cash and Cash Equivalents
The following is a summary of cash and cash equivalents.
<TABLE>
<CAPTION>
================================================================================
($ in thousands) December 31
- --------------------------------------------------------------------------------
1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Cash and due from banks ............................. $571,051 $567,057
Short-term investments:
Federal funds sold ............................. 167,050 224,580
Securities purchased under agreements to resell 85,000 147,991
Interest-bearing time deposits in domestic banks 4,598 5,393
- --------------------------------------------------------------------------------
Total short-term investments .............. 256,648 377,964
- --------------------------------------------------------------------------------
Total cash and cash equivalents ........... $827,699 $945,021
================================================================================
</TABLE>
<PAGE>
Note 4
Securities
The following is a summary of securities classified as available for
sale and held to maturity. The Company had no securities classified as held to
maturity during 1998.
<TABLE>
<CAPTION>
===================================================================================================================
($ in thousands) December 31, 1999
- -------------------------------------------------------------------------------------------------------------------
Amortized Fair Unrealized Unrealized
Type Cost Value Gains Losses
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available for sale:
U.S. Treasuries ........................................... $ 278,869 $ 276,973 $ 115 $ 2,011
U.S. government agencies:
Mortgage-backed securities ........................... 1,020,715 997,758 4,291 27,248
Bonds ................................................ 1,122,229 1,065,331 215 57,113
States and political subdivisions ......................... 225,098 224,442 1,890 2,546
Other ..................................................... 96,675 95,818 184 1,041
- -------------------------------------------------------------------------------------------------------------------
Total securities available for sale .................. $2,743,586 $2,660,322 $ 6,695 $89,959
- -------------------------------------------------------------------------------------------------------------------
Held to maturity:
U.S. government agencies:
Mortgage-backed securities ........................... $ 300,525 $ 297,072 $ 557 $ 4,010
- -------------------------------------------------------------------------------------------------------------------
Total securities held to maturity .................... $ 300,525 $ 297,072 $ 557 $ 4,010
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
($ in thousands) December 31, 1998
- -------------------------------------------------------------------------------------------------------------------
Amortized Fair Unrealized Unrealized
Type Cost Value Gains Losses
- -------------------------------------------------------------------------------------------------------------------
Available for sale:
U.S. Treasuries ........................................... $ 253,423 $ 257,608 $ 4,185 $ -
U.S. government agencies:
Mortgage-backed securities ........................... 1,007,913 1,019,708 14,928 3,133
Bonds ................................................ 1,136,711 1,153,179 18,349 1,881
States and political subdivisions ......................... 245,489 255,815 10,528 202
Other ..................................................... 75,203 75,391 188 -
- -------------------------------------------------------------------------------------------------------------------
Total securities available for sale .................. $2,718,739 $2,761,701 $48,178 $ 5,216
===================================================================================================================
</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
- -----------------------------------------------------------------
1999 1998 1997
- -----------------------------------------------------------------
<S> <C> <C> <C>
Realized gains ........ $ 465 $ 6,356 $ 2,894
Realized losses ....... (33) (457) (155)
- -----------------------------------------------------------------
Net realized gains $ 432 $ 5,899 $ 2,739
=================================================================
</TABLE>
<PAGE>
Securities with carrying values of $2,802,414,000 and $2,587,140,000 at
December 31, 1999 and 1998, respectively, were pledged to secure public or trust
deposits or were sold under repurchase agreements.
<TABLE>
<CAPTION>
================================================================================
($ in thousands) December 31
- --------------------------------------------------------------------------------
1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Available for sale:
U.S. Treasuries ............................... $ 276,973 $ 257,608
U.S. government agencies:
Mortgage-backed securities ............... 994,715 993,041
Bonds .................................... 1,061,737 1,143,460
States and political subdivisions ............. 165,699 192,024
Other ......................................... 2,765 1,007
- --------------------------------------------------------------------------------
Total available for sale ................. 2,501,889 2,587,140
- --------------------------------------------------------------------------------
Held to maturity:
U.S. government agencies:
Mortgage-backed securities ............... 300,525 -
- --------------------------------------------------------------------------------
Total held to maturity ................... 300,525 -
- --------------------------------------------------------------------------------
Total carrying value of pledged securities $2,802,414 $2,587,140
================================================================================
</TABLE>
The amortized cost and estimated fair value by maturity of securities
are shown in the following table. Securities are classified according to their
contractual maturities without consideration of principal amortization,
potential prepayments or call options. Accordingly, actual maturities may differ
from contractual maturities.
<TABLE>
<CAPTION>
================================================================================
($ in thousands) December 31, 1999
- --------------------------------------------------------------------------------
Amortized Fair
Cost Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Available for sale:
Due in 1 year or less .................. $ 270,054 $ 268,611
Due after 1 year through 5 years ....... 454,657 447,608
Due after 5 years through 10 years ..... 979,188 938,272
Due after 10 years ..................... 1,039,687 1,005,831
- --------------------------------------------------------------------------------
Total securities available for sale $2,743,586 $2,660,322
- --------------------------------------------------------------------------------
Held to maturity:
Due after 5 years through 10 years ..... $ 6,313 $ 5,855
Due after 10 years ..................... 294,212 291,217
- --------------------------------------------------------------------------------
Total securities held to maturity.. $ 300,525 $ 297,072
================================================================================
</TABLE>
<PAGE>
Note 5
Loans
The following is a summary of commercial and small business loans
classified by repayment source and consumer loans classified by type.
