Quarterly Report

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 September 30, 2004 and on their results of operations during the third quarters of 2004 and 2003 and during the nine-month periods through September 30 in each year. Nearly all of the Company's operations are contained in its banking subsidiary, Whitney National Bank (the "Bank"). This discussion and analysis is intended to highlight and supplement information presented elsewhere in this quarterly report on Form 10-Q, particularly the consolidated financial statements and related notes in Item 1. This discussion and analysis should be read in conjunction with the Company's 2003 annual report on Form 10-K.
Certain financial information for prior periods has been reclassified to conform to the current presentation.

FORWARD-LOOKING STATEMENTS
This discussion contains "forward-looking statements" within the meaning of section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended. Such statements include, but may not be limited to, those regarding (a) changes in the duration of the investment portfolio with changes in market rates, (b) the future level of funds available in the customer deposit base, (c) the results of net interest income simulations run by the Company to measure interest rate sensitivity, (d) the performance of Whitney's net interest income and net interest margin assuming certain future conditions, (e) possible future levels of income from secondary mortgage market operations, and (f) expected increases in certain categories of noninterest expense.
Forward-looking statements, which Whitney makes in good faith, are based on numerous assumptions, certain of which may be referred to specifically in connection with a particular statement. Some of the more important assumptions include:
o expectations about overall economic strength and the performance of the economies in Whitney's market area,
o expectations about the movement of interest rates, including actions that may be taken by the Federal Reserve Board in response to changing economic conditions,
o reliance on existing or anticipated changes in laws or regulations affecting the activities of the banking industry and other financial service providers, and
o expectations regarding the nature and level of competition, changes in customer behavior and preferences, and Whitney's ability to execute its plans to respond effectively. Because it is uncertain whether future conditions and events will confirm these assumptions, there is a risk that Whitney's future results will differ materially from what is stated in or implied by such forward-looking statements. Whitney cautions the reader to consider this risk. Whitney undertakes no obligation to update or revise any forward-looking statement included in this discussion, whether as a result of new information, future events or developments, or for any other reason.

OVERVIEW
Whitney earned $22.1 million for the quarter ended September 30, 2004, or $.54 per basic share and $.53 per diluted share. Several significant expense items, which are discussed in more detail below and in the discussion of the results of operations, impacted the results for the period. These items totaled approximately $2.7 million pretax ($1.8 million after tax or $.04 per share). For the third quarter of 2003, Whitney reported net income of $27.5 million, or $.69 per basic share and $.68 per diluted share, including the positive impact of a $4 million pretax negative provision for loan losses ($2.6 million after tax or $.07 per share). Year-to-date earnings of $70.1 million in 2004 were 6% below the comparable period in 2003. Year-to-date per share earnings were $1.73 per basic share and $1.71 per diluted share in 2004, each approximately 8% lower than in 2003.
Selected third quarter highlights follow:
o Earning assets in the third quarter of 2004 were on average 8% higher than in 2003's third quarter. Average total loans, excluding loans originated for sale, have grown consistently throughout 2003 and 2004 and were up 13% in the current year's third quarter compared to the year-earlier period. The acquisition of Madison Bank in August 2004 contributed approximately 2% to the growth in average loans. The growth in earning assets compared to the third quarter of 2003 was largely matched by 8% growth in average deposits, approximately 2% of which was related to the Madison Bank acquisition and a branch acquisition in 2004's second quarter.
o Whitney's net interest income (TE) for the third quarter of 2004 increased $6.0 million, or 8%, compared to the third quarter of 2003, consistent with the growth in average earning assets. The net interest margin (TE) was 4.46% for the third quarter of 2004, slightly higher than the year-earlier period.
o Whitney made no provision for loan losses in the third quarter of 2004. There was a $4 million negative provision in the third quarter of 2003. Net-charge offs totaled $4.3 million in the third quarter of 2004, compared to $.8 million in the third quarter of 2003. Charge-offs and collections during the third quarter of 2004 led to a $6.9 million reduction in nonperforming loans from the end of 2004's second quarter, and the loss allowance required for impaired loans decreased $4.1 million over this period.
o Noninterest income decreased 15%, or $3.5 million, from the third quarter of 2003. Fee income from Whitney's secondary mortgage market operations was down $2.2 million as a marked slowdown in refinancings led to a sharp reduction in production compared to the third quarter of 2003. There was also a $.8 million decrease in gains realized on securities transactions.
o Noninterest expense increased 11%, or $6.9 million, from 2003's third quarter. Several significant expense items impacted the most recent quarter, including a $1.6 million loss on the abandonment of certain noncancelable facility leases, $.5 million in costs to convert Madison Bank's systems, and a $.6 million casualty loss for hurricane damage. Storm-related disruptions to banking operations were minimal. These items and other incremental costs associated with Madison Bank operations totaled nearly half of the overall increase in noninterest expense. Personnel expense was up 5%, or $1.7 million, in total, including $.4 million associated with Madison Bank.

