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STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2004 Commission file number 0-1026
WHITNEY HOLDING CORPORATION
(Exact name of registrant as specified in its charter)
Louisiana 72-6017893
(State of incorporation) (I.R.S. Employer
Identification No.)
228 St. Charles Avenue
New Orleans, Louisiana 70130
(Address of principal executive offices)
(504) 586-7272
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act). Yes X No
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Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at July 31, 2004
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Common Stock, no par value 40,842,480
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WHITNEY HOLDING CORPORATION
TABLE OF CONTENTS
Page
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PART I. Financial Information
Item 1: Financial Statements:
Consolidated Balance Sheets 1
Consolidated Statements of Income 2
Consolidated Statements of Changes in Shareholders' Equity 3
Consolidated Statements of Cash Flows 4
Notes to Consolidated Financial Statements 5
Selected Financial Data 12
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
Item 3: Quantitative and Qualitative Disclosures about
Market Risk 30
Item 4: Controls and Procedures 30
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PART II. Other Information
Item 1: Legal Proceedings 31
Item 2: Changes in Securities, Use of Proceeds
and Issuer Purchases of Equity Securities 31
Item 3: Defaults upon Senior Securities 31
Item 4: Submission of Matters to a Vote of Security Holders 31
Item 5: Other Information 32
Item 6: Exhibits and Reports on Form 8-K 32
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Signature 33
Exhibit Index 34
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
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June 30 December 31
(dollars in thousands) 2004 2003
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ASSETS
Cash and due from financial institutions $ 259,116 $ 270,387
Federal funds sold and short-term investments 2,763 14,385
Loans held for sale 15,708 15,309
Investment securities
Securities available for sale 1,839,838 2,090,870
Securities held to maturity, fair values of $222,851 and $196,717, respectively 223,988 190,535
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Total investment securities 2,063,826 2,281,405
Loans, net of unearned income 5,139,549 4,882,610
Allowance for loan losses (56,447) (59,475)
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Net loans 5,083,102 4,823,135
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Bank premises and equipment 147,579 148,259
Goodwill 69,164 69,164
Other intangible assets 22,963 23,475
Accrued interest receivable 25,536 27,305
Other assets 99,369 82,158
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Total assets $7,789,126 $7,754,982
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LIABILITIES
Noninterest-bearing demand deposits $1,952,420 $1,943,248
Interest-bearing deposits 4,388,362 4,215,334
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Total deposits 6,340,782 6,158,582
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Short-term and other borrowings 545,300 600,053
Accrued interest payable 4,762 4,493
Other liabilities 55,558 151,541
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Total liabilities 6,946,402 6,914,669
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SHAREHOLDERS' EQUITY
Common stock, no par value
Authorized - 100,000,000 shares
Issued - 40,829,274 and 40,448,929 shares, respectively 2,800 2,800
Capital surplus 200,413 183,624
Retained earnings 677,398 656,195
Accumulated other comprehensive income (20,606) 8,438
Treasury stock at cost - 10,592 and 937 shares, respectively (465) (30)
Unearned restricted stock compensation (16,816) (10,714)
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Total shareholders' equity 842,724 840,313
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Total liabilities and shareholders' equity $7,789,126 $7,754,982
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The accompanying notes are an integral part of these financial statements.
1
WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
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Three Months Ended Six Months Ended
June 30 June 30
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(dollars in thousands, except per share data) 2004 2003 2004 2003
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INTEREST INCOME
Interest and fees on loans $63,564 $63,610 $126,575 $127,379
Interest and dividends on investments
Mortgage-backed securities 15,087 12,417 31,000 26,105
U.S. agency securities 2,822 3,722 6,155 7,874
U.S. Treasury securities 1,364 1,872 2,913 3,485
Obligations of states and political subdivisions 2,497 2,046 4,909 4,157
Other securities 285 486 577 1,029
Interest on federal funds sold and short-term investments 46 232 76 393
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Total interest income 85,665 84,385 172,205 170,422
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INTEREST EXPENSE
Interest on deposits 8,060 11,151 16,030 23,694
Interest on short-term and other borrowings 1,246 712 2,626 1,412
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Total interest expense 9,306 11,863 18,656 25,106
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NET INTEREST INCOME 76,359 72,522 153,549 145,316
PROVISION FOR LOAN LOSSES 2,000 - - 500
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NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 74,359 72,522 153,549 144,816
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NONINTEREST INCOME
Service charges on deposit accounts 9,452 9,330 18,768 18,627
Secondary mortgage market operations 1,363 2,987 2,649 5,724
Bank card fees 2,668 2,443 5,004 4,649
Trust service fees 2,303 2,058 4,492 4,107
Other noninterest income 5,605 6,308 11,385 11,514
Securities transactions - - - -
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Total noninterest income 21,391 23,126 42,298 44,621
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NONINTEREST EXPENSE
Employee compensation 29,860 28,298 58,412 56,130
Employee benefits 7,680 7,489 15,193 14,147
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Total personnel expense 37,540 35,787 73,605 70,277
Net occupancy expense 4,964 4,902 9,748 9,498
Equipment and data processing expense 4,240 4,318 8,618 8,523
Telecommunication and postage 2,277 2,066 4,506 4,145
Corporate value and franchise taxes 1,982 1,653 3,845 3,526
Legal and professional fees 1,245 1,486 2,256 3,041
Amortization of intangibles 1,289 1,291 2,578 2,752
Other noninterest expense 10,735 9,142 21,142 18,177
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Total noninterest expense 64,272 60,645 126,298 119,939
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INCOME BEFORE INCOME TAXES 31,478 35,003 69,549 69,498
INCOME TAX EXPENSE 9,575 11,253 21,488 22,278
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NET INCOME $21,903 $23,750 $48,061 $47,220
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EARNINGS PER SHARE
Basic $.54 $.60 $1.19 $1.19
Diluted .53 .59 1.17 1.17
WEIGHTED-AVERAGE SHARES OUTSTANDING
Basic 40,304,997 39,867,549 40,248,221 39,826,668
Diluted 40,978,580 40,360,070 40,919,927 40,288,610
CASH DIVIDENDS PER SHARE $.33 $.30 $.66 $.60
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The accompanying notes are an integral part of these financial statements.
2
WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
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Accumulated Unearned
Other Restricted
(dollars in thousands, Common Capital Retained Comprehensive Treasury Stock
except per share data) Stock Surplus Earnings Income Stock Compensation Total
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Balance at December 31, 2002 $2,800 $167,235 $607,235 $30,104 $ - $(6,891) $800,483
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Comprehensive income:
Net income - - 47,220 - - - 47,220
Other comprehensive income:
Unrealized net holding loss on
securities, net of reclassification
adjustments and taxes - - - (3,113) - - (3,113)
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Total comprehensive income - - 47,220 (3,113) - - 44,107
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Cash dividends, $.60 per share - - (24,132) - - - (24,132)
Stock issued to dividend reinvestment plan - 854 - - - - 854
Long-term incentive plan stock activity:
Restricted grants and related activity - 5,489 - - (1,084) (2,985) 1,420
Options exercised - 2,283 - - 197 - 2,480
Directors' compensation plan
stock activity - 231 - - 167 - 398
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Balance at June 30, 2003 $2,800 $176,092 $630,323 $26,991 $(720) $(9,876) $825,610
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Balance at December 31, 2003 $2,800 $183,624 $656,195 $8,438 $(30) $(10,714) $840,313
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Comprehensive income:
Net income - - 48,061 - - - 48,061
Other comprehensive income:
Unrealized net holding loss on
securities, net of reclassification
adjustments and taxes - - - (29,044) - - (29,044)
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Total comprehensive income - - 48,061 (29,044) - - 19,017
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Cash dividends, $.66 per share - - (26,858) - - - (26,858)
Stock issued to dividend reinvestment plan - 993 - - 30 - 1,023
Long-term incentive plan stock activity:
Restricted grants and related activity - 9,711 - - (643) (6,102) 2,966
Options exercised - 5,244 - - - - 5,244
Directors' compensation plan
stock activity - 841 - - 178 - 1,019
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Balance at June 30, 2004 $2,800 $200,413 $677,398 $(20,606) $(465) $(16,816) $842,724
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The accompanying notes are an integral part of these financial statements.
3
WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Six Months Ended
June 30
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(dollars in thousands) 2004 2003
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OPERATING ACTIVITIES
Net income $48,061 $47,220
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization of bank premises and equipment 6,612 6,607
Amortization of purchased intangibles 2,578 2,752
Restricted stock compensation earned 4,585 2,836
Premium amortization (discount accretion), net 1,368 4,963
Provision for losses on loans and foreclosed assets 48 527
Net gains on sales of foreclosed assets and surplus property (781) (778)
Deferred tax expense (benefit) 754 (1,108)
Net increase in loans originated and held for sale (399) (27,549)
Net increase in trading account securities (272) (60,447)
Increase (decrease) in accrued income taxes 1,113 (1,579)
Decrease in accrued interest receivable and prepaid expenses 1,878 200
Increase in accrued interest payable and other accrued expenses 647 2,570
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Net cash provided by (used in) operating activities 66,192 (23,786)
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INVESTING ACTIVITIES
Proceeds from maturities of investment securities held to maturity 7,980 8,741
Purchases of investment securities held to maturity (41,797) (7,965)
Proceeds from maturities of investment securities available for sale 295,683 427,325
Purchases of investment securities available for sale (190,684) (471,409)
Net increase in loans (261,893) (146,838)
Net (increase) decrease in federal funds sold and short-term investments 11,622 (6,843)
Proceeds from sales of foreclosed assets and surplus property 3,307 2,617
Purchases of bank premises and equipment (6,277) (3,960)
Net cash received in branch acquisition 23,044 -
Other, net 1,558 (2,494)
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Net cash used in investing activities (157,457) (200,826)
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FINANCING ACTIVITIES
Net increase (decrease) in transaction account and savings account deposits (4,786) 179,907
Net increase (decrease) in time deposits 161,867 (2,350)
Net decrease in short-term and other borrowings (54,753) (8,237)
Proceeds from issuance of common stock 6,292 3,329
Purchases of common stock (1,890) (1,528)
Cash dividends (26,736) (36,141)
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Net cash provided by financing activities 79,994 134,980
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Decrease in cash and cash equivalents (11,271) (89,632)
Cash and cash equivalents at beginning of period 270,387 326,124
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Cash and cash equivalents at end of period $259,116 $236,492
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Cash received during the period for:
Interest income $173,974 $171,479
Cash paid during the period for:
Interest expense $18,387 $25,885
Income taxes 18,900 24,100
Noncash investing activities:
Foreclosed assets received in settlement of loans $1,342 $2,090
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The accompanying notes are an integral part of these financial statements.
4
WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Whitney
Holding Corporation and its subsidiaries (the "Company" or "Whitney"). All
significant intercompany balances and transactions have been eliminated. Certain
financial information for prior periods has been reclassified to conform to the
current presentation.
In preparing the consolidated financial statements, the Company is
required 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. The consolidated financial statements reflect
all adjustments which are, in the opinion of management, necessary for a fair
statement of the financial condition, results of operations, changes in
shareholders' equity and cash flows for the interim periods presented. These
adjustments are of a normal recurring nature and include appropriate estimated
provisions.
Pursuant to rules and regulations of the Securities and Exchange
Commission ("SEC"), certain financial information and disclosures have been
condensed or omitted in preparing the consolidated financial statements
presented in this quarterly report on Form 10-Q. These financial statements
should be read in conjunction with the Company's 2003 annual report on Form
10-K. Financial information reported in these financial statements is not
necessarily indicative of the financial condition, results of operations or cash
flows of any other interim or annual periods.
NOTE 2 - MERGERS AND ACQUISITIONS
In March 2004, Whitney entered into a definitive agreement to acquire
Madison BancShares, Inc. ("Madison") and its subsidiary, Madison Bank. Madison
Bank operates four banking locations in the Tampa Bay, Florida metropolitan
area, with approximately $225 million in total assets and $186 million in
deposits. Madison shareholders will receive $29.89 per share in cash and/or
Whitney stock for a total transaction value of approximately $66 million.
Whitney stock is limited to 65% of the total consideration paid and will total
approximately 1,020,000 shares. Subject to certain conditions and the approval
by Madison shareholders, this transaction is scheduled to close in the third
quarter of 2004.
In June 2004, Whitney National Bank (the "Bank") assumed approximately
$24 million in deposits and acquired certain assets from the First National Bank
Northwest Florida. The deposits and assets were associated with two First
National locations in Fort Walton Beach, Florida. Whitney recognized an
intangible asset for the value of the deposit relationships acquired of $2.1
million that will be amortized over an estimated life of 8 years. No loans or
other noncash financial assets were exchanged in this transaction.
