<PAGE>
HIBERNIA CORPORATION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 2000 Commission File Number 1-10294
-------------- -------
HIBERNIA CORPORATION
(Exact name of registrant as specified in its charter)
Louisiana 72-0724532
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
313 Carondelet Street, New Orleans, Louisiana 70130
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code (504) 533-5332
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at April 30, 2000
Class A Common Stock, no par value 159,740,547 Shares
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheets
Hibernia Corporation and Subsidiaries March 31 December 31 March 31
Unaudited ($ in thousands) 2000 1999 1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Cash and cash equivalents .......................................... $ 788,993 $ 827,699 $ 715,518
Securities available for sale ...................................... 2,688,304 2,660,322 2,751,068
Securities held to maturity (estimated fair value of $278,465 and
$297,072 at March 31, 2000 and December 31, 1999, respectively) 291,857 300,525 -
Mortgage loans held for sale ....................................... 71,852 92,704 243,764
Loans, net of unearned income ...................................... 11,326,032 10,856,676 10,148,816
Reserve for loan losses ........................................ (161,274) (156,072) (150,008)
- ------------------------------------------------------------------------------------------------------------------------------------
Loans, net ................................................. 11,164,758 10,700,604 9,998,808
- ------------------------------------------------------------------------------------------------------------------------------------
Bank premises and equipment ........................................ 204,735 205,165 193,489
Customers' acceptance liability .................................... 129 108 224
Other assets ....................................................... 531,132 527,052 380,791
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets ............................................... $ 15,741,760 $ 15,314,179 $ 14,283,662
====================================================================================================================================
Liabilities
Deposits:
Noninterest-bearing ............................................ $ 2,110,021 $ 2,085,322 $ 1,942,742
Interest-bearing ............................................... 10,051,173 9,770,581 8,886,111
- ------------------------------------------------------------------------------------------------------------------------------------
Total deposits ............................................. 12,161,194 11,855,903 10,828,853
- ------------------------------------------------------------------------------------------------------------------------------------
Short-term borrowings .............................................. 1,168,651 1,102,690 1,137,973
Liability on acceptances ........................................... 129 108 224
Other liabilities .................................................. 173,509 135,114 161,500
Debt ............................................................... 844,638 844,849 805,480
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities .......................................... 14,348,121 13,938,664 12,934,030
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Shareholders' equity
Preferred Stock, no par value:
Authorized - 100,000,000 shares; Series A issued and outstanding -
1,860,000, 2,000,000 and 2,000,000 at March 31, 2000,
December 31, 1999 and March 31, 1999, respectively ............ 93,000 100,000 100,000
Class A Common Stock, no par value:
Authorized - 300,000,000 shares; issued - 160,338,912, 160,324,729
and 160,097,236 at March 31, 2000,
December 31, 1999 and March 31, 1999, respectively ............ 307,851 307,824 307,387
Surplus ............................................................ 425,331 425,185 423,268
Retained earnings .................................................. 660,806 631,314 542,837
Treasury stock at cost: 170,000 shares at March 31, 2000 ........... (1,641) - -
Accumulated other comprehensive income ............................. (57,022) (54,122) 13,891
Unearned compensation .............................................. (34,686) (34,686) (37,751)
- ------------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity ................................. 1,393,639 1,375,515 1,349,632
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity ................. $ 15,741,760 $ 15,314,179 $ 14,283,662
====================================================================================================================================
- ----------------
See notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Income Statements
Hibernia Corporation and Subsidiaries
Three Months Ended March 31,
Unaudited ($ in thousands, except per-share data) 2000 1999
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Interest income
Interest and fees on loans ...................... $ 233,253 $ 201,940
Interest on securities available for sale ....... 42,049 41,767
Interest on securities held to maturity ......... 4,569 -
Interest on short-term investments .............. 2,829 3,669
Interest and fees on mortgage loans held for sale 1,356 3,712
- -----------------------------------------------------------------------------------------------
Total interest income ....................... 284,056 251,088
- -----------------------------------------------------------------------------------------------
Interest expense
Interest on deposits ............................ 109,813 86,031
Interest on short-term borrowings ............... 13,955 12,845
Interest on debt ................................ 11,970 11,135
- -----------------------------------------------------------------------------------------------
Total interest expense ...................... 135,738 110,011
- -----------------------------------------------------------------------------------------------
Net interest income ................................. 148,318 141,077
Provision for loan losses ....................... 16,250 30,000
- -----------------------------------------------------------------------------------------------
Net interest income after provision for loan losses . 132,068 111,077
- -----------------------------------------------------------------------------------------------
Noninterest income
Service charges on deposits ..................... 24,077 22,602
Trust fees ...................................... 6,664 4,536
Retail investment service fees .................. 8,523 5,448
Mortgage loan origination and servicing fees .... 5,240 4,502
Other service, collection and exchange charges .. 10,093 8,026
Other operating income .......................... 3,846 6,062
Securities gains, net ........................... 30 41
- -----------------------------------------------------------------------------------------------
Total noninterest income .................... 58,473 51,217
- -----------------------------------------------------------------------------------------------
Noninterest expense
Salaries and employee benefits .................. 56,285 60,584
Occupancy expense, net .......................... 8,408 7,869
Equipment expense ............................... 7,601 9,031
Data processing expense ......................... 8,093 8,066
Advertising and promotional expense ............. 3,767 3,630
Foreclosed property expense, net ................ 77 (371)
Amortization of intangibles ..................... 6,630 4,525
Other operating expense ......................... 22,200 23,003
- -----------------------------------------------------------------------------------------------
Total noninterest expense ................... 113,061 116,337
- -----------------------------------------------------------------------------------------------
Income before income taxes .......................... 77,480 45,957
Income tax expense .................................. 27,349 16,386
- -----------------------------------------------------------------------------------------------
Net income .......................................... $ 50,131 $ 29,571
===============================================================================================
Net income applicable to common shareholders ........ $ 48,406 $ 27,846
===============================================================================================
Net income per common share ......................... $ 0.31 $ 0.18
===============================================================================================
Net income per common share - assuming dilution ..... $ 0.31 $ 0.18
===============================================================================================
- -----------
See notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Changes in Shareholders' Equity
Hibernia Corporation and Subsidiaries
($ in thousands, except per-share data)
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated
Other
Preferred Common Retained Comprehensive Comprehensive
Stock Stock Surplus Earnings Income Other Income
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1999 ........... $ 100,000 $ 307,824 $ 425,185 $ 631,314 $ (54,122) $ (34,686)
Net income .............................. - - - 50,131 - - $ 50,131
Unrealized gains (losses) on securities,
net of reclassification adjustments - - - - (2,900) - (2,900)
- ------------------------------------------------------------------------------------------------------------------------------------
Comprehensive income .................... $ 47,231
- ------------------------------------------------------------------------------------------------------------------------------------
Issuance of common stock:
Stock Option Plan .................... - 18 53 - - -
Restricted stock awards .............. - 9 37 - - -
Cash dividends declared:
Preferred ($.8625 per share) ......... - - - (1,725) - -
Common ($.12 per share) .............. - - - (18,914) - -
Acquisition of treasury stock ........... - - - - - (1,641)
Redemption of preferred stock ........... (7,000) - 131 - - -
Other ................................... - - (75) - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Balances at March 31, 2000 .............. $ 93,000 $ 307,8510 $ 425,331 $ 660,806 $ (57,022) $ (36,327)
====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated
Other
Preferred Common Retained Comprehensive Comprehensive
Stock Stock Surplus Earnings Income Other Income
- ------------------------------------------------------------------------------------------------------------------------------------
Balances at December 31, 1998 ........... $ 100,000 $ 306,913 $ 416,269 $ 531,233 $ 27,938 $ (37,751)
Net income .............................. - - - 29,571 - - $ 29,571
Unrealized gains (losses) on securities,
net of reclassification adjustments - - - - (14,047) - (14,047)
- ------------------------------------------------------------------------------------------------------------------------------------
Comprehensive income .................... $ 15,524
- ------------------------------------------------------------------------------------------------------------------------------------
Issuance of common stock:
Stock Option Plan .................... - 468 1,632 - - -
Restricted stock awards .............. - 6 43 - - -
By pooled companies prior to merger - - 5,387 - - -
Cash dividends declared:
Preferred ($.8625 per share) ......... - - - (1,725) - -
Common ($.105 per share) ............. - - - (16,115) - -
By pooled companies prior to merger - - - (127) - -
Other ................................... - - (63) - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Balances at March 31, 1999 .............. $ 100,000 $ 307,387 $ 423,268 $ 542,837 $ 13,891 $ (37,751)
====================================================================================================================================
- ----------------
See notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
Hibernia Corporation and Subsidiaries
Three Months Ended March 31
Unaudited ($ in thousands) 2000 1999
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating activities
Net income ............................................................ $ 50,131 $ 29,571
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses ...................................... 16,250 30,000
Amortization of intangibles and deferred charges ............... 6,603 4,475
Depreciation and amortization .................................. 6,797 8,146
Non-cash compensation expense .................................. - 4,385
Premium amortization, net of discount accretion ................ (124) 1,832
Realized securities gains, net ................................. (30) (41)
Gains on sales of assets, net .................................. (700) (747)
Provision for losses on foreclosed and other assets ............ 187 166
Decrease in mortgage loans held for sale ....................... 20,852 37,670
Increase in deferred income tax asset .......................... (267) (1,597)
Increase in interest receivable and other assets ............... (8,375) (2,559)
Increase in interest payable and other liabilities ............. 38,618 9,581
- ------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities ........................ 129,942 120,882
- ------------------------------------------------------------------------------------------------------------------
Investing activities
Purchases of securities available for sale ............................ (281,083) (153,648)
Proceeds from maturities of securities available for sale ............. 228,036 119,805
Proceeds from maturities of securities held to maturity ............... 8,665 -
Proceeds from sales of securities available for sale .................. 20,760 21,080
Net increase in loans ................................................. (281,603) (224,666)
Proceeds from sales of loans .......................................... 1,334 1,186
Purchases of loans .................................................... (201,528) (28,733)
Purchases of premises, equipment and other assets ..................... (8,507) (12,298)
Proceeds from sales of foreclosed assets and excess bank-owned property 2,469 2,371
Proceeds from sales of premises, equipment and other assets ........... 846 123
- ------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities ............................ (510,611) (274,780)
- ------------------------------------------------------------------------------------------------------------------
Financing activities
Net increase (decrease) in deposits ................................... 305,291 (63,720)
Net increase in short-term borrowings ................................. 65,961 3,837
Payments on debt ...................................................... (211) (857)
Proceeds from issuance of common stock ................................ 71 3,102
Dividends paid ........................................................ (20,639) (17,967)
Redemption of preferred shares ........................................ (6,869) -
Acquisition of treasury stock ......................................... (1,641) -
- ------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities ................. 341,963 (75,605)
- ------------------------------------------------------------------------------------------------------------------
Decrease in cash and cash equivalents ................................... (38,706) (229,503)
Cash and cash equivalents at beginning of period ........................ 827,699 945,021
- ------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period ....................... $ 788,993 $ 715,518
==================================================================================================================
- --------------
See notes to consolidated financial statements
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
Hibernia Corporation and Subsidiaries
Unaudited
Note 1
Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles. In the opinion
of management, all adjustments (consisting of normal accruals) considered
necessary for a fair presentation have been included. For further information,
refer to the audited consolidated financial statements and notes included in
Hibernia Corporation's Annual Report on Form 10-K for the year ended December
31, 1999.
Note 2
Merger Agreements
On April 1, 2000 Hibernia Corporation (the Company) purchased Southcoast
Capital, L.L.C. (Southcoast). Southcoast is a full-service investment banking
firm providing corporate finance, equity research, institutional equity sales
and trading services. Under the purchase method of accounting, the assets and
liabilities of Southcoast were adjusted to their estimated fair value as of the
purchase date and their financial results will be included from the date of
consummation of the merger. The excess of cost over the fair value of net assets
acquired was approximately $4.6 million and is being amortized on a
straight-line basis over 20 years.
Hibernia National Bank has signed a definitive agreement with Compass Bank
to purchase three East Texas banking offices. The purchase price will be based
on deposits at closing along with the market value of the three branches. In
addition to acquiring all deposits and related buildings of the banking offices,
Hibernia is purchasing selected loans. This purchase transaction is expected to
be completed in the second quarter of 2000.
Note 3
Employee Benefit Plans
The Company's stock option plans provide incentive and non-qualified
options to various key employees and non-employee directors. Options granted to
directors upon inception of service as a director vest in six months and are
granted at the fair market value of the stock at the date of grant. Until
October 1997 those options were granted under the 1987 Stock Option Plan; since
October 1997 those options have been granted under the 1993 Directors' Stock
Option Plan. 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, and were granted at the fair market value
of the stock at the date of grant.
Options granted to employees and directors, other than the chief executive
officer, become immediately exercisable if the holder of the option dies while
the option is outstanding. Options granted under the 1987 Stock Option Plan
generally expire 10 years from the date granted. Options granted under the
Long-Term Incentive Plan and the 1993 Directors' Stock Option Plan generally
expire 10 years from the date of grant unless the holder dies, retires, becomes
permanently disabled or leaves the employ of the Company, at which time the
options expire at various times ranging from 30 to 365 days. All options vest
immediately upon a change in control of the Company.
The following tables summarize the option activity in the plans during the
first quarter of 2000. During 1997, the 1987 Stock Option Plan was terminated;
therefore, at March 31, 2000 there are no shares available for grant under this
plan. The termination did not impact options outstanding under the 1987 Stock
Option Plan.
