Company Is Well-Positioned to Serve as a Leader in the Rebuilding
Efforts Hibernia Corporation (NYSE: HIB) today reported a net loss
for third-quarter 2005 of $58.1 million, compared with net income
of $76.5 million a year earlier. The net loss per common share and
net loss per common share assuming dilution for third-quarter 2005
were $0.37, compared to earnings per common share (EPS) and EPS
assuming dilution of $0.50 and $0.49, respectively, a year earlier.
Results reflect the impact of hurricanes Katrina and Rita on
Hibernia and a significant portion of its footprint, including the
New Orleans area, southwest Louisiana and southeast Texas. For the
first nine months of 2005, net income was $107.1 million, down from
$215.8 million a year earlier. EPS and EPS assuming dilution for
the first nine months of 2005 were $0.68 and $0.67, respectively,
down from $1.40 and $1.37 a year earlier. Results for the first
nine months of the year also reflect Hibernia's merger with Coastal
Bancorp, Inc., parent of a $2.7-billion-asset Texas savings bank,
which became effective May 13, 2004. Costs incurred in
third-quarter 2005 relating to the hurricanes totaled approximately
$197.7 million, including the following: -- A charge of $175
million to provision expense directly related to the hurricanes.
This expense was established based on management's best estimate of
the hurricanes' impact on the loan portfolio using currently
available information. Because it is too early to determine with
certainty the full extent of the impact, the estimate is based on
judgment and subject to change in either direction. Management will
continue to carefully assess and review the exposure of the loan
portfolio to hurricane-related factors. -- Capitalized costs of
$11.5 million necessitated by disruption caused by the hurricanes.
These costs were for purchases of information-technology equipment
and office furniture, as well as other facility enhancements to
accommodate displaced employees. These costs are not included in
third-quarter 2005 operating results. -- Property damage of $34.3
million, of which approximately $25.1 million is expected to be
covered by insurance proceeds. -- Additional expenses - including
employee assistance, marketing, data processing and others - of
approximately $2.0 million that exceeded expected insurance
coverage. In addition, third-quarter 2005 results were impacted by
a reduction in revenue resulting from the waiver of certain fees
and service charges to businesses and consumers in
hurricane-impacted areas, as well as economic disruption in those
markets. The third-quarter 2005 provision for loan losses was
$197.0 million, compared to $12.3 million a year earlier. The
reserve for loan losses was $402.2 million at Sept. 30, 2005, up
71% from $235.2 million a year earlier and up 77% from June 30,
2005. The reserve for loan losses at the end of the third quarter
represents 2.45% of total loans, up from 1.52% a year earlier and
1.42% at the end of second-quarter 2005. "Katrina, the country's
largest natural disaster, and Rita, a powerful Category 4 storm
that caused extensive damage, combined to significantly impact the
communities we serve and our business in the third quarter," said
President and CEO Herb Boydstun. "The world has witnessed the
unprecedented one-two punch of these fierce hurricanes and the pain
they have inflicted on the people of the Central Gulf Coast.
Greater New Orleans and many other communities served by Hibernia
have been severely impacted by the evacuation of large portions of
the population, widespread property damage and the disruption
caused by these factors on the operations and revenue-generating
capacity of local businesses and government. "Still, these
hurricanes did not damage the spirit of our people or of the
affected communities, where the determination to restore and
rebuild is very strong," Boydstun added. "For more than 135 years,
our bank has been an important partner for consumers and
businesses, providing products, services and expertise to help them
achieve their financial goals and realize their dreams. We are
well-capitalized, as reflected in our leverage ratio, and we are
recognized as a leading corporate citizen throughout the region we
serve. Now, in the aftermath of Katrina and Rita, our communities
need us more than ever, and we are here for them." Boydstun pointed
out that Hibernia has taken, and continues to take, decisive action
on a number of fronts to help customers, employees and communities
as a whole during this difficult time. "Our employees are putting
forth a tremendous effort to meet the needs of clients and
co-workers," he said. "We are particularly proud of the teamwork
displayed by our displaced employees and their colleagues in
undamaged markets as they effectively handle an enormous increase
in customer traffic at branches visited by thousands of people who
have evacuated." Hibernia: A Leader in the Rebuilding Effort
Hibernia responded in several ways to meet the needs of individuals
and businesses affected by Katrina and Rita, including: -- Loan
Payments. Automatic deferment of consumer and certain
small-business loan payments until January 2006 for customers in
impacted areas. -- Mortgage Payments. Up to three months of
suspended payments on first mortgages held by Hibernia for
qualified customers in impacted areas. Up to 18 months of temporary
forbearance on first mortgages held by Hibernia also may be
available to repay suspended payments. -- Fee Waivers. Waiver of
certain fees and service charges for customers from
hurricane-impacted markets. This included waiver of Hibernia's ATM
fees when customers used a non-Hibernia ATM and waiver of charges
related to insufficient funds in checking accounts during periods
following the hurricanes. The regions impacted by Katrina and Rita
are expected to see a significant increase in residential
construction and renovations in the months and years to come. "Tens
of thousands of homes will need to be repaired or rebuilt, and
Hibernia is well-positioned to provide financing for this massive
effort," said Paul Peters, president of mortgage banking for
Hibernia. "Hibernia has mortgage-loan production offices
conveniently located in all major hurricane-affected markets in
Louisiana, as well as in Texas and on the Mississippi Gulf Coast."
