UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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)
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Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes X No
----- -----
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 April 30, 2004
----- -----------------------------
Common Stock, no par value 40,610,145
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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 11
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
Item 3: Quantitative and Qualitative Disclosures
about Market Risk 27
Item 4: Controls and Procedures 27
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PART II. Other Information
Item 1: Legal Proceedings 28
Item 2: Changes in Securities, Use of Proceeds
and Issuer Purchases of Equity Securities 28
Item 3: Defaults upon Senior Securities 28
Item 4: Submission of Matters to a Vote of Security Holders 28
Item 5: Other Information 28
Item 6: Exhibits and Reports on Form 8-K 28
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Signature 29
Exhibit Index 30
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PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
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March 31 December 31
(dollars in thousands) 2004 2003
------------------------------------------------------------------------------------------------------------------
ASSETS
Cash and due from financial institutions $ 235,054 $ 270,387
Federal funds sold and short-term investments 100,707 14,385
Loans held for sale 16,303 15,309
Investment securities
Securities available for sale 2,017,866 2,090,870
Securities held to maturity, fair values of $220,866 and
$196,717, respectively 214,808 190,535
------------------------------------------------------------------------------------------------------------------
Total investment securities 2,232,674 2,281,405
Loans, net of unearned income 4,984,165 4,882,610
Allowance for loan losses (57,603) (59,475)
------------------------------------------------------------------------------------------------------------------
Net loans 4,926,562 4,823,135
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Bank premises and equipment 147,483 148,259
Goodwill 69,164 69,164
Other intangible assets 22,186 23,475
Accrued interest receivable 27,856 27,305
Other assets 77,908 82,158
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Total assets $7,855,897 $7,754,982
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LIABILITIES
Noninterest-bearing demand deposits $1,937,379 $1,943,248
Interest-bearing deposits 4,361,011 4,215,334
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Total deposits 6,298,390 6,158,582
------------------------------------------------------------------------------------------------------------------
Short-term and other borrowings 606,006 600,053
Accrued interest payable 4,313 4,493
Other liabilities 75,397 151,541
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Total liabilities 6,984,106 6,914,669
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SHAREHOLDERS' EQUITY
Common stock, no par value
Authorized - 100,000,000 shares
Issued - 40,587,728 and 40,448,929 shares, respectively 2,800 2,800
Capital surplus 190,348 183,624
Retained earnings 668,960 656,195
Accumulated other comprehensive income 20,429 8,438
Treasury stock at cost - 937 shares in 2003 - (30)
Unearned restricted stock compensation (10,746) (10,714)
------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 871,791 840,313
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Total liabilities and shareholders' equity $7,855,897 $7,754,982
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The accompanying notes are an integral part of these financial statements.
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WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
-----------------------------------------------------------------------------------------------------------
Three Months Ended
March 31
-----------------------------------------------------------------------------------------------------------
(dollars in thousands, except per share data) 2004 2003
-----------------------------------------------------------------------------------------------------------
INTEREST INCOME
Interest and fees on loans $63,011 $63,769
Interest and dividends on investment securities
Mortgage-backed securities 15,913 13,688
U.S. agency securities 3,333 4,152
U.S. Treasury securities 1,549 1,613
Obligations of states and political subdivisions 2,412 2,111
Other securities 292 543
Interest on federal funds sold and short-term investments 30 161
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Total interest income 86,540 86,037
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INTEREST EXPENSE
Interest on deposits 7,970 12,543
Interest on short-term and other borrowings 1,380 700
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Total interest expense 9,350 13,243
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NET INTEREST INCOME 77,190 72,794
PROVISION FOR LOAN LOSSES (2,000) 500
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NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 79,190 72,294
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NONINTEREST INCOME
Service charges on deposit accounts 9,316 9,297
Secondary mortgage market operations 1,286 2,737
Bank card fees 2,336 2,206
Trust service fees 2,189 2,049
Other noninterest income 5,780 5,206
Securities transactions - -
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Total noninterest income 20,907 21,495
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NONINTEREST EXPENSE
Employee compensation 28,552 27,832
Employee benefits 7,513 6,658
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Total personnel expense 36,065 34,490
Net occupancy expense 4,784 4,596
Equipment and data processing expense 4,378 4,205
Telecommunication and postage 2,229 2,079
Corporate value and franchise taxes 1,863 1,873
Legal and professional fees 1,011 1,555
Amortization of intangibles 1,289 1,461
Other noninterest expense 10,407 9,035
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Total noninterest expense 62,026 59,294
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INCOME BEFORE INCOME TAXES 38,071 34,495
INCOME TAX EXPENSE 11,913 11,025
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NET INCOME $26,158 $23,470
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EARNINGS PER SHARE
Basic $ .65 $ .59
Diluted .64 .58
WEIGHTED-AVERAGE SHARES OUTSTANDING
Basic 40,191,444 39,785,332
Diluted 40,861,274 40,216,355
CASH DIVIDENDS PER SHARE $ .33 $ .30
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The accompanying notes are an integral part of these financial statements.
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WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
----------------------------------------------------------------------------------------------------------------------------
Accumulated Unearned
Other Restricted
(dollars in thousands, Common Capital Retained Comprehensive Treasury Stock
except per share data) Stock Surplus Earnings Income Stock Compensation Total
----------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2002 $2,800 $167,235 $607,235 $30,104 $ - $(6,891) $800,483
----------------------------------------------------------------------------------------------------------------------------
Comprehensive income:
Net income - - 23,470 - - - 23,470
Other comprehensive income:
Unrealized net holding loss on
securities, net of reclassification
adjustments and taxes - - - (2,258) - - (2,258)
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Total comprehensive income - - 23,470 (2,258) - - 21,212
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Cash dividends, $.30 per share - - (12,037) - - - (12,037)
Stock issued to dividend reinvestment plan - 425 - - - - 425
Long-term incentive plan stock activity:
Restricted grants and related activity - 2,133 - - (211) (658) 1,264
Options exercised - 1,063 - - - - 1,063
Directors' compensation plan
stock activity - 141 - - - - 141
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Balance at March 31, 2003 $2,800 $170,997 $618,668 $27,846 $(211) $(7,549) $812,551
----------------------------------------------------------------------------------------------------------------------------
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Balance at December 31, 2003 $2,800 $183,624 $656,195 $8,438 $(30) $(10,714) $840,313
----------------------------------------------------------------------------------------------------------------------------
Comprehensive income:
Net income - - 26,158 - - - 26,158
Other comprehensive income:
Unrealized net holding gain on
securities, net of reclassification
adjustments and taxes - - - 11,991 - - 11,991
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Total comprehensive income - - 26,158 11,991 - - 38,149
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Cash dividends, $.33 per share - - (13,393) - - - (13,393)
Stock issued to dividend reinvestment plan - 483 - - 30 - 513
Long-term incentive plan stock activity:
Restricted grants and related activity - 2,337 - - - (32) 2,305
Options exercised - 3,602 - - - - 3,602
Directors' compensation plan
stock activity - 302 - - - - 302
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Balance at March 31, 2004 $2,800 $190,348 $668,960 $20,429 $ - $(10,746) $871,791
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The accompanying notes are an integral part of these financial statements.