<TABLE>
<CAPTION>
=============================================================================================================
Weighted
Average
Incentive Non-Qualified Total Exercise Price
<S> <C> <C> <C> <C>
1987 Stock Option Plan:
Outstanding, December 31, 1999 ..... 43,913 1,083,512 1,127,425 $ 6.10
- -------------------------------------------------------------------------------------------------------------
Outstanding, March 31, 2000 ........ 43,913 1,083,512 1,127,425 $ 6.10
=============================================================================================================
Exercisable, March 31, 2000 ........ 43,913 1,083,512 1,127,425 $ 6.10
=============================================================================================================
Long-Term Incentive Plan:
Outstanding, December 31, 1999 ..... 12,598 8,809,474 8,822,072 $ 13.09
Granted ............................ - 2,773,085 2,773,085 9.97
Canceled ........................... - (35,049) (35,049) 15.81
Exercised .......................... - (10,049) (10,049) 7.73
- -------------------------------------------------------------------------------------------------------------
Outstanding, March 31, 2000 ........ 12,598 11,537,461 11,550,059 $ 12.34
=============================================================================================================
Exercisable, March 31, 2000 ........ 12,598 5,354,801 5,367,399 $ 11.00
=============================================================================================================
Available for grant, March 31, 2000 831,746
=============================================================================================================
1993 Directors' Stock Option Plan:
Outstanding, December 31, 1999 ..... - 370,000 370,000 $ 12.49
- -------------------------------------------------------------------------------------------------------------
Outstanding, March 31, 2000 ........ - 370,000 370,000 $ 12.49
=============================================================================================================
Exercisable, March 31, 2000 ........ - 198,750 198,750 $ 9.71
=============================================================================================================
Available for grant, March 31, 2000 502,500
=============================================================================================================
</TABLE>
In addition to the above option activity in the plans, 3,500 shares of
restricted stock were awarded under the Long-Term Incentive Plan during the
first quarter of 2000.
Note 4
Net Income Per Common Share
The following sets forth the computation of net income per common share and
net income per common share - assuming dilution.
<TABLE>
<CAPTION>
======================================================================================================
($ in thousands, except per-share data) Three Months Ended March 31
- ------------------------------------------------------------------------------------------------------
2000 1999
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Numerator:
Net income .................................... $ 50,131 $ 29,571
Preferred stock dividends ..................... 1,725 1,725
- ------------------------------------------------------------------------------------------------------
Numerator for net income per common share ..... 48,406 27,846
Effect of dilutive securities ................. - -
- ------------------------------------------------------------------------------------------------------
Numerator for net income per common
share - assuming dilution ................. $ 48,406 $ 27,846
- ------------------------------------------------------------------------------------------------------
Denominator:
Denominator for net income per common
share (weighted average shares outstanding) 157,511,645 156,951,925
Effect of dilutive securities:
Stock options ............................. 630,027 1,920,105
Restricted stock awards ................... 96,175 80,000
- ------------------------------------------------------------------------------------------------------
Denominator for net income per common
share - assuming dilution ................. 158,237,847 158,952,030
- ------------------------------------------------------------------------------------------------------
Net income per common share ....................... $ 0.31 $ 0.18
======================================================================================================
Net income per common share - assuming dilution ... $ 0.31 $ 0.18
======================================================================================================
</TABLE>
The weighted average shares outstanding exclude average common shares held
by the Company's Employee Stock Ownership Plan which have not been committed to
be released. These shares totaled 2,722,004 and 3,001,756 for the three months
ended March 31, 2000 and 1999, respectively. The common shares issued in all
mergers accounted for as poolings of interests consummated in 1999 are
considered to be outstanding as of January 1, 1999, the beginning of the
earliest period presented.
Options with an exercise price greater than the average market price of the
Company's Class A Common Stock for the periods presented are antidilutive and,
therefore, are not included in the computation of net income per common share -
assuming dilution. During the three months ended March 31, 2000 and 1999 there
were 9,541,411 antidilutive options outstanding with exercise prices ranging
from $9.91 to $21.72 per option, and 4,105,509 antidilutive options outstanding
with exercise prices ranging from $16.09 to $21.72 per option, respectively.
Note 5
Segment Information
The Company's segment information is presented by line of business. Each
line of business is a strategic unit that provides various products and services
to groups of customers that have certain common characteristics. The basis of
segmentation and the accounting policies used by each segment are consistent
with that described in the December 31, 1999 Annual Report. There are no
significant intersegment revenues.
The following table presents selected financial information for each
segment.
<TABLE>
<CAPTION>
====================================================================================================================================
Small Investments
Commercial Business Consumer and Public Segment
($ in thousands) Banking Banking Banking Funds Other Total
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Three months ended March 31, 2000
Average loans .................... $ 3,696,500 $ 2,325,100 $ 4,916,400 $ 1,100 $ 34,400 $ 10,973,500
Average assets ................... $ 3,756,400 $ 2,377,300 $ 8,001,700 $ 3,078,900 $ 612,300 $ 17,826,600
Average deposits ................. $ 967,200 $ 1,657,900 $ 7,002,100 $ 1,942,400 $ (8,700) $ 11,560,900
Net interest income .............. $ 31,570 $ 37,155 $ 73,503 $ 13,101 $ (5,843) $ 149,486
Noninterest income ............... $ 7,887 $ 6,209 $ 46,957 $ 423 $ 109 $ 61,585
Net income ....................... $ 9,576 $ 10,800 $ 25,722 $ 7,096 $ (1,968) $ 51,226
====================================================================================================================================
Three months ended March 31, 1999
Average loans .................... $ 3,888,100 $ 1,962,500 $ 4,104,300 $ 2,400 $ 41,000 $ 9,998,300
Average assets ................... $ 4,066,000 $ 2,061,700 $ 6,715,200 $ 4,127,800 $ 521,500 $ 17,492,200
Average deposits ................. $ 791,500 $ 1,365,800 $ 6,346,400 $ 1,912,600 $ 54,500 $ 10,470,800
Net interest income .............. $ 31,889 $ 32,157 $ 62,181 $ 20,701 $ (4,745) $ 142,183
Noninterest income ............... $ 8,329 $ 4,736 $ 39,015 $ 228 $ (422) $ 51,886
Net income ....................... $ 8,861 $ 3,838 $ 5,658 $ 12,178 $ (734) $ 29,801
====================================================================================================================================
</TABLE>
The following is a reconciliation of segment totals to consolidated totals.
<TABLE>
<CAPTION>
====================================================================================================================================
Average Average Average Net Interest Noninterest
($ in thousands) Loans Assets Deposits Income Income Net Income
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Three months ended March 31, 2000
Segment total ..................... $ 10,973,500 $ 17,826,600 $ 11,560,900 $ 149,486 $ 61,585 $ 51,226
Excess funds invested ........... - (2,831,100) - - - -
Reclassification of cash items
in process of collection ...... - 314,900 314,900 - - -
Taxable-equivalent adjustment on
tax exempt loans .............. - - - (1,168) - (759)
Mortgage servicing rights ....... - (21,300) - - (3,112) (1,466)
Income tax expense .............. - - - - - 1,130
- ------------------------------------------------------------------------------------------------------------------------------------
Consolidated total ................ $ 10,973,500 $ 15,289,100 $ 11,875,800 $ 148,318 $ 58,473 $ 50,131
====================================================================================================================================
Three months ended March 31, 1999
Segment total ..................... $ 9,998,300 $ 17,492,200 $ 10,470,800 $ 142,183 $ 51,886 $ 29,801
Excess funds invested ........... - (3,513,400) - - - -
Reclassification of cash items
in process of collection ...... - 297,100 297,100 - - -
Taxable-equivalent adjustment on
tax exempt loans .............. - - - (1,106) - (719)
Mortgage servicing rights ....... - (16,700) - - (669) 18
Income tax expense .............. - - - - - 471
- ------------------------------------------------------------------------------------------------------------------------------------
Consolidated total ................ $ 9,998,300 $ 14,259,200 $ 10,767,900 $ 141,077 $ 51,217 $ 29,571
====================================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED SUMMARY OF INCOME AND SELECTED FINANCIAL DATA (1)
Hibernia Corporation and Subsidiaries
- ----------------------------------------------------------------------------------------------------------------------------
Three Months Ended
March 31 December 31 March 31
($ in thousands, except per-share data) 2000 1999 1999
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income ....................................... $ 284,056 $ 277,144 $ 251,088
Interest expense ...................................... 135,738 127,929 110,011
- ----------------------------------------------------------------------------------------------------------------------------
Net interest income ................................... 148,318 149,215 141,077
Provision for loan losses ............................. 16,250 17,100 30,000
- ----------------------------------------------------------------------------------------------------------------------------
Net interest income after
provision for loan losses ......................... 132,068 132,115 111,077
- ----------------------------------------------------------------------------------------------------------------------------
Noninterest income:
Noninterest income ................................. 58,443 54,996 51,176
Securities gains, net ..................... 30 24 41
- ----------------------------------------------------------------------------------------------------------------------------
Noninterest income .................................... 58,473 55,020 51,217
Noninterest expense ................................... 113,061 112,175 116,337
- ----------------------------------------------------------------------------------------------------------------------------
Income before taxes ................................... 77,480 74,960 45,957
Income tax expense .................................... 27,349 26,249 16,386
- ----------------------------------------------------------------------------------------------------------------------------
Net income ............................................ $ 50,131 $ 48,711 $ 29,571
- ----------------------------------------------------------------------------------------------------------------------------
Net income applicable to common shareholders .......... $ 48,406 $ 46,986 $ 27,846
============================================================================================================================
Per common share information:
Net income ......................................... $ 0.31 $ 0.30 $ 0.18
Net income - assuming dilution ..................... $ 0.31 $ 0.30 $ 0.18
Cash dividends declared ............................ $ 0.12 $ 0.12 $ 0.105
Average shares outstanding (000s) ..................... 157,512 157,513 156,952
Average shares outstanding - assuming dilution (000s) . 158,238 158,741 158,952
Dividend payout ratio ................................. 38.71% 40.00% 58.33%
============================================================================================================================
Selected quarter-end balances (in millions)
Loans ................................................. $ 11,326.0 $ 10,856.7 $ 10,148.8
Deposits .............................................. 12,161.2 11,855.9 10,828.9
Debt .................................................. 844.6 844.8 805.5
Equity ................................................ 1,393.7 1,375.5 1,349.6
Total assets .......................................... 15,741.8 15,314.2 14,283.7
============================================================================================================================
Selected average balances (in millions)
Loans ................................................. $ 10,973.5 $ 10,879.0 $ 9,998.3
Deposits .............................................. 11,875.8 11,554.2 10,767.9
Debt .................................................. 844.7 934.0 806.0
Equity ................................................ 1,383.1 1,372.3 1,356.6
Total assets .......................................... 15,289.1 15,022.0 14,259.2
============================================================================================================================
Selected ratios
Net interest margin (taxable-equivalent) .............. 4.27% 4.34% 4.35%
Return on assets ...................................... 1.31% 1.30% 0.83%
Return on common equity ............................... 15.08% 14.77% 8.86%
Return on total equity ................................ 14.50% 14.20% 8.72%
Efficiency ratio ...................................... 53.99% 54.21% 59.64%
Average equity/average assets ......................... 9.05% 9.14% 9.51%
Tier 1 risk-based capital ratio ....................... 10.15% 10.21% 10.82%
Total risk-based capital ratio ........................ 11.40% 11.46% 12.07%
Leverage ratio ........................................ 8.12% 8.11% 8.43%
============================================================================================================================
Cash-basis financial data (2)
Net income applicable to common shareholders .......... $ 52,329 $ 50,984 $ 30,489
Net income per common share ........................... $ 0.33 $ 0.32 $ 0.19
Net income per common share - assuming dilution ....... $ 0.33 $ 0.32 $ 0.19
Return on assets ...................................... 1.43% 1.42% 0.91%
Return on common equity ............................... 19.14% 18.92% 10.98%
Efficiency ratio ...................................... 51.62% 51.76% 58.14%
Average equity/average assets ......................... 7.90% 7.94% 8.58%
============================================================================================================================
- ---------------
(1) All financial information has been restated for mergers accounted for
as poolings of interests. The effects of mergers accounted for as
purchase transactions have been included from the date of consummation.
Prior periods have been conformed to current-period presentation.
(2) Excluding amortization and balances of purchase accounting intangibles
net of applicable taxes.
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Management's Discussion presents a review of the major factors and trends
affecting the performance of Hibernia Corporation (the "Company" or "Hibernia")
and its subsidiaries, principally Hibernia National Bank (the "Bank"). This
discussion should be read in conjunction with the accompanying tables and
consolidated financial statements.
FIRST-QUARTER 2000 HIGHLIGHTS
Hibernia Corporation's first-quarter 2000 results reflected record earnings
and revenues.
o Net income for the first quarter of 2000 totaled $50.1 million ($.31 per
common share), up 70% compared to $29.6 million ($.18 per common share) for
the first quarter of 1999. Cash-basis net income per common share was $.33
in the first quarter of 2000 compared to $.19 in the first quarter of 1999.
o Net income for the first quarter of 2000, excluding merger-related
expenses, was $50.2 million ($.31 per common share), up 43% compared to
$35.2 million ($.21 per common share) for the first quarter of 1999.
