<PAGE>
HIBERNIA CORPORATION 

Corporate Offices                   Mailing Address
313 Carondelet Street               P.O. Box 61540
New Orleans, LA 70130               New Orleans, LA 70161
504-533-3333                        Internet:
                                    http://www.hiberniabank.com

Stock Listing

The  common  stock of  Hibernia  Corporation  is  listed  on the New York  Stock
Exchange under the ticker symbol "HIB".  Price and volume information are listed
under  "Hibernia"  and  "HIB" in The  Wall  Street  Journal  and  under  similar
designations  in  other  daily   newspapers.   At  December  31,  1996, Hibernia
Corporation had 14,569  shareholders  of record and 4,512  full-time  equivalent
employees.

Shareholder Assistance

Shareholders  requesting a change of address,  records or information about lost
certificates,  or who want to have dividends deposited directly into checking or
savings accounts should contact:

Chase Mellon Shareholder Services
Security Relations Department
85 Challenger Road, Overpeck Centre
Ridgefield, NJ 07660
Toll free: 800-814-0305

Dividend Reinvestment and Stock Purchase Plan

Hibernia's  Dividend  Reinvestment  and Stock  Purchase  Plan is an  economical,
convenient  way for  shareholders  to increase  their  holdings of the Company's
stock. Once enrolled in the plan,  shareholders may purchase new shares directly
from the Company by reinvesting  cash dividends,  making optional cash purchases
or both.

Direct Deposit of Dividends

By depositing  dividends directly to checking or savings accounts,  shareholders
can receive their funds  faster.  To sign up or receive  information,  call toll
free 800-814-0305.

For Information

Shareholders,  media representatives and other individuals seeking copies of the
annual report, Form 10-K and Form 10-Q, as well as general  information,  should
contact  Jim   Lestelle,   Senior  Vice   President  and  Manager  of  Corporate
Communications, at 504-533-5482 or toll free at 800-245-4388.
         Analysts  and others  seeking  financial  data or a  prospectus  on the
Dividend  Reinvestment  and Stock  Purchase Plan should  contact Dana M. Combes,
Senior Vice  President  and Manager of Investor  and  Government  Relations,  at
504-533-2180 or toll free at 800-245-4388.
         For fax access to news releases, quarterly reports, analyst reports and
dividend reinvestment details, call toll free 800-207-9063.

Duplicate Mailings

The  Company is  required to mail  information  to each name on its  shareholder
list,  even if it means sending  duplicates.  Shareholders  wishing to eliminate
duplicate  mailings  should  write to Chase Mellon  Shareholder  Services at the
address on this page  indicating  which names  should be removed.  This will not
affect dividend or proxy mailings.

<TABLE>
<CAPTION>
Hibernia Stock Price And Dividend Information

                                 1996                           1995
--------------------------------------------------------------------------------
                                            Cash                            Cash
                       Market Price(1) Dividends       Market Price(1) Dividends
                       High       Low   Declared       High       Low   Declared
--------------------------------------------------------------------------------
<S>                  <C>        <C>        <C>       <C>        <C>       <C>  
First quarter ..     $10.88     $10.00     $0.07     $ 7.88     $6.88     $0.06
--------------------------------------------------------------------------------
Second quarter .     $11.88     $10.00     $0.07     $ 9.38     $7.75     $0.06
--------------------------------------------------------------------------------
Third quarter ..     $11.75     $10.00     $0.07     $10.63     $8.75     $0.06
--------------------------------------------------------------------------------
Fourth quarter .     $13.50     $11.13     $0.08     $11.00     $9.75     $0.07
--------------------------------------------------------------------------------
----------
(1) NYSE closing price.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
Five-Year Consolidated Summary of Income and Selected Financial Data (1)

Hibernia Corporation and Subsidiaries
----------------------------------------------------------------------------------------------------------------------------
Year Ended December 31
($ in thousands, except per-share data)                     1996             1995          1994            1993            1992
----------------------------------------------------------------------------------------------------------------------------
<S>                                                     <C>             <C>            <C>             <C>             <C>       
Interest income ....................................    $  625,628      $  562,846     $  479,945      $  458,132      $  523,598
Interest expense ...................................       259,411         242,090        178,829         162,142         230,464
------------------------------------------------------------------------------------------------------------------------------------
Net interest income ................................       366,217         320,756        301,116         295,990         293,134
Provision for possible loan losses .................       (12,625)          1,140        (17,869)         (2,786)         72,297
------------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision
    for possible loan losses .......................       378,842         319,616        318,985         298,776         220,837
------------------------------------------------------------------------------------------------------------------------------------
Noninterest income:
   Noninterest income ..............................       115,665         103,966         94,847          90,639          92,102
   Securities gains (losses), net ..................        (5,306)            248         (1,669)            819          17,295
------------------------------------------------------------------------------------------------------------------------------------
Noninterest income .................................       110,359         104,214         93,178          91,458         109,397
Noninterest expense ................................       319,733         284,078        302,918         304,234         308,719
------------------------------------------------------------------------------------------------------------------------------------
Income before taxes ................................       169,468         139,752        109,245          86,000          21,515
Income tax expense .................................        59,518          10,867          7,785          13,292           8,765
------------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations ..................       109,950         128,885        101,460          72,708          12,750
Extraordinary loss on debt restructuring, net of tax          --              --             --              --           (39,179)
Utilization of net operating loss carryforwards ....          --              --             --              --             6,181
Cumulative effect of change in accounting for
   income taxes ....................................          --              --             --             3,461            --
------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) ..................................    $  109,950      $  128,885     $  101,460      $   76,169      $  (20,248)
------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) applicable to common shareholders     $  108,210      $  128,885     $  101,460      $   76,169      $  (20,248)
------------------------------------------------------------------------------------------------------------------------------------
Per common share information: (2)
   Income from continuing operations ...............    $     0.85      $     1.02     $     0.80      $     0.57      $     0.17
   Net income (loss) ...............................    $     0.85      $     1.02     $     0.80      $     0.60      $    (0.28)
   Tax-effected net income (loss) (3) ..............    $     0.85      $     0.72     $     0.56      $     0.47      $    (0.26)
   Cash dividends declared .........................    $     0.29      $     0.25     $     0.19      $     0.03      $       --
Average shares outstanding (000s) ..................       126,766         126,881        127,596         127,024          73,457
Dividend payout ratio ..............................        34.12%          24.51%         23.75%           5.00%            -- %
------------------------------------------------------------------------------------------------------------------------------------
Selected year-end balances (in millions)
Loans ..............................................    $  6,043.0      $  4,723.2     $  3,818.9      $  3,389.2      $  3,362.7
Deposits ...........................................       7,821.8         6,569.7        6,344.3         6,134.2         6,031.1
Debt ...............................................          51.3            34.4           21.0            39.2            39.1
Equity .............................................         936.4           767.8          637.7           594.6           506.8
Total assets .......................................       9,306.8         7,755.7        7,294.5         7,119.0         6,970.9
------------------------------------------------------------------------------------------------------------------------------------
Selected average balances (in millions)
Loans ..............................................    $  5,295.1      $  4,251.0     $  3,561.0      $  3,273.8      $  3,932.5
Deposits ...........................................       6,892.5         6,374.2        6,192.7         5,979.7         6,360.7
Debt ...............................................          26.9            26.6           32.9            37.9           127.1
Equity .............................................         814.8           694.5          615.9           547.2           345.6
Total assets .......................................       8,200.6         7,480.0        7,179.2         6,882.8         7,261.8
------------------------------------------------------------------------------------------------------------------------------------
Selected ratios
Net interest margin (taxable-equivalent) ...........         4.89%           4.69%          4.59%           4.70%          4.50 %
Return on assets ...................................         1.34%           1.72%          1.41%           1.11%         (0.28)%
Return on common equity ............................        13.71%          18.56%         16.47%          13.92%         (5.86)%
Return on total equity .............................        13.49%          18.56%         16.47%          13.92%         (5.86)%
Efficiency ratio ...................................        65.50%          65.84%         75.24%          77.34%         78.60 %
Average equity/average assets ......................         9.94%           9.28%          8.58%           7.95%          4.76 %
Tier 1 risk-based capital ratio ....................        12.07%          14.66%         15.53%          14.91%         12.82 %
Total risk-based capital ratio .....................        13.33%          15.93%         16.81%          16.20%         14.13 %
Leverage ratio .....................................         8.78%           9.71%          8.92%           7.77%          6.69 %
------------------------------------------------------------------------------------------------------------------------------------
Tax-effected net income and ratios excluding
  goodwill and core deposit intangible amortization
  and balances (3) (4)
Net income (loss) applicable to common shareholders     $  114,061      $   93,947     $   93,289      $   64,384      $ (13,067)
Net income (loss) per common share (2) .............    $     0.90      $     0.74     $     0.73      $     0.51      $   (0.18)
Return on assets ...................................         1.40%           1.26%          1.31%           0.94%         (0.18)%
Return on common equity ............................        15.69%          13.94%         16.15%          12.88%         (4.45)%
Efficiency ratio ...................................        64.17%          65.12%         69.70%          76.06%         77.08 %
------------------------------------------------------------------------------------------------------------------------------------
----------
(1)    All financial  information has been restated for mergers accounted for as
       poolings of interests.  The effects of mergers  accounted for as purchase
       transactions  have been  included  from the date of  consummation.  Prior
       periods have been conformed to current-period presentation.
(2)    Income per common share data are based on the weighted  average number of
       common  shares  outstanding  (net  of  uncommitted  ESOP  shares)  in the
       respective period. Dividends per common share are historical amounts.
(3)    Adjusted to reflect a 35% effective tax rate for years prior to 1996.
(4)    Amortization  and  balances  of  core  deposit  intangibles  are  net  of
       applicable  taxes.   Goodwill  amortization  and  balances  are  not  tax
       effected.
</TABLE>

<PAGE>
HIBERNIA CORPORATION

Management's Discussion and Analysis
of Financial Condition and Results
of Operations

      Management's  Discussion presents a review of the major factors and trends
affecting the performance of Hibernia  Corporation (the "Company" or "Hibernia")
and its subsidiaries,  principally  Hibernia National Bank and Hibernia National
Bank of Texas, formerly Texarkana National Bank, collectively referred to as the
"Banks." To make certain  comparisons more  meaningful,  net income and earnings
per  common  share  for  1995 and  prior  years  are  adjusted  on a pro  forma,
tax-effected  basis.  Tax  expense is assumed  at an  effective  tax rate of 35%
rather than the lower- than-normal  federal income tax rate actually incurred as
the Company recognized deferred tax benefits.  This discussion should be read in
conjunction with the accompanying tables and consolidated financial statements.


Merger Activity

      In 1996 the Company  completed  five mergers,  two in Louisiana and one in
Texas which were  accounted for as poolings of  interests,  and two in Louisiana
which were accounted for as purchase  transactions.  The Company  completed four
mergers in 1995 and six in 1994,  all of which were accounted for as poolings of
interests. All prior-year information has been restated to reflect the effect of
mergers  accounted  for as  poolings of  interests.  For the two mergers in 1996
accounted  for as purchase  transactions,  the  financial  information  of those
institutions is combined with Hibernia as of and subsequent to consummation.

      Measures of financial performance  subsequent to the purchase transactions
are more relevant when comparing  "tangible" results (i.e.,  before amortization
of goodwill and core deposit  intangibles)  because they are more  indicative of
cash flows, and thus the Company's  ability to support growth and pay dividends.
The tangible  measures of financial  performance  are presented in the Five-Year
and  Quarterly  Consolidated  Summary of Income and Selected  Financial  Data on
pages 26 and 45.

      The institutions  with which the Company merged are collectively  referred
to as the "merged companies." The merged companies in transactions accounted for
as poolings of  interests  are  referred to as the "pooled  companies,"  and the
merged  companies in transactions  accounted for as purchases are referred to as
the "purchased companies."

1996 Highlights:

     Net income for 1996 totaled  $110.0  million ($.85 per common  share).  For
     1995,  reported net income of $128.9 million ($1.02 per common share) would
     have been $90.8 million ($.72 per common  share) on a  tax-effected  basis.
     Therefore,  on a comparable  basis,  net income for 1996  increased 21% and
     earnings per common share increased 18% from 1995.
   
     Profitability, loans and core deposits continued to increase; asset quality
     improved; and the Company's franchise was further enhanced by the completed
     mergers and by investments in Hibernia's  strategic  improvement  process -
     Vision 2000.

     Returns on assets  (ROA) and total  equity  (ROE)  were  1.34% and  13.49%,
     respectively, in 1996, compared to 1.21% and 13.08% on a tax-effected basis
     in 1995.

     Loans grew 28% to $6.0 billion at December 31, 1996, with commercial  loans
     up 32%, small business banking loans up 25%, and consumer loans up 26% from
     a year earlier.

     Nonperforming  loans declined 9% from $17.7 million at December 31, 1995 to
     $16.0 million at December 31, 1996.  The year-end 1996 reserve  coverage of
     nonperforming loans stood at 796% compared to 851% at the end of 1995.

     Nonperforming  assets  declined 7% to $24.9  million from $26.8  million at
     December  31,  1995.  The  nonperforming  asset ratio  declined to 0.41% at
     December 31, 1996 compared to 0.57% at year-end 1995.

     Net  interest  income  increased  $45.5  million in 1996  compared to 1995,
     primarily due to a $1.0 billion increase in average loans. The shift in the
     mix of earning assets to higher-yielding loans resulted in a 20 basis point
     increase in the net interest margin to 4.89% for 1996.

     Operating  efficiency  continued to improve.  In 1996, the efficiency ratio
     was 65.50%,  compared to 65.84% in 1995 and 75.24% in 1994.  Excluding  the
     impact of  amortization  of  goodwill  and core  deposit  intangibles,  the
     efficiency  ratio in 1996 was 64.17%  compared to 65.12% in 1995 and 69.70%
     in 1994.

     Cash dividends per common share for 1996 increased to $.29, 16% higher than
     the 1995 cash  dividend  of $.25 per common  share and 53% higher  than the
     1994 cash dividend of $.19 per common share.  The dividend payout ratio for
     1996, 1995 and 1994 was 34.12%, 24.51% and 23.75%, respectively.

     The five  institutions  with which Hibernia  completed  mergers in 1996 had
     combined  assets of $1.6  billion and 48 offices.  Since the  beginning  of
     1994,  Hibernia has completed  mergers with 15  institutions  with combined
     assets of $3.4 billion and 112 offices.

Financial Condition

Earning Assets

      Interest  income from earning  assets  (including  loans,  securities  and
short-term  investments) is the Company's main source of income. Average earning
assets  totaled $7.6 billion in 1996,  compared to $7.0 billion in 1995 and $6.7
billion in 1994.  Average  earning assets  increased  $625.2 million in 1996 and
$278.2 million in 1995 due to the effect of the purchased  companies in 1996 and
new loan growth, partially offset by decreases in total securities.

      Loan  demand,  which  has  been  strong  since  the  second  half of 1993,
continued  to improve  throughout  1996.  The  Company  used the  proceeds  from
maturities of lower-yielding,  earning assets and the growth in deposits to fund
the increase in loans. As a result of this shift of earning  assets,  loans as a
percentage of average  earning  assets  increased to 69.6% in 1996,  compared to
60.9% in 1995, and 53.1% in 1994. Total securities decreased to 28.0% of average
earning assets in 1996 from 37.3% in 1995 and 44.0% in 1994.

      Total earning  assets as of December 31, 1996 were $8.4  billion,  up $1.2
billion from a year earlier due to a $1.3 billion (28%) increase in loans.

      LOANS.  The  Company's  lending  activities  are  subject to both  prudent
underwriting  standards and liquidity  considerations.  Loans allow  Hibernia to
meet customer  credit needs,  while at the same time  achieving  yields that are
generally  higher than those available on alternative  earning  assets.  Lending
relationships  are one way  Hibernia  meets  its goal of  providing  for all the
financial needs of its customers.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
TABLE 1 - COMPOSITION OF LOAN PORTFOLIO
---------------------------------------------------------------------------------------------------
December 31 ($ in millions)                                    1996                   1995
---------------------------------------------------------------------------------------------------
                                                         Loans     Percent       Loans    Percent
---------------------------------------------------------------------------------------------------
<S>                                                  <C>            <C>      <C>            <C>  
Commercial:
    Commercial and industrial ..................     $    865.9      14.3%   $    660.0      14.0%
    Services industry ..........................          455.3       7.5         276.5       5.9
    Real estate ................................          419.1       6.9         353.3       7.5
    Health care ................................          227.3       3.8         166.4       3.5
    Transportation, communications and utilities          182.4       3.0         184.1       3.9
    Energy .....................................          143.2       2.4          85.8       1.8
    Other ......................................           45.9       0.8          42.7       0.9
---------------------------------------------------------------------------------------------------
          Total commercial .....................        2,339.1      38.7       1,768.8      37.5
---------------------------------------------------------------------------------------------------
Small Business Banking:
    Commercial and industrial ..................          601.7      10.0         489.5      10.3
    Services industry ..........................          183.2       3.0         114.2       2.4
    Real estate ................................          118.9       2.0         103.0       2.2
    Health care ................................           54.7       0.9          33.8       0.7
    Transportation, communications and utilities           24.3       0.4          13.6       0.3
    Energy .....................................            6.8       0.1           8.2       0.2
    Other ......................................          120.9       2.0         127.0       2.7
---------------------------------------------------------------------------------------------------
          Total small business banking .........        1,110.5      18.4         889.3      18.8
---------------------------------------------------------------------------------------------------
Consumer:
    Residential mortgages:
        First mortgages ........................        1,082.2      17.9         830.4      17.6
        Junior liens ...........................          121.2       2.0          78.4       1.6
    Indirect ...................................          749.9      12.4         660.6      14.0
    Revolving credit ...........................          144.4       2.4          89.3       1.9
    Other ......................................          495.7       8.2         406.4       8.6
---------------------------------------------------------------------------------------------------
          Total consumer .......................        2,593.4      42.9       2,065.1      43.7
---------------------------------------------------------------------------------------------------
Total loans ....................................     $  6,043.0     100.0%   $  4,723.2     100.0%
---------------------------------------------------------------------------------------------------
</TABLE>



      Hibernia  engages  in  commercial  and  consumer  lending.   The  specific
underwriting  criteria for each major loan category is outlined in a formal loan
policy and is  approved  by the Board of  Directors.  In  general,  each loan is
evaluated based on cash flow, collateral, market conditions, prevailing economic
trends,  character  and  leverage  capacity  of the  borrower,  and  capital and
investment in a particular property, if applicable.  The loan policy,  including
the underwriting  criteria for major loan  categories,  is adjusted on a regular
basis. The loan policy and underwriting  criteria are adjusted due to changes in
the experience of the existing portfolio,  financial and market conditions,  and
regulations, among other things.


      Average loans  increased  $1.0 billion in 1996 and $0.7 billion in 1995 as
all segments  experienced  significant  growth. The Company's efforts to achieve
its goal of becoming the best financial services provider in each of its markets
by  building  the  most  comprehensive  and  convenient  banking  network,   and
delivering  top-quality  service across a broad range of financial  products and
services enabled Hibernia to increase loans in an improving economy.

      Table 1 details  Hibernia's  commercial and small  business  banking loans
classified by repayment source and consumer loans classified by type. Commercial
loans grew $570.3  million (32%),  small  business  banking loans were up $221.2
million (25%) and consumer  loans  increased  $528.3  million (26%) in 1996. The
growth from new and existing customers accounted for $965.9 million (73%) of the
overall growth in loans in 1996, with the remainder of the growth resulting from
the effects of the purchased  companies.  The portfolio mix was 42.9%  consumer,
38.7%  commercial and 18.4% small business  banking at year-end 1996 compared to
43.7%,  37.5% and 18.8%,  respectively,  at year-end  1995.  Hibernia's  lending
strategy is to increase  consumer and small business  lending while  maintaining
preeminence in commercial lending.

       Commercial Loans. The purchased companies accounted for 25% of the growth
in commercial  loans,  with the  remaining  75% resulting  from new and existing
customers.  The growth from new and existing customers was distributed among the
services industry, up $160.9 million (58%); commercial and industrial, up $142.3
million (22%);  energy,  up $55.0 million  (64%);  health care, up $45.6 million
(27%); and commercial real estate, up $31.0 million (9%).

      Expertise  in  specialized  industries  including  maritime,  health care,
energy,  commercial real estate and agriculture  allowed Hibernia's  experienced
team of lenders to  increase  the  commercial  portfolio  in a growing  regional
economy.  The skills of lenders  who have  joined the  Company  through  mergers
enabled Hibernia to more than double agriculture loans during 1996. In addition,
Hibernia  has  identified  niches  such as  equipment  leasing  and  asset-based
lending, where customer needs can be met efficiently and profitably.

      Small Business Banking Loans.  Hibernia  generally  categorizes  companies
with  revenues  of less than $10  million as small  businesses.  In  addition to
growth  related  to the  purchased  companies  (approximately  50%),  the  small
business banking portfolio showed increases in the services  industry,  up $54.8
million,   and  commercial  and  industrial,   up  $34.4  million.   Centralized
underwriting,  utilization of sophisticated credit scoring models and Hibernia's
shortened  application form,  QuickApp,  have made the underwriting process more
efficient.  This allows the experienced  business bankers located in each market
to  concentrate  on serving the credit and other  financial  needs of small- and
medium-sized  business  customers.  One of the newest  products that  Hibernia's
business  bankers can offer  customers is the  CapitalAccess(R)  credit card for
small businesses, introduced in early 1996.

      Consumer Loans. The increase in consumer loans to $2.6 billion at December
31,  1996,  from $2.1  billion at December 31,  1995,  resulted  primarily  from
internal  growth of $410.7 million.  Increased  marketing  efforts,  new product
development and extended service hours,  designed to maximize the  effectiveness
of the  Company's  extensive  office  network,  were the major  factors  in this
growth.

      Loans secured by mortgages on residential property and indirect automobile
lending  (primarily  through  dealerships) are the two largest components of the
consumer portfolio.

      Residential  mortgage  loans  increased  $294.6  million  (32%)  in  1996.
Technology-driven   enhancements  helped  streamline  the  mortgage  origination
process,  thereby  improving  customer  service.  Because  of this  improvement,
realtors  recommended  and homeowners  increasingly  chose Hibernia for mortgage
financing  as  evidenced  by the 37%  increase in  origination  of loans for the
purchase of homes to over a  half-billion  dollars.  Contributing  to the higher
service levels were innovations like Desktop Underwriter, a software system from
Fannie Mae, the nation's largest source of home mortgage funds; laptop computers
used by Hibernia's team of mortgage loan originators to take applications in the
field; and automated loan closings.

      Approximately   half  of  the  1996   mortgage  loan   originations   were
adjustable-rate  loans that Hibernia  retained in its  portfolio.  The remaining
loans  were  securitized  and  sold,  while  Hibernia   generally  retained  the
associated servicing rights.  Hibernia services almost $2.0 billion in loans. In
addition to loans for the purchase of homes,  Hibernia offers  customers a broad
assortment  of loans  secured by  residential  mortgages,  including  the Equity
PrimeLine(R),  an  attractively  priced line of credit  secured by a homeowner's
residence.

       Hibernia's   experienced  team  of  indirect  lending  professionals  and
continued  expansion  of its banking  office  system have enabled the Company to
build the largest  market share in indirect  lending  among banks in  Louisiana.
Tiered  pricing  of  indirect  loans has  enabled  Hibernia  to offer  top-rated
customers  attractive  rates,  while also  allowing  the  Company to earn higher
returns on loans  carrying  slightly more risk. The indirect  lending  portfolio
ended 1996 at $749.9 million, a 14% increase over year-end 1995.

      SECURITIES.  At the  end of  1996,  securities  totaled  $2.2  billion,  a
decrease  of $171.5  million,  or 7.3%,  from the end of 1995.  The  decrease is
primarily  due to a  reduction  in  mortgage-backed  securities  as a result  of
contractual  payments,  prepayments of principal and sales,  partially offset by
the addition of the  securities  portfolios of the purchased  companies.  During
1996 Hibernia  restructured  its  portfolio of securities  available for sale to
enhance  future  interest  income and  improve an  already  strong net  interest
margin.  This  restructuring  resulted  in the sale of almost  $200  million  of
adjustable-rate  mortgage-backed securities and the purchase of a similar amount
of  obligations  of  state  and  municipal   governments   and   mortgage-backed
securities. Of total securities at December 31, 1996, 91% are debt securities of
the U.S. government or its agencies. The composition of the securities portfolio
is shown in Table 2.

      On  December  29,  1995,  in  accordance  with  the  Financial  Accounting
Standards  Board Special Report "A Guide to  Implementation  of Statement 115 on
Accounting for Certain  Investments in Debt and Equity  Securities," the Company
chose to reclassify all of its securities  held to maturity to the available for
sale  portfolio.  At the  date of the  transfer,  the  amortized  cost of  those
securities  was $1.7 billion and net unrealized  gains were $21.5 million.  This
reclassification gives the Company greater flexibility in managing the portfolio
for income,  interest-rate risk and liquidity.  Although net unrealized gains or
losses in the available for sale portfolio are reflected as a separate component
of equity,  these  gains or losses are not  included in  regulatory  capital for
purposes of computing  capital  adequacy  ratios.  It is anticipated that future
purchases of securities will be classified as available for sale.

