SEC Filing | Capital One Financial Corp.

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FORM 8-K AMENDMENT #1

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K/A

AMENDMENT No. 1 TO

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of

The Securities Exchange Act of 1934

Date of Report: January 6, 2006

Date of Earliest Event Reported: November 16, 2005

CAPITAL ONE FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

1-13300

54-1719854

(State or other jurisdiction

of incorporation)

(Commission File Number)

(IRS Employer

Identification No.)

1680 Capital One Drive,

McLean, Virginia

22102

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (703) 720-1000

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

On November 18, 2005 Capital One Financial Corporation (“Capital One” or the “Company”) filed a Form 8-K reporting the closing of its merger with Hibernia Corporation (“Hibernia”) on November 16, 2005. In that filing the Company indicated that it would amend the Form 8-K at a later date to include the financial information required by Item 9.01. This amendment to the November 18, 2005 Form 8-K is being filed to provide such financial information, which is attached as Exhibits 99.1, 99.2 and 99.3 to this report.

Item 9.01 Financial Statements and Exhibits.

(a)	Financial Statements of Businesses Acquired

The required consolidated financial statements of Hibernia as of and for the fiscal year ended December 31, 2004 and for the nine-month period ended September 30, 2005 are attached hereto as Exhibit 99.1 and 99.2, respectively, and are incorporated in their entirety herein by reference.

(b)	Pro Forma Financial Information

The required pro forma financial information as of September 30, 2005 and for the nine and twelve months ended September 30, 2005 and December 31, 2004, respectively, are attached hereto as Exhibit 99.3 and are incorporated in their entirety herein by reference.

(c)

Exhibits


Exhibit		Description
23.1		Consent of Ernst & Young LLP.

99.1		Audited consolidated financial statements of Hibernia Corporation as of and for the year ended December 31, 2004.

99.2		Unaudited consolidated financial statements of Hibernia Corporation as of and for the nine months September 30, 2005.

99.3		Preliminary Unaudited Pro Forma Condensed Combined Financial Information as of September 30, 2005 and for the nine and twelve months ended September 30, 2005 and December 31, 2004, respectively.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this Current Report on Form 8-K to be signed on its behalf by the undersigned hereunto duly authorized.


	CAPITAL ONE FINANCIAL CORPORATION

Dated: January 6, 2006	By:	/S/ GARY L. PERLIN
		Executive Vice President,
		Chief Financial Officer

EXHIBIT INDEX


23.1		Consent of Ernst & Young LLP.

99.1		Audited consolidated financial statements of Hibernia Corporation as of and for the year ended December 31, 2004.

99.2		Unaudited consolidated financial statements of Hibernia Corporation as of and for the nine months ended September 30, 2005.

99.3		Preliminary Unaudited Pro Forma Condensed Combined Financial Information as of September 30, 2005 and for the nine and twelve months ended September 30, 2005 and December 31, 2004, respectively.

Exhibit 23.1

Exhibit 23.1

Consent of Independent Auditors

We consent to the use of our reports dated February 23, 2005, with respect to the consolidated financial statements of Hibernia Corporation, and our report dated February 23, 2005, with respect to Hibernia Corporation management’s assessment of the effectiveness of internal control over financial reporting, and the effectiveness of internal control over financial reporting of Hibernia Corporation, incorporated by reference in Hibernia Corporation’s Annual Report (Form 10-K) for the year ended December 31, 2004, and the incorporation by reference of these reports in the Registration Statements, as listed below, of Capital One Financial Corporation and in the related Prospectuses, where applicable.


Registration Statement Number	Form	Description
33-80263	Form S-8	Marketing and Management Services Agreement
33-86986	Form S-8	1994 Stock Incentive Plan
33-91790	Form S-8	1995 Non-Employee Directors Stock Incentive Plan
33-97032	Form S-8	Amendment to 1994 Stock Incentive Plan
33-99748	Form S-3	Dividend Reinvestment and Stock Purchase Plan
333-42853	Form S-8	1994 Stock Incentive Plan
333-51637	Form S-8	1994 Stock Incentive Plan
333-57317	Form S-8	1994 Stock Incentive Plan
		1998 Special Option Program
333-60831	Form S-3	Acquisition of Summit Acceptance Corporation
333-78067	Form S-8	1994 Stock Incentive Plan
333-78609	Form S-8	1999 Stock Incentive Plan
333-78635	Form S-8	1999 Non-Employee Directors Stock Incentive Plan
333-91327	Form S-8	1994 Stock Incentive Plan
333-92345	Form S-8	1994 Stock Incentive Plan
333-43288	Form S-8	1994 Stock Incentive Plan
333-58628	Form S-8	1994 Stock Incentive Plan
333-61574	Form S-3	Registration of Securities for Resale
333-72822	Form S-8	1994 Stock Incentive Plan
333-72820	Form S-8	1999 Non-Employee Stock Incentive Plan
333-72832	Form S-3	Registration of Securities for Resale by Selling Stockholders in PeopleFirst Acquisition
333-76726	Form S-8	1994 Stock Incentive Plan
333-72820	Form S-8	1999 Non-Employee Directors Stock Incentive Plan
333-97127	Form S-8	2002 Associate Savings Plan
333-97125	Form S-3	2002 Dividend Reinvestment Stock Purchase Plan
333-97123	Form S-8	2002 Non-Executive Officer Stock Incentive Plan
333-97119	Form S-3	Common Stock, Debt Securities, Preferred Stock, Stock Purchase Contracts & Equity Units in the amount of $2 billion
333-100488	Form S-8	2002 Associate Stock Purchase Plan
333-117920	Form S-8	2004 Stock Incentive Plan
333-126795	Form S-3/A	Common Stock, Debt Securities, Preferred Stock, Stock Purchase Contracts & Equity Units in the amount of $2.5 billion
333-124428	Form S-4/A	Acquisition of Hibernia Corporation

/s/Ernst & Young

January 6, 2006

EXHIBIT 99.1

Exhibit 99.1

LOGO

February 23, 2005

Management’s Report on Internal Control over Financial Reporting

To the Board of Directors and Shareholders of Hibernia Corporation:

Management of Hibernia Corporation (the Company) is responsible for the preparation, integrity, and fair presentation of its published financial statements as of December 31, 2004, and for the year then ended. The consolidated financial statements of Hibernia Corporation have been prepared in accordance with accounting principles generally accepted in the United States and, as such, include some amounts that are based on judgments and estimates of management, giving due consideration to materiality. Management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Exchange Act rules 13a-15(f) and 15d-15(f).

Management has in place an internal accounting control system designed to safeguard corporate assets from material loss or misuse. The internal control system includes an organizational structure that provides appropriate delegation of authority and segregation of duties, established policies and procedures, and comprehensive internal audit and loan review programs. Management believes that this system provides assurance that assets are adequately safeguarded and that the accounting records, which are the basis for the preparation of all financial statements, are reliable. There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even effective internal control can provide only reasonable assurance with respect to financial statement preparation. Further, because of changes in conditions, the effectiveness of internal control may vary over time.

Management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2004. This evaluation was based on criteria for effective internal control over financial reporting described in “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, management concluded that the Company maintained effective internal control over financial reporting as of December 31, 2004.

Our management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2004 has been audited by Ernst & Young LLP, as stated in their report of independent registered public accounting firm, which is included herein.


/s/ J. Herbert Boydstun		/s/ Marsha M. Gassan
J. Herbert Boydstun President and Chief Executive Officer		Marsha M. Gassan Senior Executive Vice President and Chief Financial Officer

/s/ Jan M. Macaluso
Jan M. Macaluso Executive Vice President and Chief Accounting Officer

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Hibernia Corporation

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control over Financial Reporting, that Hibernia Corporation maintained effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Hibernia Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because management’s assessment and our audit were conducted to also meet the reporting requirements of Section 112 of the Federal Deposit Insurance Corporation Improvement Act (FDICIA), management’s assessment and our audit of Hibernia Corporation’s internal control over financial reporting included controls over the preparation of financial statements in accordance with the instructions for the preparation of Consolidated Financial Statements for Bank Holding Companies (Form FRY-9C). A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Hibernia Corporation maintained effective internal control over financial reporting as of December 31, 2004, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, Hibernia Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Hibernia Corporation as of December 31, 2004 and 2003, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2004 and our report dated February 23, 2005 expressed an unqualified opinion thereon.

/s/ Ernst & Young, LLP

New Orleans, Louisiana

February 23, 2005

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Hibernia Corporation

We have audited the accompanying consolidated balance sheets of Hibernia Corporation and Subsidiaries as of December 31, 2004 and 2003, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2004. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Hibernia Corporation and Subsidiaries at December 31, 2004 and 2003, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2004, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Hibernia Corporation’s internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 23, 2005, expressed an unqualified opinion thereon.

/s/ Ernst & Young, LLP

New Orleans, Louisiana

February 23, 2005

Consolidated Balance Sheets

HIBERNIA CORPORATION AND SUBSIDIARIES


December 31 ($ in thousands)	2004			2003
Assets
Cash and cash equivalents	$	1,151,066		$	957,611
Trading account assets		—			3,853
Securities available for sale		4,524,340			3,866,470
Securities held to maturity (estimated fair value of $36,564 and $61,633 at December 31, 2004 and 2003, respectively)		35,819			60,209
Mortgage loans held for sale		78,136			195,177
Loans, net of unearned income		15,719,216			12,882,986
Reserve for loan losses		(227,574	)		(213,275	)

Loans, net		15,491,642			12,669,711

Premises and equipment		293,356			217,399
Customers’ acceptance liability		141			131
Goodwill		337,441			209,114
Other intangible assets		33,328			130,996
Other assets		362,819			249,771

Total assets	$	22,308,088		$	18,560,442

Liabilities
Deposits:
Noninterest-bearing	$	3,264,190		$	2,827,642
Interest-bearing		14,114,756			11,331,877

Total deposits		17,378,946			14,159,519

Short-term borrowings		555,325			1,280,802
Liability on acceptances		141			131
Other liabilities		521,203			240,693
Debt		1,910,576			1,101,812

Total liabilities		20,366,191			16,782,957

Shareholders’ equity
Class A Common Stock, no par value:
Authorized - 300,000,000 shares; issued - 171,095,717 and 168,214,757 shares at December 31, 2004 and 2003, respectively		328,504			322,972
Surplus		562,969			515,289
Retained earnings		1,347,544			1,171,537
Treasury stock at cost - 15,850,266 and 12,953,260 shares at December 31, 2004 and 2003, respectively		(297,626	)		(226,970	)
Accumulated other comprehensive income		15,198			12,779
Unearned compensation		(14,692	)		(18,122	)

Total shareholders’ equity		1,941,897			1,777,485

Total liabilities and shareholders’ equity	$	22,308,088		$	18,560,442

See notes to consolidated financial statements.

Consolidated Income Statements

HIBERNIA CORPORATION AND SUBSIDIARIES


Year Ended December 31 ($ in thousands, except per-share data)	2004			2003			2002
Interest income
Interest and fees on loans	$	827,060		$	732,399		$	785,296
Interest on securities available for sale		162,026			147,265			160,022
Interest on securities held to maturity		2,486			5,207			11,575
Interest on short-term investments		4,217			3,424			6,158
Interest on mortgage loans held for sale		6,644			22,010			24,043

Total interest income		1,002,433			910,305			987,094

Interest expense
Interest on deposits		189,175			158,295			220,617
Interest on short-term borrowings		7,146			6,338			9,006
Interest on debt		55,439			74,919			53,234

Total interest expense		251,760			239,552			282,857

Net interest income		750,673			670,753			704,237
Provision for loan losses		48,250			60,050			80,625

Net interest income after provision for loan losses		702,423			610,703			623,612

Noninterest income
Service charges on deposits		181,684			157,748			138,857
Card-related fees		60,074			47,923			39,949
Mortgage banking		34,845			26,506			11,502
Retail investment fees		30,357			27,241			30,488
Trust fees		23,273			23,520			24,394
Insurance		18,725			18,181			16,137
Investment banking		18,660			12,460			15,033
Other service, collection and exchange charges		21,438			19,933			20,769
Other operating income		18,714			23,382			17,159
Securities losses, net		(20,344	)		(6,811	)		(13,353	)

Total noninterest income		387,426			350,083			300,935

Noninterest expense
Salaries and employee benefits		336,392			296,127			289,264
Occupancy expense, net		46,337			37,815			36,983
Equipment expense		37,260			32,842			31,238
Data processing expense		38,128			35,922			34,560
Advertising and promotional expense		31,698			23,710			22,471
Amortization of purchase accounting intangibles		6,442			5,055			5,940
Foreclosed property expense, net		(1,619	)		9,867			1,088
Other operating expense		145,493			123,045			120,183

Total noninterest expense		640,131			564,383			541,727

Income before income taxes and minority interest		449,718			396,403			382,820
Income tax expense		156,688			138,067			132,963
Minority interest, net of income tax expense		76			—			—

Net income	$	292,954		$	258,336		$	249,857

Net income per common share	$	1.90		$	1.67		$	1.59

Net income per common share - assuming dilution	$	1.86		$	1.64		$	1.56

See notes to consolidated financial statements.


Consolidated Statements of Changes in Shareholders’ Equity HIBERNIA CORPORATION AND SUBSIDIARIES ($ in thousands, except per-share data)
	Common Stock		Surplus			Retained Earnings			Treasury			Accumulated Other Comprehensive Income			Unearned Compensation			Comprehensive Income
Balances at December 31, 2001	$	311,715	$	446,900		$	850,295		$	(35,927	)	$	13,279		$	(26,483	)
Net income for 2002		—		—			249,857			—			—			—		$	249,857
Change in unrealized gains (losses) on securities, net of reclassification adjustments		—		—			—			—			28,568			—			28,568
Change in accumulated gains (losses) on cash flow hedges, net of reclassification adjustments		—		—			—			—			(16,460	)		—			(16,460	)

Comprehensive income																		$	261,965

Issuance of common stock:
Stock option plans		7,334		28,307			—			—			—			—
Restricted stock awards		155		731			—			—			—			—
Cash dividends declared on common ($.57 per share)		—		—			(89,442	)		—			—			—
Acquisition of treasury stock		—		—			—			(107,004	)		—			—
Allocation of ESOP shares		—		2,175			—			—			—			4,918
Net tax benefit related to stock option plans and ESOP		—		12,688			—			—			—			—
Other		—		(744	)		—			—			—			—

Balances at December 31, 2002		319,204		490,057			1,010,710			(142,931	)		25,387			(21,565	)

Net income for 2003		—		—			258,336			—			—			—		$	258,336
Change in unrealized gains (losses) on securities, net of reclassification adjustments		—		—			—			—			(34,675	)		—			(34,675	)
Change in accumulated gains (losses) on cash flow hedges, net of reclassification adjustments		—		—			—			—			22,067			—			22,067

Comprehensive income																		$	245,728

Issuance of common stock:
Stock option plans		3,652		20,074			—			—			—			—
Restricted stock awards		80		734			—			—			—			—
Directors’ compensation		—		337			—			464			—			—
Purchase warrants		—		(2,446	)		—			3,102			—			—
Cash dividends declared on common ($.63 per share)		—		—			(97,509	)		—			—			—
Acquisition of treasury stock		—		—			—			(87,605	)		—			—
Allocation of ESOP shares		—		2,339			—			—			—			3,443
Net tax benefit related to stock option plans and ESOP		—		4,210			—			—			—			—
Other		36		(16	)		—			—			—			—

Balances at December 31, 2003		322,972		515,289			1,171,537			(226,970	)		12,779			(18,122	)

Net income for 2004		—		—			292,954			—			—			—		$	292,954
Change in unrealized gains (losses) on securities, net of reclassification adjustments		—		—			—			—			(8,443	)		—			(8,443	)
Change in accumulated gains (losses) on cash flow hedges, net of reclassification adjustments		—		—			—			—			10,862			—			10,862

Comprehensive income																		$	295,373

Issuance of common stock:
Stock option plans		5,439		33,596			—			—			—			—
Restricted stock awards		93		1,096			—			—			—			—
Directors’ compensation		—		83			—			75			—			—
Cash dividends declared on common ($.76 per share)		—		—			(116,947	)		—			—			—
Acquisition of treasury stock		—		—			—			(70,731	)		—			—
Allocation of ESOP shares		—		3,163			—			—			—			3,430
Net tax benefit related to stock option plans and ESOP		—		9,742			—			—			—			—

Balances at December 31, 2004	$	328,504	$	562,969		$	1,347,544		$	(297,626	)	$	15,198		$	(14,692	)



See notes to consolidated financial statements.

Consolidated Statements of Cash Flows

HIBERNIA CORPORATION AND SUBSIDIARIES


Year Ended December 31 ($ in thousands)	2004			2003			2002
Operating activities
Net income	$	292,954		$	258,336		$	249,857
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		48,250			60,050			80,625
Minority interest in net income		76			—			—
Amortization of intangibles and deferred charges		11,420			67,972			57,889
Depreciation and amortization		37,895			33,566			31,449
Non-cash derivative instruments losses (gains), net		1,657			(548	)		(609	)
Non-cash compensation expense		798			498			886
Premium amortization, net		15,176			27,859			5,640
Realized securities losses, net		20,344			6,811			13,353
Losses (gains) on sales of assets, net		234			(11,861	)		(260	)
Provision for losses on foreclosed and other assets		552			11,134			912
Decrease in mortgage loans held for sale		149,236			325,385			57,669
Decrease (increase) in deferred income tax asset		(25,193	)		(916	)		9,929
Net tax benefit related to stock options and the employee
stock ownership plan		9,742			4,210			12,688
Decrease (increase) in interest receivable and other assets		40,594			(17,480	)		(16,897	)
Increase in interest payable and other liabilities		8,451			1,087			5,236

Net cash provided by operating activities		612,186			766,103			508,367

Investing activities
Purchases of securities available for sale		(2,145,801	)		(2,928,633	)		(5,464,046	)
Proceeds from maturities of securities available for sale		1,844,145			1,729,529			5,098,285
Proceeds from maturities of securities held to maturity		24,344			80,152			109,106
Proceeds from sales of securities available for sale		368,522			503,734			293,837
Net decrease (increase) in loans		(819,672	)		(880,404	)		3,105
Proceeds from sales of loans		36,639			172,610			21,105
Purchases of loans		(150,501	)		(745,730	)		(331,670	)
Acquisitions, net of cash acquired of $34,111 and $36 for the years ended December 31, 2004 and 2002, respectively		(217,815	)		—			(2,464	)
Purchases of premises, equipment and other assets		(88,957	)		(84,714	)		(87,004	)
Proceeds from sales of foreclosed assets and excess bank-owned property		9,036			8,499			6,275
Proceeds from sales of premises, equipment and other assets		39,106			10,081			1,021

Net cash used by investing activities		(1,100,954	)		(2,134,876	)		(352,450	)

Financing activities
Net increase in deposits		1,531,669			678,497			527,910
Net increase (decrease) in short-term borrowings		(725,477	)		705,354			(177,299	)
Proceeds from issuance of debt		703,720			300,000			100,000
Payments on debt		(679,046	)		(300,429	)		(40,742	)
Proceeds from issuance of common stock		39,035			24,382			35,641
Dividends paid		(116,947	)		(97,509	)		(89,442	)
Acquisition of treasury stock		(70,731	)		(87,605	)		(107,004	)

Net cash provided by financing activities		682,223			1,222,690			249,064

Increase (decrease) in cash and cash equivalents		193,455			(146,083	)		404,981
Cash and cash equivalents at beginning of year		957,611			1,103,694			698,713

Cash and cash equivalents at end of year	$	1,151,066		$	957,611		$	1,103,694

Supplemental disclosures
Cash paid during the year for:
Interest expense	$	247,058		$	247,377		$	289,533
Income taxes	$	168,250		$	122,500		$	104,750
Non-cash investing and financing activities:
Loans, bank premises and equipment and other assets transferred to foreclosed assets and excess bank-owned property	$	6,454		$	22,508		$	5,970
Acquisitions:
Fair value of assets acquired	$	2,751,647		$	—		$	2,535
Fair value of liabilities assumed	$	2,499,721		$	—		$	35

See notes to consolidated financial statements.

Notes to Consolidated Financial Statements

Hibernia Corporation and Subsidiaries

Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Hibernia Corporation (the Parent Company) is a financial holding company which, through its bank and nonbank subsidiaries, provides a broad array of financial products and services throughout Louisiana, Texas and portions of South Mississippi. The principal products and services offered include retail, small business, commercial, international, mortgage and private banking; leasing; investment banking; corporate finance; treasury management; merchant processing; insurance; and trust and investment management. Hibernia National Bank (the Bank), through a wholly owned subsidiary, also acts as a retail broker, providing access to alternative investment products, including stocks, bonds, mutual funds and annuities.

The accounting principles followed by Hibernia Corporation and Subsidiaries (the Company or Hibernia) and the methods of applying those principles conform with accounting principles generally accepted in the United States and those generally practiced within the banking industry.

CONSOLIDATION

The consolidated financial statements include the accounts of the Parent Company, its wholly owned subsidiaries and a consolidated variable interest entity. The effects of mergers accounted for as purchase transactions have been included from the date of consummation (see Note 2). All significant intercompany transactions and balances have been eliminated.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with stated maturities of three months or less when purchased to be cash equivalents.

SHORT-TERM INVESTMENTS

Short-term investments include interest-bearing time deposits in domestic banks, federal funds sold, securities purchased under agreements to resell and trading account assets. Included in trading account assets is an interest-only strip receivable resulting from a loan securitization and securities held by an investment banking subsidiary. Certain short-term investments are considered to be cash equivalents.

SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL AND SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

Securities purchased under agreements to resell and securities sold under agreements to repurchase are generally treated as collateralized financing transactions and are recorded at the amounts at which the securities were acquired or sold plus accrued interest. The fair value of securities pledged as collateral under these agreements is continually monitored to ensure protection of the Company’s assets.

SECURITIES

Management determines the appropriate classification of securities (trading, available for sale or held to maturity) at the time of purchase and re-evaluates this classification periodically. Securities classified as trading account assets are held for sale in anticipation of short-term market movements. Debt securities are classified as held to maturity when the Company has the positive intent and ability to hold the securities to maturity. Securities not classified as held to maturity or trading are classified as available for sale.

Securities classified as trading account assets are carried at market value and are included in short-term investments. Gains and losses, both realized and unrealized, are reflected in earnings as other operating income. Securities classified as held to maturity are stated at amortized cost. Securities classified as available for sale are stated at fair value, with unrealized gains and losses, net of tax, reported in shareholders’ equity and included in other comprehensive income. Securities with limited marketability, such as stocks of the Federal Reserve Bank and Federal Home Loan Bank, are carried at fair value, which approximates cost, and are included in securities available for sale.

The estimated fair value of securities is based on quoted market prices and prices obtained from independent pricing services, when available, or estimated by management for securities for which there is no public market. In establishing

values for securities for which there is no public market, including the Company’s private equity portfolio, the Company’s management considers, among other factors, the cost of the investment to the Company, developments since the acquisition of the investment, the financial condition and operating results of the investee, the long-term potential of the business of the investee, recent arm’s-length transactions involving similar securities, and expected initial public offering prices. For these investments, the Company has relied on financial data of the investees and, in many instances, on information from the Board of Directors and management of the investee companies as to the potential effect of future developments.

Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

The amortized cost of securities classified as held to maturity or available for sale is adjusted for amortization of premiums and accretion of discounts to maturity or, in the case of mortgage-backed securities, over the estimated life of the security. Amortization, accretion and accruing interest are included in interest income on securities using the level-yield method. Realized gains and losses on sales are included in net securities gains (losses). The cost of securities sold is determined based on the specific identification method.

The Company reviews investment securities for impairment at least quarterly. Impairment is considered to be other-than-temporary if it is likely that all amounts contractually due will not be received for debt securities and when there is no positive evidence indicating that an investment’s carrying amount is recoverable in the near term for equity securities. When impairment is considered other-than-temporary, the cost basis of the security is written down to fair value, with the impairment charge included in earnings in net securities gains (losses). The new cost basis is not changed for subsequent recoveries in fair value. Increases in fair value above cost are reflected net of tax in shareholders’ equity and included in other comprehensive income. In evaluating whether impairment is temporary or other-than-temporary, the Company considers, among other things, the time period the security has been in an unrealized loss position; the financial condition of the issuer and its industry; recommendations of investment advisors; economic forecasts; market or industry trends; changes in tax laws, regulations or other governmental policies significantly affecting the issuer; any downgrades from rating agencies; and any reduction or elimination of dividends. The intent and ability of the Company to hold a security for a period of time sufficient to allow for any anticipated recovery in fair value is also considered.

MORTGAGE LOANS HELD FOR SALE

Mortgage loans held for sale consist primarily of single-family residential loans collateralized by the underlying property. Mortgage loans held for sale that are covered by forward sales contracts are designated as hedged items. These mortgage loans are carried at cost, adjusted for changes in fair value based on sales commitments or current market quotes after the date of designation as a hedged item. Those loans not designated as hedged items are carried at the lower of aggregate cost or market. Market adjustments and realized gains and losses are classified as noninterest income.

LOANS

Loans are stated at the principal amounts outstanding, less unearned income and the reserve for loan losses. Interest on loans and accretion of unearned income are computed by methods which approximate a level rate of return on recorded principal. Loan origination and commitment fees and certain direct loan origination costs are deferred, and the net amount is amortized as an adjustment of the related loan’s yield over the life of the loan.

A loan’s past due or delinquency status is determined based on its contractual terms. Commercial and small business loans are placed in nonaccrual status at 90 days past due or sooner if, in management’s opinion, there is doubt concerning full collectibility of both principal and interest. Real estate secured consumer loans are placed in nonaccrual status at 180 days past due. All other consumer loans are subject to mandatory charge-off when any payment of principal or interest is more than 120 days delinquent and are therefore not placed in nonaccrual status prior to charge-off. Commercial and small business nonaccrual loans are considered to be impaired in accordance with the provisions of Statement 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 homogeneous loans and therefore are not individually evaluated for impairment under the provisions of SFAS No. 114. Nonaccrual loans are charged off when deemed uncollectible by management. Interest payments received on nonaccrual loans are applied to principal if there is doubt as to the collectibility of the principal; otherwise, these receipts are recorded as interest income. A loan remains in nonaccrual status until it is current as to principal and interest, and the borrower demonstrates the ability to fulfill the contractual obligation.

RESERVE FOR LOAN LOSSES

The reserve for loan losses is maintained to provide for probable credit losses related to specifically identified loans and for losses inherent in the loan portfolio that have been incurred as of the balance sheet date. The reserve is comprised of

specific reserves, general reserves and an unallocated reserve. Specific reserves are assessed for each loan that is reviewed for impairment or for which a probable loss has been identified. The reserve related to loans that are identified as impaired is based on discounted expected future cash flows (using the loan’s initial effective interest rate), the observable market value of the loan, or the estimated fair value of the collateral for certain collateral dependent loans. 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 primarily 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. These general reserves are then adjusted for other factors which could include the impact of expected losses, including 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 are also considered, as well as the results of loan reviews performed by internal and external examiners. 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.

The reserve for loan losses is based on management’s estimate of probable credit losses inherent in the loan portfolio; actual credit losses may vary from the current estimate. The reserve for loan losses is reviewed periodically, taking into consideration the risk characteristics of the loan portfolio, past charge-off experience, general economic conditions and other factors that warrant current recognition. As adjustments to the reserve for loan losses become necessary, they are reflected as a provision for loan losses in current earnings. Actual loan charge-offs are deducted from and subsequent recoveries are added to the reserve.

PREMISES AND EQUIPMENT

Premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are computed primarily using the straight-line method over the estimated useful lives of the assets, which generally are 10 to 20 years for buildings and 3 to 10 years for equipment, and over the shorter of the lease terms or the estimated lives of leasehold improvements.

CUSTOMERS’ ACCEPTANCE LIABILITIES AND LIABILITY ON ACCEPTANCES

Customers’ acceptance liabilities are recorded when funds are payable to another financial institution on behalf of the Company’s customer. At the time the amount is determined to be payable (due to a triggering event such as delivery of goods), a liability on acceptances is recorded to reflect the amount payable, offset with a customers’ acceptance liability receivable from the customer. Prior to the triggering event, the contractual amount of the agreement is included in standby letters of credit.

FORECLOSED ASSETS AND EXCESS BANK-OWNED PROPERTY

Foreclosed assets include real estate and other collateral acquired upon the default of loans. Foreclosed assets and excess bank-owned property are recorded at the fair value of the assets less estimated selling costs. The initial reduction of an outstanding loan amount to fair value upon transfer to foreclosed assets is deducted from the reserve for loan losses. Losses arising from the transfer of premises and equipment and other assets to excess bank-owned property or foreclosed assets are charged to expense. A valuation reserve for foreclosed assets and excess bank-owned property is maintained for subsequent valuation adjustments on a specific-property basis. Income and expenses associated with foreclosed assets and excess bank-owned property prior to sale are included in noninterest expense.

GOODWILL AND OTHER PURCHASE ACCOUNTING INTANGIBLES

Under the purchase method of accounting, in accordance with SFAS No. 141, “Business Combinations,” the purchase price in an acquisition is allocated to the estimated fair value of the assets acquired and liabilities assumed, including identifiable intangible assets. The excess of costs over the fair value of the net assets acquired is recorded as goodwill. The Company accounts for excess costs of net assets acquired in purchase transactions (goodwill) and other intangible assets in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets.” In accordance with these rules, goodwill and intangible assets deemed to have indefinite lives are not amortized, but are subject to impairment tests. Impairment testing is

a two-step process that first compares the fair value of a reporting unit with its carrying amount, and second, if necessary, measures impairment loss by comparing the implied fair value of the reporting unit goodwill with the carrying amount of that goodwill. The Company’s reporting units are operating segments as defined by SFAS No. 131, “Disclosure about Segments of an Enterprise and Related Information.” The Company’s reporting units are based on lines of business. Assets and liabilities are allocated to reporting units using the Company’s internal management reporting system. Goodwill is allocated directly to these reporting units, when applicable, or based on the allocation of loans to the reporting segments for each region in which the goodwill originated. When quoted market prices are not available for assets and liabilities, fair values are based on estimates using present value or other valuation techniques. These impairment tests are performed at a reporting unit level annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired. To the extent that impairment exists, write-downs to realizable value are recorded. Purchased intangible assets with finite useful lives are amortized using various methods over the period which each such asset is expected to contribute directly to the future cash flows of the Company.

Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

TRANSFERS AND SERVICING OF FINANCIAL ASSETS

The Company sells mortgage and other loans through secondary market securitizations. A transfer of financial assets is accounted for as a sale when control is surrendered over the asset transferred. Control is considered surrendered when 1) the transferred assets have been isolated from the transferor; 2) each transferee has the right to pledge or exchange the asset; and 3) the transferor does not maintain effective control over the assets either through any agreement that entitles or obligates the transferor to repurchase the assets or through the ability to unilaterally cause the holder to return specific assets. Upon consummation of the sale, the securitized loans are removed from the balance sheet and a gain or loss on the sale is recognized. If the securitized asset is retained rather than sold, the asset is reclassified on the balance sheet and no gain or loss is recognized.

The Company may retain residual interests in the securitized and sold assets, which may take the form of an interest-only strip receivable, a cash reserve account (securitization proceeds receivable) or a servicing asset. Gains and losses on sales of loans depend in part on the previous carrying amount of the financial assets involved in the transfer. These carrying amounts are allocated between the assets sold and the retained interests based on their relative fair values at the date of transfer. The fair value of retained interests are determined using quoted market prices, if available, or estimated based on the present value of expected future cash flows using management’s estimates of key assumptions. Key assumptions may include credit losses, prepayment speeds and discount rates commensurate with the risks involved.

Interest-only strip receivables are carried at fair value in trading account assets. Cash receipts are applied as a reduction of the balance. Securitization proceeds receivable are included in other assets. Changes in the fair value of retained interests are recorded as other operating income.

A servicing asset is recorded when the right to service loans for others is acquired through a purchase or retained upon the sale of loans. The fair value of capitalized servicing rights is based upon the present value of estimated future cash flows. Based upon current fair values, capitalized servicing rights are periodically assessed for impairment. To the extent that temporary impairment exists, write-downs are recognized in current earnings as an adjustment to the corresponding valuation allowance. Other-than-temporary impairment is recognized through a write-down of the asset with a corresponding reduction in the valuation allowance. Impairment is considered to be other-than-temporary when the Company determines that the carrying value is expected to continue to exceed the fair value for an extended period of time based on forecasted assumptions, including expected interest rate levels and prepayment speeds. For purposes of performing an impairment evaluation, the portfolio is stratified on the basis of certain risk characteristics including loan type and interest rate. Capitalized servicing rights are amortized over the period of estimated net servicing income, which considers appropriate prepayment assumptions.

RESERVE FOR LENDING RELATED COMMITMENTS

The Company maintains an allowance to cover probable credit losses inherent in lending related commitments, which include unfunded commitments to extend credit, letters of credit, financial guarantees (standby letters of credit) and derivative instruments. On December 31, 2004, this allowance was transferred from the reserve for loan losses to other liabilities. The adequacy of the reserve is assessed on a basis consistent with that of funded transactions. Prior to December 31, 2004, increases or decreases to this reserve were included in the provision for loan losses. Subsequent increases or decreases are reflected in noninterest expense.

TAXES

The Parent Company and its subsidiaries file a consolidated federal income tax return. The Company accounts for income taxes using the liability method. Temporary differences occur between the financial reporting and tax bases of assets and liabilities. Deferred tax assets and liabilities are recorded for these differences based on enacted tax rates and laws that will be in effect when the differences are expected to reverse.

Hibernia National Bank is subject to a Louisiana shareholders’ tax, which is based partly on income. The income portion is reported as state income tax. In addition, certain subsidiaries of the Parent Company and Hibernia National Bank are subject to Louisiana state income and franchise tax. The Texas operations of Hibernia National Bank and other subsidiaries of the Parent are subject to Texas franchise tax.

DERIVATIVE FINANCIAL INSTRUMENTS

The Company may enter into derivative contracts for the purposes of managing exposure to interest rate or foreign exchange risk or to meet the financing needs of its customers.

For derivatives designated as hedging the exposure to changes in the fair value of an asset or liability (fair value hedge), the gain or loss is recognized in earnings in the period of the fair value change together with the offsetting loss or gain on the hedged item attributable to the risk being hedged. Earnings will be affected to the extent to which the hedge is not effective in achieving offsetting changes in fair value. For derivatives designated as hedging exposure to variable cash flows of a forecasted transaction (cash flow hedge), the effective portion of the derivative’s gain or loss is initially reported as a component of other comprehensive income and subsequently reclassified into earnings when the forecasted transaction affects earnings or in certain circumstances, when the hedge is terminated. The ineffective portion of the gain or loss is reported in earnings immediately. For derivatives that are not designated as hedging instruments, changes in the fair value of the derivatives are recognized in earnings immediately.

Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

In applying hedge accounting for derivatives, the Company establishes a method for assessing the effectiveness of the hedging derivative and a measurement approach for determining the ineffective aspect of the hedge upon the inception of the hedge. These methods are consistent with the Company’s approach to managing risk.

STOCK OPTIONS

The Company provides stock-based compensation under plans which grant stock options to employees and directors (see Note 16). SFAS No. 123, “Accounting for Stock-Based Compensation,” defines financial accounting and reporting standards for stock-based compensation plans using a fair-value-based method of accounting for stock-based compensation. However, SFAS No. 123 also allows an entity to measure stock-based compensation cost using the intrinsic value method of Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees.” The Company has elected to account for its stock-based compensation plans under APB Opinion No. 25. In accordance with APB Opinion No. 25, compensation expense relating to stock options is not reflected in net income provided the exercise price of the stock options granted equals or exceeds the market value of the underlying common stock at the date of the grant. The Company’s practice has been to grant options at no less than the fair market value of the stock at the date of grant. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123 for stock options.


	Year ended December 31
($ in thousands, except per share data)	2004			2003			2002
Reported net income	$	292,954		$	258,336		$	249,857
Deduct: Stock option compensation expense under the fair value method, net of related tax effect (see Note 16)		(7,510	)		(6,021	)		(6,065	)

Pro forma net income	$	285,444		$	252,315		$	243,792

Reported net income per common share	$	1.90		$	1.67		$	1.59

Pro forma net income per common share	$	1.86		$	1.63		$	1.55

Reported net income per common share - assuming dilution	$	1.86		$	1.64		$	1.56

Pro forma net income per common share - assuming dilution	$	1.81		$	1.60		$	1.52

The fair values of the options were estimated using a Black-Scholes option valuation model. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. The option valuation model requires the input of highly subjective assumptions, including the expected stock price volatility. Changes in subjective input assumptions can materially affect the fair value estimate.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The determination of the allowance for loan losses, the valuation of mortgage servicing rights, the allocation of the purchase price in acquisitions and judgments regarding goodwill impairment are particularly critical because they involve a higher degree of complexity and subjectivity and require estimates and assumptions about uncertain matters. Actual results could differ from those estimates.

RECLASSIFICATION

Certain items included in the consolidated financial statements for 2003 and 2002 have been reclassified to conform with the 2004 presentation.

RECENT ACCOUNTING PRONOUNCEMENTS

In March 2004, the Securities and Exchange Commission (SEC) staff issued Staff Accounting Bulletin 105 (SAB 105), “Application of Accounting Principles to Loan Commitments.” SAB 105 informs registrants of the SEC staff’s view on the accounting for loan commitments that are subject to SFAS No. 133 Implementation Issue No. C13, which includes the Company’s mortgage loan interest rate lock commitments. Under the Company’s previous accounting policy, an asset was recorded upon inception of the commitment based on projected revenues, net of expenses, and adjusted upward or downward depending on whether interest rates had decreased or increased from the date of commitment to the valuation date. Under the new guidance, expected future cash flows from servicing rights must be excluded from projected net revenues. SAB 105 was effective for loan commitments entered into after March 31, 2004 that are accounted for as derivatives. The adoption of this guidance did not have a material impact on the financial condition or the operating results of the Company.

Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123 (revised 2004), “Share-Based Payment” (SFAS No. 123(R)). This statement is a revision to SFAS No. 123, “Accounting for Stock-Based Compensation” and supersedes APB Opinion No. 25, “Accounting for Shares Issued to Employees,” and related implementation guidance. This statement eliminates the alternative to use APB Opinion No. 25’s intrinsic value method of accounting that was provided in SFAS No. 123, as originally issued. As a result, this statement requires a public entity to measure the cost of employee services received in exchange for an award of equity based instruments based on the grant-date fair value of the award and recognize the cost over the period during which an employee is required to provide service in exchange for the award. In addition, this statement amends the treatment of award forfeitures and the accounting for the tax effects of share–based compensation awards. SFAS 123(R) is effective at the beginning of the first interim or annual period beginning after June 15, 2005 and applies to all awards granted, modified, repurchased or cancelled after that date. The Company anticipates that the adoption of SFAS No. 123(R) will decrease 2005 after tax net income per common share – assuming dilution by approximately $0.05 if the modified retrospective application is applied for periods prior to July 1, 2005.

Note 2 MERGERS

On May 13, 2004, the Company purchased all of the outstanding stock and options of Coastal Bancorp, Inc. (Coastal) for $231,014,000 in cash (including tax withholding). Coastal was the parent of Coastal Banc Holding Company, Inc., which owned Coastal Banc ssb, a Texas-chartered FDIC-insured state savings bank headquartered in Houston, Texas. This transaction significantly increased the Company’s presence in the Houston area and provided entry into Austin, Corpus Christi, the Rio Grande Valley and other communities in South Texas.

The acquisition was accounted for as a purchase in accordance with SFAS No. 141, “Business Combinations.” Under the purchase method of accounting, the purchase price was allocated to the assets acquired and the liabilities assumed based on their estimated fair values as of the purchase date. At May 13, 2004, the Company recorded fair values of $1,957,767,000 in loans, $2,738,087,000 in total assets, $1,695,936,000 in deposits and $2,498,754,000 in total liabilities. The excess of cost over the fair value of the net assets acquired (goodwill) totaled $116,934,000. Coastal goodwill was allocated to the Company’s reportable segments as follows: Consumer - $60,277,000, Small Business - $35,155,000 and Commercial - $21,502,000. In accordance with SFAS No. 142, the carrying amount of goodwill will not be amortized but will be subject to

annual impairment testing. In addition, a core deposit intangible of $23,596,000 was recorded and is being amortized on an accelerated basis over 10 years. The results of operations of Coastal have been included in the Company’s consolidated financial statements since the date of acquisition.

Unaudited pro forma consolidated operating results giving effect to the purchase of Coastal as if the transaction had occurred at the beginning of each period presented is included in the table below. These pro forma results combine historical results of Coastal into the Company’s operating results, with certain adjustments made for the estimated impact of purchase accounting adjustments and acquisition funding. In addition, pro forma information does not include the effect of anticipated savings resulting from the merger. Unaudited pro forma data is not necessarily indicative of the results that would have occurred had the acquisition taken place at the beginning of the periods presented or of future results.


	Year Ended December 31
($ in thousands, except per-share data)	2004		2003		2002
Net interest and noninterest income	$	1,437,241	$	1,393,565	$	1,443,608
Net income	$	295,965	$	271,776	$	267,475
Net income per common share	$	1.92	$	1.76	$	1.71
Net income per common share - assuming dilution	$	1.88	$	1.72	$	1.67

Included in the 2004 results are $6,448,000 of merger related expenses incurred by the Company. These merger-related expenses include items such as salaries and benefits, occupancy and equipment, data processing, advertising and other expenses associated with the merger and integration of Coastal.

On April 28, 2004, Hibernia National Bank, a subsidiary of Hibernia Corporation, purchased 50% of the outstanding shares of The MerchantNet.com Corporation (MerchantNet), with an option to purchase the remaining 50% at a later date. MerchantNet is a provider of payment solutions for merchants and is currently doing business under the name “Hibernia Merchant Services.” MerchantNet is included in the Company’s consolidated financial statements as it meets the definition of a variable interest entity and the Company is the primary beneficiary as defined in Financial Accounting Standards Board Interpretation (FIN) No. 46(R), “Consolidation of Variable Interest Entities.” The transaction was accounted for as a purchase in accordance with SFAS No. 141. The purchase price of $12,500,000 was allocated to the assets acquired and liabilities assumed based on their estimated fair values, resulting in goodwill totaling $11,393,000, which is included in the Company’s Commercial segment. In addition, a customer list intangible of $1,845,000 was recorded and is being amortized on an accelerated basis over 10 years. The results of MerchantNet’s operations have been included in the Company’s consolidated financial statements since the date of acquisition. Because the Company does not own 100% of MerchantNet, a liability for the minority ownership interest of the entity is included in other liabilities in the consolidated balance sheets and the net income relating to the minority interest, net of income tax, is deducted as a single line item in the consolidated income statements. Pro forma results of operations have not been presented as the effect of the MerchantNet acquisition was not considered material to the operations of the Company.

On April 1, 2002, the Company purchased Friedler/LaRocca Financial Partners, L.L.C. (Friedler/LaRocca), a firm specializing in life insurance and other financial services for wealthy clients, for a total purchase price of $2,500,000. Under the purchase method of accounting, the assets and liabilities of the purchased company were adjusted to their estimated fair values as of the purchase date. Pro forma results of operations have not been presented as the effect of the Friedler/LaRocca acquisition was not considered material to the operations of the Company.

Note 3 CASH AND CASH EQUIVALENTS

The following is a summary of cash and cash equivalents.


	December 31
($ in thousands)	2004		2003
Cash and due from banks	$	612,872	$	699,060
Federal funds sold		431,500		10,302
Securities purchased under agreements to resell		90,000		235,000
Interest-bearing time deposits in domestic banks		16,694		13,249

Total cash and cash equivalents	$	1,151,066	$	957,611

Note 4 SECURITIES

The following is a summary of securities classified as available for sale and held to maturity.


	December 31, 2004
($ in thousands)	Amortized Cost		Fair Value		Unrealized Gains		Unrealized Losses
Available for sale:
U.S. Treasuries	$	30,364	$	30,222	$	—	$	142
U.S. government agencies:
Mortgage-backed securities		3,483,752		3,494,482		21,002		10,272
Bonds		634,070		634,240		1,740		1,570
Stocks		63,840		57,200		—		6,640
States and political subdivisions		94,234		99,345		5,122		11
Other		208,979		208,851		274		402

Total securities available for sale	$	4,515,239	$	4,524,340	$	28,138	$	19,037

Held to maturity:
U.S. government agencies:
Mortgage-backed securities	$	35,819	$	36,564	$	748	$	3

Total securities held to maturity	$	35,819	$	36,564	$	748	$	3

Note 4 SECURITIES (continued)


	December 31, 2003
($ in thousands)	Amortized Cost		Fair Value		Unrealized Gains		Unrealized Losses
Available for sale:
U.S. Treasuries	$	30,680	$	31,209	$	529	$	—
U.S. government agencies:
Mortgage-backed securities		2,748,486		2,761,905		23,578		10,159
Bonds		764,564		765,780		10,457		9,241
Stocks		67,832		67,832		—		—
States and political subdivisions		124,940		133,242		8,319		17
Other		107,878		106,502		184		1,560

Total securities available for sale	$	3,844,380	$	3,866,470	$	43,067	$	20,977

Held to maturity:
U.S. government agencies:
Mortgage-backed securities	$	60,209	$	61,633	$	1,427	$	3

Total securities held to maturity	$	60,209	$	61,633	$	1,427	$	3

The following is a summary of realized gains and losses from sales and writedowns due to other–than–temporary impairment of securities available for sale.


	Year Ended December 31
($ in thousands)	2004			2003			2002
Realized gains	$	3,566		$	10,887		$	689
Realized losses		(18,403	)		(5,403	)		(25	)
Writedowns due to other–than–temporary impairment		(5,507	)		(12,295	)		(14,017	)

Securities losses, net	$	(20,344	)	$	(6,811	)	$	(13,353	)

Included in realized gains and losses are gains and losses on sales of private equity securities. Private equity gains totaled $1,501,000, $725,000 and $497,000 for the years ended December 31, 2004, 2003 and 2002, respectively. Private equity losses totaling $76,000 were incurred during 2004. Included in writedowns due to other-than-temporary impairment are losses associated with private equity securities totaling $1,515,000, $128,000 and $14,017,000 for the years ended December 31, 2004, 2003 and 2002, respectively. Private equity securities totaled $3,932,000 and $7,032,000 at December 31, 2004 and 2003, respectively.

The following is a summary of securities in an unrealized loss position at December 31, 2004 and 2003, by category and length of time that the individual securities have been in a continuous unrealized loss position.