FINANCIAL CONDITION

LOANS, CREDIT RISK MANAGEMENT AND ALLOWANCE FOR LOAN LOSSES
Loan Portfolio Developments
Total loans increased $497 million, or 10%, from year-end 2003 to the end of 2004's third quarter, and were up 15%, or $710 million, from the end of 2003's third quarter. Approximately $189 million of loans was acquired with Madison Bank in the third quarter of 2004. The loan portfolio has grown consistently throughout 2003 and 2004, although the rate of internal growth slowed somewhat in the most recent quarterly period. New customer development and demand from Whitney's established customer base for commercial, commercial real estate and real estate construction loans has accounted for most of the increase. Table 1, which is based on regulatory reporting codes for banks, shows loan balances at September 30, 2004 and at the end of the four prior quarters.

TABLE 1.  LOANS
---------------------------------------------------------------------------------------------------------------
                                                     2004                                      2003
------------------------------------------------------------------------------  -------------------------------
(dollars in thousands)            September 30       June 30         March 31        December 31   September 30
---------------------------------------------------------------------------------------------------------------
Commercial, financial and
    agricultural                   $2,263,882      $2,276,942      $2,203,213        $2,213,207     $2,041,629
Real estate  -  commercial,
    construction and other          2,104,184       1,882,044       1,821,445         1,726,212      1,705,289
Real estate  -
    residential mortgage              684,303         658,187         628,331           619,869        610,795
Individuals                           327,654         322,376         331,176           323,322        311,823
---------------------------------------------------------------------------------------------------------------
    Total loans                    $5,380,023      $5,139,549      $4,984,165        $4,882,610     $4,669,536
---------------------------------------------------------------------------------------------------------------

The portfolio of commercial loans, other than those secured by real property, increased 2%, or $51 million, between year-end 2003 and September 30, 2004. This portfolio sector grew 11%, or $222 million, from the end of 2003's third quarter. The Madison Bank acquisition had little impact on this portfolio segment. Overall the portfolio has remained diversified, with customers in a wide range of industries, including oil and gas exploration and production, marine transportation, wholesale and retail trade in and the 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 $483 million, or approximately 9% of total loans at the end of 2004's third quarter, down from 10% at year-end 2003. The total at September 30, 2004 was up $66 million from the end of the year-earlier quarter. The major portion of Whitney's customer base provides transportation and other services and products to support exploration and production activities, although market conditions have increased lending opportunities in the exploration and production sector.
Outstanding balances under participations in larger shared-credit loan commitments totaled $346 million at the end of 2004's third quarter, including approximately $121 million related to the oil and gas industry. Substantially all such shared credits are with customers operating in Whitney's market area.

The commercial real estate portfolio, which includes construction loans and loans secured by properties used in commercial or industrial operations, grew 22%, or $378 million, from December 31, 2003, and has increased 23%, or $399 million, since the end of the third quarter of 2003. $222 million of this growth occurred in the third quarter of 2004, almost two-thirds of which related to the Madison Bank acquisition. Whitney has been able to develop new business in this highly competitive market, including increased activity at its Houston operations, and the Company continues to finance new projects for its well-established customer base.
The residential mortgage loan portfolio has shown moderate growth beginning with the fourth quarter of 2003. Whitney has increased the promotion of tailored mortgage products that are held in the portfolio, although it continues to sell most conventional residential mortgage loan production in the secondary market. The Madison Bank acquisition accounted for most of the growth in this portfolio segment during the third quarter of 2004.