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WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Three Months Ended
March 31
------------------------------------------------------------------------------------------------------------------
(dollars in thousands) 2004 2003
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OPERATING ACTIVITIES
Net income $ 26,158 $ 23,470
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of bank premises and equipment 3,312 3,224
Amortization of purchased intangibles 1,289 1,461
Restricted stock compensation earned 2,260 1,226
Premium amortization (discount accretion), net 1,011 1,926
Provision for losses on loans and foreclosed assets (1,978) 515
Net gains on sales of foreclosed assets and surplus property (218) (376)
Deferred tax expense (benefit) 176 (549)
Net (increase) decrease in loans originated and held for sale (994) 4,062
Increase in accrued income taxes 11,727 9,977
Increase in accrued interest receivable and prepaid expenses (2,477) (4,506)
Increase (decrease) in accrued interest payable and other accrued expenses (1,966) 130
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Net cash provided by operating activities 38,300 40,560
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INVESTING ACTIVITIES
Proceeds from maturities of investment securities held to maturity 2,510 6,465
Purchases of investment securities held to maturity (23,216) (2,735)
Proceeds from maturities of investment securities available for sale 162,158 209,563
Purchases of investment securities available for sale (161,636) (243,790)
Net increase in loans (101,936) (66,397)
Net increase in federal funds sold and short-term investments (86,322) (67,519)
Proceeds from sales of foreclosed assets and surplus property 2,045 1,716
Purchases of bank premises and equipment (2,816) (1,597)
Other, net (718) 3,577
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Net cash used in investing activities (209,931) (160,717)
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FINANCING ACTIVITIES
Net increase in transaction account and savings account deposits 38,719 94,239
Net increase in time deposits 101,089 19,642
Net increase (decrease) in short-term and other borrowings 5,953 (54,647)
Proceeds from issuance of common stock 3,883 1,461
Cash dividends (13,346) (12,009)
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Net cash provided by financing activities 136,298 48,686
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Decrease in cash and cash equivalents (35,333) (71,471)
Cash and cash equivalents at beginning of period 270,387 326,124
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Cash and cash equivalents at end of period $235,054 $254,653
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Cash received during the period for:
Interest income $85,989 $85,660
Cash paid during the period for:
Interest expense $9,530 $13,199
Income taxes - 1,500
Noncash investing activities:
Foreclosed assets received in settlement of loans $1,079 $273
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The accompanying notes are an integral part of these financial statements.
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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.
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 three banking locations in the Tampa Bay, Florida metropolitan
area, with approximately $215 million in total assets and $175 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. Subject to
certain conditions and the receipt of necessary approvals from Madison
shareholders and appropriate regulatory agencies, this transaction is expected
to close in the third quarter of 2004.
In April 2004, Whitney National Bank (the "Bank") signed a definitive
agreement with First National Bank Northwest Florida to assume certain deposits
and acquire certain assets associated with two First National branches in Fort
Walton Beach, Florida for a deposit premium of approximately $2 million.
Deposits at these two branches total approximately $30 million. No loans will be
exchanged in this transaction. The transaction is subject to regulatory approval
and is expected to be completed late in the second quarter of 2004.
NOTE 3 - OTHER ASSETS AND OTHER LIABILITIES
The more significant components of other assets and other liabilities
at March 31, 2004 and December 31, 2003 were as follows:
Other assets
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March 31 December 31
(dollars in thousands) 2004 2003
----------------------------------------------------------------------------------------------------------
Net deferred income tax asset $14,497 $21,190
Low-income housing tax credit fund investments 15,626 16,199
Cash surrender value of life insurance 8,777 8,665
Prepaid pension asset 5,972 7,230
Prepaid expenses 6,961 4,288
Foreclosed assets and surplus property 2,812 3,490
Miscellaneous investments, receivables and other assets 23,263 21,096
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Total other assets $77,908 $82,158
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Other liabilities
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March 31 December 31
(dollars in thousands) 2004 2003
----------------------------------------------------------------------------------------------------------
Trade date securities payable $14,572 $100,925
Accrued taxes and expenses 20,890 12,319
Dividends payable 13,391 13,344
Obligation for postretirement benefits other than pensions 9,722 9,379
Miscellaneous payables, deferred income and other liabilities 16,822 15,574
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Total other liabilities $75,397 $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 recognized in the first quarters of 2004 and 2003 were as follows:
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Three Months Ended
March 31
----------------------------------------------------------------------------------------------------------
(dollars in thousand) 2004 2003
----------------------------------------------------------------------------------------------------------
Service cost for benefits during the period $1,558 $1,019
Interest cost on benefit obligation 1,616 1,495
Expected return on plan assets (2,000) (1,655)
Amortization of:
Unrecognized net actuarial (gains) losses 90 61
Unrecognized net implementation asset - (18)
Unrecognized prior service cost (27) (27)
----------------------------------------------------------------------------------------------------------
Net periodic benefit expense $1,237 $ 875
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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 less than $200,000 in the first quarter of 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 net periodic postretirement benefit expense of
approximately $.5 million in the first quarter of 2004 and $.3 million in the
first quarter of 2003. None of the individual components of the net periodic
expense was individually significant for either period.
As discussed in Note 9, Whitney has 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.
This deferral is effective until authoritative guidance on the accounting for
the federal subsidy introduced by the act is issued, or until certain
significant events occur, such as a plan amendment. The authoritative guidance
that is eventually issued could require the Company to change previously
reported information, although the impact would 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. No stock-based compensation
awards were made during the first quarter of 2004 or 2003.