	December 31, 2004
	Less than 12 Months				12 Months or Longer				Total
($ in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Available for sale:
U.S. Treasuries	$	30,222	$	142	$	—	$	—	$	30,222	$	142
U.S. government agencies:
Mortgage-backed securities		935,560		6,969		368,389		3,303		1,303,949		10,272
Bonds		300,847		1,545		223		25		301,070		1,570
Stocks		57,200		6,640		—		—		57,200		6,640
States and political subdivisions		2,742		2		246		9		2,988		11
Other		20,813		75		8,419		327		29,232		402

Total temporarily impaired available for sale	$	1,347,384	$	15,373	$	377,277	$	3,664	$	1,724,661	$	19,037

Held to maturity:
U.S. government agencies:
Mortgage-backed securities	$	—	$	—	$	300	$	3	$	300	$	3

Total temporarily impaired held to maturity	$	—	$	—	$	300	$	3	$	300	$	3

Note 4 SECURITIES (continued)


	December 31, 2003
	Less than 12 Months				12 Months or Longer				Total
($ in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Available for sale:
U.S. government agencies:
Mortgage-backed securities	$	1,041,412	$	10,045	$	4,954	$	114	$	1,046,366	$	10,159
Bonds		186,531		9,240		47		1		186,578		9,241
States and political subdivisions		34		6		463		11		497		17
Other		4,929		85		7,032		1,475		11,961		1,560

Total temporarily impaired available for sale	$	1,232,906	$	19,376	$	12,496	$	1,601	$	1,245,402	$	20,977

Held to maturity:
U.S. government agencies:
Mortgage-backed securities	$	857	$	3	$	—	$	—	$	857	$	3

Total temporarily impaired held to maturity	$	857	$	3	$	—	$	—	$	857	$	3

Included in U.S. government agency securities available for sale at December 31, 2004 are 26 individual debt securities which have been in a continuous unrealized loss position for 12 months or longer. These securities had fair values totaling $368,612,000 and unrealized losses totaling $3,328,000 at December 31, 2004. Included in states and political subdivisions securities available for sale is one individual debt security which has been in a continuous unrealized loss position for 12 months or longer. This security had a fair value of $246,000 and an unrealized loss of $9,000 at December 31, 2004. These U.S. government agency and municipal debt securities are primarily fixed rate securities that were acquired in a low interest rate environment. Interest rates have risen since acquisition causing the value of the debt securities to decline.

Included in other securities available for sale at December 31, 2004 are two private equity securities which have been in a continuous unrealized loss position for 12 months or longer. These securities had fair values totaling $3,519,000 and unrealized losses totaling $227,000 at December 31, 2004. These securities consist of equity interests in limited partnerships that invest in various other companies. One partnership has been impaired since 2001; however, the Company has recorded other-than-temporary impairment on a portion of this investment during this period of impairment, as information indicated that the impairment would not be recoverable. The other partnership has been impaired since the third quarter of 2002. In

establishing the fair value of these investments, the Company’s management considers, among other factors, the cost of the investment to the Company, developments since the acquisition of the investment, the financial condition and operating results of the investee, the long-term potential of the business of the investee, recent arm’s length transactions involving similar securities, and expected initial public offering prices. There is no public market for these private equity investments and the Company, in making its valuations, has relied on financial data of the investees and, in many instances, on information from the Board of Directors and management of the investee companies as to the potential effect of future developments. Based on all information available, including financial and other information provided by the investee, the Company considers this impairment to be temporary.

Also included in other securities at December 31, 2004 is a mutual fund with a fair value of $4,900,000 and an unrealized loss of $100,000. This mutual fund is a private, closed-end fund which invests in mortgage-backed securities in pre-defined areas. These mortgage-backed securities were acquired in a low interest rate environment. As interest rates have risen, the value of these securities has declined.

The Company considers the impairment on the available for sale securities that are in unrealized loss positions to be temporary. The Company believes that it will collect all amounts contractually due and recover its net investment, and that it has the intent and the ability to hold these securities until the fair value is at least equal to the carrying value.

Included in U.S. government agency securities held to maturity at December 31, 2004 is one individual debt security which has been in a continuous unrealized loss position for 12 months or longer. This security had a fair value of $300,000 and an unrealized loss of $3,000 at December 31, 2004. The Company believes it will collect all amounts contractually due on this security as it will be held until maturity.

Note 4 SECURITIES (continued)

Securities with carrying values of $3,936,867,000 and $3,682,617,000 at December 31, 2004 and 2003, respectively, were pledged to secure public or trust deposits or were sold under repurchase agreements. The following is a summary of pledged securities.


	December 31
($ in thousands)	2004		2003
Available for sale:
U.S. Treasuries	$	30,222	$	31,209
U.S. government agencies:
Mortgage-backed securities		3,154,947		2,701,056
Bonds		628,577		764,500
States and political subdivisions		87,293		125,610
Other		9		33

Total available for sale		3,901,048		3,622,408

Held to maturity:
U.S. government agencies:
Mortgage-backed securities		35,819		60,209

Total held to maturity		35,819		60,209

Total carrying value of pledged securities	$	3,936,867	$	3,682,617

The amortized cost and estimated fair value by maturity of securities are shown in the following table. Securities are classified according to their contractual maturities without consideration of principal amortization, potential prepayments or call options. Accordingly, actual maturities may differ from contractual maturities.


	December 31, 2004
($ in thousands)	Amortized Cost		Fair Value
Available for sale:
Due in 1 year or less	$	279,906	$	273,225
Due after 1 year through 5 years		224,398		224,803
Due after 5 years through 10 years		650,275		650,945
Due after 10 years		3,360,660		3,375,367

Total securities available for sale	$	4,515,239	$	4,524,340

Held to maturity:
Due after 1 years through 5 years	$	303	$	300
Due after 5 years through 10 years		8,549		8,713
Due after 10 years		26,967		27,551

Total securities held to maturity	$	35,819	$	36,564

Note 5 LOANS

The following is a summary of commercial and small business loans classified by repayment source and consumer loans classified by type.


	December 31
($ in thousands)	2004		2003
Commercial:
Commercial and industrial	$	1,240,460	$	1,051,349
Real estate		1,089,763		590,784
Services industry		728,171		699,253
Health care		207,703		237,162
Transportation, communications and utilities		141,389		141,978
Energy		433,252		387,514
Other		157,172		126,138

Total commercial		3,997,910		3,234,178

Small Business:
Commercial and industrial		883,595		725,495
Real estate		836,935		604,777
Services industry		755,292		654,871
Health care		229,833		188,234
Transportation, communications and utilities		109,163		99,501
Energy		49,523		29,612
Other		376,794		340,412

Total small business		3,241,135		2,642,902

Consumer:
Residential mortgages:
First mortgages		4,201,076		3,151,076
Junior liens		359,578		369,582
Real estate secured revolving credit		853,538		646,168
Indirect		2,422,919		2,234,653
Revolving credit:
Secured		9,734		11,758
Unsecured		120,378		106,659
Other:
Secured		271,298		309,327
Unsecured		241,650		176,683

Total consumer		8,480,171		7,005,906

Total loans	$	15,719,216	$	12,882,986

The following is a summary of nonperforming loans, foreclosed assets and excess bank-owned property.


	December 31
($ in thousands)	2004		2003
Nonaccrual loans	$	65,086	$	55,576
Restructured loans		—		—

Nonperforming loans		65,086		55,576

Foreclosed assets		11,685		11,512
Excess bank-owned property		986		678

Total nonperforming assets	$	77,757	$	67,766

Loans 90 days or more past due and still accruing	$	9,569	$	7,730

Note 5 LOANS (continued)

At December 31, 2004 and 2003, the recorded investment in loans that were considered to be impaired was $47,354,000 and $43,107,000, respectively. Included in the 2004 and 2003 amounts were $33,763,000 and $27,008,000, respectively, of impaired loans for which the related reserve for loan losses was $3,985,000 and $3,367,000, respectively. At

December 31, 2004 and 2003, impaired loans that did not require a reserve for loan losses amounted to $13,591,000 and $16,099,000, respectively. The average recorded investment in impaired loans during the years ended December 31, 2004, 2003 and 2002 was approximately $46,640,000, $42,851,000 and $55,205,000, respectively.

The amount of interest income actually recognized on nonperforming loans during 2004, 2003 and 2002 was approximately $2,547,000, $962,000 and $903,000, respectively, substantially all of which related to impaired loans. The amount of interest income that would have been recorded during 2004, 2003 and 2002 if these loans had been current in accordance with their original terms was approximately $5,038,000, $4,885,000 and $5,322,000, respectively. Interest payments received on impaired loans are applied to principal if there is doubt as to the collectibility of the principal; otherwise, these receipts are recorded as interest income.

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


	Year Ended December 31
($ in thousands)	2004			2003			2002
Balance at beginning of year	$	213,275		$	212,765		$	195,766
Loans charged off		(62,606	)		(73,271	)		(79,835	)
Recoveries		13,819			13,731			16,209

Net loans charged off		(48,787	)		(59,540	)		(63,626	)

Provision for loan losses		48,250			60,050			80,625
Addition due to purchase transaction		20,836			—			—
Transfer to a reserve for lending related commitments		(6,000	)		—			—

Balance at end of year	$	227,574		$	213,275		$	212,765

On December 31, 2004, the Company transferred its reserve for lending related commitments from the reserve for loan losses to other liabilities. This reserve is maintained to cover probable credit losses inherent in lending related commitments, which include unfunded commitments to extend credit, letters of credit, financial guarantees (standby letters of credit) and derivative instruments.

Note 6 LOAN SECURITIZATIONS

In June 2001, the Company sold fixed-rate indirect automobile loans totaling $592,177,000 in a securitization transaction. Under the terms of the agreement, the Company received annual servicing fees of approximately one percent of the outstanding balance of the automobile loans and maintained the option to repurchase the loans when the outstanding principal balance reached 10% of the original principal balance. The fair value of the retained interests at the date of the securitization included an interest-only strip receivable of $24,648,000, recorded as a trading asset, and a cash reserve account (securitization proceeds receivable) of $20,494,000, included in other assets. In August 2004, the Company exercised its option to repurchase the outstanding indirect auto loans, which totaled $58,225,000. The repurchase transaction resulted in a gain of $651,000, which was deferred and is being amortized as an adjustment to interest income on the loans over the estimated life of the repurchased portfolio. During 2004, $182,000 of this deferred gain was recognized as income.

At December 31, 2003, the outstanding principal balance of the securitized automobile loans totaled $111,062,000, of which $279,000 was past due 90 days or more. Net charge-offs on the securitized automobile loans totaled $941,000 and $2,982,000 during 2004 (through the repurchase date) and 2003, respectively. The related interest-only strip totaled $3,226,000 and the securitization proceeds receivable totaled $28,743,000 at December 31, 2003. Cash flows consisted of $625,000, $1,930,000 and $3,714,000 of servicing income and $224,000, $342,000 and $482,000 of interest on the securitization proceeds receivable in 2004, 2003 and 2002, respectively. The securitization proceeds receivable was increased by $1,560,000 and $3,644,000 during 2003 and 2002, respectively. Additionally, excess cash flows of $2,181,000, $5,634,000 and $12,103,000 were applied to reduce the balance of the interest-only strip receivable during 2004, 2003 and 2002, respectively. The retained interests were liquidated upon the repurchase of the outstanding loan balances in 2004, resulting in a cash receipt of $30,482,000.

Note 6 LOAN SECURITIZATIONS (continued)

From 1999 through 2001, the Company securitized and retained portions of its first residential mortgage loans with recourse provisions through the Federal National Mortgage Association (FNMA). The loans were reclassified to investment securities, which resulted in the retention of 100% of the interests in the securitizations. Under the recourse provisions with FNMA, the Company assumes the risk of borrower default and has established reserves to cover potential losses. For loans reclassified as available for sale securities, a servicing rights asset was recorded and is being amortized over the period of net servicing income. A servicing rights asset was not recorded on the loans reclassified as held to maturity securities. The

balance of these securitized loans, which are serviced by the Bank, totaled $71,255,000 and $115,937,000 at December 31, 2004 and 2003, respectively. Included in these balances are securitized loans 90 days or more past due of $591,000 and $349,000 at December 31, 2004 and 2003, respectively. Certain individual securities from these securitizations have been sold from the available for sale portfolio and control over these assets was surrendered. For securities that were sold, the remaining interests consist only of the servicing rights asset and the recourse provision. Investment securities resulting from mortgage loan securitizations had carrying values of $5,229,000 and $8,884,000 in securities available for sale at December 31, 2004 and 2003, respectively, and $35,819,000 and $60,209,000 in securities held to maturity at December 31, 2004 and 2003, respectively.

Note 7 PREMISES AND EQUIPMENT

The following tables detail premises and equipment and related depreciation and amortization expense.


($ in thousands)	December 31
	2004			2003
Land	$	83,487		$	55,966
Buildings		242,623			205,203
Leasehold improvements		45,589			38,096
Furniture and equipment		230,588			198,726

		602,287			497,991
Less accumulated depreciation and amortization		(308,931	)		(280,592	)

Total premises and equipment	$	293,356		$	217,399


($ in thousands)	Year Ended December 31
	2004		2003		2002
Provisions for depreciation and amortization included in:
Occupancy expense	$	11,313	$	10,108	$	10,153
Equipment expense		20,509		17,770		15,637

Total depreciation and amortization expense	$	31,822	$	27,878	$	25,790

Note 8 GOODWILL AND OTHER INTANGIBLE ASSETS

The Company accounts for goodwill and other intangible assets in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets.” Under these rules, goodwill and intangible assets deemed to have indefinite lives are not amortized, but are subject to annual impairment tests. Other intangible assets are amortized over their useful lives.

The carrying amount of goodwill not subject to amortization totaled $337,441,000 and $209,114,000 at December 31, 2004 and 2003, respectively, which was net of accumulated amortization of $66,914,000. At December 31, 2004, goodwill is included in the Company’s reportable segments as

Note 8 GOODWILL AND OTHER INTANGIBLE ASSETS (continued)

follows: Consumer - $162,767,000; Small Business - $83,495,000; Commercial - $91,171,000; and Investments and Public Funds - $8,000. The Company performed annual impairment tests as of September 30, 2004 and 2003, which did not indicate impairment of the Company’s recorded goodwill. Management is not aware of any changes in circumstances since the impairment testing that would indicate that goodwill might be impaired.

The Company records purchase accounting intangible assets that consist of core deposit intangibles, trust intangibles and customer lists intangibles, which are subject to amortization. These include both contractual and noncontractual customer relationships. The core deposit and trust intangibles reflect the value of deposit and trust customer relationships which arose from the purchases of financial institutions. The customer lists intangibles represent the purchase of customer lists and contracts from a merchant processing company and individual insurance agents or agencies. The following table summarizes the Company’s purchase accounting intangible assets included in other intangible assets.


	December 31, 2004						December 31, 2003
($ in thousands) Purchase accounting intangibles	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Core deposit	$	59,748	$	35,445	$	24,303	$	36,152	$	31,925	$	4,227
Trust		17,059		13,839		3,220		17,059		11,692		5,367
Customer lists		6,260		2,086		4,174		4,458		1,390		3,068

Total	$	83,067	$	51,370	$	31,697	$	57,669	$	45,007	$	12,662

Amortization expense relating to purchase accounting intangibles totaled $6,442,000, $5,055,000 and $5,940,000 for the years ended December 31, 2004, 2003 and 2002, respectively. The weighted-average amortization period of these assets is 9 years. Estimated future amortization expense is as follows: 2005 - $6,638,000; 2006 - $4,938,000; 2007 - $3,355,000; 2008 - $3,048,000; 2009 - $2,924,000; and thereafter - $10,794,000. These estimates do not assume the addition of any new purchase accounting intangibles.

Also included in other intangible assets are capitalized mortgage servicing rights with net carrying amounts of $1,631,000 and $118,334,000 at December 31, 2004 and 2003, respectively. The carrying amount at December 31, 2003 is net of a reserve for temporary impairment of $31,121,000. Amortization expense of mortgage servicing rights and the net reversal of (provision for) temporary impairment are recorded in noninterest income.

During 2004, the Company sold substantially all of its mortgage servicing portfolio (including excess servicing) for $123,983,000. The net carrying value of the capitalized mortgage servicing rights sold was $120,164,000. Excess servicing rights (which are included in other assets) with a net carrying value of $1,899,000 were included in this transaction. After recording expenses of $3,828,000 associated with the sale, the transaction resulted in a net loss of $1,908,000.

The following is a summary of the activity in capitalized mortgage servicing rights net of the valuation reserve for temporary impairment.


	Year Ended December 31
($ in thousands)	2004			2003			2002
Mortgage servicing rights at beginning of year	$	149,455		$	152,903		$	95,022
Additions		10,327			66,869			86,652
Acquired in merger		2,299			—			—
Amortization expense		(23,089	)		(44,438	)		(28,771	)
Other-than-temporary impairment		(8,007	)		(25,879	)		—
Sales		(129,354	)		—			—

Mortgage servicing rights at end of year		1,631			149,455			152,903

Valuation reserve for temporary impairment at beginning of year		(31,121	)		(38,500	)		(15,301	)
Reversal of (provision for) temporary impairment, net		14,000			(18,500	)		(23,199	)
Other-than-temporary impairment		8,007			25,879			—
Reversal due to sales		9,114			—			—

Valuation reserve for temporary impairment at end of year		—			(31,121	)		(38,500	)

Mortgage servicing rights, net at end of year	$	1,631		$	118,334		$	114,403

Note 9 TIME DEPOSITS

At December 31, 2004, time deposits with a remaining maturity of one year or more amounted to $2,433,346,000. Maturities of all time deposits are as follows: 2005 - $3,918,039,000; 2006 - $670,357,000; 2007 - $656,828,000; 2008 - $244,588,000; 2009 - $378,238,000; and thereafter - $483,335,000.

Domestic certificates of deposit of $100,000 or more amounted to $2,185,998,000 and $1,801,313,000 at December 31, 2004 and 2003, respectively. Interest on these certificates amounted to $42,896,000, $40,258,000 and $53,453,000 in 2004, 2003 and 2002, respectively.

Foreign deposits, which are deposit liabilities of the Cayman Island office of Hibernia National Bank, amounted to $936,758,000 and $703,183,000 at December 31, 2004 and 2003, respectively. These deposits are comprised primarily of individual deposits of $100,000 or more. Interest expense on foreign deposits amounted to $8,004,000, $5,668,000 and $8,418,000 for 2004, 2003 and 2002, respectively.

Note 10 SHORT-TERM BORROWINGS

The following is a summary of short-term borrowings.


	December 31
($ in thousands)	2004		2003
Securities sold under agreements to repurchase	$	475,252	$	613,805
Federal Reserve Bank treasury, tax and loan account		43,084		50,305
Federal funds purchased		36,989		616,692

Total short-term borrowings	$	555,325	$	1,280,802

Federal funds purchased and securities sold under agreements to repurchase generally mature within one to three days from the transaction date. The Federal Reserve Bank treasury, tax and loan account is an open-ended note option with the Federal Reserve Bank of Atlanta. The following is a summary of pertinent data related to short-term borrowings.


	December 31
($ in thousands)	2004			2003			2002
Outstanding at December 31	$	555,325		$	1,280,802		$	575,448
Maximum month-end outstandings	$	1,384,458		$	1,280,802		$	722,157
Average daily outstandings	$	719,386		$	709,553		$	625,611
Average rate during the year		0.99	%		0.89	%		1.44	%
Average rate at year end		1.69	%		0.80	%		1.14	%

Note 11 DEBT

The following is a summary of debt.


	December 31
($ in thousands)	2004		2003
Federal Home Loan Bank long-term advances	$	1,745,638	$	1,101,812
Subordinated notes		99,970		—
Subordinated debentures		64,929		—
Other debt		39		—

Total debt	$	1,910,576	$	1,101,812

The Federal Reserve Home Loan Bank (FHLB) advances are secured by the Company’s investment in FHLB stock and by a blanket floating lien on portions of the Company’s residential mortgage loan portfolio. FHLB stock totaled $117,976,000 and $72,575,000 at December 31, 2004 and 2003, respectively, and is included in securities available for sale.

The FHLB long-term advances include advances of $520,024,000 and $401,812,000 at December 31, 2004 and 2003, respectively, which accrue interest at fixed contractual rates and advances of $1,225,000,000 and $700,000,000 at December 31, 2004 and 2003, respectively, which accrue interest at variable rates. In connection with the Coastal acquisition, the Company assumed $722,250,000 of FHLB advances and recorded a fair value adjustment totaling $1,390,000. The fair value adjustment is being amortized over the lives of the related advances. The unamortized balance of the fair value adjustment totaled $614,000 at December 31, 2004. Interest expense was decreased by $776,000 during 2004 as a result of amortization of the fair value adjustment.

The long-term fixed rate advances amortize and/or mature at various dates through 2019. The weighted average rate on the fixed rate advances totaled 3.88% and 5.47% at December 31, 2004 and 2003, respectively. Included in the fixed rate advances are convertible advances totaling $200,000,000 and $400,000,000 at December 31, 2004 and 2003, respectively. A $200,000,000 advance matured during 2004. The remaining convertible advance matures in 2008, accrues interest at a rate of 5.28%, and is convertible by the FHLB to a floating rate at quarterly intervals which began in June, 2003. The Company has the option to repay the advance in the event of conversion by the FHLB. The variable rate advances mature at various dates through 2009. The weighted average rate on the variable advances totaled 1.54% and 1.19% during 2004 and 2003, respectively.

The Company instituted hedges against the effect of rising interest rates on a portion of its variable rate FHLB advances by entering into interest rate swap agreements whereby the Company receives quarterly variable rate (LIBOR) payments and pays fixed rates on notional amounts. The notional amounts of these interest rate swaps totaled $700,000,000 and $400,000,000 at December 31, 2004 and 2003, respectively. The maturities of these interest rate swaps match the maturities of the underlying debt, which ranged from 2007 to 2009 at December 31, 2004. Net settlements on the swap agreements are accrued monthly, effectively converting the related FHLB advances from variable rates to weighted average fixed rates of 3.53% and 4.51% at December 31, 2004 and 2003, respectively.

As part of the financing for the purchase of Coastal Bancorp, Inc., Hibernia Corporation issued $100,000,000 in ten year 5.35% fixed-rate subordinated notes in April 2004, at a discount of $32,000. The discount is being amortized over the life of the subordinated notes. In March 2004, the Company entered into a $50,000,000 forward-start interest rate swap agreement and a $50,000,000 treasury interest rate lock agreement to protect against a rise in interest rates. The contracts were terminated upon the issuance of the subordinated notes, resulting in a gain of $4,692,000. This gain and debt issuance costs of $939,000 have been deferred and are being recognized over the life of the subordinated notes using the level-yield method, resulting in an effective rate of 4.98%.