<TABLE>
<CAPTION>
================================================================================
($ in thousands) December 31
- --------------------------------------------------------------------------------
1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Commercial:
Commercial and industrial .................. $ 1,501,038 $1,371,174
Services industry .......................... 955,418 1,055,589
Real estate ................................ 434,232 457,427
Health care ................................ 298,070 306,522
Transportation, communications and utilities 228,614 211,986
Energy ..................................... 192,587 421,998
Other ...................................... 83,349 55,140
- --------------------------------------------------------------------------------
Total commercial ...................... 3,693,308 3,879,836
- --------------------------------------------------------------------------------
Small Business:
Commercial and industrial .................. 823,369 770,811
Services industry .......................... 539,585 440,194
Real estate ................................ 340,190 274,661
Health care ................................ 150,818 107,616
Transportation, communications and utilities 91,947 82,175
Energy ..................................... 43,652 46,312
Other ...................................... 372,305 347,975
- --------------------------------------------------------------------------------
Total small business .................. 2,361,866 2,069,744
- --------------------------------------------------------------------------------
Consumer:
Residential mortgages:
First mortgages ....................... 2,263,405 1,915,562
Junior liens .......................... 282,123 190,073
Indirect ................................... 1,277,294 850,501
Revolving credit ........................... 374,152 325,788
Other ...................................... 604,528 675,690
- --------------------------------------------------------------------------------
Total consumer ........................ 4,801,502 3,957,614
- --------------------------------------------------------------------------------
Total loans ........................... $10,856,676 $9,907,194
================================================================================
</TABLE>
The following is a summary of nonperforming loans, foreclosed assets
and excess bank-owned property. For a discussion of private equity investments,
refer to Note 23 - "Hibernia Corporation."
<TABLE>
<CAPTION>
============================================================
($ in thousands) December 31
- ------------------------------------------------------------
1999 1998
- ------------------------------------------------------------
<S> <C> <C>
Nonaccrual loans .............. $76,461 $40,940
Restructured loans ............ - -
- ------------------------------------------------------------
Nonperforming loans ...... 76,461 40,940
- ------------------------------------------------------------
Foreclosed assets ............. 7,710 10,762
Excess bank-owned property .... 4,197 2,648
- ------------------------------------------------------------
Total nonperforming assets $88,368 $54,350
============================================================
</TABLE>
At December 31, 1999 and 1998, the recorded investment in loans that
were considered to be impaired was $69,997,000 and $37,191,000, respectively.
Included in the 1999 and 1998 amounts were $65,896,000 and $33,226,000,
respectively, of impaired loans for which the related reserve for loan losses
was $17,244,000 and $9,798,000, respectively. At December 31, 1999 and 1998,
impaired loans that did not have a reserve for loan losses amounted to
$4,101,000 and $3,965,000, respectively. The average recorded investment in
impaired loans during the years ended December 31, 1999, 1998 and 1997 was
approximately $60,834,000, $26,911,000 and $16,466,000, respectively.
<PAGE>
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, 1999,
1998 and 1997, the Company recognized interest income on impaired loans of
$3,145,000, $1,682,000 and $1,199,000, respectively.
Interest income in the amount of $6,723,000 for 1999, $3,291,000 for
1998 and $2,057,000 for 1997 would have been recorded on nonperforming loans if
they had been classified as performing. The Company recorded $3,145,000,
$1,682,000 and $1,199,000 of interest income on nonperforming loans during 1999,
1998 and 1997, respectively.
The following is a summary of activity in the reserve for loan losses.
<TABLE>
<CAPTION>
===================================================================================
($ in thousands) Year Ended December 31
- -----------------------------------------------------------------------------------
1999 1998 1997
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year ............. $ 130,347 $ 126,557 $ 146,097
Loans charged off ................... (83,366) (40,888) (46,417)
Recoveries .......................... 18,438 17,452 22,965
- -----------------------------------------------------------------------------------
Net loans charged off .......... (64,928) (23,436) (23,452)
- -----------------------------------------------------------------------------------
Provision for loan losses ........... 87,800 27,226 3,433
Addition due to purchase transactions 3,035 - 479
Transfer due to securitizations ..... (182) - -
- -----------------------------------------------------------------------------------
Balance at end of year ................... $ 156,072 $ 130,347 $ 126,557
===================================================================================
</TABLE>
<PAGE>
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
- --------------------------------------------------------------------------------
1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Land ......................................... $ 38,632 $ 37,904
Buildings .................................... 190,285 179,860
Leasehold improvements ....................... 33,946 30,660
Furniture and equipment ...................... 149,169 131,682
- --------------------------------------------------------------------------------
412,032 380,106
Less accumulated depreciation and amortization (206,867) (185,383)
- --------------------------------------------------------------------------------
Total bank premises and equipment ....... $ 205,165 $ 194,723
================================================================================
</TABLE>
<TABLE>
================================================================================
($ in thousands) Year Ended December 31
- --------------------------------------------------------------------------------
1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Provisions for depreciation
and amortization included in:
Occupancy expense $ 9,756 $11,086 $ 9,525
Equipment expense 17,429 16,980 17,976
- --------------------------------------------------------------------------------
Total depreciation and
amortization expense $27,185 $28,066 $27,501
================================================================================
</TABLE>
<PAGE>
Note 7
Deposits
At December 31, 1999, time deposits with a remaining maturity of one
year or more amounted to $985,142,000. Maturities of all time deposits are as
follows: 2000 - $4,270,170,000; 2001 - $732,287,000; 2002 - $109,412,000; 2003 -
$32,542,000; 2004 - $56,572,000; and thereafter - $54,329,000.
Domestic certificates of deposit of $100,000 or more amounted to
$2,085,972,000 and $1,746,404,000 at December 31, 1999 and 1998, respectively.
Interest on these certificates amounted to $90,594,000, $86,132,000 and
$84,255,000 in 1999, 1998 and 1997, respectively.
Foreign deposits, which are deposit liabilities of the Cayman Island
office of Hibernia National Bank, amounted to $362,723,000 and $321,537,000 at
December 31, 1999 and 1998, respectively. These deposits are comprised primarily
of individual deposits of $100,000 or more. Interest expense on foreign deposits
amounted to $14,266,000, $11,422,000 and $5,204,000 for 1999, 1998 and 1997,
respectively.
Note 8
Short-Term Borrowings
The following is a summary of short-term borrowings.
<TABLE>
<CAPTION>
=========================================================================================
($ in thousands) December 31
- -----------------------------------------------------------------------------------------
1999 1998
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Federal funds purchased ........................... $ 552,275 $ 705,320
Securities sold under agreements to repurchase .... 475,416 390,743
Federal Reserve Bank treasury, tax and loan account 74,999 38,073
- -----------------------------------------------------------------------------------------
Total short-term borrowings .................. $1,102,690 $1,134,136
=========================================================================================
</TABLE>
Federal funds purchased and securities sold under agreements to
repurchase generally mature within one to 14 days from the transaction date. The
Federal Reserve Bank treasury, tax and loan account is an open-ended note option
with the Federal Reserve Bank of Atlanta. The following is a summary of
pertinent data related to short-term borrowings.