Merger-related expenses net of income tax totaled $0.1 million and $5.6
million for the first quarter of 2000 and 1999, respectively.
o Pre-tax, pre-provision earnings were $93.7 million, a 23% increase from the
first quarter 1999 level of $76.0 million. The first quarter of 2000
included a provision for loan losses totaling $16.3 million compared to
$30.0 million for the first quarter of 1999.
o On a taxable-equivalent basis excluding securities transactions, revenues
for the first quarter of 2000 totaled $209.4 million, a $14.3 million (7%)
increase from the first quarter 1999 level of $195.1 million. Noninterest
income (excluding securities transactions) increased $7.3 million (14%) to
$58.4 million for the first quarter of 2000 compared to the first quarter
of 1999.
o Total assets grew $1.5 billion (10%) to $15.7 billion at March 31, 2000
compared to March 31, 1999. Shareholders' equity increased $44.0 million
(3%) to $1.4 billion at March 31, 2000 compared to March 31, 1999. Book
value per common share increased $.31 (4%) to $8.26 at March 31, 2000
compared to March 31, 1999.
o Total loans grew $1.2 billion (12%) from March 31, 1999 to $11.3 billion at
March 31, 2000. Consumer loans grew $1.2 billion (30%) to $5.2 billion,
small business loans increased $241.8 million (12%) to $2.3 billion and
commercial loans decreased $258.1 million (6%) to $3.8 billion. Commercial
loans decreased as management implemented new policies designed to better
manage and diversify risk of the portfolio.
o Delinquencies as a percentage of total loans at March 31, 2000 were 0.39%,
down from 0.48% at March 31, 1999. Commercial, small business and consumer
loan delinquencies were 0.11%, 0.42% and 0.58%, respectively, at March 31,
2000, compared to 0.20%, 0.68% and 0.66%, respectively, at March 31, 1999.
o Total deposits grew $1.3 billion (12%) from March 31, 1999 to $12.2 billion
at March 31, 2000.
o In March 2000, Hibernia became one of the first U.S. bank holding companies
to become a "financial holding company" as a result of the
Gramm-Leach-Bliley Act. This reclassification will allow Hibernia to offer
a broader range of products and services, thus creating new opportunities
for the Company to add or enhance its lines of business.
o In April 2000, Hibernia's Board of Directors declared a quarterly cash
dividend of 12 cents per common share, a 14% increase from 10.5 cents per
common share declared in April 1999. In addition, the Board of Directors
authorized a buyback of up to 7.5 million common shares over the next 12
months.
MERGER ACTIVITY
On April 1, 2000, the Company consummated the purchase of Southcoast
Capital, L.L.C. (Southcoast), a full-service investment banking firm providing
corporate finance, equity research, institutional equity sales and trading
services. In accordance with the purchase method of accounting, Southcoast's
financial results will be included from the date of the consummation of the
merger. In the first quarter of 1999, the Company completed a merger with one
East Texas financial institution which was accounted for as a pooling of
interests. All prior-period information has been restated to reflect the effect
of this merger. In the second quarter of 1999, the Company purchased the assets
and assumed the liabilities of the Beaumont branches of Chase Bank of Texas,
N.A. (the "Beaumont transaction"). At the date of purchase the four Beaumont
branches located in Jefferson County, Texas had $172 million in loans, $465
million in deposits and over $1.4 billion in assets held in trust accounts.
Because the Beaumont transaction was accounted for as a purchase, the results of
operations of the Beaumont branches are included with those of Hibernia from the
transaction consummation date.
Measures of financial performance subsequent to purchase transactions are
more relevant when comparing "cash-basis" results (i.e., before amortization of
purchase accounting intangibles), because they are more indicative of cash
flows, and thus the Company's ability to support growth and pay dividends. The
cash-basis measures of financial performance are presented in the Consolidated
Summary of Income and Selected Financial Data on page 12.
The institutions with which the Company merged are collectively referred to
as the "merged companies." The merged companies in transactions accounted for as
poolings of interests are referred to as the "pooled companies," and the merged
companies in transactions accounted for as purchases are referred to as the
"purchased companies."
During the first quarter of 2000, Hibernia announced the signing of an
agreement to purchase three East Texas banking offices from Compass Bank. The
purchase price will be based upon deposits at closing along with the market
value of the three banking offices, which will be appraised in the second
quarter of 2000. In addition to acquiring all deposits and related buildings of
the banking offices, Hibernia is purchasing selected loans. At March 31, 2000
the three Compass banking offices had approximately $42.6 million in loans and
$118.8 million in deposits. Upon completion of this transaction, Hibernia would
have approximately $15.8 billion in assets and 255 banking locations in 34
Louisiana parishes and 15 Texas counties.
FINANCIAL CONDITION:
EARNING ASSETS
Earning assets averaged $14.2 billion in the first quarter of 2000, a
$849.8 million (6%) increase from the first-quarter 1999 average of $13.3
billion. The increase in average earning assets was primarily due to loan growth
in the consumer and small business portfolios, primarily as a result of the
Company's continued emphasis on real estate secured loans and an increase in
indirect lending. Hibernia has funded the loan growth through increases in
deposits and borrowed funds.
Loans. Average loans for the first quarter of 2000 of $11.0 billion were up
$94.5 million (1%) from the fourth quarter of 1999 and up $975.2 million (10%)
compared to the first quarter of 1999. Excluding the effect of the Beaumont
transaction, average loans increased approximately 8% for the first quarter of
2000 compared to the first quarter of 1999.
Table 1 presents Hibernia's commercial and small business loans classified
by repayment source and consumer loans classified by type at March 31, 2000,
December 31, 1999 and March 31, 1999. Total loans increased $469.3 million (4%)
during the first quarter of 2000 compared to December 31, 1999.
<TABLE>
<CAPTION>
====================================================================================================================
TABLE 1 - COMPOSITION OF LOAN PORTFOLIO
====================================================================================================================
March 31, 2000 December 31, 1999 March 31, 1999
- --------------------------------------------------------------------------------------------------------------------
($ in millions) Loans Percent Loans Percent Loans Percent
====================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Commercial:
Commercial and industrial ....... $ 1,476.8 13.0 % $ 1,501.0 13.8 % $ 1,431.6 14.1 %
Services industry ............... 905.2 8.0 955.4 8.8 1,064.2 10.5
Real estate ..................... 494.3 4.4 434.2 4.0 508.0 5.0
Health care ..................... 329.6 2.9 298.1 2.7 318.3 3.1
Transportation, communications..
and utilities ................ 244.6 2.2 228.6 2.1 210.3 2.1
Energy .......................... 240.8 2.1 192.6 1.8 425.0 4.2
Other ........................... 65.8 0.6 83.4 0.8 57.8 0.6
- --------------------------------------------------------------------------------------------------------------------
Total commercial ............. 3,757.1 33.2 3,693.3 34.0 4,015.2 39.6
- --------------------------------------------------------------------------------------------------------------------
Small Business:
Commercial and industrial ....... 763.1 6.7 823.4 7.6 738.4 7.3
Services industry ............... 556.8 4.9 539.6 5.0 473.9 4.6
Real estate ..................... 372.5 3.3 340.2 3.1 295.9 2.9
Health care ..................... 142.9 1.3 150.8 1.4 115.2 1.1
Transportation, communications..
and utilities ................ 94.3 0.8 91.9 0.9 80.7 0.8
Energy .......................... 33.3 0.3 43.7 0.4 37.3 0.4
Other ........................... 373.5 3.3 372.3 3.4 353.2 3.5
- --------------------------------------------------------------------------------------------------------------------
Total small business ......... 2,336.4 20.6 2,361.9 21.8 2,094.6 20.6
- --------------------------------------------------------------------------------------------------------------------
Consumer:
Residential mortgages:
First mortgages .............. 2,520.4 22.3 2,263.4 20.8 1,997.7 19.7
Junior liens ................. 303.4 2.7 282.1 2.6 199.2 2.0
Indirect ........................ 1,433.0 12.6 1,277.3 11.8 907.5 8.9
Revolving credit ................ 379.3 3.3 374.2 3.4 328.0 3.2
Other ........................... 596.4 5.3 604.5 5.6 606.6 6.0
- --------------------------------------------------------------------------------------------------------------------
Total consumer ............... 5,232.5 46.2 4,801.5 44.2 4,039.0 39.8
====================================================================================================================
Total loans ....................... $ 11,326.0 100.0 % $ 10,856.7 100.0 % $ 10,148.8 100.0 %
====================================================================================================================
</TABLE>
Consumer loans increased $431.0 million (9%) and $1.2 billion (30%)
compared to December 31, 1999 and March 31, 1999, respectively. The consumer
portfolio growth was spread among residential mortgages and indirect loans.
Small business loans decreased $25.5 million (1%) compared to December 31,
1999 and increased $241.8 million (12%) compared to March 31, 1999. The small
business portfolio has recently been impacted by competitive pressures and a
slowing of loan activity in this industry segment. The increase in small
business loans from March 31, 1999 was primarily focused in the services and
real estate industry categories.
Commercial loans increased $63.8 million (2%) compared to December 31, 1999
and decreased $258.1 million (6%) compared to March 31, 1999. The decrease in
commercial loans from March 31, 1999 was the result of the implementation of new
policies designed to better manage and diversify the risk of the portfolio.
Although the overall economy continues to expand, the energy industry
experienced a decline in 1998 and early 1999 as oil prices decreased worldwide.
While oil prices have rebounded in recent months, the recovery in this industry
may be delayed due to uncertainties with respect to future price trends. The
Company's experienced energy/maritime management team reviews the energy
portfolio for potential adverse developments and proactively manages Hibernia's
exposure to risk. As a result of these efforts, the Company's energy portfolio
has been reduced from levels experienced in early 1999. However, the Company
remains active in the energy industry on a selective basis, and the energy
portion of the loan portfolio represents 2.4% of total loans as of March 31,
2000.
During 1999, Hibernia securitized $512.6 million of its residential first
mortgages through the Federal National Mortgage Association (FNMA), of which
$210.0 million was securitized during the second quarter of 1999 and $302.6
million was securitized during the fourth quarter of 1999. These portions of the
consumer portfolio were securitized with recourse provisions, and reserves have
been established to cover estimated losses. These transactions affect the
categorization of individual line items on the balance sheet by reducing
mortgage loans and increasing securities and related recourse reserves.
Securities Available for Sale. Average securities available for sale
decreased $155.4 million (6%) in the first quarter of 2000 compared to the first
quarter of 1999. The decrease was primarily the result of the change in
unrealized securities gains (losses) reflecting the current interest rate
environment. Securities primarily consist of mortgage-backed and U.S. government
agency securities. Most securities held by the Company qualify as securities
that may be pledged and are used for customer repurchase agreements and to
collateralize public fund deposits.
Securities Held to Maturity. Average securities held to maturity in the
first quarter of 2000 totaled $297.3 million. The increase from the first
quarter of 1999 was a result of the securitization of $302.6 million of
residential first mortgages in the fourth quarter of 1999.
Short-Term Investments. Average short-term investments, primarily federal
funds sold and securities purchased under agreements to resell (reverse
repurchase agreements), for the three months ended March 31, 2000 totaled $196.6
million, down $104.0 million (35%) compared to $300.6 million in the first
quarter of 1999. The decrease in short-term investments is primarily due to a
reduction in reverse repurchase agreements. This reduction is the result of the
securitization of residential first mortgages previously discussed which
generated collateral required for certain deposits, thus reducing the need for
reverse repurchase agreements.
Mortgage Loans Held For Sale. Mortgage loans held for sale are loans that
have been originated and are pending securitization or sale in the secondary
market. Since mortgage warehouse loans are generally held in inventory for a
short period of time (30 to 60 days), there may be significant differences
between average and period-end balances. Average mortgage loans held for sale
for the first quarter of 2000 decreased $163.3 million (69%) compared to the
same period in 1999. As a result of changes in the interest rate environment,
the Company experienced an increase in the level of adjustable-rate mortgages
funded and retained. Generally, Hibernia retains adjustable-rate mortgage loans
and sells fixed-rate mortgage loans, while retaining the associated servicing
rights.
ASSET QUALITY
Several key measures are used to evaluate and monitor the Company's asset
quality. These measures include the level of loan delinquencies, nonaccrual
loans, restructured loans, foreclosed assets and excess bank-owned property, in
addition to their related ratios.
Table 2 shows loan delinquencies and delinquencies as a percentage of their
related portfolio segment and in total for each of the last five quarters. Total
delinquencies decreased $4.3 million (9%) from March 31, 1999 and decreased $5.0
million (10%) from December 31, 1999. Accruing loans past due 90 days or more
were $6.3 million at March 31, 2000 compared to $7.1 million at March 31, 1999
and $6.0 million at December 31, 1999.
<TABLE>
<CAPTION>
====================================================================================================================
TABLE 2 - LOAN DELINQUENCIES
====================================================================================================================
March 31 Dec. 31 Sept. 30 June 30 March 31
($ in millions) ............................ 2000 1999 1999 1999 1999
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Days past due:
30 to 89 days .......................... $ 38.3 $ 43.6 $ 72.6 $ 51.3 $ 41.8
90 days or more ........................ 6.3 6.0 7.3 35.8 7.1
- --------------------------------------------------------------------------------------------------------------------
Total delinquencies ................ $ 44.6 $ 49.6 $ 79.9 $ 87.1 $ 48.9
====================================================================================================================
Total delinquencies as a percentage of loans
Commercial ............................. 0.11 % 0.15 % 0.92 % 1.11 % 0.20 %
Small business ......................... 0.42 % 0.34 % 0.37 % 0.47 % 0.68 %
Consumer ............................... 0.58 % 0.75 % 0.76 % 0.76 % 0.66 %
Total loans ............................ 0.39 % 0.46 % 0.73 % 0.83 % 0.48 %
====================================================================================================================
</TABLE>
Delinquencies as a percentage of total loans at March 31, 2000 were 0.39%,
down from 0.48% a year ago and down from 0.46% at December 31, 1999. The
improvement in small business delinquencies from the first quarter of 1999 is
the result of continued enhancements in the underwriting, portfolio management
and collection processes. The improvement in consumer delinquencies from the
prior quarter is primarily due to seasonal declines as well as a continued
strong focus on the collection process.