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 recognized no compensation expense with respect to fixed awards of stock
options. The Company has granted 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. The
compensation expense recognized under APB No. 25 for the Company's restricted
stock grants to employees 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
March 31
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(dollars in thousands, except per share data) 2004 2003
-----------------------------------------------------------------------------------------------------------
Net income $26,158 $23,470
Stock-based compensation expense included in reported net income,
net of related tax effects 1,469 797
Stock-based compensation expense determined under fair value-based
method for all awards, net of related tax effects (1,108) (1,011)
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Pro forma net income $26,519 $23,256
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Earnings per share:
Basic - as reported $.65 $.59
Basic - pro forma .66 .58
Diluted - as reported .64 .58
Diluted - pro forma .65 .58
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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 March 31, 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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March 31 December 31
(dollars in thousands) 2004 2003
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Commitments to extend credit - revolving $1,514,406 $1,410,555
Commitments to extend credit - nonrevolving 349,761 355,076
Standby and other letters of credit 313,876 292,558
Credit card and related lines 405,319 388,902
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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 March 31, 2004, only one swap with a remaining notional amount of $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. There was no ineffectiveness recognized in earnings during the quarter.
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
March 31
--------------------------------------------------------------------------------
(dollars in thousands, except per share data) 2004 2003
--------------------------------------------------------------------------------
Numerator:
Net income $26,158 $23,470
Effect of dilutive securities - -
--------------------------------------------------------------------------------
Numerator for diluted earnings per share $26,158 $23,470
--------------------------------------------------------------------------------
Denominator:
Weighted-average shares outstanding 40,191,444 39,785,332
Effect of potentially dilutive securities
and contingently issuable shares 669,830 431,023
--------------------------------------------------------------------------------
Denominator for diluted earnings per share 40,861,274 40,216,355
--------------------------------------------------------------------------------
Earnings per share:
Basic $.65 $.59
Diluted .64 .58
--------------------------------------------------------------------------------
Antidilutive stock options - 584,325
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NOTE 9 - ACCOUNTING PRONOUNCEMENTS
In December 2003, the 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 a staff
position in early January 2004 in response to certain accounting issues raised
by the enactment of the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 on December 8, 2003. The most significant issue
concerns how and when to account for the federal subsidy to plan sponsors that
is provided for in the act. The staff position allowed a company to defer
recognizing the impact of this new legislation in its accounting for
postretirement health benefits. If elected, the deferral is effective until
authoritative guidance on the accounting for the federal subsidy is issued, or
until certain significant events occur, such as a plan amendment. Whitney made
this deferral election. The authoritative guidance that is eventually issued
could require the Company to change previously reported information, although
the impact would 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. 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.
WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(Unaudited)
----------------------------------------------------------------------------------------------------------------------------
2004 2003
--------------------------------------------------------------------------
(dollars in thousands, except per share data) First Quarter Fourth Quarter Third Quarter Second Quarter First Quarter
----------------------------------------------------------------------------------------------------------------------------
QUARTER-END BALANCE SHEET DATA
Total assets $7,855,897 $7,754,982 $7,310,341 $7,284,531 $7,183,424
Earning assets 7,333,849 7,193,709 6,747,540 6,714,784 6,656,438
Loans 4,984,165 4,882,610 4,669,536 4,628,728 4,525,436
Investment securities 2,232,674 2,281,405 1,972,175 2,009,226 2,000,804
Deposits 6,298,390 6,158,582 5,964,257 5,960,436 5,896,760
Shareholders' equity 871,791 840,313 831,045 825,610 812,551
----------------------------------------------------------------------------------------------------------------------------
AVERAGE BALANCE SHEET DATA
Total assets $7,722,135 $7,389,183 $7,293,393 $7,191,244 $7,074,196
Earning assets 7,175,034 6,858,134 6,772,338 6,686,717 6,550,281
Loans 4,906,710 4,733,236 4,620,970 4,564,160 4,461,849
Investment securities 2,245,626 2,069,396 1,974,230 1,997,090 1,975,563
Deposits 6,119,857 6,039,349 5,949,378 5,898,219 5,762,353
Shareholders' equity 855,476 835,924 822,678 824,584 811,347
----------------------------------------------------------------------------------------------------------------------------
INCOME STATEMENT DATA
Interest income $86,540 $83,791 $83,856 $84,385 $86,037
Interest expense 9,350 8,830 9,573 11,863 13,243
Net interest income 77,190 74,961 74,283 72,522 72,794
Net interest income (TE) 78,671 76,346 75,696 73,857 74,216
Provision for loan losses (2,000) - (4,000) - 500
Noninterest income 20,907 21,345 23,538 23,126 21,495
Net securities gains in noninterest income - - 863 - -
Noninterest expense 62,026 61,652 61,332 60,645 59,294
Net income 26,158 23,820 27,502 23,750 23,470
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KEY RATIOS
Return on average assets 1.36% 1.28% 1.50% 1.32% 1.35%
Return on average shareholders' equity 12.30 11.31 13.26 11.55 11.73
Net interest margin 4.40 4.43 4.45 4.43 4.57
Average loans to average deposits 80.18 78.37 77.67 77.38 77.43
Efficiency ratio 62.29 63.11 62.35 62.53 61.95
Allowance for loan losses to loans 1.16 1.22 1.31 1.43 1.46
Nonperforming assets to loans plus foreclosed assets
and surplus property .56 .62 .73 .87 .98
Net annualized charge-offs (recoveries) to average loans (.01) .16 .07 (.03) .07
Average shareholders' equity to average assets 11.08 11.31 11.28 11.47 11.47
Shareholders' equity to total assets 11.10 10.84 11.37 11.33 11.31
Leverage ratio 9.96 10.13 10.04 9.91 9.86
----------------------------------------------------------------------------------------------------------------------------
COMMON SHARE DATA
Earnings Per Share
Basic $.65 $.59 $.69 $.60 $.59
Diluted .64 .59 .68 .59 .58
Dividends
Cash dividends per share $.33 $.33 $.30 $.30 $.30
Dividend payout ratio 51.20% 56.02% 44.01% 50.93% 51.29%
Book Value Per Share $21.48 $20.78 $20.59 $20.48 $20.25
Trading Data
High price $44.00 $41.32 $36.00 $34.46 $34.55
Low price 39.72 33.88 31.55 31.44 30.75
End-of-period closing price 41.74 40.99 34.00 32.00 34.20
Trading volume 3,488,599 3,077,088 5,300,892 8,201,397 6,344,880
Average Shares Outstanding
Basic 40,191,444 40,067,684 39,993,350 39,867,549 39,785,332
Diluted 40,861,274 40,620,758 40,383,047 40,360,070 40,216,355
----------------------------------------------------------------------------------------------------------------------------
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.
|
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 March 31,
2004 and on their results of operations during the first quarters of 2004 and
2003. Virtually 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.
OVERVIEW
Whitney earned $26.2 million for the quarter ended March 31, 2004, an
11% increase over net income of $23.5 million reported for the first quarter of
2003. Per share earnings were up 10%, to $.65 per basic share and $.64 per
diluted share in 2004's first quarter from $.59 and $.58, respectively, in the
year-earlier period.