<TABLE>
<CAPTION>
====================================================================================
($ in thousands) December 31
- ------------------------------------------------------------------------------------
1999 1998 1997
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding at December 31 ... $1,102,690 $1,134,136 $719,961
Maximum month-end outstandings $1,301,423 $1,134,136 $938,716
Average daily outstandings ... $1,086,547 $ 790,890 $606,102
Average rate during the year.. 4.9% 5.1% 5.2%
Average rate at year end ..... 4.9% 5.0% 5.7%
====================================================================================
</TABLE>
<PAGE>
Note 9
Debt
The following is a summary of outstanding debt.
<TABLE>
<CAPTION>
================================================================================
($ in thousands) December 31
- --------------------------------------------------------------------------------
1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Federal Home Loan Bank callable advances $400,000 $300,000
Federal Home Loan Bank long-term advances 444,849 505,689
Other ................................... - 648
- --------------------------------------------------------------------------------
Total debt ......................... $844,849 $806,337
================================================================================
</TABLE>
The Federal Home Loan Bank (FHLB) advances are secured by the Company's
investment in FHLB stock, which totaled $48,972,000 and $43,032,000 at December
31, 1999 and 1998, respectively, and also by a blanket floating lien on portions
of the Company's residential mortgage loan portfolio.
The FHLB callable advances require monthly interest payments. An
advance in the amount of $200,000,000 matures in 2008, accrues interest at a
rate of 5.28%, and is callable at quarterly intervals which begin in June 2003.
Another $200,000,000 advance matures in 2004, accrues interest at a rate of
5.65%, and is callable at quarterly intervals which begin in September 2001. 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
$2,251,000, including interest, and are scheduled to amortize through various
dates between 2000 and 2015. However, should the residential mortgage 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: 2000 - $100,853,000; 2001 -
$301,014,000; 2002 - $40,741,000; 2003 - $429,000; 2004 - $200,369,000; and
thereafter - $201,443,000.
Note 10
Other Assets and Other Liabilities
The following are summaries of other assets and other liabilities.
<TABLE>
<CAPTION>
================================================================================
($ in thousands) December 31
- --------------------------------------------------------------------------------
1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Other assets:
Accrued interest receivable ...... $ 96,907 $ 93,765
Foreclosed assets and excess
bank-owned property ......... 11,907 13,410
Deferred income taxes ............ 73,277 26,482
Goodwill, net .................... 194,217 140,877
Core deposit intangibles, net .... 17,170 9,650
Trust intangibles, net ........... 15,007 -
Mortgage servicing rights, net ... 45,746 31,111
Other ............................ 72,821 54,532
- --------------------------------------------------------------------------------
Total other assets .......... $527,052 $369,827
================================================================================
Other liabilities:
Accrued interest payable ......... $ 39,711 $ 37,524
Trade accounts payable and
accrued liabilities ......... 52,408 74,347
Reserve for future rental payments
under sale/leaseback ........ 18,270 19,821
Other ............................ 24,725 20,213
- --------------------------------------------------------------------------------
Total other liabilities ..... $135,114 $151,905
================================================================================
</TABLE>
Amortization expense relating to goodwill totaled $9,840,000,
$8,591,000 and $8,772,000 for the years ended December 31, 1999, 1998 and 1997,
respectively. Accumulated amortization relating to goodwill at December 31, 1999
and 1998 totaled $54,338,000 and $46,274,000, respectively. Amortization expense
relating to core deposit intangibles totaled $5,197,000, $3,847,000 and
$4,931,000 in 1999, 1998 and 1997, respectively. Accumulated amortization
relating to core deposit intangibles totaled $15,852,000 and $10,655,000 at
December 31, 1999 and 1998, respectively. Amortization expense relating to trust
intangibles totaled $2,052,000 in 1999. Accumulated amortization relating to
trust intangibles totaled $2,052,000 at December 31, 1999.
<PAGE>
Mortgage servicing rights of $27,009,000 and $24,066,000 were added
during the years ended December 31, 1999 and 1998, respectively. Amortization
expense related to mortgage servicing rights totaled $6,674,000, $3,900,000 and
$1,331,000 for 1999, 1998 and 1997, respectively. There was no valuation reserve
for mortgage servicing rights in 1997. A valuation reserve in the amount of
$800,000 was established in 1998. There was no activity in this valuation
reserve during 1999.
Note 11
Preferred Stock
The Company has authorized 100,000,000 shares of no par value preferred
stock. At December 31, 1999 and 1998, 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. 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.
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, 1999, the RSP owned approximately 3,149,000 shares of Hibernia Class A
Common Stock. The Company's contributions to the RSP totaled $5,627,000 in 1999,
$5,511,000 in 1998 and $5,048,000 in 1997.
The Company maintains incentive pay and bonus programs for certain
employees. Costs of these programs were $24,371,000, $25,732,000 and $21,051,000
for the years ended December 31, 1999, 1998 and 1997, 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 was recorded in 1997 relating to the
1995-1997 Plan.
A new performance share awards plan (1998-2000 Plan) was established
for the three-year period from January 1, 1998 through December 31, 2000. The
structure of the 1998-2000 Plan was similar to that of the 1995-1997 Plan.
Compensation expense of $8,000,000 was recorded in 1998 relating to the
1998-2000 Plan and reversed in 1999. The reversal resulted from the failure to
meet certain requirements necessary to achieve a payout under the 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.
The ESOP owned approximately 3,874,000 shares of Hibernia Class A
Common Stock at December 31, 1999 and 1998. The outstanding debt obligation of
the ESOP totaled $34,686,000 and $37,751,000 at December 31, 1999 and 1998,
respectively. The Bank makes annual contributions to the ESOP in an amount
determined by its Board 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 1999, 1998 and 1997 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 are
eliminated 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 $2,763,000, $4,224,000 and $3,014,000 relating
to the ESOP was recorded during 1999, 1998 and 1997, respectively. The ESOP held
1,151,000 and 872,000 allocated shares and 2,723,000 and 3,002,000 suspense
shares at December 31, 1999 and 1998, respectively. The fair value of the
suspense shares at December 31, 1999 and 1998 was $28,929,000 and $52,168,000,
respectively.