5
NOTE 3 - OTHER ASSETS AND OTHER LIABILITIES
The more significant components of other assets and other liabilities
at June 30, 2004 and December 31, 2003 were as follows:
Other assets
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June 30 December 31
(dollars in thousands) 2004 2003
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Net deferred income tax asset $37,555 $21,190
Low-income housing tax credit fund investments 19,022 16,199
Cash surrender value of life insurance 8,818 8,665
Prepaid pension asset 4,527 7,230
Prepaid expenses 7,961 4,288
Foreclosed assets and surplus property 2,450 3,490
Miscellaneous investments, receivables and other assets 19,036 21,096
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Total other assets $99,369 $82,158
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Other liabilities
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June 30 December 31
(dollars in thousands) 2004 2003
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Trade date securities payable $ 580 $100,925
Accrued taxes and expenses 13,682 12,319
Dividends payable 13,466 13,344
Obligation for postretirement benefits other than pensions 10,061 9,379
Miscellaneous payables, deferred income and other liabilities 17,769 15,574
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Total other liabilities $55,558 $151,541
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NOTE 4 - EMPLOYEE BENEFIT PLANS
Retirement Plans
Whitney has a noncontributory qualified defined benefit pension plan
covering substantially all of its employees. The Company contributed $8 million
to the plan in 2003. Based on currently available information, the Company does
not anticipate making a contribution during 2004. The components of net pension
expense were as follows:
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Three Months Ended Six Months Ended
June 30 June 30
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(dollars in thousands) 2004 2003 2004 2003
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Service cost for benefits during the period $1,698 $1,637 $3,256 $2,656
Interest cost on benefit obligation 1,662 1,520 3,278 3,015
Expected return on plan assets (2,013) (1,655) (4,013) (3,310)
Amortization of:
Unrecognized net actuarial losses 126 143 216 204
Unrecognized net implementation asset - (124) - (142)
Unrecognized prior service cost (27) (27) (54) (54)
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Net pension expense $1,446 $1,494 $2,683 $2,369
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6
Whitney also has an unfunded nonqualified defined benefit pension plan
that provides retirement benefits to designated executive officers. The net
pension expense for nonqualified plan benefits was approximately $.2 million for
the second quarter and $.4 million year-to-date in both 2004 and 2003.
Health and Welfare Plans
Whitney maintains health care and life insurance benefit plans for
retirees and their eligible dependents. Participant contributions are required
under the health plan. The Company funds its obligations under these plans as
contractual payments come due to health care organizations and insurance
companies.
Whitney recognized a net periodic expense for postretirement benefits
of approximately $.5 million in the second quarter of 2004 and $.7 million in
the second quarter of 2003. Year-to-date expense through June 30 was $1.1
million in 2004 and $.9 million in 2003. None of the individual components of
the net periodic expense was individually significant for any period.
As discussed in Note 9, Whitney elected to defer recognizing the impact
of the Medicare Prescription Drug, Improvement and Modernization Act of 2003
("Medicare Drug Act") in its accounting for postretirement health benefits,
pending authoritative guidance on the accounting for the federal subsidy
introduced by the act. This guidance has been issued and will be implemented
effective with the quarter ending September 30, 2004. The impact will likely be
immaterial.
NOTE 5 - STOCK-BASED INCENTIVE COMPENSATION
Whitney maintains incentive compensation plans that incorporate
stock-based compensation. The plans for both key employees and directors have
been approved by the Company's shareholders, including the new long-term
incentive plan for key employees that was approved at the Company's annual
meeting in April 2004. The new employee plan provides for substantially the same
types of stock-based compensation awards as earlier plans and authorizes the
issuance of up to 2,600,000 Whitney common shares, plus any unused authorization
from the most recent prior plan, to satisfy awards.
During June 2004, annual stock-based compensation awards were made
under each of these plans as follows:
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Stock Grant Stock Option Award
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(dollars in thousands, except per share data) Shares Market Value Shares Exercise Price
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Long-term incentive plan for key employees 163,750 $7,089 442,825 $43.29
Directors' compensation plan 7,200 $322 48,000 $44.75
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Employees forfeit their stock grants if they terminate employment
within three years of the award date and during this period they cannot transfer
or otherwise dispose of the shares received. In addition, the employee grants
can be adjusted based on Whitney's financial performance over the restriction
period in relation to that of a designated peer group. Depending on the
performance adjustment, the actual number of shares that vest can range from 0%
to 200% of the initial grants. The directors' shares are awarded without any
significant restrictions and are not subject to adjustment.
Compensation expense for stock grants, initially measured as the market
value of the shares awarded on the grant date, is recognized ratably over the
restriction period, if any.
7
The expense for employee grants is re-measured periodically to reflect changes
in the expected performance adjustment and in the market value of the Company's
stock, and any difference from the previous measurement is recognized
prospectively.
The stock options are fixed awards. The exercise price for options is
set at the market price for Whitney's stock on the grant date. All options are
fully exercisable after six months from the grant date and expire after ten
years. Unexercised options can expire earlier if a recipient terminates service
with the Company.
Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation," as amended by SFAS No. 148,
established a fair value-based method of accounting for stock-based
compensation. As provided for in SFAS No. 123, however, the Company elected to
continue to follow Accounting Principles Board Opinion ("APB") No. 25 and
related interpretations to measure and recognize stock-based incentive
compensation expense. Under this Opinion, Whitney recognizes no compensation
expense with respect to fixed awards of stock options. The Company grants
options with an exercise price equal to the stock's market price. As such, the
options had no intrinsic value on the award date, which is also the measurement
date for compensation expense under APB No. 25. The compensation expense
recognized under APB No. 25 for the Company's performance-based restricted stock
grants reflects their fair value, but the timing of when fair value is
determined and the method of allocating expense over time differ in certain
respects from what is required under SFAS No. 123, as amended.
The following shows the effect on net income and earnings per share if
Whitney had applied the provisions of SFAS No. 123 to measure and recognize
stock-based compensation expense for all awards.
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Three Months Ended June 30 Six Months Ended June 30
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(dollars in thousands, except per share data) 2004 2003 2004 2003
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Net income $21,903 $23,750 $48,061 $47,220
Stock-based compensation expense included
in net income, net of related tax effects 1,512 797 2,981 1,843
Stock-based compensation expense determined
under SFAS No. 123, net of related tax effects (5,133) (3,373) (6,241) (4,385)
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Pro forma net income $18,282 $21,174 $44,801 $44,678
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Earnings per share:
Basic - as reported $.54 $.60 $1.19 $1.19
Basic - pro forma .45 .53 1.11 1.12
Diluted - as reported .53 .59 1.17 1.17
Diluted - pro forma .45 .52 1.09 1.11
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Weighted-average fair value of options awarded $9.96 $6.55 $9.96 $6.55
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The fair values of the stock options were estimated as of the grant
dates using the Black-Scholes option-pricing model. The estimated option value
totaled $4.9 million for the 2004 awards and $3.0 million for the 2003 awards.
If expensed, the after-tax impact would have been to reduce net income by $4.2
million in 2004 and $2.6 million in 2003. The full impact is reflected in both
the quarterly and year-to-date pro forma information in the table above. The
Company made the following significant assumptions in applying the
option-pricing model: (a) a weighted-average expected annualized volatility for
Whitney's common stock of 24.97% in 2004
8
and 25.55% in 2003; (b) a weighted-average option life of 6.86 years in 2004 and
7.00 years in 2003; (c) an expected annual dividend yield of 3.23% in 2004 and
3.56% in 2003; and (d) a weighted-average risk-free interest rate of 4.44% in
2004 and 3.01% in 2003.
NOTE 6 - CONTINGENCIES
The Company and its subsidiaries are parties to various legal
proceedings arising in the ordinary course of business. After reviewing pending
and threatened actions with legal counsel, management believes that the ultimate
resolution of these actions will not have a material effect on Whitney's
financial condition, results of operations or cash flows.
NOTE 7 - OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS AND DERIVATIVES
To meet the financing needs of its customers, the Bank issues financial
instruments which represent conditional obligations that are not recognized on
the consolidated balance sheets. These financial instruments include commitments
to extend credit under loan facilities and guarantees under standby and other
letters of credit. Such instruments expose the Bank to varying degrees of credit
and interest rate risk in much the same way as funded loans.
Commitments under loan facilities, including credit card and related
lines, obligate the Bank to make loans to customers as long as there is no
violation of the conditions established in the underlying contracts. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Substantially all of the letters of credit are standby
agreements that obligate the Bank to fulfill a customer's financial commitments
to a third party if the customer is unable to perform. The Bank issues standby
letters of credit primarily to provide credit enhancement to its customers'
commercial or public financing arrangements and to help customers demonstrate
the financial capacity required to obtain essential goods and services. The
majority of standby letters of credit at June 30, 2004 have a term of one year
or less.
The Bank's exposure to credit losses from these financial instruments
is represented by their contractual amounts. Because loan commitments and
letters of credit may, and many times do, expire without being drawn upon,
however, the contractual amounts should not be understood to represent expected
future funding requirements. The Bank follows its standard credit policies in
making loan commitments and financial guarantees and requires collateral support
if warranted. The collateral required could include cash instruments, marketable
securities, accounts receivable, inventory, property, plant and equipment, and
income-producing commercial property.
A summary of off-balance-sheet financial instruments follows:
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June 30 December 31
(dollars in thousands) 2004 2003
- --------------------------------------------------------------------------------
Commitments to extend credit - revolving $1,479,370 $1,410,555
Commitments to extend credit - nonrevolving 386,241 355,076
Credit card and related lines 417,179 388,902
Standby and other letters of credit 331,300 292,558
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During the latter half of 2003 the Bank began using interest rate swaps
to bring the market risk associated with the longer-duration fixed-rate loans
desired by certain customers in line with Whitney's asset/liability management
objectives. At June 30, 2004, only one swap with a
9
remaining notional amount of approximately $22 million had been executed,
essentially converting the related fixed-rate commercial loan into a
floating-rate loan. The swap was structured to be a highly effective hedge
against changes in the loan's fair value that result from changes in the
benchmark interest rate and qualifies as a fair value hedge. There was no
ineffectiveness recognized in earnings during the first six months of 2004.
NOTE 8 - EARNINGS PER SHARE
The components used to calculate basic and diluted earnings per share
were as follows:
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Three Months Ended June 30 Six Months Ended June 30
- ---------------------------------------------------------------------------------------------------------------
(dollars in thousands, except per share data) 2004 2003 2004 2003
- ---------------------------------------------------------------------------------------------------------------
Numerator:
Net income $21,903 $23,750 $48,061 $47,220
Effect of dilutive securities - - - -
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Numerator for diluted earnings per share $21,903 $23,750 $48,061 $47,220
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Denominator:
Weighted-average shares outstanding 40,304,997 39,867,549 40,248,221 39,826,668
Effect of potentially dilutive securities
and contingently issuable shares 673,583 492,521 671,706 461,942
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Denominator for diluted earnings per share 40,978,580 40,360,070 40,919,927 40,288,610
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Earnings per share:
Basic $.54 $.60 $1.19 $1.19
Diluted .53 .59 1.17 1.17
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Antidilutive stock options - 870,802 - 728,355
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NOTE 9 - ACCOUNTING PRONOUNCEMENTS
In December 2003, the Financial Accounting Standards Board ("FASB")
issued a revised version of SFAS No. 132. This revised statement added to the
annual disclosures about pensions and other postretirement benefits that were
required by the original statement issued in 1997. With certain limited
exceptions, the added annual disclosures were effective as of December 31, 2003.
The revised statement also introduced a requirement for certain interim
disclosures that are included in Note 4. Both the original and the revised
statements address disclosure only and do not address accounting measurement or
recognition for benefit obligations.
Also related to postretirement benefits, the FASB issued staff
positions in January and May of 2004 in response to certain accounting issues
raised by the enactment of the Medicare Drug Act. The most significant issue
concerned how and when to account for the federal subsidy to plan sponsors that
is provided for in the act. As allowed for in the initial staff position,
Whitney elected to defer recognizing the impact of this new legislation in its
accounting for postretirement health benefits until authoritative guidance on
the accounting for the federal subsidy was issued. The staff position issued in
May provided the authoritative guidance that is effective for the Company's
third quarter of 2004. The impact of applying this guidance will likely be
immaterial.
The SEC issued Staff Accounting Bulletin ("SAB") 105 in early March
2004 to communicate its view that the fair value recognized for a loan
commitment accounted for as a derivative instrument should not incorporate
expected cash flows related to servicing. The provisions of SAB 105 must be
applied to loan commitments entered into after March 31, 2004.