Nonperforming loans consist of nonaccrual loans (loans on which interest
income is not currently recognized) and restructured loans (loans with
below-market rates or other concessions due to the deteriorated financial
condition of the borrower). Nonperforming loans totaled $77.4 million at March
31, 2000, up from $63.5 million at March 31, 1999 and up slightly from $76.5
million at December 31, 1999. The change from the first quarter of 1999 was
primarily driven by nonaccrual loans in the commercial loan portfolio, which
increased to $51.2 million from $42.1 million as a result of the deterioration
of two large credits in the health care and death care industries during the
latter part of 1999. This increase was partially offset by sales, payments and
charge-offs of large commercial credits in 1999. The majority of nonperforming
consumer loans are residential mortgage loans on which no significant losses are
expected.
Foreclosed assets totaled $7.2 million at March 31, 2000, down $2.1 million
(22%) from a year earlier, and down $0.5 million (7%) from December 31, 1999.
Excess bank-owned property at March 31, 2000 was up $0.3 million (7%) from March
31, 1999, and down $0.3 million (7%) from December 31, 1999.
Nonperforming assets as a percentage of total loans plus foreclosed assets
and excess bank-owned property (nonperforming asset ratio) is one measure of
asset quality. At March 31, 2000 the Company's nonperforming asset ratio was
0.78% compared to 0.75% at March 31, 1999 and 0.81% at December 31, 1999.
The composition of nonperforming loans, foreclosed assets (assets to which
title has been assumed in satisfaction of debt) and excess bank-owned property
as well as certain asset quality ratios for the past five quarters are set forth
in Table 3.
<TABLE>
<CAPTION>
=======================================================================================================================
TABLE 3 - NONPERFORMING ASSETS
=======================================================================================================================
March 31 Dec. 31 Sept. 30 June 30 March 31
($ in thousands) ........................ 2000 1999 1999 1999 1999
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans:
Commercial .......................... $ 51,187 $ 51,620 $ 35,906 $ 63,425 $ 42,120
Small business ...................... 19,325 18,329 19,061 19,039 16,613
Consumer ............................ 6,928 6,512 6,991 4,203 4,721
Restructured loans - - - - -
- -----------------------------------------------------------------------------------------------------------------------
Total nonperforming loans ....... 77,440 76,461 61,958 86,667 63,454
- -----------------------------------------------------------------------------------------------------------------------
Foreclosed assets ....................... 7,186 7,710 9,944 9,311 9,268
Excess bank-owned property .............. 3,887 4,197 4,127 4,559 3,622
- -----------------------------------------------------------------------------------------------------------------------
Total nonperforming assets ...... $ 88,513 $ 88,368 $ 76,029 $ 100,537 $ 76,344
=======================================================================================================================
Reserve for loan losses ................. $ 161,274 $ 156,072 $ 156,282 $ 150,805 $ 150,008
Nonperforming loan ratio:
Commercial loans .................... 1.36 % 1.40 % 0.95 % 1.59 % 1.05 %
Small business loans ................ 0.83 % 0.78 % 0.81 % 0.82 % 0.79 %
Consumer loans ...................... 0.13 % 0.14 % 0.15 % 0.10 % 0.12 %
Total loans ......................... 0.68 % 0.70 % 0.57 % 0.83 % 0.63 %
Nonperforming asset ratio ............... 0.78 % 0.81 % 0.70 % 0.96 % 0.75 %
Reserve for loan losses as a
percentage of nonperforming loans ... 208.26 % 204.12 % 252.24 % 174.01 % 236.40 %
=======================================================================================================================
</TABLE>
At March 31, 2000 the recorded investment in loans considered impaired
under Statement of Financial Accounting Standards (SFAS) No. 114 was $70.5
million. The related portion of the reserve for loan losses was $22.7 million.
The comparable amounts at March 31, 1999 were $59.0 million and $24.5 million,
respectively. These loans are included in nonaccrual loans in Table 3.
Table 4 presents a summary of changes in nonperforming loans for the last
five quarters. Loans totaling $11.3 million were added to nonperforming loans
during the first quarter of 2000. Payments and sales resulted in a $4.6 million
reduction in nonperforming loans while $0.4 million of loans were returned to
performing status. Charge-offs further reduced nonperforming loans in the first
quarter of 2000 by $4.0 million. To the extent that nonaccrual loans that have
been charged-off are recovered in subsequent periods, the recoveries would be
reflected in the reserve for loan losses in Table 5 and not as a component of
nonperforming loan activity.
<TABLE>
<CAPTION>
===============================================================================================================
TABLE 4 - SUMMARY OF NONPERFORMING LOAN ACTIVITY
===============================================================================================================
2000 1999
- ---------------------------------------------------------------------------------------------------------------
First Fourth Third Second First
($ in thousands) ............. Quarter Quarter Quarter Quarter Quarter
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonperforming loans
at beginning of period ... $ 76,461 $ 61,958 $ 86,667 $ 63,454 $ 40,940
Additions .................... 11,329 32,296 24,309 43,804 42,428
Charge-offs, gross ........... (3,998) (10,347) (16,195) (9,974) (7,662)
Transfer to OREO ............. (1,355) (2,489) (1,623) (801) (243)
Returns to performing status . (420) (869) (5,064) (509) (219)
Payments and sales ........... (4,577) (4,088) (26,136) (9,307) (11,790)
- ---------------------------------------------------------------------------------------------------------------
Nonperforming loans
at end of period ......... $ 77,440 $ 76,461 $ 61,958 $ 86,667 $ 63,454
===============================================================================================================
</TABLE>
In addition to the nonperforming loans discussed above, other commercial
loans that are subject to potential future classification as nonperforming
totaled $67.6 million at March 31, 2000, an increase of $4.9 million (8%) from
December 31, 1999 and a decrease of $28.9 million (30%) from March 31, 1999.
RESERVE AND PROVISION FOR LOAN LOSSES
The provision for loan losses is a charge to earnings to maintain the
reserve for loan losses at a level consistent with management's assessment of
the loan portfolio in light of current economic conditions and market trends.
The Company recorded a $16.3 million provision for loan losses in the first
quarter of 2000 compared to $30.0 million in the first quarter of 1999. The
higher provision for the first quarter of 1999 was primarily due to the addition
to nonperforming status of one large commercial loan to a customer that filed
for bankruptcy protection in March 1999 which was subsequently sold at a
discount. The provision for loan losses for the first quarter of 2000 exceeded
net charge-offs by $5.2 million.
Net charge-offs totaled $11.0 million in the first quarter of 2000 compared
to $10.3 million in the first quarter of 1999. As a percentage of average loans,
annualized net charge-offs were 0.40% in the first quarter of 2000 compared to
0.41% in the first quarter of 1999 and 0.63% in the fourth quarter of 1999.
Commercial net charge-offs declined to $2.6 million in the first quarter of
2000, down from $9.0 million in the fourth quarter of 1999 and $4.4 million in
the first quarter of 1999. Net charge-offs in the small business portfolio
increased to $3.0 million in the first quarter of 2000, up from $2.4 million in
the fourth quarter of 1999 and $2.0 million in the first quarter of 1999.
Consumer net charge-offs declined to $5.4 million in the first quarter of 2000,
down from $5.8 million in the prior quarter. Consumer net charge-offs in the
first quarter of 2000 were up from $4.0 million a year ago, primarily as a
result of the growth in the portfolio.
The reserve for loan losses is comprised of specific reserves (assessed for
each loan that is reviewed for impairment or for which a probable loss has been
identified), general reserves (based on historical loss factors) and an
unallocated reserve.
The Company continuously evaluates its reserve for loan losses to maintain
an adequate level to absorb loan losses inherent in the loan portfolio. Reserves
on impaired loans are based on discounted cash flows using the loan's initial
effective interest rate, the observable market value of the loan or the fair
value of the collateral for certain collateral-dependent loans. Factors
contributing to the determination of specific reserves include the financial
condition of the borrower, changes in the value of pledged collateral and
general economic conditions. General reserves are established based on
historical charge-offs considering factors which include risk rating, industry
concentration and loan type, with the most recent charge-off experience weighted
more heavily. The unallocated reserve, which is judgmentally determined,
generally serves to compensate for the uncertainty in estimating loan losses,
including the possibility of changes in risk ratings and specific reserve
allocations. It also considers the lagging impact of historical charge-off
ratios in periods where future charge-offs are expected to increase or decrease
significantly. In addition, the reserve considers trends in delinquencies and
nonaccrual loans, industry concentration, the volatility of risk ratings and the
evolving portfolio mix in terms of collateral, relative loan size, the degree of
seasoning in the various loan products and loans recently acquired through
mergers. The results of reviews performed by internal and external examiners are
also considered.
The methodology used in the periodic review of reserve adequacy, which is
performed at least quarterly, is designed to be dynamic and responsive to
changes in actual credit losses. These changes are reflected in both the general
and unallocated reserves. The historical loss ratios, which are key factors in
this analysis, are updated quarterly and are weighted more heavily for recent
charge-off experience. The review of reserve adequacy is performed by executive
management and presented to the Board of Directors for its review, consideration
and ratification.
There were no significant changes in the composition of the loan portfolio
from the first quarter of 1999 except for the previously discussed decrease in
the commercial portfolio and increases in the small business and consumer
portfolios, particularly in residential mortgages and indirect loans. The
Company continued to focus on managing its problem loan exposure in the first
quarter of 2000. The reserve coverage of total loans was virtually unchanged for
the first quarter of 2000 in view of the risk profile of the portfolio as
indicated by the Company's internal risk rating system at the end of the quarter
and based on consistent application of our reserve methodology.
Table 5 presents an analysis of the activity in the reserve for loan losses
for the last five quarters.
<TABLE>
<CAPTION>
===========================================================================================================================
TABLE 5 - RESERVE FOR LOAN LOSSES ACTIVITY
===========================================================================================================================
2000 1999
- -------------------------------------------------------------------------------------------------------------------------
First Fourth Third Second First
($ in thousands) Quarter Quarter Quarter Quarter Quarter
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at beginning of period ......... $ 156,072 $ 156,282 $ 150,805 $ 150,008 $ 130,347
Loans charged off:
Commercial ......................... (2,826) (9,402) (19,221) (10,390) (7,182)
Small business ..................... (3,947) (3,432) (2,803) (2,916) (2,983)
Consumer ........................... (7,198) (7,440) (5,906) (5,524) (6,167)
Recoveries:
Commercial ......................... 204 426 1,367 682 2,828
Small business ..................... 951 1,074 1,790 970 1,000
Consumer ........................... 1,768 1,645 1,750 2,740 2,165
- -------------------------------------------------------------------------------------------------------------------------
Net loans charged off .................. (11,048) (17,128) (23,023) (14,438) (10,339)
Provision for loan losses .............. 16,250 17,100 28,500 12,200 30,000
Additions due to purchase transactions . - - - 3,035 -
Transfer due to securitizations ........ - (182) - - -
- -------------------------------------------------------------------------------------------------------------------------
Balance at end of period ............... $ 161,274 $ 156,072 $ 156,282 $ 150,805 $ 150,008
=========================================================================================================================
Reserve for loan losses
as a percentage of loans ........... 1.42 % 1.44 % 1.44 % 1.44 % 1.48 %
Annualized net charge-offs as a
percentage of average loans:
Commercial ..................... 0.28 % 0.97 % 1.85 % 0.97 % 0.44 %
Small business ................. 0.52 % 0.40 % 0.18 % 0.36 % 0.38 %
Consumer ....................... 0.44 % 0.48 % 0.37 % 0.27 % 0.40 %
Total loans .................... 0.40 % 0.63 % 0.86 % 0.56 % 0.41 %
=========================================================================================================================
</TABLE>
The assumptions and methodologies used in allocating the reserve were
unchanged during the quarter. The allocations to the commercial and small
business portfolios continued to increase from a year ago. This reallocation is
consistent with management's expectations and the loan loss methodology which
weights recent history more heavily and also reflects the current risk profile
of the portfolio.
The reserve coverage of annualized net charge-offs improved during the
quarter to 365% from 228% in the fourth quarter of 1999 and 363% in the first
quarter of 1999. This improvement was primarily due to the lower level of
commercial net charge-offs during the first quarter of 2000. The reserve for
loan losses is established to provide for losses which are inherent in the
portfolio. Therefore, a comparison of historical charge-offs to the reserve is
not necessarily an appropriate measure of reserve adequacy, since the timing of
charge-offs and recoveries impacts these ratios.
The reserve for loan losses totaled $161.3 million, or 1.42% of total loans
at March 31, 2000, compared to $150.0 million, or 1.48% of total loans at March
31, 1999 and $156.1 million, or 1.44% of total loans at December 31, 1999. The
reserve for loan losses as a percentage of nonperforming loans was 208% at March
31, 2000, compared to 236% at March 31, 1999 and 204% at December 31, 1999. The
present level of the reserve for loan losses is considered adequate to absorb
probable loan losses inherent in the portfolio considering the level and mix of
the loan portfolio, current economic conditions and market trends.
FUNDING SOURCES:
DEPOSITS
Average deposits totaled $11.9 billion in the first quarter of 2000, a $1.1
billion (10%) increase from the first quarter of 1999. Excluding the effect of
the Beaumont transaction, average deposits increased approximately 6% for the
first quarter of 2000 compared to the same period in 1999. Table 6 presents the
composition of average deposits for the periods presented.