Note 14
Stock Options
SFAS No.123,"Accounting for Stock-Based Compensation," defines 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 90 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 1999,
1998 and 1997. 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, 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
Canceled ................ - (86,876) (86,876) 18.80
Exercised ............... (6,250) (8,949) (15,199) 6.05
- -------------------------------------------------------------------------------------
Outstanding, December 31, 1999 43,913 1,083,512 1,127,425 $ 6.10
=====================================================================================
Exercisable, December 31, 1999 43,913 1,083,512 1,127,425 $ 6.10
=====================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================
Weighted-
Average
Exercise
Incentive Non-Qualified Total Price
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long-Term Incentive Plan:
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
Granted (weighted-average fair value $4.49 per share) - 2,411,175 2,411,175 15.95
Canceled ............................................ - (260,788) (260,788) 16.29
Exercised ........................................... - (407,062) (407,062) 8.40
- -------------------------------------------------------------------------------------------------------------------
Outstanding, December 31, 1999 ........................... 12,598 8,809,474 8,822,072 $ 13.09
===================================================================================================================
Exercisable, December 31, 1999 ........................... 12,598 3,842,659 3,855,257 $ 9.20
===================================================================================================================
Available for Grant, December 31, 1999 ................... 1,164,446
===================================================================================================================
1993 Directors' Stock Option Plan:
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
Granted (weighted-average fair value $3.45 per share) - 80,000 80,000 12.90
Canceled ............................................ - (5,000) (5,000) 21.72
Exercised ........................................... - (40,000) (40,000) 9.79
- -------------------------------------------------------------------------------------------------------------------
Outstanding, December 31, 1999 ........................... - 370,000 370,000 $ 12.49
===================================================================================================================
Exercisable, December 31, 1999 ........................... - 193,750 193,750 $ 9.65
===================================================================================================================
Available for Grant, December 31, 1999 ................... 502,500
===================================================================================================================
</TABLE>
In addition to the above option activity in the plans, 82,346, 484,915
and 7,900 shares of restricted stock were awarded under the Long-Term Incentive
Plan during the years ended December 31, 1999, 1998 and 1997, respectively.
<PAGE>
The following table presents the weighted-average remaining life as of
December 31, 1999 for options outstanding for the 1987 Stock Option Plan, the
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
- ---------------------------------------------------------------------------------------------------------
1987 Stock Option Plan:
<S> <C> <C> <C> <C> <C>
$4.19 to $5.31 .............. 457,759 $ 4.42 2.23 years 457,759 $ 4.42
$7.19 to $8.75 .............. 667,666 $ 7.23 3.29 years 667,666 $ 7.23
$14.94....................... 2,000 $ 14.94 0.55 years 2,000 $ 14.94
- ---------------------------------------------------------------------------------------------------------
Long-Term Incentive Plan:
$6.88 to $8.25 .............. 2,274,322 $ 7.48 4.41 years 2,274,322 $ 7.48
$10.19 to $13.97 ............ 2,630,000 $ 12.00 6.81 years 1,578,635 $ 11.65
$15.13 to $16.09 ............ 2,202,325 $ 16.09 9.08 years 1,100 $ 16.09
$18.28 to $21.56 ............ 1,715,425 $ 18.37 8.08 years 1,200 $ 18.28
- ---------------------------------------------------------------------------------------------------------
1993 Directors' Stock Option Plan:
$7.31 to $8.13 .............. 115,000 $ 7.83 4.45 years 115,000 $ 7.83
$10.44 to $13.00 ............ 185,000 $ 12.09 7.85 years 68,750 $ 11.46
$17.00 to $21.72 ............ 70,000 $ 21.22 8.35 years 10,000 $ 18.25
=========================================================================================================
</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 1999, 1998 and 1997, respectively:
risk-free interest rates of 4.92%, 5.66% and 6.67%; expected dividend yields of
2.66%, 1.95% and 2.39%; expected volatility factors of the market price of the
Hibernia Class A Common Stock of 29%, 24% 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
- ----------------------------------------------------------------------------------------------------------------
1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------
As Reported Pro Forma As Reported Pro Forma As Reported Pro Forma
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net income ........... $ 175,103 $ 170,348 $ 180,956 $ 177,268 $ 147,895 $ 145,832
Net income per
common share .... $ 1.07 $ 1.04 $ 1.11 $ 1.08 $ .90 $ .89
Net income per
common share -
assuming dilution $ 1.06 $ 1.03 $ 1.09 $ 1.07 $ .89 $ .87
================================================================================================================
</TABLE>
<PAGE>
Note 15
Leases
The Company leases its headquarters, operations center and certain
other office space, 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 50 years.
Total rental expense (none of which represents contingent rentals)
included in occupancy and equipment expense was $13,697,000, $12,449,000 and
$12,745,000 in 1999, 1998 and 1997, respectively.
Minimum rental commitments for long-term operating leases are as
follows: 2000 - $12,131,000; 2001 - $12,041,000; 2002 - $11,737,000; 2003 -
$11,267,000; 2004 - $10,865,000; and thereafter - $40,760,000.
Note 16
Other Operating Expense
The following is a summary of other operating expense.
<TABLE>
<CAPTION>
=======================================================================
($ in thousands) Year Ended December 31
- -----------------------------------------------------------------------
1999 1998 1997
- -----------------------------------------------------------------------
<S> <C> <C> <C>
State taxes on equity .......... $12,115 $11,237 $ 7,681
Telecommunications ............. 9,844 11,259 11,437
Professional fees .............. 7,371 6,755 10,539
Postage ........................ 7,256 7,216 7,110
Stationery and supplies ........ 6,344 5,736 6,355
Loan collection expense ........ 5,003 4,771 4,054
Regulatory expense ............. 3,061 2,867 2,953
Other .......................... 42,890 37,466 40,423
- -----------------------------------------------------------------------
Total other operating expense $93,884 $87,307 $90,552
=======================================================================
</TABLE>
Note 17
Income Taxes
Income tax expense includes amounts currently payable and amounts
deferred to or from other years as a result of differences in the timing of
recognition of income and expense for financial reporting and federal tax
purposes. The following is a summary of the components of income tax expense.