10
Applying the guidance in SAB 105 did not impact Whitney's financial condition or
results of operations.
The Emerging Issues Task Force reached a consensus in March 2004 on a
model to be used to determine if the impairment of certain debt and equity
securities and cost method investments should be considered other than temporary
and an impairment loss recognized. The model is to be applied prospectively in
interim or annual reporting periods beginning after June 15, 2004. Whitney does
not expect the application of this model to have a material impact on its
financial condition or results of operations.
In December 2003, the American Institute of Certified Public
Accountants issued Statement of Position ("SOP") 03-3 to address the accounting
for differences between contractual cash flows and expected cash flows from
loans or debt securities acquired in a transfer if those differences are
attributable, at least in part, to credit quality. This SOP prohibits the
"carrying over" or creation of valuation allowances in the initial accounting
for all acquired loans that are within its scope. It also specifies how these
differences impact the yield subsequently recognized on these loans. SOP 03-3 is
effective for loans acquired in fiscal years beginning after December 31, 2004
and does not change the accounting for loans previously acquired.
11
WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(Unaudited)
- --------------------------------------------------------------------------------------------------------------------------
Six Months Ended
Second First Second June 30
Quarter Quarter Quarter -------------------------
(dollars in thousands, except per share data) 2004 2004 2003 2004 2003
- --------------------------------------------------------------------------------------------------------------------------
QUARTER-END BALANCE SHEET DATA
Total assets $7,789,126 $7,855,897 $7,284,531 $7,789,126 $7,284,531
Earning assets 7,221,846 7,333,849 6,714,784 7,221,846 6,714,784
Loans 5,139,549 4,984,165 4,628,728 5,139,549 4,628,728
Investment securities 2,063,826 2,232,674 2,009,226 2,063,826 2,009,226
Deposits 6,340,782 6,298,390 5,960,436 6,340,782 5,960,436
Shareholders' equity 842,724 871,791 825,610 842,724 825,610
- --------------------------------------------------------------------------------------------------------------------------
AVERAGE BALANCE SHEET DATA
Total assets $7,782,108 $7,722,135 $7,191,244 $7,752,122 $7,133,044
Earning assets 7,253,932 7,175,034 6,686,717 7,214,481 6,618,877
Loans 5,069,304 4,906,710 4,564,160 4,988,007 4,513,287
Investment securities 2,149,211 2,245,626 1,997,090 2,197,417 1,986,387
Deposits 6,248,685 6,119,857 5,898,219 6,184,271 5,830,662
Shareholders' equity 862,016 855,476 824,584 858,746 818,002
- --------------------------------------------------------------------------------------------------------------------------
INCOME STATEMENT DATA
Interest income $85,665 $86,540 $84,385 $172,205 $170,422
Interest expense 9,306 9,350 11,863 18,656 25,106
Net interest income 76,359 77,190 72,522 153,549 145,316
Net interest income (TE) 77,869 78,671 73,857 156,540 148,073
Provision for loan losses 2,000 (2,000) - - 500
Noninterest income 21,391 20,907 23,126 42,298 44,621
Net securities gains (losses) in noninterest income - - - - -
Noninterest expense 64,272 62,026 60,645 126,298 119,939
Net income 21,903 26,158 23,750 48,061 47,220
- --------------------------------------------------------------------------------------------------------------------------
KEY RATIOS
Return on average assets 1.13% 1.36% 1.32% 1.25% 1.33%
Return on average shareholders' equity 10.22 12.30 11.55 11.25 11.64
Net interest margin 4.31 4.40 4.43 4.36 4.50
Average loans to average deposits 81.13 80.18 77.38 80.66 77.41
Efficiency ratio 64.75 62.29 62.53 63.52 62.24
Allowance for loan losses to loans 1.10 1.16 1.43 1.10 1.43
Nonperforming assets to loans plus foreclosed assets
and surplus property .68 .56 .87 .68 .87
Net annualized charge-offs (recoveries) to average loans .25 (.01) (.03) .12 .02
Average shareholders' equity to average assets 11.08 11.08 11.47 11.08 11.47
Shareholders' equity to total assets 10.82 11.10 11.33 10.82 11.33
Leverage ratio 10.03 9.96 9.91 10.03 9.91
- --------------------------------------------------------------------------------------------------------------------------
COMMON SHARE DATA
Earnings Per Share
Basic $.54 $.65 $.60 $1.19 $1.19
Diluted .53 .64 .59 1.17 1.17
Dividends
Cash dividends per share $.33 $.33 $.30 $.66 $.60
Dividend payout ratio 61.48% 51.20% 50.93% 55.88% 51.11%
Book Value Per Share $20.65 $21.48 $20.48 $20.65 $20.48
Trading Data
High price $44.79 $44.00 $34.46 $44.79 $34.55
Low price 39.52 39.72 31.44 39.52 30.75
End-of-period closing price 44.67 41.74 32.00 44.67 32.00
Trading volume 3,328,548 3,488,599 8,201,397 6,817,147 14,546,277
Average Shares Outstanding
Basic 40,304,997 40,191,444 39,867,549 40,248,221 39,826,668
Diluted 40,978,580 40,861,274 40,360,070 40,919,927 40,288,610
- --------------------------------------------------------------------------------------------------------------------------
Tax-equivalent (TE) amounts are calculated using a marginal federal income tax rate of 35%.
The efficiency ratio is noninterest expense to total net interest (TE) and noninterest income,
excluding securities transactions.
12
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The purpose of this discussion and analysis is to focus on significant
changes in the financial condition of Whitney Holding Corporation and its
subsidiaries (the "Company" or "Whitney") from December 31, 2003 to June 30,
2004 and on their results of operations during the second quarters of 2004 and
2003 and during the six-month periods through June 30 in each year. Nearly all
of the Company's operations are contained in its banking subsidiary, Whitney
National Bank (the "Bank"). This discussion and analysis is intended to
highlight and supplement information presented elsewhere in this quarterly
report on Form 10-Q, particularly the consolidated financial statements and
related notes in Item 1. This discussion and analysis should be read in
conjunction with the Company's 2003 annual report on Form 10-K.
Certain financial information for prior periods has been reclassified
to conform to the current presentation.
FORWARD-LOOKING STATEMENTS
This discussion contains "forward-looking statements" within the
meaning of section 27A of the Securities Act of 1933, as amended, and section
21E of the Securities Exchange Act of 1934, as amended. Such statements include,
but may not be limited to, those regarding (a) changes in the duration of the
investment portfolio with changes in market rates, (b) the future level of funds
available in the customer deposit base, (c) the results of net interest income
simulations run by the Company to measure interest rate sensitivity, (d) the
performance of Whitney's net interest income and net interest margin assuming
certain future conditions, (e) possible future levels of income from secondary
mortgage market operations, and (f) expected increases in certain categories of
noninterest expense.
Forward-looking statements, which Whitney makes in good faith, are
based on numerous assumptions, certain of which may be referred to specifically
in connection with a particular statement. Some of the more important
assumptions include:
o expectations about overall economic strength and the performance
of the economies in Whitney's market area,
o expectations about the movement of interest rates, including
actions that may be taken by the Federal Reserve Board in response
to changing economic conditions,
o reliance on existing or anticipated changes in laws or regulations
affecting the activities of the banking industry and other
financial service providers, and
o expectations regarding the nature and level of competition,
changes in customer behavior and preferences, and Whitney's
ability to execute its plans to respond effectively.
Because it is uncertain whether future conditions and events will
confirm these assumptions, there is a risk that Whitney's future results will
differ materially from what is stated in or implied by such forward-looking
statements. Whitney cautions the reader to consider this risk.
Whitney undertakes no obligation to update or revise any
forward-looking statement included in this discussion, whether as a result of
new information, future events or developments, or for any other reason.
13
OVERVIEW
Whitney earned $21.9 million for the quarter ended June 30, 2004, an 8%
decrease compared to net income of $23.8 million reported for the second quarter
of 2003. Per share earnings were $.54 per basic share and $.53 per diluted share
in 2004's second quarter, down 10% from $.60 and $.59, respectively, in the
year-earlier period. Year-to-date earnings of $48.1 million in 2004 were up 2%
from the comparable period in 2003. Per share earnings were unchanged at $1.19
per basic share and $1.17 per diluted share for the six months ended June 30,
2004 and 2003.
Selected second quarter highlights follow:
o Earning assets in the second quarter of 2004 were on average 8%
higher than in 2003's second quarter. Average loans have grown
steadily throughout 2003 and the first half of 2004 and were up
11% in the current year's second quarter compared to the
year-earlier quarter. Average investment securities increased 8%
from the second quarter of 2003 to 2004's second quarter,
reflecting the temporary strategy management executed in late 2003
to invest in advance of paydowns on the securities portfolio
expected in 2004. Both deposit growth and additional short-term
borrowings helped fund the growth in earning assets, but the
overall mix of funding sources has remained relatively stable.
o Whitney's net interest income (TE) for the second quarter of 2004
increased $4.0 million, or 5%, compared to the second quarter of
2003, driven by the growth in average earning assets. The net
interest margin (TE) was 4.31% for the second quarter of 2004,
which reflects moderate compression relative to the year-earlier
period that partly offset the favorable impact of earning asset
growth.
o Whitney provided $2 million for loan losses during the second
quarter of 2004. There had been a $2 million negative provision in
2004's first quarter and no provision in the second quarter of
2003. Net-charge offs totaled $3.2 million in the second quarter
of 2004, compared to small net recoveries in both the first
quarter of 2004 and the second quarter of 2003. Whitney's credit
quality had both favorable and unfavorable movement during the
most recent quarter. An unexpected development with one credit was
the main factor behind a $7 million increase in nonperforming
loans from the end of 2004's first quarter, but the total of all
loans criticized through the internal credit risk classification
process at June 30, 2004 was down $14 million from March 31, 2004.
o Noninterest income decreased 8%, or $1.7 million, from the second
quarter of 2003. Although most major sources of noninterest income
posted stable to higher results compared to the second quarter of
2003, fee income from Whitney's secondary mortgage market
operations was down by $1.6 million as higher mortgage rates
dampened home loan production.
o Noninterest expense increased 6%, or $3.6 million, from 2003's
second quarter. Personnel expense was up 5%, or $1.8 million, in
total. Employee compensation rose 6%, with approximately half from
an increase in stock-based compensation under the management
incentive plan. Employee benefits were 3% higher.
14
FINANCIAL CONDITION
LOANS, CREDIT RISK MANAGEMENT AND ALLOWANCE FOR LOAN LOSSES
Loan Portfolio Developments
Total loans increased $257 million, or 5%, from year-end 2003 to the
end of 2004's second quarter, and were up 11%, or $511 million, from the end of
2003's second quarter. The commercial loan portfolio has shown steady growth
throughout 2003 and the first half of 2004, with strong support from new
customer development. Table 1, which is based on regulatory reporting codes for
banks, shows loan balances at June 30, 2004 and at the end of the four prior
quarters.
TABLE 1. LOANS
- -----------------------------------------------------------------------------------------------------------------
2004 2003
- -------------------------------------------------------------- -----------------------------------------------
(dollars in thousands) June 30 March 31 December 31 September 30 June 30
- -----------------------------------------------------------------------------------------------------------------
Commercial, financial and
agricultural $2,276,942 $2,203,213 $2,213,207 $2,041,629 $2,022,159
Real estate -
commercial and other 1,882,044 1,821,445 1,726,212 1,705,289 1,667,838
Real estate -
residential mortgage 658,187 628,331 619,869 610,795 615,742
Individuals 322,376 331,176 323,322 311,823 322,989
- -----------------------------------------------------------------------------------------------------------------
Total loans $5,139,549 $4,984,165 $4,882,610 $4,669,536 $4,628,728
- -----------------------------------------------------------------------------------------------------------------
The portfolio of commercial loans, other than those secured by real
property, increased 3%, or $64 million, between year-end 2003 and June 30, 2004.
This portfolio sector grew 13%, or $255 million, from the end of 2003's second
quarter. Overall the portfolio has remained diversified, with customers in a
wide range of industries, including oil and gas exploration and production,
marine transportation, wholesale and retail trade in and manufacture of various
durable and nondurable products, financial services, and professional services.
Also included in the commercial loan category are loans to individuals,
generally secured by collateral other than real estate, that are used to fund
investments in new or expanded business opportunities. There have been no major
trends or changes in the concentration mix of this portfolio category from
year-end 2003.