<TABLE>
<CAPTION>
=====================================================================================================================
TABLE 6 - DEPOSIT COMPOSITION
=====================================================================================================================
First Quarter 2000 Fourth Quarter 1999 First Quarter 1999
- ---------------------------------------------------------------------------------------------------------------------
Average % of Average % of Average % of
- ---------------------------------------------------------------------------------------------------------------------
($ in millions) ................ Balances Deposits Balances Deposits Balances Deposits
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Noninterest-bearing ............ $ 2,036.3 17.1 % $ 2,057.0 17.8 % $ 1,920.6 17.8 %
NOW accounts ................... 304.6 2.6 304.5 2.6 299.9 2.8
Money market deposit accounts .. 2,204.2 18.6 2,017.1 17.5 2,205.6 20.5
Savings accounts ............... 2,028.3 17.1 1,930.4 16.7 1,341.8 12.5
Other consumer time deposits ... 2,908.6 24.5 2,933.8 25.4 2,954.7 27.4
- ---------------------------------------------------------------------------------------------------------------------
Total core deposits ........ 9,482.0 79.9 9,242.8 80.0 8,722.6 81.0
- ---------------------------------------------------------------------------------------------------------------------
Public fund certificates of
deposit of $100,000 or more 973.1 8.2 959.0 8.3 1,095.0 10.2
Certificates of deposit of
$100,000 or more ........... 1,096.7 9.2 1,026.5 8.9 644.9 6.0
Foreign time deposits .......... 324.0 2.7 325.9 2.8 305.4 2.8
- ---------------------------------------------------------------------------------------------------------------------
Total deposits ............. $ 11,875.8 100.0 % $ 11,554.2 100.0 % $ 10,767.9 100.0 %
=====================================================================================================================
</TABLE>
Average core deposits totaled $9.5 billion in the first quarter of 2000, a
$759.4 million (9%) increase from the first quarter of 1999. The Beaumont
transaction accounted for approximately 45% of the growth in average core
deposits in the first quarter of 2000 compared to the first quarter of 1999.
Average noninterest-bearing deposits grew $115.7 million and average savings
deposits increased $686.5 million in the first quarter of 2000 compared to the
first quarter of 1999. The increases were primarily due to internal growth as a
result of Hibernia's emphasis on attracting new deposits and expanding current
banking relationships through outstanding service and the promotion of products,
including Tower GoldSM Services, which offers liquidity, competitive interest
rates and the security of a bank deposit. NOW account average balances were up
$4.7 million and average money market deposit accounts were down $1.4 million in
the first quarter of 2000 compared to the first quarter of 1999.
Average noncore deposits were up $348.5 million (17%) from the first
quarter of 1999 to $2.4 billion or 20% of total deposits. The Beaumont
transaction accounted for approximately 40% of the growth in average noncore
deposits in the first quarter of 2000 compared to the first quarter of 1999.
Average large denomination certificates of deposit increased $329.9 million
compared to the first quarter of 1999 as a result of competitive pricing and
increased marketing efforts. Average foreign time deposits increased $18.6
million due to successful efforts to market a treasury management product which
sweeps commercial customer funds into higher-yielding Eurodollar deposits.
Total deposits at March 31, 2000, were $12.2 billion, up $1.3 billion (12%)
from March 31, 1999. The Beaumont transaction accounted for approximately
one-third of the growth in total deposits.
BORROWINGS
Average borrowings (which include federal funds purchased; securities sold
under agreements to repurchase; treasury, tax and loan account; and debt)
decreased $63.1 million (3%) to $1.9 billion for the first quarter of 2000
compared to the first quarter of 1999.
Average debt for the first quarter of 2000 totaled $844.7 million, up from
$806.0 million in the first quarter of 1999. At March 31, 2000 the Company's
debt, which is comprised of advances from the Federal Home Loan Bank of Dallas
(FHLB), totaled $844.6 million. Debt increased $39.2 million from March 31, 1999
as Hibernia locked in attractive rates. During 1999, the FHLB exercised its
right to call a $100 million advance, and a $100 million advance reached
maturity. Replacement funding consisted of a $200 million advance bearing a
fixed rate of 5.65% and a $40 million advance bearing a monthly adjustable rate.
The FHLB may demand payment of $400 million in callable advances at quarterly
intervals, of which $200 million is not callable before September 2001 and $200
million is not callable before June 2003. If called prior to maturity,
replacement funding will be offered by the FHLB at a then-current rate. The
Company's reliance on borrowings, while higher than a year ago, continues to be
within parameters determined by management to be prudent in terms of liquidity
and interest rate sensitivity.
INTEREST RATE SENSITIVITY
The primary objective of asset/liability management is controlling interest
rate risk. On a continuing basis, management monitors the sensitivity of net
interest income to changes in interest rates through methods that include
simulation and gap reports. Using these tools, management attempts to optimize
the asset/liability mix to minimize the impact of significant rate movements
within a broad range of interest rate scenarios. Management may alter the mix of
floating- and fixed-rate assets and liabilities, change pricing schedules,
adjust maturities through the sale and purchase of securities available for
sale, and enter into derivative contracts as a means of minimizing interest rate
risk.
On a limited basis, the Company has entered into interest rate and foreign
exchange rate swap, forward and option contracts to hedge interest rate or
foreign exchange risk on specific assets and liabilities. Hibernia held foreign
exchange rate forward contracts totaling $13.4 million at March 31, 2000, which
minimize the Company's exchange rate risk on loans to be repaid in foreign
currencies.
Derivative financial instruments are also held or issued by the Company for
trading purposes to provide customers the ability to manage their own interest
rate sensitivity. Matched positions are ordinarily established to minimize risk
to the Company. The notional value of derivative financial instruments held for
trading totaled $525.2 million at March 31, 2000. In addition to these
customer-related derivative financial instruments, the Company has entered into
contracts for its own account related to its mortgage origination activity which
totaled $132.1 million at March 31, 2000. Hibernia's credit exposure related to
derivative financial instruments held for trading totaled $6.2 million at March
31, 2000.
RESULTS OF OPERATIONS:
NET INTEREST INCOME
Taxable-equivalent net interest income for the first quarter of 2000
totaled $151.0 million, a $7.1 million increase from the same period in 1999 and
down $0.9 million from the fourth quarter of 1999.
Factors contributing to the increase in net interest income from the first
quarter of 1999 include: overall growth in earning assets, the positive effect
of the change in the mix of earning assets from securities, short-term
investments and mortgage loans held for sale to loans; higher yields on earning
assets; and the effect of the Beaumont transaction (approximately one-half of
the increase for the first quarter of 2000). These factors were partially offset
by higher rates paid on deposits and borrowings; the continuing change in the
deposit mix toward market-rate deposits; and the effect of the change in the mix
of the loan portfolio.
Factors contributing to the decrease in net interest income from the fourth
quarter of 1999 include: higher rates paid on deposits and borrowings, the
continuing change in the deposit mix toward market-rate deposits, and a higher
level of interest income recorded from collection on nonaccrual or previously
charged-off loans in the fourth quarter of 1999. These factors were partially
offset by overall growth in earning assets and the effect of the change in the
mix of the loan portfolio.
Table 7 shows the composition of earning assets for the most recent five
quarters, reflecting the change in the mix of earning assets.
<TABLE>
<CAPTION>
=====================================================================================================================
TABLE 7 - INTEREST-EARNING ASSET COMPOSITION
=====================================================================================================================
2000 1999
- ---------------------------------------------------------------------------------------------------------------------
First Fourth Third Second First
(Percentage of average balances) Quarter Quarter Quarter Quarter Quarter
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial loans .................. 26.0 % 26.6 % 27.9 % 29.6 % 29.3 %
Small business loans .............. 16.4 16.9 16.9 16.3 15.7
Consumer loans .................... 35.0 34.6 32.6 30.4 30.0
- ---------------------------------------------------------------------------------------------------------------------
Total loans ................... 77.4 78.1 77.4 76.3 75.0
- ---------------------------------------------------------------------------------------------------------------------
Securities available for sale ..... 18.6 19.0 20.0 20.6 21.0
Securities held to maturity ....... 2.1 0.9 - - -
- ---------------------------------------------------------------------------------------------------------------------
Total securities .............. 20.7 19.9 20.0 20.6 21.0
- ---------------------------------------------------------------------------------------------------------------------
Short-term investments ............ 1.4 1.3 1.6 1.6 2.2
Mortgage loans held for sale ...... 0.5 0.7 1.0 1.5 1.8
- ---------------------------------------------------------------------------------------------------------------------
Total interest-earning assets . 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
=====================================================================================================================
</TABLE>
Table 8 details the net interest margin for the most recent five quarters.
<TABLE>
<CAPTION>
===============================================================================================================
TABLE 8 - NET INTEREST MARGIN (taxable-equivalent)
===============================================================================================================
2000 1999
- ---------------------------------------------------------------------------------------------------------------
First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Yield on earning assets ............. 8.12 % 7.98 % 7.91 % 7.72 % 7.70 %
Rate on interest-bearing liabilities 4.66 4.44 4.26 4.11 4.14
- ---------------------------------------------------------------------------------------------------------------
Net interest spread ............. 3.46 3.54 3.65 3.61 3.56
Contribution of
noninterest-bearing funds ....... 0.81 0.80 0.77 0.78 0.79
- ---------------------------------------------------------------------------------------------------------------
Net interest margin ............. 4.27 % 4.34 % 4.42 % 4.39 % 4.35 %
===============================================================================================================
Noninterest-bearing funds
supporting earning assets ....... 17.47 % 17.98 % 18.27 % 19.07 % 19.17 %
===============================================================================================================
</TABLE>
The net interest margin was 4.27% for the first quarter of 2000, down eight
basis points from the first quarter of 1999 and down seven basis points from the
fourth quarter of 1999. The decline in the net interest margin is due to a
decline in the interest rate spread as a result of the increasingly competitive
interest rate environment, a decline in the level of noninterest-bearing funds
supporting earning assets, a shift in the mix of funding sources toward market
rate funds and a higher level of public fund deposits. Although these public
fund deposits had a positive impact on net interest income by virtue of their
collateral requirements, the net interest spread earned on these funds is
thinner in relation to other earning assets. These factors were partially offset
by the positive effects of the overall growth of earning assets and the change
in the mix of earning assets.
Table 9 presents an analysis of changes in taxable-equivalent net interest
income between the first quarter of 2000 and the fourth quarter of 1999 and
between the first quarter of 2000 and the first quarter of 1999.
<TABLE>
<CAPTION>
=======================================================================================================================
TABLE 9 - CHANGES IN TAXABLE-EQUIVALENT NET INTEREST INCOME (1)
=======================================================================================================================
First Quarter 2000 Compared to:
- -----------------------------------------------------------------------------------------------------------------------
Fourth Quarter 1999 First Quarter 1999
- -----------------------------------------------------------------------------------------------------------------------
Increase (Decrease) Due to Change In:
- -----------------------------------------------------------------------------------------------------------------------
($ in thousands) Volume Rate Total Volume Rate Total
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Taxable-equivalent
interest earned on:
Commercial loans ............... $ (172) $ 985 $ 813 $ (4,233) $ 7,532 $ 3,299
Small business loans ........... (888) 328 (560) 5,133 2,065 7,198
Consumer loans ................. 2,953 416 3,369 19,981 815 20,796
- -----------------------------------------------------------------------------------------------------------------------
Loans ...................... 1,893 1,729 3,622 20,881 10,412 31,293
- -----------------------------------------------------------------------------------------------------------------------
Securities available for sale .. (121) 733 612 (2,489) 2,629 140
Securities held to maturity .... 2,649 12 2,661 4,569 - 4,569
- -----------------------------------------------------------------------------------------------------------------------
Loans ...................... 2,528 745 3,273 2,080 2,629 4,709
- -----------------------------------------------------------------------------------------------------------------------
Short-term investments ......... 121 210 331 (1,420) 580 (840)
Mortgage loans held for sale ... (414) 52 (362) (2,877) 521 (2,356)
- -----------------------------------------------------------------------------------------------------------------------
Total .................... 4,128 2,736 6,864 18,644 14,142 32,806
=======================================================================================================================
Interest paid on:
NOW accounts ................... 1 601 602 32 854 886
Money market
deposit accounts ........... 1,229 1,138 2,367 (7) 2,517 2,510
Savings accounts ............... 1,039 1,102 2,141 6,658 4,718 11,376
Other consumer time deposits ... (313) 678 365 (569) 1,012 443
Public fund certificates of
deposit of $100,000 or more 185 899 1,084 (1,568) 1,787 219
Certificates of deposit
of $100,000 or more ........ 989 242 1,231 6,275 1,134 7,409
Foreign deposits ............... (25) 261 236 211 728 939
Federal funds purchased ........ 508 303 811 (2,437) 1,399 (1,038)
Repurchase agreements .......... (192) 338 146 946 1,202 2,148
Debt ........................... (1,265) 91 (1,174) 543 292 835
- -----------------------------------------------------------------------------------------------------------------------
Total .................... 2,156 5,653 7,809 10,084 15,643 25,727
=======================================================================================================================
Taxable-equivalent
net interest income ............ $ 1,972 $ (2,917) $ (945) $ 8,580 $ (1,501) $ 7,079
=======================================================================================================================
- --------------
(1) Change due to mix (both volume and rate) has been allocated to volume and
rate changes in proportion to the relationship of the absolute dollar
amounts to the changes in each.
</TABLE>
The analysis of Consolidated Average Balances, Interest and Rates on pages
24 and 25 of this discussion presents the Company's taxable-equivalent net
interest income and average balances for the three months ended March 31, 2000,
December 31, 1999 and March 31, 1999.