<TABLE>
<CAPTION>
================================================================================
($ in thousands) Year Ended December 31
- --------------------------------------------------------------------------------
1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Current tax expense:
Federal income tax ..................... $ 90,089 $89,035 $ 63,483
State income tax ....................... 6,963 6,181 3,882
- --------------------------------------------------------------------------------
Total current tax expense ......... 97,052 95,216 67,365
- --------------------------------------------------------------------------------
Deferred tax expense (benefit):
Federal income tax ..................... (1,368) 670 16,241
Change in deferred tax valuation reserve - - (3,317)
- --------------------------------------------------------------------------------
Total deferred tax expense ........ (1,368) 670 12,924
- --------------------------------------------------------------------------------
Income tax expense .......................... $ 95,684 $95,886 $ 80,289
================================================================================
Shareholders' equity:
Change in accumulated other
comprehensive income .............. $(44,166) $ 6,609 $ 3,829
================================================================================
</TABLE>
<PAGE>
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
- ------------------------------------------------------------------------------------------------------------------------
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------
Amount Rate Amount Rate Amount Rate
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Tax expense based on federal statutory rate $ 94,775 35.0 % $ 96,895 35.0 % $ 79,864 35.0 %
Tax-exempt interest ....................... (6,634) (2.5) (6,543) (2.4) (6,396) (2.8)
State income tax, net of federal benefit .. 4,526 1.7 4,018 1.5 2,523 1.1
Goodwill .................................. 2,873 1.0 2,891 1.0 3,040 1.3
Other ..................................... 144 0.1 (1,375) (0.5) 1,258 0.6
- ------------------------------------------------------------------------------------------------------------------------
Income tax expense ................... $ 95,684 35.3 % $ 95,886 34.6 % $ 80,289 35.2 %
========================================================================================================================
</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
- --------------------------------------------------------------------------------
1999 1998
- --------------------------------------------------------------------------------
Deferred tax assets:
<S> <C> <C>
Reserve for loan losses ........... $ 54,625 $45,621
Sale/leaseback .................... 6,116 7,024
Loan fees ......................... 4,126 3,443
Accrued expenses .................. 9,071 9,614
Deferred compensation ............. 4,146 3,659
Net unrealized losses on securities
available for sale ........... 29,142 -
Other ............................. 5,007 7,708
- --------------------------------------------------------------------------------
Total deferred tax assets .... 112,233 77,069
- --------------------------------------------------------------------------------
Deferred tax liabilities:
Net unrealized gains on securities
available for sale ........... - 15,024
Depreciation ...................... 12,123 14,260
Core deposit intangibles .......... 1,380 2,601
Mortgage servicing rights ......... 6,525 4,764
Other ............................. 18,928 13,938
- --------------------------------------------------------------------------------
Total deferred tax liabilities 38,956 50,587
- --------------------------------------------------------------------------------
Deferred tax assets, net of
deferred tax liabilities $ 73,277 $26,482
================================================================================
</TABLE>
Management assesses realizability of the net deferred tax asset based
on the Company's ability to: first, recover taxes previously paid and, second,
generate taxable income and capital gains in the future. A deferred tax
valuation reserve is established, if needed, to limit the net deferred tax asset
to its realizable value.
<PAGE>
Note 18
Net Income Per Common Share Data
The following sets forth the computation of net income per common share
and net income per common share - assuming dilution.
<TABLE>
<CAPTION>
==============================================================================================================
($ in thousands, except per-share data) Year Ended December 31
- --------------------------------------------------------------------------------------------------------------
1999 1998 1997
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Numerator:
Net income ..................................... $ 175,103 $ 180,956 $ 147,895
Preferred stock dividends ...................... (6,900) (6,900) (6,900)
- --------------------------------------------------------------------------------------------------------------
Numerator for net income per common share ...... 168,203 174,056 140,995
Effect of dilutive securities .................. - - -
- --------------------------------------------------------------------------------------------------------------
Numerator for net income per common
share - assuming dilution ................ $ 168,203 $ 174,056 $ 140,995
==============================================================================================================
Denominator:
Denominator for net income per common
share (weighted-average shares outstanding) 157,253,229 157,168,782 156,323,513
Effect of dilutive securities:
Stock options ............................. 1,548,018 2,410,838 2,204,500
Purchase warrants ......................... - - 174,376
Restricted stock awards ................... 100,775 35,850 151,255
- --------------------------------------------------------------------------------------------------------------
Denominator for net income per common
share - assuming dilution ................. 158,902,022 159,615,470 158,853,644
- --------------------------------------------------------------------------------------------------------------
Net income per common share ......................... $ 1.07 $ 1.11 $ 0.90
==============================================================================================================
Net income per common share - assuming dilution ..... $ 1.06 $ 1.09 $ 0.89
==============================================================================================================
</TABLE>
The weighted-average shares outstanding exclude 2,902,121, 2,224,254
and 1,782,937 average common shares in 1999, 1998 and 1997, 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 1999, 1998 and 1997 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 1999 there were 4,014,750 antidilutive options outstanding with
exercise prices ranging from $13.97 to $21.72, during 1998 there were 269,076
antidilutive options outstanding with exercise prices ranging from $18.80 to
$21.72 and during 1997 there were 129,501 antidilutive options outstanding with
exercise prices ranging from $16.30 to $18.80.
<PAGE>
Note 19
Comprehensive Income
The following is a summary of the components of other comprehensive
income.