In connection with the Coastal merger, the Company assumed $51,546,000 aggregate principal amount of 9.0% junior subordinated debentures due June 30, 2032. The debentures were issued by Coastal to Coastal Capital Trust I (CCTI), a business trust. The Company became the sponsor of CCTI which issued 2,000,000 of 9.0% Cumulative Trust Preferred Securities. The trust preferred securities have a liquidation amount of $25 per security and are traded on the Nasdaq National Market. The Company also assumed $10,310,000 aggregate principal amount of floating rate (LIBOR plus 3.05%, reset quarterly) junior subordinated debentures due June 30, 2033. The debentures were issued by Coastal to Coastal Capital Trust II (CCTII), a business trust. The Company became the sponsor of CCTII which issued 10,000 floating rate (LIBOR plus 3.05%, reset quarterly) trust preferred securities to a private institutional investor. These trust preferred securities have a liquidation rate of $1,000 per security. The weighted average contractual interest rate on these floating rate instruments was 4.69% during 2004. The trust preferred securities represent an interest in the Company’s junior subordinated debentures, which were purchased by the business trusts and have substantially the same payment terms as the trust preferred securities. The junior subordinated debentures are the only assets of CCTI and II and interest payments from the debentures, payable quarterly, finance the distributions paid on the trust preferred securities. The trust preferred securities are subject to mandatory redemption at the liquidation preference, in whole or in part, upon repayment of the junior subordinated debentures at maturity or their earlier redemption. The junior subordinated debentures are redeemable prior to the maturity date, at the option of the Company, in whole or in part, subject to the terms of the trust indentures, on or after June 30, 2007 and June 30, 2008, for the subordinated debentures payable to CCTI and CCTII, respectively. The junior subordinated debentures are also redeemable at any time in whole, but not in part, upon the occurrence of specific events defined within the trust indentures. The Company has the option to defer interest payments on either junior subordinated debenture for a period not to exceed 20 consecutive quarters. The subordinated debentures were recorded on the Company’s books at their fair value on May 13, 2004, which totaled $65,704,000. The fair value adjustment of $3,847,000 is being amortized over the estimated life of the subordinated debentures, which is assumed to terminate at the earliest redemption date. The unamortized balance of the fair value adjustment totaled $3,073,000 at December 31, 2004. Interest expense for 2004 was decreased by $774,000 as a result of the amortization of this fair value adjustment. Debt issuance costs associated with CCTI and CCTII are also being amortized over the estimated lives of the instruments. Unamortized debt issuance costs totaled $1,645,000 at December 31, 2004. Amortization of debt issuance costs increased interest expense by $416,000 in 2004. A portion of these subordinated debentures qualifies as Tier 1 Capital under Federal Reserve Bank regulatory capital rules.

The other debt outstanding as of December 31, 2004 consists of a note payable by MerchantNet, which is due in monthly installment payments through 2006.

Maturities of debt are as follows: 2005 - $382,143,000; 2006 - $316,427,000; 2007 - $105,776,000; 2008 - $314,297,000; 2009 - $603,825,000; and thereafter - - $188,108,000.

Note 12 OTHER ASSETS AND OTHER LIABILITIES

The following are summaries of other assets and other liabilities.


	December 31
($ in thousands)	2004		2003
Other assets:
Proceeds receivable from sale of mortgage servicing rights	$	85,986	$	—
Accrued interest receivable		80,436		69,577
Deferred income taxes		45,405		12,657
Accounts receivable		43,485		33,060
Fair value derivative assets		27,394		34,364
Cash surrender value of life insurance		24,839		26,667
Prepaid expenses		15,059		8,275
Foreclosed assets and excess bank-owned property		12,671		12,190
Securitization proceeds receivable		—		28,743
Other		27,544		24,238

Total other assets	$	362,819	$	249,771

Other liabilities:
Trade date securities payable	$	329,743	$	59,931
Trade accounts payable and accrued liabilities		89,611		73,815
Accrued interest payable		21,428		16,726
Fair value derivative liabilities		19,099		34,363
Other		61,322		55,858

Total other liabilities	$	521,203	$	240,693

Note 13 PREFERRED AND COMMON STOCK

The Company has authorized 100,000,000 shares of no par value preferred stock. There were no preferred shares issued and outstanding at December 31, 2004 or 2003.

The Company has authorized 300,000,000 shares of no par value Class A Common Stock. There were 171,095,717 and 168,214,757 shares issued and 155,245,451 and 155,261,497 shares outstanding at December 31, 2004 and 2003, respectively. The Company held 15,850,266 and 12,953,260 shares of Class A Common Stock in treasury at December 31, 2004 and 2003, respectively. The Company repurchased 2,882,000, 4,454,000, and 5,452,000 shares of common stock under buyback programs at a total cost of $70,158,000, $87,527,000, and $105,175,000 during 2004, 2003 and 2002, respectively.

As partial consideration in the July 6, 2000 acquisition of Rosenthal Agency, Inc., an insurance brokerage firm, the Company issued 790,888 common stock purchase warrants recorded at a fair value of $2,000,000. Each warrant was convertible into one share of Class A Common Stock at an exercise price of $13.12 per share. The warrants became exercisable July 7, 2003 and were exercised during 2003.

Note 14 EMPLOYEE BENEFIT PLANS

The Company maintains a defined-contribution benefit plan under Section 401(k) of the Internal Revenue Code, the Retirement Security Plan (RSP). Substantially all employees who have completed one year of service are eligible to participate in the RSP. Employees contribute a portion of their compensation with the Company matching 100% of the first 5%. The matching contributions are invested in Hibernia Class A Common Stock and are charged to employee benefits expense. Participants may elect to immediately transfer Company contributions received to any of the plan’s other investment options. At December 31, 2004, the RSP owned approximately 3,878,000 shares of Hibernia Class A Common Stock. The Company’s contributions to the RSP totaled $9,350,000 in 2004, $8,673,000 in 2003 and $8,071,000 in 2002.

The Company maintains incentive pay and bonus programs for certain employees. Costs of these programs were $70,819,000, $58,803,000 and $58,252,000 for the years ended December 31, 2004, 2003 and 2002, respectively.

Note 15 EMPLOYEE STOCK OWNERSHIP PLAN

The Company has an internally-leveraged employee stock ownership plan (ESOP) in which substantially all employees participate. The ESOP owned approximately 3,364,000 and 3,523,000 shares of Hibernia Class A Common Stock at December 31, 2004 and 2003, respectively. The outstanding debt obligation of the ESOP totaled $14,692,000 and $18,122,000 at December 31, 2004 and 2003, respectively. The Bank makes annual contributions to the ESOP in an amount determined by its Board of Directors (or a committee authorized by the Board of Directors), but at least equal to the ESOP’s

minimum debt service less dividends received by the ESOP. Dividends received by the ESOP in 2004, 2003 and 2002 were used to pay debt service, and it is anticipated that this practice will continue in the future. The ESOP shares initially were pledged as collateral for its debt. As the debt is repaid, shares are released from collateral and allocated to active participants.

The debt of the ESOP is recorded as debt of the Parent Company, and the shares pledged as collateral are reported as unearned compensation in equity. Hibernia National Bank’s loan asset and the Parent Company’s debt liability are eliminated in consolidation. As shares are committed to be released, the Company reports compensation expense equal to the current market value of the shares, and the shares become outstanding for net income per common share computations. Dividends on allocated ESOP shares are recorded as a reduction of retained earnings; dividends on unallocated ESOP shares are recorded as a reduction of debt and accrued interest by the Parent Company.

Compensation expense of $5,406,000, $4,881,000 and $5,971,000 relating to the ESOP was recorded during 2004, 2003 and 2002, respectively. The ESOP held 2,218,000 and 2,093,000 allocated shares and 1,146,000 and 1,430,000 suspense shares at December 31, 2004 and 2003, respectively. The fair value of the suspense shares at December 31, 2004 and 2003 was $33,814,000 and $33,622,000, respectively.

Note 16 STOCK OPTIONS

SFAS No. 123, “Accounting for Stock-Based Compensation,” defines financial accounting and reporting standards for stock-based compensation plans. Those plans include all arrangements by which employees and directors receive shares of stock or other equity instruments of a company, or a company incurs liabilities to employees or directors in amounts based on the price of the stock. SFAS No. 123 defines a fair-value-based method of accounting for stock-based compensation. However, SFAS No. 123 also allows an entity to continue to measure stock-based compensation cost using the intrinsic value method of APB Opinion No. 25, “Accounting for Stock Issued to Employees.” Entities electing to retain the accounting prescribed in APB No. 25 must make pro forma disclosures of net income, net income per common share and net income per common share - assuming dilution as if the fair-value-based method of accounting defined in SFAS No. 123 had been applied. The Company retained the provisions of APB No. 25 for expense recognition purposes. Under APB No. 25, because the exercise price of the Company’s stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized.

The Company’s stock option plans provide incentive and nonqualified options to various key employees and non-employee directors. The Company’s practice has been to grant options at no less than the fair market value of the stock at the date of grant. Until October 1997, options granted to non-employee directors were granted under the 1987 Stock Option Plan; after October 1997 through January 2003, those options were granted under the 1993 Directors’ Stock Option Plan. Under those plans, options granted to non-employee directors upon inception of service as a director and certain options granted to directors who retire as employees vest six months from the date of grant. Other options granted to directors under those plans and options granted to employees under the 1987 Stock Option Plan and the Long-Term Incentive Plan generally become exercisable in the following increments: 50% 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. All options vest immediately upon a change in control of the Company. Existing options granted under these plans remain outstanding under the original terms of the plans.

During 2001, an option was granted to a former chief executive officer, prior to his separation from the Company, under an individual stock option plan referred to as the 2001 Nonqualified Stock Option Plan. That option vested in July 2001.

Options granted to employees and directors under the plans described above generally 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 unless the holder leaves the employ of the Company other than through retirement, death or disability, in which case the options expire at the date of termination. Options granted under the Long-Term Incentive Plan and the 1993 Directors’ Stock Option Plan generally expire 10 years from the date of grant, although they may expire earlier if the holder dies, retires, becomes permanently disabled or otherwise leaves the employ of the Company (in which case the options expire at various times ranging from 90 days to 12 months).

During 2003, shareholders approved the 2003 Long-Term Incentive Compensation Plan (2003 Plan). The 2003 Plan supersedes and replaces the Company’s Long-Term Incentive Plan and replaces the 1993 Directors’ Stock Option Plan. Options that are granted to employees under the 2003 Plan that vest based on length of service (as opposed to performance measures) generally are exercisable in the same increments as those issued under the Long-Term Incentive Plan, although they may vest earlier in the event of termination of employment as a result of death, disability or retirement or in the event of a change in control of the Company. Options issued to non-employee directors under the 2003 Plan vest immediately. Stock issued to non-employee directors pursuant to the exercise of those options (other than those used to pay the exercise price, if permitted) is subject to a minimum one-year holding period. Options issued under the 2003 Plan generally expire 10 years from the date of grant, although they may expire earlier if (i) the holder leaves the employ or service of the Company other

than through retirement, death or disability, in which case (except as provided below) vested options expire in 90 days (or at original expiration date, if earlier), or (ii) the holder retires, dies or becomes disabled, in which case vested options expire in three years (or at original expiration date, if earlier). All options vest immediately upon a change of control of the Company. Unvested options are forfeited upon termination. As to options issued after September 22, 2004, upon termination for certain specific elements of cause (as defined in the 2003 plan) vested options are also forfeited.

The option granted under the 2001 Nonqualified Stock Option Plan expires January 31, 2006, unless the holder dies, in which case the option expires one year following the death (but not later than January 31, 2006). Shares to be issued upon the exercise of the option granted under the 2001 Nonqualified Stock Option Plan are to be issued out of the Company’s treasury stock.

The following summarizes the option activity in the plans during 2004, 2003 and 2002. At December 31, 2004 there were 7,038,353 shares available for grant under the 2003 Long-Term Incentive Compensation Plan. There are no shares available for grant under the 1987 Stock Option Plan, the Long-Term Incentive Plan, the 1993 Directors’ Stock Option Plan and the 2001 Nonqualified Stock Option Plan.


	Incentive		Nonqualified		Total		Weighted- Average Exercise Price
1987 Stock Option Plan:
Outstanding, December 31, 2001	7,500		1,008,336		1,015,836		$	6.19
Exercised	(7,500	)	(988,336	)	(995,836	)	$	6.15

Outstanding, December 31, 2002	—		20,000		20,000		$	8.31
Exercised	—		(15,000	)	(15,000	)	$	8.46

Outstanding, December 31, 2003	—		5,000		5,000		$	7.88
Exercised	—		(5,000	)	(5,000	)	$	7.88

Outstanding, December 31, 2004	—		—		—			—

Long-Term Incentive Plan:
Outstanding, December 31, 2001	—		12,101,615		12,101,615		$	12.82
Granted (weighted-average fair value $4.87 per share)	—		2,880,522		2,880,522		$	17.97
Canceled	—		(394,924	)	(394,924	)	$	15.06
Exercised	—		(2,840,385	)	(2,840,385	)	$	10.56

Outstanding, December 31, 2002	—		11,746,828		11,746,828		$	14.56
Granted (weighted-average fair value $4.15 per share)	—		2,962,760		2,962,760		$	18.52
Canceled	—		(669,359	)	(669,359	)	$	16.56
Exercised	—		(1,746,544	)	(1,746,544	)	$	12.56

Outstanding, December 31, 2003	—		12,293,685		12,293,685		$	15.69
Canceled	—		(181,997	)	(181,997	)	$	17.63
Exercised	—		(2,766,507	)	(2,766,507	)	$	13.81

Outstanding, December 31, 2004	—		9,345,181		9,345,181		$	16.20

Exercisable, December 31, 2004	—		4,976,544		4,976,544		$	14.83

1993 Directors’ Stock Option Plan:
Outstanding, December 31, 2001	—		402,500		402,500		$	12.91
Granted (weighted-average fair value $5.47 per share)	—		70,000		70,000		$	19.80
Exercised	—		(18,750	)	(18,750	)	$	12.15

Outstanding, December 31, 2002	—		453,750		453,750		$	14.01
Exercised	—		(146,250	)	(146,250	)	$	12.22

Outstanding, December 31, 2003	—		307,500		307,500		$	14.86
Canceled	—		(5,000	)	(5,000	)	$	21.72
Exercised	—		(60,000	)	(60,000	)	$	13.22

Outstanding, December 31, 2004	—		242,500		242,500		$	15.12

Exercisable, December 31, 2004	—		210,000		210,000		$	14.60


	Incentive	Nonqualified		Total		Weighted- Average Exercise Price
2001 Nonqualified Stock Option Plan:
Outstanding, December 31, 2002	—	250,000		250,000		$	13.84

Outstanding, December 31, 2003	—	250,000		250,000		$	13.84

Outstanding, December 31, 2004	—	250,000		250,000		$	13.84

Exercisable, December 31, 2004	—	250,000		250,000		$	13.84

2003 Long - Term Incentive Compensation Plan:
Granted (weighted-average fair value $4.14 per share)	—	67,250		67,250		$	18.80
Exercised	—	(5,000	)	(5,000	)	$	18.23

Outstanding, December 31, 2003	—	62,250		62,250		$	18.85
Granted (weighted-average fair value $5.45 per share)	—	2,681,971		2,681,971		$	23.23
Canceled	—	(60,435	)	(60,435	)	$	23.23
Exercised	—	(4,000	)	(4,000	)	$	18.23

Outstanding, December 31, 2004	—	2,679,786		2,679,786		$	23.13

Exercisable, December 31, 2004	—	98,250		98,250		$	20.47

In addition to the above option activity in the plans, 38,565 and 30,950 shares of restricted stock were awarded under the 2003 Long-Term Incentive Compensation Plan during the years ended December 31, 2004 and 2003, respectively, and 3,000 and 44,627 shares of restricted stock were awarded under the Long-Term Incentive Plan during the years ended December 31, 2003 and 2002, respectively. The following table presents the weighted-average remaining life by plan as of December 31, 2004 for options outstanding within the stated exercise price ranges.


	Outstanding				Exercisable
Exercise Price Range Per Share	Number of Options	Weighted- Average Exercise Price		Weighted- Average Remaining Life	Number of Options	Weighted- Average Exercise Price
Long-Term Incentive Plan:
$6.94 to $12.13	1,007,842	$	10.03	4.25 years	1,007,842	$	10.03
$13.31 to $17.15	2,865,692	$	14.39	4.86 years	2,335,934	$	14.58
$17.75 to $18.54	5,421,397	$	18.28	7.01 years	1,585,768	$	18.11
$18.89 to $20.22	50,250	$	19.45	3.63 years	47,000	$	19.47

1993 Directors’ Stock Option Plan:
$8.13 to $10.44	61,250	$	10.03	3.18 years	61,250	$	10.03
$11.81 to $15.48	98,750	$	13.69	4.41 years	88,750	$	13.49
$19.80 to $21.72	82,500	$	20.62	5.61 years	60,000	$	20.92

2001 Nonqualified Stock Option Plan:
$13.84	250,000	$	13.84	1.07 years	250,000	$	13.84

2003 Long - Term Incentive Compensation Plan:
$18.23 to $21.99	108,000	$	20.24	8.84 years	91,000	$	20.25
$22.97 to $23.65	2,559,786	$	23.23	9.08 years	7,250	$	23.23
$26.36 to $29.25	12,000	$	28.68	9.90 years	—		—

The following pro forma information was determined as if the Company had accounted for stock options using the fair-value-based method as defined in SFAS No. 123, in which the estimated fair value of the options granted is amortized to expense on a straight-line basis over the options’ vesting period. The fair value of the options was estimated using a Black-Scholes option valuation model with the following weighted-average assumptions for 2004, 2003 and 2002, respectively: risk-free interest rates of 3.41%, 3.25% and 4.68%; expected dividend yields of 3.10%, 3.24% and 3.11%; expected volatility factors of the market price of the Hibernia Class A Common Stock of 29%, 30% and 33%; and an expected life of the options of six years.

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. The option valuation model requires the input of highly subjective assumptions, including the expected stock price volatility. Changes in the subjective input assumptions can materially affect the fair value estimate.


	Year Ended December 31
	2004				2003				2002
($ in thousands, except per-share data)	As Reported		Pro Forma		As Reported		Pro Forma		As Reported		Pro Forma
Net income	$	292,954	$	285,444	$	258,336	$	252,315	$	249,857	$	243,792
Net income per common share	$	1.90	$	1.86	$	1.67	$	1.63	$	1.59	$	1.55
Net income per common share - assuming dilution	$	1.86	$	1.81	$	1.64	$	1.60	$	1.56	$	1.52

Note 17 MORTGAGE BANKING

The following is a summary of the components of mortgage banking income.


	Year Ended December 31
($ in thousands)	2004			2003			2002
Mortgage loan origination and servicing fees	$	33,942		$	38,205		$	35,485
Amortization of mortgage servicing rights		(23,089	)		(44,438	)		(28,771	)
Reversal of (provision for) temporary impairment of mortgage servicing rights		14,000			(18,500	)		(23,199	)
Gain on sales of mortgage loans		11,900			51,239			27,987
Loss on sale of mortgage servicing portfolio		(1,908	)		—			—

Total mortgage banking	$	34,845		$	26,506		$	11,502

Note 18 LEASES

The Company leases its headquarters, operations center and certain other office space, premises and equipment under non-cancelable operating leases which expire at various dates through 2035. Certain of the leases have escalation clauses and renewal options ranging from one to 50 years.

Total rental expense (none of which represents contingent rentals) included in occupancy and equipment expense was $19,768,000, $15,875,000 and $16,030,000 in 2004, 2003 and 2002, respectively.

Minimum rental commitments for long-term operating leases are as follows: 2005 - $18,626,000; 2006 - $20,737,000; 2007 - $19,450,000; 2008 - $15,412,000; 2009 - $8,110,000; and thereafter - $40,409,000.

Note 19 OTHER OPERATING EXPENSE

The following is a summary of other operating expense.


	Year Ended December 31
($ in thousands)	2004		2003		2002
State taxes on equity	$	17,575	$	16,237	$	15,875
Card-related processing expense		12,330		8,836		6,914
Telecommunications		9,940		9,005		9,345
Stationery and supplies		9,721		7,875		8,394
Loan collection expense		9,117		9,451		10,222
Postage		8,962		8,229		7,838
Professional fees		8,054		7,674		9,518
Regulatory expense		4,670		4,254		4,156
Other		65,124		51,484		47,921

Total other operating expense	$	145,493	$	123,045	$	120,183

Note 20 INCOME TAXES

Income tax expense includes amounts currently payable and amounts deferred to or from other years as a result of differences in the timing of recognition of income and expense for financial reporting and federal tax purposes. The following is a summary of the components of income tax expense.


	Year Ended December 31
($ in thousands)	2004			2003			2002
Current tax expense:
Federal income tax	$	173,965		$	130,907		$	113,944
State income tax		7,069			7,989			8,433

Total current tax expense		181,034			138,896			122,377

Deferred tax expense (benefit):
Federal income tax		(24,346	)		(829	)		10,586

Total deferred tax expense (benefit)		(24,346	)		(829	)		10,586

Income tax expense	$	156,688		$	138,067		$	132,963

The preceding table does not reflect the tax effects of unrealized gains and losses on securities and cash flow hedges that are included in shareholders’ equity, or the tax effects recorded in shareholders’ equity related to the Company’s stock option plans and employee stock ownership plan. As a result of these tax effects, shareholders’ equity increased by $8,439,000, $10,998,000 and $6,169,000 in 2004, 2003 and 2002, respectively.

The following is a reconciliation of the federal statutory income tax rate to the Company’s effective rate.


	Year Ended December 31
	2004					2003					2002
($ in thousands)	Amount			Rate		Amount			Rate		Amount			Rate
Tax expense based on federal statutory rate	$	157,401		35.0	%	$	138,741		35.0	%	$	133,987		35.0	%
Tax-exempt interest		(3,674	)	(0.8	)		(4,244	)	(1.1	)		(4,997	)	(1.3	)
State income tax, net of federal benefit		4,595		1.0			5,193		1.3			5,482		1.4
Other		(1,634	)	(0.4	)		(1,623	)	(0.4	)		(1,509	)	(0.4	)

Income tax expense	$	156,688		34.8	%	$	138,067		34.8	%	$	132,963		34.7	%

Deferred income taxes are based on differences between the bases of assets and liabilities for financial statement purposes and tax reporting purposes and capital loss and net operating loss carryforwards. The tax effects of the cumulative temporary differences and loss carryforwards which create deferred tax assets and liabilities are detailed in the following table.


	December 31
($ in thousands)	2004		2003
Deferred tax assets:
Reserve for loan losses	$	81,751	$	74,646
Accrued expenses		10,970		10,883
Securities writedowns		10,022		10,178
Deferred compensation		7,307		7,158
Loan fees		3,205		2,792
Net unrealized losses on cash flow hedges		—		850
Alternative minimum tax credit carryforward		1,316		—
Other		15,934		13,878

Total deferred tax assets		130,505		120,385

Deferred tax liabilities:
Leasing		21,447		24,936
Depreciation		18,648		17,084
Goodwill and other purchase accounting intangibles		10,427		—
Net unrealized gains on cash flow hedges		4,999		—
Net unrealized gains on securities available for sale		3,186		7,732
Mortgage servicing rights		508		36,321
Other		18,090		13,860

Total deferred tax liabilities		77,305		99,933

Deferred tax assets, net of deferred tax liabilities		53,200		20,452

Deferred tax valuation allowance		7,795		7,795

Total net deferred tax asset	$	45,405	$	12,657

Management assesses realizability of the net deferred tax asset based on the Company’s ability to first, recover taxes previously paid and, second, generate taxable income and capital gains in the future. The securities writedowns, when realized for tax purposes, will be capital losses for which the Company will need to generate capital gains in order to utilize these capital losses. A deferred tax valuation allowance of $7,795,000 has been established to reduce the deferred tax asset related to securities writedowns to the estimated realizable value.