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
CONSOLIDATED AVERAGE BALANCES, INTEREST AND RATES
====================================================================================================================================
Hibernia Corporation and Subsidiaries
Taxable-equivalent basis (1) First Quarter 2000
====================================================================================================================================
(Average balances $ in millions, Average
interest $ in thousands) Balance Interest Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Interest-earning assets:
Commercial loans .............................. $ 3,693.2 $ 78,262 8.52 %
Small business loans .......................... 2,322.5 52,822 9.15
Consumer loans ................................ 4,957.8 103,255 8.37
- ------------------------------------------------------------------------------------------------------------------------------------
Total loans (2) ........................... 10,973.5 234,339 8.58
- ------------------------------------------------------------------------------------------------------------------------------------
Securities available for sale ................. 2,640.2 43,613 6.61
Securities held-to-maturity ................... 297.3 4,569 6.15
- ------------------------------------------------------------------------------------------------------------------------------------
Total securities .......................... 2,937.5 48,182 6.56
- ------------------------------------------------------------------------------------------------------------------------------------
Short-term investments ........................ 196.6 2,829 5.79
Mortgage loans held for sale .................. 75.0 1,356 7.24
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets ............. 14,182.6 $ 286,706 8.12 %
- ------------------------------------------------------------------------------------------------------------------------------------
Reserve for loan losses ........................... (158.0)
Noninterest-earning assets:
Cash and due from banks ....................... 516.3
Other assets .................................. 748.2
- ------------------------------------------------------------------------------------------------------------------------------------
Total noninterest-earning assets .......... 1,264.5
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets .............................. $ 15,289.1
====================================================================================================================================
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing deposits:
NOW accounts .............................. $ 304.6 $ 2,864 3.78 %
Money market deposit accounts ............. 2,204.2 15,046 2.75
Savings accounts .......................... 2,028.3 22,110 4.38
Other consumer time deposits .............. 2,908.6 36,549 5.05
Public fund certificates of deposit
of $100,000 or more ................... 973.1 13,482 5.57
Certificates of deposit of $100,000 or more 1,096.7 15,497 5.68
Foreign time deposits ..................... 324.0 4,265 5.30
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits ....... 9,839.5 109,813 4.49
- ------------------------------------------------------------------------------------------------------------------------------------
Short-term borrowings:
Federal funds purchased ................... 508.9 7,262 5.74
Repurchase agreements ..................... 512.2 6,693 5.26
Debt .......................................... 844.7 11,970 5.70
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities ........ 11,705.3 $ 135,738 4.66 %
- ------------------------------------------------------------------------------------------------------------------------------------
Noninterest-bearing liabilities:
Noninterest-bearing deposits .................. 2,036.3
Other liabilities ............................. 164.4
- ------------------------------------------------------------------------------------------------------------------------------------
Total noninterest-bearing liabilities ..... 2,200.7
- ------------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity ........................ 1,383.1
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 15,289.1
====================================================================================================================================
SPREAD AND NET YIELD
Interest rate spread .............................. 3.46
Cost of funds supporting interest-earning assets .. 3.85
Net interest income/margin ........................ $ 150,968 4.27 %
====================================================================================================================================
- ----------
(1) Based on the statutory income tax rate of 35%.
(2) Yield computations include nonaccrual loans in loans outstanding.
</TABLE>
<TABLE>
<CAPTION>
====================================================================================================================================
CONSOLIDATED AVERAGE BALANCES, INTEREST AND RATES (CONTINUED)
====================================================================================================================================
Hibernia Corporation and Subsidiaries
Taxable-equivalent basis (1) Fourth Quarter 1999 First Quarter 1999
- ------------------------------------------------------------------------------------------------------------------------------------
(Average balances $ in millions, Average Average
interest $ in thousands) Balance Interest Rate Balance Interest Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Commercial loans .............................. $ 3,701.4 $ 77,449 8.30 $ 3,906.2 $ 74,963 7.78 %
Small business loans .......................... 2,361.6 53,382 8.97 2,094.1 45,624 8.84
Consumer loans ................................ 4,816.0 99,886 8.24 3,998.0 82,459 8.34
- ------------------------------------------------------------------------------------------------------------------------------------
Total loans (2) ........................... 10,879.0 230,717 8.42 9,998.3 203,046 8.23
- ------------------------------------------------------------------------------------------------------------------------------------
Securities available for sale ................. 2,647.6 43,001 6.49 2,795.6 43,473 6.23
Securities held-to-maturity ................... 124.9 1,908 6.11 - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total securities .......................... 2,772.5 44,909 6.47 2,795.6 43,473 6.23
- ------------------------------------------------------------------------------------------------------------------------------------
Short-term investments ........................ 187.7 2,498 5.28 300.6 3,669 4.95
Mortgage loans held for sale .................. 97.9 1,718 7.02 238.3 3,712 6.32
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets ............. 13,937.1 $ 279,842 7.98 % 13,332.8 $ 253,900 7.70 %
- ------------------------------------------------------------------------------------------------------------------------------------
Reserve for loan losses ........................... (157.8) (130.9)
Noninterest-earning assets:
Cash and due from banks ....................... 523.8 486.0
Other assets .................................. 718.9 571.3
- ------------------------------------------------------------------------------------------------------------------------------------
Total noninterest-earning assets .......... 1,242.7 1,057.3
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets .............................. $ 15,022.0 $ 14,259.2
====================================================================================================================================
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing deposits:
NOW accounts .............................. $ 304.5 $ 2,262 2.95 % $ 299.9 $ 1,978 2.68 %
Money market deposit accounts ............. 2,017.1 12,679 2.49 2,205.6 12,536 2.31
Savings accounts .......................... 1,930.4 19,969 4.10 1,341.8 10,734 3.24
Other consumer time deposits .............. 2,933.8 36,184 4.89 2,954.7 36,106 4.96
Public fund certificates of deposit
of $100,000 or more ................... 959.0 12,398 5.13 1,095.0 13,263 4.91
Certificates of deposit of $100,000 or more 1,026.5 14,266 5.51 644.9 8,088 5.09
Foreign time deposits ..................... 325.9 4,029 4.90 305.4 3,326 4.42
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits ....... 9,497.2 101,787 4.25 8,847.3 86,031 3.94
- ------------------------------------------------------------------------------------------------------------------------------------
Short-term borrowings:
Federal funds purchased ................... 472.7 6,451 5.41 691.9 8,300 4.86
Repurchase agreements ..................... 527.4 6,547 4.92 431.0 4,545 4.28
Debt .......................................... 934.0 13,144 5.58 806.0 11,135 5.60
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities ........ 11,431.3 $ 127,929 4.44 % 10,776.2 $ 110,011 4.14 %
- ------------------------------------------------------------------------------------------------------------------------------------
Noninterest-bearing liabilities:
Noninterest-bearing deposits .................. 2,057.0 1,920.6
Other liabilities ............................. 161.4 205.8
- ------------------------------------------------------------------------------------------------------------------------------------
Total noninterest-bearing liabilities ..... 2,218.4 2,126.4
- ------------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity ........................ 1,372.3 1,356.6
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 15,022.0 $ 14,259.2
====================================================================================================================================
SPREAD AND NET YIELD
Interest rate spread .............................. 3.54 % 3.56 %
Cost of funds supporting interest-earning assets .. 3.64 % 3.35 %
Net interest income/margin ........................ $ 151,913 4.34 % $ 143,889 4.35 %
====================================================================================================================================
- ----------
(1) Based on the statutory income tax rate of 35%.
(2) Yield computations include nonaccrual loans in loans outstanding.
</TABLE>
<PAGE>
NONINTEREST INCOME
Noninterest income for the first quarter of 2000 was up $7.3 million (14%)
to $58.5 million compared to the first quarter of 1999. The effect of the
Beaumont transaction accounted for approximately one-half of the increase for
the first quarter of 2000. The major categories of noninterest income for the
three months ended March 31, 2000 and 1999 are presented in Table 10.
<TABLE>
<CAPTION>
=============================================================================================
TABLE 10 - NONINTEREST INCOME
=============================================================================================
Three Months Ended
- ---------------------------------------------------------------------------------------------
Percentage
March 31 March 31 Increase
($ in thousands) 2000 1999 (Decrease)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service charges on deposits ......... $24,077 $22,602 7 %
Trust fees .......................... 6,664 4,536 47
Retail investment service fees ...... 8,523 5,448 56
Mortgage loan origination
and servicing fees .............. 5,240 4,502 16
Other service, collection and
exchange charges:
ATM fees ........................ 3,227 2,838 14
Debit/credit card fees .......... 3,238 2,257 43
Other ........................... 3,628 2,931 24
- ---------------------------------------------------------------------------------------------
Total other service, collect
and exchange charges ... 10,093 8,026 26
- ---------------------------------------------------------------------------------------------
Other operating income:
Gain on sales of mortgage loans . 1,629 2,132 (24)
Other income .................... 2,217 3,930 (44)
- ---------------------------------------------------------------------------------------------
Total other operating income 3,846 6,062 (37)
- ---------------------------------------------------------------------------------------------
Securities gains, net ............... 30 41 (27)
- ---------------------------------------------------------------------------------------------
Total noninterest income ... $58,473 $51,217 14 %
=============================================================================================
</TABLE>
Service charges on deposits increased $1.5 million (7%) for the first
quarter of 2000 over the comparable period in 1999. This change was the result
of growth in transaction-based fees and commercial account analysis fees due to
an increase in the number of accounts.
Trust fees were up $2.1 million (47%) in the first quarter of 2000 compared
to the same period in 1999 primarily due to new business and the income
associated with the $1.4 billion increase in trust assets resulting from the
Beaumont transaction.
Retail investment service fees increased $3.1 million (56%) in the first
quarter of 2000 compared to the same period in 1999 primarily due to market
conditions which resulted in an increase in the sale of financial products
including annuities and discount brokerage services.
Mortgage loan origination and servicing fees increased $0.7 million (16%)
in the first quarter of 2000 compared to the same period in 1999. The increase
in mortgage fees resulted primarily from the Company's continued emphasis on
mortgage banking and the increase in volume of mortgage loans serviced to $5.7
billion at March 31, 2000 as compared to $4.4 billion at March 31, 1999. In the
first three months of 2000, Hibernia processed approximately $0.5 billion in
residential first mortgages.
Other service, collection and exchange charges were up $2.1 million (26%)
in the first quarter of 2000 compared to the first quarter of 1999. Increases in
fees resulting from ATMs and debit cards were the major factors contributing to
the growth. ATM fees increased $0.4 million due to the continued growth of the
ATM network and expansion of ATM services. Debit/credit card fees increased $1.0
million primarily due to fees generated by Hibernia's CheckmateSM debit card and
Capital Access(C) credit card for small businesses.
Other operating income decreased $2.2 million (37%) compared to the first
quarter of 1999. Gains on sale of mortgage loans were down $0.5 million
primarily due to the current interest rate environment. Other income decreased
$1.7 million from first quarter 1999. The first quarter of 1999 included a $1.7
million gain related to an investment in a mezzanine financing.
NONINTEREST EXPENSE
For the first quarter of 2000, noninterest expense totaled $113.1 million,
a $3.3 million (3%) decrease from the first quarter of 1999. Excluding the
effect of the Beaumont transaction, noninterest expense would have decreased
approximately 10% for the first quarter of 2000 compared to the first quarter of
1999. Excluding merger-related expenses, noninterest expense increased $5.3
million (5%) in the first quarter of 2000 over the first quarter of 1999.
Merger-related expenses totaled $0.1 million in the first quarter of 2000 and
$8.7 million in the first quarter of 1999. The major categories contributing to
the changes in noninterest expense were staff costs, occupancy and equipment,
the amortization of intangibles and professional fees. Noninterest expense for
the three months ended March 31, 2000 and 1999 are presented by major category
in Table 11.
<TABLE>
<CAPTION>
=======================================================================================================
TABLE 11 - NONINTEREST EXPENSE
=======================================================================================================
Three Months Ended
- -------------------------------------------------------------------------------------------------------
Percentage
March 31 March 31 Increase
($ in thousands) 2000 1999 (Decrease)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Salaries ......................... $ 46,705 $ 51,485 (9) %
Benefits ......................... 9,580 9,099 5
- -------------------------------------------------------------------------------------------------------
Total staff costs ............ 56,285 60,584 (7)
- -------------------------------------------------------------------------------------------------------
Occupancy, net ................... 8,408 7,869 7
Equipment ........................ 7,601 9,031 (16)
- -------------------------------------------------------------------------------------------------------
Total occupancy and equipment 16,009 16,900 (5)
- -------------------------------------------------------------------------------------------------------
Data processing .................. 8,093 8,066 -
Advertising and promotional
expenses ..................... 3,767 3,630 4
Foreclosed property expense, net . 77 (371) (121)
Amortization of intangibles ...... 6,630 4,525 47
Telecommunications ............... 2,388 2,532 (6)
Postage .......................... 1,942 1,868 4
Stationery and supplies .......... 1,101 1,480 (26)
Professional fees ................ 1,693 2,400 (29)
State taxes on equity ............ 2,754 2,847 (3)
Regulatory expense ............... 1,040 761 37
Loan collection expense .......... 1,061 1,005 6
Other ............................ 10,221 10,110 1
- -------------------------------------------------------------------------------------------------------
Total noninterest expense .... $ 113,061 $ 116,337 (3) %
=======================================================================================================
Efficiency ratio (1) ............. 53.99 % 59.64 %
Cash-basis efficiency ratio (2) .. 51.62 % 58.14 %
=======================================================================================================
- ------------
(1) Noninterest expense as a percentage of taxable-equivalent net interest
income plus noninterest income (excluding securities transactions).
(2) Excluding amortization of purchase accounting intangibles.
</TABLE>
Staff costs, which represent the largest component of noninterest expense,
decreased $4.3 million (7%) in the first quarter of 2000 compared to the same
period a year ago. Excluding the effect of merger-related expenses, staff costs
increased $0.8 million (1%). Merger-related expenses were $0.1 million in the
first quarter of 2000 and $5.1 million in the first quarter of 1999.
Merger-related expenses in the first quarter of 1999 included a $4.4 million
stock grant agreement with two key merger employees that was in place several
years prior to negotiation of the merger agreement.