      The Company held no trading securities at December 31, 1996, and there was
no significant trading activity during 1996, 1995 or 1994.

      Average  securities  available  for sale  increased  $1.4 billion in 1996,
reflecting the transfer of securities from

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
TABLE 2 - COMPOSITION OF SECURITIES
--------------------------------------------------------------------------------
                                       Available   Held to
December 31  ($ in millions)            for Sale   Maturity        Total
--------------------------------------------------------------------------------
<S>                                   <C>          <C>          <C>       
1996
    U.S. Treasuries .............     $    365.2   $   --       $    365.2
    U.S. government agencies:
        Mortgage-backed securities       1,294.3       --          1,294.3
        Other ...................          333.4       --            333.4
    States and political subdivisions      135.6       --            135.6
    Other .......................           48.4       --             48.4
    Derivative financial instruments         1.8       --              1.8
--------------------------------------------------------------------------------
          Total .................     $  2,178.7   $   --       $  2,178.7
--------------------------------------------------------------------------------
1995
    U.S. Treasuries .............     $    356.5   $   --       $    356.5
    U.S. government agencies:
        Mortgage-backed securities       1,587.8       --          1,587.8
        Other ...................          261.9       --            261.9
    States and political subdivisions       87.2       --             87.2
    Other .......................           56.7       --             56.7
    Derivative financial instruments         0.1       --              0.1
--------------------------------------------------------------------------------
          Total .................     $  2,350.2   $   --       $  2,350.2
--------------------------------------------------------------------------------
1994
    U.S. Treasuries .............     $     28.8   $    553.6   $    582.4
    U.S. government agencies:
        Mortgage-backed securities         477.7      1,098.0      1,575.7
        Other ...................          167.2        198.6        365.8
    States and political subdivisions       36.6         54.0         90.6
    Other .......................           67.7       --             67.7
    Derivative financial instruments         5.1       --              5.1
--------------------------------------------------------------------------------
          Total .................     $    783.1   $  1,904.2   $  2,687.3
--------------------------------------------------------------------------------
</TABLE>


<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
TABLE 3 - MATURITIES AND YIELDS OF SECURITIES
---------------------------------------------------------------------------------------------------------------------------------
                                                         Due after 1     Due after 5
                                       Due in 1 year     year through   years through        Due after
December 31, 1996 ($ in millions)          or less         5 years         10 years           10 years             Total
---------------------------------------------------------------------------------------------------------------------------------
                                       Amount   Yield   Amount   Yield   Amount Yield      Amount  Yield       Amount  Yield
---------------------------------------------------------------------------------------------------------------------------------
<S>                              <C>      <C>   <C>       <C>    <C>      <C>     <C>      <C>       <C>      <C>       <C> 
Available for sale: (1)
  U.S. Treasuries ..................   $ 98.0   5.71%   $267.2   7.05%   $ --     -- %    $   --     -- %    $  365.2   6.69%
---------------------------------------------------------------------------------------------------------------------------------
  U.S. government agencies:
      Mortgage-backed securities (2)      7.9   6.37      70.4   7.21     117.8   7.41     1,098.2   6.84     1,294.3   6.91
---------------------------------------------------------------------------------------------------------------------------------
      Other ........................     51.1   5.50     169.1   6.07      60.2   6.96        53.0   6.25       333.4   6.17
---------------------------------------------------------------------------------------------------------------------------------
  States and political subdivisions       4.2   5.36      25.4   5.14      44.9   5.19        61.1   5.56       135.6   5.35
---------------------------------------------------------------------------------------------------------------------------------
  Other ............................     44.1   3.95       6.1   6.00      --     --          --     --          50.2   4.20
---------------------------------------------------------------------------------------------------------------------------------
        Total ......................   $205.3   5.30%   $538.2   6.66%   $222.9   6.84%   $1,212.3   6.75%   $2,178.7   6.60%
---------------------------------------------------------------------------------------------------------------------------------
----------------
(1)  Yield  computations  are based on the market value of securities  available
     for sale.
(2)  Mortgage-backed securities are classified according to contractual maturity
     without consideration of principal amortization or projected prepayments.
</TABLE>

held  to  maturity  and  the  addition  of the  securities  available  for  sale
attributable  to the purchased  companies,  partially  offset by the decrease in
mortgage-backed  securities  previously  described.  Average  securities held to
maturity  decreased  $1.8  billion  from  1995 to 1996  due to the  transfer  of
securities to available for sale.


      Maturities and yields of securities at year-end 1996 are detailed in Table
3.  Mortgage-backed  securities are classified according to contractual maturity
without consideration of principal amortization or projected prepayments.

      At December 31, 1996,  the available for sale  portfolio  included  $484.2
million of  adjustable-rate  securities,  primarily  mortgage-backed  securities
whose  yields  are tied to a  cost-of-funds  index.  In much the same  manner as
Hibernia's  cost of funds adjusts to new market rates over a period of time, the
rates on these  securities  may not fully  reflect  a change in market  interest
rates  for  more  than a  year.  The  Company  purchased  these  adjustable-rate
securities to shorten the average  repricing  period of its portfolio as part of
its continuing strategy to reduce interest rate risk.

      The average  repricing period of total securities at December 31, 1996 was
2.7 years,  compared to 3.2 years at December 31,  1995.  The  repricing  period
decreased  due to  increased  prepayment  speeds  for the  Company's  fixed-rate
mortgage-backed  securities,  which account for over one-third of the securities
available for sale. Carrying  securities  available for sale at market value has
the effect of recognizing a yield on the securities  equal to the current market
yield.


Asset Quality

     Nonperforming  assets consist of nonaccrual  loans (loans on which interest
income is not currently recognized), restructured loans (loans with below-market
interest rates or other concessions due to the deteriorated  financial condition
of the borrower),  foreclosed  assets (assets to which title has been assumed in
satisfaction of debt) and excess bank-owned property. Interest payments received
on  nonperforming  loans are applied to reduce principal if there is doubt as to
the collectibility of the principal;  otherwise,  these receipts are recorded as
interest income. Certain nonperforming

<TABLE>
<CAPTION>

--------------------------------------------------------------------------------------------------------------
TABLE 4 - NONPERFORMING ASSETS
--------------------------------------------------------------------------------------------------------------
December 31 ($ in thousands)                    1996          1995          1994          1993          1992
--------------------------------------------------------------------------------------------------------------

<S>                                         <C>           <C>           <C>           <C>           <C>     
Nonaccrual loans ......................     $ 16,043      $ 17,692      $ 22,210      $ 92,953      $184,468
Restructured loans ....................         --            --           6,024         3,348         4,426
--------------------------------------------------------------------------------------------------------------
    Nonperforming loans ...............       16,043        17,692        28,234        96,301       188,894
Foreclosed assets .....................        5,206         6,114        10,479        18,895        45,984
Excess bank-owned property ............        3,670         2,946          --            --             142
--------------------------------------------------------------------------------------------------------------
    Total nonperforming assets ........     $ 24,919      $ 26,752      $ 38,713      $115,196      $235,020
--------------------------------------------------------------------------------------------------------------
Accruing loans past due 90 days or more     $  5,281      $  2,922      $  4,403      $  5,031      $  9,747
Reserve for possible loan losses ......     $127,768      $150,516      $156,005      $186,562      $211,820
Nonperforming assets/loans plus
    foreclosed assets and excess
    bank-owned property ...............        0.41%         0.57%         1.01%         3.38%         6.89%
Reserve for possible loan losses/loans         2.11%         3.19%         4.09%         5.50%         6.30%
Reserve for possible loan losses/
    nonperforming loans ...............       796.4%        850.8%        552.5%        193.7%        112.1%
Net loans charged off/average loans ...        0.30%         0.16%         0.36%         0.70%         2.04%
--------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
TABLE 5 - SUMMARY OF NONPERFORMING LOAN ACTIVITY
---------------------------------------------------------------------------------------------------------------
                                                                             Small
                                           Commercial         Other       Business
($ in thousands)                          Real Estate    Commercial        Banking      Consumer         Total
---------------------------------------------------------------------------------------------------------------
<S>                                          <C>           <C>           <C>           <C>           <C>     
Nonperforming loans at December 31, 1995     $  7,961      $  2,195      $  5,685      $  1,851      $ 17,692
Additions ..............................          138        10,848        13,709         8,331        33,026
Charge-offs - gross ....................         (133)       (2,804)       (3,790)       (7,077)      (13,804)
Transfers to foreclosed assets .........         (134)         (316)         (528)          (43)       (1,021)
Returned to performing status ..........         (165)         (391)         (728)         (163)       (1,447)
Sales ..................................       (1,192)       (5,847)          (36)         --          (7,075)
Payments ...............................       (4,165)       (1,844)       (4,893)         (426)      (11,328)
---------------------------------------------------------------------------------------------------------------
Nonperforming loans at December 31, 1996     $  2,310      $  1,841      $  9,419      $  2,473      $ 16,043
---------------------------------------------------------------------------------------------------------------
</TABLE>



loans are current as to principal  and interest  payments but are  classified as
nonperforming because there is a question concerning full collectibility of both
principal and interest.


      Nonperforming  assets  totaled  $24.9  million at  year-end  1996,  a $1.8
million (7%) decrease from the prior year.  Nonperforming  assets totaling $26.8
million at December  31, 1995 were down $12.0  million  (31%) from  December 31,
1994.  The  composition  of  nonperforming  assets and certain key asset quality
ratios for the past five years are illustrated in Table 4.

      Table 5  details  nonperforming  loan  activity  during  1996 by loan type
(commercial real estate, other commercial, small business banking and consumer).
Payments,  sales and loans returned to performing  status  accounted for a $19.9
million reduction in nonperforming loans. Charge-offs of nonperforming loans and
transfers to foreclosed  assets  totaled $14.8  million,  while $33.0 million in
loans were transferred to nonperforming status in 1996.

      In addition to the  nonperforming  loans discussed above,  there are $29.8
million of  commercial  loans which,  in  management's  opinion,  are subject to
potential future classification as nonperforming.  Most of this amount is due to
one large  commercial  customer  who has an  agreement to sell the business to a
third party.  It is not  anticipated  that the Company will incur a  significant
loss associated with this customer.

      Foreclosed  assets and excess bank-owned  property,  which are recorded at
fair value less estimated  selling cost,  totaled $8.9 million at year-end 1996,
$9.1 million at year-end 1995 and $10.5 million at year-end  1994.  Improvements
in commercial  real estate and general  economic  conditions,  which allowed for
favorable dispositions, were the primary factors in the declines.

      As of  January  1,  1995,  the  Company  adopted  Statement  of  Financial
Accounting  Standards  (SFAS) No. 114,  "Accounting  for  Impairment of a Loan,"
which,  as it relates to  in-substance  foreclosures,  requires  that a creditor
continue to follow loan  classification on the balance sheet unless the creditor
receives physical possession of the collateral. Accordingly, upon adoption, $7.1
million of in-substance  foreclosures were transferred from foreclosed  property
to  nonperforming  loans,  and  related  loss  reserves  of  $0.2  million  were
transferred  to the reserve for possible loan losses.  The Company  reclassified
in-substance  foreclosures  and the  related  loss  reserves  for all periods to
conform to the new  classification  requirements.  At  December  31,  1996,  the
recorded  investment in loans that were considered to be impaired under SFAS No.
114 was $14.3 million with the related  reserve for possible loan losses of $1.5
million. These loans are included in nonaccrual loans in Table 4.

       One  measure  of  asset  quality  is the  level of  nonperforming  assets
compared to total loans plus foreclosed  assets and excess  bank-owned  property
(nonperforming asset ratio). At year-end 1996, the Company's nonperforming asset
ratio was 0.41%,  compared to 0.57% at year-end 1995 and 1.01% at year-end 1994.
Another  measure of asset  quality is the amount of net  charge-offs  during the
year compared to average loans.  As  illustrated in Table 6, net  charge-offs in
1996 totaled $15.7  million,  a $9.1 million  increase from $6.6 million in 1995
and a $3.0 million  increase from $12.7 million in 1994.  Net  charge-offs  as a
percentage of average loans were 0.30% in 1996, 0.16% in 1995 and 0.36% in 1994.

      The  level of  accruing,  delinquent  loans  (over 30 days  past due) as a
percentage  of total  loans was 1.2% at December  31,  1996  compared to 1.1% at
year-end 1995 and 0.9% at year-end 1994. The commercial loan  delinquency  ratio
increased in 1996 from 0.2% to 0.8%,  primarily  due to the one large  potential
nonperforming  loan  discussed  previously.  The  small  business  banking  loan
delinquency ratio was unchanged at 1.3%, and the consumer loan delinquency ratio
decreased from 1.7% to 1.6%.

       Although  the net  charge-off  and  delinquency  ratios have  risen,  the
increases are  indicative of the size and growth rate of the loan  portfolio and
are not necessarily indicative of a significant increase in risk.


Reserve and Provision for Possible Loan Losses

      The reserve  for  possible  loan  losses is composed of specific  reserves
(assessed  for each loan that is impaired or for which a probable  loss has been
identified),   general   reserves  and  an   unallocated   reserve.   Management
continuously  evaluates  the  reserve to ensure the level is  adequate to absorb
loan losses inherent in the loan portfolio. Reserves on impaired loans are based
on discounted cash flows using the loan's initial effective interest rate or the
fair value of the collateral  for certain  collateral-dependent  loans.  Factors
contributing to the  determination  of specific  reserves  include the financial
condition  of the  borrower,  changes  in the value of  pledged  collateral  and
general  economic   conditions.   General  reserves  are  established  based  on
historical loss experience and trends in delinquencies and nonaccrual loans. The
unallocated  reserve  serves to  compensate  generally  for the  uncertainty  in
estimating loan losses,  including the possibility of changes in risk ratings of
loans and in specific reserve allocations.

      The  provision  for possible  loan losses (a component of earnings) is the
means by which the reserve for  possible  loan losses is adjusted to establish a
reserve level considered  adequate by management to absorb future potential loan
losses.

     The Board of Directors reviews the adequacy of the reserve each quarter. As
a result of continued asset quality  improvement and strong reserve coverage,  a
$12.6  million  negative  provision was recorded in 1996. In 1995 a $1.1 million
provision was recorded by the pooled companies, and in 1994 a negative provision
of $17.9 million was recorded.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
TABLE 6 - LOAN LOSS RESERVE ACTIVITY
--------------------------------------------------------------------------------
Year Ended December 31
($ in thousands) ...................       1996         1995         1994
--------------------------------------------------------------------------------
<S>                                    <C>          <C>          <C>      
Balance at beginning
  of year ..........................   $ 150,516    $ 156,005    $ 186,562
  Loans charged off ................     (34,875)     (24,985)     (31,520)
  Recoveries .......................      19,141       18,356       18,832
--------------------------------------------------------------------------------
Net loans
  charged off ......................     (15,734)      (6,629)     (12,688)
--------------------------------------------------------------------------------
Provision for possible
  loan losses ......................     (12,625)       1,140      (17,869)
Addition due to
  purchased
  companies ........................       5,611         --           --
--------------------------------------------------------------------------------
Balance at end
  of year ..........................   $ 127,768    $ 150,516    $ 156,005
--------------------------------------------------------------------------------
</TABLE>

      The year-end 1996 reserve of $127.8 million  provided  796.4%  coverage of
nonperforming  loans compared to $150.5 million with 850.8% coverage at year-end
1995 and $156.0  million with 552.5%  coverage at year-end 1994. As a percentage
of total  loans,  the reserve for loan losses  amounted to 2.11% at December 31,
1996, compared to 3.19% and 4.09% at year-end 1995 and 1994, respectively.  Even
though the  reserve for loan losses has  declined  over the last four years,  in
total and as a percentage of loans, the present level is considered  adequate to
absorb future  potential loan losses.  Because factors such as loan growth,  the
future  collectibility  of loans and the amounts and timing of future cash flows
expected to be received on  impaired  loans are  uncertain,  the level of future
provisions (positive or negative), if any, cannot be predicted.

      An allocation of the December 31, 1996, reserve is presented in Table 7.

<TABLE>
<CAPTION>
-------------------------------------------------------
TABLE 7 - ALLOCATION OF RESERVE
FOR POSSIBLE LOAN LOSSES
-------------------------------------------------------
                              Reserve for       % of
December 31, 1996                Possible      Total
($ in millions)               Loan Losses    Reserve
-------------------------------------------------------
<S>                              <C>            <C> 
Commercial real estate loans     $    5.5       4.3%
Other commercial loans .....         19.2      15.0
Small business banking loans          9.6       7.5
Consumer loans .............         61.8      48.4
Unallocated reserve ........         31.7      24.8
-------------------------------------------------------
    Total ..................     $  127.8     100.0%
-------------------------------------------------------
</TABLE>


Funding Sources:


Deposits and Borrowings

      DEPOSITS.  Deposits are the  Company's  primary  source of funding for its
earning assets.  Hibernia  offers a variety of products  designed to attract and
retain customers, with the primary focus on core deposits.

      Average  deposits  totaled $6.9 billion in 1996, a $518.3  million  (8.1%)
increase from 1995.  Half of this  increase was  internally  generated  with the
remainder due to the purchased  companies.  Average core deposits were up $287.0
million to $5.7 billion or 82.7% of total  deposits.  Total deposits at year-end
1996   were   $7.8   billion,    up   $1.3   billion   from    year-end    1995.

<TABLE>
<CAPTION>
------------------------------------------------------
TABLE 8 - AVERAGE DEPOSIT RATES
------------------------------------------------------
                                1996    1995    1994
------------------------------------------------------
<S>                             <C>     <C>     <C>  
NOW accounts .............      2.87%   2.20%   1.78%
Money market
  deposit accounts .......      2.36    2.65    2.50
Savings accounts .........      2.11    2.19    2.13
Other consumer
  time deposits ..........      5.51    5.64    4.35
Public fund certificates
  of deposits of
  $100,000 or more .......      5.40    5.91    4.19
Certificates of deposit
  of $100,000 or more ....      5.13    4.87    3.81
Foreign time deposits ....      5.41    5.75    4.65
------------------------------------------------------
    Total interest-bearing
      deposits ...........      4.28%   4.33%   3.34%
------------------------------------------------------
</TABLE>

      NOW account average  balances were down $327.4  million,  and money market
deposit  accounts were up $321.7  million in 1996  compared to 1995.  During the
fourth  quarter of 1995,  Hibernia  instituted a new product,  the Reserve Money
Manager  account,  in which  each NOW  account  is  joined  with a money  market
account. As needed, funds are moved from the money market account to cover items
presented  for  payment  to the  customer's  NOW  account up to a maximum of six
transfers per statement  cycle.  The effect of the Reserve Money Manager account
on  average  balances  was $533.5  million  in 1996 and  $103.5  million in 1995
(reducing  NOW account  average  balances and  increasing  money market  deposit
account average balances).

       Net of this effect,  NOW account average  balances were up $102.6 million
(14%),  and money  market  deposit  account  average  balances  were down $108.3
million (10%).  Internal growth accounted for approximately half of the increase
in average NOW accounts with the remainder due to the purchased companies. Money
market  deposit  accounts  declined  because the rate paid on these accounts was
less  attractive  than  those  of other  investment  products,  including  other
Hibernia deposits.

       Other consumer time deposits  increased  $186.5  million (9%),  with less
than a third of the increase  coming from the purchased  companies.  New deposit
products  successfully  introduced  during 1996,  such as the Celebration CD and
7-day CD, with an attractive rate and short maturity,  were the major factors in
the increase in other consumer time deposits.

       Average noncore deposits  increased $231.3 million (24%) in 1996 compared
to the prior year.  Public fund certificates of deposit increased $154.0 million
(22%),  and other  large-denomination  certificates  of deposit  increased $70.6
million  (34%).  These  increases  were  primarily due to internal  growth.  The
increase in public  fund  deposits  is due,  in part,  to greater  access in new
markets  (through  mergers) to public agency funds as well as increases in funds
from existing relationships.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
TABLE 9  -  DEPOSIT COMPOSITION
------------------------------------------------------------------------------------------------------------
                                              1996                   1995                       1994
------------------------------------------------------------------------------------------------------------
                                      Average     % of        Average    % of           Average    % of
($ in millions)                       Balances    Deposits    Balances   Deposits       Balances   Deposits
------------------------------------------------------------------------------------------------------------
<S>                                 <C>            <C>      <C>            <C>      <C>            <C>  
Demand, noninterest-bearing ...     $  1,228.7      17.8%   $  1,139.6      17.9%   $  1,106.4      17.9%
NOW accounts ..................          305.4       4.4         632.8       9.9         712.2      11.5
Money market deposit accounts .        1,468.1      21.3       1,146.4      18.0       1,202.6      19.4
Savings accounts ..............          386.1       5.6         369.0       5.8         399.3       6.5
Other consumer time deposits ..        2,315.0      33.6       2,128.5      33.4       1,891.2      30.5
------------------------------------------------------------------------------------------------------------
        Total core deposits ...        5,703.3      82.7       5,416.3      85.0       5,311.7      85.8
------------------------------------------------------------------------------------------------------------
Public fund certificates of
    deposit of $100,000 or more          868.2      12.6         714.2      11.2         650.3      10.5
Certificates of deposit of
    $100,000 or more ..........          279.2       4.1         208.6       3.3         213.6       3.4
Foreign time deposits .........           41.8       0.6          35.1       0.5          17.1       0.3
------------------------------------------------------------------------------------------------------------
        Total deposits ........     $  6,892.5     100.0%   $  6,374.2     100.0%   $  6,192.7     100.0%
------------------------------------------------------------------------------------------------------------
</TABLE>

       BORROWINGS.  Average  borrowings - which include federal funds purchased,
securities sold under agreements to repurchase (repurchase  agreements) and debt
increased  $61.3 million (21%) to $347.6  million in 1996 compared to 1995.  The
increase results primarily from growth in repurchase  agreements  related to new
treasury  management  products  which  "sweep"  funds  from  customers'  deposit
accounts.  Fluctuations in short-term  borrowings can also stem from differences
in the timing of the expansion of lending  opportunities and the growth of other
funding sources (deposits and proceeds from maturing securities).


       The Company's debt at December 31, 1996, which totaled $51.3 million,  is
comprised primarily of advances from the Federal Home Loan Bank of Dallas.


Interest Rate Sensitivity

      Interest rate risk is the potential impact of changes in interest rates on
net interest  income and results from mismatches in repricing  opportunities  of
assets and liabilities over a period of time. The Company uses simulation models
to estimate the effects of changing  interest  rates and various  balance  sheet
strategies on the level of net interest income.  Management may alter the mix of
floating- and  fixed-rate  assets and  liabilities,  change  pricing  schedules,
adjust maturities  through sales and purchases of securities  available for sale
and enter into derivative contracts as a means of limiting interest rate risk to
an acceptable  level.  Table 10 presents  Hibernia's  interest rate  sensitivity
position at December 31, 1996.

      This profile,  usually referred to as a Gap analysis,  is based on a point
in  time  and may not be  meaningful  because  assets  and  liabilities  must be
categorized  according to contractual  maturities  and repricing  periods rather
than estimating these  characteristics,  as is done in simulation models.  Also,
the Gap analysis does not consider subsequent changes in interest rate levels or
spreads between asset and liability categories.