Loans outstanding to oil and gas industry customers totaled $522
million, or approximately 10% of total loans at the end of 2004's second
quarter, the same percentage as at year-end 2003. The total at June 30, 2004 was
up $101 million from the end of the year-earlier quarter, with more than half of
this growth in the exploration and production sector of this industry. The
largest portion of the portfolio outstanding to this industry continues to be
with businesses that provide transportation and other services and products to
support exploration and production activities.
Outstanding balances under participations in larger shared-credit loan
commitments totaled $341 million at the end of 2004's second quarter, including
approximately $155 million related to the oil and gas industry. Substantially
all such shared credits are with customers operating in Whitney's market area.
The commercial real estate portfolio, which includes construction loans
and loans secured by properties used in commercial or industrial operations,
grew 9%, or $156 million, from December 31, 2003, and has increased 13%, or $214
million, since the end of the second quarter
15
of 2003. Whitney has been able to develop new business in this highly
competitive market, including increased activity at its Houston operations, and
the Company continues to finance new projects for its well-established customer
base.
The residential mortgage loan portfolio has shown moderate growth
beginning with the fourth quarter of 2003. Whitney has increased the promotion
of tailored mortgage products that are held in the portfolio, although it
continues to sell most conventional residential mortgage loan production in the
secondary market.
Credit Risk Management and Allowance for Loan Losses
Whitney manages credit risk mainly through adherence to consistent
underwriting and loan administration standards established by its Credit Policy
Committee and through the efforts of the credit administration function to
ensure consistent application and monitoring of standards throughout the
Company. Lending officers are responsible for ongoing monitoring and the
assignment of risk ratings to individual loans based on established guidelines.
An independent credit review function reporting to the Audit Committee of the
Board of Directors assesses the accuracy of officer ratings and the timeliness
of rating changes and performs concurrent reviews of the underwriting process.
Management's evaluation of credit risk in the portfolio is ultimately
reflected in the estimate of probable losses inherent in the loan portfolio that
is reported in the Company's financial statements as the allowance for loan
losses. Changes in this ongoing evaluation over time are reflected in the
provision for loan losses charged to expense. The methodology for determining
the allowance involves significant judgment, and important factors that
influence this judgment are re-evaluated quarterly to respond to changing
conditions.
The recorded allowance encompasses three elements: (1) allowances
established for losses on criticized loans; (2) allowances based on historical
loss experience for loans with acceptable credit quality; and (3) allowances
based on general economic conditions and other qualitative risk factors internal
and external to the Company.
TABLE 2. NONPERFORMING ASSETS
- ------------------------------------------------------------------------------------------------------------------
2004 2003
- --------------------------------------------------------------------------- --------------------------------------
June March December September June
(dollars in thousands) 30 31 31 30 30
- --------------------------------------------------------------------------- --------------------------------------
Loans accounted for on a nonaccrual basis $32,560 $25,095 $26,776 $30,533 $35,622
Restructured loans 74 98 114 215 224
- ------------------------------------------------------------------------------------------------------------------
Total nonperforming loans 32,634 25,193 26,890 30,748 35,846
Foreclosed assets and surplus property 2,450 2,812 3,490 3,255 4,556
- --------------------------------------------------------------------------- --------------------------------------
Total nonperforming assets $35,084 $28,005 $30,380 $34,003 $40,402
- --------------------------------------------------------------------------- --------------------------------------
Loans 90 days past due still accruing $2,986 $3,653 $3,385 $2,725 $3,445
- --------------------------------------------------------------------------- --------------------------------------
Ratios:
Nonperforming assets to loans
plus foreclosed assets and surplus property .68% .56% .62% .73% .87%
Allowance for loan losses to
nonperforming loans 172.97 228.65 221.18 199.69 184.80
Loans 90 days past due still accruing to
loans .06 .07 .07 .06 .07
- ------------------------------------------------------------------------------------------------------------------
16
Criticized loans are credits with above-average weaknesses as
identified through the internal risk-rating process. The total of criticized
loans at June 30, 2004 was down $14 million from March 31, 2004 and had declined
$25 million from year-end 2003. There was both favorable and unfavorable
movement during the second quarter of 2004 in the various rating categories that
make up criticized loans. Loans rated as having doubtful prospects for full
repayment increased $9 million for the second quarter of 2004, to a total of $23
million. An unexpected development with one commercial credit contributed to
this increase and was the main factor behind the $7 million increase in
nonperforming loans from the end of 2004's first quarter, as shown in Table 2.
There was favorable movement, however, in loans less severely criticized, the
total of which was down $23 million for the quarter. Loans rated as having
well-defined weaknesses that would likely result in some loss if not corrected
decreased $16 million during the second quarter of 2004, to a total of $79
million at quarter end. Loans warranting special attention totaled $60 million
at the end of the current quarter, down $7 million from March 31, 2004.
The net impact of these changes in criticized loans during the second
quarter of 2004 on the determination of the allowance for loan losses was
minimal, although the allowance for criticized loans considered impaired under
SFAS No. 114 increased $4.5 million for the period. The overall allowance
determined at June 30, 2004 declined $1.1 million from the level at March 31,
2004, including a small but favorable impact from management's regular quarterly
reassessment of loss experience factors.
TABLE 3. SUMMARY OF ACTIVITY IN THE ALLOWANCE FOR LOAN LOSSES
- ---------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30 June 30
- ---------------------------------------------------------------------------------------------------------------
(dollars in thousands) 2004 2003 2004 2003
- ---------------------------------------------------------------------------------------------------------------
Balance at the beginning of period $57,603 $65,878 $59,475 $66,115
Provision for loan losses charged to operations 2,000 - - 500
Loans charged to the allowance:
Commercial, financial and agricultural (3,136) (3,677) (3,661) (4,818)
Real estate - commercial and other (86) (298) (176) (298)
Real estate - residential mortgage (188) (186) (248) (323)
Individuals (687) (689) (1,408) (1,417)
- ---------------------------------------------------------------------------------------------------------------
Total charge-offs (4,097) (4,850) (5,493) (6,856)
- ---------------------------------------------------------------------------------------------------------------
Recoveries of loans previously charged off:
Commercial, financial and agricultural 380 787 1,462 1,134
Real estate - commercial and other 29 2,358 65 2,639
Real estate - residential mortgage 35 1,667 103 1,747
Individuals 497 403 835 964
- ---------------------------------------------------------------------------------------------------------------
Total recoveries 941 5,215 2,465 6,484
- ---------------------------------------------------------------------------------------------------------------
Net (charge-offs) recoveries (3,156) 365 (3,028) (372)
- ---------------------------------------------------------------------------------------------------------------
Balance at the end of period $56,447 $66,243 $56,447 $66,243
- ---------------------------------------------------------------------------------------------------------------
Ratios:
Net annualized charge-offs (recoveries)
to average loans .25% (.03)% .12% .02%
Gross annualized charge-offs to average loans .32 .43 .22 .30
Recoveries to gross charge-offs 22.97 107.53 44.88 94.57
Allowance for loan losses to loans at period end 1.10 1.43 1.10 1.43
- ---------------------------------------------------------------------------------------------------------------
17
Table 3 compares second quarter and year-to-date activity in the
allowance for loan losses for 2004 with the comparable periods of 2003. Net
charge-offs totaled $3.2 million in the second quarter of 2004, compared to a
small net recovery of charge-offs in the second quarter of 2003. There have been
no significant trends related to industries or markets underlying the Company's
charge-off and recovery activity or the changes in its nonperforming assets.
INVESTMENT SECURITIES
The portfolio of investment securities was maintained at a fairly
stable level during most of 2003 as funds from deposit growth and reductions in
liquidity investments and other earning assets were available to support steady
loan growth. Toward the end of 2003, management executed a strategy, in response
to market conditions, to invest in advance of the paydowns and prepayments on
securities expected in 2004, and the portfolio increased $309 million during the
fourth quarter of 2003. This strategy has been unwinding as planned during the
first half of 2004, and the portfolio total of $2.06 billion at June 30, 2004
was down 10%, or $218 million, compared to December 31, 2003, with proceeds
supporting loan growth. The average investment securities portfolio in the
second quarter of 2004 was up 8%, or $152 million, from the year-earlier period.
The composition of the average portfolio and effective yields are shown in Table
7. Whitney has increased the proportion of both mortgage-backed securities and
state and municipal obligations in the portfolio, and the duration of the
portfolio increased to 3.5 years at June 30, 2004 from 3.2 years at year-end
2003 and 2.0 years at June 30, 2003. The duration of the portfolio at June 30,
2004 would extend to 3.9 years assuming an immediate 300 basis point increase in
market rates, according to the Company's asset/liability management model.
Duration provides a measure of the sensitivity of the portfolio's fair value to
changes in interest rates.
Securities available for sale constituted 89% of the total investment
portfolio at June 30, 2004. There was a net unrealized loss on this portfolio
segment of approximately $32 million at quarter end that was largely
concentrated in mortgage-backed securities. The overall unrealized loss
represented 1.7% of amortized cost. At year-end 2003, there was a net unrealized
gain of $13 million, or less than 1% of amortized cost, again largely
concentrated in mortgage-backed securities. The net unrealized gain or loss will
vary based on overall changes in market rates, shifts in the slope of the yield
curve, movement in spreads to the yield curve for different types of securities,
and changing expectations about the timing of cash flows on securities that can
be prepaid.
Securities in the Company's portfolio that are subject to possible
credit deterioration, such as obligations of states and political subdivisions,
are monitored for signs that contractual obligations may not be met and that
there may be value impairment that is other than temporary. If such impairment
is identified, the carrying amount of the security is reduced with a charge to
operations. No impairment losses were recognized in the first six months of 2004
and 2003.
The Company does not normally maintain a trading portfolio, other than
holding trading account securities for short periods while buying and selling
securities for customers. Such securities, if any, are included in other assets
in the consolidated balance sheets.
18
DEPOSITS AND BORROWINGS
Deposits at June 30, 2004 were up 3%, or $182 million, from the level
at year-end 2003. Compared to June 30, 2003, deposits were up 6%, or $380
million. Late in the second quarter of 2004, Whitney completed a branch purchase
that added approximately $24 million to deposits. Short-term and other
borrowings decreased 9%, or $55 million, from year-end 2003, but were up 22%, or
$100 million, compared to the year-earlier quarter.
TABLE 4. DEPOSITS
- -----------------------------------------------------------------------------------------------------------------
2004 2003
- -------------------------------------------------------------- -----------------------------------------------
(dollars in thousands) June 30 March 31 December 31 September 30 June 30
- -----------------------------------------------------------------------------------------------------------------
Noninterest-bearing
demand deposits $1,952,420 $1,937,379 $1,943,248 $1,815,163 $1,805,861
NOW account deposits 823,298 860,650 827,360 708,682 698,641
Money market deposits 1,343,645 1,373,574 1,396,420 1,407,112 1,387,765
Savings deposits 644,783 620,087 585,943 564,322 554,143
Other time deposits 715,594 730,186 745,478 773,321 803,837
Time deposits $100,000
and over 861,042 776,514 660,133 695,657 710,189
- -----------------------------------------------------------------------------------------------------------------
Total deposits $6,340,782 $6,298,390 $6,158,582 $5,964,257 $5,960,436
- -----------------------------------------------------------------------------------------------------------------
Sustained demand for deposit products and appropriate deposit pricing
strategies have helped maintain a favorable mix of deposits through the first
half of 2004. Table 4 presents the composition of deposits at June 30, 2004
and at the end of the previous four quarters.
Total lower-cost deposits at the end of the second quarter of 2004 were
little changed from year-end 2003, but were 7%, or $318 million, higher than the
year-earlier period, with noninterest-bearing demand deposits up 8% and deposits
in lower-cost interest-bearing products up 6%. Lower-cost deposits, which
exclude time deposits, remained approximately three-quarters of total deposits
over this period, and noninterest-bearing demand deposits were steady at close
to 30% of total deposits.
Higher-cost time deposits were up 12%, or $171 million, from year-end
2003, and increased 4%, or $63 million from the end of 2003's second quarter.
The increase in time deposits of $100,000 and over in 2004 largely reflected the
addition of competitively bid public funds, partly as an alternative to other
short-term borrowings. Public fund time deposits totaled $243 million at June
30, 2004, up $153 million from year-end 2003 and $141 million from June 30,
2003. The addition of public funds offset some rate-driven customer migration
away from time deposits, with some customers migrating to other lower-cost
products. Public funds also factored into the fluctuations in NOW deposits from
the third quarter of 2003 through the end of 2004's second quarter. The Bank
received an unexpected $80 million commercial deposit at the end of 2004's first
quarter that was held briefly in a NOW account.
