Back to GetFilings.com

INDEX TO FORM 10-K

        Certain information required by Form 10-K is incorporated by reference to the Annual Report as indicated below. Only that information expressly incorporated by reference is deemed filed with the Commission.

⁽¹⁾ The material required by Items 10 through 14 is incorporated by reference to the Company’s definitive Proxy Statement for its 2004 Annual Meeting which will be filed with the Commission within 120 days of December 31, 2003; however, the “Executive Compensation Committee Report” and the “Stock Performance Graph” contained therein are not incorporated herein by reference.

PART I

Item 1. BUSINESS

        Hibernia Corporation (Company) is a Louisiana business corporation organized in 1972. The Company became a bank holding company in 1973 and a financial holding company in 2000. As of December 31, 2003, the Company was the largest publicly traded financial holding company headquartered in Louisiana with assets of $18.6 billion and deposits of $14.2 billion. Hibernia National Bank (Bank), the Company’s sole depository institution subsidiary, was chartered as a national banking association in 1933 and can trace its origins back to 1870. As a financial holding company, the Company can offer a broad range of products and services that are financial in nature. In addition to the Bank, the Company also owns nonbank subsidiaries which engage in insurance brokerage and investment banking businesses.

        As of December 31, 2003, the Company operated in 259 locations in 34 Louisiana parishes and 18 Texas counties and two mortgage loan production and retail brokerage services offices in southern Mississippi.

        In December 2002, the Company opened a commercial financial center in Dallas, Texas. In 2003, the Company opened its second commercial financial center in Houston, Texas, and opened the first of its Texas de novo branches in the Dallas and Houston markets along with an additional branch in the Tyler market in East Texas. In December 2003, the Company signed a definitive merger agreement with Coastal Bancorp, Inc. (Coastal), based in Houston, Texas. The proposed merger would give Hibernia an increased presence in Houston and entry into markets from Austin to the Rio Grande Valley. This transaction, which is subject to, among other things, regulatory and Coastal shareholder approval, is expected to be completed in or near second-quarter 2004, and would increase the Company’s total assets to over $20 billion and nearly double the number of Hibernia’s Texas branches.

        In 2002, the Company enhanced its expertise in life insurance and financial planning by purchasing Friedler/LaRocca Financial Partners, L.L.C., a New Orleans based firm specializing in life insurance and other financial services for wealthy clients.

        At December 31, 2003, the Company and its subsidiaries had 5,339 full-time equivalent employees.

        The Company offers a broad array of financial products and services, including retail, small business, commercial, international, mortgage and private banking; leasing; investment banking; corporate finance; treasury management; property and casualty, life, and health insurance; trust and investment management; and retail brokerage, and provides access to alternative investments, including mutual funds and annuities. The Company also performs mortgage servicing, which includes acceptance and application of mortgage loan and escrow payments.

        The Company provides financial risk management products and advisory services to customers. These products are designed to assist customers in managing their exposure in the areas of interest rate and currency risks. The Company offers repurchase agreements, bankers acceptances, Eurodollar deposits, safekeeping of securities, U.S. government and government agency obligations, tax-free municipal obligations, reverse repurchase agreements, letters of credit, and collection and foreign exchange transactions.

        Information on the Company’s various segments 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 Company’s reportable operating segments are Consumer, Small Business, Commercial, and Investments and Public Funds. The Other segment includes the areas of support services and facilities management. Further segment information is included in Note 28 of the “Notes to Consolidated Financial Statements” in the Company’s Annual Report. For a discussion of operating results, see the “Segment Results” section in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report. The portion of the Company’s revenue derived from foreign customers is not a material portion of its overall revenues.

        The Company’s primary assets are loans. At December 31, 2003, loans represented 69% of the Company’s total assets.

        The reserve for loan losses is maintained to provide for probable credit losses related to specifically identified loans and for losses inherent in the loan portfolio that have been incurred as of the balance sheet date. The reserve 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 for exposures arising from factors which are not addressed by specific reserves.