<TABLE>
<CAPTION>
=====================================================================================
Income Tax
Before Expense After
($ in thousands) Income Taxes (Benefit Income Taxes
- -------------------------------------------------------------------------------------
Year ended December 31, 1999
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Unrealized gains (losses) on securities
available for sale, net ............. $(124,472) $(43,552) $(80,920)
Reclassification adjustment for net
(gains) losses realized in net income (1,754) (614) (1,140)
- -------------------------------------------------------------------------------------
Other comprehensive income ..... $(126,226) $(44,166) $(82,060)
=====================================================================================
=====================================================================================
Year ended December 31, 1998
- -------------------------------------------------------------------------------------
Unrealized gains (losses) on securities
available for sale, net ............. $ 18,278 $ 6,313 $ 11,965
Reclassification adjustment for net
(gains) losses realized in net income 847 296 551
- -------------------------------------------------------------------------------------
Other comprehensive income ..... $ 19,125 $ 6,609 $ 12,516
=====================================================================================
=====================================================================================
Year ended December 31, 1997
- -------------------------------------------------------------------------------------
Unrealized gains (losses) on securities
available for sale, net ............. $ 11,404 $ 3,894 $ 7,510
Reclassification adjustment for net
(gains) losses realized in net income (187) (65) (122)
- -------------------------------------------------------------------------------------
Other comprehensive income ..... $ 11,217 $ 3,829 $ 7,388
=====================================================================================
</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 $24,668,000 and $22,008,000
at December 31, 1999 and 1998, respectively. The change during 1999 reflects
$5,439,000 in loan advances and $2,779,000 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 $4,693,000 and $7,882,000 at December 31, 1999 and 1998, 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, trust operations and other fee-generating businesses. Accordingly,
the aggregate fair value amounts presented do not represent the underlying value
of the Company.
<PAGE>
The carrying amount of cash and cash equivalents, 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. The estimated fair value of mortgage
servicing rights is based on present values of estimated future cash flows. The
estimated fair value of commitments to extend credit and letters of credit and
financial guarantees are based on fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements and the
counterparties' credit standing.
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 loan losses which totaled
$156,072,000 and $130,347,000 at December 31, 1999 and 1998, respectively.
The fair value estimates presented are based on information available
to management as of December 31, 1999 and 1998. Although management is not aware
of any factors that would significantly affect the estimated fair value amounts,
these amounts have not been revalued for purposes of these financial statements
since those dates. Therefore, current estimates of fair value may differ
significantly from the amounts presented.
<TABLE>
<CAPTION>
===========================================================================================
($ in thousands) December 31
- -------------------------------------------------------------------------------------------
1999 1998
- -------------------------------------------------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Cash and cash equivalents ... $ 827,699 $ 827,699 $ 945,021 $ 945,021
Securities available for sale $2,660,322 $2,660,322 $2,761,701 $2,761,701
Securities held to maturity.. $ 300,525 $ 297,072 $ - $ -
Mortgage loans held for sale $ 92,704 $ 92,951 $ 281,434 $ 294,367
Commercial loans ............ $3,693,308 $3,711,726 $3,879,836 $3,919,242
Small business loans ........ $2,361,866 $2,381,764 $2,069,744 $2,105,160
Consumer loans .............. $4,801,502 $4,854,143 $3,957,614 $4,050,755
Mortgage servicing rights ... $ 45,746 $ 62,618 $ 31,111 $ 37,018
Liabilities
Noninterest-bearing deposits $2,085,322 $2,085,322 $2,065,770 $2,065,770
Interest-bearing deposits ... $9,770,581 $9,781,759 $8,826,803 $8,864,682
Short-term borrowings ....... $1,102,690 $1,102,690 $1,134,136 $1,134,136
Debt ........................ $ 844,849 $ 848,150 $ 806,337 $ 815,530
===========================================================================================
</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.
<PAGE>
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
loan losses. Management does not anticipate any material losses related to these
instruments.
<TABLE>
<CAPTION>
==========================================================================================
($ in thousands) December 31
- ------------------------------------------------------------------------------------------
1999 1998
- ------------------------------------------------------------------------------------------
Contract Fair Contract Fair
Amount Value Amount Value
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commitments
to extend credit ... $3,519,620 $(31,477) $3,492,945 $(31,559)
- ------------------------------------------------------------------------------------------
Letters of credit and
financial guarantees $ 269,563 $ (2,003) $ 227,247 $ (1,679)
==========================================================================================
</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, 1999 and 1998 was $5,370,000 and $3,993,000,
respectively. The Company manages the potential credit exposure through
evaluation of the counterparty credit standing, collateral agreements and other
contract provisions. The potential credit exposure from future market movements
is estimated by using a statistical model that takes into consideration possible
changes in interest rates over time.
The amounts disclosed in the following table represent the
end-of-period notional and estimated fair value of derivative financial
instruments held or issued for trading purposes and the average aggregate fair
value of those instruments during the year. Net trading gains recognized in
earnings on interest rate contracts outstanding were immaterial for all years
presented.
<TABLE>
<CAPTION>
===========================================================================================================
($ in thousands) Notional Amount Fair Value Average Fair Value
- -----------------------------------------------------------------------------------------------------------
December 31 December 31 Year Ended December 31
- -----------------------------------------------------------------------------------------------------------
1999 1998 1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest rate swaps:
Assets .................... $259,650 $227,180 $ 5,370 $ 3,993 $ 3,181 $ 3,284
Liabilities ............... $239,650 $150,580 $(4,643) $(2,805) $(2,325) $(2,117)
Options, caps and floors held .. $ 502 $ 13,603 $ - $ - $ - $ 3
Options, caps and floors written $ 502 $ 13,603 $ (1) $ (1) $ (1) $ (4)
===========================================================================================================
</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 was
accrued as interest rates changed and was recognized as an adjustment to
interest expense on deposits. The related amount payable or receivable was
included in other assets or other liabilities. This interest rate swap matured
on January 4, 1999.
<PAGE>
Note 22
Regulatory Matters and Dividend Restrictions
The Company and the Bank 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 Bank 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
Bank's 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, 1999 and 1998, the most recent notifications from
the OCC categorized the Bank 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 Bank's categories.
The Company's and the Bank's 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, 1999
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Hibernia Corporation ........... $1,203,242 10.21% $1,350,708 11.46% $1,203,242 8.11%
Hibernia National Bank ......... $1,073,402 9.11% $1,220,769 10.36% $1,073,402 7.24%
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
December 31, 1998
- ------------------------------------------------------------------------------------------------------------------------
Hibernia Corporation ........... $1,165,985 10.78% $1,296,332 11.98% $1,165,985 8.55%
Hibernia National Bank ......... $1,040,458 9.61% $1,170,805 10.82% $1,040,458 7.67%
========================================================================================================================
</TABLE>
Under current FRB regulations, the Bank may lend the Parent Company up
to 10% of its capital and surplus.