SHAREHOLDERS' EQUITY AND CAPITAL ADEQUACY
Shareholders' equity totaled $843 million at June 30, 2004, which
represented an increase of $2 million from the end of 2003. During the first
half of 2004, Whitney retained $21 million of earnings, net of dividends
declared, and recognized $9 million in additional equity from activity in
stock-based compensation plans for employees and directors, including option
exercises. There was a $29 million decrease in other comprehensive income for
the first six months of 2004 quarter representing an
19
unrealized net holding loss on securities available for sale. The Company paid
56% of its earnings for the first half of 2004 in dividends, up from the 50%
payout ratio for the full year in 2003.
The ratios in Table 5 indicate that the Company remained strongly
capitalized at June 30, 2004. The increase in risk-weighted assets since
year-end 2003 resulted mainly from an increase in loans and, to a lesser degree,
from growth in off-balance-sheet obligations, such as loan facilities and
letters of credit, which are converted to assets for the risk-based capital
calculations.
TABLE 5. RISK-BASED CAPITAL AND CAPITAL RATIOS
- --------------------------------------------------------------------------------
June 30 December 31
(dollars in thousands) 2004 2003
- --------------------------------------------------------------------------------
Tier 1 regulatory capital $771,203 $739,236
Tier 2 regulatory capital 56,447 59,475
- --------------------------------------------------------------------------------
Total regulatory capital $827,650 $798,711
- --------------------------------------------------------------------------------
Risk-weighted assets $6,066,745 $5,777,094
- --------------------------------------------------------------------------------
Ratios
Leverage (Tier 1 capital to average assets) 10.03% 10.13%
Tier 1 capital to risk-weighted assets 12.71 12.80
Total capital to risk-weighted assets 13.64 13.83
Shareholders' equity to total assets 10.82 10.84
- --------------------------------------------------------------------------------
The regulatory capital ratios for Whitney National Bank exceed the
minimum required ratios, and the Bank has been categorized as "well-capitalized"
in the most recent notice received from its primary regulatory agency.
LIQUIDITY MANAGEMENT AND CONTRACTUAL OBLIGATIONS
Liquidity Management
The objective of liquidity management is to ensure that funds are
available to meet cash flow requirements of depositors and borrowers, while at
the same time meeting the operating, capital and strategic cash flow needs of
the Company and the Bank. Whitney develops its liquidity management strategies
and measures and monitors liquidity risk as part of its overall asset/liability
management process.
On the liability side, liquidity management focuses on growing the base
of core deposits at competitive rates, including the use of treasury-management
products for commercial customers, while at the same time ensuring access to
economical wholesale funding sources. The section above on Deposits and
Borrowings discusses changes in these liability funding sources in the second
quarter of 2004. Liquidity management on the asset side primarily addresses the
composition and maturity structure of the loan and investment securities
portfolios and their impact on the Company's ability to generate cash flows.
Cash generated from operations is another important source of funds to
meet liquidity needs. The consolidated statements of cash flows present
operating cash flows and summarize all significant sources and uses of funds for
the first six months of 2004 and 2003.
As noted earlier, continued high levels of funds available in the
Bank's customer deposit base helped support increased loan production and
overall growth in earning assets during 2003 and into the second quarter of
2004. Management anticipates that some of this funds availability will moderate
with increased economic activity, renewed confidence in the capital markets and
20
rising market interest rates and has factored this possibility into its
liquidity projections and modeling parameters.
At June 30, 2004, Whitney Holding Corporation had approximately $165
million in cash and demand notes from the Bank available to provide liquidity
for acquisitions, dividend payments to shareholders, or other corporate uses,
before consideration of any future dividends that may be received from the Bank.
In March 2004, Whitney announced an agreement to acquire Madison BancShares,
Inc. for stock and cash in a transaction scheduled to close in the third quarter
of 2004. The cash component of the purchase price will total approximately $23
million and will be funded from the holding company's existing liquidity
sources.
Contractual Obligations
Payments due from the Company and the Bank under specified long-term
and certain other binding contractual obligations were scheduled in Whitney's
annual report on 10-K for the year ended December 31, 2003. The most significant
obligations, other than obligations under deposit contracts and short-term
borrowings, were for operating leases for banking facilities. The Company and
the Bank have no significant long-term borrowings. There have been no material
changes in contractual obligations from year-end 2003 through the end of 2004's
second quarter.
OFF-BALANCE SHEET ARRANGEMENTS
As a normal part of it business, the Company enters into arrangements
that create financial obligations that are not recognized, wholly or in part, in
the consolidated financial statements. The most significant off-balance-sheet
obligations are the Bank's commitments under traditional credit-related
financial instruments. Table 6 schedules these commitments as of June 30, 2004
by the periods in which they expire. Commitments under credit card and personal
credit lines generally have no stated maturity.
TABLE 6. CREDIT-RELATED COMMITMENTS
- ----------------------------------------------------------------------------------------------------------------
(dollars in thousands) Commitments expiring by period from June 30, 2004
- ----------------------------------------------------------------------------------------------------------------
Less than 1 - 3 3 - 5 More than
Total 1 year years years 5 years
- ----------------------------------------------------------------------------------------------------------------
Loan commitments - revolving $1,479,370 $1,132,480 $302,299 $43,918 $673
Loan commitments - nonrevolving 386,241 184,324 201,917 - -
Credit card and personal credit lines 417,179 417,179 - - -
Standby and other letters of credit 331,300 261,770 69,530 - -
- ----------------------------------------------------------------------------------------------------------------
Total $2,614,090 $1,995,753 $573,746 $43,918 $673
- ----------------------------------------------------------------------------------------------------------------
Revolving loan commitments are issued to support commercial activities.
The availability of funds under revolving loan commitments generally depends on
whether the borrower continues to meet credit standards established in the
underlying contract. Many such commitments are used only partially or not at all
before they expire. Credit card and personal credit lines are generally subject
to cancellation if the borrower's credit quality deteriorates, and many lines
remain partly or wholly unused. Unfunded balances on revolving loan commitments
and credit lines should not be used to project actual future liquidity
requirements. Nonrevolving loan commitments are issued mainly to provide
financing for the acquisition and construction of real property, both commercial
and residential, although many are not expected to lead to permanent financing
by the Bank. Expectations about the level of draws under all credit-related
21
commitments are incorporated into the Company's liquidity and asset/liability
management models.
Substantially all of the letters of credit are standby agreements that
obligate the Bank to fulfill a customer's financial commitments to a third party
if the customer is unable to perform. The Bank issues standby letters of credit
primarily to provide credit enhancement to its customers' other commercial or
public financing arrangements and to help them demonstrate financial capacity to
vendors. The Company has historically had minimal calls to perform under standby
agreements.
ASSET/LIABILITY MANAGEMENT
The objective of the Company's asset/liability management is to
implement strategies for the funding and deployment of its financial resources
that are expected to maximize soundness and profitability over time at
acceptable levels of risk.
Interest rate sensitivity is the potential impact of changing rate
environments on both net interest income and cash flows. The Company measures
interest rate sensitivity primarily by running net interest income simulations.
The net interest income simulations run at the end of 2004's second quarter
indicated that Whitney continued to be moderately asset sensitive over the near
term, similar to its position at year-end 2003. Based on these simulations,
annual net interest income (TE) would be expected to increase $17.8 million, or
5.6%, and decrease $18.9 million, or 6.0%, if interest rates instantaneously
increased or decreased, respectively, from current rates by 100 basis points.
These changes are measured against the results of a base simulation run that
uses current growth forecasts and assumes a stable rate environment and
structure. The comparable simulation run at year-end 2003 produced results that
ranged from a positive impact on net interest income (TE) of $14.7 million, or
4.7%, to a negative impact of $15.4 million, or 5.0%. The actual impact that
changes in interest rates have on net interest income will depend on many
factors. These include Whitney's ability to achieve growth in earning assets and
maintain a desired mix of earning assets and interest-bearing liabilities, the
actual timing when assets and liabilities reprice, the magnitude of interest
rate changes, interest rate spreads and the level of success of asset/liability
management strategies implemented.
22
RESULTS OF OPERATIONS
NET INTEREST INCOME
Whitney's net interest income (TE) increased $4.0 million, or 5%,
compared to the second quarter of 2003. The favorable impact of 8% growth in
earning assets was partly offset by moderate compression in the net interest
margin (TE) relative to the year-earlier period. Second quarter net interest
income (TE) in 2004 was $.8 million, or 1%, lower than in the current year's
first quarter.
As noted earlier, Whitney is moderately asset sensitive, which implies
that its net interest margin would tend to widen in a rising rate environment,
holding other factors constant, but tend to compress in a declining rate
environment. The net interest margin (TE) is net interest income (TE) as a
percent of average earning assets. Whitney's net interest margin (TE) was 4.31%
in 2004's second quarter, down 12 basis points from the year-earlier quarter and
9 basis points below the 4.40% margin in the first quarter of 2004. Tables 7 and
8 show the components of changes in the Company's net interest income (TE) and
net interest margin (TE).
The overall yield on average earning assets for the second quarter of
2004 was 31 basis points lower than in the year-earlier period, mainly
reflecting a 51 basis point decline in the effective yield on the loan
portfolio. Loan yields were also down 13 basis points between the first and
second quarters of 2004, and the yield on average assets declined 10 basis
points between these periods. A further shift to variable pricing within the
loan portfolio and the concentration of loan growth in high-quality commercial
credits contributed to the decline in comparative loan yields, but also
positioned the portfolio for more rapid yield improvement with rising short-term
market interest rates. The yield on the largely fixed-rate investment portfolio
is less responsive to changes in market rates and the overall investment
portfolio yield has fluctuated within a narrow range from the second quarter of
2003 through the current year's second quarter. The investment portfolio yield
in 2004 has benefited from the strategy executed in late 2003 to invest in
advance of expected paydowns and prepayments on securities, which increased the
proportion of mortgage-backed securities in the portfolio.
No significant shift in asset mix accompanied the overall growth in
average earning assets compared to the second quarter of 2003. Average loans,
including loans held for sale, increased to 70% of earning assets from 69% in
the second quarter of 2003. Investment securities were steady at 30% of average
earning assets.
Funding costs for the current year's second quarter were down 19 basis
points compared to the second quarter of 2003. The cost of interest-bearing
deposits decreased 33 basis points, with the rate on time deposits down 50 basis
points and the rate on other interest-bearing deposits lower by 21 basis points.
The rate on short-term borrowings, however, was up 11 basis points in 2004's
second quarter compared to the same period in 2003. Funding costs in the second
quarter of 2004 for both deposits and short-term borrowings were little changed
compared to 2004's first quarter.
23
TABLE 7. SUMMARY OF AVERAGE BALANCE SHEETS, NET INTEREST INCOME(TE)(a) AND INTEREST RATES
- --------------------------------------------------------------------------------------------------------------------------
(dollars in thousands) Second Quarter 2004 First Quarter 2004 Second Quarter 2003
- --------------------------------------------------------------------------------------------------------------------------
Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
- --------------------------------------------------------------------------------------------------------------------------
ASSETS
EARNING ASSETS
Loans (TE)(b) (c) $5,086,100 $63,729 5.04% $4,917,213 $63,193 5.17% $4,615,620 $63,844 5.55%
- --------------------------------------------------------------------------------------------------------------------------
Mortgage-backed securities 1,397,338 15,087 4.32 1,437,831 15,913 4.43 1,198,002 12,417 4.15
U.S. agency securities 346,237 2,822 3.26 385,251 3,333 3.46 368,823 3,722 4.04
U.S. Treasury securities 131,146 1,364 4.18 158,036 1,549 3.94 197,629 1,872 3.80
Obligations of states and political
subdivisions (TE) 240,969 3,842 6.38 229,439 3,711 6.47 186,749 3,147 6.74
Other securities 33,521 285 3.40 35,069 292 3.33 45,887 486 4.24
- --------------------------------------------------------------------------------------------------------------------------
Total investment securities 2,149,211 23,400 4.36 2,245,626 24,798 4.42 1,997,090 21,644 4.34
- --------------------------------------------------------------------------------------------------------------------------
Federal funds sold and
short-term investments 18,621 46 .99 12,195 30 .99 74,007 232 1.25
- --------------------------------------------------------------------------------------------------------------------------
Total earning assets 7,253,932 $87,175 4.83% 7,175,034 $88,021 4.93% 6,686,717 $85,720 5.14%
- --------------------------------------------------------------------------------------------------------------------------
NONEARNING ASSETS
Other assets 585,274 606,708 571,934
Allowance for loan losses (57,098) (59,607) (67,407)
- --------------------------------------------------------------------------------------------------------------------------
Total assets $7,782,108 $7,722,135 $7,191,244
- --------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND
SHAREHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES
NOW account deposits $ 793,746 $ 697 .35% $ 791,812 $ 668 .34% $ 698,456 $ 820 .47%
Money market deposits 1,363,687 2,212 .65 1,409,981 2,292 .65 1,403,139 3,143 .90
Savings deposits 634,595 489 .31 602,763 439 .29 553,511 655 .47
Other time deposits 720,801 2,290 1.28 738,464 2,455 1.34 813,893 3,793 1.87
Time deposits $100,000 and over 791,246 2,372 1.21 698,795 2,116 1.22 689,112 2,740 1.60
- --------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 4,304,075 8,060 .75 4,241,815 7,970 .76 4,158,111 11,151 1.08
- --------------------------------------------------------------------------------------------------------------------------
Short-term and other borrowings 616,644 1,246 .81 692,076 1,380 .80 408,410 712 .70
- --------------------------------------------------------------------------------------------------------------------------
Total interest-bearing
liabilities 4,920,719 $9,306 .76% 4,933,891 $9,350 .76% 4,566,521 $11,863 1.04%
- --------------------------------------------------------------------------------------------------------------------------
NONINTEREST-BEARING
LIABILITIES AND
SHAREHOLDERS' EQUITY
Demand deposits 1,944,610 1,878,042 1,740,108
Other liabilities 54,763 54,726 60,031
Shareholders' equity 862,016 855,476 824,584
- --------------------------------------------------------------------------------------------------------------------------
Total liabilities and
shareholders' equity $7,782,108 $7,722,135 $7,191,244
- --------------------------------------------------------------------------------------------------------------------------
Net interest income and
margin (TE) $77,869 4.31% $78,671 4.40% $73,857 4.43%
Net earning assets and spread $2,333,213 4.07% $2,241,143 4.17% $2,120,196 4.10%
Interest cost of funding earning
assets .52% .53% .71%
- --------------------------------------------------------------------------------------------------------------------------
(a) Tax-equivalent (TE) amounts are calculated using a marginal federal income tax rate of 35%.