Included in deferred tax assets at December 31, 2004 are $1,316,000 in alternative minimum tax credit carryforwards which do not expire.

Note 21 NET INCOME PER COMMON SHARE DATA

The following sets forth the computation of net income per common share and net income per common share - assuming dilution.


	Year Ended December 31
($ in thousands, except per-share data)	2004		2003		2002
Numerator:
Net income	$	292,954	$	258,336	$	249,857
Effect of dilutive securities		—		—		—

Numerator for net income per common share - assuming dilution	$	292,954	$	258,336	$	249,857

Denominator:
Denominator for net income per common share (weighted-average shares outstanding)		153,858,514		154,500,054		156,808,005
Effect of dilutive securities:
Stock options		3,604,839		3,036,045		2,905,523
Purchase warrants		—		—		253,359
Restricted stock awards		35,553		64,125		90,277

Denominator for net income per common share - assuming dilution		157,498,906		157,600,224		160,057,164

Net income per common share	$	1.90	$	1.67	$	1.59

Net income per common share - assuming dilution	$	1.86	$	1.64	$	1.56

The weighted-average shares outstanding exclude 1,353,000, 1,620,221 and 1,952,030 average common shares in 2004, 2003 and 2002, respectively, held by the Hibernia ESOP (see Note 15) which have not been committed to be released.

Options with an exercise price greater than the average market price of the Company’s Class A Common Stock for the year are antidilutive and, therefore, are not included in the computation of net income per common share - assuming dilution. During 2004 there were 12,000 antidilutive options outstanding (which had exercise prices ranging from $26.36 to $29.25 per option share), during 2003 there were 73,000 antidilutive options outstanding (which had exercise prices ranging from $19.86 to $22.97 per option share) and during 2002 there were 218,500 antidilutive options outstanding (which had exercise prices ranging from $19.50 to $21.72 per option share).

Note 22 COMPREHENSIVE INCOME

The following is a summary of the components of other comprehensive income.


($ in thousands)	Before Income Taxes			Income Tax Expense (Benefit)			After Income Taxes
Year ended December 31, 2004
Unrealized gains (losses) on securities available for sale, net	$	(24,147	)	$	(8,451	)	$	(15,696	)
Reclassification adjustment for net (gains) losses realized in net income		11,158			3,905			7,253

Unrealized gains (losses) on securities available for sale, net		(12,989	)		(4,546	)		(8,443	)

Unrealized gains (losses) on cash flow hedges, net		15,850			5,548			10,302
Reclassification adjustment for net (gains) losses realized in net income		861			301			560

Unrealized gains (losses) on cash flow hedges, net		16,711			5,849			10,862

Other comprehensive income	$	3,722		$	1,303		$	2,419

Year ended December 31, 2003
Unrealized gains (losses) on securities available for sale, net	$	(39,630	)	$	(13,870	)	$	(25,760	)
Reclassification adjustment for net (gains) losses realized in net income		(13,716	)		(4,801	)		(8,915	)

Unrealized gains (losses) on securities available for sale, net		(53,346	)		(18,671	)		(34,675	)

Unrealized gains (losses) on cash flow hedges, net		10,376			3,632			6,744
Reclassification adjustment for net (gains) losses realized in net income		23,574			8,251			15,323

Unrealized gains (losses) on cash flow hedges, net		33,950			11,883			22,067

Other comprehensive income	$	(19,396	)	$	(6,788	)	$	(12,608	)

Year ended December 31, 2002
Unrealized gains (losses) on securities available for sale, net	$	43,990		$	15,397		$	28,593
Reclassification adjustment for net (gains) losses realized in net income		(39	)		(14	)		(25	)

Unrealized gains (losses) on securities available for sale, net		43,951			15,383			28,568

Unrealized gains (losses) on cash flow hedges, net		(25,324	)		(8,864	)		(16,460	)
Reclassification adjustment for net (gains) losses realized in net income		—			—			—

Unrealized gains (losses) on cash flow hedges, net		(25,324	)		(8,864	)		(16,460	)

Other comprehensive income	$	18,627		$	6,519		$	12,108

The following is a summary of the components of accumulated other comprehensive income.


	December 31
($ in thousands)	2004		2003
Unrealized gains on securities available for sale, net	$	5,915	$	14,358
Unrealized gains (losses) on cash flow hedges, net		9,283		(1,579	)

Total accumulated other comprehensive income	$	15,198	$	12,779

Note 23 DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

The Company maintains positions in a variety of derivative financial instruments. Many of these positions are customer-oriented and include interest rate swaps, options, caps, floors and foreign exchange contracts. Matched positions are established for these customer-oriented activities to minimize risk to the Company. Additionally, the Company enters into forward sales contracts for its own account related to mortgage origination activity. These contracts protect the Company against changes in the fair value of mortgage loans held for sale (as well as anticipated loan fundings) due to changes in market conditions, primarily the interest rate environment. Portions of these contracts are designated as fair value hedges. The Company also enters into interest rate swap agreements to manage interest rate risk on a portion of its FHLB advances and certain certificates of deposit as well as foreign exchange forward contracts to minimize risk on loans which will be repaid in foreign currencies. These contracts are designated as hedges.

Interest rate contracts are entered into by the Company in order to manage interest rate exposure. Interest rate contracts involve the risk of dealing with counterparties and their ability to meet contractual terms. These counterparties must receive appropriate credit approval before the Company enters into such interest rate contracts.

The amounts disclosed in the following table represent the notional amounts and estimated fair values of derivative financial instruments which were not designated as hedges at December 31, 2004 and 2003. Notional principal amounts express the volume of these derivative financial instruments although the amounts potentially subject to credit and market risk are much smaller. The estimated fair values represent the net present values of the expected future cash flows of these derivative financial instruments, based on quoted market prices, dealer quotes and prices obtained from independent pricing services. Positive fair values of the derivative contracts are reported in other assets, negative fair values are reported in other liabilities.


	December 31
	2004					2003
($ in thousands)	Notional Amount		Estimated Fair Value			Notional Amount		Estimated Fair Value
Interest rate swaps:
Assets	$	957,663	$	16,969		$	1,066,327	$	31,703
Liabilities	$	850,645	$	(13,603	)	$	921,822	$	(27,069	)
Options, caps and floors held	$	15,000	$	—		$	32,248	$	603
Options, caps and floors written	$	15,000	$	—		$	32,248	$	(603	)
Mortgage interest rate lock commitments	$	51,708	$	(281	)	$	189,107	$	2,004
Mortgage forward sales contracts	$	51,708	$	154		$	189,107	$	(1,764	)
Foreign exchange contracts:
Purchased	$	22	$	—		$	404	$	38
Sold	$	22	$	—		$	408	$	(33	)

Noninterest income of $424,000, $2,492,000 and $1,982,000 was recognized on customer-related interest rate contracts not designated as hedges during 2004, 2003 and 2002, respectively. Also during 2004, 2003 and 2002, noninterest income was reduced by $368,000 and $412,000, and increased by $230,000, respectively, relating to the value of interest rate lock commitment derivatives and the related forward sales contracts resulting from the Company’s mortgage origination activity.

The amounts disclosed in the following table represent the notional amounts and estimated fair values of derivative financial instruments which were designated as hedges at December 31, 2004 and 2003. Notional principal amounts express the volume of these derivative financial instruments although the amounts potentially subject to credit and market risk are much smaller. The estimated fair values represent the net present values of the expected future cash flows of these derivative financial instruments, based on quoted market prices, dealer quotes and prices obtained from independent pricing services. Positive fair values of the derivative contracts are reported in other assets. Negative fair values of derivative contracts are reported in other liabilities. For fair value hedges, the change in the estimated fair value of the hedged item adjusts the carrying amount of the hedged item.


	December 31, 2004										December 31, 2003
						Hedged Item										Hedged Item
($ in thousands)	Notional Amount		Estimated Fair Value			Hedged Amount		Change in Estimated Fair Value			Notional Amount		Estimated Fair Value			Hedged Amount		Change in Estimated Fair Value
Fair value hedges:
Mortgage forward sales contracts	$	69,284	$	27							$	141,265	$	(2,465	)
Mortgage loans held for sale						$	69,284	$	(27	)						$	141,265	$	2,465
Interest rate swaps relating to certificates of deposit:
Assets	$	42,750	$	222							$	—	$	—
Liabilities	$	425,500	$	(5,101	)						$	—	$	—
Certificates of deposit						$	467,742	$	4,861							$	—	$	—
Foreign exchange contracts	$	—	$	—							$	7,665	$	16
Foreign-denominated loans						$	—	$	—							$	7,665	$	(16	)
Cash flow hedges:
Interest rate swaps relating to FHLB advances:
Assets	$	650,000	$	10,022							$	—	$	—
Liabilities	$	50,000	$	(114	)						$	400,000	$	(2,429	)

Fair value hedges: Portions of the forward sales contracts relating to mortgage loans held for sale are designated as fair value hedges. The purpose of these contracts is to protect the Company from the risk that changes in the interest rate environment will affect the sales price of loans when they are eventually sold. As interest rates rise, the decline in the value of the loans is offset by the increase in the value of the forward sales contracts. Conversely, as interest rates decline, the value of the forward sales contracts decreases, but the value of the loans increases, resulting in no impact on earnings. There was no effect on income related to hedge ineffectiveness in 2004, 2003 or 2002.

During 2004, the Company entered into interest rate swap agreements that modify the Company’s exposure to interest rate risk by effectively converting a portion of the Company’s brokered and public fund certificates of deposit from fixed rates to variable rates. The maturities and call features of these interest rate swaps match the features of the hedged deposits. As interest rates fall, the decline in the value of the certificates of deposit is offset by the increase in the value of the interest rate swaps. Conversely, as interest rates rise, the value of the underlying deposits increase, but the value of the interest rate swaps decrease, resulting in no impact on earnings. Hedge ineffectiveness on these transactions resulted in a reduction of noninterest income of $18,000 in 2004. As a result of these swaps, interest expense on deposits was reduced by $5,066,000 during 2004, which is the difference between the fixed and floating rates for the period the swaps were in effect.

The Company enters into forward exchange contracts to hedge certain expected loan payments denominated in foreign currencies. The purpose of these derivative contracts is to protect the Company from risk that changes in the foreign exchange rates will affect the value of the foreign-denominated loans. Changes in the fair value of the foreign exchange contracts are offset by changes in the fair value of the corresponding hedged loans, resulting in no impact on earnings.

Cash flow hedges: The Company enters into interest rate swap agreements that effectively modify the Company’s exposure to interest rate risk by converting a portion of the Company’s variable rate FHLB advances to fixed rates. The maturities of these interest rate swaps match the maturities of the underlying debt, with various maturities from 2007 to 2009. These contracts are designated as cash flow hedges. These agreements involve the receipt of floating rate amounts in exchange for fixed-rate interest payments over the life of the agreements without an exchange of the underlying principal amount. There was no effect on income related to hedge ineffectiveness in 2004, 2003 or 2002. As a result of these swaps, interest expense was increased by $9,673,000, $21,121,000 and $19,176,000 for the years ended December 31, 2004, 2003 and 2002, respectively. This impact represents the difference between fixed and floating rates for the period the swaps were in effect. As interest is accrued monthly on the underlying FHLB advances, the fair value of the swaps recorded in other comprehensive income is adjusted and the current month’s swap payable or receivable is recorded in interest expense. In accordance with the provisions of SFAS No. 133 for cash flow hedges, the hedged FHLB advances are not marked to market and therefore are not reflected in the preceding table.

In March 2004, the Company entered into a $50,000,000 forward-start interest rate swap agreement and a $50,000,000 treasury interest rate lock agreement to protect against a rise in interest rates on subordinated notes issued in April 2004. The contracts were terminated upon the issuance of the subordinated notes, resulting in a gain of $4,692,000. This gain has been deferred and is being recognized over the life of the subordinated notes using the level-yield method. A total of $469,000 relating to this deferred gain is expected to be recognized in 2005.

During 2003, the Company prepaid a five-year $300 million variable-rate FHLB advance and terminated the related interest rate swap agreement. The cost associated with the termination of the related swap agreement was $19,690,000, which was recorded in interest expense.

Note 24 COMMITMENTS AND CONTINGENCIES

In the normal course of business, the Company enters into a number of financial commitments. Commitments to extend credit are legally binding, conditional agreements generally having fixed expiration or termination dates and specified interest rates and purposes. These commitments generally require customers to maintain certain credit standards. Collateral requirements and loan-to-value ratios are the same as those for funded transactions and are established based on management’s credit assessment of the customer. Commitments may expire without being drawn upon. Therefore, the total commitment amount does not necessarily represent future requirements.

On December 31, 2004, the Company transferred its reserve for lending related commitments, which includes unfunded commitments to extend credit, letters of credit, financial guarantees (standby letters of credit) and derivative instruments from the reserve for loan losses to other liabilities. The reserve totaled $6,000,000 at December 31, 2004.

Effective January 1, 2003, the Company adopted the recognition and measurement provisions of FASB Interpretation No 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” The recognition and measurement provisions of the interpretation were applicable on a prospective basis to certain guarantees issued or modified after December 31, 2002 and require the guarantor to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. Of the standby letters of credit and financial guarantees outstanding at December 31, 2004 and 2003, $499,299,000 and $248,970,000, respectively, relate to guarantees entered into after January 1, 2003, which have negative fair values of $7,262,000 and $2,591,000, respectively and are included in other liabilities.

The following is a summary of the contractual amounts of financial commitments at December 31, 2004 and 2003.


	December 31
($ in thousands)	2004		2003
Commitments to extend credit	$	4,307,301	$	3,561,661
Letters of credit and financial guarantees	$	662,931	$	562,659

In December 2003, the Company entered into a binding commitment by signing a definitive merger agreement with Coastal. The merger was completed in the second quarter of 2004. See Note 2 for further discussion of the merger.

The Company is a party to certain legal proceedings arising from matters incidental to its business. Management and counsel are of the opinion that these actions will not have a material effect on the financial condition or operating results of the Company.

Note 25 FAIR VALUE OF FINANCIAL INSTRUMENTS

Generally accepted accounting principles require disclosure of fair value information about financial instruments for which it is practicable to estimate fair value, whether or not the financial instruments are recognized in the financial statements. When quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. The derived fair value estimates cannot be substantiated through comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. Certain financial instruments and all non-financial instruments are excluded from these disclosure requirements. Further, the disclosures do not include estimated fair values for items which are not financial instruments but which represent significant value to the Company, including core deposit intangibles, trust operations and other fee-generating businesses. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.

The carrying amount of cash and cash equivalents, trading account assets, mortgage loans held for sale, noninterest-bearing deposits and short-term borrowings approximates the estimated fair value of these financial instruments. The estimated fair value of securities is based on quoted market prices and prices obtained from independent pricing services, when available, or estimated by management using various factors for securities for which there is no public market. The estimated fair value of loans, interest-bearing deposits and debt is based on present values using applicable risk-adjusted spreads to the appropriate yield curve to approximate current interest rates applicable to each category of these financial instruments. The estimated fair value of mortgage servicing rights is based on present values of estimated future cash flows. Mortgage servicing rights are valued on an individual loan basis, grouped in tranches stratified by loan type, rate type (fixed vs. adjustable) and interest rate. The estimated fair value of commitments to extend credit and letters of credit and financial guarantees are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing.

Interest rates are not adjusted for changes in credit risk of performing commercial and small business loans for which there are no known credit concerns. Management segregates loans in appropriate risk categories and believes the risk factor embedded in the interest rates results in a fair valuation of these loans on an entry-value basis.

Variances between the carrying amount and the estimated fair value of loans reflect both credit risk and interest rate risk. The Company is protected against changes in credit risk by the reserve for loan losses which totaled $227,574,000 and $213,275,000 at December 31, 2004 and 2003, respectively. In addition, credit risk exposure on loans is mitigated by many factors including maintaining a diversified portfolio and obtaining collateral or other forms of credit support from borrowers. The loan portfolio is diversified by loan type, industry and borrower. The requirements for collateral, covenants or guarantees are assessed as part of the Company’s underwriting process based on the loan type and the borrower’s creditworthiness. The Company’s credit policies provide standards with respect to monitoring and valuation of collateral.

The fair value estimates presented are based on information available to management as of December 31, 2004 and 2003. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, these amounts have not been revalued for purposes of these financial statements since those dates. Therefore, current estimates of fair value may differ significantly from the amounts presented.


	December 31
	2004				2003
($ in thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Assets
Cash and cash equivalents	$	1,151,066	$	1,151,066	$	957,611	$	957,611
Trading account assets	$	—	$	—	$	3,853	$	3,853
Securities available for sale	$	4,524,340	$	4,524,340	$	3,866,470	$	3,866,470
Securities held to maturity	$	35,819	$	36,564	$	60,209	$	61,633
Mortgage loans held for sale	$	78,136	$	78,136	$	195,177	$	195,177
Commercial loans	$	3,997,910	$	3,999,265	$	3,234,178	$	3,242,837
Small business loans	$	3,241,135	$	3,253,989	$	2,642,902	$	2,661,307
Consumer loans	$	8,480,171	$	8,331,164	$	7,005,906	$	7,056,031
Mortgage servicing rights, net	$	1,631	$	1,799	$	118,334	$	123,043

Liabilities
Noninterest-bearing deposits	$	3,264,190	$	3,264,190	$	2,827,642	$	2,827,642
Interest-bearing deposits	$	14,114,756	$	14,143,813	$	11,331,877	$	11,387,857
Short-term borrowings	$	555,325	$	555,325	$	1,280,802	$	1,280,802
Debt	$	1,910,576	$	1,941,006	$	1,101,812	$	1,144,530

The following table represents the contractual amounts and estimated fair value of other financial instruments.


	December 31
	2004					2003
($ in thousands)	Contract Amount		Fair Value			Contract Amount		Fair Value
Commitments to extend credit	$	4,307,301	$	(17,199	)	$	3,561,661	$	(14,600	)
Letters of credit and financial guarantees	$	662,931	$	(9,590	)	$	562,659	$	(5,834	)

See Note 23 for fair value information on derivative financial instruments.

Note 26 RELATED-PARTY TRANSACTIONS

Certain directors and officers of the Company, members of their immediate families and entities in which they or members of their immediate families have principal ownership interests are customers of and have other transactions with the Company in the ordinary course of business. As customers, related parties engage in various transactions including but not limited to loans, deposits and securities sold under repurchase agreements.

Loans to these parties are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable third-party transactions and do not involve more than normal risks of collectibility or present other unfavorable features. Loans outstanding to these related parties were $15,475,000 and $21,428,000 at December 31, 2004 and 2003, respectively. The change during 2004 reflects $13,747,000 in loan advances and $19,700,000 in loan payments. These amounts do not include loans made in the ordinary course of business to other entities with which the Company has no relationship, other than a director of the Company being a director of the other entity, unless that director had the ability to significantly influence the other entity.

Securities sold to related parties under repurchase agreements amounted to $10,339,000 and $7,494,000 at December 31, 2004 and 2003, respectively. The security repurchase agreements are between the Bank and entities with which directors of the Company have affiliations. These agreements are made in the ordinary course of business and are on the same terms as those with unrelated entities.

In November 2003, the Company sold its 50% interest in a joint venture with an unrelated third party to originate, sell and service loans under the Federal National Mortgage Association (Fannie Mae) Delegated Underwriting & Servicing (DUS) program. A gain of $6,166,000 was recorded on the sale of the Company’s interest in the joint venture and was included in other operating income in 2003. The Company’s investment in this joint venture had been accounted for using the equity method. Pretax operating earnings of $965,000 and $1,345,000 related to this joint venture were recorded during 2003 and 2002, respectively. The joint venture originated loans which totaled $72,265,000 during 2003. All loans originated were sold within a short time period (less than one quarter) after origination. These loan originations corresponded directly with an amount advanced on the joint venture’s line of credit with the Company. Prior to the sale, the Company had extended a line of credit to this joint venture which totaled $35,000,000. During 2003, in the period in which the joint venture remained a related party, the joint venture drew advances of $72,265,000 and made payments of $81,430,000 on its line of credit. These

advances were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable third party transactions and did not involve more than normal risk of collectibility or present other unfavorable features.

The Company’s joint venture was not a party to any loan securitizations involving the Company. The loans originated by the joint venture were commercial real estate loans, primarily multifamily properties. The loans were sold to investors (primarily Fannie Mae), and servicing rights were recorded at the time of the sale by the joint venture. The other partner in the joint venture serviced these loans under a sub-servicing agreement. The servicing rights were carried at the lower of amortized cost or market value in the financial statements of the joint venture. There were no security interests purchased by the Company or the other partner in the joint venture that related to any loans sold by the joint venture.

Note 27 REGULATORY MATTERS AND DIVIDEND RESTRICTIONS

The Company and the Bank are subject to various regulatory capital requirements administered by the Federal Reserve Bank (FRB) and the Office of the Comptroller of the Currency (OCC), respectively. Failure to meet minimum capital requirements can initiate certain mandatory – and possibly additional discretionary – actions by the FRB and OCC that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Company’s and the Bank’s capital amounts and classifications are also subject to qualitative judgments by the FRB and OCC about components, risk weightings and other factors.

As of December 31, 2004 and 2003, the most recent notifications from the OCC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. For a bank to be designated as well capitalized, it must have Tier 1 and total risk-based capital ratios of at least 6.0% and 10.0%, respectively, and a leverage ratio of at least 5.0%. There are no conditions or events since those notifications that management believes have changed the Bank’s categories nor is management aware of any material unresolved regulatory issues.

The Company’s and the Bank’s actual capital amounts and ratios are presented in the following table.


	Tier 1 Risk-Based Capital				Total Risk-Based Capital				Leverage
($ in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
December 31, 2004
Hibernia Corporation	$	1,612,466	9.48	%	$	1,925,231	11.32	%	$	1,612,466	7.51	%
Hibernia National Bank	$	1,602,679	9.44	%	$	1,815,229	10.69	%	$	1,602,679	7.47	%

December 31, 2003
Hibernia Corporation	$	1,534,079	10.50	%	$	1,717,078	11.75	%	$	1,534,079	8.65	%
Hibernia National Bank	$	1,381,815	9.47	%	$	1,564,639	10.72	%	$	1,381,815	7.80	%

Under current FRB regulations, the Bank may lend the Parent Company up to 10% of its capital and surplus, provided that any such loan is secured at the time of the transaction by collateral having the market value required by applicable regulations.

The payment of dividends by the Bank to the Parent Company is restricted by various regulatory and statutory limitations. In 2005, the Bank would have available to pay dividends to the Parent Company, without approval of the OCC, approximately $152,452,000, plus net retained profits earned in 2005 prior to the dividend declaration date.

Banks are required to maintain cash on hand or noninterest-bearing balances with the FRB to meet reserve requirements. Average noninterest-bearing balances with the FRB were $30,519,000 in 2004 and $44,576,000 in 2003.

Note 28 HIBERNIA CORPORATION

The following Balance Sheets, Income Statements and Statements of Cash Flows reflect the financial position and results of operations for the Parent Company only.