Credit Risk Management and Allowance for Loan Losses Whitney manages credit risk mainly through adherence to consistent underwriting and loan administration standards established by its Credit Policy Committee and through the efforts of the credit administration function to ensure consistent application and monitoring of standards throughout the Company. Lending officers are responsible for ongoing monitoring and the assignment of risk ratings to individual loans based on established guidelines. An independent credit review function reporting to the Audit Committee of the Board of Directors assesses the accuracy of officer ratings and the timeliness of rating changes and performs concurrent reviews of the underwriting process.
Management's evaluation of credit risk in the loan portfolio is ultimately reflected in the estimate of probable losses inherent in the 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.
Criticized loans are credits with above-average weaknesses as identified through the internal risk-rating process. The total of criticized loans would have decreased approximately $7 million during the third quarter of 2004 absent the impact of the Madison Bank acquisition. Including Madison Bank's loans, the total of criticized loans at September 30, 2004 was up $11 million from June 30, 2004. No Madison Bank loans were rated as having doubtful prospects for full repayment, and the total of loans classified as doubtful decreased $5 million for the third quarter of 2004, to $18 million at quarter end. This reduction included a $3.2 million charge-off from one commercial credit that had been first identified as impaired in the second quarter of 2004 after unexpected developments. Charge-offs and collections also led to a $7 million decrease in the total of nonperforming loans from the end of 2004's second quarter, as shown in Table 2. There were no significant additions to loans rated doubtful or to nonperforming loans during the most recent quarter. Loans rated as having well-defined weaknesses that would likely result in some loss if not corrected increased $4 million during the third quarter of 2004, to

a total of $83 million at quarter end. Loans warranting special attention totaled $73 million at the end of the current quarter, up $12 million from June 30, 2004.

TABLE 2.  NONPERFORMING ASSETS
--------------------------------------------------------------------------------------------------------------
                                                                2004                             2003
------------------------------------------------------------------------------------- ------------------------
                                                   September     June        March        December   September
(dollars in thousands)                                 30         30           31            31         30
--------------------------------------------------------------------------------------------------------------
Loans accounted for on a nonaccrual basis           $25,659     $32,560     $25,095       $26,776     $30,533
Restructured loans                                       61          74          98           114         215
--------------------------------------------------------------------------------------------------------------
   Total nonperforming loans                         25,720      32,634      25,193        26,890      30,748
Foreclosed assets and surplus property                2,950       2,450       2,812         3,490       3,255
--------------------------------------------------------------------------------------------------------------
   Total nonperforming assets                       $28,670     $35,084     $28,005       $30,380     $34,003
--------------------------------------------------------------------------------------------------------------
Loans 90 days past due still accruing                $4,814      $2,986      $3,653        $3,385      $2,725
--------------------------------------------------------------------------------------------------------------
Ratios:
   Nonperforming assets to loans
     plus foreclosed assets and surplus property        .53%        .68%        .56%          .62%        .73%
   Allowance for loan losses to
     nonperforming loans                             212.33      172.97      228.65        221.18      199.69
   Loans 90 days past due still accruing to
     loans                                              .09         .06         .07           .07         .06
--------------------------------------------------------------------------------------------------------------

TABLE 3.  SUMMARY OF ACTIVITY IN THE ALLOWANCE FOR LOAN LOSSES
---------------------------------------------------------------------------------------------------------------
                                                           Three Months Ended           Nine Months Ended
                                                               September 30                September 30
---------------------------------------------------------------------------------------------------------------
(dollars in thousands)                                     2004          2003           2004         2003
---------------------------------------------------------------------------------------------------------------
Balance at the beginning of period                       $56,447       $66,243        $59,475      $66,115
Allowance of acquired banks                                2,461           -            2,461          -
Provision for loan losses charged to operations              -          (4,000)           -         (3,500)
Loans charged to the allowance:
     Commercial, financial and agricultural               (4,369)       (1,241)        (8,030)      (6,059)
     Real estate - commercial, construction and other        (72)         (396)          (248)        (694)
     Real estate - residential mortgage                     (238)         (209)          (486)        (532)
     Individuals                                            (637)         (582)        (2,045)      (1,999)
---------------------------------------------------------------------------------------------------------------
         Total charge-offs                                (5,316)       (2,428)       (10,809)      (9,284)
---------------------------------------------------------------------------------------------------------------
Recoveries of loans previously charged off:
     Commercial, financial and agricultural                  601           429          2,063        1,563
     Real estate - commercial, construction and other         30           652             95        3,291
     Real estate - residential mortgage                       75            33            178        1,780
     Individuals                                             313           472          1,148        1,436
---------------------------------------------------------------------------------------------------------------
         Total recoveries                                  1,019         1,586          3,484        8,070
---------------------------------------------------------------------------------------------------------------
Net charge-offs                                           (4,297)         (842)        (7,325)      (1,214)
---------------------------------------------------------------------------------------------------------------
Balance at the end of period                             $54,611       $61,401        $54,611      $61,401
---------------------------------------------------------------------------------------------------------------
Ratios:

     Net annualized charge-offs to average loans             .33%          .07%           .19%         .04%
     Gross annualized charge-offs to average loans           .41           .21            .28          .27
     Recoveries to gross charge-offs                       19.17         65.32          32.23        86.92
     Allowance for loan losses to loans at period end       1.02          1.31           1.02         1.31
---------------------------------------------------------------------------------------------------------------

The allowance for criticized loans considered impaired under SFAS No. 114 decreased $4.1 million during the third quarter of 2004, although the net impact of all changes in criticized loans was to reduce the corresponding allowance by $2.9 million for the period. The overall allowance for loan losses determined as of September 30, 2004 was $1.8 million lower than the level at June 30, 2004. Management's regular quarterly reassessment of loss experience factors and the consideration of general economic and other qualitative risk factors had a minimal impact. The $188 million in total loans acquired with Madison Bank carried a $2.5 million allowance for loan losses.
Table 3 compares third quarter and year-to-date activity in the allowance for loan losses for 2004 with the comparable periods of 2003. There have been no significant trends related to industries or markets underlying the Company's charge-off and recovery activity or the changes in its nonperforming assets.

INVESTMENT SECURITIES
The portfolio of investment securities was maintained at a fairly stable level during most of 2003 as funds from deposit growth and reductions in liquidity investments and other earning assets were available to support steady loan growth. Toward the end of 2003, management executed a strategy, in response to market conditions, to invest in advance of the paydowns and prepayments on securities expected in 2004, and the portfolio increased $309 million during the fourth quarter of 2003. This strategy has been unwinding as planned during 2004, and the portfolio total of $2.04 billion at September 30, 2004 was down 10%, or $239 million, compared to December 31, 2003, with proceeds supporting loan growth. The average investment securities portfolio in the third quarter of 2004 was up 4%, or $79 million, from the year-earlier period.
The composition of the average portfolio and effective yields are shown in Table 7. Whitney has increased the proportion of both mortgage-backed securities and state and municipal obligations in the portfolio, and the duration of the portfolio increased to 3.2 years at both September 30, 2004 and year-end 2003 from 2.9 years at September 30, 2003. The duration of the portfolio at September 30, 2004 would extend to 3.8 years assuming an immediate 300 basis point increase in market rates, according to the Company's asset/liability management model. Duration provides a measure of the sensitivity of the portfolio's fair value to changes in interest rates.
Securities available for sale constituted 89% of the total investment portfolio at September 30, 2004. There was a minor net unrealized loss on this portfolio segment at quarter end. At year-end 2003, there was a net unrealized gain of $13 million, 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.
Management monitors securities that are subject to possible credit deterioration, such as obligations of states and political subdivisions, 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 nine months of 2004 or 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 September 30, 2004 were up 5%, or $332 million, from the level at year-end 2003. Compared to September 30, 2003, deposits were up 9%, or $527 million. Deposits at the locations acquired with Madison Bank in August 2004 and the branch purchase in June 2004 contributed approximately 3% to each of these growth rates. Short-term and other borrowings decreased 2%, or $11 million, from year-end 2003, but were up 31%, or $139 million, compared to the year-earlier quarter.
Continued demand for deposit products and appropriate deposit-pricing strategies helped maintain a favorable mix of deposits through the first nine months of 2004. Table 4 presents the composition of deposits at September 30, 2004 and at the end of the previous four quarters.

TABLE 4. DEPOSITS
---------------------------------------------------------------------------------------------------------------
                                                      2004                                     2003
------------------------------------------------------------------------------  -------------------------------
(dollars in thousands)            September 30       June 30        March 31         December 31   September 30
---------------------------------------------------------------------------------------------------------------
Noninterest-bearing
   demand deposits                 $2,008,634      $1,952,420      $1,937,379        $1,943,248     $1,815,163
NOW account deposits                  818,677         823,298         860,650           827,360        708,682
Money market deposits               1,353,702       1,343,645       1,373,574         1,396,420      1,407,112
Savings deposits                      691,402         644,783         620,087           585,943        564,322
Other time deposits                   729,410         715,594         730,186           745,478        773,321
Time deposits $100,000
   and over                           888,983         861,042         776,514           660,133        695,657
---------------------------------------------------------------------------------------------------------------
    Total deposits                 $6,490,808      $6,340,782      $6,298,390        $6,158,582     $5,964,257
---------------------------------------------------------------------------------------------------------------