Selected highlights from the first quarter's results follow:
o Growth in earning assets spurred a $4.5 million, or 6%, increase
in net interest income (TE) compared to the first quarter of 2003.
The net interest margin (TE) was a healthy 4.40% for the first
quarter of 2004, although there was moderate margin compression
relative to the year-earlier period that partly offset the
favorable impact of earning asset growth. The margin for the
current quarter was down only slightly from 4.43% in the fourth
quarter of 2003. Whitney's asset yields and funding costs have
begun to stabilize after trending lower during a period of
sustained low market interest rates.
o Improved credit quality during the first quarter of 2004 led to a
$2 million negative provision for loan losses during the period.
Whitney recorded no provision in 2003's fourth quarter and a
provision of $.5 million in the first quarter of 2003. The total
of loans criticized through the internal credit risk
classification process at March 31, 2004 was down $11 million from
year-end 2003. There was a small net recovery of charge-offs in
the first quarter of 2004, compared to net charge-offs of $1.9
million in the fourth quarter of 2003 and $.7 million in 2003's
first quarter.
o Noninterest income decreased 3%, or $.6 million, from the first
quarter of 2003. Though most major sources of noninterest income
posted stable to higher results compared to the first quarter of
2003, fee income from Whitney's secondary mortgage market
operations was down by $1.5 million. Home loan production, and
refinancing activity in particular, began a marked slowdown toward
the end of the third quarter of 2003 as mortgage rates trended
higher.
o Noninterest expense increased 5%, or $2.7 million, from 2003's
first quarter. Personnel expense was up 5%, or $1.6 million, in
total, with employee compensation
up 3% and employee benefits higher by 13%. An increase in the expense estimated for pension and retiree health benefits was the main factor behind the overall rise in employee benefits for the first quarter of 2004. Branch additions and enhancements to customer service capabilities contributed to moderate increases in several other major expense categories compared to the first quarter of 2003.
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, (a) comments on the future level of funds available
in the customer deposit base, (b) statements of the results of net interest
income simulations run by the Company to measure interest rate sensitivity, (c)
comments about the performance of Whitney's net interest income and net interest
margin assuming certain future conditions, (d) comments about possible future
levels of income from secondary mortgage market operations, (e) projections of
expense levels for retirement benefits.
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.
FINANCIAL CONDITION
LOANS, CREDIT RISK MANAGEMENT AND ALLOWANCE FOR LOAN LOSSES
Loan Portfolio Developments
Total loans increased $102 million, or 2%, from year-end 2003 to the
end of 2004's first quarter, and were up 10%, or $459 million, from the end of
2003's first quarter. Beginning in the latter half of 2002, the commercial loan
portfolio has shown steady growth, with strong support from new customer
development. Table 1, which is based on regulatory reporting codes, shows loan
balances at March 31, 2004 and at the end of the four prior quarters.
TABLE 1. LOANS
---------------------------------------------------------------------------------------------------------------
2004 2003
---------------------------------------------- ----------------------------------------------------------------
(dollars in thousands) March 31 December 31 September 30 June 30 March 31
---------------------------------------------------------------------------------------------------------------
Commercial, financial and
agricultural $2,203,213 $2,213,207 $2,041,629 $2,022,159 $1,957,036
Real estate -
commercial and other 1,821,445 1,726,212 1,705,289 1,667,838 1,617,929
Real estate -
residential mortgage 628,331 619,869 610,795 615,742 630,519
Individuals 331,176 323,322 311,823 322,989 319,952
---------------------------------------------------------------------------------------------------------------
Total loans $4,984,165 $4,882,610 $4,669,536 $4,628,728 $4,525,436
---------------------------------------------------------------------------------------------------------------
|
The portfolio of commercial loans, other than those secured by real
property, was stable between year-end 2003 and March 31, 2004. This portfolio
sector grew 13%, or $246 million, from the end of the year-earlier quarter.
Overall the portfolio has remained well-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 $510
million, or approximately 10% of total loans at the end of 2004's first quarter,
the same percentage as at year-end 2003. The total at March 31, 2004 was up $93
million from the end of the year-earlier quarter, with the majority of this
growth in the exploration and production sector of this industry. The larger
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 $350 million at the end of 2004's first quarter, including
approximately $152 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 loans secured by
properties used in commercial or industrial operations, grew 6%, or $95 million,
from December 31, 2003, and has increased 13%, or $204 million, since the end of
the first quarter 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.
Whitney continues to sell most of its residential mortgage loan
production in the secondary market, and the balance in this portfolio segment
has trended lower in recent years. The moderate portfolio growth in the fourth
quarter of 2003 and this year's first quarter reflected the increased promotion
of tailored mortgage products that are held in the portfolio as well as a
slowdown in payoffs on refinancings.