        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 loans identified as impaired are based on discounted expected 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. Commercial and small business nonaccrual loans are considered to be impaired in accordance with the provisions of Statements of Financial Accounting Standards (SFAS) No. 114, “Accounting by Creditors for Impairment of a Loan,” when it is probable that all amounts due in accordance with the contractual terms will not be collected. For purposes of determining impairment, consumer loans are collectively evaluated as they are considered to be comprised of large groups of smaller-balance homogenous loans and therefore are not individually evaluated for impairment under the provision of SFAS No. 114. 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, particularly in times of changing economic conditions, and considers the possibility of improper risk ratings and possible over- or under-allocations of specific reserves. In evaluating the unallocated reserve, management 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, management 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. Changes in underwriting standards, credit administration and collection, regulation and other factors which impact the credit quality and collectibility of the loan portfolio also impact the unallocated reserve levels. 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 and expected 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. See “Reserve and Provision for Loan Losses” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report for a further discussion of the reserve for loan losses.

COMPETITION

        The financial services industry in which the Company operates is highly competitive. The Bank competes with national and state banks for deposits, loans, and trust accounts and with savings and loan associations and credit unions for loans and deposits. In addition, the Bank competes with other providers of financial services, from both inside and outside Louisiana and Texas, including finance companies, institutional buyers of commercial paper, money market funds, brokerage firms, investment companies, insurance companies, insurance agencies and governmental agencies. These competitors are actively engaged in marketing various types of loans, commercial paper, short-term obligations, investments, insurance and other products and services.

SUPERVISION AND REGULATION

        The financial services industry is extensively regulated under both federal and state law. The Company is subject to regulation and examination by the Board of Governors of the Federal Reserve System (FRB) and the Federal Reserve Bank of Atlanta. The Bank is subject to regulation and examination by the Office of the Comptroller of the Currency (OCC). The small business investment company subsidiary is regulated by the Small Business Administration. Insurance agency subsidiaries are regulated by state agencies in the states in which they operate. Hibernia Investments, L.L.C., a subsidiary of the Bank, and Hibernia Southcoast Capital, Inc., a subsidiary of the Company, are regulated by the Securities and Exchange Commission (SEC), the National Association of Securities Dealers, Inc., and the Louisiana Office of Financial Institutions, through the Deputy Commissioner of Securities. The Company is subject to the Bank Holding Company Act (BHCA), which requires the Company to obtain the prior approval of the FRB to acquire a significant equity interest in any additional banks or bank holding companies. Under the provisions of the Gramm-Leach-Bliley Act (GLBA), the Company is eligible to engage in nonbanking activities which are financial in nature by notifying, or in certain cases obtaining the prior approval of, the FRB. Under the GLBA, subsidiaries of financial holding companies engaged in nonbank activities would be supervised and regulated by the federal and state agencies which normally supervise and regulate such functions outside of the financial holding company context. Although the FRB continues to be the primary “umbrella” regulator of financial holding companies, the GLBA limits the ability of the FRB to order a financial holding company subsidiary which is regulated by the SEC or a state insurance authority to provide funds or assets to an affiliated depository institution under the FRB’s “source of strength” doctrine.

        The Bank is subject to a number of laws regulating depository institutions, including the Federal Deposit Insurance Corporation Improvement Act of 1991, which expanded the regulatory and enforcement powers of the federal bank regulatory agencies, required that these agencies prescribe standards relating to internal controls, information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, compensation, fees and benefits, and mandated annual examinations of banks by their primary regulators. The Bank is also subject to a number of consumer protection laws and regulations of general applicability, including the USA Patriot Act, which is designed to identify, prevent and deter international money laundering and terrorist financing.