Occupancy and equipment expenses decreased $0.9 million (5%) in the first
quarter of 2000 compared to the first quarter of 1999. Excluding the effect of
merger-related expenses, occupancy and equipment expenses increased $0.5 million
(3%).
Amortization of intangibles, a noncash expense, increased $2.1 million
(47%) to $6.6 million in the first quarter of 2000 compared to the first quarter
of 1999. This increase is primarily due to amortization of goodwill, core
deposit intangibles and trust intangibles associated with the purchase of the
Beaumont branches.
Professional fees decreased $0.7 million (29%) for the first quarter of
2000 compared to the same period of 1999. Excluding merger-related expenses,
professional fees increased $0.1 million (3%).
The Company's efficiency ratio, defined as noninterest expense as a
percentage of taxable-equivalent net interest income plus noninterest income
(excluding securities transactions), is a key measure used to evaluate the
success of efforts to control costs while generating revenue efficiently. The
efficiency ratio at March 31, 2000 was 53.99% compared to 59.64% at March 31,
1999. Excluding the effect of merger-related expenses, the efficiency ratio
would have been 53.94% and 55.18% for the first quarter of 2000 and 1999,
respectively.
The cash-basis efficiency ratio, which excludes amortization of purchase
accounting intangibles from the calculation, was 51.62% for the first quarter of
2000 compared to 58.14% for the same period of 1999. Excluding the effect of
merger-related expenses, the cash-basis efficiency ratio would have been 51.58%
and 53.69% for the first quarter of 2000 and the first quarter of 1999,
respectively. The improvement in efficiency for the first quarter of 2000
reflects higher revenue growth rates compared to expense growth rates. The
Company expects this ratio to decline further in future periods. The declines
are expected to result from achievement of cost efficiencies contemplated in
completed business combinations, enhancement of noninterest revenue sources and
increased net interest income.
INCOME TAXES
The Company recorded $27.3 million in income tax expense in the first
quarter of 2000, an $11.0 million (67%) increase from $16.4 million in the first
quarter of 1999 as pretax income rose 69%.
Hibernia National Bank is subject to a Louisiana shareholders' tax based
partly on income. The income portion is recorded as state income tax. In
addition, certain subsidiaries of the Company and Hibernia National Bank are
subject to Louisiana state income tax. The Texas operations of Hibernia National
Bank are subject to Texas franchise tax.
CAPITAL
Shareholders' equity totaled $1,393.7 million at March 31, 2000 compared to
$1,349.6 million a year earlier. The increase is primarily the result of net
income over the most recent 12 months totaling $195.7 million, a $3.1 million
increase in unearned compensation and the issuance of $2.5 million of common
stock, partially offset by a $70.9 million change in unrealized gains (losses)
on securities available for sale, $70.8 million in dividends declared on common
stock, the redemption of $7.0 million of preferred stock, $6.9 million in
dividends declared on preferred stock and an increase of $1.6 million of
treasury stock. The change in unrealized gains (losses) is primarily due to a
change in the interest rate environment.
Risk-based capital and leverage ratios exceed the ratios required for
designation as a "well-capitalized" institution under regulatory guidelines.
Table 12 presents Hibernia's ratios along with selected components of the
capital ratio calculations for the most recent five quarters.
<TABLE>
<CAPTION>
=========================================================================================================================
TABLE 12 - CAPITAL
=========================================================================================================================
March 31 Dec. 31 Sept. 30 June 30 March 31
($ in millions) 2000 1999 1999 1999 1999
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Risk-based capital:
Tier 1 ..................... $ 1,229.2 $ 1,203.2 $ 1,166.1 $ 1,128.5 $ 1,188.1
Total ...................... 1,380.7 1,350.7 1,312.1 1,271.8 1,325.7
Assets:
Quarterly average assets (1) 15,129.7 14,833.7 14,624.0 14,185.1 14,090.2
Net risk-adjusted assets ... 12,109.4 11,788.6 11,671.2 11,457.9 10,985.4
Ratios:
Tier 1 risk-based capital .. 10.15 % 10.21 % 9.99 % 9.85 % 10.82 %
Total risk-based capital ... 11.40 % 11.46 % 11.24 % 11.10 % 12.07 %
Leverage ................... 8.12 % 8.11 % 7.97 % 7.96 % 8.43 %
=========================================================================================================================
- ---------------
(1) Excluding the adjustment for unrealized gains (losses) on securities
available for sale and disallowed intangibles.
</TABLE>
The acquisition of the Beaumont branches of Chase Bank of Texas, N.A.,
which was completed in the second quarter of 1999, enabled Hibernia to leverage
its capital by acquiring assets without increasing equity. As a result of this
transaction, the Company's capital ratios declined from previous levels, but
continue to exceed the standards required for designation as a
"well-capitalized" institution.
In the first quarter of 2000, the Company redeemed approximately $7.0
million of preferred stock. In April 2000, Hibernia's Board of Directors
authorized the Company to begin a buyback of up to 7.5 million common shares
over the next 12 months. If all of the shares authorized to be repurchased were
purchased, the buyback would represent approximately 4.7% of current shares
outstanding.
LIQUIDITY
Liquidity is a measure of the ability to fund loan commitments and meet
deposit maturities and withdrawals in a timely and cost-effective way. These
needs can be met by generating profits, attracting new deposits, converting
assets (including short-term investments, mortgage loans held for sale,
securities available for sale and loans) to cash and increasing borrowings. To
minimize funding risks, management monitors liquidity through periodic reviews
of maturity profiles, yield and rate behaviors, and loan and deposit forecasts.
Attracting and retaining core deposits are the Company's primary sources of
liquidity. Core deposits totaled $9.6 billion at March 31, 2000, a $0.9 billion
(10%) increase from March 31, 1999. This increase is the result of Hibernia's
extensive banking office network, aided by the promotion of attractive deposit
products, and the effect of the Beaumont transaction, which added approximately
$331.0 million in core deposits. In addition, Hibernia has a large base of
treasury management-related repurchase agreements and foreign deposits as part
of total customer relationships. Because of the nature of the relationships,
these funds are considered stable and not subject to the same volatility as
other sources of noncore funds. Large-denomination certificates of deposit and
public funds were additional sources of liquidity during the quarter.
The loan-to-deposit ratio, one measure of liquidity, was 93.1% at March 31,
2000, 91.6% at December 31, 1999, and 93.7% at March 31, 1999. The decrease in
first quarter of 2000 and the fourth quarter of 1999 compared to the first
quarter of 1999 reflects the effect of the Beaumont transaction which added
$464.8 million in deposits and $172.0 million in loans (a 37.0% loan-to-deposit
ratio). Another indicator of liquidity is the large liability dependence ratio,
which measures reliance on short-term borrowings and other large liabilities
(including large-denomination and public fund certificates of deposit and
foreign deposits). Based on average balances, 23.0% of Hibernia's loans and
securities were funded by net large liabilities (total large liabilities less
short-term investments) in the first quarter of 2000, up 29 basis points from
the fourth quarter of 1999 and up 101 basis points from the first quarter of
1999. The level of large liability dependence is within limits established by
management to maintain liquidity and soundness.
Management believes that the current level of short-term investments and
securities available for sale is adequate to meet the Company's current
liquidity needs. In February 1999 Hibernia National Bank established a $2.0
billion bank note program. Notes issued under the program will mature 30 days or
more after the date of issue and bear fixed or floating interest rates.
Additional sources of liquidity available to the Company include the ability to
issue brokered certificates of deposit and the ability to sell or securitize a
substantial portion of the Company's $2.5 billion residential first mortgage
portfolio and $1.4 billion indirect consumer portfolio. The Company also has
available Federal funds lines and its membership in the FHLB to further augment
liquidity by providing a readily accessible source of funds at competitive
rates.
Statements in Management's Discussion and Analysis of Financial Condition
and Results of Operations that are not historical facts should be considered
forward-looking statements with respect to Hibernia. Forward-looking statements
of this type speak only as of the date of this filing. By nature,
forward-looking statements involve inherent risk and uncertainties. Various
factors, including, but not limited to, economic conditions, asset quality,
interest rates, loan demand and changes in the assumptions used in making the
forward-looking statements, could cause actual results to differ materially from
those contemplated by the forward-looking statements.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 6. Exhibits and Reports on Form 8-K*
(a) Exhibits
EXHIBIT DESCRIPTION
3.1 Exhibit 3.1 to the Quarterly Report on Form 10-Q (as amended)
for the fiscal quarter ended June 30, 1998, filed with the
Commission by the Registrant (Commission File No. 0-7220) is
hereby incorporated by reference (Articles of Incorporation of
the Registrant, as amended to date)
3.2 Exhibit 3.2 to the Annual Report on Form 10-K for the fiscal
year ended December 31, 1996, filed with the Commission by the
Registrant (Commission File No. 0-7220) is hereby incorporated
by reference (By-Laws of the Registrant, as amended to date)
10.13 Exhibit 10.13 to the Annual Report on Form 10-K for the fiscal
year ended December 31, 1998, filed with the Commission by the
Registrant (Commission File No. 0-7220) is hereby incorporated
by reference (Deferred Compensation Plan for Outside Directors
of Hibernia Corporation and its Subsidiaries, as amended to
date)
10.14 Exhibit 10.14 to the Annual Report on Form 10-K for the fiscal
year ended December 31, 1990, filed with the Commission by the
Registrant (Commission File No. 0-7220) is hereby incorporated
by reference (Hibernia Corporation Executive Life Insurance
Plan)
10.16 Exhibit 4.7 to the Registration Statement on Form S-8 filed
with the Commission by the Registrant (Registration No.
33-26871) is hereby incorporated by reference (Hibernia
Corporation 1987 Stock Option Plan, as amended to date)
10.34 Exhibit C to the Registrant's definitive proxy statement dated
August 17, 1992 relating to its 1992 Annual Meeting of
Shareholders filed by the Registrant with the Commission is
hereby incorporated by reference (Long-Term Incentive Plan of
Hibernia Corporation)
10.35 1993 Director Stock Option Plan of Hibernia Corporation, as
amended to date
10.36 Exhibit 10.36 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993 filed with the
Commission (Commission file no. 0-7220) is hereby incorporated
by reference (Employment agreement between Stephen A. Hansel
and Hibernia Corporation)
10.38 Exhibit 10.38 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1999 filed with the
Commission (Commission File No. 0-7220) is hereby incorporated
by reference (Employment Agreement between E. R. "Bo"
Campbell and Hibernia Corporation)
10.40 Exhibit 10.40 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996 filed with the
Commission (Commission File No. 0-7220) is hereby incorporated
by reference (Split-Dollar Life Insurance Plan of Hibernia
Corporation effective as of July 1996)
10.41 Exhibit 10.41 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996 filed with the
Commission (Commission File No. 0-7220) is hereby incorporated
by reference (Nonqualified Deferred Compensation Plan for Key
Management Employees of Hibernia Corporation effective as of
July 1996)
10.42 Exhibit 10.42 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996 filed with the
Commission (Commission File No. 0-7220) is hereby incorporated
by reference (Supplemental Stock Compensation Plan for Key
Management Employees effective as of July 1996)
10.43 Exhibit 10.43 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996 filed with the
Commission (Commission No. 0-7220) is hereby incorporated by
reference (Nonqualified Target Benefit (Deferred Award) Plan
of Hibernia Corporation effective as of July 1996))
10.44 Exhibit 10.44 to the Registrant's Quarterly Report on Form
10-Q for the fiscal quarter ended June 30, 1999 (Form of
Change of Control Employment Agreement for Executive and
Senior Officers of the Registrant, as amended to date)
10.45 Exhibit 10.45 to the Registrant's Annual Report on Form
10-K (as amended) for the fiscal year ended December 31, 1997
filed with the Commission (Commission No. 0-7220) is hereby
incorporated by reference (Employment Agreement between
Randall A. Howard and Hibernia Corporation)
13 Exhibit 13 to the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1998 filed with the
Commission (Commission File No.0-7220) is hereby incorporated
by reference (1998 Annual Report to security holders of
Hibernia Corporation).
21 Exhibit 21 to the Annual Report on Form 10-K for the fiscal
year ended December 31, 1998, filed with the Commission by the
Registrant (Commission File No. 0-7220) is hereby incorporated
by reference (Subsidiaries of the Registrant)
27 Financial Data Schedule
99.1 Exhibit 99.1 to the Annual Report on Form 10-K (as amended)
dated May 28, 1999 is hereby incorporated by reference (Annual
Report of the Retirement Security Plan for the fiscal year
ended December 31, 1998)
99.2 Exhibit 99.2 to the Annual Report on Form 10-K (as amended)
dated May 28, 1999 is hereby incorporated by reference (Annual
Report of the Employee Stock Ownership Plan and Trust for the
fiscal year ended December 31, 1998)
(b) Reports on Form 8-K
A report on Form 8-K dated January 26, 2000, was filed by
the registrant reporting Item 5 Other Events.
A report on Form 8-K dated April 20, 2000, was filed by
the registrant reporting Item 5 Other Events.
*Exhibits and Reports on Form 8-K have been separately filed with the
Commission.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized to sign on behalf of the registrant.