Credit Risk Management and Allowance for Loan Losses
Whitney manages credit risk through adherence to consistent
underwriting standards established by its Credit Policy Committee. The credit
administration function ensures consistent underwriting, policy administration
and monitoring 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
-------------------------------------------------------------- -------------------------------------------------
March December September June March
(dollars in thousands) 31 31 30 30 31
------------------------------------------------------------------------------------------------------------------
Loans accounted for on a nonaccrual basis $25,095 $26,776 $30,533 $35,622 $41,050
Restructured loans 98 114 215 224 243
------------------------------------------------------------------------------------------------------------------
Total nonperforming loans 25,193 26,890 30,748 35,846 41,293
Foreclosed assets and surplus property 2,812 3,490 3,255 4,556 3,283
------------------------------------------------------------------------------------------------------------------
Total nonperforming assets $28,005 $30,380 $34,003 $40,402 $44,576
------------------------------------------------------------------------------------------------------------------
Loans 90 days past due still accruing $3,653 $3,385 $2,725 $3,445 $3,926
------------------------------------------------------------------------------------------------------------------
Ratios:
Nonperforming assets to loans plus
foreclosed assets and surplus property .56% .62% .73% .87% .98%
Allowance for loan losses to
nonperforming loans 228.65 221.18 199.69 184.80 159.54
Loans 90 days past due still accruing to
loans .07 .07 .06 .07 .09
------------------------------------------------------------------------------------------------------------------
|
Criticized loans are credits with above-average weaknesses as identified through the internal risk-rating process. The total of criticized loans at March 31, 2004 was down $11 million from year-end 2003, including a $1.7 million reduction in total nonperforming loans as shown in Table 2. Loans identified as having well-defined weaknesses that would likely result in some loss if not corrected decreased $12 million during the first quarter of 2004, to a total of $95 million at quarter end. The buyout by another bank of Whitney's commitment under a larger shared-credit facility was the main factor behind this decrease. Loans warranting special attention totaled $67 million at the end of the current quarter, down $4 million from year-end 2003. Loans with doubtful prospects for full repayment increased $5 million for the first quarter of 2004, largely on the downgrade of one commercial credit.
TABLE 3. SUMMARY OF ACTIVITY IN THE ALLOWANCE FOR LOAN LOSSES
------------------------------------------------------------------------------------------------------------------
Three Months Ended
March 31
------------------------------------------------------------------------------------------------------------------
(dollars in thousands) 2004 2003
------------------------------------------------------------------------------------------------------------------
Balance at the beginning of period $59,475 $66,115
Provision for loan losses charged to operations (2,000) 500
Loans charged to the allowance:
Commercial, financial and agricultural (525) (1,141)
Real estate - commercial and other (90) -
Real estate - residential mortgage (60) (137)
Individuals (721) (728)
------------------------------------------------------------------------------------------------------------------
Total charge-offs (1,396) (2,006)
------------------------------------------------------------------------------------------------------------------
Recoveries of loans previously charged off:
Commercial, financial and agricultural 1,082 347
Real estate - commercial and other 36 281
Real estate - residential mortgage 68 80
Individuals 338 561
------------------------------------------------------------------------------------------------------------------
Total recoveries 1,524 1,269
------------------------------------------------------------------------------------------------------------------
Net (charge-offs) recoveries 128 (737)
------------------------------------------------------------------------------------------------------------------
Balance at the end of period $57,603 $65,878
------------------------------------------------------------------------------------------------------------------
Ratios:
Net annualized charge-offs (recoveries) to average loans (.01)% .07%
Gross annualized charge-offs to average loans .11 .18
Recoveries to gross charge-offs 109.17 63.26
Allowance for loan losses to loans at period end 1.16 1.46
------------------------------------------------------------------------------------------------------------------
|
The allowance required for criticized loans was reduced by $1.6 million during the first quarter of 2004, including a $.8 million reduction in the allowance for loans considered impaired under SFAS No. 114. The overall allowance needed at March 31, 2004 was $1.9 million below the level at December 31, 2003. Table 3 compares first quarter 2004 activity in the allowance for loan losses with the first quarter of 2003. There was a small recovery of charge-offs in the first quarter of 2004, compared to net charge-offs of $.7 million in 2003's first quarter.
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. The portfolio total of $2.23 billion at March 31, 2004
was down 2% compared to December 31, 2003 but up 12%, or $232 million, from the
end of 2003's first quarter. The average investment in securities in the first
quarter of 2004 was up 14%, or $270 million, from the year-earlier period.
Short-term liquidity investments, including federal funds sold, totaled
$101 million at the end of 2004's first quarter, compared to $14 million at
December 31, 2003 and $72 million a year earlier. The level at March 31, 2004,
however, reflected an unexpected large deposit of approximately $80 million at
quarter end that was held only briefly. Average short-term liquidity investments
totaled $12 million for the first quarter of 2004.
Securities available for sale constituted 90% of the total investment
portfolio at March 31, 2004. There was a net unrealized gain on this portfolio
segment of $31 million at quarter end that was concentrated in mortgage-backed
securities. The overall unrealized gain represented 1.6% 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 quarters 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.
DEPOSITS AND BORROWINGS
Deposits at March 31, 2004 were up 2%, or $140 million, from the level
at year-end 2003. Compared to the end of the year-earlier quarter, deposits were
up 7%, or $402 million. Short-term and other borrowings were little changed from
year-end 2003, but were up 52%, or $207 million, compared to the year-earlier
quarter. Deposit growth and additional short-term borrowings supported the
growth in earning assets through the end of the first quarter of 2004, which
totaled $140 million compared to year-end 2003 and $677 million compared to
March 31, 2003.
TABLE 4. DEPOSITS
--------------------------------------------------------------------------------------------------------------
2004 2003
---------------------------------------------- ---------------------------------------------------------------
(dollars in thousands) March 31 December 31 September 30 June 30 March 31
--------------------------------------------------------------------------------------------------------------
Noninterest-bearing
demand deposits $1,937,379 $1,943,248 $1,815,163 $1,805,861 $1,728,356
NOW account deposits 860,650 827,360 708,682 698,641 678,442
Money market deposits 1,373,574 1,396,420 1,407,112 1,387,765 1,402,382
Savings deposits 620,087 585,943 564,322 554,143 551,562
Other time deposits 730,186 745,478 773,321 803,837 825,705
Time deposits $100,000
and over 776,514 660,133 695,657 710,189 710,313
--------------------------------------------------------------------------------------------------------------
Total deposits $6,298,390 $6,158,582 $5,964,257 $5,960,436 $5,896,760
--------------------------------------------------------------------------------------------------------------
|
Sustained demand for deposit products and appropriate deposit pricing
strategies have helped maintain a favorable mix of deposits through the first
quarter of 2004. Table 4 presents the composition of deposits at March 31, 2004
and at the end of the previous four quarters.
Total lower-cost deposits at the end of the first quarter of 2004 were
up close to 1% from year-end 2003 and were 10%, or $431 million, higher than the
year-earlier period, with noninterest-bearing demand deposits up 12% and
deposits in lower-cost interest-bearing products up 8%. Lower-cost deposits
remained approximately three-quarters of total deposits over this period, and
noninterest-bearing demand deposits were a fairly steady 30% of total deposits.