Hibernia has been Louisiana's residential mortgage leader for nine
consecutive years, according to the Mortgage Bankers Association of
America. Hibernia is working diligently with Fannie Mae, Freddie
Mac and other housing-finance organizations on the development of
innovative home ownership and renovation programs for people in
hurricane-impacted markets. "Restoring homes and bringing back
neighborhoods are the catalyst for getting businesses to re-open
and for the economy to get back on track," said Peters. "We've been
in constant contact with all of these housing agencies, working as
a team to provide the resources and loan programs necessary to make
a positive difference in this massive recovery effort." Business
Continuity Program Minimizes Disruption In advance of both
hurricanes, Hibernia activated a comprehensive business continuity
action program that minimized, and in some cases prevented,
disruption of the company's most critical systems and processes.
"Given the magnitude of these two storms -- which caused widespread
property damage, extensive flooding and power outages -- our
business continuity program has performed well and succeeded in its
goal of minimizing disruption of service to customers," said
Boydstun. Hibernia has made significant progress in reopening
locations and restoring operations in areas affected by the two
hurricanes. Of Hibernia's 326 locations in Louisiana and Texas,
only 37 remained closed as of Oct. 20. Of those 37 locations, 26
remained closed primarily due to varying degrees of damage from the
hurricanes. Most of the bank's locations in Jefferson Parish, which
borders New Orleans to the west, have reopened. Offices are now
open in the French Quarter, Uptown and Algiers sections of New
Orleans. Hibernia is assessing areas of hurricane-impacted regions
that suffered damage and plans to return to those that are
redeveloping. Summary of Financial Performance Loans at Sept. 30,
2005, were $16.4 billion, up 6% from $15.5 billion a year earlier.
Loans to consumers and businesses considered impacted by the
hurricanes accounted for approximately 40% of total loans at Sept.
30, 2005. Deposits at Sept. 30, 2005, totaled $18.5 billion, up 10%
from $16.7 billion a year earlier. Deposits to consumers and
businesses considered impacted by the hurricanes accounted for more
than half of total deposits at Sept. 30, 2005. Net interest income
for third-quarter 2005 totaled $191.6 million, virtually unchanged
from $191.8 million a year earlier. The third-quarter 2005 net
interest margin was 3.69%, down 21 basis points from 3.90% a year
earlier. The decline reflects a $5.0-million adjustment to the
dealer reserves for automobile financing, resulting from the
estimated impact of early termination of automobile loans as a
result of hurricane damage to those vehicles. The adjustment
negatively impacted the third-quarter 2005 margin by 10 basis
points. Third-quarter 2005 noninterest income totaled $102.8
million, down 1% from a year earlier. Included in third-quarter
2005 was a 3% decrease in service charges on deposits. The decline
resulted mainly from the company's decision to waive certain fees
and service charges - including the previously mentioned ATM fees
and charges related to insufficient funds in checking accounts -
following the hurricanes to help customers and businesses affected
by disruption from the disasters. Noninterest expense for
third-quarter 2005 totaled $185.0 million, up 11% from $166.4
million a year earlier. Included in third-quarter 2005 is $2.9
million in salaries and benefits expenses consisting primarily of
disaster-relief grants for employees affected by the hurricanes. In
the aftermath of the hurricanes, the company has provided financial
assistance to help employees with temporary housing and other
living expenses, which also contributed to the increase in
noninterest expense in third-quarter 2005. Advertising and
promotional expense associated with the hurricanes totaled $2.8
million in third-quarter 2005, reflecting the company's efforts to
announce assistance programs, branch re-openings, special services
and products to customers and employees. In third-quarter 2005,
data processing expenses associated with the hurricanes totaled
$1.3 million. Third-quarter 2005 noninterest expense excludes the
previously mentioned $11.5 million of capitalized costs
necessitated by the hurricane disruption as the company activated
its business continuity program and transferred operations to data
back-up sites. Asset quality Asset-quality results for
third-quarter 2005 include the following: -- Net charge-offs were
$21.9 million, up 81% from $12.1 million for third-quarter 2004.