Balance Sheets ($ in thousands)	December 31
Balance Sheets ($ in thousands)	2004		2003
Investment in bank subsidiary	$	1,959,103	$	1,594,992
Investment in nonbank subsidiaries		57,382		56,102
Other assets		107,937		155,249

Total assets	$	2,124,422	$	1,806,343

Other liabilities	$	2,933	$	10,736
Debt		179,592		18,122
Shareholders’ equity		1,941,897		1,777,485

Total liabilities and shareholders’ equity	$	2,124,422	$	1,806,343


Income Statements ($ in thousands)	Year Ended December 31
Income Statements ($ in thousands)	2004			2003			2002
Equity in undistributed net income of subsidiaries	$	82,408		$	64,224		$	85,506
Dividends from subsidiaries		217,000			195,340			167,650
Interest income		1,278			984			1,536
Other income		159			323			264
Securities gains (losses), net		(90	)		699			(873	)

Total income		300,755			261,570			254,083

Interest expense		6,279			—			—
Other expense		3,458			2,502			2,608

Total expense		9,737			2,502			2,608

Income before income taxes		291,018			259,068			251,475
Income tax expense (benefit)		(1,936	)		732			1,618

Net income	$	292,954		$	258,336		$	249,857


Statements of Cash Flows ($ in thousands)	Year Ended December 31
Statements of Cash Flows ($ in thousands)	2004			2003			2002
Operating activities:
Net income	$	292,954		$	258,336		$	249,857
Non-cash adjustment for equity in subsidiaries’ undistributed net income		(82,408	)		(64,224	)		(85,506	)
Realized securities (gains) losses, net		90			(699	)		873
Other adjustments		8,894			13,403			5,212

Net cash provided by operating activities		219,530			206,816			170,436

Investing activities:
Acquisitions, net of cash acquired of $3,167		(227,847	)		—			—
Investment in and advances to subsidiaries		(26,500	)		(4,700	)		(9,975	)
Repayment of advances to subsidiaries		24,000			3,250			—
Purchases of securities available for sale		(995	)		(466	)		(1,094	)
Proceeds from sales of securities available for sale		5,455			1,457			1,058
Other		—			—			571

Net cash used by investing activities		(225,887	)		(459	)		(9,440	)

Financing activities:
Dividends paid		(116,947	)		(97,509	)		(89,442	)
Issuance of common stock		40,382			25,997			35,783
Proceeds from issuance of debt		103,721			—			—
Purchase of treasury stock		(70,731	)		(87,605	)		(107,004	)

Net cash used by financing activities		(43,575	)		(159,117	)		(160,663	)

Increase (decrease) in cash and cash equivalents		(49,932	)		47,240			333
Cash and cash equivalents at beginning of year		133,973			86,733			86,400

Cash and cash equivalents at end of year	$	84,041		$	133,973		$	86,733

Note 29 SEGMENT INFORMATION

SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information,” establishes standards for the reporting of financial information from operating segments in annual and interim financial statements. SFAS No. 131 requires that financial information be reported on the same basis that is reported internally for evaluating segment performance and allocating resources to segments.

The Company’s segment information is presented by line of business. Each line of business is a strategic unit that provides various products and services to groups of customers that have certain common characteristics. The reportable operating segments are Consumer, Small Business, Commercial, and Investments and Public Funds. The Consumer segment provides individuals with comprehensive products and services, including mortgage and other loans, deposit accounts, trust and investment management, brokerage, and life and health insurance. The Small Business and Commercial segments provide business entities with comprehensive products and services, including loans, deposit accounts, leasing, treasury management, investment banking, property and casualty insurance and private equity investments. The Small Business segment provides products and services to mid-size and smaller business entities (generally with annual revenues less than $10,000,000 with higher thresholds in larger Texas markets) and the Commercial segment provides products and services to larger business entities. The Investments and Public Funds segment provides a treasury function for the Company by managing public entity deposits, the investment portfolio, interest rate risk, and liquidity and funding positions. The provision for temporary impairment of mortgage servicing rights, primarily a function of interest rate risks, is also included in this segment. The Other segment includes the areas of support services and facilities management as well as income and expense items considered to be unusual.

The accounting policies used by each segment are the same as those discussed in the summary of significant accounting policies, except as described in the reconciliation of segment totals to consolidated totals. The following is a summary of certain average balances by segment.


($ in thousands)	Consumer		Small Business		Commercial		Investments and Public Funds		Other		Segment Total
December 31, 2004
Average loans	$	8,027,200	$	3,051,500	$	3,474,100	$	300	$	4,900	$	14,558,000
Average assets	$	10,754,800	$	3,061,400	$	3,555,800	$	4,190,600	$	830,600	$	22,393,200
Average deposits	$	8,752,000	$	2,224,600	$	1,590,200	$	2,629,200	$	33,400	$	15,229,400

December 31, 2003
Average loans	$	6,459,600	$	2,522,900	$	2,930,700	$	300	$	1,500	$	11,915,000
Average assets	$	9,144,600	$	2,532,400	$	3,027,300	$	3,969,200	$	672,600	$	19,346,100
Average deposits	$	7,721,900	$	1,960,700	$	1,229,400	$	2,314,400	$	24,400	$	13,250,800

The following table presents condensed income statements for each segment.


($ in thousands)	Consumer		Small Business		Commercial		Investments and Public Funds			Other			Segment Total
Year ended December 31, 2004
Net interest income	$	434,824	$	193,373	$	140,554	$	21,746		$	(36,149	)	$	754,348
Provision for loan losses		26,619		10,024		11,576		—			31			48,250

Net interest income after provision for loan losses		408,205		183,349		128,978		21,746			(36,180	)		706,098

Noninterest income		259,859		37,836		87,996		(2,648	)		4,383			387,426
Noninterest expense		400,356		128,621		110,885		14,969			(14,700	)		640,131

Income before income taxes and minority interest		267,708		92,564		106,089		4,129			(17,097	)		453,393
Income tax expense		93,706		32,398		37,105		1,445			(1,397	)		163,257
Minority interest		—		—		76		—			—			76

Net income	$	174,002	$	60,166	$	68,908	$	2,684		$	(15,700	)	$	290,060

Year ended December 31, 2003
Net interest income	$	389,723	$	172,450	$	118,446	$	48,956		$	(55,280	)	$	674,295
Provision for loan losses		34,189		11,755		14,099		—			7			60,050

Net interest income after provision for loan losses		355,534		160,695		104,347		48,956			(55,287	)		614,245

Noninterest income		252,495		35,122		82,667		(23,342	)		3,141			350,083
Noninterest expense		358,387		112,104		105,499		14,107			(25,714	)		564,383

Income before income taxes		249,642		83,713		81,515		11,507			(26,432	)		399,945
Income tax expense		87,384		29,300		28,530		4,027			(4,067	)		145,174

Net income	$	162,258	$	54,413	$	52,985	$	7,480		$	(22,365	)	$	254,771

Year ended December 31, 2002
Net interest income	$	338,205	$	168,807	$	110,124	$	124,610		$	(33,377	)	$	708,369
Provision for loan losses		43,844		15,709		21,062		—			10			80,625

Net interest income after provision for loan losses		294,361		153,098		89,062		124,610			(33,387	)		627,744

Noninterest income		219,556		32,599		60,042		(20,331	)		9,069			300,935
Noninterest expense		337,859		106,977		94,045		13,960			(11,114	)		541,727

Income before income taxes		176,058		78,720		55,059		90,319			(13,204	)		386,952
Income tax expense		61,627		27,552		19,271		31,611			853			140,914

Net income	$	114,431	$	51,168	$	35,788	$	58,708		$	(14,057	)	$	246,038

In order to analyze segments on an individual basis, each segment’s balance sheet is balanced by adjusting assets or liabilities to reflect its net funding position. Assets are increased if the segment has excess funds; liabilities are increased if the segment requires funding. Segment assets and deposits are decreased for cash items in process of collection, which are reclassified from assets to deposits. In 2004, the Company began to purchase brokered certificates of deposits. Brokered certificates of deposit are not included in deposits in the segment analysis and therefore are shown in the reconciliation of segment totals to consolidated totals.

Each segment’s net interest income includes an adjustment for match funding of the segment’s earning assets and liabilities. Match funding is calculated as the net interest income attributable to the various products of the segment and also indicates the historical interest rate risk taken by the entity as a whole. Interest income for tax-exempt and tax-deferred loans is adjusted to a taxable-equivalent basis. Each segment is charged a provision for loan losses that is determined based on each loan’s risk rating or loan type. In addition, each reportable segment recognizes federal income tax assuming a 35% income tax rate. State income tax expense is separately recorded on certain regulated entities that are included in the consumer segment with the remaining balance included in the other segment.

Direct support costs, such as deposit servicing, technology, and loan servicing and underwriting, are allocated to each segment based on activity-based cost studies, where appropriate, or on various statistics or staff costs. Indirect costs, such as management expenses and corporate support, are allocated to each segment based on various statistics or staff costs. There are no significant intersegment revenues.

The following is a reconciliation of segment totals to consolidated totals.


($ in thousands)	Average Loans		Average Assets			Average Deposits
December 31, 2004
Segment total	$	14,558,000	$	22,393,200		$	15,229,400
Excess funds invested		—		(2,304,700	)		—
Brokered certificates of deposit		—		—			316,700
Reclassification of cash items in process of collection		—		362,700			362,700

Consolidated total	$	14,558,000	$	20,451,200		$	15,908,800

December 31, 2003
Segment total	$	11,915,000	$	19,346,100		$	13,250,800
Excess funds invested		—		(1,947,200	)		—
Reclassification of cash items in process of collection		—		358,100			358,100

Consolidated total	$	11,915,000	$	17,757,000		$	13,608,900


($ in thousands)	Net Interest Income			Provision for Loan Losses		Noninterest Income		Noninterest Expense		Income Tax Expense (Benefit)			Minority Interest		Net Income
Year ended December 31, 2004
Segment total	$	754,348		$	48,250	$	387,426	$	640,131	$	163,257		$	76	$	290,060
Taxable-equivalent adjustment		(3,675	)		—		—		—		(3,675	)		—		—
Income tax expense		—			—		—		—		(2,894	)		—		2,894

Consolidated total	$	750,673		$	48,250	$	387,426	$	640,131	$	156,688		$	76	$	292,954

Year ended December 31, 2003
Segment total	$	674,295		$	60,050	$	350,083	$	564,383	$	145,174		$	—	$	254,771
Taxable-equivalent adjustment		(3,542	)		—		—		—		(3,542	)		—		—
Income tax expense		—			—		—		—		(3,565	)		—		3,565

Consolidated total	$	670,753		$	60,050	$	350,083	$	564,383	$	138,067		$	—	$	258,336

Year ended December 31, 2002
Segment total	$	708,369		$	80,625	$	300,935	$	541,727	$	140,914		$	—	$	246,038
Taxable-equivalent adjustment		(4,132	)		—		—		—		(4,132	)		—		—
Income tax expense		—			—		—		—		(3,819	)		—		3,819

Consolidated total	$	704,237		$	80,625	$	300,935	$	541,727	$	132,963		$	—	$	249,857

EXHIBIT 99.2

Exhibit 99.2

Consolidated Balance Sheets

Hibernia Corporation and Subsidiaries


Unaudited ($ in thousands)	September 30 2005			December 31 2004			September 30 2004
Assets
Cash and cash equivalents	$	1,691,679		$	1,151,066		$	956,214
Trading account assets		1			—			226
Securities available for sale		4,286,887			4,524,340			3,991,239
Securities held to maturity (estimated fair value of $20,816, $36,564 and $40,647, at September 30, 2005, December 31, 2004 and September 30, 2004, respectively)		20,395			35,819			39,750
Mortgage loans held for sale		80,108			78,136			87,445
Loans, net of unearned income		16,411,129			15,719,216			15,502,030
Reserve for loan losses		(402,251	)		(227,574	)		(235,233	)

Loans, net		16,008,878			15,491,642			15,266,797

Premises and equipment		294,769			293,356			283,360
Customers’ acceptance liability		228			141			2,374
Goodwill		337,441			337,441			337,441
Other intangible assets		27,884			33,328			33,862
Other assets		444,258			362,819			354,662

Total assets	$	23,192,528		$	22,308,088		$	21,353,370

Liabilities
Deposits:
Noninterest-bearing	$	3,688,539		$	3,264,190		$	3,245,513
Interest-bearing		14,788,658			14,114,756			13,496,215

Total deposits		18,477,197			17,378,946			16,741,728

Short-term borrowings		668,278			555,325			545,925
Liability on acceptances		228			141			2,374
Other liabilities		266,010			521,203			246,723
Debt		1,753,428			1,910,576			1,925,153

Total liabilities		21,165,141			20,366,191			19,461,903

Shareholders’ equity
Class A Common Stock, no par value:
Authorized - 300,000,000 shares; issued - 176,210,151, 171,095,717 and 170,643,760 at September 30, 2005, December 31, 2004 and September 30, 2004, respectively		338,323			328,504			327,636
Surplus		662,898			562,969			551,784
Retained earnings		1,360,903			1,347,544			1,301,175
Treasury stock at cost: 16,272,294, 15,850,266 and 15,582,755 shares at September 30, 2005, December 31, 2004 and September 30, 2004, respectively		(312,786	)		(297,626	)		(289,932	)
Accumulated other comprehensive income		(7,259	)		15,198			18,926
Unearned compensation		(14,692	)		(14,692	)		(18,122	)

Total shareholders’ equity		2,027,387			1,941,897			1,891,467

Total liabilities and shareholders’ equity	$	23,192,528		$	22,308,088		$	21,353,370

See notes to consolidated financial statements.

Consolidated Income Statements

Hibernia Corporation and Subsidiaries


	Three Months Ended September 30						Nine Months Ended September 30
Unaudited ($ in thousands, except per-share data)	2005			2004			2005			2004
Interest income
Interest and fees on loans	$	253,808		$	217,797		$	732,080		$	600,043
Interest on securities available for sale		44,589			41,362			138,729			120,220
Interest on securities held to maturity		333			555			1,195			1,993
Interest on short-term investments		2,496			461			6,737			1,766
Interest on mortgage loans held for sale		1,386			1,383			3,572			5,475

Total interest income		302,612			261,558			882,313			729,497

Interest expense
Interest on deposits		88,899			51,833			230,070			130,203
Interest on short-term borrowings		4,815			1,605			11,390			5,131
Interest on debt		17,339			16,281			50,631			39,361

Total interest expense		111,053			69,719			292,091			174,695

Net interest income		191,559			191,839			590,222			554,802
Provision for loan losses		197,000			12,250			226,700			36,250

Net interest income (loss) after provision for loan losses		(5,441	)		179,589			363,522			518,552

Noninterest income
Service charges on deposits		46,434			48,115			147,850			133,637
Card-related fees		18,062			15,994			52,360			43,844
Mortgage banking		5,287			5,701			14,841			28,792
Retail investment fees		5,968			7,887			22,477			23,723
Trust fees		5,960			5,839			17,510			17,892
Insurance		4,931			4,808			15,213			14,381
Investment banking		6,829			5,017			20,291			12,454
Other service, collection and exchange charges		5,386			5,585			17,446			16,210
Other operating income		3,987			4,992			18,419			14,964
Securities gains (losses), net		(58	)		153			1,664			(20,387	)

Total noninterest income		102,786			104,091			328,071			285,510

Noninterest expense
Salaries and employee benefits		98,618			87,347			284,131			248,242
Occupancy expense, net		13,743			12,411			39,715			34,003
Equipment expense		10,867			9,624			31,464			27,323
Data processing expense		11,032			9,540			31,071			28,791
Advertising and promotional expense		11,202			8,350			29,544			24,431
Amortization of purchase accounting intangibles		1,621			1,904			5,034			4,616
Foreclosed property expense, net		(317	)		(493	)		(14,789	)		(708	)
Other operating expense		38,218			37,668			118,111			105,514

Total noninterest expense		184,984			166,351			524,281			472,212

Income (loss) before income taxes and minority interest		(87,639	)		117,329			167,312			331,850
Income tax expense (benefit)		(29,632	)		40,823			60,323			115,942
Minority interest, net of income taxes		123			40			(92	)		71

Net income (loss)	$	(58,130	)	$	76,466		$	107,081		$	215,837

Net income (loss) per common share	$	(0.37	)	$	0.50		$	0.68		$	1.40

Net income (loss) per common share - assuming dilution	$	(0.37	)	$	0.49		$	0.67		$	1.37

See notes to consolidated financial statements.


Consolidated Statements of Changes in Shareholders’ Equity

*Hibernia Corporation and Subsidiaries*
Unaudited ($ in thousands, except per-share data)	Common Stock		Surplus		Retained Earnings			Treasury			Accumulated Other Comprehensive Income			Unearned Compensation			Comprehensive Income
Balances at December 31, 2004	$	328,504	$	562,969	$	1,347,544		$	(297,626	)	$	15,198		$	(14,692	)
Net income		—		—		107,081			—			—			—		$	107,081
Change in unrealized gains (losses) on securities, net of reclassification adjustments		—		—		—			—			(29,192	)		—			(29,192	)
Change in accumulated gains (losses) on cash flow hedges, net of reclassification adjustments		—		—		—			—			6,735			—			6,735

Comprehensive income																	$	84,624

Issuance of common stock:
Stock option plans		9,757		69,737		—			2,615			—			—
Restricted stock awards		49		687		—			—			—			—
Directors’ compensation		13		203		—			—			—			—
Cash dividends declared on common ($.60 per share)		—		—		(93,722	)		—			—			—
Acquisition of treasury stock		—		—		—			(17,775	)		—			—
Net tax benefit related to stock option plans and ESOP		—		29,302		—			—			—			—

Balances at September 30, 2005	$	338,323	$	662,898	$	1,360,903		$	(312,786	)	$	(7,259	)	$	(14,692	)


	Common Stock		Surplus		Retained Earnings			Treasury			Accumulated Other Comprehensive Income		Unearned Compensation			Comprehensive Income
Balances at December 31, 2003	$	322,972	$	515,289	$	1,171,537		$	(226,970	)	$	12,779	$	(18,122	)
Net income		—		—		215,837			—			—		—		$	215,837
Change in unrealized gains (losses) on securities, net of reclassification adjustments		—		—		—			—			1,873		—			1,873
Change in accumulated gains (losses) on cash flow hedges, net of reclassification adjustments		—		—		—			—			4,274		—			4,274

Comprehensive income																$	221,984

Issuance of common stock:
Stock option plans		4,601		28,072		—			—			—		—
Restricted stock awards		63		705		—			—			—		—
Directors’ compensation		—		83		—			75			—		—
Cash dividends declared on common ($.56 per share)		—		—		(86,199	)		—			—		—
Acquisition of treasury stock		—		—		—			(63,037	)		—		—
Net tax benefit related to stock option plans and ESOP		—		7,635		—			—			—		—

Balances at September 30, 2004	$	327,636	$	551,784	$	1,301,175		$	(289,932	)	$	18,926	$	(18,122	)


See notes to consolidated financial statements.

Consolidated Statements of Cash Flows

Hibernia Corporation and Subsidiaries

Nine Months Ended September 30


Unaudited ($ in thousands)	2005			2004
Operating activities
Net income	$	107,081		$	215,837
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		226,700			36,250
Minority interest		(92	)		71
Amortization of intangibles and deferred charges		3,798			11,418
Depreciation and amortization		31,138			27,342
Non-cash compensation expense		577			532
Non-cash derivative instruments losses, net		94			1,301
Premium amortization, net		7,129			11,994
Realized securities losses (gains), net		(1,664	)		20,387
Losses (gains) on sales of assets, net		(19,471	)		483
Provision for losses on foreclosed and other assets		34,879			481
Decrease (increase) in mortgage loans held for sale		(1,989	)		141,127
Increase in deferred income tax asset		(51,356	)		(17,734	)
Net tax benefit related to stock options and the employee stock ownership plan		29,302			7,635
Decrease (increase) in interest receivable and other assets		(9,266	)		38,229
Increase in interest payable and other liabilities		45,530			54,244

Net cash provided by operating activities		402,390			549,597

Investing activities
Purchases of securities available for sale		(1,983,731	)		(1,630,934	)
Proceeds from maturities of securities available for sale		1,481,066			1,592,568
Proceeds from maturities of securities held to maturity		8,832			20,421
Proceeds from sales of securities available for sale		391,548			327,591
Net increase in loans		(772,451	)		(581,931	)
Proceeds from sales of loans		24,307			31,001
Purchases of loans		(3,602	)		(149,726	)
Purchases of premises, equipment and other assets		(71,458	)		(66,660	)
Proceeds from sales of foreclosed assets and excess bank-owned property		29,623			7,369
Proceeds from sales of mortgage servicing rights, premises, equipment and other assets		4,000			39,049
Acquisition, net of cash acquired of $34,111		—			(217,815	)

Net cash used by investing activities		(891,866	)		(629,067	)

Financing activities
Net increase in deposits		1,102,743			889,932
Net increase (decrease) in short-term borrowings		112,953			(734,877	)
Proceeds from issuance of debt		100,000			704,658
Payments on debt		(256,219	)		(665,077	)
Proceeds from issuance of common stock		82,109			32,673
Dividends paid		(93,722	)		(86,199	)
Acquisition of treasury stock		(17,775	)		(63,037	)

Net cash provided by financing activities		1,030,089			78,073

Increase (decrease) in cash and cash equivalents		540,613			(1,397	)
Cash and cash equivalents at beginning of period		1,151,066			957,611

Cash and cash equivalents at end of period	$	1,691,679		$	956,214

See notes to consolidated financial statements.

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, 2004.

Note 2

Hurricane Impact

On August 29, 2005, hurricane Katrina made landfall and subsequently caused extensive flooding and destruction along the coastal areas of the Gulf of Mexico, including New Orleans and other communities in Louisiana in which Hibernia conducts business. Operations in many of the Company’s markets were disrupted by both the evacuation of large portions of the population as well as damage and/or lack of access to the Company’s banking and operation facilities. Prior to landfall, the Company implemented its comprehensive business continuity action program. Key employees were moved to contingency recovery sites and the operations of the Company’s critical applications were transferred to back-up facilities. The Company’s business critical systems experienced minimal outages during the transition period. On September 24, 2005, hurricane Rita made landfall near the border of Louisiana and Texas, causing additional damage and disruption to certain areas affected by hurricane Katrina as well as additional areas further west.

The following table summarizes the costs incurred for the three and nine months ending September 30, 2005 relating to the hurricanes, net of $47,934,000 in insurance receivables. The table does not include hurricane related capitalized costs of $11,518,000 for purchases of information-technology equipment, office furniture and other facility costs to accommodate displaced employees.


($ in thousands)	Three and Nine Months Ended September 30, 2005
Provision for loan losses	$	175,000

Noninterest expense:
Salaries and benefits	$	2,854
Occupancy and equipment		781
Data processing		1,288
Advertising and promotional expense		2,781
Other operating expense		3,456

Total noninterest expense	$	11,160

Total pretax hurricane expense	$	186,160

The charge of $175,000,000 to provision expense was established based on management’s best estimate of the hurricanes’ impact on the loan portfolio using currently available information. Many factors were considered, including liquidity, cash flows and collateral, as well as volatility in historical losses in times of economic stress. Various assumptions were used to estimate a range of loss from a worst case of approximately $225 million to a best case of approximately $100 million and management’s best estimate of $175 million. The range was developed on a number of judgmental assumptions and is subject to change in the future as additional information becomes available. The ability of Hibernia’s borrowers to repay their loans will be impacted by many factors including the speed of recovery, the ability to build an effective levee system to safeguard New Orleans and its surrounding areas in the future, the payment of insurance claims, and the willingness and ability of businesses and consumers to return to the impacted areas. Management will continue to carefully assess and review the exposure of the loan portfolio to hurricane-related factors.