Higher-cost time deposits were down 2%, or $29 million, from 2003's first
quarter, with some of these funds flowing to other lower-cost products. The
increase in time deposits of $100,000 and over in the first quarter of 2004
largely reflected the addition of competitively bid public funds. Public funds
also factored into the fluctuations in NOW deposits from the third quarter of
2003 through the end of 2004's first quarter. As noted earlier, the Bank
received an unexpected $80 million deposit at the most recent quarter end that
was held briefly in a NOW account.
SHAREHOLDERS' EQUITY AND CAPITAL ADEQUACY
Shareholders' equity totaled $872 million at March 31, 2004, which
represented an increase of $31 million from the end of 2003. During the first
quarter of 2004, Whitney retained $13 million of earnings, net of dividends
declared, and recognized $6 million in additional equity from activity in
stock-based compensation plans for employees and directors, including option
exercises. There was also a $12 million increase in other comprehensive income
for the quarter representing an unrealized net holding gain on securities
available for sale. The Company paid 51% of its earnings for the first quarter
of 2004 in dividends, little changed from the 50% payout ratio for the full year
in 2003.
The ratios in Table 5 indicate that the Company remained strongly capitalized at March 31, 2004. The increase in risk-weighted assets since year-end 2003 resulted mainly from an increase in loans and other on-balance-sheet assets.
TABLE 5. RISK-BASED CAPITAL AND CAPITAL RATIOS
--------------------------------------------------------------------------------------------
March 31 December 31
(dollars in thousands) 2004 2003
--------------------------------------------------------------------------------------------
Tier 1 regulatory capital $760,012 $739,236
Tier 2 regulatory capital 57,603 59,475
--------------------------------------------------------------------------------------------
Total regulatory capital $817,615 $798,711
--------------------------------------------------------------------------------------------
Risk-weighted assets $5,929,220 $5,777,094
--------------------------------------------------------------------------------------------
Ratios
Leverage (Tier 1 capital to average assets) 9.96% 10.13%
Tier 1 capital to risk-weighted assets 12.82 12.80
Total capital to risk-weighted assets 13.79 13.83
Shareholders' equity to total assets 11.10 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 first
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 quarters 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 first quarter of 2004.
Management anticipates that some of this funds availability will moderate with
increased economic activity, renewed confidence in the capital markets and
rising market interest rates and has factored this possibility into its
liquidity projections and planning procedures.
At March 31, 2004, Whitney Holding Corporation had approximately $178 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 expected to close in the third quarter of 2004. The cash component of the purchase price will total approximately $23 million.
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
first 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 March 31, 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 March 31, 2004
----------------------------------------------------------------------------------------------------------------
Less than 1 - 3 3 - 5 More than
Total 1 year years years 5 years
----------------------------------------------------------------------------------------------------------------
Loan commitments - revolving $1,514,406 $1,099,791 $356,224 $57,528 $863
Loan commitments - nonrevolving 349,761 163,735 186,026 - -
Credit card and personal credit lines 405,319 405,319 - - -
Standby and other letters of credit 313,876 245,895 67,981 - -
----------------------------------------------------------------------------------------------------------------
Total $2,583,362 $1,914,740 $610,231 $57,528 $863
----------------------------------------------------------------------------------------------------------------
|
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
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 first 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 $16.9 million, or
5.5%, and decrease $15.5 million, or 5.0%, 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.
During 2003 the Bank began using interest rate swaps to bring the
market risk associated with longer-duration fixed-rate loans desired by certain
customers in line with Whitney's asset/liability management objectives. Through
March 31, 2004, swap activity has been very limited, with no significant impact
on the Company's interest rate sensitivity.
RESULTS OF OPERATIONS
NET INTEREST INCOME
Whitney's net interest income (TE) increased $4.5 million, or 6%, from
the first quarter of 2003. The favorable impact of 10% growth in earning assets
and an additional day's interest in the current period was partly offset by
moderate compression in the net interest margin (TE) relative to the
year-earlier period. First quarter net interest income (TE) in 2004 was up $2.3
million, or 3%, from the fourth quarter of 2003.
As noted earlier, Whitney is moderately asset sensitive, which implies
that its net interest margin would tend to compress in a declining rate
environment, holding other factors constant, but tend to widen in a rising 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) remained a
healthy 4.40% in 2004's first quarter, down 17 basis points from the
year-earlier quarter and only slightly below the 4.43% margin in the fourth
quarter of 2003. Tables 7 and 8 show the components of changes in the Company's
net interest income (TE) and net interest margin (TE).
Whitney's asset yields and funding costs have begun to stabilize after
trending lower during a period of sustained low market interest rates. The
overall yield on average earning assets for the first quarter of 2004 was 46
basis points lower than in the year-earlier period, but was essentially level
with the yield for the fourth quarter of 2003. Loan yields were also relatively
stable compared to the fourth quarter of 2003, but were down 57 basis points
compared to the first quarter of 2003. Because a substantial portion of the loan
portfolio carries adjustable rates tied to market indices or prime, the overall
loan yield tends to be more responsive to changes in market rates than the
overall yield on the largely fixed-rate investment portfolio. The yield on the
investment portfolio in the first quarter of 2004 was 29 basis points below the
year-earlier period and up slightly from 2003's fourth quarter. The investment
portfolio yield in 2004's first quarter 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 first quarter of 2003. Average loans,
including loans held for sale, were steady at 69% of earning assets. Investment
securities increased to 31% of average earning assets compared to 30% in the
year-earlier period.
Funding costs for the current year's first quarter were down 29 basis
points compared to the first quarter of 2003, but were up slightly from 2003's
fourth quarter, mainly reflecting an increase in short-term borrowings to
partially fund growth in the loan and investment portfolios. The rate on average
interest-bearing deposits other than time deposits decreased by 32 basis points
from the first quarter of 2003 while the rate on time deposits fell 70 basis
points. Compared to 2003's fourth quarter, the rate on average time deposits
decreased 5 basis points and the rate on other interest-bearing deposits was
essentially flat.