(b) Includes loans held for sale.
(c) Average balance includes nonaccruing loans of $26,684, $26,095 and $39,189, respectively, in the second and
first quarters of 2004 and the second quarter of 2003.
24
TABLE 7. SUMMARY OF AVERAGE BALANCE SHEETS, NET INTEREST INCOME(TE)(a) AND INTEREST RATES (continued)
- ---------------------------------------------------------------------------------------------------------------------------
Six Months Ended Six Months Ended
(dollars in thousands) June 30, 2004 June 30, 2003
- ---------------------------------------------------------------------------------------------------------------------------
Average Average
Balance Interest Rate Balance Interest Rate
- ---------------------------------------------------------------------------------------------------------------------------
ASSETS
EARNING ASSETS
Loans (TE)(b),(c) $5,001,656 $126,922 5.10% $4,568,636 $127,899 5.64%
- ---------------------------------------------------------------------------------------------------------------------------
Mortgage-backed securities 1,417,584 31,000 4.37 1,180,826 26,105 4.42
U.S. agency securities 365,744 6,155 3.37 380,342 7,874 4.14
U.S. Treasury securities 144,591 2,913 4.05 187,338 3,485 3.75
Obligations of states and political
subdivisions (TE) 235,203 7,553 6.42 189,186 6,394 6.76
Other securities 34,295 577 3.36 48,695 1,029 4.23
- ---------------------------------------------------------------------------------------------------------------------------
Total investment in securities 2,197,417 48,198 4.39 1,986,387 44,887 4.52
- ---------------------------------------------------------------------------------------------------------------------------
Federal funds sold and
short-term investments 15,408 76 .99 63,854 393 1.24
- ---------------------------------------------------------------------------------------------------------------------------
Total earning assets 7,214,481 $175,196 4.88% 6,618,877 $173,179 5.26%
- ---------------------------------------------------------------------------------------------------------------------------
NONEARNING ASSETS
Other assets 595,993 581,169
Allowance for loan losses (58,352) (67,002)
- ---------------------------------------------------------------------------------------------------------------------------
Total assets $7,752,122 $7,133,044
- ---------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND
SHAREHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES
NOW account deposits $ 792,778 $1,365 .35% $ 693,045 $1,713 .50%
Money market deposits 1,386,835 4,504 .65 1,392,383 6,742 .98
Savings deposits 618,679 928 .30 545,986 1,397 .52
Other time deposits 729,632 4,745 1.31 823,975 8,178 2.00
Time deposits $100,000 and over 745,022 4,488 1.21 675,891 5,664 1.69
- ---------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 4,272,946 16,030 .75 4,131,280 23,694 1.16
- ---------------------------------------------------------------------------------------------------------------------------
Short-term and other borrowings 654,360 2,626 .81 424,092 1,412 .67
- ---------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 4,927,306 $18,656 .76% 4,555,372 $25,106 1.11%
- ---------------------------------------------------------------------------------------------------------------------------
NONINTEREST-BEARING
LIABILITIES AND
SHAREHOLDERS' EQUITY
Demand deposits 1,911,325 1,699,382
Other liabilities 54,745 60,288
Shareholders' equity 858,746 818,002
- ---------------------------------------------------------------------------------------------------------------------------
Total liabilities and
shareholders' equity $7,752,122 $7,133,044
- ---------------------------------------------------------------------------------------------------------------------------
Net interest income and margin (TE) $156,540 4.36% $148,073 4.50%
Net earning assets and spread $2,287,175 4.12% $2,063,505 4.15%
Interest cost of funding earning assets .52% .76%
- ---------------------------------------------------------------------------------------------------------------------------
(a) Tax-equivalent (TE) amounts are calculated using a marginal federal income tax rate of 35%.
(b) Includes loans held for sale.
(c) Average balance includes nonaccruing loans of $26,390 and $38,623, respectively, in the first six months
of 2004 and 2003.
25
TABLE 8. SUMMARY OF CHANGES IN NET INTEREST INCOME(TE)(a) (b)
- ---------------------------------------------------------------------------------------------------------------------------
Second Quarter 2004 Compared to: Six Months Ended June 30,
First Quarter 2004 Second Quarter 2003 2004 Compared to 2003
-------------------------------------------------------- ------------------------------
Due to Due to Due to
Change in Total Change in Total Change in Total
--------------- Increase --------------- Increase ----------------- Increase
(dollars in thousands) Volume Rate (Decrease) Volume Rate (Decrease) Volume Rate (Decrease)
- ----------------------------------------------------------------------------------------- ------------------------------
INTEREST INCOME (TE)
Loans (TE) $2,144 $(1,608) $ 536 $6,102 $(6,217) $(115) $11,552 $(12,529) $(977)
- ----------------------------------------------------------------------------------------- ------------------------------
Mortgage-backed securities (442) (384) (826) 2,135 535 2,670 5,180 (285) 4,895
U.S. agency securities (325) (186) (511) (217) (683) (900) (293) (1,426) (1,719)
U.S. Treasury securities (276) 91 (185) (682) 174 (508) (844) 272 (572)
Obligations of states and political
subdivisions (TE) 184 (53) 131 871 (176) 695 1,491 (332) 1,159
Other securities (13) 6 (7) (116) (85) (201) (268) (184) (452)
- ----------------------------------------------------------------------------------------- ------------------------------
Total investment securities (872) (526) (1,398) 1,991 (235) 1,756 5,266 (1,955) 3,311
- ----------------------------------------------------------------------------------------- ------------------------------
Federal funds sold and
short-term investments 16 - 16 (146) (40) (186) (251) (66) (317)
- ----------------------------------------------------------------------------------------- ------------------------------
Total interest income (TE) 1,288 (2,134) (846) 7,947 (6,492) 1,455 16,567 (14,550) 2,017
- ----------------------------------------------------------------------------------------- ---------------------------------
INTEREST EXPENSE
NOW account deposits 2 27 29 101 (224) (123) 222 (570) (348)
Money market deposits (75) (5) (80) (87) (844) (931) (27) (2,211) (2,238)
Savings deposits 24 26 50 86 (252) (166) 167 (636) (469)
Other time deposits (58) (107) (165) (399) (1,104) (1,503) (856) (2,577) (3,433)
Time deposits $100,000 and over 277 (21) 256 368 (736) (368) 536 (1,712) (1,176)
- ----------------------------------------------------------------------------------------- ------------------------------
Total interest-bearing deposits 170 (80) 90 69 (3,160) (3,091) 42 (7,706) (7,664)
- ----------------------------------------------------------------------------------------- ------------------------------
Short-term and other borrowings (152) 18 (134) 405 129 534 881 333 1,214
- ----------------------------------------------------------------------------------------- ------------------------------
Total interest expense 18 (62) (44) 474 (3,031) (2,557) 923 (7,373) (6,450)
- ----------------------------------------------------------------------------------------- ------------------------------
Change in net interest income $1,270 $(2,072) $(802) $7,473 $(3,461) $ 4,012 $15,644 $(7,177) $ 8,467
- ----------------------------------------------------------------------------------------- ------------------------------
(a)Tax-equivalent (TE) amounts are calculated using a marginal federal income tax rate of 35%.
(b)The change in interest shown as due to changes in either volume or rate includes an allocation of the amount
that reflects the interaction of volume and rate changes. This allocation is based on the absolute dollar
amounts of change due solely to changes in volume or rate.
26
The overall funding mix shifted only slightly in the second quarter of
2004, although the Bank has accessed a combination of additional short-term
borrowings and public fund time deposits to support earning asset growth.
Average noninterest-bearing deposits funded 27% of average earning assets in the
second quarter of 2004, up from 26% in 2003's second quarter, and the percentage
of funding from all noninterest-bearing sources was steady at approximately 32%
between these periods. Lower-cost interest-bearing deposits supported close to
39% of earning assets, down slightly from 40% in the year-earlier quarter.
Higher-cost sources of funds, which include time deposits and short-term
borrowings, increased to 29% of average earning assets from 28% in the second
quarter of 2003, including the impact of additional public funds deposits.
For the first six months of 2004, net interest income (TE) increased
6%, or $8.5 million, compared to the first half of 2003, driven by 9% growth in
average earning assets between these periods. The net interest margin (TE) was
4.36% for the 2004 period and 4.50% for the prior year's period. The yield on
average earning assets decreased 38 basis points, with the loan portfolio yield
down 54 basis points and the rate earned on the investment portfolio down 13
basis points. The total interest cost of funding earning assets declined 24
basis points compared to the first six months of 2003. Substantially the same
factors that affected the mix and rates for earning assets and funding sources
in the second quarter of 2004 were evident for the year-to-date period.
PROVISION FOR LOAN LOSSES
Whitney recorded a $2 million provision for loan losses in the second
quarter of 2004, compared to a negative provision of the same amount in 2004's
first quarter and no provision in the second quarter of 2003. Net charge-offs
totaled $3.2 million in the second quarter of 2004, compared to small net
recoveries in both the first quarter of 2004 and 2003's second quarter.
For a more detailed discussion of changes in the allowance for loans
losses, nonperforming assets and general credit quality, see the earlier section
on Loans, Credit Risk Management and Allowance for Loan Losses. The future level
of the allowance and provisions for loan losses will reflect management's
ongoing evaluation of credit risk, based on established internal policies and
practices.
NONINTEREST INCOME
Noninterest income totaled $21.4 million for the second quarter of
2004, a decrease of 8%, or $1.7 million, from the second quarter of 2003. Most
major sources of noninterest income posted higher results compared to the second
quarter of 2003, but fee income from Whitney's secondary mortgage market
operations declined $1.6 million, or 54%. Higher mortgage rates have dampened
the demand for home loans, and for refinancings in particular, and Whitney's
production of loans for sale during the second quarter of 2004 was less than
half that produced in the year-earlier period. Given the current rate
environment and an expectation of rising rates over the near term, both loan
production levels and secondary mortgage market fee income for the third quarter
of 2004 are expected to be well below the results for the year-earlier period.
Bank card fees, both credit and debit cards, increased a combined 9%,
or $.2 million, compared to 2003's second quarter. Fee income from credit card
activity was up 16% in the second quarter of 2004, generally consistent with the
growth in transaction volume. Debit card fee income, however, was essentially
unchanged from the year-earlier period, despite a 14% increase in transaction
volume. Visa USA restructured and effectively lowered debit transaction rates in
early 2004 following the temporary rate reduction it implemented in August 2003
27
under the terms of a settlement with merchants. Fees per transaction generated
under the restructured rates have been somewhat higher than under the temporary
rate reduction.
Service charges on deposit accounts in the second quarter of 2004 were
up 1% from the year-earlier period. Improved pricing and the addition of new
services helped offset the impact of reduced charging opportunities on both
commercial and personal accounts. Trust service fees increased 12%, or $.2
million, compared to the second quarter of 2003 with the help of new business
and improved equity market valuations.