        The banking industry is affected by the monetary and fiscal policies of the FRB. An important function of the FRB is to regulate the national supply of bank credit to moderate recessions and to curb inflation. Among the instruments of monetary policy used by the FRB to implement its objectives are: open-market operations in U. S. government securities, changes in the discount rate and the federal funds rate (the rate banks charge each other for overnight borrowings), and changes in reserve requirements on bank deposits.

        On July 30, 2002, the Sarbanes–Oxley Act of 2002 (the Act) was signed into law. The Act addresses many aspects of financial accounting, corporate governance and public company disclosure. Among other things, it establishes a comprehensive framework for the oversight of public company auditing and for strengthening the independence of auditors and audit committees. Under the Act, audit committees are responsible for the appointment, compensation and oversight of the work of the auditors. The non-audit services that can be provided to a company by its auditor are limited. Audit committee members are subject to specific rules addressing their independence. The Act also requires enhanced and accelerated financial disclosures, and it establishes various responsibility measures (including, for example, requiring the chief executive officer and chief financial officer to certify to the quality of the company’s financial reporting). The Act imposes restrictions on and accelerated reporting requirements for certain insider trading activities. It imposes a variety of penalties for fraud and other violations and creates a new federal felony for securities fraud. Various sections of the Act are applicable to the Company. Portions of the Act were effective immediately; others became effective or are in process of becoming effective through rulings by the SEC, based on timelines set forth in the law.

LOAN PORTFOLIO

        The amounts and percentages of loans outstanding by type are as follows:

SELECTED LOAN MATURITIES

        The following table shows selected categories of loans outstanding as of December 31, 2003, which, based on remaining scheduled repayments of principal, are due in the periods indicated. In addition, the amounts contractually due after one year are summarized according to their interest sensitivity.

SUMMARY OF LOAN LOSS EXPERIENCE

        The following is a summary of activity in the reserve for loan losses:

ALLOCATION OF RESERVE FOR LOAN LOSSES

        The reserve for loan losses has been allocated according to the amount deemed to be reasonably necessary to provide for probable credit losses inherent in the loan portfolio within the categories of loans set forth in the following table. See “Reserve and Provision for Loan Losses” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report for a discussion of the factors used in determining the adequacy of the reserve for loan losses.

MATURITIES OF LARGE-DENOMINATION CERTIFICATES OF DEPOSIT

        The following table shows large-denomination certificates of deposit as of December 31, 2003 by remaining maturity.

AVAILABLE INFORMATION

        The Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available free of charge through the Company’s web site as soon as reasonably practicable after such material is electronically filed or furnished to the SEC. The Company’s web site address is www.hibernia.com.

        The Company has adopted a code of ethics that applies to its principal executive officer; principal financial officer; and principal accounting officer and controller. This code of ethics is available on the Company’s web site, at www.hibernia.com (under “Corporate, Investor and Media Relations,” “Company Overview,” “Corporate Governance”) and is available in print to anyone who requests it. In addition, the following information is also available at the same location on the Company web site and in print to any shareholder who requests it: The Company’s Corporate Governance Guidelines; charters for the Company’s Audit, Executive Compensation and Board Governance Committees; the Company’s employee Code of Ethics; and the Company’s Code of Business Conduct and Ethics for Members of the Board of Directors. The Company’s web site will be updated, in accordance with applicable SEC or New York Stock Exchange requirements, to include any changes to, or waivers of, a code of ethics applicable to executive officers or directors of the Company within five business days.

FORWARD-LOOKING STATEMENTS

        Statements in this Form 10-K that are not historical facts should be considered forward-looking statements with respect to the Company. Forward-looking statements of this type speak only as of the date of this report. By nature, forward-looking statements involve inherent risk and uncertainties. Various factors, including, but not limited to, unforeseen local, regional, national or global events, economic conditions, asset quality, interest rates, prepayment speeds, servicing costs, loan demand, changes in business or consumer spending, borrowing or savings habits, competition, stock price volatility, government monetary policy, anticipated expense levels, changes in laws and regulations, the level of success of the Company’s asset/liability management strategies as well as its marketing, product development, sales and other strategies, the effect of changes in accounting policies and practices, as may be adopted by the Financial Accounting Standards Board and other accounting standard setters, the costs and effects of litigation and unexpected or adverse outcomes in such litigation, unexpected costs or issues in its expansion or acquisition plans 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 and could impact the Company’s ability to achieve the goals described in its mission statement. The Company undertakes no obligation to update or revise forward-looking statements to reflect subsequent circumstances, events or information or for any other reason.