      Although  Table 10  indicates  that  the  Company  is  liability-sensitive
(interest-bearing  liabilities  exceed earning  assets) up to one year, this may
not be true in  practice.  The 1-30 day deposit  category  includes  NOW,  money
market and savings accounts which have indeterminate maturities.  The rates paid
on these core deposits,  which account for almost 36% of interest-bearing funds,
do not  necessarily  reprice in a direct  relationship  to  changes in  interest
rates. In addition,  one of Hibernia's  deposit products is the consumer One Way
CDSM,  which gives the customer a one-time  opportunity  to adjust the rate on a
certificate of deposit during its two-year term. As of December 31, 1996,  these
deposits totaled over $600 million, of which approximately $100 million had been
repriced. Of the remaining $500 million, approximately $450 million are included
in the 1-30 day deposit category  because these  certificates may reprice at any
time.  However,  these deposits adjust to market rates over a much longer period
as individual  depositors  choose when to exercise the option to adjust the rate
on their deposits.
<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------------
TABLE 10 - INTEREST RATE SENSITIVITY AND GAP ANALYSIS
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                        Over 5 Years
December 31, 1996                           1-30       31-60        61-90         91-365     1 Year -       and Non-
($ in thousands)                            Days        Days         Days           Days      5 Years      Sensitive         Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>          <C>          <C>          <C>            <C>          <C>            <C>       
Earning assets:
    Loans .........................   $2,195,810   $  78,059    $  80,108    $   712,272    $2,615,595   $   361,184    $6,043,028
    Securities available for sale .    2,178,674          --           --             --            --            --     2,178,674
    Other earning assets ..........      158,000          --           --            293            --            --       158,293
------------------------------------------------------------------------------------------------------------------------------------
        Total earning assets ......    4,532,484      78,059       80,108        712,565     2,615,595       361,184     8,379,995
------------------------------------------------------------------------------------------------------------------------------------
Funding sources:
    NOW accounts ..................      472,424          --           --             --            --            --       472,424
    Money market deposit accounts .    1,487,250          --           --             --            --            --     1,487,250
    Savings accounts ..............      437,249          --           --             --            --            --       437,249
    Other interest-bearing deposits    1,711,647     298,301      264,777      1,105,945       388,651       114,642     3,883,963
    Short-term borrowings .........      331,796          --           --             --            --            --       331,796
    Long-term debt ................           --          --       42,202             99            54         8,994        51,349
    Noninterest-bearing sources ...           --          --           --             --            --     1,715,964     1,715,964
------------------------------------------------------------------------------------------------------------------------------------
        Total funding sources .....    4,440,366     298,301      306,979      1,106,044       388,705     1,839,600     8,379,995
------------------------------------------------------------------------------------------------------------------------------------
Repricing/maturity gap:
    Period ........................   $   92,118   $(220,242)   $(226,871)   $  (393,479)   $2,226,890   $(1,478,416)   $       --
    Cumulative ....................   $   92,118   $(128,124)   $(354,995)   $  (748,474)   $1,478,416   $        --    $       --
------------------------------------------------------------------------------------------------------------------------------------
Gap/total earning assets:
    Period ........................         1.1%       (2.6)%       (2.7)%        (4.7)%         26.6%        (17.6)%
    Cumulative ....................         1.1%       (1.5)%       (4.2)%        (8.9)%         17.6%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

      In addition to core deposits,  which serve to lessen the volatility of net
interest  income in changing rate  conditions,  the Company's  loan and security
portfolios contain fixed-rate mortgage loans and mortgage-backed securities that
have  actual  maturities  and cash  flows  that vary with the level of  interest
rates.  These earning assets are reported in the over 5 years and  non-sensitive
category,  when in fact a portion of these  balances may be subject to repricing
within one year or less.  Depending on market interest rates,  actual cash flows
from these instruments will vary from the contractual  maturities due to payoffs
and refinancing activity.


      On a limited  basis,  Hibernia uses  derivative  financial  instruments to
manage interest rate exposure. These agreements involve the risk of dealing with
counterparties and their ability to meet contractual terms. These counterparties
must  receive  appropriate  credit  approval  before the Company  enters into an
interest rate contract.  Notional  principal amounts express the volume of these
transactions, although the amounts potentially subject to credit and market risk
are much smaller.

      Derivative  financial  instruments - including  interest rate swaps, caps,
floors and options - were entered  into by one of the pooled  companies to hedge
against  exposure  to  changes  in  interest  rates on the  market  value of the
securities  available  for sale  portfolio.  At December 31, 1996,  the notional
value of these  derivatives  was $176.0 million  compared to a notional value of
$478.5 million at December 31, 1995. The fair value of these derivatives of $1.8
million  and $0.1  million  at  December  31,  1996 and 1995,  respectively,  is
included in the securities available for sale portfolio.

      Derivative  financial  instruments  are also held or issued by the Company
for trading purposes to provide  Hibernia  customers the ability to manage their
own  interest  rate  sensitivity.  In general,  matched  trading  positions  are
established  to minimize risk to the Company.  The notional  value of derivative
financial  instruments held for trading totaled $209.9 million at year-end 1996,
$318.9 million at year-end 1995 and $358.8 million at year-end 1994.  Hibernia's
credit exposure  related to derivative  financial  instruments  held for trading
totaled $0.9 million at December 31, 1996 and $0.1 million at December 31, 1995.


Net Interest Margin

      The net interest  margin is  taxable-equivalent  net interest  income as a
percentage of average  earning  assets.  Net interest  income is the  difference
between  total  interest and fee income  generated  by earning  assets and total
interest  expense  incurred on  interest-bearing  liabilities and is affected by
the:

      o     volume, yield and mix of earning assets;
      o     level of nonperforming loans;
      o     volume, yield and mix of interest-bearing
            liabilities;
      o     amount of noninterest-bearing liabilities
            supporting earning assets; and
      o     interest rate environment.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
TABLE 11 - NET INTEREST MARGIN (taxable-equivalent)
--------------------------------------------------------------------------------------------------------------
                                                            1996       1995       1994       1993       1992
--------------------------------------------------------------------------------------------------------------
<S>                                                        <C>        <C>        <C>        <C>        <C>   
Yield on earning assets ...........................         8.30%      8.15%      7.26%      7.21%      7.96%
Rate on interest-bearing liabilities ..............         4.32       4.38       3.38       3.15       4.02
--------------------------------------------------------------------------------------------------------------
    Net interest spread ...........................         3.98       3.77       3.88       4.06       3.94
Contribution of noninterest-bearing funds .........         0.91       0.92       0.71       0.64       0.56
--------------------------------------------------------------------------------------------------------------
    Net interest margin ...........................         4.89%      4.69%      4.59%      4.70%      4.50%
--------------------------------------------------------------------------------------------------------------
Noninterest-bearing funds supporting earning assets        21.01%     20.96%     21.06%     20.15%     14.18%
--------------------------------------------------------------------------------------------------------------
</TABLE>


      The net  interest  margin is composed of the net  interest  spread,  which
measures  the  difference  between the average  yield on earning  assets and the
average  rate paid on  interest-bearing  liabilities,  and the  contribution  of
noninterest-bearing  funds,  which  measures  the effect of  noninterest-bearing
funds  (primarily  demand  deposits  and  shareholders'  equity) on net interest
income. In general, the higher the ratio of noninterest-bearing funds supporting
earning   assets,    the   higher   the   net   interest   margin.    Hibernia's
noninterest-bearing  funds ratio was 21.01% in 1996,  compared to 20.96% in 1995
and 21.06% in 1994.  Table 11 details the components of the net interest  margin
for the past five years.


      The net  interest  margin of 4.89% in 1996  compares  to 4.69% in 1995 and
4.59% in 1994. The change in the mix of earning assets to  proportionately  more
loans with  comparatively  higher yields than other earning assets - contributed
to the increase in the net interest margin.  In 1996, loans amounted to 69.6% of
average  earning assets  compared to 60.9% in 1995. In addition to the favorable
effect of the change in the mix, total funding costs decreased by 6 basis points
as deposit costs decreased 5 basis points and other interest-bearing liabilities
decreased 54 basis points.

      The 10 basis point  increase in the net interest  margin from 1994 to 1995
was also due to the change in the mix of earning assets.  In the rising interest
rate environment, the positive impact of higher yields on earning assets and the
increased value of Hibernia's noninterest-bearing funds resulted in a higher net
interest margin.  These increases were mostly offset by similarly rising funding
costs.


Results of Operations:

      The Company earned $110.0  million,  or $.85 per common share, in 1996. In
1995, fully tax-effected net income was $90.8 million, or $.72 per common share.
Fully  tax-effected  net  income in 1994 was $71.0  million,  or $.56 per common
share.

      Operating  results improved in 1996 because of a $45.0 million increase in
taxable-equivalent  net interest income  resulting from an improved net interest
margin and higher  earning  assets,  an $11.7  million  increase in  noninterest
income  (excluding  securities   transactions)  and  a  $12.6  million  negative
provision for possible loan losses in 1996 compared to a $1.1 million  provision
in 1995.  These  favorable  effects were partially  offset by securities  losses
totaling  $5.3  million  in 1996 and a $35.7  million  increase  in  noninterest
expense. Expenses related to the purchased companies and Vision 2000, Hibernia's
strategic improvement process, as well as nonrecurring expenses were the primary
factors for the increase in noninterest expense.

      The  improvement in 1995 from 1994 was due to a $19.7 million  increase in
taxable-equivalent   net  interest  income,  an  $11.0  million  improvement  in
noninterest  income  and an  $18.8  million  decrease  in  noninterest  expense.
Partially  offsetting  these favorable  effects,  1994 results  benefited from a
$17.9 million negative loan loss provision, compared to a $1.1 million provision
recorded in 1995.


Net Interest Income

      Net interest income on a taxable-equivalent basis increased $45.0 million,
or  13.7%,   to  $372.5   million   in  1996  from   $327.5   million  in  1995.
Taxable-equivalent net interest income in 1994 was $307.8 million.

      Taxable-equivalent  net interest income increased in 1996 over 1995 and in
1995 over 1994  primarily as a result of the change in the mix and the growth in
earning assets.

      As indicated in Table 13, the change in volumes raised  taxable-equivalent
net interest  income in 1996 by $45.3 million  compared to 1995. A $95.0 million
increase in  taxable-equivalent  interest  income due to the growth in loans was
partially offset by a decrease in taxable-equivalent  interest income related to
securities.  In  addition,  interest  expense  increased  due to the  growth  in
interest-bearing    liabilities.    There   was    virtually    no   change   in
taxable-equivalent net interest income

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
TABLE 12  -  INTEREST-EARNING ASSET COMPOSITION
-------------------------------------------------------------------------------------------
(Percentage of average balances)        1996       1995       1994       1993       1992
-------------------------------------------------------------------------------------------
<S>                                    <C>        <C>        <C>        <C>        <C>  
Loans ..........................        69.6%      60.9%      53.1%      50.8%      58.9%
Securities available for sale ..        28.0       11.0       14.0       14.1       12.4
Securities held to maturity ....           -       26.3       30.0       29.4       20.7
-------------------------------------------------------------------------------------------
   Total securities ............        28.0       37.3       44.0       43.5       33.1
-------------------------------------------------------------------------------------------
Short-term investments .........         2.4        1.8        2.9        5.7        8.0
-------------------------------------------------------------------------------------------
   Total interest-earning assets       100.0%     100.0%     100.0%     100.0%     100.0%
-------------------------------------------------------------------------------------------
</TABLE>


<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
TABLE 13 - CHANGES IN TAXABLE-EQUIVALENT NET INTEREST INCOME (1)
-----------------------------------------------------------------------------------------------------------------------------
                                                  1996 Compared to 1995                  1995 Compared to 1994
                                          ------------------------------------   -------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
                                                       Increase (Decrease) Due to Change In:
-----------------------------------------------------------------------------------------------------------------------------
($ in thousan ds)                             Volume          Rate         Total         Volume         Rate          Total
-----------------------------------------------------------------------------------------------------------------------------
<S>                                        <C>            <C>          <C>            <C>           <C>           <C>     
Taxable-equivalent interest earned on:
    Loans ............................     $  95,005      $(7,720)     $  87,285      $ 63,114      $ 19,078      $ 82,192
    Securities available for sale ....        90,277          (20)        90,257       (10,677)        7,292        (3,385)
    Securities held to maturity ......      (117,670)          --       (117,670)       (9,996)       14,766         4,770
    Short-term investments ...........         3,090         (678)         2,412        (3,449)        2,876          (573)
-----------------------------------------------------------------------------------------------------------------------------
        Total ........................        70,702       (8,418)        62,284        38,992        44,012        83,004
-----------------------------------------------------------------------------------------------------------------------------
Interest paid on:
    NOW accounts .....................        (8,581)       3,436         (5,145)       (1,520)        2,760         1,240
    Money market deposit accounts ....         7,856       (3,489)         4,367        (1,441)        1,710           269
    Savings accounts .................           368         (298)            70          (660)          259          (401)
    Other consumer time deposits .....        10,319       (2,820)         7,499        11,227        26,528        37,755
    Public fund certificates of
        deposit of $100,000 or more ..         8,538       (3,848)         4,690         2,893        12,028        14,921
    Certificates of deposit
        of $100,000 or more ..........         3,602          575          4,177          (197)        2,225         2,028
    Foreign deposits .................           370         (127)           243           998           226         1,224
    Federal funds purchased ..........          (273)        (317)          (590)          744           834         1,578
    Repurchase agreements ............         3,177       (1,090)         2,087         2,951         3,037         5,988
    Long-term debt ...................            14          (91)           (77)         (496)         (845)       (1,341)
-----------------------------------------------------------------------------------------------------------------------------
        Total ........................        25,390       (8,069)        17,321        14,499        48,762        63,261
-----------------------------------------------------------------------------------------------------------------------------
Taxable-equivalent
    net interest income ..............     $  45,312      $  (349)     $  44,963      $ 24,493      $ (4,750)     $ 19,743
-----------------------------------------------------------------------------------------------------------------------------
----------------
(1)  Change due to mix (both rate and volume) has been  allocated  to volume and
     rate changes in  proportion  to the  relationship  of the  absolute  dollar
     amounts to the changes in each.
</TABLE>

attributable to interest rates as the decrease in yields  (primarily  loans) was
offset by lower rates paid on interest-bearing funds.


      For  1995   compared   to  1994,   the  change  in  net   volumes   raised
taxable-equivalent  net  interest  income by $24.5  million,  with the growth in
loans adding $63.1 million to taxable-equivalent interest income. The net change
attributable to interest rates lowered taxable-equivalent net interest income by
$4.8 million.


Noninterest Income

       Service  charges on deposits,  trust fees,  mortgage loan servicing fees,
retail  investment  service  fees and income  generated  from the  operation  of
automated  teller machines  (ATMs) were the largest  contributors to noninterest
income in 1996.  Noninterest income totaled $110.4 million in 1996,  compared to
$104.2  million  in  1995  and  $93.2  million  in  1994.  Excluding  securities
transactions,  noninterest income was up $11.7 million (11%) in 1996 compared to
1995.

       Nonrecurring items in both 1996 and 1995 distort comparisons from year to
year. In 1996,  nonrecurring items include a $1.4 million gain on the settlement
of an acquired  loan and a $0.5 million  gain related to the sale of  Hibernia's
municipal bond administration  business. The nonrecurring items in 1995 include:
a $2.4 million  gain  related to the  divestiture  of three  banking  offices in
Northwest Louisiana in connection with Hibernia's merger with Pioneer Bancshares
Corporation; a $0.6 million fee to amend the terms of a large commercial credit;
and gains to record  the  sales of the  Company's  student  loan  portfolio  and
municipal bond  administration  business totaling $1.8 million and $1.6 million,
respectively.

      Net of the  nonrecurring  items and securities  transactions,  noninterest
income was up $16.2 million (17%), with less than 20% of the increase  resulting
from  income  related  to  the  purchased   companies.   The  major   categories
contributing  to the increases in  noninterest  income were increases in service
charges on  deposits,  ATM and debit card fees,  trust fees,  retail  investment
service income, and gains on the sale of mortgage loans.

      The increase in service  charges on deposits of $9.6 million (20%) was due
to  increases  in  fee-generating  deposit  balances and an increase in the fees
charged for certain deposit-related activities. ATM fees increased

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
TABLE 14 - NONINTEREST INCOME
--------------------------------------------------------------------------------------------------------------
                                                                                   Percent Increase (Decrease)
--------------------------------------------------------------------------------------------------------------
                                                                                            1996       1995
($ in thousands)                                   1996          1995         1994     over 1995  over 1994
--------------------------------------------------------------------------------------------------------------
<S>                                           <C>            <C>          <C>             <C>         <C> 
Service charges on deposits .............     $  58,330      $ 48,715     $ 47,139         19.7%       3.3%
Trust fees ..............................        13,397        12,498       13,092          7.2       (4.5)
Other service, collection and
    exchange charges:
    Mortgage loan servicing fees ........         7,943         8,127        7,637         (2.3)       6.4
    Retail investment service fees ......         8,659         6,197        6,163         39.7        0.6
    ATM fees ............................         6,880         5,535        3,157         24.3       75.3
    Other ...............................        10,503         8,814        5,530         19.2       59.4
--------------------------------------------------------------------------------------------------------------
          Total other service, collection
              and exchange charges ......        33,985        28,673       22,487         18.5       27.5
--------------------------------------------------------------------------------------------------------------
Other income:
    Gain on divestiture of
        banking offices .................            --         2,361           --       (100.0)       --
    Gain on sales of business lines .....           517         3,402           --        (84.8)       --
    Other income ........................         9,436         8,317       12,129         13.5      (31.4)
--------------------------------------------------------------------------------------------------------------
          Total other income ............         9,953        14,080       12,129        (29.3)      16.1
--------------------------------------------------------------------------------------------------------------
Securities gains (losses), net ..........        (5,306)          248       (1,669)         N/M        N/M
--------------------------------------------------------------------------------------------------------------
          Total noninterest income ......     $ 110,359      $104,214     $ 93,178          5.9%      11.8%
--------------------------------------------------------------------------------------------------------------
----------------
N/M = Not meaningful
</TABLE>

$1.3 million (24%) due to an expanded and upgraded network and surcharges on ATM
transactions. Hibernia's debit card, CheckMateSM, a concept acquired from a 1995
merger,  was introduced  companywide in 1996 and earned over $1.3 million in its
initial year, with expectations of further significant growth in 1997.


      Trust fees were up $0.9  million  (7%)  despite the sale of the  municipal
bond  administration  business.  Retail investment service income increased $2.5
million  (40%) due to the  success of  variable-rate  annuity  and  mutual  fund
products   delivered   throughout  the  Hibernia  banking  office  system  by  a
restructured sales force.

      Gains on sales of mortgage  loans were up $1.0 million in 1996 compared to
1995 due to the significant increase in volume.

      In 1996 Hibernia  recorded $5.3 million in securities  losses  compared to
gains of $0.2  million  in 1995.  The  losses  in 1996  were the  result  of the
restructuring of the securities  available for sale portfolio which was designed
to enhance future earnings and improve an already strong net interest margin.

      Excluding  securities  transactions and nonrecurring  items in both years,
noninterest  income in 1995  increased $4.5 million (5%) compared to 1994 due to
increases in service charges on deposits and ATM fees.

Noninterest Expense

      Noninterest  expense  totaled $319.7  million in 1996,  compared to $284.1
million in 1995 and $302.9 million in 1994. Excluding certain nonrecurring items
and merger-related  expenses for both years,  noninterest  expense in 1996 would
have been  $308.1  million,  a $31.0  million  (11%)  increase  over  1995.  The
nonrecurring  items  included  $4.0  million  in asset  write-downs  related  to
technology  enhancements,  $4.3  million in  merger-related  expenses and a $3.3
million addition to reserves for health care benefits and other expenses, all in
1996, and $7.0 million in merger-related expenses in 1995.  Approximately 30% of
the $31.0 million  increase in  noninterest  expense in 1996 was due to expenses
related to the  purchased  companies.  The  remainder of the increase was due to
higher staff costs and $7.0 million in expenses related to Vision 2000.

      Staff costs  increased  $24.4 million (18%),  or $22.7 million (17%) after
merger-related expenses and the addition to the reserve for health care benefits
are  excluded.  The  purchased  companies  accounted  for  $3.3  million  of the
increase.  Higher  accruals for  incentives and bonuses and increases in various
medical and insurance  benefits were other major  factors  contributing  to this
increase.  The increases in incentives and bonuses reflect Hibernia's  continued
movement toward more performance-based  compensation,  which began several years
ago.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
TABLE 15 - NONINTEREST EXPENSE
--------------------------------------------------------------------------------------------------------------
                                                                                  Percent Increase (Decrease)
--------------------------------------------------------------------------------------------------------------
                                                                                          1996       1995
($ in thousands)                              1996           1995           1994     over 1995  over 1994
--------------------------------------------------------------------------------------------------------------
<S>                                      <C>            <C>            <C>              <C>         <C> 
Salaries ...........................     $ 133,496      $ 116,122      $ 112,060         15.0%       3.6%
Benefits ...........................        27,674         20,682         20,942         33.8       (1.2)
--------------------------------------------------------------------------------------------------------------
    Total staff costs ..............       161,170        136,804        133,002         17.8        2.9
--------------------------------------------------------------------------------------------------------------
Occupancy, net .....................        26,959         26,501         28,338          1.7       (6.5)
Equipment ..........................        28,735         21,648         17,871         32.7       21.1
--------------------------------------------------------------------------------------------------------------
    Total occupancy and equipment ..        55,694         48,149         46,209         15.7        4.2
--------------------------------------------------------------------------------------------------------------
Data processing ....................        20,234         19,373         21,231          4.4       (8.8)
Telecommunications .................         8,844          7,089          4,417         24.8       60.5
Advertising and promotional expenses         9,709          7,430          6,177         30.7       20.3
Postage ............................         6,224          5,302          4,843         17.4        9.5
Stationery and supplies ............         6,610          6,393          5,555          3.4       15.1
Professional fees ..................         7,542          7,793         11,983         (3.2)     (35.0)
State taxes on equity ..............         6,000          4,491          3,164         33.6       41.9
Regulatory expense .................         1,196          8,493         15,663        (85.9)     (45.8)
Loan collection expense ............         2,494          2,149          1,822         16.1       17.9
Foreclosed property expense, net ...        (1,743)          (699)        (7,064)       149.4      (90.1)
Amortization of intangibles ........         7,290          3,709         23,231         96.5      (84.0)
Other ..............................        28,469         27,602         32,685          3.1      (15.6)
--------------------------------------------------------------------------------------------------------------
    Total noninterest expense ......     $ 319,733      $ 284,078      $ 302,918         12.6%      (6.2)%
--------------------------------------------------------------------------------------------------------------
Efficiency ratio (1)                        65.50%         65.84%         75.24%
--------------------------------------------------------------------------------------------------------------
----------------
(1)   Noninterest  expense as a percentage  of  taxable-equivalent  net interest
      income plus noninterest income (excluding securities transactions).
</TABLE>

      Occupancy and equipment  expense  increased  $7.5 million  (16%),  or $3.3
million (7%)  excluding the $4.0 million  asset  write-down  and  merger-related
expenses  in both years.  Almost half of the  increase is due to expenses of the
purchased companies, with the remainder primarily due to higher depreciation and
maintenance  expenses  related to the  Company's  investment  in new  technology
designed to improve customer service and enhance employee efficiency.

       Data  processing  expenses  increased  $0.9 million (4%), or $2.2 million
(12%)  excluding  merger-related  expenses.  Vision 2000  expenses  totaled $3.9
million and the expenses of the purchased  companies totaled $0.2 million.  Data
processing  expenses in 1995  included  approximately  $1.0 million of duplicate
expenses to outside  vendors as Hibernia  completed its conversion to a new data
processor in the first quarter of 1995. Net of the expenses  related to mergers,
the purchased  companies and Vision 2000 in 1996, and the duplicate  expenses in
1995, data processing  expenses declined $0.9 million  primarily  resulting from
the  efficiencies  of  combining  the data  processing  functions  of the merged
companies.  Telecommunications expenses increased $1.8 million (25%) as Hibernia
moved toward enhancing its  communication  capability as part of Vision 2000. In
addition,  data line  expenses  related to its  enhanced  ATM network  increased
telecommunications expenses.

       Regulatory  expenses  decreased  $7.3 million  (86%) in 1996  compared to
1995. The lower expense levels are the result of the virtual elimination of FDIC
premiums for well-capitalized,  highly-rated banks. Recently enacted legislation
imposed a one-time  $4.5  billion  assessment  on thrifts  and banks with thrift
deposits in order to raise the  reserves of the  Savings  Association  Insurance
Fund to legally  required levels.  Because Hibernia has no thrift deposits,  the
Company did not incur expenses in 1996 related to this assessment.  However, the
legislation  provides that, beginning in 1997, banks will pay assessments (based
on  deposit  levels)  to fund  interest  on bonds of the  Financing  Corporation
(FICO). The Company's 1997 expense related to the FICO funding is anticipated to
be approximately $1.0 million.

       Professional fees decreased $0.3 million (3%).  Excluding  merger-related
expenses,  professional  fees  increased  $0.7 million  (12%)  primarily  due to
consultant and other  professional  fees related to Vision 2000.  State taxes on
equity increased $1.5 million (34%) due to the growth in equity.

       Amortization of intangibles,  a noncash  expense,  increased $3.6 million
(97%)  due to the  goodwill  and core  deposit  intangibles  created  by the two
mergers  in 1996  accounted  for as  purchase  transactions.  These two  mergers
resulted in goodwill of $120.1  million and core  deposit  intangibles  of $18.5
million.  The goodwill will be amortized on a straight-line basis over 25 years,
while the core deposit  intangibles  will be amortized on an  accelerated  basis
over 10 years.

      Postage  increased $0.9 million (17%),  while  advertising and promotional
expenses  increased  $2.3  million  (31%)  because  of  a  general  increase  in
advertising,  product  development  activity and direct marketing.  During 1996,
Hibernia  intensified  efforts to better  identify the  financial  needs of both
existing and potential  customers;  to design products to meet customers' needs;
and to efficiently deliver those products.

      Noninterest  expense declined $18.8 million (6%) in 1995 compared to 1994.
Excluding  merger-related  expenses of $7.0 million in 1995 and a $17.6  million
charge for the  impairment  of  goodwill  and  merger-related  expenses of $11.1
million in 1994,  total  noninterest  expenses  increased  $2.9  million (1%) to
$277.1  million  in 1995.  The  major  factors  increasing  noninterest  expense
included a $6.4 million decrease in the net revenues  attributable to foreclosed
assets  and a  $5.9  million  (5%)  increase  in  staff  costs  related  to  the
institution  of the Hibernia  Employee  Stock  Ownership Plan (ESOP) in 1995 and
normal salary  increases.  These  increases  were offset by a $7.2 million (46%)
decrease in regulatory  expenses (due to the virtual elimination of FDIC deposit
premiums in mid-1995) and a $3.4 million  (37%)  decrease in  professional  fees
primarily due to a reduction in legal fees.