Other noninterest income decreased $.7 million, or 11%, although
revenue from recurring sources was on the whole steady between the second
quarters of 2003 and 2004. In the second quarter of 2003, other noninterest
income included a $1.4 million gain on the sale of a portfolio of loans
originated under affordable-housing programs. Gains on sales of foreclosed and
surplus property included in other noninterest income, however, were $.5 million
higher in 2004's second quarter.
Noninterest income was $42.3 million through the first six months of
2004, a decrease of 5%, or $2.3 million, from the first half of 2003.
Year-to-date changes in individual income categories from the prior year were
for the most part consistent with the quarterly changes discussed above and were
driven by substantially the same factors. Recurring revenue sources included in
other noninterest income posted improved results for the first six months of
2004, with growth in fees on commercial credit facilities the major contributor.
Year-to-date other noninterest income was down only 1% from the comparable
period in 2003.
NONINTEREST EXPENSE
Total noninterest expense of $64.3 million in the second quarter of
2004 was 6%, or $3.6 million, higher than the total for the year-earlier period.
Personnel expense increased 5%, or $1.8 million, in total, with
employee compensation up 6%, or $1.6 million, and employee benefits higher by
3%, or $.2 million. Base pay and compensation earned under sales-based incentive
programs increased a combined 3%, or $.8 million. Compensation under the
management incentive plan was up a comparable amount, with stock-based
compensation driving this increase. Stock-based compensation will vary with
changes in Whitney's stock price, which was up 40% at the end of 2004's second
quarter from a year earlier.
Net occupancy expense in the second quarter of 2004 was up around 1%
from the comparable period in 2003. A moderate increase in net occupancy expense
in 2004 was expected with the opening of six new or replacement branches
scheduled for late 2003 through the third quarter of the current year, including
three additional locations to serve the Houston market. To reduce costs over the
long term and enhance productivity, certain operations in Houston will be moved
to one of the new locations and out of space that is subject to a noncancelable
lease. Whitney expects to recognize a loss of up to $1.8 million in the third
quarter of 2004 related to its remaining obligation under the lease.
Equipment and data processing expense decreased nearly 2% in the second
quarter of 2004 compared to 2003's second quarter, although a moderate increase
is expected for the full year. The data processing system's capacity was
upgraded in the second half of 2003 and applications and capabilities have been
added to support expanded customer service. Upgrades to the capacity and
functionality of branch communication lines were the main factor behind the 10%
increase in the telecommunication and postage expense category.
28
A number of factors contributed to the $1.6 million, or 17%, net
increase in other noninterest expense. The largest factors were an increase in
marketing activities and the amortization of expanded affordable housing
investments. Management has directed additional resources to marketing
activities in 2004 to support new product introductions and broaden market
recognition. Tax credits associated with the affordable housing investments
helped lower the effective tax rate as noted in the following section.
In connection with its acquisition of Madison BancShares, Inc.
scheduled for the third quarter of 2004, the Company expects to recognize
nonrecurring expenses totaling approximately $1.1 million to integrate acquired
operations and personnel into the Whitney system.
For the six-month period, noninterest expense totaled $126 million.
This was a 5%, or $6.4 million, increase compared to the first half of 2003.
Similar to the quarterly comparison, year-to-date personnel expense was up 5%
from 2003, or $3.3 million in total. Employee compensation rose 4%, of $2.3
million, with $1.8 million in additional stock-based management incentive
compensation. Base pay and sales-based incentive compensation increased less
that 1%, reflecting the impact of a sharp reduction in mortgage origination
commissions on lower production in 2004. Employee benefits were up 7%, or $1.0
million. Defined benefit pension expense and the cost of providing health
benefits to retirees increased a combined $.5 million for the year-to-date
period. The Company also experienced an expected increase in the cost of
providing current health benefits in 2004.
The changes in other major noninterest expense categories between the
first six months of 2003 and 2004 were generally consistent with the
quarter-to-quarter changes and were influenced mainly by the same factors cited
in the discussion of quarterly results above.
INCOME TAXES
The Company provided for income tax expense at an effective rate of
30.4% in the second quarter of 2004 compared to a rate of 32.1% in the 2003's
second quarter. Year-to-date, the rate was 30.9% in 2004 and 32.1% in 2003.
Whitney's effective tax rate has been lower than the 35% federal statutory rate
primarily because of tax-exempt interest income from the financing of state and
local governments. Additional investment in projects that generate affordable
housing tax credits helped lower the effective tax rate in the second quarter
and first six months of 2004 compared to the year-earlier periods.
29
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required for this item is included in the section
entitled Asset/Liability Management in Management's Discussion and Analysis of
Financial Condition and Results of Operations that appears in Item 2 of this
Form 10-Q and is incorporated here by reference.
ITEM 4. CONTROLS AND PROCEDURES
The Company's management, with the participation of the CEO and CFO,
has evaluated the effectiveness of the Company's disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended) as of the end of the period covered by this
quarterly report on Form 10-Q. Based on that evaluation, the CEO and CFO have
concluded that the disclosure controls and procedures as of the end of the
period covered by this quarterly report are effective. There were no changes in
the Company's internal control over financial reporting during the fiscal
quarter covered by this quarterly report that have materially affected, or are
reasonably likely to materially affect, the Company's internal control over
financial reporting.
30
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity
Securities
The following table provides information with respect to purchases made
by or on behalf of the Company or any "affiliated purchaser" (as defined in Rule
10b-18(a)(3) under the Securities Exchange Act of 1934) of the Company's common
stock during the three months ended June 30, 2004.
------------------- ------------------ --------------- ------------------------ ------------------------
Total Number of Shares Maximum Number of
Average Price Purchased as Part of Shares that May Yet Be
Total Number of Paid per Publicly Announced Purchased Under the
Period Shares Purchased Share Plans or Programs (1) Plans or Programs (1)
------------------- ------------------ --------------- ------------------------ ------------------------
April 2004 - - - -
------------------- ------------------ --------------- ------------------------ ------------------------
May 2004 109 (2) $43.315 - -
------------------- ------------------ --------------- ------------------------ ------------------------
June 2004 43,453 (3) $43.916 - -
------------------- ------------------ --------------- ------------------------ ------------------------
(1) The Company has no publicly announced plans or programs to purchase its common stock.
(2) Represents shares tendered to the Company as consideration for the exercise price of employee
stock options.
(3) Includes 423 shares tendered to the Company as consideration for the exercise price of employee
stock options and 43,030 shares tendered as consideration for employee tax obligations
arising from the vesting of performance-based restricted stock awards.
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of Whitney Holding Corporation's shareholders was
held on April 28, 2004. Proxies for the meeting were solicited pursuant to
Section 14(a) of the Securities and Exchange Act of 1934. There was no
solicitation in opposition to the nominees for election to the Company's Board
for Directors as listed in the proxy statement, and all nominees were elected.
31
The voting results for each nominee for director were as follows:
Nominee For Withhold
-------------------------------------------------------------------
Harry J. Blumenthal 27,563,951 5,880,760
Joel B. Bullard, Jr. 33,127,191 317,520
Angus R. Cooper, II 33,032,894 411,817
Kathryn M. Sullivan 33,063,644 381,067
The proposal to adopt the 2004 Whitney Holding Corporation Long-Term
Incentive Plan was approved as follows:
Broker
For Against Abstain Nonvote
-----------------------------------------------------
24,270,947 3,327,476 160,330 5,685,958
The shareholder proposal to delete Article XVI of Whitney Holding
Corporation's Articles of Incorporation did not come to a vote for lack of the
quorum required by the Company's charter to vote on that proposal.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
The exhibits listed on the accompanying Exhibit Index, located on page
34, are filed (or furnished, as applicable) as part of this report. The Exhibit
Index is incorporated herein by reference in response to this Item 6(a).
(b) Reports on Form 8-K
The registrant furnished a Form 8-K dated April 21, 2004 that reported
under Item 12 the release of its financial results for the quarter ended March
31, 2004. The news release covering the financial results was furnished as an
exhibit under Item 7.
32
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WHITNEY HOLDING CORPORATION
(Registrant)
By: /s/Thomas L. Callicutt, Jr.
----------------------------------------
Thomas L. Callicutt, Jr.
Executive Vice President and
Chief Financial Officer
(in his capacities as a duly authorized
officer of the registrant and as
principal accounting officer)
August 9, 2004
---------------------------------------
Date
33
EXHIBIT INDEX
Exhibit Description
- ------------- --------------------------------------------------------------
Exhibit 3.1 Copy of the Company's Composite Charter (filed as Exhibit
3.1 to the Company's quarterly report on Form 10-Q for the
quarter ended September 30, 2000 (Commission file number
0-1026) and incorporated by reference).
Exhibit 3.2 Copy of the Company's Bylaws (filed as Exhibit 3.2 to the
Company's annual report on Form 10-K for the year ended
December 31, 2003 (Commission file number 0-1026) and
incorporated by reference).
Exhibit 10.1* Form of executive agreement between Whitney Holding
Corporation, Whitney National Bank and each of Kevin P. Reed
and Lewis P. Rogers.
Exhibit 10.2* Whitney Holding Corporation 2004 Long-Term Incentive Plan
(filed as Exhibit B to the Company's Proxy Statement for
the 2004 Annual Meeting of Shareholders dated March 19, 2004
(Commission file number 0-1026) and incorporated by
reference).
Exhibit 31.1 Certification by the Company's Chief Executive Officer
pursuant to Rule 13a-14(a) or Rule 15d-14(a), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 31.2 Certification by the Company's Chief Financial Officer
pursuant to Rule 13a-14(a) or Rule 15d-14(a), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32 Certification by the Company's Chief Executive Officer and
Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
* Management contract or compensatory plan or arrangement.
34
Exhibit 10.1
WHITNEY HOLDING CORPORATION
and
WHITNEY NATIONAL BANK
EXECUTIVE AGREEMENT
-------------------
THIS AGREEMENT (the "Agreement") is made by and between WHITNEY HOLDING
CORPORATION, a corporation organized and existing under the laws of the State of
Louisiana (the "Holding Corporation"), WHITNEY NATIONAL BANK, a financial
institution organized and existing under the laws of the United States (the
"Bank"), and (the "Executive").
-------------------------
WHEREAS, the Executive is presently employed by each of the Holding
Corporation and the Bank as an Executive Vice President
NOW, THEREFORE, effective June 15, 2004, the Holding Corporation, the
Bank, and the Executive agree as follows:
SECTION I
---------
DEFINITIONS
-----------
1.1 "Change in Duties" means the occurrence of one of the
following events in connection with a Change in Control:
a. A diminution in the nature or scope of the Executive's
authorities or duties, a change in his reporting
responsibilities or titles or the assignment of the Executive
to any duties or responsibilities that are inconsistent with
his position, duties, responsibilities or status immediately
preceding such assignment;
b. A reduction in the Executive's compensation during the Covered
Period. For this purpose, "compensation" means the fair market
value of all remuneration paid to the Executive by the
Employer during the immediately preceding calendar year,
including, without limitation, deferred compensation, stock
options and other forms of incentive compensation awards,
coverage under any employee benefit plan (such as a pension,
thrift, medical, dental, life insurance or long-term
disability plan) and other perquisites;
c. The transfer of the Executive to a location requiring a change
in his residence or a material increase in the amount of
travel ordinarily required of the Executive in the performance
of his duties; or
d. A good faith determination by the Executive that his position,
duties, responsibilities or status has been affected, whether
directly or indirectly, in any manner which prohibits the
effective discharge of any such duties or responsibilities.
35
1.2 "Change in Control" means and shall be deemed to have occurred
if:
a. Any "person," including any "group," determined in accordance
with Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended, becomes the beneficial owner, directly or
indirectly, of securities of the Holding Corporation
representing 20% or more of the combined voting power of the
Holding Corporation's then outstanding securities, without the
approval, recommendation, or support of the Board of Directors
of the Holding Corporation as constituted immediately prior to
such acquisition;
b. The Federal Deposit Insurance Corporation or any other
regulatory agency negotiates and implements a plan for the
merger, transfer of assets and liabilities, reorganization,
and/or liquidation of the Bank;
c. Either of the Holding Corporation or the Bank is merged into
another corporate entity or consolidated with one or more
corporations, other than a wholly owned subsidiary of the
Holding Corporation;
d. A change in the members of the Board of Directors of the
Holding Corporation which results in the exclusion of a
majority of the "continuing board." For this purpose, the term
"continuing board" means the members of the Board of Directors
of the Holding Corporation, determined as of the date on which
this Agreement is executed and subsequent members of such
board who are elected by or on the recommendation of a
majority of such "continuing board"; or
e. The sale or other disposition of all or substantially all of
the stock or the assets of the Bank by the Holding Corporation
(or any successor corporation thereto),
1.3 "Company" means the Holding Corporation and the Bank.