The increase was due primarily to charge-offs related to two
borrowers in the commercial portfolio. The increase includes $3.8
million of overdraft net charge-offs in third-quarter 2005.
Effective first-quarter 2005, overdraft net charge-offs are charged
to the reserve for loan losses. -- The net charge-off ratio was
0.54%, compared to 0.31% a year earlier. By category, net
charge-off ratios were: consumer, 0.53%, compared to 0.44%;
commercial, 0.65%, compared to a net recovery of 0.06%; and
small-business, 0.45%, compared to 0.41%. Overdraft net charge-offs
contributed nine basis points to the net charge-off ratio and 14
basis points to the consumer net charge-off ratio. -- Nonperforming
assets at Sept. 30, 2005, were $111.8 million, compared to $75.7
million a year earlier; nonperforming loans were $103.6 million,
compared to $64.3 million. The increases were due primarily to the
transfer to nonperforming loans of several large credits in the
commercial portfolio that were impacted by the hurricanes. -- The
nonperforming asset ratio at Sept. 30, 2005, was 0.68%, compared to
0.49% a year earlier; the nonperforming loan ratio was 0.63%,
compared to 0.41%. -- Loan delinquencies increased to approximately
$300 million, or almost 2% of loans at Sept. 30, 2005, compared to
$60 million, or 0.4% of loans at June 30, 2005, and $65 million, or
0.4% of loans at Sept. 30, 2004. Delinquencies for third-quarter
2005 were negatively affected by continuing payment interruptions
and the short-term disruption of the collections area during the
hurricanes. -- Reserve coverage of nonperforming loans at Sept. 30,
2005, was 388%, compared to 366% a year earlier. Texas Branch
Expansion Continues Despite the challenges and focus on hurricane
issues, Hibernia opened five Texas de novo locations during the
first month of the hurricane recovery period, and the company
expects to open six more before the end of the year - three in
Dallas-Fort Worth and three in Houston. In addition, Hibernia
expanded its Texas presence to San Antonio, where it opened a
commercial banking office. Additional Information Other financial
results at Sept. 30, 2005, compared to a year earlier, include the
following: -- Assets: $23.2 billion, up 9% from $21.4 billion. --
Leverage ratio: 7.86%, compared to 7.46%. For supplemental
financial tables, go to www.hibernia.com/earnings. Hibernia's
merger into Capital One Financial Corporation is scheduled to close
two business days following the Nov. 14, 2005, special meeting of
Hibernia shareholders to vote upon the amended merger agreement.
The merger is subject to Hibernia shareholders' approval of the
amended agreement and the effectiveness of all necessary regulatory
approvals. Proxy packages for the special meeting have been mailed.
Hibernia shareholders who have not received their package should
call Mellon Investor Services at 1-800-814-0305 for a duplicate
proxy package. The deadline for shareholders to submit their vote
by proxy (by telephone or Internet) is Nov. 13, so shareholders who
have not received their package should not delay in calling about a
duplicate package. Merger Consideration Election packages allowing
shareholders to choose the type of consideration they prefer to
receive if the merger of Hibernia and Capital One Financial
Corporation is completed also have been mailed. Shareholders who
have not received a Merger Consideration Election package should
call Computershare at 1-866-469-6745 for a duplicate merger
consideration package. The deadline for submitting merger
consideration elections is Nov. 11, so shareholders should not
delay in calling about a duplicate package if one is needed. Voting
and merger consideration instruction forms have been mailed to
participants in the company's Employee Stock Ownership Plan (ESOP),
Retirement Security Plan (RSP) or both. Participants in the plans
who have not received that package should call Mellon Investor
Services at 1-800-814-0305 for duplicate Voting Instruction Forms
and at 1-888-867-6202 for duplicate Merger Consideration
Instruction Forms. The deadline to submit these ESOP/RSP forms is
Nov. 7, so participants in the plans should not delay in calling
about a duplicate package if they do not receive their package.