      The  Company's  efficiency  ratio,  defined  as  noninterest  expense as a
percentage of  taxable-equivalent  net interest income plus  noninterest  income
(excluding  securities  transactions),  is one  measure  of the  success  of its
efforts to control costs and generate income  efficiently.  The efficiency ratio
of  65.50% in 1996  compares  favorably  to  65.84% in 1995 and  75.24% in 1994.
Excluding amortization of goodwill and core deposit intangibles,  the efficiency
ratio was 64.17% in 1996,  down almost 100 basis  points from 65.12% in 1995 and
down over 550 basis points from 69.70% in 1994.


Income Taxes

      The Company  recorded a $59.5 million  provision for income taxes in 1996,
compared to $10.9 million in 1995 and $7.8 million in 1994. During 1995 and 1994
the Company recorded federal income taxes at a  lower-than-normal  effective tax
rate due to previously unrecognized deferred tax benefits.

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

      Net future  deductible  temporary  differences at December 31, 1996,  were
$157.8 million.  The reserve for possible loan losses  represents $127.8 million
of the future deductible  temporary  differences.  The reserve for possible loan
losses has been  recognized as expense for financial  reporting  purposes but is
not  deductible for federal income tax purposes until the loans are charged off.
Valued at the 35% federal statutory tax rate, the net future deductible  amounts
(excluding  the  capital  loss  carryforwards  for  which a  valuation  has been
established),  if ultimately  recognized,  would  generate tax benefits of $47.5
million.  These  benefits  are  recorded as a deferred tax asset at December 31,
1996.


Capital

      Capital represents  shareholder  ownership in the Company - the book value
of assets in excess of  liabilities.  It provides a base for asset  growth while
serving,  together  with the  reserve for  possible  loan  losses,  as a cushion
against  potential  losses.  Support for future asset  expansion could come from
utilization of existing  capital,  issuance of debt or new capital and retention
of earnings.  Hibernia's common dividend payout ratio (common dividends declared
per share  divided  by income  per  common  share) was 34.12% in 1996 and 24.51%
(34.72% on a tax-effected basis) in 1995, as the Company seeks a balance between
shareholders' return and earnings retention requirements.

      Shareholders'  equity totaled $936.4 million at the end of 1996,  compared
to $767.8  million at the end of 1995 and $637.7 million at the end of 1994. The
$168.6 million (22%) increase in 1996 was primarily due to current-year earnings
totaling $110.0 million and the

<TABLE>
<CAPTION>
TABLE 16 - CAPITAL
----------------------------------------------------------------------------------------------------
($ in millions)                           1996         1995         1994         1993         1992
----------------------------------------------------------------------------------------------------
<S>                                 <C>          <C>          <C>          <C>          <C>       
Risk-based capital:
    Tier 1 ....................     $    777.1   $    732.3   $    641.0   $    536.4   $    457.4
    Total .....................          858.1        795.8        693.8        583.2        504.1

Assets:
    Quarterly average assets(1)        8,850.9      7,541.5      7,182.5      6,907.0      6,834.4
    Net risk-adjusted assets ..        6,438.3      4,996.4      4,128.0      3,599.0      3,568.3

Ratios:
    Tier 1 risk -based capital          12.07%       14.66%       15.53%       14.91%       12.82%
    Total risk-based capital            13.33%       15.93%       16.81%       16.20%       14.13%
    Leverage .............               8.78%        9.71%        8.92%        7.77%        6.69%
----------------------------------------------------------------------------------------------------
----------------
(1) Excluding SFAS No. 115 adjustment and disallowed intangibles.
</TABLE>

issuance  of $100  million of  preferred  stock on  September  30,  1996.  These
increases were  partially  offset by $36.4 million in dividends on common stock,
$1.7 million for one quarter of dividends on preferred stock and an $8.3 million
decrease  in  unrealized  gains on  securities  available  for sale.  The $130.1
million  (20%)  increase  in 1995  reflected  the  Company's  $128.9  million in
earnings  and a $42.5  million  increase due to the change in  unrealized  gains
(losses) on securities  available for sale, partially offset by common dividends
totaling  $30.8  million and a $14.4 million  increase in unearned  compensation
related to the ESOP instituted in 1995.


      Regulations  applicable  to  national  banks and their  holding  companies
prescribe  minimum  capital  levels.  These  levels  are  based  on  established
guidelines which relate required capital standards to both risk-weighted  assets
(risk-based  capital ratios) and total assets  (leverage  ratio).  In accordance
with risk-based guidelines,  assets and off-balance-sheet  financial instruments
are  assigned  a weight to measure  their  level of risk.  The total  risk-based
capital ratio for the Company was 13.33% at year-end 1996, compared to 15.93% at
year-end 1995.  Leverage  ratios were 8.78% and 9.71% at year-end 1996 and 1995,
respectively.

      The two mergers  completed during 1996 that were accounted for as purchase
transactions  enabled  Hibernia to leverage its capital,  acquiring  assets (and
earnings  capacity)  without  increasing  equity.  As  a  result,  leverage  and
risk-based  capital ratios declined in 1996 but still  significantly  exceed the
standards  required for  designation of an  institution  as well  capitalized by
regulators. Table 16 shows the calculation of capital ratios for the Company for
the past five years.

       The  Fixed/Adjustable  Rate  Noncumulative   Preferred  Stock  issued  on
September  30,  1996 is  nonconvertible  and  qualifies  as Tier 1 capital.  The
issuance allowed Hibernia to maintain its strong capital ratios and enhances its
ability to act when future opportunities  arise. A shelf registration  statement
filed by the Company in July 1996 with the  Securities  and Exchange  Commission
allows the  Company to issue up to $250  million of  securities  over a two-year
period,  including  preferred  stock and  subordinated  debt. The remaining $150
million in securities included in this shelf registration  provide Hibernia with
the flexibility to quickly modify its capital  structure to meet competitive and
market conditions.


Liquidity


      Liquidity  is a  measure  of  ability  to fund loan  commitments  and meet
deposit  maturities and  withdrawals in a timely and  cost-effective  way. These
needs can be met by generating  profits,  attracting new deposits and converting
assets (such as short-term  investments  and  securities  available for sale) to
cash.  Management  monitors  liquidity  through a  periodic  review of  maturity
profiles,  yield and rate behaviors,  and loan and deposit forecasts to minimize
funding risks.

      Attracting  and  retaining  core  deposits  at  competitive  rates  is the
Company's  primary  source of  liquidity.  Hibernia's  extensive  retail  office
network,  aided by the  introduction  of new  deposit  products,  provided  $6.5
billion in core  deposits at year-end  1996,  up $843.1  million (15%) from $5.6
billion a year earlier. As previously mentioned in the discussion of borrowings,
Hibernia has a large base of treasury  management-related  repurchase agreements
as  part  of  total  customer  relationships.  Because  of  the  nature  of  the
relationships,  these  funds are  considered  stable and not subject to the same
volatility as other sources of noncore funds. Large-denomination certificates of
deposit and public funds were additional sources of liquidity during the year.

      Hibernia's  loan-to-deposit  ratio at year-end  1996  increased  to 77.3%,
compared to 71.9% at year-end 1995 and 60.2% at year-end 1994.  These  increases
resulted primarily from significant growth in loans, which outpaced increases in
the deposit  base.  Management  believes  that current and  projected  levels of
short-term  investments  and securities  available for sale are adequate to meet
the Company's liquidity needs. In addition, the Company's $150 million remaining
shelf registration  previously  discussed and its membership in the Federal Home
Loan Bank further augment liquidity management by providing a readily accessible
source of funds at competitive rates.

      Hibernia  Corporation  (the Parent  Company)  requires  liquidity  to fund
operating  expenses and investments and to pay dividends.  At December 31, 1996,
the Parent Company had $167.3 million in funds.  During 1996, the Parent Company
received net proceeds of $98.0 million from the issuance of preferred stock, and
$30.8 million in dividends from its bank  subsidiaries.  The Parent Company paid
$36.4  million in  dividends  to its  common  shareholders  and $1.7  million in
preferred stock dividends.

      The  Consolidated  Statements  of Cash  Flows  can be used to  assess  the
Company's ability to generate positive future net cash flows from operations and
its ability to meet future  obligations.  The Company had a net increase in cash
and cash  equivalents  in 1996 of $215.8  million.  Cash  provided by  financing
activities  totaled $520.4 million,  as total deposits increased $406.2 million,
excluding the impact of the purchased  companies,  and the issuance of preferred
stock  provided  net  cash of $98.0  million.  Net cash  provided  by  operating
activities  totaled $177.9  million after  adjusting 1996 net income for noncash
items.  These  increases  to cash  were  partially  offset  by net cash  used in
investing  activities  of  $482.4  million,  as loans  increased  $1.2  billion,
excluding  the impact of the  purchased  companies,  partially  offset by $542.0
million in cash provided by the sale and maturities of securities  available for
sale, excluding the impact of the purchased companies.

      Cash and cash equivalents  decreased $121.0 million in 1995. This decrease
was the result of cash used in investing  activities of $576.7 million, as loans
increased $1.2 billion,  partially offset by a net decrease in securities.  Both
operating and financing  activities  provided cash during 1995,  with operations
providing  $131.7  million and financing  activities  providing  $324.0  million
esulting primarily from an increase in deposits.

<PAGE>
<TABLE>
<CAPTION>

Quarterly Consolidated Summary of Income and Selected Financial Data (1)

Hibernia Corporation and Subsidiaries                             1996                                    1995
-------------------------------------------------------------------------------------------------------------------------------
($ in thousands, except per-share data)         Fourth      Third     Second     First    Fourth     Third    Second     First
-------------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>       <C>        <C>       <C>       <C>       <C>       <C>       <C>     
Interest income ............................   $171,350  $155,441   $151,100  $147,737  $145,636  $143,451  $139,655  $134,104
Interest expense ...........................     70,726    65,042     62,158    61,485    61,697    62,336    61,301    56,756
-------------------------------------------------------------------------------------------------------------------------------
Net interest income ........................    100,624    90,399     88,942    86,252    83,939    81,115    78,354    77,348
Provision for possible loan losses .........       --     (13,600)       550       425       450       530        30       130
-------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision
    for possible loan losses ...............    100,624   103,999     88,392    85,827    83,489    80,585    78,324    77,218
-------------------------------------------------------------------------------------------------------------------------------
Noninterest income:
   Noninterest income ......................     31,545    28,409     28,312    27,399    26,394    25,688    26,632    25,252
   Securities gains (losses), net ..........        165    (5,584)        46        67        50       179       (32)       51
-------------------------------------------------------------------------------------------------------------------------------
Noninterest income .........................     31,710    22,825     28,358    27,466    26,444    25,867    26,600    25,303
Noninterest expense ........................     84,210    88,885     73,929    72,709    74,151    67,540    70,224    72,163
-------------------------------------------------------------------------------------------------------------------------------
Income before taxes ........................     48,124    37,939     42,821    40,584    35,782    38,912    34,700    30,358
Income tax expense .........................     17,189    13,369     14,678    14,282     1,675     3,461     2,721     3,010
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
Net income .................................   $ 30,935  $ 24,570   $ 28,143  $ 26,302  $ 34,107  $ 35,451  $ 31,979  $ 27,348
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
Net income applicable to common shareholders   $ 29,195  $ 24,570   $ 28,143  $ 26,302  $ 34,107  $ 35,451  $ 31,979  $ 27,348
-------------------------------------------------------------------------------------------------------------------------------
Per common share information: (2)
   Net income ..............................   $   0.23  $   0.19   $   0.22  $   0.21  $   0.27  $   0.28  $   0.25  $   0.21
   Tax-effected net income (3) .............   $   0.23  $   0.19   $   0.22  $   0.21  $   0.18  $   0.20  $   0.18  $   0.15
   Cash dividends declared .................   $   0.08  $   0.07   $   0.07  $   0.07  $   0.07  $   0.06  $   0.06  $   0.06
Average shares outstanding (000s) ..........    127,080   126,834    126,620   126,524   126,409   126,319   126,682   128,138
Dividend payout ratio ......................     34.78%    36.84%     31.82%    33.33%    25.93%    21.43%    24.00%    28.57%
-------------------------------------------------------------------------------------------------------------------------------
Selected quarter-end balances (in millions)
Loans ......................................   $6,043.0  $5,717.5   $5,204.4  $4,956.4  $4,723.2  $4,455.8  $4,226.3  $3,995.8
Deposits ...................................    7,821.8   7,375.9    6,628.9   6,651.0   6,569.7   6,382.3   6,429.1   6,366.5
Debt .......................................       51.3      17.9       26.8      35.1      34.4      26.1      29.9      18.9
Equity .....................................      936.4     903.8      781.6     775.1     767.8     725.4     695.5     677.3
Total assets ...............................    9,306.8   8,807.7    7,855.2   7,880.6   7,755.7   7,497.8   7,552.2   7,375.3
-------------------------------------------------------------------------------------------------------------------------------
Selected average balances (in millions)
Loans ......................................   $5,892.0  $5,356.3   $5,084.7  $4,839.9  $4,593.6  $4,319.1  $4,145.3  $3,938.1
Deposits ...................................    7,529.3   6,839.7    6,617.4   6,577.4   6,391.4   6,385.9   6,342.0   6,377.2
Debt .......................................       31.4      21.3       27.3      27.5      31.8      27.5      26.5      20.6
Equity .....................................      921.0     787.7      773.8     775.9     736.8     706.7     678.2     655.5
Total assets ...............................    9,008.2   8,136.9    7,854.8   7,794.2   7,563.3   7,542.2   7,443.8   7,368.0
-------------------------------------------------------------------------------------------------------------------------------
Selected ratios
Net interest margin (taxable-equivalent) ...      4.93%     4.88%      4.95%     4.83%     4.81%     4.69%     4.63%     4.64%
Annualized return on assets ................      1.37%     1.21%      1.43%     1.35%     1.80%     1.88%     1.72%     1.48%
Annualized return on common equity .........     14.22%    12.49%     14.55%    13.56%    18.52%    20.07%    18.86%    16.69%
Annualized return on total equity ..........     13.44%    12.48%     14.55%    13.56%    18.52%    20.07%    18.86%    16.69%
Efficiency ratio ...........................     62.96%    73.87%     62.24%    63.07%    66.23%    62.27%    65.81%    69.15%
Average equity/average assets ..............     10.22%     9.68%      9.85%     9.95%     9.74%     9.37%     9.11%     8.90%
Tier 1 risk-based capital ratio ............     12.07%    12.77%     13.97%    14.32%    14.66%    14.93%    14.93%    15.64%
Total risk-based capital ratio .............     13.33%    14.03%     15.24%    15.59%    15.93%    16.20%    16.20%    16.92%
Leverage ratio .............................      8.78%     9.71%      9.84%     9.68%     9.71%     9.36%     9.09%     9.04%
-------------------------------------------------------------------------------------------------------------------------------
Tax-effected net income and ratios excluding
  goodwill and core deposit intangible
  amortization and balances (3) (4)
Net income applicable to common shareholders   $ 32,132  $ 25,931   $ 28,920  $ 27,079  $ 24,035  $ 26,070  $ 23,332  $ 20,510
Net income per common share (2) ............   $   0.25  $   0.20   $   0.23  $   0.21  $   0.19  $   0.21  $   0.18  $   0.16
Annualized return on assets ................      1.45%     1.29%      1.48%     1.39%     1.27%     1.39%     1.26%     1.12%
Annualized return on common equity .........     19.07%    14.38%     15.31%    14.31%    13.40%    15.19%    14.20%    12.95%
Efficiency ratio ...........................     60.38%    72.62%     61.59%    62.39%    65.54%    61.55%    65.08%    68.41%
-------------------------------------------------------------------------------------------------------------------------------
----------------
(1)    All financial  information has been restated for mergers accounted for as
       poolings of interests.  The effects of mergers  accounted for as purchase
       transactions  have been  included  from the date of  consummation.  Prior
       periods have been conformed to current-period presentation.
(2)    Income per common share data are based on the weighted  average number of
       common  shares  outstanding  (net  of  uncommitted  ESOP  shares)  in the
       respective period. Dividends per common share are historical amounts.
(3)    Adjusted to reflect a 35% effective tax rate for 1995.
(4)    Amortization  and  balances  of  core  deposit  intangibles  are  net  of
       applicable  taxes.   Goodwill  amortization  and  balances  are  not  tax
       effected.
</TABLE>

Fourth Quarter Results:

      Hibernia  reported  consolidated net income of $30.9 million in the fourth
quarter of 1996, a 33% increase  from $23.3 million on a  tax-effected  basis in
the fourth  quarter of 1995 and a 26% increase  from $24.6  million in the third
quarter of 1996.  Earnings in the third quarter of 1996 were negatively impacted
by $5.6 million in securities losses,  $4.0 million in asset write-downs related
to technology  enhancements,  $3.7 million in merger-related expenses and a $3.3
million addition to reserves for health care benefits and other expenses.  These
items were partially offset by a $13.6 million  negative  provision for possible
loan losses.  Earnings  per common share of $.23 for the fourth  quarter of 1996
increased  $.05 from the  tax-effected  earnings per common share of $.18 in the
fourth  quarter of 1995 and $.04 from  third-quarter  1996  earnings of $.19 per
common share.

      Net interest income, on a taxable-equivalent basis, totaled $102.2 million
in the fourth  quarter of 1996,  compared to $85.6 million in the fourth quarter
of 1995 and $91.9 million in the third quarter of 1996. The fourth-quarter  1996
increase in net interest  income over the fourth  quarter of 1995 was  primarily
the result of the growth in loans both in total and as a  percentage  of average
earning assets.  Average loans increased $1.3 billion over the fourth quarter of
1995 to $5.9 billion,  or 71.3% of average  earning assets  compared to 64.9% of
average  earning assets in the fourth quarter of 1995.  Loans  increased  $535.7
million in the fourth quarter of 1996 compared to the third quarter of 1996. The
net  interest  spread  of 4.04% in the  fourth  quarter  of 1996 was up 19 basis
points over the fourth  quarter of 1995 and was up 4 basis points from the third
quarter  of 1996.  The  average  yield on earning  assets was 8.33%,  up 6 basis
points  compared  to the fourth  quarter  of 1995 and up 1 basis  point from the
third  quarter of 1996.  The average rate paid on  interest-bearing  liabilities
decreased by 13 basis points from the fourth  quarter of 1995 and 3 basis points
from the third quarter of 1996 to 4.29% in the fourth quarter of 1996.

      The net interest margin  increased 12 basis points over the fourth quarter
of 1995 to 4.93% for the fourth quarter of 1996.  Even though money market rates
were down in the fourth  quarter of 1996 compared to the fourth quarter of 1995,
resulting in a decrease in yields on loans and interest-bearing liabilities, the
overall  yield on  earning  assets  increased  due to the  change  in the mix of
earning  assets.  Compared to the third quarter of 1996 the net interest  margin
was up 5 basis points.  A 4 basis point increase in loan yields  resulted in a 1
basis  point  increase  in the yield on earning  assets.  At the same  time,  an
increase in lower-rate NOW, money market and savings accounts as a percentage of
interest-bearing  deposits led to a 3 basis point  decline in the cost of funds.
In addition,  the  percentage of  noninterest-bearing  funds  (primarily  demand
deposits and equity)  supporting  earning  assets in the fourth  quarter of 1996
increased by 41 basis  points  compared to the third  quarter of 1996.  Table 17
illustrates  the components of the net interest  margin on a quarterly basis for
1996 and 1995.

      Average earning assets increased $1.2 billion (17%) to $8.3 billion in the
fourth quarter of 1996 from $7.1 billion in the fourth quarter of 1995.  Average
earning  assets were up $756.5  million  (10%)  compared to the third quarter of
1996. Average loans increased $1.3 billion (28%) over the fourth quarter of 1995
and increased  $535.7  million  (10%) over the third  quarter of 1996,  with the
purchased  companies  contributing  almost 30% of the growth  over the  year-ago
quarter and about half of the growth over the prior  quarter.  Period-end  loans
grew $325.5 million,  23% on an annualized  basis,  during the fourth quarter of
1996, primarily due to internal growth.

       Average  securities  for the fourth quarter of 1996 totaled $2.2 billion,
down $207.1  million (9%) from the fourth  quarter of 1995 and up $203.0 million
(10%) from the third quarter of 1996. The decline from the
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
TABLE 17 - NET INTEREST MARGIN  (taxable-equivalent)
-------------------------------------------------------------------------------------------------------------------------
                                                      1996                                        1995
-------------------------------------------------------------------------------------------------------------------------
                                   Fourth       Third     Second      First    Fourth       Third     Second      First
                                  Quarter     Quarter    Quarter    Quarter   Quarter     Quarter    Quarter    Quarter
-------------------------------------------------------------------------------------------------------------------------
<S>                                 <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>   
Yield on earning assets ....         8.33%      8.32%      8.34%      8.22%      8.27%      8.20%      8.16%      7.99%
Rate on interest-bearing
    liabilities ............         4.29       4.32       4.30       4.35       4.42       4.44       4.45       4.22
-------------------------------------------------------------------------------------------------------------------------
        Net interest spread          4.04       4.00       4.04       3.87       3.85       3.76       3.71       3.77
Contribution of noninterest-
    bearing funds ..........         0.89       0.88       0.91       0.96       0.96       0.93       0.92       0.87
-------------------------------------------------------------------------------------------------------------------------
        Net interest margin          4.93%      4.88%      4.95%      4.83%      4.81%      4.69%      4.63%      4.64%
-------------------------------------------------------------------------------------------------------------------------
Noninterest-bearing funds/
    earning assets .........        20.65%     20.24%     21.13%     22.11%     21.79%     20.83%     20.61%     20.58%
-------------------------------------------------------------------------------------------------------------------------
</TABLE>

fourth quarter of 1995 came as the result of the  reinvestment  of proceeds from
payments and maturities into higher-yielding  loans. The increase from the third
quarter  was  due to the  impact  of the  purchased  companies  as  well  as the
reinvestment  by the  Company  of  proceeds  from  securities  sold in the third
quarter of 1996.


      Average  deposits  increased  $1.1  billion  (18%) to $7.5  billion in the
fourth quarter of 1996 from $6.4 billion in the fourth quarter of 1995.  Average
deposits  were up $689.6  million  (10%)  from the third  quarter  of 1996.  The
purchased  companies  accounted for about 75% of the growth in deposits over the
fourth  quarter  of 1995 and about 90% of the growth  over the third  quarter of
1996.

      Noninterest income, excluding securities transactions,  was $31.5 million,
up $5.2 million (20%) from the fourth quarter of 1995, and up $3.1 million (11%)
compared  to the  third  quarter  of  1996.  Income  related  to  the  purchased
companies, primarily service charges on deposits, contributed approximately half
of the increase in both periods. Service charges on deposits, income from retail
investment  services,  trust  fees and ATM fees  were the  major  categories  of
noninterest  income that increased in the fourth quarter of 1996 over the fourth
quarter of 1995 and the third quarter of 1996.

      Noninterest  expense of $84.2  million  in the fourth  quarter of 1996 was
$10.0 million higher than $74.2 million  reported in the fourth quarter of 1995.
Expenses  related to the  purchased  companies  accounted  for almost 75% of the
increase, primarily staff costs and amortization of intangibles.

      Compared to the third quarter of 1996,  noninterest expenses in the fourth
quarter of 1996 were down $4.7 million.  Excluding the effect of  merger-related
and  nonrecurring  expenses,  noninterest  expenses  were up $5.9  million.  The
nonrecurring  expenses in the third quarter of 1996 included the $4.0 million in
asset  write-downs  and the $3.3  million  addition to reserves  for health care
benefits and other expenses. Expenses related to the purchased companies were up
over $7.5 million in the fourth  quarter of 1996 compared to the third  quarter,
while Vision 2000 expenses were down $1.4 million in the fourth  quarter of 1996
to $1.0 million.

      The Company's  efficiency  ratio was 62.96% in the fourth  quarter of 1996
compared  to 66.23%  and  73.87%  in the  fourth  quarter  of 1995 and the third
quarter of 1996,  respectively.  Excluding  amortization  of  goodwill  and core
deposit  intangibles,  the efficiency  ratio was 60.38% in the fourth quarter of
1996,  down over 500 basis points from 65.54% in the fourth  quarter of 1995 and
down  significantly  from  the  third  quarter  of  1996  partially  due  to the
nonrecurring  items  and  Vision  2000  expenses  in the third  quarter  of 1996
previously discussed.