TABLE 7. SUMMARY OF AVERAGE BALANCE SHEETS, NET INTEREST INCOME(TE)(a) AND INTEREST RATES
---------------------------------------------------------------------------------------------------------------------------
First Quarter 2004 Fourth Quarter 2003 First Quarter 2003
---------------------------------------------------------------------------------------------------------------------------
Average Average Average
(dollars in thousands) Balance Interest Rate Balance Interest Rate Balance Interest Rate
---------------------------------------------------------------------------------------------------------------------------
ASSETS
EARNING ASSETS
Loans (TE)(b) (c) $4,917,213 $63,193 5.17% $4,751,187 $62,296 5.20% $4,521,129 $64,055 5.74%
---------------------------------------------------------------------------------------------------------------------------
Mortgage-backed securities 1,437,831 15,913 4.43 1,160,121 12,941 4.46 1,163,458 13,688 4.71
U.S. agency securities 385,251 3,333 3.46 467,226 4,224 3.62 391,987 4,152 4.24
U.S. Treasury securities 158,036 1,549 3.94 199,995 1,879 3.73 176,932 1,613 3.70
Obligations of states and political
subdivisions (TE) 229,439 3,711 6.47 205,292 3,356 6.54 191,651 3,247 6.78
Other securities 35,069 292 3.33 36,762 382 4.16 51,535 543 4.21
---------------------------------------------------------------------------------------------------------------------------
Total investment securities 2,245,626 24,798 4.42 2,069,396 22,782 4.40 1,975,563 23,243 4.71
---------------------------------------------------------------------------------------------------------------------------
Federal funds sold and
short-term investments 12,195 30 .99 37,551 98 1.04 53,589 161 1.22
---------------------------------------------------------------------------------------------------------------------------
Total earning assets 7,175,034 $88,021 4.93% 6,858,134 $85,176 4.94% 6,550,281 $87,459 5.39%
---------------------------------------------------------------------------------------------------------------------------
NONEARNING ASSETS
Other assets 606,708 592,570 590,508
Allowance for loan losses (59,607) (61,521) (66,593)
---------------------------------------------------------------------------------------------------------------------------
Total assets $7,722,135 $7,389,183 $7,074,196
---------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND
SHAREHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES
NOW account deposits $ 791,812 $ 668 .34% $ 744,553 $ 581 .31% $ 687,573 $ 893 .53%
Money market deposits 1,409,981 2,292 .65 1,435,926 2,366 .65 1,381,507 3,599 1.06
Savings deposits 602,763 439 .29 575,905 403 .28 538,379 742 .56
Other time deposits 738,464 2,455 1.34 757,140 2,671 1.40 834,169 4,385 2.13
Time deposits $100,000 and over 698,795 2,116 1.22 669,322 2,103 1.25 662,523 2,924 1.79
---------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 4,241,815 7,970 .76 4,182,846 8,124 .77 4,104,151 12,543 1.24
---------------------------------------------------------------------------------------------------------------------------
Short-term and other borrowings 692,076 1,380 .80 453,268 706 .62 439,948 700 .65
---------------------------------------------------------------------------------------------------------------------------
Total interest-bearing
liabilities 4,933,891 $ 9,350 .76% 4,636,114 $ 8,830 .76% 4,544,099 $13,243 1.18%
---------------------------------------------------------------------------------------------------------------------------
NONINTEREST-BEARING
LIABILITIES AND
SHAREHOLDERS' EQUITY
Demand deposits 1,878,042 1,856,503 1,658,202
Other liabilities 54,726 60,642 60,548
Shareholders' equity 855,476 835,924 811,347
---------------------------------------------------------------------------------------------------------------------------
Total liabilities and
shareholders' equity $7,722,135 $7,389,183 $7,074,196
---------------------------------------------------------------------------------------------------------------------------
Net interest income and margin (TE) $78,671 4.40% $76,346 4.43% $74,216 4.57%
Net earning assets and spread $2,241,143 4.17% $2,222,020 4.18% $2,006,182 4.21%
Interest cost of funding earning assets .53% .51% .82%
---------------------------------------------------------------------------------------------------------------------------
(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 $26,095, $28,556 and $38,050 respectively, in the first
quarter of 2004 and the fourth and first quarters of 2003.
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TABLE 8. SUMMARY OF CHANGES IN NET INTEREST INCOME(TE)(a) (b)
------------------------------------------------------------------------------------------------------------------
First Quarter 2004 Compared to:
Fourth Quarter 2003 First Quarter 2003
--------------------------------------------------------------------
Due to Due to
Change in Total Change in Total
------------------ Increase ------------------ Increase
(dollars in thousands) Volume Rate (Decrease) Volume Rate (Decrease)
------------------------------------------------------------------------------------------------------------------
INTEREST INCOME (TE)
Loans (TE) $1,460 $(563) $ 897 $5,639 $(6,501) $ (862)
------------------------------------------------------------------------------------------------------------------
Mortgage-backed securities 3,074 (102) 2,972 3,071 (846) 2,225
U.S. agency securities (715) (176) (891) (70) (749) (819)
U.S. Treasury securities (427) 97 (330) (173) 109 (64)
Obligations of states and political
subdivisions (TE) 391 (36) 355 616 (152) 464
Other securities (17) (73) (90) (152) (99) (251)
------------------------------------------------------------------------------------------------------------------
Total investment securities 2,306 (290) 2,016 3,292 (1,737) 1,555
------------------------------------------------------------------------------------------------------------------
Federal funds sold and
short-term investments (64) (4) (68) (105) (26) (131)
------------------------------------------------------------------------------------------------------------------
Total interest income (TE) 3,702 (857) 2,845 8,826 (8,264) 562
------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
NOW account deposits 35 52 87 125 (350) (225)
Money market deposits (74) - (74) 75 (1,382) (1,307)
Savings deposits 17 19 36 83 (386) (303)
Other time deposits (77) (139) (216) (454) (1,476) (1,930)
Time deposits $100,000 and over 71 (58) 13 158 (966) (808)
------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits (28) (126) (154) (13) (4,560) (4,573)
------------------------------------------------------------------------------------------------------------------
Short-term and other borrowings 431 243 674 478 202 680
------------------------------------------------------------------------------------------------------------------
Total interest expense 403 117 520 465 (4,358) (3,893)
------------------------------------------------------------------------------------------------------------------
Change in net interest income (TE) $3,299 $(974) $2,325 $8,361 $(3,906) $4,455
------------------------------------------------------------------------------------------------------------------
(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.
|
Sustained low market rates coupled with strong demand for deposit products allowed Whitney to implement deposit-pricing strategies to help gradually shift the mix of funds in favor of noninterest-bearing and lower-cost interest-bearing sources. This overall funding mix remained favorable in the first quarter of 2004, although the Bank accessed additional short-term borrowings and public fund time deposits to support earning asset growth. Average noninterest-bearing deposits funded 26% of average earning assets in the first quarter of 2004, up from a healthy 25% in 2003's first quarter, and the percentage of funding from all noninterest-bearing sources was steady at 31% between these periods. Lower-cost interest-bearing deposits supported close to 39% of earning assets, down slightly from 40% in the year-earlier period. Higher-cost sources of funds, which include time deposits and short-term borrowings, were level at 30% of average earning assets.