Item 2. PROPERTIES

        The Company’s executive offices are located in downtown New Orleans, Louisiana, in the main office of Hibernia National Bank. The Company leases its main office building and operations center under the terms of sale/leaseback agreements. The Company and the Bank consider all properties owned or leased to be suitable and adequate for their intended purposes and consider the terms of existing leases to be fair and reasonable.

        On December 31, 2003, the Company reported miscellaneous property with a net book value of $12,190,000. These properties include $11,512,000 of properties acquired from borrowers either as a result of foreclosures or voluntarily in full or partial satisfaction of indebtedness previously contracted and $678,000 of duplicate or excess bank-owned property. See “Asset Quality” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report for a further discussion of these properties.

Item 3. LEGAL PROCEEDINGS

        The Company and its subsidiaries are parties to certain pending legal proceedings arising from matters incidental to their business. Management is of the opinion that these actions will not have a material effect on the financial condition, results of operations, or liquidity of the Company.

Item X. EXECUTIVE OFFICERS OF THE REGISTRANT

        Following is a list of executive officers of the Company as of March 1, 2004. Each executive officer of the Company is elected annually by the Board of Directors and holds his or her position until the earlier of (a) the meeting of the Board of Directors immediately following the Annual Meeting of shareholders and the election and qualification of his or her successor or (b) his or her removal, termination, or resignation from office.

        PAUL J. BONITATIBUS, 54, is President, Consumer and Business Banking, of the Company and Hibernia National Bank, a position he assumed in May 2003. Prior to that, and since January 2001, he was Chief Community Banking Executive. Prior to that, from June 2000 until January 2001, Mr. Bonitatibus was Chairman of the Greater New Orleans Region. Before that, he was President of the Greater New Orleans Market area.

        J. HERBERT BOYDSTUN, 57, became President and Chief Executive Officer of the Company and Hibernia National Bank as of December 17, 2000. Prior to that, since June 2000, Mr. Boydstun was Chief Community Banking Officer of the Company and Hibernia National Bank. Before that, since 1996, Mr. Boydstun was Chairman of the Southwest Region of the Company and Hibernia National Bank. Mr. Boydstun served as Southcentral/Northeast Regional Chairman from 1995 to 1996 and as Northeast Regional Chairman from August 1994 until 1995. Mr. Boydstun also serves on the Boards of Directors of the Company and Hibernia National Bank.

        MARSHA M. GASSAN, 51, serves as Senior Executive Vice President and Chief Financial Officer of the Company and Hibernia National Bank, positions that she assumed in April 1996. During 1998 and a portion of 1999, Ms. Gassan also served as Treasurer of the Company and Hibernia National Bank. Prior to April 1996, Ms. Gassan served as Executive Vice President, General Auditor and manager of Credit Risk Management of the Company and Hibernia National Bank (from 1994 to 1996), and as Senior Vice President and manager of Credit Risk Management (from 1992 to 1994).

        RUSSELL S. HOADLEY, 59, serves as Executive Vice President and Chief Public Affairs Officer of the Company and Hibernia National Bank, positions he assumed in May 2003. Prior to that, since 1994, Mr. Hoadley was Executive Vice President/Employee and Public Relations. From the time he joined the Company in July 1993 until his promotion in 1994, Mr. Hoadley served as Senior Vice President/Public Affairs and Marketing for the Company and Hibernia National Bank.