<PAGE>
<TABLE>
<CAPTION>
Consolidated Average Balances, Interest and Rates

Hibernia Corporation and Subsidiaries
Taxable-equivalent basis(1)                                        1996                                 1995
--------------------------------------------------------------------------------------------------------------------------
(Average balances $ in millions,                   Average                               Average
interest $ in thousands)                           Balance        Interest      Rate     Balance       Interest     Rate
--------------------------------------------------------------------------------------------------------------------------

<S>                                                 <C>           <C>            <C>      <C>          <C>          <C>  
ASSETS
Interest-earning assets:
    Loans(2) ...................................    $5,295.1      $481,150       9.09%    $4,251.0     $393,865     9.27%
    Securities available for sale ..............     2,131.9       140,966       6.61        766.6       50,709     6.61
    Securities held to maturity ................        --            --         --        1,841.3      117,670     6.39
--------------------------------------------------------------------------------------------------------------------------
        Total securities .......................     2,131.9       140,966       6.61      2,607.9      168,379     6.46
--------------------------------------------------------------------------------------------------------------------------
    Short-term investments .....................       183.3         9,780       5.34        126.2        7,368     5.84
--------------------------------------------------------------------------------------------------------------------------
        Total interest-earning assets ..........     7,610.3      $631,896       8.30%     6,985.1     $569,612     8.15%
--------------------------------------------------------------------------------------------------------------------------
Reserve for possible loan losses ...............      (144.1)                               (154.9)
Noninterest-earning assets:
    Cash and due from banks ....................       337.1                                 322.3
    Other assets ...............................       397.3                                 327.5
--------------------------------------------------------------------------------------------------------------------------
        Total noninterest-earning assets .......       734.4                                 649.8
--------------------------------------------------------------------------------------------------------------------------
        Total assets ...........................    $8,200.6                              $7,480.0
--------------------------------------------------------------------------------------------------------------------------

LIABILITIES AND
      SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
    Interest-bearing deposits:
        NOW accounts ...........................    $  305.4      $  8,764       2.87%    $  632.8     $ 13,909     2.20%
        Money market deposit accounts ..........     1,468.1        34,709       2.36      1,146.4       30,342     2.65
        Savings accounts .......................       386.1         8,161       2.11        369.0        8,091     2.19
        Other consumer time deposits ...........     2,315.0       127,461       5.51      2,128.5      119,962     5.64
        Public fund certificates of deposit
            of $100,000 or more ................       868.2        46,880       5.40        714.2       42,190     5.91
        Certificates of deposit
            of $100,000 or more ................       279.2        14,334       5.13        208.6       10,157     4.87
        Foreign time deposits ..................        41.8         2,261       5.41         35.1        2,018     5.75
--------------------------------------------------------------------------------------------------------------------------
        Total interest-bearing deposits ........     5,663.8       242,570       4.28      5,234.6      226,669     4.33
--------------------------------------------------------------------------------------------------------------------------
    Short-term borrowings:
        Federal funds purchased ................        49.5         2,546       5.14         54.5        3,136     5.75
        Repurchase agreements ..................       271.2        12,742       4.70        205.2       10,655     5.19
    Debt .......................................        26.9         1,553       5.78         26.6        1,630     6.12
--------------------------------------------------------------------------------------------------------------------------
        Total interest-bearing liabilities .....     6,011.4      $259,411       4.32%     5,520.9     $242,090     4.38%
--------------------------------------------------------------------------------------------------------------------------
Noninterest-bearing liabilities:
    Demand deposits ............................     1,228.7                               1,139.6
    Other liabilities ..........................       145.7                                 125.0
--------------------------------------------------------------------------------------------------------------------------
        Total noninterest-bearing liabilities ..     1,374.4                               1,264.6
--------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity .....................       814.8                                 694.5
--------------------------------------------------------------------------------------------------------------------------
        Total liabilities and
                shareholders' equity ...........    $8,200.6                              $7,480.0
--------------------------------------------------------------------------------------------------------------------------

SPREAD AND NET YIELD
Interest rate spread ...........................                                 3.98%                              3.77%
Cost of funds supporting interest-earning assets                                 3.41%                              3.47%
Net interest income/margin .....................                  $372,485       4.89%                 $327,522     4.69%
--------------------------------------------------------------------------------------------------------------------------
----------------
(1)  Based on the  statutory  income tax rate of 35% for the years 1993  through
     1996 and 34% for 1992.
(2)  Yield computations include nonaccrual loans in loans outstanding.
</TABLE>

Consolidated Average Balances, Interest and Rates (Cont.)

<TABLE>
<CAPTION>
Hibernia Corporation and Subsidiaries
Taxable-equivalent basis(1)                                         1994                                1993
------------------------------------------------------------------------------------------------------------------------------
(Average balances $ in millions,                    Average                               Average
interest $ in thousands)                            Balance       Interest      Rate      Balance      Interest        Rate
------------------------------------------------------------------------------------------------------------------------------

<S>                                                 <C>           <C>            <C>      <C>          <C>             <C>  
ASSETS
Interest-earning assets:
    Loans(2) ...................................    $3,561.0      $311,673       8.75%    $3,273.8     $285,658        8.73%
    Securities available for sale ..............       937.8        54,094       5.77        909.0       57,647        6.34
    Securities held to maturity ................     2,010.4       112,900       5.62      1,895.5      110,136        5.81
------------------------------------------------------------------------------------------------------------------------------
        Total securities .......................     2,948.2       166,994       5.66      2,804.5      167,783        5.98
------------------------------------------------------------------------------------------------------------------------------
   Short-term investments .....................       197.7         7,941       4.02        369.2       11,448        3.10
------------------------------------------------------------------------------------------------------------------------------
        Total interest-earning assets ..........     6,706.9      $486,608       7.26%     6,447.5     $464,889        7.21%
------------------------------------------------------------------------------------------------------------------------------
Reserve for possible loan losses ...............      (181.5)                               (208.9)
Noninterest-earning assets:
    Cash and due from banks ....................       318.0                                 290.2
    Other assets ...............................       335.8                                 354.0
------------------------------------------------------------------------------------------------------------------------------
        Total noninterest-earning assets .......       653.8                                 644.2
------------------------------------------------------------------------------------------------------------------------------
        Total assets ...........................    $7,179.2                              $6,882.8
------------------------------------------------------------------------------------------------------------------------------

LIABILITIES AND
      SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
    Interest-bearing deposits:
        NOW accounts ...........................    $  712.2      $ 12,669       1.78%    $  659.8     $ 11,440        1.73%
        Money market deposit accounts ..........     1,202.6        30,073       2.50      1,193.9       29,465        2.47
        Savings accounts .......................       399.3         8,492       2.13        381.4        8,483        2.22
        Other consumer time deposits ...........     1,891.2        82,207       4.35      1,862.1       75,260        4.04
        Public fund certificates of deposit
            of $100,000 or more ................       650.3        27,269       4.19        634.0       20,901        3.30
        Certificates of deposit
            of $100,000 or more ................       213.6         8,129       3.81        223.1        7,610        3.41
        Foreign time deposits ..................        17.1           794       4.65          5.0          149        2.98
------------------------------------------------------------------------------------------------------------------------------
        Total interest-bearing deposits ........     5,086.3       169,633       3.34      4,959.3      153,308        3.09
------------------------------------------------------------------------------------------------------------------------------
    Short-term borrowings:
        Federal funds purchased ................        39.1         1,558       3.99         35.7        1,057        2.96
        Repurchase agreements ..................       136.4         4,667       3.42        115.6        3,356        2.90
    Debt .......................................        32.9         2,971       9.04         37.9        4,421       11.66
------------------------------------------------------------------------------------------------------------------------------
        Total interest-bearing liabilities .....     5,294.7      $178,829       3.38%     5,148.5     $162,142        3.15%
------------------------------------------------------------------------------------------------------------------------------
Noninterest-bearing liabilities:
    Demand deposits ............................     1,106.4                               1,020.4
    Other liabilities ..........................       162.2                                 166.7
------------------------------------------------------------------------------------------------------------------------------
        Total noninterest-bearing liabilities ..     1,268.6                               1,187.1
------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity .....................       615.9                                 547.2
------------------------------------------------------------------------------------------------------------------------------
        Total liabilities and
                shareholders' equity ...........    $7,179.2                              $6,882.8
------------------------------------------------------------------------------------------------------------------------------

SPREAD AND NET YIELD
Interest rate spread ...........................                                 3.88%                                 4.06%
Cost of funds supporting interest-earning assets                                 2.67%                                 2.51%
Net interest income/margin .....................                  $307,779       4.59%                 $302,747        4.70%
------------------------------------------------------------------------------------------------------------------------------
----------------
(1)  Based on the  statutory  income tax rate of 35% for the years 1993  through
     1996 and 34% for 1992.
(2)  Yield computations include nonaccrual loans in loans outstanding. 
</TABLE>


<TABLE>
<CAPTION>
Consolidated Average Balances, Interest and Rates (Cont.)
                                                                                          
Hibernia Corporation and Subsidiaries                                                     
Taxable-equivalent basis(1)                                        1992                  
------------------------------------------------------------------------------------------------------------------------------
                                                                                          Compound
                                                                                           5-Year
                                                                                        Growth Rate
(Average balances $ in millions,                     Average                            For Average
interest $ in thousands)                             Balance      Interest       Rate      Balances
------------------------------------------------------------------------------------------------------------------------------
ASSETS
Interest-earning assets:
<S>                                                 <C>           <C>            <C>        <C> 
    Loans(2) ...................................    $3,932.5      $356,307       9.06%         6.1%
    Securities available for sale ..............       828.2        66,648       8.05         20.8
    Securities held to maturity ................     1,380.7        89,870       6.51       (100.0)
------------------------------------------------------------------------------------------------------------------------------
        Total securities .......................     2,208.9       156,518       7.09         (0.7)
------------------------------------------------------------------------------------------------------------------------------
    Short-term investments .....................       533.5        18,319       3.43        (19.2)
------------------------------------------------------------------------------------------------------------------------------
        Total interest-earning assets ..........     6,674.9      $531,144       7.96%         2.7
------------------------------------------------------------------------------------------------------------------------------
Reserve for possible loan losses ...............      (237.3)                                 (9.5)
Noninterest-earning assets:
    Cash and due from banks ....................       310.1                                   1.7
    Other assets ...............................       514.1                                  (5.0)
------------------------------------------------------------------------------------------------------------------------------
        Total noninterest-earning assets .......       824.2                                  (2.3)
------------------------------------------------------------------------------------------------------------------------------
        Total assets ...........................    $7,261.8                                   2.5%
------------------------------------------------------------------------------------------------------------------------------

LIABILITIES AND
      SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
    Interest-bearing deposits:
        NOW accounts ...........................    $  669.0      $ 16,842       2.52%       (14.5)%
        Money market deposit accounts ..........     1,350.3        42,488       3.15          1.7
        Savings accounts .......................       362.2        10,776       2.98          1.3
        Other consumer time deposits ...........     2,098.6        99,691       4.75          2.0
        Public fund certificates of deposit
            of $100,000 or more ................       658.7        26,422       4.01          5.7
        Certificates of deposit
            of $100,000 or more ................       238.1        11,974       5.03          3.2
        Foreign time deposits ..................         2.2            71       3.23         80.2
------------------------------------------------------------------------------------------------------------------------------
        Total interest-bearing deposits ........     5,379.1       208,264       3.87          1.0
------------------------------------------------------------------------------------------------------------------------------
    Short-term borrowings:
        Federal funds purchased ................       108.2         3,566       3.30        (14.5)
        Repurchase agreements ..................       114.1         3,896       3.41         18.9
    Debt .......................................       127.1        14,738      11.59        (26.7)
------------------------------------------------------------------------------------------------------------------------------
        Total interest-bearing liabilities .....     5,728.5      $230,464       4.02%         1.0
------------------------------------------------------------------------------------------------------------------------------
Noninterest-bearing liabilities:
    Demand deposits ............................       981.6                                   4.6
    Other liabilities ..........................       206.1                                  (6.7)
------------------------------------------------------------------------------------------------------------------------------
        Total noninterest-bearing liabilities ..     1,187.7                                   3.0
------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity .....................       345.6                                  18.7
------------------------------------------------------------------------------------------------------------------------------
        Total liabilities and
                shareholders' equity ...........    $7,261.8                                   2.5%
------------------------------------------------------------------------------------------------------------------------------

SPREAD AND NET YIELD
Interest rate spread ...........................                                 3.94%
Cost of funds supporting interest-earning assets                                 3.46%
Net interest income/margin .....................                  $300,680       4.50%
------------------------------------------------------------------------------------------------------------------------------
----------------
(1)  Based on the  statutory  income tax rate of 35% for the years 1993  through
     1996 and 34% for 1992.
(2)  Yield computations include nonaccrual loans in loans outstanding.
 </TABLE>

<PAGE>

GRAPHIC MATERIAL INDEX

      GRAPHIC DESCRIPTION                 CROSS REFERENCE

Average Earning Asset Mix Pie Chart       See Consolidated Average Balances 
                                              Interest and Rates

Loan Portfolio Mix Pie Chart              See MD&A Table 1

Nonperforming Asset Ratio Graph           See MD&A Table 4

Net Interest Margin Graph                 See MD&A Table 11

Annual Dividends Graph                    See Five-Year Consolidated Summary of
                                              Income and Selected Financial Data
                                               
                                              
<PAGE>

Report of Ernst & Young LLP, Independent Auditors



The Board of Directors and Shareholders
Hibernia Corporation



We have  audited  the  accompanying  consolidated  balance  sheets  of  Hibernia
Corporation  and  Subsidiaries as of December 31, 1996 and 1995, and the related
consolidated  statements of income,  changes in shareholders'  equity,  and cash
flows for each of the three years in the period ended  December 31, 1996.  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  generally   accepted  auditing
standards.  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, 1996 and 1995, and the consolidated
results of their  operations and their cash flows for each of the three years in
the period ended  December 31,  1996,  in  conformity  with  generally  accepted
accounting principles.



/s/Ernst & Young LLP

New Orleans, Louisiana
January 15, 1997



<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheets

Hibernia Corporation and Subsidiaries
December 31 ($ in thousands)                                                  1996             1995
-------------------------------------------------------------------------------------------------------

<S>                                                                    <C>              <C>    
Assets
  Cash and due from banks ........................................     $   558,440      $   403,667
  Short-term investments .........................................         158,293           97,248
  Securities available for sale ..................................       2,178,674        2,350,229
  Securities held to maturity ....................................            --               --
  Loans, net of unearned income ..................................       6,043,028        4,723,193
      Reserve for possible loan losses ...........................        (127,768)        (150,516)
-------------------------------------------------------------------------------------------------------
          Loans, net .............................................       5,915,260        4,572,677
-------------------------------------------------------------------------------------------------------
  Bank premises and equipment ....................................         172,107          128,306
  Customers' acceptance liability ................................             135             --
  Other assets ...................................................         323,887          203,592
-------------------------------------------------------------------------------------------------------
          Total assets ...........................................     $ 9,306,796      $ 7,755,719
-------------------------------------------------------------------------------------------------------

Liabilities
  Deposits:
      Demand, noninterest-bearing ................................     $ 1,540,917      $ 1,236,735
      Interest-bearing ...........................................       6,280,886        5,332,962
-------------------------------------------------------------------------------------------------------
          Total deposits .........................................       7,821,803        6,569,697
-------------------------------------------------------------------------------------------------------
  Short-term borrowings ..........................................         331,796          265,126
  Liability on acceptances .......................................             135             --
  Other liabilities ..............................................         165,328          118,728
  Debt ...........................................................          51,349           34,361
-------------------------------------------------------------------------------------------------------
          Total liabilities ......................................       8,370,411        6,987,912
-------------------------------------------------------------------------------------------------------
Shareholders' equity Preferred Stock, no par value:
    Authorized - 100,000,000 shares; 2,000,000  Series A
      issued and outstanding at December 31, 1996 ................         100,000             --
  Class A Common Stock, no par value:
    Authorized - 200,000,000 shares; issued 128,805,305, and
     128,311,148 at December 31, 1996 and 1995, respectively .....         247,306          246,357
  Surplus ........................................................         377,028          373,556
  Retained earnings ..............................................         217,797          146,010
  Treasury stock at cost, 50,000 and 17,407 shares at December 31,
     1996 and 1995, respectively .................................            (569)            (183)
  Unrealized gains on securities available for sale ..............           8,141           16,457
  Unearned compensation ..........................................         (13,318)         (14,390)
-------------------------------------------------------------------------------------------------------
          Total shareholders' equity .............................         936,385          767,807
-------------------------------------------------------------------------------------------------------
          Total liabilities and shareholders' equity .............     $ 9,306,796      $ 7,755,719
-------------------------------------------------------------------------------------------------------
----------------
See notes to consolidated financial statements.
</TABLE>



<PAGE>
<TABLE>
<CAPTION>
Consolidated Income Statements

Hibernia Corporation and Subsidiaries
Year Ended December 31 ($ in thousands, except per share data)        1996           1995           1994
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                              <C>            <C>            <C>    
Interest income
    Interest and fees on loans .............................     $ 477,299      $ 389,609      $ 307,545
    Interest on securities available for sale ..............       138,549         49,632         53,134
    Interest on securities held to maturity ................          --          116,237        111,325
    Interest on short-term investments .....................         9,780          7,368          7,941
------------------------------------------------------------------------------------------------------------------------------------
        Total interest income ..............................       625,628        562,846        479,945
------------------------------------------------------------------------------------------------------------------------------------
Interest expense
    Interest on deposits ...................................       242,570        226,669        169,633
    Interest on short-term borrowings ......................        15,288         13,791          6,225
    Interest on debt .......................................         1,553          1,630          2,971
------------------------------------------------------------------------------------------------------------------------------------
        Total interest expense .............................       259,411        242,090        178,829
------------------------------------------------------------------------------------------------------------------------------------
Net interest income ........................................       366,217        320,756        301,116
    Provision for possible loan losses .....................       (12,625)         1,140        (17,869)
------------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for possible loan losses       378,842        319,616        318,985
------------------------------------------------------------------------------------------------------------------------------------
Noninterest income
    Service charges on deposits ............................        58,330         48,715         47,139
    Trust fees .............................................        13,397         12,498         13,092
    Other service, collection and exchange charges .........        33,985         28,673         22,487
    Gain on divestiture of banking offices .................          --            2,361           --
    Gain on sale of business lines .........................           517          3,402           --
    Other operating income .................................         9,436          8,317         12,129
    Securities gains (losses), net .........................        (5,306)           248         (1,669)
------------------------------------------------------------------------------------------------------------------------------------
        Total noninterest income ...........................       110,359        104,214         93,178
------------------------------------------------------------------------------------------------------------------------------------
Noninterest expense
    Salaries and employee benefits .........................       161,170        136,804        133,002
    Occupancy expense, net .................................        26,959         26,501         28,338
    Equipment expense ......................................        28,735         21,648         17,871
    Data processing expense ................................        20,234         19,373         21,231
    Foreclosed property expense, net .......................        (1,743)          (699)        (7,064)
    Amortization of intangibles ............................         7,290          3,709         23,231
    Other operating expense ................................        77,088         76,742         86,309
------------------------------------------------------------------------------------------------------------------------------------
        Total noninterest expense ..........................       319,733        284,078        302,918
------------------------------------------------------------------------------------------------------------------------------------
Income before income taxes .................................       169,468        139,752        109,245
Income tax expense .........................................        59,518         10,867          7,785
------------------------------------------------------------------------------------------------------------------------------------
Net income .................................................     $ 109,950      $ 128,885      $ 101,460
------------------------------------------------------------------------------------------------------------------------------------

Net income applicable to common shareholders ...............     $ 108,210      $ 128,885      $ 101,460
------------------------------------------------------------------------------------------------------------------------------------

Net income per common share ................................     $    0.85      $    1.02      $    0.80
------------------------------------------------------------------------------------------------------------------------------------
----------------
See notes to consolidated financial statements.
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Changes in Shareholders' Equity

Hibernia Corporation and Subsidiaries
($ in thousands, except per-share data)
------------------------------------------------------------------------------------------------------------------------------------
                                                                                        Retained
                                         Preferred          Common                      Earnings
                                             Stock           Stock       Surplus       (Deficit)         Other          Total
------------------------------------------------------------------------------------------------------------------------------------

<S>                                        <C>           <C>           <C>            <C>            <C>            <C>      
Balances at December 31, 1993 ........     $    --       $ 244,725     $ 369,409      $ (32,796)     $  13,303      $ 594,641
Net income for 1994 ..................          --            --            --          101,460           --          101,460
Issuance of common stock:
   Dividend Reinvestment Plan ........          --             433         1,340           --             --            1,773
   Stock Option Plan .................          --              36            67           --             --              103
   Exercise of purchase warrants .....          --             860           372           --             --            1,232
   By pooled companies prior to merger          --            --           1,586           --             --            1,586
Cash dividends declared:
   Common ($.19 per share) ...........          --            --            --          (17,353)          --          (17,353)
   By pooled companies prior to merger          --            --            --           (3,985)          --           (3,985)
Acquisition of treasury stock ........          --            --            --             --           (2,414)        (2,414)
Change in unrealized gains (losses)
   on securities available for sale ..          --            --            --             --          (39,709)       (39,709)
Reduction of ESOP commitment .........          --            --            --             --              400            400
Other ................................          --            --             (17)            14           --               (3)
------------------------------------------------------------------------------------------------------------------------------------
Balances at December 31, 1994 ........          --         246,054       372,757         47,340        (28,420)       637,731
------------------------------------------------------------------------------------------------------------------------------------
Net income for 1995 ..................          --            --            --          128,885           --          128,885
Issuance of common stock:
   Dividend Reinvestment Plan ........          --             170           477           --             --              647
   Stock Option Plan .................          --              81           214           --               94            389
   Retirement Security Plan ..........          --            --             (32)          --              798            766
   Restricted stock awards ...........          --              52          (122)          --            1,902          1,832
Cash dividends declared:
   Common ($.25 per share) ...........          --            --            --          (28,343)          --          (28,343)
   By pooled companies prior to merger          --            --            --           (2,436)          --           (2,436)
Acquisition of treasury stock ........          --            --            --             --             (563)          (563)
Purchase of common shares by ESOP ....          --            --            --             --          (16,044)       (16,044)
Allocation of ESOP shares ............          --            --             338           --            1,654          1,992
Change in unrealized gains (losses)
   on securities available for sale ..          --            --            --             --           42,463         42,463
Other ................................          --            --             (76)           564           --              488
------------------------------------------------------------------------------------------------------------------------------------
Balances at December 31, 1995 ........          --         246,357       373,556        146,010          1,884        767,807
------------------------------------------------------------------------------------------------------------------------------------
Net income for 1996 ..................          --            --            --          109,950           --          109,950
Issuance of common stock:
   Dividend Reinvestment Plan ........          --             275         1,310           --             --            1,585
   Stock Option Plan .................          --             282           844           --              483          1,609
   Retirement Security Plan ..........          --             383         1,862           --             --            2,245
   Restricted stock awards ...........          --               9            44           --               11             64
   By pooled companies prior to merger          --            --             638           --             --              638
Issuance of preferred stock ..........       100,000          --          (2,000)          --             --           98,000
Cash dividends declared:
   Common ($.29 per share) ...........          --            --            --          (34,916)          --          (34,916)
   Preferred ($.87 per share) ........          --            --            --           (1,740)          --           (1,740)
   By pooled companies prior to merger          --            --            --           (1,507)          --           (1,507)
Acquisition of treasury stock ........          --            --            --             --             (880)          (880)
Purchase of common shares by ESOP ....          --            --            --             --             (306)          (306)
Allocation of ESOP shares ............          --            --             774           --            1,378          2,152
Change in unrealized gains (losses)
   on securities available for sale ..          --            --            --             --           (8,316)        (8,316)
------------------------------------------------------------------------------------------------------------------------------------
   Balances at December 31, 1996 .....     $ 100,000     $ 247,306     $ 377,028      $ 217,797      $  (5,746)     $ 936,385
------------------------------------------------------------------------------------------------------------------------------------
----------------
See notes to consolidated financial statements.
</TABLE>