The payment of dividends by the Bank to the Parent Company is
restricted by various regulatory and statutory limitations. In 2000, the Bank
would have available to pay dividends to the Parent Company, without approval of
the OCC, approximately $223,578,000, plus net retained profits earned in 2000
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 $18,947,000 in 1999 and $22,804,000 in 1998.
<PAGE>
Note 23
Hibernia Corporation
The following Balance Sheets, Income Statements and Statements of Cash
Flows reflect the financial position and results of operations for the Parent
Company only.
<TABLE>
<CAPTION>
================================================================================
Balance Sheets
- --------------------------------------------------------------------------------
($ in thousands) December 31
- --------------------------------------------------------------------------------
1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Investment in bank subsidiary ................... $1,246,205 $1,218,705
Other assets .................................... 165,940 165,898
- --------------------------------------------------------------------------------
Total assets ............................... $1,412,145 $1,384,603
================================================================================
Other liabilities ............................... $ 1,944 $ 1,603
Debt (includes ESOP guarantee
of $34,686 and $37,751
at December 31, 1999 and 1998, respectively) 34,686 38,398
Shareholders' equity ............................ 1,375,515 1,344,602
- --------------------------------------------------------------------------------
Total liabilities and shareholders' equity.. $1,412,145 $1,384,603
================================================================================
</TABLE>
The Parent Company and certain of its nonbank subsidiaries engage in
private equity investments. These investments, totaling $34,966,000 and
$29,346,000 at December 31, 1999 and 1998, respectively, are primarily equity
transactions, some of which contain minor debt features. At December 31, 1999,
$7,000,000 of these investments were not in compliance with their contractual
terms.
<TABLE>
<CAPTION>
========================================================================================================================
Income Statements
- ------------------------------------------------------------------------------------------------------------------------
($ in thousands) Year Ended December 31
- ------------------------------------------------------------------------------------------------------------------------
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity in undistributed net income of subsidiaries $ 96,087 $127,277 $ 86,526
Dividends from bank subsidiary ................... 77,044 50,520 53,596
Other income ..................................... 9,748 7,582 12,260
- ------------------------------------------------------------------------------------------------------------------------
Total income ................................ 182,879 185,379 152,382
- ------------------------------------------------------------------------------------------------------------------------
Interest expense ................................. - 77 519
Other expense .................................... 7,183 2,829 1,516
- ------------------------------------------------------------------------------------------------------------------------
Total expense ............................... 7,183 2,906 2,035
- ------------------------------------------------------------------------------------------------------------------------
Income before income taxes ....................... 175,696 182,473 150,347
Income tax expense ............................... 593 1,517 2,452
- ------------------------------------------------------------------------------------------------------------------------
Net income ....................................... $175,103 $180,956 $147,895
========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
========================================================================================================================
Statements of Cash Flows
- ------------------------------------------------------------------------------------------------------------------------
($ in thousands) Year Ended December 31
- ------------------------------------------------------------------------------------------------------------------------
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net income ......................................... $ 175,103 $ 180,956 $ 147,895
Non-cash adjustment for equity in
subsidiaries' undistributed net income ........ (96,087) (127,277) (86,526)
Realized securities gains, net ..................... (364) (3,778) (1,305)
Other adjustments .................................. 3,739 2,213 (8,688)
- ------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities ..... 82,391 52,114 51,376
- ------------------------------------------------------------------------------------------------------------------------
Investing activities
Investment in subsidiaries ......................... (15,500) (8,360) (28,000)
Purchases of securities available for sale ......... (9,292) (205,513) (120,000)
Proceeds from sales of securities available for sale 603 206,697 121,305
Other .............................................. 4,455 (6,430) 834
- ------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities ......... (19,734) (13,606) (25,861)
- ------------------------------------------------------------------------------------------------------------------------
Financing activities
Payments on debt ................................... (647) (366) (7,392)
Issuance of common stock ........................... 6,168 14,027 9,848
Purchase of treasury stock ......................... - - (299)
Dividends paid ..................................... (75,022) (64,428) (55,362)
- ------------------------------------------------------------------------------------------------------------------------
Net cash used by financing activities ......... (69,501) (50,767) (53,205)
- ------------------------------------------------------------------------------------------------------------------------
Decrease in cash and cash equivalents ................... (6,844) (12,259) (27,690)
Cash and cash equivalents at beginning of year .......... 134,610 146,869 174,559
- ------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year ................ $ 127,766 $ 134,610 $ 146,869
========================================================================================================================
</TABLE>
<PAGE>
Note 24
Segment Information
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," 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.
The Company's segment information is presented by line of business.