        RANDALL E. HOWARD, 56, serves as President, Commercial Banking, of the Company and Hibernia National Bank, a position he assumed in May 2003. Prior to that, from June 2000 to May 2003, he was Chief Commercial Banking Executive of the Company and Hibernia National Bank. Before that, and since February 1998, Mr. Howard was Chairman of the Southeast Region for the Company and Hibernia National Bank. Prior to that time, from 1987 to February 1998, Mr. Howard served as President and Chief Executive Officer of ArgentBank, a Louisiana banking association headquartered in Thibodaux, Louisiana, which was merged with and into Hibernia National Bank in early 1998. Mr. Howard was elected to the Boards of Directors of the Company and Hibernia National Bank on December 20, 2000 to fill a vacancy on the Board.

        ROBERT M. KOTTLER, 45, serves as Senior Executive Vice President and Chief Sales Support Officer of the Company and Hibernia National Bank, positions he assumed in May 2003. Prior to that, and since 1999, he was Executive Vice President and Marketing and Delivery Channel Manager of the Company and Hibernia National Bank. Before that, he was Senior Vice President and Small Business Lending and Product Manager of Hibernia National Bank (1994 to 1999), and Vice President and Small Business Banking Service Manager (1988 to 1994).

        JAN M. MACALUSO, 44, serves as Executive Vice President, Controller, Chief Accounting Officer and Assistant Treasurer of the Company and Executive Vice President and Controller of Hibernia National Bank, positions she assumed (except for Assistant Treasurer) in May 2003. Prior to that, she was Senior Vice President, Assistant Treasurer and Deputy Controller of the Company and Senior Vice President and Deputy Controller of Hibernia National Bank (1999 to 2003), Vice President and Financial Reporting Manager of the Company and Hibernia National Bank (1995 to 1999), and Assistant Vice President and Financial Reporting Manager of Hibernia National Bank (1989 to 1995).

        RONALD E. SAMFORD, JR., 51, serves as Senior Executive Vice President and Chief Administrative Officer, positions he assumed in May 2003. Prior to that, and since 1992, he was Executive Vice President and Controller of the Company and Hibernia National Bank and Chief Accounting Officer of the Company.

        ROBERT M. STUART, JR., 47, serves as Senior Executive Vice President and Chief Credit Officer of the Company and Hibernia National Bank, positions he assumed in May 2003. Prior to that, he was Executive Vice President and a Regional Commercial Manager of the Company and Hibernia National Bank (2000 to 2003), and Senior Vice President and a Commercial Banking Division Manager of Hibernia National Bank (1990 to 2000).

PART II

Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKLHOLDER MATTERS

        Recent Sales of Unregistered Securities. From November 26, 2003 through December 17, 2003, a total of 41,050 shares of Class A Common Stock were issued from the Company’s treasury in private transactions to a warrantholder pursuant to his exercise of warrants acquired by him in connection with the Company’s acquisition of the Rosenthal Agency in 2000. The exercise price of the warrants was $13.12 for each share of stock issued under the warrants. Warrants for 95,444 shares were exercised as a net issuance pursuant to which shares which otherwise would have been issued in connection with the exercise were used to pay the purchase price. An aggregate of 54,394 shares were used to pay the purchase price in such net issuances, leaving an aggregate of 41,050 shares issued. No underwriters or other securities dealers were used in these transactions. These transactions were exempt under Section 4(2) of the Securities Act of 1933, as amended, as a private offering.

Item 9a. CONTROLS AND PROCEDURES

        As of December 31, 2003, an evaluation was carried out under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the Company’s disclosure controls and procedures. Based on that evaluation, the Company’s management, including the CEO and CFO, concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2003. There have been no changes in the Company’s internal controls over financial reporting made during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on March 1, 2004 on its behalf by the undersigned, thereunto duly authorized.

        Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed on March 1, 2004, by the following persons on behalf of the Registrant and in the capacities indicated.

*By:     /s/ Cathy E. Chessin
              Cathy E. Chessin
              Attorney-in-fact