<PAGE>
<TABLE>
<CAPTION>

Consolidated Statements of Cash Flows

Hibernia Corporation and Subsidiaries
Year Ended December 31 ($ in thousands)                                             1996               1995               1994
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>                <C>                <C>        
Operating activities
  Net income .........................................................       $   109,950        $   128,885        $   101,460
  Adjustments to reconcile net income to net
      cash provided by operating activities:
         Provision for possible loan losses ..........................           (12,625)             1,140            (17,869)
         Amortization of intangibles and deferred charges ............             7,298              3,708             23,292
         Depreciation and amortization ...............................            26,724             19,552             18,456
         Premium amortization, net of discount accretion .............             4,778              8,307             15,586
         Realized securities (gains) losses, net .....................             5,306               (248)             1,669
         Gain on sales of assets .....................................            (2,601)            (8,787)            (6,096)
         Provision for losses on foreclosed and other assets .........             1,224              1,624                 62
         Decrease (increase) in deferred income tax asset ............             7,414            (23,325)           (20,731)
         Decrease (increase) in interest receivable and other assets .            (5,498)            (5,872)             1,730
         Increase (decrease) in interest payable and other liabilities            35,922              6,746            (11,204)
------------------------------------------------------------------------------------------------------------------------------------
       Net cash provided by operating activities .....................           177,892            131,730            106,355
------------------------------------------------------------------------------------------------------------------------------------
Investing activities
  Purchases of securities held to maturity ...........................              --             (160,123)          (318,129)
  Purchases of securities available for sale .........................          (278,036)          (138,864)          (481,500)
  Proceeds from sales of securities available for sale ...............           285,118            118,468            249,122
  Maturities of securities held to maturity ..........................              --              435,511            459,925
  Maturities of securities available for sale ........................           541,952            126,380            227,628
  Net increase in loans ..............................................        (1,235,784)        (1,229,741)          (745,397)
  Proceeds from sales of loans .......................................           302,857            187,864            301,895
  Acquisitions, net of cash acquired of $172,717 .....................           (77,076)              --                 --
  Purchases of premises, equipment and other assets ..................           (30,276)           (25,478)           (26,614)
  Proceeds from sales of foreclosed assets ...........................             7,582              6,575             15,863
  Proceeds from divestiture of banking offices,
    net of cash sold of $1,069 .......................................              --              (13,709)              --
  Proceeds from sales of business lines ..............................               517            115,647               --
  Proceeds from sales of premises, equipment and other assets ........               707                726                474
------------------------------------------------------------------------------------------------------------------------------------
       Net cash used by investing activities .........................          (482,439)          (576,744)          (316,733)
------------------------------------------------------------------------------------------------------------------------------------
Financing activities
  Net increase in domestic deposits ..................................           380,693            249,834            179,546
  Net increase in time deposits - foreign office .....................            25,549             11,462             30,587
  Net increase in short-term borrowings ..............................            31,965             93,120             10,279
  Proceeds from issuance of debt .....................................           115,968             55,970              9,250
  Payments on debt ...................................................          (100,342)           (42,621)           (27,436)
  Issuance of preferred stock ........................................            98,000               --                 --
  Issuance of common stock ...........................................             6,141              3,634              4,694
  Purchase of common stock by ESOP ...................................              (306)           (16,044)              --
  Dividends paid .....................................................           (36,423)           (30,779)           (21,338)
  Acquisition of treasury stock ......................................              (880)              (563)            (2,414)
------------------------------------------------------------------------------------------------------------------------------------
       Net cash provided by financing activities .....................           520,365            324,013            183,168
------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents .....................           215,818           (121,001)           (27,210)
  Cash and cash equivalents at beginning of year .....................           500,915            621,916            649,126
------------------------------------------------------------------------------------------------------------------------------------
       Cash and cash equivalents at end of year ......................       $   716,733        $   500,915        $   621,916
------------------------------------------------------------------------------------------------------------------------------------

Supplemental disclosures Cash paid during the year for:
  Interest expense ...................................................       $   253,759        $   236,189        $   180,772
  Income taxes .......................................................       $    48,008        $    29,392        $    26,170
Non-cash investing and financing activities:
  Loans and bank premises and equipment
    transferred to foreclosed assets .................................       $     4,741        $     4,970        $     1,519
  Acquisitions:
    Cash paid for acquisitions (including transaction costs) .........       $   249,793        $      --          $      --
    Fair value of assets acquired ....................................       $ 1,141,437        $      --          $      --
    Fair value of liabilities assumed ................................       $   891,644        $      --          $      --
------------------------------------------------------------------------------------------------------------------------------------
----------------
See notes to consolidated financial statements.
</TABLE>






Notes to Consolidated Financial Statements


Hibernia Corporation and Subsidiaries



Note 1
Summary of Significant Accounting Policies
         Hibernia  Corporation  (the Parent  Company),  through its wholly owned
subsidiaries,  Hibernia  National  Bank and  Hibernia  National  Bank of  Texas,
formerly  Texarkana  National  Bank,  (the  Banks),  provides  a broad  array of
financial  products and services  throughout  Louisiana and Northeast Texas. The
principal  products  and  services  offered  include  retail,   small  business,
commercial,  international,  mortgage and private  banking;  leasing;  corporate
finance;  treasury  management  and  trust.  The  Banks,  through  wholly  owned
subsidiaries,   also  provide  retail  brokerage  and  alternative  investments,
including 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  generally  accepted  accounting  principles  and those
generally practiced within the banking industry.

Consolidation
         The  consolidated  financial  statements  include  the  accounts of the
Parent  Company  and its wholly  owned  subsidiaries:  Hibernia  National  Bank,
Hibernia National Bank of Texas,  Hibernia Capital Corporation (HCC) and Zachary
Taylor Life Insurance Company (Zachary Taylor),  for all periods presented.  HCC
is a licensed Small Business Investment Company formed in 1995 to provide equity
capital and long-term  loans to small  businesses.  Zachary  Taylor is currently
inactive,  and the Parent Company has an agreement with the Federal Reserve Bank
whereby  Zachary  Taylor will not be actively  operated as an insurance  company
without Federal Reserve Board approval.
         These  consolidated  financial  statements give  retroactive  effect to
mergers  accounted  for as poolings of  interests.  In addition,  the effects of
mergers accounted for as purchase  transactions have been included from the date
of consummation (see Note 2).
         All  significant  intercompany  transactions  and  balances  have  been
eliminated.

Use of Estimates
         The  preparation of financial  statements in conformity  with generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that affect the  amounts  reported  in the  consolidated  financial
statements  and  accompanying  notes.  Actual  results  could  differ from those
estimates.

Securities
         Management determines the appropriate classification of debt securities
(trading,  available  for sale, or held to maturity) at the time of purchase and
re-evaluates this  classification  periodically.  Trading account securities are
held for resale 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.
         Trading account securities are carried at market value and are included
in short-term investments.  Gains and losses, both realized and unrealized,  are
reflected in earnings. Held to maturity securities are stated at amortized cost.
Available for sale securities are stated at fair value,  with  unrealized  gains
and  losses,  net of tax,  reported  in a separate  component  of  shareholders'
equity.
         The amortized cost of debt securities classified as held to maturity or
available  for sale is adjusted for  amortization  of premiums and  accretion of
discounts to maturity or, in the case of  mortgage-backed  securities,  over the
estimated life of the security.  Amortization,  accretion and accruing  interest
are included in interest  income on  securities  using the  level-yield  method.
Realized  gains and  losses,  and  declines  in value  judged  to be other  than
temporary, are included in net securities gains (losses). The cost of securities
sold is determined based on the specific identification method.


Loans
         Loans are stated at the principal  amounts  outstanding,  less unearned
income and the reserve for possible loan losses. Interest on loans and accretion
of unearned  income are computed by methods  which  approximate  a level rate of
return on recorded  principal.  Loan origination and commitment fees and certain
direct loan origination  costs are deferred,  and the net amount is amortized as
an adjustment of the related loan's yield over the life of the loan.
         Commercial  and small  business  banking loans are placed in nonaccrual
status  when,  in  management's   opinion,   there  is  doubt   concerning  full
collectibility of both principal and interest. All commercial and small business
banking  nonaccrual  loans are  considered  to be  impaired in  accordance  with
Statement of  Financial  Accounting  Standards  (SFAS) No. 114,  "Accounting  by
Creditors for Impairment of a Loan."  Consumer  loans are generally  charged off
when any payment of  principal  or  interest  is more than 120 days  delinquent.
Interest payments received on nonaccrual loans are applied to principal if there
is doubt as to the  collectibility of the principal;  otherwise,  these receipts
are recorded as interest income. A loan remains in nonaccrual status until it is
current as to principal and interest and the borrower  demonstrates  the ability
to fulfill the contractual obligation.

Reserve for Possible Loan Losses
         The  reserve for  possible  loan  losses is  maintained  to provide for
possible  losses  inherent in the loan  portfolio.  The reserve related to loans
that are  identified  as impaired is based on discounted  cash flows,  using the
loan's initial effective  interest rate, or the fair value of the collateral for
certain collateral dependent loans.
         The reserve is based on management's  estimate of future losses; actual
losses  may  vary  from  the  current   estimate.   The   estimate  is  reviewed
periodically,  taking into  consideration the risk  characteristics  of the loan
portfolio,  past loss experience,  general economic conditions and other factors
which deserve  current  recognition.  As  adjustments  to the estimate of future
losses  become  necessary,  they  are  reflected  as a  provision  (positive  or
negative)  for  possible  loan losses in  current-period  earnings.  Actual loan
losses are deducted from and subsequent recoveries are added to the reserve.

Foreclosed Assets and Excess Bank-Owned Property
         Foreclosed  assets  include real estate and other  collateral  acquired
upon the default of loans and loans classified as in-substance foreclosures.  In
accordance with SFAS No. 114, a loan is classified as  in-substance  foreclosure
when the Company has taken  possession of the  collateral  regardless of whether
formal  foreclosure   proceedings  take  place.  Foreclosed  assets  and  excess
bank-owned  property are recorded at the fair value of the assets less estimated
selling costs.  Losses arising from the initial reduction of an outstanding loan
amount to fair value are  deducted  from the reserve for  possible  loan losses.
Losses  arising  from the  transfer of bank  premises  and  equipment  to excess
bank-owned  property are charged to expense.  A valuation reserve for foreclosed
assets and excess  bank-owned  property is maintained for  subsequent  valuation
adjustments on a  specific-property  basis.  Income and expenses associated with
foreclosed assets and excess  bank-owned  property prior to sale are included in
current earnings.

Bank Premises and Equipment
         Bank  premises  and  equipment  are  stated  at cost  less  accumulated
depreciation  and  amortization.  Depreciation  and  amortization  are  computed
primarily using the straight-line  method over the estimated useful lives of the
assets,  which  generally are 10 to 30 years for buildings and 3 to 15 years for
equipment,  and over the  shorter of the lease terms or the  estimated  lives of
leasehold improvements.

Excess of Cost Over Fair Value of Net Assets Acquired
         The  excess  of  cost  over  the  fair  value  of net  assets  acquired
(goodwill) is being amortized using the straight-line  method over the estimated
periods benefited, generally 25 years.
         As events or changes in circumstances  warrant,  the Company  evaluates
the  realizability of goodwill by geographic region based on a comparison of the
recorded balance of goodwill to the applicable  discounted cumulative net income
before goodwill  amortization expense over the remaining  amortization period of
the associated  goodwill.  To the extent that impairment exists,  write-downs to
realizable value are recorded.

Income Taxes
         The Parent Company and its  subsidiaries  file a  consolidated  federal
income tax return.  The Company  accounts for income  taxes using the  liability
method.  Temporary  differences  occur between the  financial  reporting and tax
bases of assets  and  liabilities.  Deferred  tax  assets  and  liabilities  are
recorded for these  differences based on enacted tax rates and laws that will be
in effect when the differences are expected to reverse.
         Hibernia National Bank is subject to a Louisiana  shareholder tax which
is based partly on income.  The income  portion is reported as state income tax.
In addition,  certain  subsidiaries of the Parent Company and Hibernia  National
Bank are subject to Louisiana state income tax.  Hibernia National Bank of Texas
is subject to Texas franchise tax.

Transfers and Servicing of Financial Assets and Extinguishments of Liabilities
         In June 1996, the Financial  Accounting  Standards  Board (FASB) issued
SFAS No. 125,  "Accounting  for Transfers and Servicing of Financial  Assets and
Extinguishments  of  Liabilities,"  which  requires an entity to  recognize  the
financial and servicing  assets it controls and the  liabilities it has incurred
and to cease  to  recognize  them as  financial  assets  when  control  has been
surrendered  in  accordance  with  the  criteria   provided  in  SFAS  No.  125.
Subsequently,  the FASB issued SFAS No. 127,  "Deferral of the Effective Date of
Certain  Provisions  of SFAS No. 125," which defers until  January 1, 1998,  the
implementation  of certain aspects of the original  statement.  The Company will
apply the new rules prospectively to transactions when required. The adoption of
SFAS  No.  125 is not  expected  to  have a  material  impact  on the  financial
condition or operating results of the Company.

Cash and Cash Equivalents
         Cash  and  cash   equivalents   include   cash  and  due  from   banks,
interest-bearing  time  deposits  in domestic  banks and federal  funds sold and
securities purchased under agreements to resell.

Reclassification
       Certain items included in the consolidated  financial statements for 1995
and 1994 have been reclassified to conform with the 1996 presentation.

Note 2
Mergers
       The Company completed mergers with six Louisiana  financial  institutions
in 1994 and four  Louisiana  financial  institutions  in 1995, all of which were
accounted for as poolings of interests.  In 1996, the Company  completed mergers
with five financial  institutions,  two in Louisiana and one in Northeast  Texas
which were  accounted for as poolings of interests,  and two in Louisiana  which
were accounted for as purchase transactions.  The Company completed mergers with
Commercial Bancshares, Inc. (Commercial), Bastrop National Bank (Bastrop), First
Bancorp of Louisiana,  Inc. (First Bancorp), First Continental Bancshares,  Inc.
(First Continental),  Pioneer Bancshares  Corporation  (Pioneer) and First State
Bank and Trust Company (First State) in 1994;  American Bank  (American),  STABA
Bancshares,  Inc. (STABA),  Progressive  Bancorporation,  Inc. (Progressive) and
Bank of St. John (St.  John) in 1995; and FNB  Bancshares,  Inc.  (FNB),  Bunkie
Bancshares,  Inc.  (Bunkie),  CM Bank Holding  Company,  Inc.  (Calcasieu),  St.
Bernard Bank & Trust Co. (St. Bernard) and Texarkana National  Bancshares,  Inc.
(Texarkana)  in 1996.  It should be noted that the merger with  Texarkana  was a
holding  company only  merger,  and Hibernia  National  Bank of Texas  (formerly
Texarkana National Bank) is a wholly-owned subsidiary of the Parent Company.

         The  institutions  with  which  the  Company  merged  are  collectively
referred to as the "merged  companies."  The merged  companies  in  transactions
accounted  for  as  poolings  of  interests  are  referred  to  as  the  "pooled
companies," and the merged companies in transactions  accounted for as purchases
are referred to as the "purchased companies."

         The  following  table  shows the  merger  date,  consideration  issued,
exchange ratio and accounting method for each merger.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
                                                                 Exchange
                            Merger Date     Consideration(1)        Ratio        Accounting Method
------------------------------------------------------------------------------------------------------
<S>                   <C>                   <C>                  <C>          <C>                       
Commercial ......          July 1, 1994     2,367,481 shares       8.40:1     Pooling of interests
Bastrop .........          July 1, 1994     2,444,043 shares       8.15:1     Pooling of interests
First Bancorp ...        August 1, 1994     4,311,315 shares      18.14:1     Pooling of interests
First Continental        August 1, 1994     3,898,655 shares       1.41:1     Pooling of interests
Pioneer .........     December 31, 1994     8,370,512 shares      30.50:1     Pooling of interests
First State .....     December 31, 1994     3,350,000 shares      33.50:1     Pooling of interests
American ........         March 1, 1995     2,098,968 shares       4.82:1     Pooling of interests
STABA ...........           May 1, 1995     2,180,133 shares      18.33:1     Pooling of interests
Progressive .....          July 1, 1995     2,488,249 shares       4.05:1     Pooling of interests
St. John ........          July 1, 1995     3,338,700 shares      11.13:1     Pooling of interests
FNB .............       January 1, 1996       889,640 shares      92.00:1     Pooling of interests
Bunkie ..........      January 15, 1996     1,874,760 shares     170.34:1     Pooling of interests
Calcasieu .......       August 26, 1996     $    201,700,000          N/A                 Purchase
St. Bernard .....       October 1, 1996     $     46,600,000          N/A                 Purchase
Texarkana .......     December 31, 1996     6,236,621 shares       8.20:1     Pooling of interests
------------------------------------------------------------------------------------------------------
----------------
(1) All shares issued were Hibernia Class A Common Stock.
</TABLE>


         The  following  table  shows  the  key  components  of the  results  of
operations  of the merged  companies  accounted for as poolings of interests for
the years ended December 31, 1995 and 1994.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
                                                  
                                Hibernia         1995               1996 Pooled Companies
                             (originally       Pooled      -----------------------------------------
($ in thousands)                reported) Companies(1)      FNB      Bunkie   Texarkana       Total
--------------------------------------------------------------------------------------------------------
Year ended December 31, 1995
--------------------------------------------------------------------------------------------------------
<S>                              <C>          <C>         <C>        <C>        <C>         <C>     
Net interest income              $299,760     $  --       $2,483     $4,103     $14,410     $320,756

Net income .........             $123,859     $  --       $  788     $1,052     $ 3,186     $128,885
--------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------
Year ended December 31, 1994
--------------------------------------------------------------------------------------------------------
Net interest income              $260,103     $23,109     $2,093     $3,781     $12,030     $301,116

Net income .........             $ 84,651     $10,369     $  632     $1,254     $ 4,554     $101,460
--------------------------------------------------------------------------------------------------------
----------------
(1) Results of operations  for the year ended  December 31, 1995 are included in
Hibernia's results.
</TABLE>

       Under the purchase  method of accounting,  the assets and  liabilities of
Calcasieu and St. Bernard were adjusted to their estimated fair value as of each
purchase date. The excess of cost over the fair value of net assets acquired was
$120,126,000  and is being amortized on a straight-line  basis over 25 years. In
addition,  a core deposit  intangible of  $18,457,000  was recorded and is being
amortized on an accelerated  basis over 10 years.  The following  table presents
unaudited pro forma information  giving effect to the purchases of Calcasieu and
St. Bernard as if the  transactions had occurred at the beginning of each period
presented.  The effect of anticipated savings resulting from the mergers has not
been included in the pro forma  information.  Unaudited pro forma information is
not necessarily indicative of future results.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
($ in thousands, except per-share data)    Year Ended December 31
--------------------------------------------------------------------------
                                        1996         1995         1994
--------------------------------------------------------------------------
<S>                                 <C>          <C>          <C>     
Interest and noninterest income     $781,416     $734,023     $635,404

Net income ....................     $ 99,165     $126,005     $ 98,974

Net income per common share ...     $   0.78     $   0.99     $   0.78
--------------------------------------------------------------------------
</TABLE>


Note 3
Short-Term Investments
         The following is a summary of short-term investments.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
($ in thousands)                                           December 31
-------------------------------------------------------------------------------
                                                       1996       1995
-------------------------------------------------------------------------------
<S>                                                <C>        <C>     
Federal funds sold and securities purchased
    under agreements to resell .................   $158,000   $ 96,321
Interest-bearing time deposits in domestic banks        293        927
--------------------------------------------------------------------------------
  Total short-term investments .................   $158,293   $ 97,248
--------------------------------------------------------------------------------
</TABLE>


Note 4
Securities
         The Company adopted SFAS No. 115,  "Accounting for Certain  Investments
in Debt and Equity  Securities,"  effective  December 31, 1993.  On November 15,
1995, the FASB issued a Special Report,  "A Guide to Implementation of Statement
115 on  Accounting  for  Certain  Investments  in Debt  and  Equity  Securities"
(Guide). In accordance with the Guide,  Hibernia chose to reclassify  securities
from held to  maturity  to  available  for  sale.  At the date of  transfer  the
amortized cost of those securities was  $1,665,664,000  and net unrealized gains
included in shareholders' equity were $21,522,000.
         A summary of securities classified as available for sale follows.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
($ in thousands)                                        December 31, 1996
------------------------------------------------------------------------------------------
                                      Amortized         Fair   Unrealized   Unrealized
Type                                       Cost        Value        Gains       Losses
------------------------------------------------------------------------------------------
<S>                                  <C>          <C>          <C>          <C>       
  U.S. Treasuries ................   $  359,758   $  365,171   $    5,445   $       32
  U.S. government agencies:
     Mortgage-backed securities ..    1,289,850    1,294,336       15,755       11,269
     Other .......................      332,890      333,388        1,917        1,419
   States and political subdivisions    133,705      135,593        2,431          543
   Other .........................       48,188       48,371          188            5
   Derivative financial instruments       1,765        1,815          967          917
------------------------------------------------------------------------------------------
     Total available for sale ....   $2,166,156   $2,178,674   $   26,703   $   14,185
------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
($ in thousands)                                        December 31, 1995
----------------------------------------------------------------------------------------
                                     Amortized          Fair   Unrealized   Unrealized
Type                                      Cost         Value        Gains       Losses
----------------------------------------------------------------------------------------
<S>                                  <C>          <C>          <C>          <C>       
  U.S. Treasuries ................   $  345,791   $  356,526   $   10,896   $      161
  U.S. government agencies:
     Mortgage-backed securities ..    1,572,942    1,587,780       22,033        7,195
     Other .......................      261,999      261,958        1,363        1,404
   States and political subdivisions     85,876       87,224        1,524          176
   Other .........................       56,455       56,638          306          123
   Derivative financial instruments       1,945          103          587        2,429
----------------------------------------------------------------------------------------
     Total available for sale ....   $2,325,008   $2,350,229   $   36,709   $   11,488
----------------------------------------------------------------------------------------
</TABLE>

         The  following is a summary of realized  gains and losses from the sale
of available for sale securities for the years ended December 31, 1996, 1995 and
1994.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
($ in thousands)                        Year Ended December 31
----------------------------------------------------------------------------
                                      1996       1995       1994
----------------------------------------------------------------------------
<S>                                <C>        <C>        <C>    
Realized gains .................   $   307    $ 1,790    $ 5,632
Realized losses ................    (5,613)    (1,542)    (7,301)
----------------------------------------------------------------------------
     Net realized gains (losses)   $(5,306)   $   248    $(1,669)
----------------------------------------------------------------------------
</TABLE>

         Securities with carrying values of $1,988,002,000 and $1,915,529,000 at
December 31, 1996 and 1995,  respectively,  were either pledged to secure public
and  trust  deposits  or sold  under  repurchase  agreements.  
<TABLE>
<CAPTION>
-------------------------------------------------------------
($ in  thousands)                           December 31
                                         1996         1995
-------------------------------------------------------------
<S>                                 <C>          <C>       
U.S. Treasuries .................   $  359,835   $  343,504
U.S. government agencies:
   Mortgage-backed securities ...    1,249,743    1,270,529
   Other ........................      322,691      271,470
States and political subdivisions       55,733       30,026
-------------------------------------------------------------
     Total pledged securities ...   $1,988,002   $1,915,529
-------------------------------------------------------------
</TABLE>

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

<TABLE>
<CAPTION>
--------------------------------------------------------------
($ in thousands)                         December 31, 1996
--------------------------------------------------------------
                                      Amortized         Fair
                                           Cost        Value
--------------------------------------------------------------
<S>                                  <C>          <C>       
Due in 1 year or less ............   $  204,828   $  205,304
Due after 1 year through 5 years .      531,388      538,173
Due after 5 years through 10 years      219,762      222,959
Due after 10 years ...............    1,210,178    1,212,238
--------------------------------------------------------------
    Total ........................   $2,166,156   $2,178,674
--------------------------------------------------------------
</TABLE>

         One of the pooled companies entered into various  derivative  financial
instruments to hedge against exposure to changes in interest rates in the market
value of its securities available for sale portfolio. Notional principal amounts
are used to express the volume of the various derivative financial  instruments,
but the amounts subject to credit risk are much smaller.
         The following table summarizes the notional amounts, amortized cost and
estimated fair value of the derivative  financial  instruments held to hedge the
available  for sale  portfolio  at December  31, 1996 and 1995.  The Company has
included  deferred  gains and losses  relating  to sold,  settled or  terminated
derivative  financial  instruments  in amortized  cost.  The fair value of these
instruments is included in the available for sale portfolio.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
($ in thousands)                             Notional Value            Amortized Cost        Fair Value
---------------------------------------------------------------------------------------------------------------
                                                December 31             December 31    Year Ended December 31
---------------------------------------------------------------------------------------------------------------
                                             1996         1995        1996         1995        1996      1995
---------------------------------------------------------------------------------------------------------------
<S>                                      <C>          <C>          <C>          <C>          <C>        <C>  
Interest rate swaps, caps and floors     $176,000     $175,000     $ 2,322      $ 1,686      $1,815     $ 516
U.S. Treasury put and call options .     $     --     $ 18,500     $  (206)     $  (183)     $--        $ 112
Treasury note short positions ......     $     --     $ 80,000     $  (351)     $    94      $--        $(244)
Eurodollar short positions .........     $     --     $205,000     $     --     $   348      $--        $(281)
---------------------------------------------------------------------------------------------------------------
</TABLE>


Note 5
Loans
         The  following  is a summary  of  commercial  loans and small  business
banking loans  classified by repayment  source and consumer loans  classified by
type.
<TABLE>
<CAPTION>
---------------------------------------------------------------------
($ in thousands)                                 December 31
---------------------------------------------------------------------
                                               1996           1995
---------------------------------------------------------------------
<S>                                      <C>            <C>       
Commercial:
    Commercial and industrial ......     $  865,855     $  659,949
    Services industry ..............        455,323        276,494
    Real estate ....................        419,081        353,347
    Health care ....................        227,315        166,350
    Transportation, communications
        and utilities ..............        182,417        184,111
    Energy .........................        143,214         85,804
    Other ..........................         45,959         42,702
---------------------------------------------------------------------
        Total commercial ...........      2,339,164      1,768,757
---------------------------------------------------------------------
Small Business Banking:
    Commercial and industrial ......        601,648        489,443
    Services industry ..............        183,192        114,238
    Real estate ....................        118,898        102,971
    Health care ....................         54,697         33,834
    Transportation, communications
        and utilities ..............         24,300         13,544
    Energy .........................          6,834          8,238
    Other ..........................        120,915        127,036
---------------------------------------------------------------------
        Total small business banking      1,110,484        889,304
---------------------------------------------------------------------
Consumer:
    Residential mortgages:
        First mortgages ............      1,082,191        830,404
        Junior liens ...............        121,200         78,392
    Indirect .......................        749,861        660,607
    Revolving credit ...............        144,435         89,294
    Other ..........................        495,693        406,435
---------------------------------------------------------------------
        Total consumer .............      2,593,380      2,065,132
---------------------------------------------------------------------
Total loans ........................     $6,043,028     $4,723,193
---------------------------------------------------------------------
</TABLE>