Each line of business is a strategic unit that provides various products and
services to groups of customers that have certain common characteristics. 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, factoring,
treasury management and private equity investments. 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, 1999
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Average loans ... $3,899,600 $2,188,400 $4,332,300 $ 1,300 $ 34,200 $10,455,800
Average assets .. $3,962,400 $2,237,400 $7,743,400 $3,028,700 $574,600 $17,546,500
Average deposits $ 847,600 $1,499,800 $6,646,200 $1,828,100 $ 57,800 $10,879,500
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
December 31, 1998
- ---------------------------------------------------------------------------------------------------
Average loans ... $3,487,700 $1,685,400 $3,901,800 $ - $ 46,700 $ 9,121,600
Average assets .. $3,550,200 $1,726,100 $6,962,500 $3,187,600 $452,800 $15,879,200
Average deposits $ 711,600 $1,215,700 $6,448,800 $1,527,700 $ 53,200 $ 9,957,000
===================================================================================================
</TABLE>
<PAGE>
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, 1999
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net interest income .......... $128,130 $142,138 $279,658 $58,552 $(18,731) $589,747
Provision for loan losses .... 43,578 17,608 26,883 - (269) 87,800
- ---------------------------------------------------------------------------------------------------
Net interest income after
provision for loan losses 84,552 124,530 252,775 58,552 (18,462) 501,947
- ---------------------------------------------------------------------------------------------------
Noninterest income ........... 26,805 20,539 166,189 1,048 7,899 222,480
Noninterest expense .......... 51,768 91,990 311,638 7,991 (19,582) 443,805
- ---------------------------------------------------------------------------------------------------
Income before income taxes ... 59,589 53,079 107,326 51,609 9,019 280,622
Income tax expense ........... 20,856 18,578 37,564 18,063 7,684 102,745
- ---------------------------------------------------------------------------------------------------
Net income ................... $ 38,733 $ 34,501 $ 69,762 $33,546 $ 1,335 $177,877
===================================================================================================
===================================================================================================
Year ended December 31, 1998
- ---------------------------------------------------------------------------------------------------
Net interest income .......... $120,710 $115,582 $261,810 $59,839 $(10,765) $547,176
Provision for loan losses .... 10,450 5,638 10,844 - 294 27,226
- ---------------------------------------------------------------------------------------------------
Net interest income after
provision for loan losses 110,260 109,944 250,966 59,839 (11,059) 519,950
- ---------------------------------------------------------------------------------------------------
Noninterest income ........... 18,821 17,412 139,181 5,084 11,132 191,630
Noninterest expense .......... 46,967 79,826 292,340 7,216 2,437 428,786
- ---------------------------------------------------------------------------------------------------
Income before income taxes ... 82,114 47,530 97,807 57,707 (2,364) 282,794
Income tax expense ........... 28,740 16,636 34,233 20,197 3,190 102,996
- ---------------------------------------------------------------------------------------------------
Net income ................... $ 53,374 $ 30,894 $ 63,574 $37,510 $ (5,554) $179,798
===================================================================================================
===================================================================================================
Year ended December 31, 1997
- ---------------------------------------------------------------------------------------------------
Net interest income .......... $ 95,046 $ 84,393 $274,488 $48,654 $ (4,520) $498,061
Provision for loan losses .... 1,068 577 1,660 - 128 3,433
- ---------------------------------------------------------------------------------------------------
Net interest income after
provision for loan losses 93,978 83,816 272,828 48,654 (4,648) 494,628
- ---------------------------------------------------------------------------------------------------
Noninterest income ........... 16,193 13,591 117,317 2,064 10,963 160,128
Noninterest expense .......... 41,273 64,960 300,772 6,302 7,943 421,250
- ---------------------------------------------------------------------------------------------------
Income before income taxes ... 68,898 32,447 89,373 44,416 (1,628) 233,506
Income tax expense ........... 24,114 11,356 31,281 15,545 3,799 86,095
- ---------------------------------------------------------------------------------------------------
Net income ................... $ 44,784 $ 21,091 $ 58,092 $28,871 $ (5,427) $147,411
===================================================================================================
</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 do not allow the capitalization of these
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 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 statistics or
staff costs. Indirect costs, such as management expenses and corporate support,
are allocated to each segment based on various statistics or staff costs. There
are no significant intersegment revenues.
<PAGE>
The following is a reconciliation of segment totals to consolidated
totals.
<TABLE>
<CAPTION>
================================================================================
Average Average Average
($ in thousands) Loans Assets Deposits
- --------------------------------------------------------------------------------
December 31, 1999
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Segment total ................... $10,455,800 $ 17,546,500 $10,879,500
Excess funds invested ........... - (3,189,700) -
Mortgage servicing rights ....... - (17,500) -
Reclassification of cash items in
process of collection ...... - 297,700 297,700
- --------------------------------------------------------------------------------
Consolidated total .............. $10,455,800 $ 14,637,000 $11,177,200
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
December 31, 1998
- --------------------------------------------------------------------------------
Segment total ................... $ 9,121,600 $ 15,879,200 $ 9,957,000
Excess funds invested ........... - (2,911,700) -
Mortgage servicing rights ....... - (15,900) -
Reclassification of cash items in
process of collection ...... - 261,200 261,200
- --------------------------------------------------------------------------------
Consolidated total .............. $ 9,121,600 $ 13,212,800 $10,218,200
================================================================================
</TABLE>
<TABLE>
<CAPTION>
========================================================================================================================
Provision Income Tax
Net Interest for Loan Noninterest Noninterest Expense
($ in thousands) Income Losses Income Expense (Benefit) Net Income
- ------------------------------------------------------------------------------------------------------------------------
Year ended December 31, 1999
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Segment total ............... $ 589,747 $87,800 $ 222,480 $ 443,805 $ 102,745 $ 177,877
Taxable-equivalent adjustment (4,942) - - - (1,730) (3,212)
Mortgage servicing rights ... - - (7,777) (2,884) (1,713) (3,180)
Income tax expense .......... - - - - (3,618) 3,618
- ------------------------------------------------------------------------------------------------------------------------
Consolidated total .......... $ 584,805 $87,800 $ 214,703 $ 440,921 $ 95,684 $ 175,103
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Year ended December 31, 1998
- ------------------------------------------------------------------------------------------------------------------------
Segment total ............... $ 547,176 $27,226 $ 191,630 $ 428,786 $ 102,996 $ 179,798
Taxable-equivalent adjustment (4,382) - - - (1,534) (2,848)
Mortgage servicing rights ... - - (4,201) (2,631) (550) (1,020)
Income tax expense .......... - - - - (5,026) 5,026
- ------------------------------------------------------------------------------------------------------------------------
Consolidated total .......... $ 542,794 $27,226 $ 187,429 $ 426,155 $ 95,886 $ 180,956
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Year ended December 31, 1997
- ------------------------------------------------------------------------------------------------------------------------
Segment total ............... $ 498,061 $ 3,433 $ 160,128 $ 421,250 $ 86,095 $ 147,411
Taxable-equivalent adjustment (3,981) - - - (1,393) (2,588)
Mortgage servicing rights ... - - (3,712) (2,371) (469) (872)
Income tax expense .......... - - - - (3,944) 3,944
- ------------------------------------------------------------------------------------------------------------------------
Consolidated total .......... $ 494,080 $ 3,433 $ 156,416 $ 418,879 $ 80,289 $ 147,895
========================================================================================================================
</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.