In addition to the previously mentioned direct expenses, results for the three and nine months ended September 30, 2005 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.

Note 3

Mergers

On March 6, 2005, Hibernia announced it had entered into an Agreement and Plan of Merger with Capital One Financial Corporation (Capital One) pursuant to which Hibernia would merge with and into Capital One, with Capital One continuing as the surviving corporation. Capital One, headquartered in McLean, Virginia, is a financial holding company whose principal subsidiaries offer consumer lending and deposit products and automobile and other motor vehicle financing products.

Subject to the terms and conditions of the initial merger agreement, each holder of Hibernia common stock would have the right, subject to proration, to elect to receive, for each share of Hibernia common stock, cash or Capital One’s common stock, in either case having a value equal to $15.35 plus the product of 0.2261 times the average closing sales price of Capital One’s common stock for the five trading days immediately preceding the merger date. Based on Capital One’s closing NYSE stock price of $78.08 on March 4, 2005, the transaction was originally valued at $33.00 per Hibernia share, for a total transaction value of approximately $5.3 billion. The transaction was approved by Hibernia shareholders on August 3, 2005. The Company had received all necessary regulatory approvals and the transaction was scheduled to be completed on September 1, 2005.

On August 29, 2005, hurricane Katrina made landfall and subsequently caused extensive flooding and destruction in many areas in which Hibernia conducts business. The transaction was temporarily postponed, in accordance with the terms of the agreement, until September 7, 2005, to allow Capital One to review the effects of hurricane Katrina. On September 6, 2005, the merger agreement was renegotiated and an amended merger agreement was signed. The renegotiated terms included a reduction in the merger consideration as well as the addition of terms providing that the completion of the merger would not be subject to conditions relating to the effects of hurricane Katrina or other hurricanes or storms.

Under the terms of the amended merger agreement, Hibernia shareholders will have the right, subject to proration, to elect to receive cash or Capital One common stock, in either case having a value per Hibernia share equal to $13.95 plus the product of 0.2055 times the average closing sales price of Capital One’s common stock for the five trading days immediately preceding the merger date. Based on the price of Capital One shares at the close of business on September 6, 2005, of $80.50, the transaction is valued at $30.49 per Hibernia share for a total transaction value of approximately $5.0 billion. The actual value upon consummation of the acquisition will depend on Capital One’s share price at that time. Also under the terms of the amended merger agreement, no events or actions arising out of, relating to or resulting from hurricanes Katrina or Rita or any other hurricane or storm will be considered in determining whether a material adverse effect has occurred or is reasonably likely to occur or whether there is or may be any failure of any closing condition. Hibernia stock options vest at change in control and will be converted into options for shares of Capital One’s common stock in connection with the closing, if not exercised before that time. The transaction is subject to Hibernia shareholder approval of the revised terms and the effectiveness of necessary regulatory approvals. The transaction is scheduled to close two business days following the November 14, 2005 special meeting of Hibernia shareholders to vote on the amended merger agreement.

On May 13, 2004, the Company purchased all of the outstanding stock and options of Coastal Bancorp, Inc. (Coastal) for $231,014,000 in cash (including income tax withholding). Coastal was the parent of Coastal Banc Holding Company, Inc., which owned Coastal Banc ssb, a Texas-chartered FDIC-insured state savings bank headquartered in Houston, Texas. This transaction significantly increased the Company’s presence in the Houston area and provided entry into Austin, Corpus Christi, the Rio Grande Valley and other communities in South Texas.

The acquisition was accounted for as a purchase in accordance with Statement of Financial Accounting Standards (SFAS) No. 141, “Business Combinations.” At May 13, 2004, the Company recorded fair values of $1,957,767,000 in loans, $2,738,087,000 in total assets, $1,695,936,000 in deposits and $2,498,754,000 in total liabilities. The excess of cost over the fair value of the net assets acquired (goodwill) totaled $116,934,000. In addition, a core deposit intangible of $23,597,000 was recorded and is being amortized over 10 years. The results of operations of Coastal have been included in the Company’s consolidated financial statements since the date of acquisition.

Unaudited pro forma consolidated operating results giving effect to the purchase of Coastal as if the transaction had occurred at the beginning of the period presented is included in the table below. These pro forma results combine historical results of Coastal into the Company’s operating results, with certain adjustments made for the estimated impact of purchase accounting adjustments and acquisition funding. In addition, pro forma information does not include the effect of anticipated savings resulting from the merger. Unaudited pro forma data is not necessarily indicative of the results that would have occurred had the acquisition taken place at the beginning of the period presented or of future results.


($ in thousands, except per-share data)	Nine Months Ended September 30, 2004
Interest and noninterest income	$	1,062,468
Net income	$	219,185
Net income per common share	$	1.42
Net income per common share - assuming dilution	$	1.39

Included in the 2004 results are $5,710,000 of merger related expenses incurred by the Company. These merger-related expenses include items such as salaries and benefits, occupancy and equipment, data processing, advertising and other expenses associated with the merger and integration of Coastal.

Note 4

Goodwill and Other Intangible Assets

The carrying amount of goodwill not subject to amortization at September 30, 2005 and 2004 totaled $337,441,000, net of accumulated amortization of $66,914,000. At September 30, 2005, goodwill is included in the Company’s reportable segments as follows: Consumer - $162,767,000; Small Business - $83,495,000; Commercial - $91,171,000 and Investments and Public Funds - $8,000. The Company performed its annual impairment tests as of September 30, 2005 and 2004, which did not indicate impairment of the Company’s recorded goodwill. Management is not aware of any events or changes in circumstances since the impairment testing that would indicate that goodwill might be impaired.

The Company records purchase accounting intangible assets that consist of core deposit intangibles, trust intangibles and customer lists intangibles, which are subject to amortization. These include both contractual and noncontractual customer relationships. The core deposit and trust intangibles reflect the value of deposit and trust customer relationships which arose from the purchases of financial institutions and branches. The customer lists intangibles represent the purchase of customer lists and contracts from a merchant processing company and individual insurance agents or agencies. The following table summarizes the Company’s purchase accounting intangible assets subject to amortization.


(in thousands)	September 30, 2005						September 30, 2004
Purchase Accounting Intangibles	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Core deposit	$	59,748	$	38,186	$	21,562	$	59,748	$	34,365	$	25,383
Trust		17,059		15,449		1,610		17,059		13,302		3,757
Customer lists		6,260		2,769		3,491		6,224		1,877		4,347

Total	$	83,067	$	56,404	$	26,663	$	83,031	$	49,544	$	33,487

The amortization expense of the purchase accounting intangibles for the three months ended September 30, 2005 and 2004 was $1,621,000 and $1,904,000, respectively and for the nine months ended September 30, 2005 and 2004 was $5,034,000 and $4,616,000, respectively. Estimated future amortization expense is as follows: remainder of 2005 - $1,604,000; 2006 - $4,938,000; 2007 - $3,355,000; 2008 - $3,048,000; 2009 - $2,924,000; 2010 - $2,701,000 and thereafter - $8,093,000. These estimates assume no additions to the current purchase accounting intangibles.

Also included in other intangible assets are capitalized mortgage servicing rights with net carrying amounts of $1,221,000 and $375,000 at September 30, 2005 and 2004, respectively. Amortization expense and the net provision for temporary impairment of mortgage servicing rights are recorded in noninterest income.

The following is a summary of the activity in capitalized mortgage servicing rights net of the valuation reserve for temporary impairment.


	Three Months Ended September 30						Nine Months Ended September 30
($ in thousands)	2005			2004			2005			2004
Mortgage servicing rights at beginning of period	$	1,342		$	134,390		$	1,631		$	149,455
Additions		—			(127,722	)		—			(118,107	)
Amortization expense		(121	)		(6,293	)		(410	)		(22,966	)
Other-than-temporary impairment		—			—			—			(8,007	)

Mortgage servicing rights at end of period		1,221			375			1,221			375

Valuation reserve for temporary impairment at beginning of period		—			(9,114	)		—			(31,121	)
Reversal of temporary impairment, net		—			—			—			14,000
Other-than-temporary impairment		—			—			—			8,007
Reversal due to sales		—			9,114			—			9,114

Valuation reserve for temporary impairment at end of period		—			—			—			—

Mortgage servicing rights, net at end of period	$	1,221		$	375		$	1,221		$	375

In the third quarter of 2004, the Company sold substantially all of its mortgage servicing portfolio. The Company’s current practice is to sell the servicing rights with mortgage loans sold.

Note 5

Employee Benefit Plans

The Company’s stock option plans provide incentive and nonqualified options to various key employees and non-employee directors. The Company’s practice has been to grant options at no less than the fair market value of the stock at the date of grant. From October 1997 through January 2003, options granted to non-employee directors were granted under the 1993 Directors’ Stock Option Plan. Under that plan, options granted to non-employee directors upon inception of service as a director and certain options granted to directors who retire as employees vest six months from the date of grant. Other options granted to directors under that plan and options granted to employees under the Long-Term Incentive Plan in effect prior to April 2003, generally become exercisable in the following increments: 50% 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. In the first quarter of 2001, an option was granted to a former chief executive officer, prior to his separation from the Company, under an individual stock option plan referred to as the 2001 Nonqualified Stock Option Plan. Shares issued upon the exercise of the option granted under this plan were issued out of treasury in the second quarter of 2005.

Options granted to employees and directors under the plans described above generally become immediately exercisable if the holder of the option dies while the option is outstanding. Options granted under the Long-Term Incentive Plan and the 1993 Directors’ Stock Option Plan generally expire 10 years from the date of grant, although they may expire earlier if the holder dies, retires, becomes permanently disabled or leaves the employ of the Company (in which case the options expire at various times ranging from 90 days to 12 months).

During 2003, shareholders approved the 2003 Long-Term Incentive Compensation Plan (2003 Plan). The 2003 Plan supersedes and replaces the Company’s Long-Term Incentive Plan and replaces the 1993 Directors’ Stock Option Plan. Existing options granted under these plans remain outstanding under the original terms of the plans. Options granted to employees under the 2003 Plan that vest based on length of service (as opposed to performance measures) generally become exercisable in the same increments as those issued under the Long-Term Incentive Plan, although they may vest earlier in the event of termination as a result of death, disability or retirement or in the event of a change in control of the Company. Options issued to non-employee directors under the 2003 Plan vest immediately. Stock issued to non-employee directors pursuant to the exercise of those options (other than those used to pay the exercise price, if permitted) is subject to a minimum one-year holding period. Options issued under the 2003 Plan generally expire 10 years from the grant date, although they may expire earlier if (i) the holder leaves the employ or service of the Company other than through retirement, death or disability, in which case (except as provided below) vested options expire in 90 days (or at original expiration date, if earlier), or (ii) the holder retires, dies or becomes disabled, in which case vested options expire in three years (or at the original expiration date, if earlier). Unvested options are forfeited upon termination. As to options issued after September 22, 2004, vested options are also forfeited under certain circumstances in the event of termination for cause.

All options vest immediately upon change in control of the Company. Consummation of the Capital One transaction would constitute a change in control.

The following tables summarize the option activity in the plans during the third quarter of 2005. There are no shares available for grant under the Long-Term Incentive Plan, the 1993 Directors’ Stock Option Plan and the 2001 Nonqualified Stock Option Plan. All options outstanding at September 30, 2005 are nonqualified.


	Options		Weighted Average Exercise Price
Long-Term Incentive Plan:
Outstanding, June 30, 2005	5,335,832		$	16.75
Cancelled	(3,262	)	$	18.32
Exercised	(853,860	)	$	15.25

Outstanding, September 30, 2005	4,478,710		$	17.04

Exercisable, September 30, 2005	2,616,054		$	16.11

1993 Directors’ Stock Option Plan:
Outstanding, June 30, 2005	86,250		$	15.62
Exercised	(33,750	)	$	14.80

Outstanding, September 30, 2005	52,500		$	16.15

Exercisable, September 30, 2005	41,250		$	15.15

2003 Long-Term Incentive Compensation Plan:
Outstanding, June 30, 2005	5,556,356		$	24.96
Cancelled	(13,175	)	$	25.59
Exercised	(41,000	)	$	24.21

Outstanding, September 30, 2005	5,502,181		$	24.97

Exercisable, September 30, 2005	61,750		$	27.72

Available for grant, September 30, 2005	4,086,742

There were no shares of restricted stock awarded under the 2003 Long-Term Incentive Compensation Plan during the third quarter of 2005.

The following pro forma information was determined as if the Company had accounted for stock options using the fair-value-based method as defined in SFAS No. 123, in which the estimated fair value of the options granted is amortized to expense over the options’ vesting period. The fair value of the options was estimated using the Black-Scholes option valuation model. Beginning in the first quarter of 2005, the Company changed its assumption for stock price volatility from historical-based volatility to a weighted average of historical-based and implied volatilities based on guidance provided by Staff Accounting Bulletin No. 107 issued in March 2005.

The Black-Scholes model estimates the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Changes in the subjective input assumptions can materially affect the fair value estimate.


($ in thousands, except per-share data)	Three Months Ended September 30						Nine Months Ended September 30
	2005			2004			2005			2004
Reported net income (loss)	$	(58,130	)	$	76,466		$	107,081		$	215,837
Deduct: Stock option compensation expense under the fair value method, net of related tax effect	$	(2,227	)	$	(1,823	)	$	(6,888	)	$	(5,558	)

Pro forma net income (loss)	$	(60,357	)	$	74,643		$	100,193		$	210,279

Reported net income (loss) per common share	$	(0.37	)	$	0.50		$	0.68		$	1.40
Pro forma net income (loss) per common share	$	(0.38	)	$	0.48		$	0.64		$	1.37

Reported net income (loss) per common share - assuming dilution	$	(0.37	)	$	0.49		$	0.67		$	1.37
Pro forma net income (loss) per common share - assuming dilution	$	(0.38	)	$	0.48		$	0.62		$	1.34

Note 6

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.


($ in thousands, except per-share data)	Three Months Ended September 30					Nine Months Ended September 30
	2005			2004		2005		2004
Numerator:
Net income (loss) - numerator for net income (loss) per common share	$	(58,130	)	$	76,466	$	107,081	$	215,837
Effect of dilutive securities		—			—		—		—

Numerator for net income (loss) per common share - assuming dilution	$	(58,130	)	$	76,466	$	107,081	$	215,837

Denominator:
Denominator for net income (loss) per common share (weighted average shares outstanding)		158,616,310			153,907,723		156,427,311		153,862,965
Effect of dilutive securities:
Stock options		—			2,949,982		4,487,160		3,321,275
Restricted stock awards		—			41,535		21,175		41,535

Denominator for net income (loss) per common share - assuming dilution		158,616,310			156,899,240		160,935,646		157,225,775

Net income (loss) per common share	$	(0.37	)	$	0.50	$	0.68	$	1.40

Net income (loss) per common share - assuming dilution	$	(0.37	)	$	0.49	$	0.67	$	1.37

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 1,068,135 and 1,326,214 for the three months ended September 30, 2005 and 2004, respectively and 1,106,507 and 1,378,558 for the nine months ended September 30, 2005 and 2004.

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 September 30, 2005 there were no antidulitive options outstanding. During the three months ended September 30, 2004, there were 2,250 antidilutive options outstanding (which had an exercise price of $26.36 per option share). During the nine months ended September 30, 2005 and 2004 there were 46,750 antidilutive options outstanding (which had exercise prices ranging from $31.55 to $31.64 per option share), and 2,250 antidilutive options outstanding (which had an exercise price of $26.36 per option share), respectively.

Note 7

Letters of Credit and Financial Guarantees

The Company issues letters of credit and financial guarantees (standby letters of credit) whereby it agrees to honor certain financial commitments in the event its customers are unable to perform. The majority of the standby letters of credit consist of financial guarantees. Some letters of credit result in the recording of customer acceptance liabilities. Customer acceptance liabilities are recorded when funds are payable to another financial institution on behalf of the Company’s customer. At the time the amount is determined to be payable (due to a triggering event such as delivery of goods), a liability is recorded to reflect the amount payable, with a corresponding receivable recorded from the customer. Prior to the triggering event, the contractual amount of the agreement is included in the letters of credit amounts. Collateral requirements are similar to those for funded transactions and are established based on management’s credit assessment of the customer. Management conducts regular reviews of all outstanding standby letters of credit and customer acceptances, and the results of these reviews are considered in assessing the adequacy of the Company’s loss reserves.

The Company had contractual amounts of standby letters of credit of $584,492,000 and $646,961,000 at September 30, 2005 and 2004, respectively and customer acceptance liabilities of $228,000 and $2,374,000 at September 30, 2005 and 2004, respectively. At September 30, 2005, standby letters of credit had expiration dates ranging from 2005 to 2010.

Effective January 1, 2003, the Company adopted the recognition and measurement provisions of the Financial Accounting Standards Board (FASB) Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” The recognition and measurement provisions of the interpretation were applicable on a prospective basis to guarantees issued or modified after December 31, 2002. The fair values of the guarantees outstanding at September 30, 2005 and 2004, respectively, that have been issued since January 1, 2003, totaled $5,479,000 and $6,917,000, and are included in other liabilities.

Note 8

Segment Information

The Company’s segment information is presented by lines of business. Each line of business is a strategic unit that provides various products and services to groups of customers with certain common characteristics. The basis of segmentation and the accounting policies used by each segment are consistent with those described in the December 31, 2004 Annual Report to Shareholders and “Segment Results” in Management’s Discussion and Analysis. There are no significant intersegment revenues. The expense impact of hurricanes Katrina and Rita are included in the “other” segment.

The following table presents selected financial information for each segment.


($ in thousands)	Consumer		Small Business		Commercial		Investments and Public Funds			Other			Segment Total
Nine months ended September 30, 2005
Average loans	$	8,800,000	$	3,245,500	$	3,874,600	$	800		$	3,600		$	15,924,500
Average assets	$	11,662,700	$	3,257,100	$	3,950,700	$	4,541,700		$	938,600		$	24,350,800
Average deposits	$	9,342,800	$	2,471,500	$	1,657,300	$	2,879,200		$	(55,400	)	$	16,295,400

Net interest income	$	339,644	$	147,707	$	111,286	$	33,061		$	(38,455	)	$	593,243
Noninterest income	$	211,795	$	35,168	$	70,128	$	2,074		$	8,906		$	328,071
Net income	$	129,030	$	43,031	$	63,139	$	16,292		$	(143,219	)	$	108,273

Nine months ended September 30, 2004
Average loans	$	7,855,700	$	2,970,900	$	3,392,100	$	400		$	3,900		$	14,223,000
Average assets	$	10,401,800	$	2,980,600	$	3,472,600	$	4,066,200		$	795,100		$	21,716,300
Average deposits	$	8,532,600	$	2,174,200	$	1,555,000	$	2,670,700		$	31,300		$	14,963,800

Net interest income	$	317,483	$	142,267	$	102,797	$	21,330		$	(26,368	)	$	557,509
Noninterest income	$	193,201	$	27,794	$	65,226	$	(3,638	)	$	2,927		$	285,510
Net income	$	125,484	$	45,056	$	50,921	$	4,225		$	(11,921	)	$	213,765

The following is a reconciliation of segment totals to consolidated totals.


($ in thousands)	Average Loans		Average Assets			Average Deposits		Net Interest Income			Noninterest Income		Net Income
Nine months ended September 30, 2005
Segment total	$	15,924,500	$	24,350,800		$	16,295,400	$	593,243		$	328,071	$	108,273
Excess funds invested		—		(2,559,900	)		—		—			—		—
Reclassification of cash items in process of collection		—		450,700			450,700		—			—		—
Brokered certificates of deposit		—		—			758,600		—			—		—
Taxable-equivalent adjustment on tax exempt loans		—		—			—		(3,021	)		—		—
Income tax expense		—		—			—		—			—		(1,192	)

Consolidated total	$	15,924,500	$	22,241,600		$	17,504,700	$	590,222		$	328,071	$	107,081

Nine months ended September 30, 2004
Segment total	$	14,223,000	$	21,716,300		$	14,963,800	$	557,509		$	285,510	$	213,765
Excess funds invested		—		(2,100,500	)		—		—			—		—
Reclassification of cash items in process of collection		—		358,400			358,400		—			—		—
Brokered certificates of deposit		—		—			214,300		—			—		—
Taxable-equivalent adjustment on tax exempt loans		—		—			—		(2,707	)		—		—
Income tax expense		—		—			—		—			—		2,072

Consolidated total	$	14,223,000	$	19,974,200		$	15,536,500	$	554,802		$	285,510	$	215,837

Note 9

Impact of Recently Issued Accounting Standards

In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123 (revised 2004), “Share-Based Payment” (SFAS No. 123(R)). This statement is a revision to SFAS No. 123, “Accounting for Stock-Based Compensation” and supersedes APB Opinion No. 25, “Accounting for Shares Issued to Employees,” and related implementation guidance. This statement eliminates the alternative to use APB Opinion No. 25’s intrinsic value method of accounting that was provided in SFAS No. 123, as originally issued. As a result, this statement requires a public entity to measure the cost of employee services received in exchange for an award of equity based instruments based on the grant-date fair value of the award and recognize the cost over the period during which an employee is required to provide service in exchange for the award. In addition, this statement amends the treatment of award forfeitures and the accounting for the tax effects of share–based compensation awards. On March 29, 2005, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 107 which expresses the view of the staff regarding the interaction between SFAS 123(R) and certain SEC rules and regulations and valuation of share based payment arrangements for public companies.

Under SFAS 123(R) the Company would have been required to implement the standard as of the first interim or annual reporting period beginning after June 15, 2005 and would have applied to all awards granted, modified, repurchased or cancelled after that date. On April 21, 2005, the SEC issued an amendment to rule 4-01(a) of Regulation S-X regarding the compliance date for SFAS 123(R) that changed the effective date to the beginning of the registrant’s first fiscal year beginning on or after June 15, 2005. The Company anticipates that SFAS No. 123(R) will decrease after tax net income per common share – assuming dilution by approximately $0.05 in the first full year of adoption.

EXHIBIT 99.3

Exhibit 99.3

PRELIMINARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL

INFORMATION

The preliminary unaudited pro forma condensed combined financial information and explanatory notes present how the combined financial statements of Capital One and Hibernia may have appeared had the businesses actually been combined as of or at the beginning of the periods presented. The preliminary unaudited pro forma condensed combined financial information shows the impact of the merger of Capital One and Hibernia on the combined balance sheets and statements of income under the purchase method of accounting with Capital One treated as the acquiror. Under this method of accounting, the assets and liabilities of Hibernia will be recorded by Capital One at their estimated fair values as of the date the merger is completed. The preliminary unaudited pro forma condensed combined balance sheet as of September 30, 2005 assumes the merger was completed on that date. The preliminary unaudited pro forma income statements for the nine months ended September 30, 2005 and the year ended December 31, 2004, were prepared assuming the merger was completed on January 1, 2005 and 2004, respectively.

It is anticipated that the merger will provide Capital One with financial benefits such as possible expense efficiencies and revenue enhancements, among other factors, although no assurances can be given that such benefits will actually be achieved. These benefits have not been reflected in the preliminary unaudited pro forma financial information. The preliminary unaudited pro forma condensed combined financial information is presented for illustrative purposes only and does not indicate the financial results of the combined companies had the companies actually been combined at the beginning of each period presented. In addition, as explained in more detail in the accompanying notes to the preliminary unaudited pro forma condensed combined financial information, the allocation of the purchase price reflected in the preliminary pro forma condensed combined financial information is subject to adjustment. The preliminary purchase price allocation will vary from the actual purchase price allocation that will be recorded upon the completion of the merger based upon changes in the estimated fair value of the assets and liabilities acquired from Hibernia. The information will be updated when all necessary information becomes available and management has completed its analysis.