         The following is a summary of nonperforming  loans,  foreclosed  assets
and excess bank-owned property.
<TABLE>
<CAPTION>
-------------------------------------------------------
($ in thousands)                        December 31
-------------------------------------------------------
                                      1996        1995
-------------------------------------------------------
<S>                                <C>         <C>    
Nonaccrual loans .............     $16,043     $17,692
Restructured loans ...........        --          --
-------------------------------------------------------
    Nonperforming loans ......      16,043      17,692
-------------------------------------------------------
Foreclosed assets ............       5,206       6,114
Excess bank-owned property ...       3,670       2,946
-------------------------------------------------------
    Total nonperforming assets     $24,919     $26,752
-------------------------------------------------------
</TABLE>

         The  Company  adopted  SFAS No. 114  effective  January  1,  1995.  The
adoption  of SFAS  No.  114 did not  have a  material  impact  on the  financial
condition or operating results of the Company. At December 31, 1996 and 1995 the
recorded  investment in loans that were considered to be impaired under SFAS No.
114 was $14,314,000 and $16,192,000, respectively. Included in the 1996 and 1995
amounts were  $10,334,000 and $14,287,000,  respectively,  of impaired loans for
which  the  related   reserve  for  possible  loan  losses  was  $1,453,000  and
$2,265,000,  respectively. At December 31, 1996 and 1995 impaired loans that did
not  have a  reserve  for  possible  loan  losses  amounted  to  $3,980,000  and
$1,905,000,  respectively.  The average  recorded  investment in impaired  loans
during the years ended December 31, 1996 and 1995 was approximately  $15,759,000
and $18,603,000,  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.  For the
years ended December 31, 1996 and 1995, the Company  recognized  interest income
on impaired loans of $2,296,000 and $2,126,000, respectively.
         Interest  income in the amount of $3,056,000  for 1996,  $3,860,000 for
1995 and $6,914,000 for 1994 would have been recorded on nonperforming  loans if
they had  been  classified  as  performing.  The  Company  recorded  $2,296,000,
$2,126,000 and $3,366,000 of interest income on nonperforming loans during 1996,
1995 and 1994, respectively.
         The following is a summary of activity in the reserve for possible loan
losses.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
($ in thousands)                                 Year Ended December 31
----------------------------------------------------------------------------
                                               1996         1995        1994
----------------------------------------------------------------------------
<S>                                       <C>          <C>          <C>     
Balance at beginning of year ..........   $ 150,516    $ 156,005    $ 186,562
    Loans charged off .................     (34,875)     (24,985)     (31,520)
    Recoveries ........................      19,141       18,356       18,832
--------------------------------------------------------------------------------
     Net loans charged off ...........      (15,734)      (6,629)     (12,688)
--------------------------------------------------------------------------------
    Provision for possible loan losses      (12,625)       1,140      (17,869)
    Addition due to purchased companies       5,611         --           --
--------------------------------------------------------------------------------
Balance at end of year ................   $ 127,768    $ 150,516    $ 156,005
--------------------------------------------------------------------------------
</TABLE>


Note 6
Related-Party Transactions
         Certain  directors  and  officers  of the  Company,  members  of  their
immediate  families  and  entities  in which they or members of their  immediate
families  have  principal  ownership  interests  are customers of and have other
transactions with the Company in the ordinary course of business. Loans to these
parties are made on substantially the same terms,  including  interest rates and
collateral,   as  those  prevailing  at  the  time  for  comparable  third-party
transactions  and do not involve  more than normal  risks of  collectibility  or
present other unfavorable features.
         Loans  outstanding to related parties were  $72,778,000 and $41,448,000
at December 31, 1996 and 1995,  respectively.  The change  during 1996  reflects
$232,581,000 in loan advances and  $201,251,000 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 the  director  had the ability to
significantly influence the other entity.
       Securities sold to related parties under repurchase  agreements  amounted
to $3,004,000 and $7,021,000 at December 31, 1996 and 1995, respectively.

Note 7
Bank Premises and Equipment
         The   following   details  bank  premises  and  equipment  and  related
depreciation and amortization expense.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
($ in thousands)                                         December 31
-----------------------------------------------------------------------------
                                                      1996         1995
-----------------------------------------------------------------------------
<S>                                              <C>          <C>      
Land .........................................   $  32,484    $  27,192
Bank premises ................................     135,997       93,639
Leasehold improvements .......................      36,001       32,582
Furniture and equipment ......................     135,273      128,161
--------------------------------------------------------------------------------
                                                   339,755      281,574
Less accumulated depreciation and amortization    (167,648)    (153,268)
--------------------------------------------------------------------------------
Total ........................................   $ 172,107    $ 128,306
--------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>

--------------------------------------------------------------------------------------------
($ in thousands)                                                   Year Ended December 31
--------------------------------------------------------------------------------------------
                                                                1996      1995        1994
--------------------------------------------------------------------------------------------
<S>                                                          <C>        <C>        <C>    
Provisions for depreciation and amortization included in:
        Occupancy expense ...............................    $ 6,693    $ 5,714    $ 7,514
        Equipment expense ...............................     18,995     12,194     10,187
--------------------------------------------------------------------------------------------
Total ...................................................    $25,688    $17,908    $17,701
--------------------------------------------------------------------------------------------
</TABLE>

         In March  1995,  the FASB  issued  SFAS No.  121,  "Accounting  for the
Impairment of Long-Lived  Assets and for  Long-Lived  Assets to be Disposed Of,"
which  requires  impairment  losses to be recorded on long-lived  assets used in
operations,  including  related  goodwill,  when  indicators of  impairment  are
present and the  undiscounted  cash flows  estimated  to be  generated  by those
assets are less than the assets' carrying  amounts.  SFAS No. 121 also addresses
the accounting  for  long-lived  assets that are expected to be disposed of. The
adoption  of SFAS No.  121 in the first  quarter of 1996 did not have a material
effect on the financial condition or operating results of the Company.


Note 8
Time Deposits
         Domestic  certificates  of  deposit of  $100,000  or more  amounted  to
$1,326,000,000  and  $900,488,000  at December 31, 1996 and 1995,  respectively.
Interest  on  these  certificates  amounted  to  $61,214,000,   $52,347,000  and
$35,398,000 in 1996, 1995 and 1994, respectively.
         Foreign  deposits,  which are deposit  liabilities of the Cayman Island
office of Hibernia  National Bank, were  $71,015,000 and $45,466,000 at December
31, 1996 and 1995,  respectively.  Interest expense on foreign deposits amounted
to $2,261,000, $2,018,000 and $794,000 for 1996, 1995 and 1994, respectively.


Note 9
Debt
         The following is a summary of outstanding debt.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
($ in thousands)                                                 December 31
--------------------------------------------------------------------------------
                                                             1996           1995
--------------------------------------------------------------------------------
<S>                                                        <C>           <C>  
Federal Home Loan Bank short-term advance,
  bearing interest at 5.77%, secured by
  two commercial real estate notes receivable, 
  interest payable monthly, maturing March 1997 ....       $42,202       $  --
Federal Home Loan Bank long-term advances ..........         7,654        31,403
Federal Reserve Bank treasury, tax and
  loan account .....................................         1,493         1,694
Other ..............................................          --           1,264
--------------------------------------------------------------------------------
  Total ............................................       $51,349       $34,361
--------------------------------------------------------------------------------
</TABLE>

         The Federal Home Loan Bank (FHLB) advances are secured by the Company's
investment in FHLB stock which totaled  $28,863,000  and $26,732,000 at December
31, 1996 and 1995, respectively, and also by a blanket floating lien on portions
of the Company's  residential  loan  portfolio.  The long-term  advances  accrue
interest at contractual  rates of 4.6% to 8.4%, are due in monthly  installments
of approximately  $130,000,  including  interest,  and are scheduled to amortize
through various dates between 1997 and 2015. However, should the loans for which
the long-term  advances were obtained  repay at a faster rate than  anticipated,
the advances are to be repaid at a correspondingly faster rate.
         The  Federal  Reserve  Bank  treasury,  tax  and  loan  account  is  an
open-ended note option with the Federal Reserve Bank of Dallas.
       Maturities of debt are as follows:  1997 - $44,801,000;  1998 - $859,000;
1999  -  $840,000;  2000  -  $846,000;  2001  -  $1,013,000;  and  thereafter  -
$2,990,000.


Note 10
Other Assets and Other Liabilities
         The following are summaries of other assets and other liabilities.
<TABLE>
<CAPTION>
----------------------------------------------------------------------
($ in thousands)                                      December 31
----------------------------------------------------------------------
                                                     1996       1995
----------------------------------------------------------------------
<S>                                               <C>        <C>     
Other assets:
    Accrued interest receivable ...............   $ 63,074   $ 56,318
    Deferred income taxes .....................     47,523     56,227
    Foreclosed assets and excess
      bank-owned property .....................      8,876      9,060
    Mortgage servicing rights .................      6,214      4,059
    Goodwill ..................................    134,590     19,096
    Core deposit intangibles ..................     16,580       --
    Other .....................................     47,030     58,832
----------------------------------------------------------------------
      Total other assets ......................   $323,887   $203,592
----------------------------------------------------------------------

Other liabilities:
    Accrued interest payable ..................   $ 34,990   $ 29,338
    Trade accounts payable and
      accrued liabilities .....................     70,320     53,316
    Trade date securities purchases not settled     17,416       --
    Reserve for future rental payments
      under sale/leaseback ....................     20,667     20,829
    Other .....................................     21,935     15,245
----------------------------------------------------------------------
      Total other liabilities .................   $165,328   $118,728
----------------------------------------------------------------------
</TABLE>

         As of January 1, 1995,  the Company  adopted SFAS No. 122,  "Accounting
for Mortgage  Servicing  Rights." SFAS No. 122 requires that the cost to acquire
or  originate  a mortgage  loan be  allocated  between the loan and the right to
service  the loan if the  acquiring  or  originating  entity  intends to sell or
securitize the loan and retain the servicing rights.  In addition,  SFAS No. 122
requires the assessment of capitalized  mortgage servicing rights for impairment
based on the fair value of those  rights.  The  adoption of SFAS No. 122 did not
have a material  effect on the financial  condition or operating  results of the
Company.
         Amortization   expense   relating  to  goodwill   totaled   $4,632,000,
$3,107,000 and $22,175,000 for the years ended December 31, 1996, 1995 and 1994,
respectively. Accumulated amortization relating to goodwill at December 31, 1996
and  1995  totaled  $69,439,000  and  $64,807,000,  respectively.  In  addition,
amortization  expense relating to core deposit intangibles totaled $1,877,000 in
1996, and accumulated amortization totaled $1,877,000 at December 31, 1996.
         In 1994,  amortization  expense  included a $16,142,000  charge for the
impairment  of  goodwill   associated  with  acquisitions   consummated  in  the
mid-to-late 1980s. As the result of a new organizational  structure  implemented
during  the third  quarter  of 1994,  management  conducted  an  analysis  which
estimated  the  discounted  cumulative  net income for each  primary  geographic
region over the  remaining  amortization  period of the  associated  goodwill of
approximately nine years. Purchase prices for these acquisitions which gave rise
to the recorded goodwill reflected  management's  intent at the time to generate
efficiencies  by  merging  the  operations  of  the  acquired  institutions  and
increasing  market share from the resulting  base.  The analysis  indicated that
projected  performance of the Company's  existing franchise in two regions would
not be adequate to support the remaining  unamortized  goodwill  resulting  from
previous acquisitions. The impaired goodwill was written off in one instance and
written down to realizable value in another. In addition, $1,449,000 of goodwill
previously recorded by one of the merged companies was written off during 1994.


Note 11
Preferred and Common Stock
         The Company has authorized 100,000,000 shares of no par value preferred
stock. At December 31, 1996, 2,000,000 shares of Series A Fixed/Adjustable  Rate
Noncumulative  Preferred  Stock  (Series A  Preferred  Stock)  were  issued  and
outstanding.  The Series A  Preferred  Stock is  nonconvertible,  with a $50 per
share liquidation preference and a 6.9% annual dividend through October 1, 2001,
payable on the first business day of each calendar quarter. Beginning October 1,
2001 the dividend rate is adjustable  but will not be less than 7.4% nor greater
than 13.4% per annum.  Proceeds from the  September  30, 1996  issuance  totaled
$98,000,000,  which  is net of  $2,000,000  in  issuance  costs.  The  Series  A
Preferred  Stock  qualifies  as Tier 1 capital for  regulatory  purposes  and is
redeemable at Hibernia's  option (with prior Federal  Reserve Board approval) at
any time after October 1, 2001.
         The Company has authorized  200,000,000  shares of no par value Class A
Common  Stock.  At  December  31,  1996,  128,805,305  shares  were  issued  and
128,755,305  shares were outstanding.  At December 31, 1995,  128,311,148 shares
were issued and 128,293,741 shares were outstanding. The Company held 50,000 and
17,407 shares of Class A Common Stock in treasury at December 31, 1996 and 1995,
respectively.


Note 12
Per Share Data
         Income per common share data are based on the weighted  average  number
of common shares  outstanding of  126,765,513,  126,880,767  and  127,595,944 in
1996, 1995 and 1994, respectively. These weighted averages exclude 1,681,835 and
1,358,201  average  common  shares in 1996 and 1995,  respectively,  held by the
Hibernia  Employee Stock  Ownership  Plan  (discussed in Note 14) which have not
been committed to be released. The common shares issued in all mergers accounted
for as poolings of interests  consummated in 1996,  1995 and 1994 are considered
to be outstanding  as of January 1, 1994,  the beginning of the earliest  period
presented.


Note 13
Employee Benefit Plans
         The Company maintains a defined-contribution benefit plan under Section
401(k) of the  Internal  Revenue  Code,  the  Retirement  Security  Plan  (RSP).
Substantially  all employees who have completed one year of service are eligible
to  participate  in the RSP.  Under the RSP,  employees  contribute a portion of
their  compensation,  with the  Company  matching a certain  portion of employee
contributions.  The  matching  contributions  are  invested in Hibernia  Class A
Common Stock and are charged to employee benefits expense. At December 31, 1996,
the RSP owned  approximately  1,800,000 shares of Hibernia Class A Common Stock.
The Company's contributions to the RSP totaled $4,874,000 in 1996, $2,896,000 in
1995 and $1,361,000 in 1994.
         The Company  maintains  incentive  pay and bonus  programs  for certain
employees. Costs of these programs were $16,850,000, $10,519,000 and $12,607,000
for the years ended December 31, 1996, 1995 and 1994, respectively.
         During 1993, the Company  established a plan (1993-1994 Plan) for grant
of  performance  share awards  under its  Long-Term  Incentive  Plan for certain
members of management. Under the 1993-1994 Plan, if the Company achieved certain
predetermined  performance goals during the two-year period from January 1, 1993
through December 31, 1994, the Company would award Hibernia Class A Common Stock
to  certain  members  of  management  who   contributed  to  that   achievement.
Approximately  260,000  shares of restricted  common stock were awarded in 1995,
net of personal tax withholding. Compensation expense of $1,477,000 was recorded
in 1994 relating to the 1993-1994 Plan.
         During  1995,  the  Company  established  a new plan  (1995-1997  Plan)
similar to the 1993-1994  Plan. The 1995-1997 Plan covers the three-year  period
from  January  1, 1995  through  December  31,  1997.  Compensation  expense  of
$3,148,000 and $1,619,000 was recorded in 1996 and 1995, respectively,  relating
to the 1995-1997 Plan.
         Certain of the merged  companies  had adopted  retention  agreements to
encourage  certain  officers and other key employees of the merged  companies to
continue their employment through the consummation of a merger. These agreements
were executed primarily to maintain stability within the organization and reduce
the risk of loss of key employees  prior to legal merger.  Compensation  expense
related to these agreements totaled $997,000, $1,195,000 and $1,400,000 in 1996,
1995 and 1994, respectively.


Note 14
Employee Stock Ownership Plans
         During 1995, the Company  instituted an employee  stock  ownership plan
(ESOP) in which  substantially  all  employees  participate.  The  ESOP,  with a
guarantee of the Parent Company,  borrowed funds from Hibernia  National Bank to
purchase  Hibernia  Class A Common Stock.  The ESOP is expected to acquire up to
$30,000,000 of Hibernia  Class A Common Stock in open-market  purchases of which
$16,350,000  had been  acquired at December 31,  1996.  At December 31, 1996 and
1995, the ESOP owned  approximately  2,036,000 and 2,009,000  shares of Hibernia
Class A Common Stock and had an outstanding  debt  obligation of $13,318,000 and
$14,390,000, respectively. The Banks make annual contributions to the ESOP in an
amount determined by their Boards 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 1996 and 1995 were used to pay debt service,  and it is  anticipated
that this practice will continue in the future.  The ESOP shares  initially were
pledged as collateral  for its debt. As the debt is repaid,  shares are released
from collateral and allocated to active employees.
         The Company  accounts  for the ESOP in  accordance  with  Statement  of
Position  93-6,  "Employers'  Accounting for Employee  Stock  Ownership  Plans."
Accordingly,  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  eliminate in  consolidation.  As shares are committed to be released,
the Company  reports  compensation  expense equal to the current market price of
the  shares,   and  the  shares  become   outstanding   for   earnings-per-share
computations.  Dividends on allocated ESOP shares are recorded as a reduction of
retained  earnings;  dividends  on  unallocated  ESOP  shares are  recorded as a
reduction of debt and accrued interest by the Parent Company.
         Compensation expense of $2,882,000 and $2,395,000 relating to this ESOP
was  recorded  during  1996 and 1995,  respectively.  The ESOP held  440,000 and
223,000 allocated shares and 1,596,000 and 1,786,000 suspense shares at December
31,  1996 and  1995,  respectively.  The fair  value of the  suspense  shares at
December 31, 1996 and 1995 was $21,145,000 and $19,200,000, respectively.
         Texarkana National Bancshares, Inc. (Texarkana),  which merged with the
Parent Company on December 31, 1996,  maintained an ESOP (the  Texarkana  ESOP).
This  ESOP,  which  remained  in  existence  subsequent  to the  merger,  covers
substantially all Texarkana employees. Upon completion of five years of service,
participants are fully vested in their accounts. Compensation expense related to
the Texarkana ESOP totaled  $350,000,  $350,000 and $300,000 for the years ended
December  31,  1996,  1995 and  1994,  respectively.  The  Texarkana  ESOP  held
1,024,000  and 979,000  allocated  shares of Hibernia  Class A Common  Stock and
74,000 and 102,000 suspense shares at December 31, 1996 and 1995,  respectively.
The fair value of the suspense shares at December 31, 1996 and 1995 was $974,000
and  $1,102,000,  respectively.  At December 31, 1996,  the Texarkana ESOP had a
note  payable  to an  unaffiliated  bank in the  amount of  $359,000,  which was
secured by approximately 74,000 shares of Hibernia Class A Common Stock owned by
the Texarkana ESOP.


Note 15
Stock Options
         SFAS No. 123,  "Accounting for Stock-Based  Compensation," which became
effective  January 1,  1996,  established  financial  accounting  and  reporting
standards  for  stock-based   compensation   plans.   Those  plans  include  all
arrangements by which  employees and directors  receive shares of stock or other
equity  instruments  of  the  company,  or the  company  incurs  liabilities  to
employees or directors in amounts based on the price of the stock.  SFAS No. 123
defines a  fair-value-based  method of accounting for stock-based  compensation.
However,  SFAS No. 123 also allows an entity to continue to measure  stock-based
compensation  cost using the  intrinsic  value method of  Accounting  Principles
Board Opinion No. 25 (APB No. 25),  "Accounting  for Stock Issued to Employees."
Entities  electing to retain the  accounting  prescribed in APB No. 25 must make
pro  forma  disclosures  of  net  income  and  earnings  per  share  as  if  the
fair-value-based  method of accounting defined in SFAS No. 123 had been applied.
The  Company  retained  the  provisions  of APB No. 25 for  expense  recognition
purposes.  Under APB No. 25, because the exercise  price of the Company's  stock
options equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized.
         The Company's  stock option plans provide  incentive and  non-qualified
options to various key employees  and  non-employee  directors.  The options are
granted at no less than the fair market value of the stock at the date of grant.
Options  granted  to  directors  under the 1987  Stock  Option  Plan vest in six
months.  All  other  options  granted  under the 1987  Stock  Option  Plan,  the
Long-Term  Incentive  Plan and the 1993  Directors'  Stock  Option  Plan  become
exercisable in the following  increments:  50% after the expiration of two years
from the date of grant, an additional 25% three years from the date of grant and
the remaining 25% four years from the date of grant.
         Options  granted  to  employees  and  directors,  other  than the chief
executive officer,  become  immediately  exercisable if the holder of the option
dies  while the  option is  outstanding.  Options  granted  under the 1987 Stock
Option Plan  generally  expire 10 years from the date granted.  Options  granted
under the Long-Term  Incentive  Plan and the 1993  Directors'  Stock Option Plan
generally  expire  10  years  from the date of grant  unless  the  holder  dies,
retires,  becomes  permanently  disabled or leaves the employ of the Company, at
which time the options expire at various times ranging from 30 to 365 days.
         At December 31, 1996,  shares  available for grant under the 1987 Stock
Option Plan, the Long-Term  Incentive Plan and the 1993 Directors'  Stock Option
Plan amounted to 152,772, 649,973 and 712,500, respectively.
         The following  summarizes  the activity in the plans during 1996,  1995
and 1994.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
                                                                                           Weighted-
                                                                                             Average
                                                            Incentive   Non-Qualified Exercise Price
-----------------------------------------------------------------------------------------------------

<S>                                                          <C>           <C>            <C>      
1987 Stock Option Plan:
Outstanding, December 31, 1993 ......................        175,553       1,373,884      $ 7.28
Granted .............................................           --            20,000        8.28
Canceled ............................................           --            (2,978)       4.94
Exercised ...........................................           --           (16,024)       4.94
--------------------------------------------------------------------------------------------------
Outstanding, December 31, 1994 ......................        175,553       1,374,882        7.32
Granted (weighted-average fair value $2.41 per share)           --            10,000        8.31
Canceled ............................................         (7,500)         (1,474)       5.25
Exercised ...........................................         (5,625)        (22,422)       4.82
--------------------------------------------------------------------------------------------------
Outstanding, December 31, 1995 ......................        162,428       1,360,986        7.40
Granted (weighted-average fair value $3.47 per share)           --             5,000       11.56
Canceled ............................................         (1,875)           --          4.38
Exercised ...........................................           --           (22,398)       4.94
--------------------------------------------------------------------------------------------------
Outstanding, December 31, 1996 ......................        160,553       1,343,588      $ 7.45
--------------------------------------------------------------------------------------------------
Exercisable, December 31, 1996 ......................        146,640       1,191,834      $ 7.47
--------------------------------------------------------------------------------------------------

Long-Term Incentive Plan:
Outstanding, December 31, 1993 ......................           --           905,000      $ 7.25
Granted .............................................         12,598       1,673,476        7.95
Award of restricted stock ...........................           --             3,000         --
Canceled ............................................           --           (59,928)       7.54
Issuances of restricted stock .......................           --            (3,000)        --
--------------------------------------------------------------------------------------------------
Outstanding, December 31, 1994 ......................         12,598       2,518,548        7.71
Granted (weighted-average fair value $2.09 per share)           --         1,458,200        6.98
Award of restricted stock ...........................           --           264,347         --
Canceled ............................................           --          (208,150)       7.43
Exercised ...........................................           --           (22,150)       7.23
Issuances of restricted stock .......................           --          (264,347)        --
--------------------------------------------------------------------------------------------------
Outstanding, December 31, 1995 ......................         12,598       3,746,448        7.45
Granted (weighted-average fair value $2.76 per share)           --         1,527,800       10.20
Award of restricted stock ...........................           --             5,775         --
Canceled ............................................           --          (282,718)       8.10
Exercised ...........................................           --          (149,558)       7.53
Issuances of restricted stock .......................           --            (5,775)        --
--------------------------------------------------------------------------------------------------
Outstanding, December 31, 1996 ......................         12,598       4,841,972      $ 8.27
--------------------------------------------------------------------------------------------------
Exercisable, December 31, 1996 ......................           --         1,211,289      $ 7.69
--------------------------------------------------------------------------------------------------
</TABLE>




<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
                                                                                   Weighted-
                                                                                     Average
                                                     Incentive  Non-Qualified Exercise Price
----------------------------------------------------------------------------------------------

1993 Directors' Stock Option Plan:
<S>                                                          <C>    <C>          <C>      
Outstanding, December 31, 1993 ......................        -       75,000      $    7.31
Granted .............................................        -       80,000           7.88
----------------------------------------------------------------------------------------------
Outstanding, December 31, 1994 ......................        -      155,000           7.60
Granted (weighted-average fair value $2.41 per share)        -       80,000           8.13
Exercised ...........................................        -       (2,500)          7.31
----------------------------------------------------------------------------------------------
Outstanding, December 31, 1995 ......................        -      232,500           7.79
Granted (weighted-average fair value $2.89 per share)        -       75,000          10.44
Canceled ............................................        -      (22,500)          7.56
Exercised ...........................................        -      (21,250)          7.70
----------------------------------------------------------------------------------------------
Outstanding, December 31, 1996 ......................        -      263,750      $    8.57
----------------------------------------------------------------------------------------------
Exercisable, December 31, 1996 ......................        -       85,000      $    7.64
----------------------------------------------------------------------------------------------
</TABLE>

The following table presents the weighted-average  remaining life as of December
31, 1996 for  options  outstanding  for the 1987 Stock  Option  Plan,  Long-Term
Incentive  Plan and the 1993  Directors'  Stock  Option  Plan  within the stated
exercise price ranges.
                                 