The deposits from recent acquisitions accounted for most of the 3%, or $119 million, growth in total lower-cost deposits from year-end 2003. Lower-cost deposits, which exclude time deposits, were 8%, or $377 million, higher than the end of the third quarter of 2003, with noninterest-bearing demand deposits up 11% and deposits in lower-cost interest-bearing products up 7%. Lower-cost deposits remained at approximately three-quarters of total deposits over this period, and noninterest-bearing demand deposits were steady at close to 31% of total deposits.
Higher-cost time deposits were up 15%, or $213 million, from year-end 2003, and have increased 10%, or $149 million from the end of 2003's third quarter. Acquired deposits contributed $69 million to these totals, including approximately $28 million of time deposits of $100,000 and over. The increase in time deposits of $100,000 and over in 2004 also reflected the addition of competitively bid public funds and temporary excess funds of certain larger commercial customers, partly as an alternative to other short-term borrowings. Public fund time deposits totaled $194 million at September 30, 2004, up $103 million from year-end 2003 and $97 million from September 30, 2003. Public funds also factored into the fluctuations in NOW deposits from the third quarter of 2003 through the end of 2004's second quarter. The Bank received an unexpected $80 million commercial deposit at the end of 2004's first quarter that was held briefly in a NOW account.

SHAREHOLDERS' EQUITY AND CAPITAL ADEQUACY
Shareholders' equity totaled $920 million at September 30, 2004, which represented an increase of $80 million from the end of 2003. The 1.03 million shares issued in the acquisition of Madison BancShares, Inc. in August 2004 were valued at $42 million. During the first nine months of 2004, Whitney retained $29 million of earnings, net of dividends declared, and recognized $15 million in additional equity from activity in stock-based compensation plans for employees and directors, including option exercises. There was an $8 million decrease in other comprehensive income for the first nine months of 2004 representing an unrealized net holding loss on securities available for sale. The Company paid 58% of its earnings for the first nine months of 2004 in dividends, up from the 50% payout ratio for the full year in 2003.
The ratios in Table 5 indicate that the Company remained strongly capitalized at September 30, 2004. The increase in risk-weighted assets since year-end 2003 resulted mainly from an increase in loans, including those acquired with Madison Bank, and, to a lesser degree, from growth in off-balance-sheet obligations, such as loan facilities and letters of credit, which are converted to assets for the risk-based capital calculations. Goodwill and other intangible assets recognized in business acquisitions are excluded from risk-weighted assets. These intangible assets, however, are also deducted in determining regulatory capital and serve to offset the addition to capital for the value of shares issued as consideration for the acquisition.

TABLE 5.  RISK-BASED CAPITAL AND CAPITAL RATIOS
--------------------------------------------------------------------------------------------
                                                      September 30           December 31
(dollars in thousands)                                    2004                  2003
--------------------------------------------------------------------------------------------
Tier 1 regulatory capital                              $778,155              $739,236
Tier 2 regulatory capital                                54,611                59,475
--------------------------------------------------------------------------------------------
   Total regulatory capital                            $832,766              $798,711
--------------------------------------------------------------------------------------------
Risk-weighted assets                                 $6,285,540            $5,777,094
--------------------------------------------------------------------------------------------
Ratios
   Leverage (Tier 1 capital to average assets)            10.05%                10.13%
   Tier 1 capital to risk-weighted assets                 12.38                 12.80
   Total capital to risk-weighted assets                  13.25                 13.83
   Shareholders' equity to total assets                   11.40                 10.84
--------------------------------------------------------------------------------------------

The regulatory capital ratios for the 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 third 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 nine months of 2004 and 2003.
As noted earlier, continued high levels of funds available in the Bank's customer deposit base helped support increased loan production and overall growth in earning assets during 2003 and into the third 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 modeling parameters.
At September 30, 2004, Whitney Holding Corporation had approximately $161 million in cash and demand notes from the Bank available to provide liquidity for acquisitions, dividend payments to shareholders, stock repurchases, or other corporate uses, before consideration of any future dividends that may be received from the Bank. In October 2004, the Board of Directors authorized the Company to repurchase up to 1.75 million shares of its common stock over a one-year period beginning October 27, 2004. Based on Whitney's closing stock price at September 30, 2004, the total cash outlay to complete the repurchase program would be approximately $74 million. In October 2004, Whitney announced an agreement to acquire Destin Bancshares, Inc. for stock and cash in a transaction expected to close in the first half of 2005. The cash component of the purchase price will total approximately $58 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 third 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 September 30, 2004 by the periods in which they expire. Commitments under credit card and personal credit lines generally have no stated maturity.