1.4 "Covered Period" means the one-year period immediately
preceding and the three-year period immediately following the occurrence of a
Change in Control.
1.5 "Employer" means the Holding Corporation or the Bank or both,
as the case may be.
1.6 "Severance Amount" means 300% of the Executive's "annual
salary." For this purpose, "annual salary" means the average of all compensation
paid to the Executive by the Company which is includible in the Executive's
gross income for the highest 3 of the 5 calendar years immediately preceding the
calendar year in which a Change in Control occurs, including the amount of any
compensation which the Executive elected to defer under any plan or arrangement
of the Company with respect to such years. If the Executive has been employed
less than 5 years prior to the calendar year in which a Change in Control
occurs, "annual salary" shall be determined by averaging the compensation (as
defined in the preceding sentence) for the Executive's actual period of
employment. Further, if the Executive has been employed less than 12 months
prior to the occurrence of a Change in control, the actual compensation of the
Executive shall be annualized for purposes of this Section 1.6. In the event of
dispute between the Executive and the Company, the determination of the "annual
salary" shall be made by an independent public accounting firm agreed upon by
the Executive and the Company.
36
1.7 "Termination" or "Terminated" means (a) termination of the
employment of the Executive with the Employer for any reason, other than cause,
or (b) the resignation of the Executive following a Change in Duties. In no
event, however, shall the Executive's voluntary separation from service with the
Employer on account of death, disability, or resignation on or after the
attainment of the normal retirement age specified in any qualified employee
benefit plan maintained by the Employer constitute a Termination. For purposes
of determining whether a Termination has occurred, "cause" means fraud,
misappropriation of or intentional material damage to the property or business
of the Employer or the commission of a felony by the Executive.
SECTION II
----------
TERMINATION RIGHTS AND OBLIGATIONS
----------------------------------
2.1 Severance Awards. If the Executive's employment is Terminated
during the Covered Period, then no later than 30 days after the later of (a) the
date of such Termination, or (b) the occurrence of a Change in Control, the
Company shall:
a. Pay to the Executive the Severance Amount;
b. Transfer to the Executive the ownership of all club
memberships, automobiles and other perquisites which were
assigned to the Executive as of the day immediately preceding
such Termination;
c. In accordance with Section 2.2 hereof, provide for the benefit
of the Executive, his spouse, and his dependents, if any,
coverage under the plans, policies or programs (as the same
may be amended from time to time) maintained by the Company
for the purpose of providing medical benefits and life
insurance to other Executive's of the Company with comparable
duties; provided, however, that in no event shall the coverage
provided under this paragraph be substantially less than the
coverage provided to the Executive as of the date immediately
preceding a Termination;
d. Pay to the Executive an amount equal to the contributions by
the Company to the Whitney National Bank of New Orleans Thrift
Incentive Plan, or a successor arrangement, that would have
been made for the lesser of (i) 3 years following the date of
Termination, or (ii) the number of years until the Executive's
normal retirement age under such plan;
e. Pay to the Executive an amount equal to the present value of
the additional benefits which would have accrued under the
Whitney National Bank Retirement Plan and the Whitney Holding
Corporation Retirement Restoration Plan, or any successors
thereto, that would have been made for the lesser of (I) three
years following the Date of Termination, or (ii) the number of
years until the Executive's normal retirement age under such
plans; and
f. Pay to the Executive the amount to which the Executive would
be entitled under the 1991 Executive Compensation Plan, or a
successor thereto, for the calendar year in which a Change in
Control occurs, determined as if all performance goals
applicable to the Company and the Executive were achieved.
37
g. Pay to the Executive an amount equal to the present value of
any benefit accrued under either the Whitney National Bank
Retirement Plan or the Whitney Holding Corporation Retirement
Restoration Plan, or any successors thereto, that would have
been payable under the terms of such plan, including any
additional accrual provided under Section 2.1e hereto, but was
forfeited on account of the application of the vesting
provisions contained in such plan.
2.2 Special Rules Governing Group Benefits. Coverage under Section
2.1c, hereof, shall (a) commence as of the later of the date of Termination or
the occurrence of a Change in Control, and (b) end as of the earlier of the
Executive's coverage under Medicare Part B or the date on which the Executive is
covered under group plans providing substantially similar benefits maintained by
another employer. For this purpose, the Company shall provide coverage during
any period in which the payment of benefits is limited by any form of
pre-existing condition clause.
Coverage under Section 2.1c, hereof, may be provided under a group
policy or program maintained by the Company or the Company, in its sole
discretion, may acquire or adopt an individual plan, policy or program providing
coverage solely for the benefit of the Executive, his spouse, and his
dependents, if any.
If coverage commences as of a Change in Control, the Company shall (a)
retroactively reinstate the Executive, his spouse, and dependents, if any, as of
the date of Termination, and (b) reimburse to the Executive his cost of
obtaining similar coverage for the period commencing on the date of Termination
and ending on the occurrence of a Change in Control. As to medical claims
incurred during such period, any coverage actually obtained by the Executive
shall be designated as the Executive's primary coverage, and the reinstated
coverage shall operate as secondary coverage.
2.3 Other Plans and Agreements. To the maximum extent permitted by
law and not withstanding any provision to the contrary contained in any plan,
grant, program, contract or other arrangement under which the Executive and the
Employer are parties, if the Executive's employment is Terminated during the
Covered Period, then any vesting schedule or other restriction on the ownership
of any benefits payable to the Executive under the terms of any such plan,
grant, contract, or arrangement shall be accelerated or lapse, as the case may
be.
Notwithstanding any provision to the contrary contained in any plan,
grant, program, contract, or arrangement under which the Executive and the
Employer are parties, in the event the Executive has elected to defer the
payment of any benefit under any such plan, grant, contract, or arrangement, the
payment of such benefit shall be accelerated and paid to the Executive in the
form of a single-sum no later than 30 days after the Executive's Termination
during the Covered Period.
2.4 Taxes. The Executive shall be responsible for applicable
income tax and the Company shall have the right to withhold from any payment
made under this Agreement, or to collect as a condition of any payment, any
income taxes required by law to be withheld.
Notwithstanding the preceding paragraph, the Company shall pay any
excise tax or similar penalty imposed by Section 4999 of the Internal Revenue
Code of 1986, as amended (the "Code") or any comparable successor provision, on
the Executive as a consequence of any
38
"excess parachute payment" within the meaning of Section 280G of the Code (or a
comparable successor provision) payable under this Agreement or any plan, grant,
program, contract or other arrangement under which the Executive and the
Employer are parties.
The Executive shall submit to the Company the calculation of the amount
to be paid by the Company under this Section 2.4, together with supporting
documentation. If the Executive and the Company disagree as to such amount, an
independent public accounting firm agreed upon by the Executive and the Company
shall make such determination.
SECTION III
-----------
MISCELLANEOUS
-------------
3.1 Notices. Notices and other communication required under this
Agreement shall be made to the Company at 228 St. Charles Avenue, New Orleans,
Louisiana 70130 and to the Executive at 228 St. Charles Avenue, New Orleans,
Louisiana 70130 or, as to each party, at such other address as may be designated
by written notice to the other. All such notices and communications shall be
effective when deposited in the United States mail, postage prepaid, or
delivered to the affected party.
3.2 Employment Rights. The terms of this Agreement shall not be
deemed to confer on the Executive any right to continue in the employ of the
Employer for any period or any right to continue his present or any other rate
of compensation.
3.3 Assignment. The Executive shall not sell, assign, pledge,
transfer or otherwise convey the right to receive any form of payment or benefit
provided under the Agreement, except by will or the laws of intestacy.
3.4 Inurement. This Agreement shall be binding upon and inure to
the benefit of the Holding Corporation, the Bank and the Executive and their
respective heirs, executors, administrators, successors, and assigns.
3.5 Payment of Expenses. In the event that it is necessary or
desirable for the Executive to retain legal counsel and/or incur other cost and
expenses in connection with the enforcement of the terms of the Agreement, the
Company shall pay (or the Executive shall be entitled to reimbursement of)
reasonable attorneys' fees, costs, and expenses actually incurred, without
regard to the final outcome, unless there is no reasonable basis for the
Executive's action.
3.6 Amendment and Termination. This Agreement shall not be
amended or terminated by any act of the Company, except as may be expressly
agreed upon, in writing, by the Company and the Executive.
3.7 Nature of Obligation. The Company intends that its obligations
hereunder be construed in the nature of severance pay. The Company's obligations
under Section 2 are absolute and unconditional and shall not be affected by any
circumstance, including. without limitation, any right of offset, counterclaim,
recoupment, defense, or other right which the
39
Company may have against the Executive or others. All amounts payable by the
Company hereunder shall be paid without notice or demand.
3.8 Choice of Law. The Agreement shall be governed and construed
in accordance with the laws of the State of Louisiana.
3.9 No Effect on Other Benefits. Any other compensation paid or
benefits provided to the Executive shall be in addition to and not in lieu of
the benefits provided to such Executive under this Agreement. Except as may be
expressly provided herein, nothing in this Agreement shall be construed as
limiting, varying or reducing the provision of any benefit available to the
Executive (or to such Executive's estate or other beneficiary) pursuant to any
employment agreement, group plan, including any qualified pension or
profit-sharing plan, health, disability or life insurance plan, or any other
form of agreement or arrangement between the Company and the Executive.
3.10 Entire Agreement. This Agreement constitutes the entire
agreement between the Executive and the Holding Corporation and the Bank and is
intended to supersede all prior written or oral understandings with respect to
the subject matter of this Agreement.
3.11 Invalidity. In the event that any one or more provisions of
this Agreement shall, for any reason, be held invalid, illegal, or unenforceable
in any manner, such invalidity, illegality or unenforceability shall not affect
any other provision of such Agreement.
3.12 Mitigation. Notwithstanding any provision of this Agreement to
the contrary and to the maximum extent permitted by law, the Executive shall not
be subject to any duty to mitigate the severance awards received hereunder by
seeking other employment. No severance award received under this Agreement shall
be offset by any compensation the Executive receives from future employment, and
the Executive shall not be required to perform any service as a condition of
this Agreement.
EXECUTED in multiple counterparts as of the dates set forth below, each
of which shall be deemed as original, and effective as of the date first set
forth above.
EXECUTIVE WHITNEY HOLDING CORPORATION
WHITNEY NATIONAL BANK
- --------------------------------
By:
---------------------------------
William L. Marks
Title: Chairman and CEO
Date:
---------------------------
Date:
-------------------------------
40
Exhibit 31.1
CERTIFICATION
-------------
I, William L. Marks, certify that:
1. I have reviewed this quarterly report on Form 10-Q for the
period ended June 30, 2004 of Whitney Holding Corporation;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
(c) disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter that has
materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the
design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report
financial information; and
(b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal control over financial reporting.
/s/William L. Marks
---------------------------------
William L. Marks
Chief Executive Officer
Date: August 9, 2004
----------------------------
41
Exhibit 31.2
CERTIFICATION
-------------
I, Thomas L. Callicutt, Jr., certify that:
1. I have reviewed this quarterly report on Form 10-Q for the
period ended June 30, 2004 of Whitney Holding Corporation;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
(c) disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter that has
materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the
design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report
financial information; and
(b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal control over financial reporting.
/s/Thomas L. Callicutt, Jr.
---------------------------------
Thomas L. Callicutt, Jr.
Chief Financial Officer
Date: August 9, 2004
----------------------------
42
Exhibit 32
CERTIFICATION PURSUANT TO 18 U.S.C SECTION 1350,
------------------------------------------------
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
--------------------------------------------------------------------
Each of the undersigned officers of Whitney Holding Corporation (the
"Company"), in the capacities and on the dates indicated below, hereby certify
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, based on their
knowledge,
(1) the Company's Quarterly Report on Form 10-Q for the period ended
June 30, 2004 (the "Report") fully complies with the requirements
of Section 13(a) or 15(d) of the Securities Exchange Act of 1934,
as amended; and
(2) the information contained in the Report fairly presents, in all
material respects, the financial condition and results of
operations of the Company.
Dated: August 9, 2004 By:/s/William L. Marks
------------------- ----------------------------------
William L. Marks
Chairman of the Board and
Chief Executive Officer
Dated: August 9, 2004 By:/s/Thomas L. Callicutt, Jr.
------------------- ----------------------------------
Thomas L. Callicutt, Jr.
Executive Vice President and
Chief Financial Officer
43