Hibernia is on Forbes magazine's list of the world's 2,000 largest
companies and Fortune magazine's list of America's top 1,000
companies according to annual revenue. Hibernia has $23.2 billion
in assets and 326 locations in 34 Louisiana parishes and 36 Texas
counties. Hibernia Corporation's common stock (HIB) is listed on
the New York Stock Exchange. Additional Information About the
Capital One Transaction In connection with the proposed merger,
Capital One has filed with the SEC a post-effective amendment to
its Registration Statement on Form S-4 that includes a new proxy
statement of Hibernia that also constitutes a prospectus of Capital
One, and has filed a definitive proxy statement/prospectus with the
SEC. Hibernia has mailed the definitive proxy statement/prospectus
to its stockholders. Investors and security holders are urged to
read the definitive proxy statement/prospectus regarding the
proposed merger, because it contains important information. You may
obtain a free copy of the definitive proxy statement/prospectus and
other related documents filed by Capital One and Hibernia with the
SEC at the SEC's website at http://www.sec.gov. The definitive
proxy statement/prospectus and the other documents also may be
obtained for free by accessing Capital One's website at
http://www.capitalone.com under the tab "Investors" and then under
the heading "SEC & Regulatory Filings" or by accessing the SEC
homepage at www.SEC.gov. Capital One, Hibernia and their respective
directors, executive officers and certain other members of
management and employees may be soliciting proxies from Hibernia
stockholders in favor of the merger. Information regarding the
persons who may, under the rules of the SEC, be considered
participants in the solicitation of the Hibernia stockholders in
connection with the proposed merger is set forth in the definitive
proxy statement/prospectus filed with the SEC. You can find
information about Capital One's executive officers and directors in
its definitive proxy statement filed with the SEC on March 21,
2005. You can find information about Hibernia's executive officers
and directors in its definitive proxy statement filed with the SEC
on March 15, 2005. You can obtain free copies of these documents
from Capital One and Hibernia using the contact information above.
Forward-looking statements Information in this press release
contains forward-looking statements, which involve a number of
risks and uncertainties. Any forward-looking information is not a
guarantee of future performance and the actual results could differ
materially from those contained in the forward-looking information.
Among the factors that could cause actual results to differ
materially are the following: the impact of property, credit and
other losses expected as the result of Hurricane Katrina and
Hurricane Rita; the amount of government, private and philanthropic
investment, including deposits, in the geographic regions impacted
by Hurricane Katrina and Hurricane Rita; the pace and magnitude of
economic recovery in the region impacted by Hurricane Katrina and
Hurricane Rita; the potential impact of damages from future
hurricanes and other storms; an increase or decrease in credit
losses (including increases due to a worsening of general economic
conditions); financial, legal, regulatory or accounting changes or
actions; changes in interest rates; general economic conditions
affecting consumer income, spending, repayments and savings; the
amount of, and rate of growth in, Hibernia's expenses (including
salaries and associate benefits and marketing expenses); Hibernia's
ability to execute on its strategic and operational plans; the
costs and effects of litigation and of unexpected or adverse
outcomes in such litigation; continued intense competition from
numerous providers of products and services which compete with
Hibernia's business; the risk that Hibernia stockholders may not
approve the proposed transaction with Capital One Financial
Corporation; and various risks associated with the proposed Capital
One transaction in the event Hibernia's shareholders approve the
transaction and it is completed, including: the ability of Capital
One and Hibernia to recruit and retain experienced personnel to
assist in management and operations; the risk that the businesses
of Capital One and Hibernia will not be integrated successfully;
the risk that the cost savings and any other synergies from the
proposed transaction may not be fully realized or may take longer
to realize than expected; disruption from the proposed transaction
making it more difficult to maintain relationships with customers,
employees or suppliers; and other risk factors listed from time to
time in Hibernia's SEC reports, including, but not limited to, the
Quarterly Report on Form 10-Q for the quarter ended June 30, 2005.