TABLE 6.  CREDIT-RELATED COMMITMENTS
----------------------------------------------------------------------------------------------------------------
(dollars in thousands)                              Commitments expiring by period from September 30, 2004
----------------------------------------------------------------------------------------------------------------
                                                               Less than        1 - 3        3 - 5    More than
                                                      Total       1 year        years        years      5 years
----------------------------------------------------------------------------------------------------------------
Loan commitments - revolving                     $1,581,841   $1,183,813     $262,502     $134,787         $739
Loan commitments - nonrevolving                     422,763      199,964      222,799            -            -
Credit card and personal credit lines               430,143      430,143            -            -            -
Standby and other letters of credit                 328,306      256,317       71,989            -            -
----------------------------------------------------------------------------------------------------------------
   Total                                         $2,763,053   $2,070,237     $557,290     $134,787         $739
----------------------------------------------------------------------------------------------------------------

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 Bank 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 third quarter indicated that Whitney continued to be moderately asset sensitive over the near term, similar to its position at year-end 2003. Based on these simulations, annual net interest income (TE) would be expected to increase $17.1 million, or 5.1%, and decrease $26.6 million, or 7.9%, 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.

RESULTS OF OPERATIONS

NET INTEREST INCOME
Whitney's net interest income (TE) increased $6.0 million, or 8%, in the third quarter of 2004 compared to the third quarter of 2003, consistent with the growth in average earning assets between these periods. Third quarter net interest income (TE) in 2004 was $3.9 million, or 5%, higher than in the current year's second quarter on average earning asset growth of 1%.
As noted earlier, Whitney is moderately asset sensitive, which implies that its net interest margin would tend to widen in a rising rate environment, holding other factors constant, but tend to compress in a declining rate environment. The net interest margin (TE) is net interest income (TE) as a percent of average earning assets. Whitney's net interest margin (TE) was 4.46% in 2004's third quarter, slightly higher than the year-earlier quarter, and up 15 basis points from 2004's second quarter. Tables 7 and 8 provide details on the components of the Company's net interest income (TE) and net interest margin (TE).
The overall yield on average earning assets for the third quarter of 2004 was unchanged from the third quarter of 2003, but has improved 18 basis points from 2004's second quarter, reflecting both rising benchmark rates for the significant variable-rate segment of Whitney's loan portfolio and an increase in the percentage of loans in the earning asset mix. A further shift to variable pricing within the loan portfolio and the concentration of loan growth in high-quality commercial credits contributed to a 10 basis point decline in loan yields between the third quarters of 2003 and 2004. This trend also positioned the portfolio for more rapid yield improvement with rising short-term market interest rates, as was evident in the 21 basis point increase in loan yields from the second to the third quarter of 2004. The addition of the Madison Bank portfolio in the third quarter of 2004 also had a small favorable impact on loan yields. The yield on the largely fixed-rate investment portfolio is less responsive to changes in market rates and the overall investment portfolio yield has fluctuated within a narrow range from the third quarter of 2003 through the current year's third quarter.
There was a moderate favorable shift in the earning asset mix in the third quarter of 2004, prompted in part by the Madison Bank acquisition. Average loans, including loans held for sale, increased to 72% of total earning assets from 69% in the third quarter of 2003 and 70% in 2004's second quarter. Investment securities were 28% of average earning assets in the most recent quarter, down slightly from 29% in the year-earlier period and 30% in the second quarter of 2004.
Funding costs for the third quarter of 2004 were on the whole little changed from both the third quarter of 2003 and 2004's second quarter. The overall cost of interest-bearing deposits decreased 3 basis points compared to the third quarter of 2003 and was up 6 basis points from 2004's second quarter. The rate on time deposits in 2004's third quarter was down 17 basis points from the year-earlier period, but was 10 basis points higher than in the second quarter of 2004. The recent increase mainly reflects a higher level of public funds deposits and the cost of deposits acquired with Madison Bank. The overall rate on other interest-bearing deposits was relatively stable, having risen only 3 basis points between the third quarters of 2003 and 2004.