PROVISION FOR LOAN LOSSES
Whitney recorded a $2 million negative provision for loan losses in the
first quarter of 2004, compared to no provision in 2003's fourth quarter and a
provision of $.5 million in the first quarter of 2003. There was a small net
recovery of charge-offs in the first quarter of 2004, compared to net
charge-offs of $1.9 million in the fourth quarter of 2003 and $.7 million in
2003's first 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 $20.9 million for the first quarter of 2004,
a decrease of 3%, or $.6 million, from the first quarter of 2003. Though most
major sources of noninterest income posted stable to higher results compared to
the first quarter of 2003, fee income from Whitney's secondary mortgage market
operations was down by $1.5 million, or 53%. Home loan production, and
refinancing activity in particular, began a marked slowdown toward the end of
the third quarter of 2003 as mortgage rates trended higher. Without a return to
a more favorable rate environment, both overall loan production levels and
secondary mortgage market fee income for the second quarter of 2004 are expected
to be well below the results for the year-earlier period.
Income from bank-issued credit and debit cards was up 6%, or $.1
million, compared to 2003's first quarter. Fee income from credit card activity
grew 16% in the first quarter of 2004, consistent with the growth in transaction
volume. Debit card fee income, however, was down 2% from the year-earlier
period, despite a 15% 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 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 first quarter of 2004 were
little changed 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 rose 7%, or $.1 million, compared to the first quarter of 2003
aided by new business opportunities and improved equity market valuations.
Other noninterest income was up 11%, or $.6 million, between the first
quarters of 2003 and 2004, including growth in investment service fees and fees
on commercial credit facilities, among other contributors.
NONINTEREST EXPENSE
Total noninterest expense of $62.0 million in the first quarter of 2004
was 5%, or $2.7 million, higher than the total for the year-earlier period.
Personnel expense increased 5%, or $1.6 million, in total, with
employee compensation up 3%, or $.7 million, and employee benefits higher by
13%, or $.9 million. The increase in employee compensation was consistent with
the increase in base pay. A sharp reduction in commission-related pay, mainly
from lower home loan production, was offset by higher stock-based compensation
under the management incentive plan that was primarily driven by an increase in
the value of Whitney's stock.
Defined benefit pension plan expense and the cost of providing health
benefits to retirees increased a combined $.7 million in the first quarter of
2004. This was the main factor behind the overall rise in employee benefits
compared to 2003's first quarter. The annual increase in expense for these
retirement benefits in 2004 is expected to be less than $1 million. The Company
has also experienced an expected increase in the cost of providing current
health benefits in 2004.
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 related to its remaining
obligation under the lease when the move is completed, which is currently
planned for the third quarter of 2004.
Equipment and data processing expense also increased moderately as
expected in the first quarter of 2004. 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 7%
increase in the telecommunication and postage expense category.
The expense for legal and professional services was down $.5 million in
the first quarter of 2004, or a third lower than in the year-earlier period.
Legal expense, which covers services for both loan collection efforts and
general corporate matters, decreased $.4 million, reflecting a benefit from
favorable trends in credit quality, among other factors. Whitney's expense for
nonlegal professional services also declined as a lower level of spending on
project-specific consulting services offset an increase in independent audit
services and fees prompted by the implementation of the Sarbanes-Oxley Act of
2002.
An increase in marketing activities and the amortization of expanded
affordable housing investments were the larger factors of a recurring nature
behind the $1.4 million, or 15%, net increase in the categories making up other
noninterest expense. 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.
INCOME TAXES
The Company provided for income tax expense at an effective rate of
31.3% in the first quarter of 2004 compared to a rate of 32.0% in the 2003's
first quarter. 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 first quarter of 2004 compared to the year-earlier period.
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 maintains disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended) that are designed to ensure that information required to be disclosed
in the reports it files under the Securities Exchange Act of 1934, as amended,
is recorded, processed, summarized and reported within the time periods
specified in the Commission's rules and forms. Such controls include those
designed to ensure that material information is communicated to management,
including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO),
as appropriate to allow timely decisions regarding required disclosure.
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 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.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
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 30, 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
On a Form 8-K dated January 21, 2004, the registrant reported under Item 12 the release of its financial results for the quarter ended December 31, 2003. The news release covering the financial results was attached as an exhibit under Item 7.
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)
Date: May 10, 2004
----------------------------
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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* Executive agreement between Whitney Holding Corporation,
Whitney National Bank and Joseph S. Exnicios.
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.
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* Management contract or compensatory plan or arrangement.
Exhibit 10.1
WHITNEY HOLDING CORPORATION
and
WHITNEY NATIONAL BANK
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 Joseph S. Exnicios (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 April 5, 2004, the Holding Corporation, the
Bank, and the Executive agree as follows:
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.
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.
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.
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.
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
"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.
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
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
/s/ Joseph S. Exnicios
----------------------
Joseph S. Exnicios
By: /s/ William L. Marks
---------------------
William L. Marks
Date: April 6, 2004 Title: Chairman and CEO
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Date: April 5, 2004
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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 March 31, 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: May 10, 2004
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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 March 31, 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: May 10, 2004
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Exhibit 32
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,
(1) the Company's Quarterly Report on Form 10-Q for the period ended March 31, 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: May 10, 2004 By: /s/ William L. Marks
------------------------------ -----------------------------
William L. Marks
Chairman of the Board and
Chief Executive Officer
Dated: May 10, 2004 By: /s/ Thomas L. Callicutt, Jr.
------------------------------ -----------------------------
Thomas L. Callicutt, Jr.
Executive Vice President and
Chief Financial Officer
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