-0- *T HIBERNIA FINANCIAL INFORMATION (Unaudited)
----------------------------------------------------------------------
SUMMARY OF OPERATIONS QUARTER ENDED
------------------------------------------------ ($ in thousands,
Sept. 30 Sept. 30 June 30 except per-share 2005 2004 CHANGE 2005
CHANGE data) --------- --------- ------ --------- ------ Interest
income $302,612 $261,558 16% $296,125 2% Interest expense 111,053
69,719 59 96,110 16 --------- --------- --------- Net interest
income 191,559 191,839 - 200,015 (4) Provision for loan losses
197,000 12,250 N/M 14,000 N/M --------- --------- --------- Net
interest income after provision (5,441) 179,589 (103) 186,015 (103)
--------- --------- --------- Noninterest income: Service charges
on deposits 46,434 48,115 (3) 51,561 (10) Card-related fees 18,062
15,994 13 17,718 2 Mortgage banking 5,287 5,701 (7) 4,923 7 Retail
investment fees 5,968 7,887 (24) 7,846 (24) Trust fees 5,960 5,839
2 5,773 3 Insurance 4,931 4,808 3 5,496 (10) Investment banking
6,829 5,017 36 5,602 22 Other service, collection and exchange
charges 5,386 5,585 (4) 6,343 (15) Other operating income 3,987
4,992 (20) 5,960 (33) Securities gains (losses), net (58) 153 (138)
527 (111) --------- --------- --------- Noninterest income 102,786
104,091 (1) 111,749 (8) --------- --------- --------- Noninterest
expense: Salaries and employee benefits 98,618 87,347 13 92,286 7
Occupancy and equipment 24,610 22,035 12 23,424 5 Data processing
11,032 9,540 16 9,913 11 Advertising and promotional expense 11,202
8,350 34 8,698 29 Stationery and supplies, postage and
telecommunications 6,985 7,318 (5) 7,318 (5) Amortization of
purchase accounting intangibles 1,621 1,904 (15) 1,670 (3)
Foreclosed property expense, net (317) (493) 36 22 N/M Other
operating expense 31,233 30,350 3 30,940 1 --------- ---------
--------- Noninterest expense 184,984 166,351 11 174,271 6
--------- --------- --------- Income (loss) before income taxes and
minority interest (87,639) 117,329 (175) 123,493 (171) Income tax
expense (benefit) (29,632) 40,823 (173) 44,025 (167) Minority
interest, net of income taxes 123 40 208 33 273 --------- ---------
--------- Net income (loss) ($58,130) $76,466 (176)% $79,435 (173)%
========= ========= ========= Net income (loss) per common share
($0.37) $0.50 (174)% $0.51 (173)% Net income (loss) per common
share - assuming dilution ($0.37) $0.49 (173)% $0.50 (172)% Return
on average assets (1.04)% 1.44% (248)bp 1.44% (248)bp Return on
average equity (10.93)% 16.40% (2,733)bp 15.64% (2,657)bp
----------------------------------------------------------------------
SUMMARY OF OPERATIONS NINE MONTHS ENDED
------------------------------ ($ in thousands, except Sept. 30
Sept. 30 per-share data) 2005 2004 CHANGE --------- ---------
------ Interest income $882,313 $729,497 21% Interest expense
292,091 174,695 67 --------- --------- Net interest income 590,222
554,802 6 Provision for loan losses 226,700 36,250 525 ---------
--------- Net interest income after provision 363,522 518,552 (30)
--------- --------- Noninterest income: Service charges on deposits
147,850 133,637 11 Card-related fees 52,360 43,844 19 Mortgage
banking 14,841 28,792 (48) Retail investment fees 22,477 23,723 (5)
Trust fees 17,510 17,892 (2) Insurance 15,213 14,381 6 Investment
banking 20,291 12,454 63 Other service, collection and exchange
charges 17,446 16,210 8 Other operating income 18,419 14,964 23
Securities gains (losses), net 1,664 (20,387) 108 ---------
--------- Noninterest income 328,071 285,510 15 --------- ---------
Noninterest expense: Salaries and employee benefits 284,131 248,242
14 Occupancy and equipment 71,179 61,326 16 Data processing 31,071
28,791 8 Advertising and promotional expense 29,544 24,431 21
Stationery and supplies, postage and telecommunications 21,823
21,316 2 Amortization of purchase accounting intangibles 5,034
4,616 9 Foreclosed property expense, net (14,789) (708) N/M Other
operating expense 96,288 84,198 14 --------- --------- Noninterest
expense 524,281 472,212 11 --------- --------- Income (loss) before
income taxes and minority interest 167,312 331,850 (50) Income tax
expense (benefit) 60,323 115,942 (48) Minority interest, net of
income taxes (92) 71 (230) --------- --------- Net income (loss)
$107,081 $215,837 (50)% ========= ========= Net income (loss) per
common share $0.68 $1.40 (51)% Net income (loss) per common share -
assuming dilution $0.67 $1.37 (51)% Return on average assets 0.64%
1.44% (80)bp Return on average equity 6.99% 15.73% (874)bp *T
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