TABLE 7.  SUMMARY OF AVERAGE BALANCE SHEETS, NET INTEREST INCOME(TE)(a) AND INTEREST RATES
--------------------------------------------------------------------------------------------------------------------------

(dollars in thousands)                    Third Quarter 2004          Second Quarter 2004          Third Quarter 2003
--------------------------------------------------------------------------------------------------------------------------
                                      Average                      Average                       Average
                                      Balance   Interest  Rate     Balance    Interest Rate      Balance  Interest   Rate
--------------------------------------------------------------------------------------------------------------------------
ASSETS
EARNING ASSETS
Loans (TE)(b) (c)                   $5,244,833   $69,185  5.25%  $5,086,100    $63,729 5.04%   $4,697,344  $63,360   5.35%
--------------------------------------------------------------------------------------------------------------------------

Mortgage-backed securities           1,324,322    14,589  4.41    1,397,338     15,087 4.32     1,061,425   11,382   4.29
U.S. agency securities                 325,303     2,682  3.30      346,237      2,822 3.26       460,044    4,449   3.87
U.S. Treasury securities               120,398     1,255  4.15      131,146      1,364 4.18       209,897    1,980   3.74
Obligations of states and political
     subdivisions (TE)                 248,670     3,941  6.34      240,969      3,842 6.38       201,740    3,425   6.79
Other securities                        34,076       318  3.73       33,521        285 3.40        41,124      414   4.03
--------------------------------------------------------------------------------------------------------------------------
     Total investment securities     2,052,769    22,785  4.44    2,149,211     23,400 4.36     1,974,230   21,650   4.38
--------------------------------------------------------------------------------------------------------------------------
Federal funds sold and
     short-term investments             11,714        41  1.39       18,621         46  .99       100,764      259   1.02
--------------------------------------------------------------------------------------------------------------------------
     Total earning assets            7,309,316   $92,011  5.01%   7,253,932    $87,175 4.83%    6,772,338  $85,269   5.01%
--------------------------------------------------------------------------------------------------------------------------
NONEARNING ASSETS
Other assets                           630,448                      585,274                       587,646
Allowance for loan losses              (57,267)                     (57,098)                      (66,591)
--------------------------------------------------------------------------------------------------------------------------
     Total assets                   $7,882,497                   $7,782,108                    $7,293,393
--------------------------------------------------------------------------------------------------------------------------

LIABILITIES AND
         SHAREHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES
NOW account deposits                $  811,827      $779   .38%  $  793,746    $   697  .35%   $  706,851  $   544    .31%
Money market deposits                1,369,703     2,276   .66    1,363,687      2,212  .65     1,416,716    2,299    .64
Savings deposits                       669,996       618   .37      634,595        489  .31       560,469      380    .27
Other time deposits                    732,506     2,425  1.32      720,801      2,290 1.28       790,238    3,236   1.62
Time deposits $100,000 and over        862,454     2,931  1.35      791,246      2,372 1.21       694,675    2,416   1.38
--------------------------------------------------------------------------------------------------------------------------
     Total interest-bearing
       deposits                      4,446,486     9,029   .81    4,304,075      8,060  .75     4,168,949    8,875    .84
--------------------------------------------------------------------------------------------------------------------------
Short-term and other borrowings        498,613     1,257  1.00      616,644      1,246  .81       457,508      698    .61
--------------------------------------------------------------------------------------------------------------------------
     Total interest-bearing
       liabilities                   4,945,099   $10,286   .83%   4,920,719    $ 9,306  .76%    4,626,457  $ 9,573    .82%
--------------------------------------------------------------------------------------------------------------------------
NONINTEREST-BEARING
     LIABILITIES AND
     SHAREHOLDERS' EQUITY
Demand deposits                      1,994,279                    1,944,610                     1,780,429
Other liabilities                       60,375                       54,763                        63,829
Shareholders' equity                   882,744                      862,016                       822,678
--------------------------------------------------------------------------------------------------------------------------
     Total liabilities and
          shareholders' equity      $7,882,497                   $7,782,108                    $7,293,393
--------------------------------------------------------------------------------------------------------------------------

Net interest income and margin (TE)              $81,725  4.46%                $77,869 4.31%               $75,696   4.45%
Net earning assets and spread       $2,364,217            4.18%  $2,333,213            4.07%   $2,145,881            4.19%
Interest cost of funding earning
  assets                                                   .55%                         .52%                          .56%
--------------------------------------------------------------------------------------------------------------------------
(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 $30,416, 26,684, and $32,360, respectively, in the third and second
       quarters of 2004 and the third quarter of 2003.