The unaudited preliminary pro forma consolidated financial information is derived from and should be read in conjunction with the historical consolidated financial statements and related notes of both Capital One and Hibernia, which are incorporated into this document by reference.

The following preliminary unaudited pro forma condensed combined balance sheet as of September 30, 2005, combines the historical balance sheets of Capital One and Hibernia assuming the companies had been combined on September 30, 2005, on a purchase accounting basis.

Unaudited Pro Forma Condensed Balance Sheets


September 30 (In Thousands, Except Per Share Data)	Capital One 2005			Hibernia 2005			Pro Forma Adjustments				Capital One Hibernia Combined
Assets:
Cash and due from banks	$	812,330		$	1,137,625		$	—			$	1,949,955
Federal funds sold and resale agreements		2,409,392			530,300			(1,390,000	)	A		1,549,692
Interest-bearing deposits at other banks		1,380,880			23,754			—				1,404,634

Cash and cash equivalents		4,602,602			1,691,679			(1,390,000	)			4,904,281
Securities available for sale		9,436,667			4,307,283			421		B		13,744,371

Mortgage loans held for sale		—			80,108			—				80,108
Loans		38,851,763			16,411,129			(174,917	)	C		54,830,562
								(257,413	)	D
Less: Allowance for loan losses		(1,447,000	)		(402,251	)		257,413		D		(1,591,838	)

Net loans		37,404,763			16,008,878			(174,917	)			53,238,724
Accounts receivable from securitizations		6,126,282			—			—				6,126,282
Premises and equipment, net		768,198			294,769			69,297		E		1,132,264
Interest receivable		367,757			121,969							489,726
Goodwill		736,058			337,441			(337,441	)	F		3,893,079
								3,157,021		F
Core deposit intangibles and other intangibles		—			26,663			(26,663	)	G,H		400,709
								380,000		G
								20,709		H
Other		982,190			323,738			(14,392	)	K		1,364,626
								73,090		K

Total assets	$	60,424,517		$	23,192,528		$	1,757,125			$	85,374,170

Liabilities:
Interest bearing deposits	$	26,772,538		$	14,788,658		$	(1,358	)	I	$	41,559,838
Non-interest bearing deposits		—			3,688,539			—				3,688,539
Senior and subordinated notes		6,651,891			99,972			(2,537	)	I		6,749,326
Other borrowings		11,613,179			2,321,734			840,000		A		14,782,529
								7,616		I
Interest payable		350,842			30,372			—				381,214
Other		3,998,840			235,866			96,974		J		4,464,680
								133,000		G

Total liabilities		49,387,290			21,165,141			1,073,695				71,626,126

Commitments and Contingencies

Stockholders’ Equity:
Common stock		2,682			338,323			(338,323	)	L		3,011
								329		L
Paid-in capital, net		3,979,525			648,206			(648,206	)	L		6,690,013
								(34,902	)	M
								2,640,813		L
								104,577		N
Retained earnings		7,104,796			1,360,903			(1,360,903	)	L		7,104,796

Cumulative other comprehensive income		20,104			(7,259	)		7,259		L		20,104
Less: Treasury stock, at cost		(69,880	)		(312,786	)		312,786		L		(69,880	)

Total stockholders’ equity		11,037,227			2,027,387			683,430				13,748,044

Total liabilities and stockholders’ equity	$	60,424,517		$	23,192,528		$	1,757,125			$	85,374,170

The following preliminary unaudited pro forma condensed combined income statement for the nine months ended September 30, 2005, combines the historical income statements of Capital One and Hibernia assuming the companies had been combined on January 1, 2005, on a purchase accounting basis.

Unaudited Pro Forma Condensed Statement of Income


Nine Months Ended September 30 (In Thousands, Except Per Share Data)	Capital One 2005		Hibernia 2005			Pro Forma Adjustments			Capital One Hibernia Combined
Interest Income:
Loans, including past-due fees	$	3,602,294	$	732,080		21,159		C	$	4,355,533
Securities available for sale		269,387		139,924		—				409,311
Interest on mortgage loans held for sale		—		3,572		—				3,572
Other		221,102		6,737		(41,700	)	A		186,139

Total interest income		4,092,783		882,313		(20,541	)			4,954,555

Interest Expense:
Deposits		829,074		230,070		433		I		1,059,577
Senior and subordinated notes		317,382		3,733		211		I		321,326
Other borrowings		303,084		58,288		(2,223	)	I		382,774
						23,625		A

Total interest expense		1,449,540		292,091		22,046				1,763,677

Net interest income		2,643,243		590,222		(42,587	)			3,190,878
Provision for loan losses		925,398		226,700		—				1,152,098

Net interest income after provision for loan losses		1,717,845		363,522		(42,587	)			2,038,780

Non-Interest Income:
Servicing and securitizations		2,923,768		14,841		—				2,938,609
Service charges and other customer-related fees		1,179,857		196,650		—				1,376,507
Interchange		380,962		3,560		—				384,522
Other		208,004		113,020		—				321,024

Total non-interest income		4,692,591		328,071		—				5,020,662

Non-Interest Expense:
Salaries and associate benefits		1,289,950		284,131		—				1,574,081
Marketing		932,501		28,279		—				960,780
Communications and data processing		426,056		45,660		—				471,716
Supplies and equipment		256,973		38,698		—				295,671
Occupancy		97,536		39,715		320		E		138,921
						1,350		H
Other		1,026,071		87,798		(5,034	)	O		1,164,168
						54,645		G
						688		H

Total non-interest expense		4,029,087		524,281		51,969				4,605,337

Income before income taxes and minority interest		2,381,349		167,312		(94,556	)			2,454,105
Income taxes		852,520		60,323		(33,095	)	P		879,748
Minority interest, net of income tax expense		—		(92	)	—				(92	)

Net income	$	1,528,829	$	107,081		(61,461	)		$	1,574,449

Basic earnings	$	6.05	$	0.68					$	5.52

Diluted earnings per share	$	5.82	$	0.67					$	5.31

Dividends paid per share	$	0.08	$	0.60					$	0.08

The following preliminary unaudited pro forma condensed combined income statement for the year ended December 31, 2004, combines the historical income statements of Capital One and Hibernia assuming the companies had been combined on January 1, 2004, on a purchase accounting basis.

Unaudited Pro Forma Condensed Statement of Income


Year Ended December 31 (In Thousands, Except Per Share Data)	Capital One 2004		Hibernia 2004		Pro Forma Adjustments			Capital One Hibernia Combined
Interest Income:
Loans, including past-due fees	$	4,234,420	$	827,060	28,212		C	$	5,089,692
Securities available for sale		312,374		164,512	—				476,886
Interest on mortgage loans held for sale		—		6,644	—				6,644
Other		247,626		4,217	(55,600	)	A		196,243

Total interest income		4,794,420		1,002,433	(27,388	)			5,769,465

Interest Expense:
Deposits		1,009,545		189,175	578		I		1,199,298
Senior and subordinated notes		486,812		3,387	282		I		490,481
Other borrowings		295,085		59,198	(2,964	)	I		382,819
					31,500		A

Total interest expense		1,791,442		251,760	29,396				2,072,598

Net interest income		3,002,978		750,673	(56,784	)			3,696,867
Provision for loan losses		1,220,852		48,250	—				1,269,102

Net interest income after provision for loan losses		1,782,126		702,423	(56,784	)			2,427,765

Non-Interest Income:
Servicing and securitizations		3,643,808		34,845	—				3,678,653
Service charges and other customer-related fees		1,482,658		237,029	—				1,719,687
Interchange		475,810		4,729	—				480,539
Other		297,881		110,823	—				408,704

Total non-interest income		5,900,157		387,426	—				6,287,583

Non-Interest Expense:
Salaries and associate benefits		1,642,721		336,392	—				1,979,113
Marketing		1,337,780		29,902	—				1,367,682
Communications and data processing		475,355		57,030	—				532,385
Supplies and equipment		349,920		46,981	—				396,901
Occupancy		206,614		46,337	428		E		255,179
					1,800		H
Other		1,309,829		123,489	(6,442	)	O		1,499,709
					71,917		G
					916		H

Total non-interest expense		5,322,219		640,131	68,619				6,030,969

Income before income taxes and minority interest		2,360,064		449,718	(125,403	)			2,684,379
Income taxes		816,582		156,688	(43,891	)	P		929,379
Minority interest, net of income tax expense		—		76	—				76

Net income	$	1,543,482	$	292,954	(81,512	)		$	1,754,924

Basic earnings per share	$	6.55	$	1.90				$	6.54

Diluted earnings per share	$	6.21	$	1.86				$	6.21

Dividends paid per share	$	0.11	$	0.76				$	0.11

NOTES TO THE PRELIMINARY UNAUDITED PRO FORMA CONDENSED COMBINED

FINANCIAL INFORMATION

Note 1 – Basis of Preliminary Pro Forma Presentation

The preliminary unaudited pro forma condensed combined financial information related to the merger is included as of and for the nine months ended September 30, 2005 and for the year ended December 31, 2004. The historical financial statements of Hibernia have been adjusted to reflect reporting reclassifications necessary to conform to the presentation of the historical financial statements of Capital One. The preliminary unaudited pro forma condensed combined financial information reflects the application of accounting principles generally accepted in the United States (“GAAP”) as of and for the nine months ended September 30, 2005 and for the year ended December 31, 2004. The adoption of new or changes to existing GAAP (including but not limited to the American Institute of Certified Public Accounts Statement of Position 03-03 (SOP 03-03), Accounting for Certain Loans or Debt Securities Acquired in a Transfer), subsequent to the pro forma financial statement dates may result in changes to the presentation of the preliminary unaudited pro forma condensed combined financial information, if material.

The preliminary pro forma adjustments include purchase price adjustments based on the conversion of each share of Hibernia common stock into $30.46 in cash or 0.3792 of a share of Capital One common stock, which is the cash or fraction of a share of Capital One common stock that Hibernia shareholders electing to receive cash or stock, respectively, received in the merger for each share of Hibernia common stock, which represented the average of the closing price of $80.32 for Capital One common stock on the NYSE for the five trading days ending prior to November 16, 2005. The total consideration of $5.0 billion, which includes the value of outstanding stock options, was paid with the issuance of approximately 32.9 million shares of Capital One’s common stock and approximately $2.2 billion in cash consideration. Outstanding options and other equity-based awards of Hibernia were exchanged for options and other equity-based awards of Capital One with the number of options, other equity-based awards and option price adjusted for the exchange ratio.

The merger will be accounted for using the purchase method of accounting, and accordingly, the assets acquired (including identifiable intangible assets and goodwill) and liabilities assumed of Hibernia will be recognized at fair value on the date the transaction is completed. The merger will qualify as a tax-free reorganization for federal income tax purposes.

The preliminary unaudited pro forma condensed combined financial information includes estimated adjustments to record the assets and liabilities of Hibernia at their respective fair values based on management’s best estimate using the information available at this time. The pro forma adjustments may be revised as additional information becomes available and as additional analysis is performed. The final allocation of the purchase price will be determined after the completion of a final analysis to determine the fair values of Hibernia’s tangible and identifiable intangible assets and liabilities as of the closing date. The final purchase price accounting adjustments may differ materially from the pro forma adjustments presented in this document. Increases or decreases in fair value of certain balance sheet amounts and other items of Hibernia as compared to the information presented in this document may change the amount of the purchase price allocated to goodwill and other assets and liabilities and may impact the statement of income due to adjustments in yield and/or amortization of adjusted assets and liabilities.

The preliminary unaudited pro forma condensed combined financial information presented in this document does not necessarily indicate the results of operations or the combined financial position that would have resulted had the merger been completed at the beginning of the applicable periods presented, nor is it indicative of the results of operations in future periods or the future financial position of the combined company.

Note 2 – Preliminary Pro Forma Adjustments

The preliminary unaudited pro forma condensed combined financial information for the merger includes the preliminary pro forma balance sheet as of September 30, 2005 assuming the merger was completed on September 30, 2005. The preliminary pro forma income statements for the nine months ended September 30, 2005 and the year ended December 31, 2004, were prepared assuming the merger was completed on January 1, 2005 and 2004, respectively.

The preliminary unaudited pro forma condensed combined financial information reflects the issuance of approximately 32.9 million shares of Capital One common stock and approximately $2.2 billion in cash consideration. Common stock issued in conjunction with this transaction was valued using the exchange ratio noted above in Note 1 – Basis of Preliminary Pro Forma Presentation.

A reconciliation of the excess consideration paid by Capital One over Hibernia’s net assets acquired (“goodwill”) is as follows:


*(in thousands)*
Costs to acquire Hibernia:
Capital One common stock issued	$	2,641,142	(L)
Cash consideration paid		2,230,000	(A)
Estimated fair value of employee stock options		104,577	(N)
Investment banking, legal, and consulting fees		29,596	(J)

Total consideration paid for Hibernia	$	5,005,315


Hibernia’s net assets at fair value:
Hibernia’s stockholders’ equity at September 30, 2005	$	2,062,289	(L)
Elimination of Hibernia’s intangibles (including goodwill)		(364,104	)(F,G,H)
Elimination of Hibernia’s deferred taxes		(14,392	)(K)
Estimated adjustments to reflect assets acquired at fair value:
Securities held to maturity		421	(B)
Net Loans		(174,917	)(C)
Property, plant, & equipment		69,297	(E)
Other identified intangibles		20,709	(H)
Deferred tax asset (not including CDI related deferred tax liability)		73,090	(K)

Estimated adjustments to reflect liabilities assumed at fair value:
Interest-bearing deposits		1,358	(I)
Senior and subordinated notes		2,537	(I)
Other borrowings		(7,616	)(I)
Personnel related liabilities		(43,252	)(J)
Other liabilities assumed		(24,126	)(J)

Less: Adjusted identifiable net assets acquired	$	(1,601,294	)


Core deposit intangibles:
Adjustment to recognize core deposit intangibles	$	(380,000	)(G)
Adjustment to recognize deferred tax liability from core deposit intangibles		133,000	(G)

Less: Core deposit intangible and related deferred tax liability	$	(247,000	)

Total estimated goodwill	$	3,157,021

(A)

Adjustment to recognize cash consideration paid and debt undertaken to complete the acquisition. Capital One had sufficient liquidity on its balance sheet to acquire the common shares exchanged for cash without additional borrowings. However, to best align the funding of the acquisition with the management of its cash position, Capital One financed the cash portion of the acquisition through a combination of proceeds from federal funds sold and resale agreements and short term borrowings. Specifically, Capital One acquired the common shares by liquidating $1.4 billion of federal funds sold and resale agreements and drawing $840.0 million from other short term borrowings. The preliminary pro forma combined income statement impact of the reduction in federal funds sold and resale agreements resulted in pre-tax decreases to interest income of $41.7 million and $55.6 million for the nine months ended September 30, 2005 and the year ended December 31, 2004, respectively. The preliminary pro forma combined income statement impact of the additional borrowings issued resulted in pre-tax increases of $23.6 million and $31.5 million to interest expense for the nine months ended September 30, 2005 and year ended December 31, 2004, respectively. Capital One has calculated the cost of the additional borrowings needed to complete the transaction using an interest rate of approximately 3.75% per annum. The cost of the additional borrowings may be significantly different as Capital One may choose to repay any such additional borrowings with cash from operations, net securities maturities or future market borrowings.

(B)

Adjustments to recognize securities held to maturity at fair value in accordance with Statement of Financial Accounting Standard No. 142, Business Combinations, (“SFAS 142”). These securities are expected to be available for sale securities upon the completion of the acquisition. The related preliminary pro forma income statement impact for this adjustment is considered to be immaterial. The final adjustment may be significantly different.

(C)

Adjustment to fair value Hibernia’s loan portfolio. The adjustment will be recognized over the estimated remaining life of the loan portfolio using the effective yield method. The adjustment reflected is based upon currently available fair value information. The preliminary pro forma combined income statement impact for the fair value adjustment resulted in increases to interest income of $21.2 million and $28.2 million for the nine months ended September 30, 2005 and the year ended December 31, 2004, respectively. The final adjustment may be significantly different.

(D)	Adjustment to recognize the impact of SOP 03-03. The final adjustment may be significantly different.

(E)

Adjustment to fair value Hibernia’s property, plant, and equipment. The adjustment will be recognized over the remaining useful life of 20 years for buildings and 5 years for equipment. The preliminary pro forma combined income statement impact for the adjustment resulted in increases to occupancy expense of $0.3 million and $0.4 million for the nine months ended September 30, 2005 and the year ended December 31, 2004, respectively. The final adjustment may be significantly different.

(F)	Adjustment to eliminate historical Hibernia goodwill and recognize goodwill resulting from the acquisition. See purchase price allocation table above for more information.

(G)

Adjustment to eliminate Hibernia’s historical core deposit intangibles of $21.6 million, recognize core deposit intangibles associated with the acquisition, the related deferred tax liability for the newly recognized core deposit intangibles, and the related preliminary pro forma combined income statement impact resulting from the acquisition. The preliminary pro forma combined income statement impact for the adjustment resulted in increases to other non-interest expense of $54.6 million and $71.9 million for the core deposit intangibles amortization for the nine months ended September 30, 2005 and the year ended December 31, 2004, respectively. The final adjustment may be significantly different.

(H)

Adjustment to eliminate Hibernia’s historical other intangible assets of $5.1 million, recognize other intangibles associated with the acquisition, and the related preliminary pro forma combined income statement impact resulting from the acquisition. The preliminary pro forma combined income statement impact for the adjustment resulted in increases to other non-interest expense of $0.7 million and $0.9 million and increases to occupancy expense of $1.4 million and $1.8 million for the amortization of other identified intangibles for the nine months ended September 30, 2005 and the year ended December 31, 2004, respectively. The final adjustment may be significantly different.

(I)

Adjustment to record the fair value of interest-bearing deposits, subordinated notes, and other borrowings at fair value in accordance with SFAS 142. The adjustment will be recognized over the estimated remaining life of the respective liabilities using the effective yield method. The preliminary pro forma combined income statement impact for the adjustments resulted in increases to interest expense of $0.4 million and $0.6 million for the interest-bearing deposits and $0.2 million and $0.3 million for the subordinated notes, and decreases to interest expense of $2.2 million and $3.0 million for the other borrowings for the nine months ended September 30, 2005 and the year ended December 31, 2004, respectively. The final adjustment may be significantly different.

(J)

Adjustment to recognize merger related costs and other liabilities assumed resulting from the acquisition. The adjustment consists of $29.6 million to reflect investment banker, legal, and consulting fees, $43.3 million for compensation and severance costs, related costs, and $24.1 million for other liabilities assumed. The final adjustment may be significantly different.

(K)

Adjustment to eliminate $14.4 million of historical Hibernia deferred taxes related to unrealized gains and losses on securities available for sale and hedging instruments and to recognize a $73.1 million deferred tax asset resulting from the fair value adjustments in accordance with Statement of Financial Accounting Standard No. 109, Accounting for Income Taxes Combinations, (“SFAS 109”).

(L)

Adjustment to eliminate Hibernia’s historical stockholders’ equity. The acquisition resulted in issuance of approximately 32.9 million shares of Capital One common stock, in addition to the cash consideration discussed in preliminary pro forma adjustment A, in exchange for the outstanding Hibernia common stock. The issuance of Capital One common stock was recognized in the preliminary pro forma balance sheet at a value of $80.32 per share, which represented the average of the closing price for Capital One common stock on the NYSE for the five trading days ending prior to November 16, 2005, which results in an increase to Capital One’s total stockholders’ equity of $2.6 billion. For more detail of the structure of the transaction see Note 1 – Basis of Preliminary Pro Forma Information.

(M)	Adjustment to convert the historical unearned compensation balance for Hibernia’s Employee Stock Ownership Plan to its new basis in Capital One shares.

(N)

Adjustment to reflect the conversion of Hibernia stock options outstanding at the closing of the merger to options to purchase Capital One common stock. In accordance with the terms of Hibernia’s stock option agreements, outstanding stock options fully vested upon the change in control and therefore the adjustment presented represents the conversion of all Hibernia stock options to fully vested options to purchase Capital One common stock. The adjustment represents the issuance of 3.8 million vested options to purchase Capital One common stock at a weighted average fair value of $27.61 per share. The number of stock options issued was based on the number of outstanding Hibernia stock options at November 16, 2005 multiplied by the exchange ratio of 0.3792. The preliminary estimated fair value was calculated using the Black-Scholes option pricing model and applying the prevailing assumptions to each tranche of the remaining converted Hibernia options outstanding at the merger close date for expected life, volatility, dividend yield and risk-free interest rate. The estimated weighted average exercise price of $56.39 was calculated using the weighted average exercise price of a Hibernia stock option divided by the exchange ratio of 0.3792.

(O)	Adjustment to reverse $5.0 million and $6.4 million of amortization for intangible assets recorded on Hibernia’s historical income statements for the nine months ended September 30, 2005 and the year ended December 31, 2004, respectively.

(P)	Adjustment to record the net tax effect of the preliminary pro forma adjustments. The income statement pro forma tax expense adjustment was recognized at an effective rate of 35.0%. The final adjustment may be significantly different.

Note 3 – Merger Related Costs

Merger related costs, which are not considered liabilities with respect to EITF 95-3, “Recognition of Liabilities in Connection with a Purchase Business Combination,” are estimated at $98.0 million. A summary of these costs, based on Capital One’s preliminary estimates, is listed below. The following items have not been included in the preliminary pro forma combined income statement.


*(in thousands)*
Merger related compensation and severance	$	40,200
Facilities and systems		47,600
Other merger related costs		10,200

Total estimated pre-tax merger related costs		98,000
Tax benefit		(34,300	)

Net estimated merger related costs	$	63,700

Merger related compensation and severance costs include employee severance, compensation arrangements and related employee benefit expenses. Facilities and system costs include costs associated with the rebranding of branch offices. Also reflected are certain technology conversion costs. Refinements to the foregoing estimates may occur subsequent to the completion of the merger. Certain merger related costs incurred by Hibernia are being expensed as incurred. All other costs incurred by Capital One will be capitalized or expensed as incurred based on the nature of cost and Capital One’s accounting policies for these costs.

Note 4 – Core Deposit Intangibles

The purchase accounting adjustments include the establishment of core deposit intangibles of $380.0 million as of September 30, 2005. The adjustments include the elimination of $21.6 million relating to the Hibernia’s core deposit intangibles as of September 30, 2005. The $380.0 million was based on a valuation of the core deposit intangibles performed with the assistance of an independent third party. Adjustments to this value may occur subsequent to the acquisition date to reflect the impact to core deposits resulting from the Gulf Coast hurricanes. The amortization of the core deposit intangibles resulting from the acquisition in the pro forma statement of income for the nine months ended September 30, 2005 is assumed to be over a 10 year period using a sum-of-the-year digits method.

The following table summarizes the amortization of the core deposit intangibles made in connection with the acquisition at an effective annual tax rate of 35.0%:


*(in thousands)*	Gross Amortization		Net After-Tax Impact
Year 1	$	71,917	$	46,746
Year 2		64,380		41,847
Year 3		56,843		36,948
Year 4		49,306		32,049
Year 5		41,769		27,150
Year 6 and thereafter		95,785		62,260

Total	$	380,000	$	247,000