HIBERNIA CORPORATION
--------------------
(Registrant)
Date: May 12, 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)
HIBERNIA CORPORATION
1993 DIRECTOR STOCK OPTION PLAN
Amended and Restated as of January 27, 1999
1. Definitions
In this Plan, except where the context otherwise indicates, the
following definitions apply:
a. "Agreement" means the written agreement implementing the
grant of an Option.
b. "Board" means the Board of Directors of the Corporation.
c. "Code" means the Internal Revenue Code of 1986 , as
amended.
d. "Committee" means the committee appointed by the Board to
administer the Plan, which committee shall meet the
standards imposed by Rule 16b-3 under the Securities
Exchange Act of 1934, as amended, or any similar
successor rule, and all of the members of which shall be
Nonemployee Directors. Unless otherwise determined by the
Board or required by this Plan, the Board Governance
Committee of the Board shall be the Committee.
e. "Common Stock" means the Class A common voting stock, no
par value, of the Corporation.
f. "Corporation" means Hibernia Corporation, a Louisiana
corporation, and any successor thereto.
g. "Date of Exercise" means the date on which the Corporation
receives notice of the exercise of an Option in accordance
with the terms of Article 7.
h. "Date of Grant" means the date on which an Option is
granted by the Committee or otherwise granted pursuant to
the terms of the Plan.
i. "Fair Market Value" of a Share means on any day the amount
equal to the average of the reported high and low sale
prices for shares of Common Stock on the NYSE, or other
market in which the Common Stock is traded, on such day as
reported by such source as the Committee may select, or,
if such price quotations are not available, then the fair
market value of a Share as determined by the Committee
pursuant to a reasonable method adopted in good faith for
such purpose.
j. "Nonemployee Director" means a director of the
Corporation, other than a Retired Employee Director, who
is not, and has not been for a period of at least one year
prior to the date as of which the determination is made,
an employee of the Corporation or a Subsidiary.
k. "Nonstatutory Stock Option" means an Option granted under
the Plan that is not an incentive stock option within the
meaning of Section 422 of the Code.
l. "NYSE" means the New York Stock Exchange, Inc.
m. "Option" means an option to purchase Shares granted in
accordance with the terms of Article 6.
n. "Option Period" means the period during which an Option
may be exercised.
o. "Option Price" means the price per Share at which an
Option may be exercised.
p. "Optionee" means a Nonemployee Director or Retired
Employee Director to whom an Option has been granted.
q. "Plan" means the Hibernia Corporation 1993 Director Stock
Option Plan.
r. "Retired Employee Director" means any Director who has
retired from service as an employee of the Company or any
of its subsidiaries.
s. "Share" means a share of authorized but unissued or
reacquired Common Stock.
t. "Subsidiary" means a corporation at least 50% of the total
combined voting power of all classes of stock of which is
owned by the Corporation, either directly or through one
or more other Subsidiaries.
2. Purpose
The Plan is intended to assist in attracting and retaining Nonemployee
Directors and Retired Employee Directors of outstanding ability and to
promote the identification of their interests with those of the
shareholders of the Corporation.
3. Administration
The Plan shall be administered by the Committee. In addition to any
other powers granted to the Committee, it shall have the following
powers, subject to the express provisions of the Plan:
a. to determine all other terms and provisions of each
Agreement, which need not be identical;
b. to construe and interpret the Agreements and the Plan;
c. to provide for the payment of the Option Price in cash,
shares of Common Stock valued at Fair Market Value on the
Date of Exercise, or a combination of cash and shares of
Common Stock;
d. to provide for satisfaction of federal, state or local tax
liabilities incurred in connection with the exercise of a
Nonstatutory Stock Option through, without limitation,
retention of shares of Common Stock otherwise issuable on
the exercise of a Nonstatutory Stock Option or delivery of
Common Stock to the Corporation by the Optionee under such
terms and conditions as the Committee deems appropriate;
and
e. to make all other determinations and take all other
actions necessary or advisable for the administration of
the Plan.
Any determinations made or actions taken by the Committee pursuant to
the Plan shall be binding and final.
4. Eligibility
Options may be granted only to Nonemployee Directors and Retired
Employee Directors. A Nonemployee Director or a Retired Employee
Director who has been granted an Option may be granted additional
Options as provided in the Plan.
5. Stock Subject to the Plan
a. There is hereby reserved for issuance upon the exercise of
Options granted under the Plan an aggregate of 1,000,000
Shares.
b. If an Option expires or terminates for any reason without
having been fully exercised, the unpurchased Shares that
had been subject to such Option at the time of its
expiration or termination shall become available for other
Options to be granted under the Plan.
c. The Shares issued upon the exercise of an Option shall be
charged against the number of Shares subject to the Plan
and such number of Shares shall not become available for
the grant of other Options.
6. Options for Nonemployee Directors and Retired Employee Directors
a. Unless prohibited by applicable law or contract to which
the Corporation is a party or is otherwise subject, on the
date that corresponds to the first business day after the
Annual Meeting of Shareholders of the Company in each year
commencing in 1993, each Nonemployee Director of the
Company shall automatically and without further action by
any person be granted an Option to purchase 5,000 shares
of Common Stock at an exercise price equal to the Fair
Market Value of the Common Stock on such Date of Grant. If
any such grant is prohibited by law or contract, it shall
be made on the first business day after such legal or
contractual restriction or limitation is no longer
effective.
b. Unless prohibited by applicable law or contract to which
the Corporation is a party or is otherwise subject, on the
date that corresponds to the first business day after the
Annual Meeting of Shareholders of the Company in each year
after an individual becomes a Retired Employee Director,
he or she shall automatically and without further action
by any person be granted an Option to purchase 5,000
shares of Common Stock at an exercise price equal to the
Fair Market Value of the Common Stock on such Date of
Grant. If any such grant is prohibited by law or contract,
it shall be made on the first business day after such
legal or contractual restriction or limitation is no
longer effective.
c. Each Option granted pursuant to this Article 6 will become
initially exercisable as to 50% of the Shares subject
thereto on the date that is two years following the Date
of Grant, as to an additional 25% of the Shares subject
thereto on the date that is three years following the Date
of Grant and as to the remaining 25% of the Shares subject
thereto on the date that is four years following the Date
of Grant. To the extent not theretofore exercised, each
Option will expire upon the earlier to occur of (i) the
date of any affiliation of the Optionee with a competitor
of the Corporation and its Subsidiaries or (ii) ten years
following the Date of Grant.
d. Nonemployee Directors may not be granted Options otherwise
than pursuant to this Article 6, except that each person
who first becomes a Nonemployee Director after October 20,
1997 automatically and without further action by any
person will be granted, on the date such person first
becomes a Nonemployee Director, a Nonstatutory Stock
Option to purchase 5,000 Shares at an Option Price equal
to the Fair Market Value of the Shares on such Date of
Grant. Each Option granted pursuant to this Article 6(d)
will become exercisable in full on the date six months
following the Date of Grant and, to the extent not
theretofore exercised, will expire upon the earlier to
occur of (i) the date of any affiliation of the Optionee
with a competitor of the Corporation and its Subsidiaries
or (ii) ten years following the Date of Grant.
e. Retired Employee Directors may not be granted Options
otherwise than pursuant to this Article 6, except that
each person who first becomes a Retired Employee Director
after October 20, 1997 automatically and without further
action by any person will be granted, on the date that is
one year after such person first becomes a Retired
Employee Director, a Nonstatutory Stock Option to purchase
5,000 Shares at an Option Price equal to the Fair Market
Value of the Shares on such Date of Grant. Each Option
granted pursuant to this Article 6(e) will become
exercisable in full on the date six months following the
Date of Grant and, to the extent not theretofore
exercised, will expire upon the earlier to occur of (i)
the date of any affiliation of the Optionee with a
competitor of the Corporation and its Subsidiaries or (ii)
ten years following the Date of Grant.
7. Exercise
An Option may, subject to the provisions of the Agreement under which
it was granted, be exercised in whole or in part by delivery to the
Corporation of written notice of exercise, in such form as the
Committee may prescribe, accompanied by full payment for the Shares
with respect to which such Option is exercised. The Committee may
provide that any Option shall be immediately exercisable in full on the
later of (i) the date on which a change of control of the Corporation
occurs, or (ii) six months after the Date of Grant, if a change of
control of the Corporation has occurred prior to six months after the
Date of Grant. The Committee may define change of control for this
purpose in such manner as it deems appropriate under the circumstances.
8. Nontransferability
Options granted under the Plan shall not be transferable otherwise than
by will or the laws of descent and distribution. An Option may be
exercised only by the Optionee during his lifetime.
9. Capital Adjustments
The number and class of Shares subject to each outstanding Option, the
Option Price thereof and the provisions of Articles 5 and 6 shall be
subject to such adjustment, if any, as the Committee in its sole
discretion deems appropriate to reflect such events as stock dividends,
stock splits, recapitalizations, mergers, consolidations or
reorganizations of or by the Corporation.
10. Termination and Amendment
The Board shall have the power to terminate the Plan and the Committee
shall have the power to amend it in any respect, provided that after
the Plan has been approved by the shareholders of the Corporation, the
Committee may not, without the approval of the shareholders of the
Corporation, amend the Plan so as to change the aggregate number of
Shares which may be issued under the Plan (except as provided in
Article 9), change the class of persons eligible to receive Options or
increase materially the benefits accruing to participants under the
Plan and provided further that the provisions of paragraph (a) of
Article 6 may not be amended more than once every six months other than
to comport with changes in the Code, the Employee Retirement Security
Act or the rules thereunder. No termination or amendment of the Plan
shall adversely affect the rights or obligations of the holder of any
Option previously granted under the Plan.
11. Modification, Extension and Renewal of Options
Subject to the terms and conditions of the Plan, the Committee may
modify, extend or renew outstanding Options or accept the surrender of
outstanding Options (to the extent not theretofore exercised) granted
under the Plan or under any other stock option plan of the Corporation
and authorize the granting of new Options in substitution therefor on
such terms consistent with the Plan as the Committee may specify,
provided, however, that no modification of an Option granted under the
Plan shall, without the consent of the Optionee, alter or impair any of
such Optionee's rights or obligations.
12. Effectiveness of the Plan
The Plan and any amendments requiring shareholder approval pursuant to
Article 10 are subject to approval by vote of the shareholders of the
Corporation after their adoption by the Board or the Committee,
respectively. Subject to such approval, the Plan and any amendments are
effective on the date of such adoption. Options may be granted prior to
shareholder approval of the Plan or amendments, but any such Option
shall be granted subject to approval of the Plan or amendments by the
shareholders. Except as may otherwise be required under Rule 16b-3 of
the Exchange Act, the day on which any Option granted prior to
shareholder approval of the Plan or such amendments is granted shall be
the Date of Grant for all purposes as if the Option had not been
subject to such approval. No Option granted subject to shareholder
approval may be exercised prior to receipt of such approval.
13. Term of the Plan
Unless sooner terminated by the Board pursuant to Article 10, the Plan
shall terminate on January 26, 2003, and no Options may be granted
after termination. Termination of the Plan shall not affect the
validity of any Option outstanding on the date of termination.
14. Indemnification of Committee
In addition to such other rights of indemnification as they may have as
directors or as members of the Committee, the members of the Committee
shall be indemnified by the Corporation against the reasonable
expenses, including attorneys' fees, actually and reasonably incurred
in connection with the defense of any action, suit or proceeding, or in
connection with any appeal therein, to which they or any of them may be
a party by reason of any action taken or failure to act under or in
connection with the Plan or any Option granted hereunder, and against
all amounts reasonably paid by them in settlement thereof or paid by
them in satisfaction of a judgment in any such action, suit or
proceeding, to the fullest extent permitted under applicable law.
15. General Provisions
a. The establishment of the Plan shall not confer upon any
Nonemployee Director or Retired Employee Director any
legal or equitable right against the Corporation, any
Subsidiary or the Committee, except as expressly provided
in the Plan.
b. The Plan does not constitute inducement or consideration
for the employment or service of any Nonemployee Director
or Retired Employee Director, nor is it a contract between
the Corporation or any Subsidiary and Nonemployee Director
or Retired Employee Director. Participation in the Plan
shall not give a Nonemployee Director or Retired Employee
Director any right to be retained in the service of the
Corporation or any Subsidiary.
c. The interests of any Nonemployee Director or Retired
Employee Director under the Plan or any Option are not
subject to the claims of creditors and may not, in any
way, be assigned, alienated or encumbered.
d. The Plan shall be governed, construed and administered in
accordance with the laws of the State of Louisiana.
Adopted April 27, 1993; amended July 23, 1997; amended January 27, 1999
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 512,298
<INT-BEARING-DEPOSITS> 6,595
<FED-FUNDS-SOLD> 270,100
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 2,688,304
<INVESTMENTS-CARRYING> 291,857
<INVESTMENTS-MARKET> 278,465
<LOANS> 11,326,032
<ALLOWANCE> (161,274)
<TOTAL-ASSETS> 15,741,760
<DEPOSITS> 12,161,194
<SHORT-TERM> 1,168,651
<LIABILITIES-OTHER> 173,638
<LONG-TERM> 844,638
0
93,000
<COMMON> 307,851
<OTHER-SE> 992,788
<TOTAL-LIABILITIES-AND-EQUITY> 15,741,760
<INTEREST-LOAN> 233,253
<INTEREST-INVEST> 46,618
<INTEREST-OTHER> 4,185
<INTEREST-TOTAL> 284,056
<INTEREST-DEPOSIT> 109,813
<INTEREST-EXPENSE> 135,738
<INTEREST-INCOME-NET> 148,318
<LOAN-LOSSES> 16,250
<SECURITIES-GAINS> 30
<EXPENSE-OTHER> 113,061
<INCOME-PRETAX> 77,480
<INCOME-PRE-EXTRAORDINARY> 50,131
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 50,131
<EPS-BASIC> 0.31
<EPS-DILUTED> 0.31
<YIELD-ACTUAL> 4.27
<LOANS-NON> 77,440
<LOANS-PAST> 6,357
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 67,634
<ALLOWANCE-OPEN> 156,072
<CHARGE-OFFS> 13,971
<RECOVERIES> 2,923
<ALLOWANCE-CLOSE> 161,274
<ALLOWANCE-DOMESTIC> 161,274
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