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
                                                          Outstanding                    Exercisable
--------------------------------------------------------------------------------------------------------------
             Exercise                                  Weighted-       Weighted-                   Weighted-
           Price Range                    Number         Average         Average      Number         Average
            Per Share                 of Options  Exercise Price  Remaining Life  of Options  Exercise Price
--------------------------------------------------------------------------------------------------------------

<S>                                    <C>              <C>         <C>            <C>             <C>   
1987 Stock Option Plan:
  $4.19 to $7.19 .................     1,271,010        $ 5.85      5.75 years     1,110,343       $ 5.66
  $7.88 to $11.56 ................        35,000        $ 8.76      7.95 years        30,000       $ 8.29
  $14.94 to $18.80 ...............       198,131        $17.51      1.58 years       198,131       $17.51
--------------------------------------------------------------------------------------------------------------

Long-Term Incentive Plan:
  $5.94 to $7.94 .................     3,338,231        $ 7.42      7.34 years     1,176,950       $ 7.66
  $8.13 to $10.63 ................     1,516,339        $10.14      9.17 years        34,339       $ 8.73
--------------------------------------------------------------------------------------------------------------

1993 Directors' Stock Option Plan:
  $7.31 to $10.44 ................       263,750        $ 8.57      7.98 years        85,000       $ 7.64
--------------------------------------------------------------------------------------------------------------
</TABLE>

         The following pro forma  information  was  determined as if the Company
had   accounted   for  stock   options   issued  in  1996  and  1995  using  the
fair-value-based  method  as  defined  in SFAS No.  123.  The fair  value of the
options was estimated  using a  Black-Scholes  option  valuation  model with the
following  weighted  average  assumptions  for  1996  and  1995,   respectively:
risk-free  interest rates of 6.44% and 7.74%;  expected dividend yields of 2.74%
and 3.41%;  expected  volatility  factors of the market  price of the  Company's
Class A Common Stock of 23% and 29%;  and an expected  life of the options of 10
years.
         The  Black-Scholes  option  valuation  model was  developed  for use in
estimating the fair value of traded  options which have no vesting  restrictions
and are fully  transferable.  In addition,  option  valuation models require the
input of highly  subjective  assumptions,  including  the  expected  stock price
volatility.  Because the Company's  employee stock options have  characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially  affect the fair value estimate,  in
management's  opinion the existing models do not necessarily  provide a reliable
single measure of the fair value of its employee and director stock options.

       For purposes of pro forma  disclosures,  the estimated  fair value of the
options  granted  in 1996 and 1995 is  amortized  to expense  over the  options'
vesting  period.  Since the Company's  options  generally  vest over a four-year
period,  the pro forma  disclosures  are not  indicative of future amounts until
SFAS No. 123 is applied to all outstanding, nonvested options.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
($ in thousands)                                            December 31
-----------------------------------------------------------------------------------------------
                                            1996                            1995
-----------------------------------------------------------------------------------------------
                                As Reported       Pro Forma     As Reported       Pro Forma
-----------------------------------------------------------------------------------------------
<S>                             <C>             <C>             <C>             <C>        
Net income ................     $   109,950     $   108,821     $   128,885     $   128,377

Net income per common share     $      0.85     $      0.84     $      1.02     $      1.01
-----------------------------------------------------------------------------------------------
</TABLE>



Note 16
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 components of income tax expense are as follows.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
($ in thousands)                                         Year Ended December 31
--------------------------------------------------------------------------------------
                                                     1996         1995         1994
--------------------------------------------------------------------------------------
<S>                                              <C>          <C>          <C>     
Current tax expense:
     Federal income tax .....................    $ 51,056     $ 29,075     $ 24,802
     State income tax .......................       3,648        3,710        3,310
--------------------------------------------------------------------------------------
Total current tax expense ...................      54,704       32,785       28,112
--------------------------------------------------------------------------------------
Deferred tax expense (benefit):
     Federal income tax .....................       1,497       14,633       16,259
--------------------------------------------------------------------------------------
     Change in deferred tax valuation reserve       3,317      (36,551)     (36,586)
--------------------------------------------------------------------------------------
Total deferred tax expense (benefit) ........       4,814      (21,918)     (20,327)
--------------------------------------------------------------------------------------
Income tax expense ..........................    $ 59,518     $ 10,867     $  7,785
--------------------------------------------------------------------------------------
Shareholders' equity:
     Change in unrealized gains (losses)
        on securities available for sale ....    $ (4,385)    $ 18,205     $(14,237)
     Change in deferred tax valuation reserve        --         (8,380)      13,176
--------------------------------------------------------------------------------------
Total shareholders' equity ..................    $ (4,385)    $  9,825     $ (1,061)
--------------------------------------------------------------------------------------
</TABLE>

         The  reconciliation  of the  federal  statutory  income tax rate to the
Company's effective rate is as follows.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
($ in thousands)                                                            Year Ended December 31
-------------------------------------------------------------------------------------------------------------------------
                                                         1996                    1995                     1994
-------------------------------------------------------------------------------------------------------------------------
                                                  Amount        Rate       Amount        Rate       Amount        Rate
-------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>             <C>      <C>             <C>      <C>             <C>  
Tax expense based on federal statutory rate     $ 59,314        35.0%    $ 48,913        35.0%    $ 38,236        35.0%
Tax-exempt interest .......................       (3,812)       (2.3)      (4,188)       (3.0)      (4,068)       (3.7)
State income tax, net of federal benefit ..        2,371         1.4        2,411         1.7        2,151         2.0
Goodwill ..................................        1,621         1.0        1,088         0.8        6,706         6.1
Benefit from change in deferred tax
  valuation reserve .......................           --          --      (36,551)      (26.1)     (36,586)      (33.5)
Other .....................................           24          --         (806)       (0.6)       1,346         1.2
-------------------------------------------------------------------------------------------------------------------------
Income tax expense ........................     $ 59,518        35.1%    $ 10,867         7.8%    $  7,785         7.1%
-------------------------------------------------------------------------------------------------------------------------
</TABLE>


         Deferred  income  taxes are based on  differences  between the bases of
assets and  liabilities  for  financial  statement  purposes  and tax  reporting
purposes,  and capital loss,  net  operating  loss and  alternative  minimum tax
credit  carryforwards.  At December  31,  1996,  the Company had  $9,477,000  in
capital loss  carryforwards  for federal  income tax  purposes,  which expire in
1997. The tax effects of the cumulative  temporary  differences and capital loss
carryforwards  which create  deferred tax assets and liabilities at December 31,
1996 and 1995, are detailed in the following table.
<TABLE>
<CAPTION>
----------------------------------------------------------------------
($ in thousands)                                  December 31
----------------------------------------------------------------------
                                               1996          1995
----------------------------------------------------------------------
<S>                                        <C>           <C>     
Deferred tax assets:
    Reserve for possible loan losses .     $ 44,719      $ 51,593
    Sale/leaseback ...................        7,527         6,810
    Loan fees ........................        2,528         2,285
    Foreclosed assets ................        1,596         2,135
    Capital loss carryforward ........        3,317          --
    Other ............................       19,904        14,425
----------------------------------------------------------------------
Total deferred tax assets ............       79,591        77,248
----------------------------------------------------------------------
Deferred tax liabilities:
    Net unrealized gains on securities
       available for sale ............        4,378         8,763
    Depreciation .....................       10,188         4,817
    Core deposit intangibles .........        5,489          --
    Discounts on securities ..........           71         1,123
    Other ............................        8,625         6,318
----------------------------------------------------------------------
Total deferred tax liabilities .......       28,751        21,021
----------------------------------------------------------------------
Deferred tax assets, net of
  deferred tax liabilities ...........       50,840        56,227
Deferred tax valuation reserve .......       (3,317)         --
----------------------------------------------------------------------
Total net deferred tax asset .........     $ 47,523      $ 56,227
----------------------------------------------------------------------
</TABLE>

         Management  assesses  realizability of the net deferred tax asset based
on the Company's  ability to: first,  recover taxes previously paid and, second,
generate  taxable  income  and  capital  gains in the  future.  A  deferred  tax
valuation reserve is established, if needed, to limit the net deferred tax asset
to its realizable value. The December 31, 1996 deferred tax valuation reserve is
the result of the potential  inability of the Company to generate  capital gains
in 1997.


Note 17
Leases
         The  Company  leases its  headquarters,  operations  center and certain
other bank premises and equipment under  non-cancelable  operating  leases which
expire at various  dates  through  2036.  Certain of the leases have  escalation
clauses and renewal options ranging from one to 30 years.
         Total rental  expense  (none of which  represents  contingent  rentals)
included in occupancy and equipment  expense was  $10,966,000,  $10,528,000  and
$10,522,000 in 1996, 1995 and 1994, respectively.
         The future  minimum  rental  commitments  at December 31, 1996, for all
long-term operating leases are as follows: 1997 - $9,846,000; 1998 - $9,336,000;
1999 -  $8,753,000;  2000 -  $8,160,000;  2001 -  $7,980,000;  and  thereafter -
$56,670,000.


Note 18
Other Operating Expense
         The following is a summary of other operating expense.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
($ in thousands)                            Year Ended December 31
-------------------------------------------------------------------------
                                            1996        1995        1994
-------------------------------------------------------------------------
<S>                                      <C>         <C>         <C>    
Telecommunications .................     $ 8,844     $ 7,089     $ 4,417
Advertising and promotional expenses       9,709       7,430       6,177
Postage ............................       6,224       5,302       4,843
Stationery and supplies ............       6,610       6,393       5,555
Professional fees ..................       7,542       7,793      11,983
State taxes on equity ..............       6,000       4,491       3,164
Regulatory expense .................       1,196       8,493      15,663
Loan collection expense ............       2,494       2,149       1,822
Other ..............................      28,469      27,602      32,685
-------------------------------------------------------------------------
    Total other operating expense ..     $77,088     $76,742     $86,309
-------------------------------------------------------------------------
</TABLE>


Note 19
Hibernia Corporation
         The following Balance Sheets,  Income Statements and Statements of Cash
Flows  reflect the financial  position and results of operations  for the Parent
Company only. 

<TABLE>
<CAPTION>
-----------------------------------------------------------
Balance Sheets
-----------------------------------------------------------
($ in thousands)                         December 31
-----------------------------------------------------------
                                        1996         1995
-----------------------------------------------------------
<S>                                 <C>          <C>     
Investment in bank subsidiaries     $779,925     $711,653
Other assets ..................      183,449       82,611
-----------------------------------------------------------
    Total assets ..............     $963,374     $794,264
-----------------------------------------------------------
Other liabilities .............     $ 13,671     $ 10,803
Debt ..........................       13,318       15,654
Shareholders' equity ..........      936,385      767,807
-----------------------------------------------------------
    Total liabilities and
      shareholders' equity ....     $963,374     $794,264
-----------------------------------------------------------
</TABLE>


<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Income Statements
--------------------------------------------------------------------------------
($ in thousands)                             Year Ended December 31
--------------------------------------------------------------------------------
                                             1996          1995         1994
--------------------------------------------------------------------------------
<S>                                  <C>           <C>            <C>      
Equity in undistributed income
    of subsidiaries ............     $  76,524     $  56,584      $  59,746
Dividends from bank subsidiaries        30,845        68,001         45,172
Other income ...................         6,056         3,684          2,335
--------------------------------------------------------------------------------
    Total income ...............       113,425       128,269        107,253
--------------------------------------------------------------------------------
Interest expense ...............             3           207          2,236
Other expense ..................         2,107         3,403          7,391
--------------------------------------------------------------------------------
    Total expense ..............         2,110         3,610          9,627
--------------------------------------------------------------------------------
Income before taxes ............       111,315       124,659         97,626
Income tax expense (benefit) ...         1,365        (4,226)        (3,834)
--------------------------------------------------------------------------------
Net income .....................     $ 109,950     $ 128,885      $ 101,460
--------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>

--------------------------------------------------------------------------------
Statements of Cash Flows
--------------------------------------------------------------------------------
($ in thousands)                                 Year Ended December 31
--------------------------------------------------------------------------------
                                             1996         1995         1994
--------------------------------------------------------------------------------
<S>                                     <C>          <C>          <C>      
Operating activities
    Net income ......................   $ 109,950    $ 128,885    $ 101,460
    Non-cash adjustment for equity
      in subsidiaries' undistributed
      net income ....................     (76,524)     (56,584)     (59,746)
    Other adjustments ...............       1,833      (10,719)     (10,441)
--------------------------------------------------------------------------------
Net cash provided by
        operating activities ........      35,259       61,582       31,273
--------------------------------------------------------------------------------
Investing activities
    Investment in subsidiaries ......      (3,000)        (100)        --
    Purchases of securities available
       for sale .....................        --           (484)      (2,605)
    Proceeds from sales of securities
       available for sale ...........        --            453          907
    Maturities of securities
       available for sale ...........        --          1,600        1,633
    Net decrease (increase) in loans        2,206      (10,867)        --
--------------------------------------------------------------------------------
Net cash used by investing activities        (794)      (9,398)         (65)
--------------------------------------------------------------------------------
Financing activities
    Payments on debt ................      (1,264)      (3,506)     (27,190)
    Purchase of treasury stock ......        (880)        (563)      (2,414)
    Dividends paid ..................     (36,423)     (30,779)     (21,338)
    Issuance of preferred stock .....      98,000         --           --
    Issuance of common stock ........       6,141        3,634        4,680
--------------------------------------------------------------------------------
Net cash provided (used) by
         financing activities .......      65,574      (31,214)     (46,262)
--------------------------------------------------------------------------------
    Increase (decrease) in cash .....     100,039       20,970      (15,054)
Cash at beginning of year ...........      67,223       46,253       61,307
--------------------------------------------------------------------------------
Cash at end of year .................   $ 167,262    $  67,223    $  46,253
--------------------------------------------------------------------------------
</TABLE>

Note 20
Financial Instruments and Derivative Financial Instruments
         Generally  accepted  accounting  principles  require disclosure of fair
value  information  about  financial  instruments for which it is practicable to
estimate fair value, whether or not the financial  instruments are recognized in
the financial  statements.  When quoted market  prices are not  available,  fair
values are based on estimates using present value or other valuation techniques.
Those techniques are significantly  affected by the assumptions used,  including
the discount  rate and  estimates  of future cash flows.  The derived fair value
estimates cannot be substantiated through comparison to independent markets and,
in many cases, could not be realized in immediate  settlement of the instrument.
Certain  financial  instruments and all  non-financial  instruments are excluded
from these  disclosure  requirements.  Further,  the  disclosures do not include
estimated  fair values for items which are not financial  instruments  but which
represent   significant   value  to  the  Company,   among  them,  core  deposit
intangibles,  loan servicing rights,  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 short-term investments, demand deposits
and  short-term  borrowings  approximates  the  estimated  fair  value  of these
financial  instruments.  The estimated fair value of  securities,  interest rate
agreements  and other  off-balance-sheet  instruments  is based on quoted market
prices, dealer quotes and prices obtained from independent pricing services. The
estimated  fair value of loans,  interest-bearing  deposits and debt is based on
present values using applicable  risk-adjusted  spreads to the appropriate yield
curve to approximate current interest rates applicable to each category of these
financial instruments.

         Interest  rates  are  not  adjusted  for  changes  in  credit  risk  of
performing  commercial and small  business  banking 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  possible  loan losses  which
totaled $127,768,000 at December 31, 1996.
         The fair value estimates  presented are based on information  available
to management as of December 31, 1996 and 1995. 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.  None of the assets or  liabilities
included in the following table are held for trading purposes.

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
($ in thousands)                                             December 31
-------------------------------------------------------------------------------------------------
                                                    1996                        1995
-------------------------------------------------------------------------------------------------
                                          Carrying           Fair       Carrying          Fair
                                            Amount          Value         Amount         Value
-------------------------------------------------------------------------------------------------
<S>                                     <C>            <C>            <C>            <C>       
Assets
    Cash and short-term investments     $  716,733     $  716,733     $  500,915     $  500,915
    Securities available for sale .     $2,178,674     $2,178,674     $2,350,229     $2,350,229
    Commercial loans ..............     $2,339,164     $2,349,641     $1,768,757     $1,782,063
    Small business banking loans ..     $1,110,484     $1,116,752     $  889,304     $  895,551
    Consumer loans ................     $2,593,380     $2,556,323     $2,065,132     $2,064,284
Liabilities
    Demand deposits ...............     $1,540,917     $1,540,917     $1,236,735     $1,236,735
    Interest-bearing deposits .....     $6,280,886     $6,306,859     $5,332,962     $5,344,076
    Short-term borrowings .........     $  331,796     $  331,796     $  265,126     $  265,126
    Debt ..........................     $   51,349     $   52,337     $   34,361     $   34,499
-------------------------------------------------------------------------------------------------
</TABLE>

         The Company issues financial instruments with off-balance-sheet risk in
the normal course of business to meet the  financing  needs of its customers and
to  reduce  exposure  to   fluctuations  in  interest  rates.   These  financial
instruments  include  commitments to extend credit,  letters of credit,  standby
letters of credit and interest rate contracts and involve,  to varying  degrees,
elements of credit and interest rate risk in excess of the amount  recognized on
the balance sheet.
         Commitments   to  extend  credit  are  legally   binding,   conditional
agreements  generally having fixed expiration or termination dates and specified
interest rates and purposes.  These  commitments  generally require customers to
maintain certain credit  standards.  Collateral  requirements and  loan-to-value
ratios are the same as those for funded  transactions and are established  based
on  management's  credit  assessment  of the  customer.  Commitments  may expire
without  being  drawn  upon.  Therefore,  the total  commitment  amount does not
necessarily represent future requirements.
         The Company issues letters of credit and financial  guarantees (standby
letters of credit) whereby it agrees to honor certain  financial  commitments in
the event its  customers  are unable to  perform.  The  majority  of the standby
letters of credit consist of performance guarantees. Management conducts regular
reviews of all outstanding  standby letters of credit,  and the results of these
reviews are  considered in assessing  the adequacy of the Company's  reserve for
possible loan losses. Management does not anticipate any material losses related
to these instruments.

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
($ in thousands)                                       December 31
---------------------------------------------------------------------------------------
                                      1996                            1995
---------------------------------------------------------------------------------------
                             Contract           Fair        Contract           Fair
($ in thousands)               Amount          Value          Amount          Value
---------------------------------------------------------------------------------------

<S>                        <C>            <C>             <C>            <C>        
Commitments
  to extend credit ...     $1,790,518     $  (16,971)     $1,199,500     $  (11,572)
---------------------------------------------------------------------------------------

Letters of credit and
  financial guarantees     $  131,970     $     (966)     $  116,149     $     (857)
---------------------------------------------------------------------------------------
</TABLE>


         The Company  maintains  trading  positions  in a variety of  derivative
financial  instruments.  These  trading  activities  are customer  oriented and,
generally,  matched  trading  positions are  established to minimize risk to the
Company. However, to meet the needs of customers, the Company also serves as the
counterparty for certain transactions.
         The credit exposure that results from interest-rate  contracts held for
trading  purposes  is limited  to the  current  fair  value of asset  derivative
positions,  which at December  31, 1996 was  $913,000.  The Company  manages the
potential  credit  exposure  through  evaluation  of  the  counterparty   credit
standing,  collateral  agreements and other contract  provisions.  The potential
credit exposure from future market movements is estimated by using a statistical
model that takes into  consideration  possible  changes in  interest  rates over
time.
         The  amounts   disclosed  in  the   following   table   represent   the
end-of-period  notional and fair value of derivative financial  instruments held
or issued for trading  purposes  and the average  aggregate  fair value of those
instruments during the year. This table includes an interest rate swap agreement
with a notional amount of $68,000,000 as of December 31, 1995. The Company was a
guarantor  of  this  agreement,  which  was  executed  by one  of the  Company's
customers,  and the  Company's  exposure to loss was  limited to the  difference
between the interest payments the customer was obligated to pay and those it was
entitled to receive. This interest rate swap agreement matured January 2, 1996.
         Net trading gains  recognized  in earnings on interest  rate  contracts
outstanding were immaterial for all years presented.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
($ in thousands)                           Notional Value                  Fair Value                 Average Fair Value
------------------------------------------------------------------------------------------------------------------------------------
                                            December 31                      December 31            Year Ended December 31
------------------------------------------------------------------------------------------------------------------------------------
                                            1996          1995           1996            1995            1996            1995
------------------------------------------------------------------------------------------------------------------------------------
<S>                                    <C>            <C>            <C>             <C>             <C>             <C>     
Interest rate swaps
    Assets .....................       $ 56,099       $  4,716       $    881        $    113        $    993        $    175
    Liabilities ................       $ 46,099       $ 73,566       $   (515)       $    (96)       $   (726)       $ (1,328)
Options, caps and floors held ..       $ 53,687       $120,063       $     32        $     28        $    (35)       $    177
Options, caps and floors written       $ 54,062       $120,598       $    (36)       $    (30)       $     30        $   (203)
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

         The Company also enters into interest rate contracts in order to manage
interest rate exposure. Interest rate contracts involve the risk of dealing with
counterparties and their ability to meet contractual terms. These counterparties
must receive  appropriate  credit approval before the Company enters into a rate
contract.  Notional principal amounts express the volume of these  transactions,
although  the  amounts  potentially  subject to credit and market  risk are much
smaller.  At  December  31,  1996 and 1995,  the  Company  was party to  several
contracts to manage the interest rate risk of securities  available for sale, as
discussed in Note 4.


Note 21
Regulatory Matters and Dividend Restrictions
         The  Company and the Banks 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 Banks 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
Banks'  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, 1996 and 1995,  the most recent  notifications  from
the OCC categorized the Banks as well capitalized under the regulatory framework
for prompt corrective  action.  For a bank to be designated as well capitalized,
it must  have a  leverage  capital  ratio of at least  5.0% and Tier 1 and total
risk-based  ratios  of at  least  6.0% and  10.0%,  respectively.  There  are no
conditions or events since those  notifications  that  management  believes have
changed the Banks' category.




          The  Company's and the Banks'  actual  capital  amounts and ratios are
presented in the following table.

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
                                       Tier 1                Total                 Tier 1
($ in thousands)                 Risk-Based Capital     Risk-Based Capital        Leverage
---------------------------------------------------------------------------------------------------
                                   Amount     Ratio      Amount      Ratio      Amount   Ratio
---------------------------------------------------------------------------------------------------
<S>                              <C>         <C>       <C>          <C>       <C>         <C>  
December 31, 1996
    Hibernia Corporation .       $777,075    12.07%    $858,137     13.33%    $777,075    8.78%
    Hibernia National Bank       $583,784     9.41%    $661,952     10.67%    $583,784    6.91%
    Hibernia National Bank
      of Texas ...........       $ 37,183    15.42%    $ 40,027     16.60%    $ 37,183    9.24%

December 31, 1995
    Hibernia Corporation .       $732,255    14.66%    $795,798     15.93%    $732,255    9.71%
    Hibernia National Bank       $640,988    13.33%    $702,198     14.60%    $640,988    8.96%
    Hibernia National Bank
      of Texas ...........       $ 34,641    15.26%    $ 37,479     16.51%    $ 34,641    8.65%
---------------------------------------------------------------------------------------------------
</TABLE>


         Under  current FRB  regulations,  each of the Banks may lend the Parent
Company up to 10% of their capital and surplus.
         The  payment  of  dividends  by the  Banks  to the  Parent  Company  is
restricted by various regulatory and statutory  limitations.  In 1997, the Banks
will have available to pay dividends to the Parent Company,  without approval of
the OCC,  approximately  $134,830,000,  plus net retained profits earned in 1997
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 $19,844,000 in 1996 and $27,400,000 in 1995.


Note 22
Contingencies
         The  Company  is a party to  certain  legal  proceedings  arising  from
matters  incidental to its business.  Management  and counsel are of the opinion
that these actions will not have a material effect on the financial condition or
results of operations of the Company.