Credit card issuer Capital One Financial Corp. (COF) has agreed to pay $5.35 billion to buy Louisiana regional bank Hibernia Corp. (HIB) in an effort to expand from direct mail marketing to branch banking outlets.

The boards of directors of Virginia-based Capital One and New Orleans-based Hibernia met Sunday and approved the cash-and-stock deal, said Richard Woods, a Capital One spokesman.

Under terms of the sale, which was announced Sunday, Hibernia shareholders will receive $33 for each share, split into 45 percent cash and 55 percent stock. That equals $15.35 in cash, and an exchange of shares worth .2261 of each Capital One share.

The deal values Hibernia shares at a 24 percent premium based on the stock's closing price Friday of $26.57 per share.

Hibernia shares soared $5.38, or 20.3 percent, to $31.95 on the New York Stock Exchange (search), while Capital One shares fell $3.08, or 3.9 percent, to $75 on the NYSE.

Hibernia has more than $22 billion in assets, 293 branches and operations in Louisiana, Texas and Mississippi. It is the 36th largest U.S. bank by market capitalization, according to data provider SNL Financial.

Hibernia Chairman E.R. Campbell will join the board of directors, and J. Herbert Boydstun will remain as president of Hibernia, which will be renamed at a later date, Woods said.

Pending regulatory and shareholder approval, the merger could be completed in the third quarter, Woods said.

McLean, Va.-based Capital One has been itching to buy a commercial bank for some time to bolster its credit card distribution — almost entirely through direct mail — to compete with large institutions such as Bank of America Corp., which can sell cards through its 6,000 branches.

"Capitol One is basically a credit card company and they wanted to acquire a bank," Boydstun said.

The combination of Capitol One's information-gathering tools and brand name will improve Hibernia's services, Boydstun said.

"This is a great old company that we love, and I know what it means to Louisiana, but companies like people have natural life cycles," Boydstun said. He added Hibernia had long been considered ripe for the taking by a major corporation. The company's stock has risen more than 12 percent in the last 12 months.

Boydstun said Sunday that Hibernia customers should see few changes. "I think that if anything the service should be expanded," he said.

Last summer, Capital One announced plans to cut more than 1,600 jobs, mainly as it closed call centers and outsourced that work.