Hibernia Corp. Acknowledges Fed Borrowings
Hibernia Corp. of New Orleans confirmed on Friday that it is borrowing funds from the Federal Reserve Bank of Atlanta but denied having liquidity problems.
Hibernia spokesman James Lestelle said the troubled banking company had been "in and out" of the discount window during the past two weeks. Mr. Lestelle declined to disclose the extent of the borrowings but said they were only a "small percentage" of the money lent by the Atlanta Fed during each of the past two weeks.
Mr. Lestelle said Hibernia's Fed borrowing has been in the "overnight" or "adjustment credit" category, which is shortterm funding. "We don't feel we have a liquidity problem, because we've also been selling funds," he said.
Loans from the Atlanta Fed's discount window reached $400 million last Wednesday, about level with the $403 million of Aug. 28 and up from $236 million on Aug. 21.
The Atlanta Fed does not break down loans made to individual banks in its district. But it is known that Southeast Banking Corp., the troubled Miami-based company, is experiencing liquidity problems and has been borrowing heavily from the discount window.
Southeast has classified its discount window borrowing as "extended credit," a term the Fed uses to denote long-term credit to banks suffering serious financial difficulties.
Banks that have short-term funding problems can borrow from the Federal Reserve if they put up collateral. However, banks generally shy away from doing so because the borrowing is often perceived as a sign that a bank is unable to meet its funding needs from traditional sources, such as customer deposits and funds purchased from correspondent banks.
Hibernia, with assets of $7.2 billion, is considered the second most troubled large bank in the Atlanta Fed's district, having lost $91 million over the past three quarters.
Reliance on Jumbos
The company has an unusually heavy reliance on jumbo deposits that exceed the $100,000 limit on federal deposit insurance. Although most of these deposits are backed by government securities and not loans, experts say customers are inclined to withdraw funds that exceed the insurance limit from banks experiencing financial problems.
At midyear, Hibernia held $1.38 billion of jumbos, equaling 25% of domestic interest-bearing deposits.
In a recent regulatory filing, Hibernia conceded "there can be no assurances" that emergency funding plans devised at the request of regulators will prove adequate.
Hibernia's stock closed at $3.50 on Friday, up 75 cents.
Kelley Holland contributed to this story.