TABLE 7.  SUMMARY OF AVERAGE BALANCE SHEETS, NET INTEREST INCOME(TE)(a) AND INTEREST RATES (continued)
------------------------------------------------------------------------------------------------------------------------------------
                                                                      Nine Months Ended             Nine Months Ended
(dollars in thousands)                                                September 30, 2004            September 30, 2003
------------------------------------------------------------------------------------------------------------------------------------
                                                                   Average                      Average
                                                                   Balance   Interest   Rate    Balance   Interest   Rate
------------------------------------------------------------------------------------------------------------------------------------
ASSETS
EARNING ASSETS
Loans (TE)(b) (c)                                                $5,083,308  $196,107   5.15% $4,612,010  $191,259   5.54%
------------------------------------------------------------------------------------------------------------------------------------

Mortgage-backed securities                                        1,386,270    45,589   4.38   1,140,588    37,487   4.38
U.S. agency securities                                              352,165     8,837   3.35     407,201    12,323   4.04
U.S. Treasury securities                                            136,468     4,168   4.08     194,940     5,465   3.75
Obligations of states and political
     subdivisions (TE)                                              239,725    11,494   6.39     193,417     9,819   6.77
Other securities                                                     34,221       895   3.49      46,144     1,443   4.17
------------------------------------------------------------------------------------------------------------------------------------
      Total investment securities                                 2,148,849    70,983   4.40   1,982,290    66,537   4.48
------------------------------------------------------------------------------------------------------------------------------------
Federal funds sold and
     short-term investments                                          14,168       117   1.10      76,293       652   1.14
------------------------------------------------------------------------------------------------------------------------------------
      Total earning assets                                        7,246,325  $267,207   4.92%  6,670,593  $258,448   5.18%
------------------------------------------------------------------------------------------------------------------------------------
NONEARNING ASSETS
Other assets                                                        607,560                      583,351
Allowance for loan losses                                           (57,988)                     (66,863)
------------------------------------------------------------------------------------------------------------------------------------
      Total assets                                               $7,795,897                   $7,187,081
------------------------------------------------------------------------------------------------------------------------------------

LIABILITIES AND
         SHAREHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES
NOW account deposits                                             $  799,175  $  2,144    .36% $  697,697  $  2,257    .43%
Money market deposits                                             1,381,083     6,780    .66   1,400,583     9,041    .86
Savings deposits                                                    635,910     1,546    .32     550,867     1,777    .43
Other time deposits                                                 730,597     7,170   1.31     812,606    11,414   1.88
Time deposits $100,000 and over                                     784,451     7,419   1.26     682,221     8,080   1.58
------------------------------------------------------------------------------------------------------------------------------------
      Total interest-bearing deposits                             4,331,216    25,059    .77   4,143,974    32,569   1.05
------------------------------------------------------------------------------------------------------------------------------------
Short-term and other borrowings                                     602,065     3,883    .86     435,354     2,110    .65
------------------------------------------------------------------------------------------------------------------------------------
      Total interest-bearing liabilities                          4,933,281  $ 28,942    .78%  4,579,328  $ 34,679   1.01%
------------------------------------------------------------------------------------------------------------------------------------
NONINTEREST-BEARING
      LIABILITIES AND
      SHAREHOLDERS' EQUITY
Demand deposits                                                   1,939,178                    1,726,694
Other liabilities                                                    56,634                       61,481
Shareholders' equity                                                866,804                      819,578
------------------------------------------------------------------------------------------------------------------------------------
      Total liabilities and
           shareholders' equity                                  $7,795,897                   $7,187,081
------------------------------------------------------------------------------------------------------------------------------------

Net interest income and margin (TE)                                          $238,265   4.39%             $223,769   4.48%
Net earning assets and spread                                    $2,313,044             4.14% $2,091,265             4.17%
Interest cost of funding earning assets                                                  .53%                         .70%
------------------------------------------------------------------------------------------------------------------------------------

 (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 $27,742 and $36,512, respectively, in the first nine months of 2004 and 2003.

TABLE 8. SUMMARY OF CHANGES IN NET INTEREST INCOME(TE)(a)(b)
------------------------------------------------------------------------------------------------------------------------------
                                                   Third Quarter 2004 Compared to:             Nine Months Ended September 30,
                                          Second Quarter 2004            Third Quarter 2003          2004 Compared to 2003
                                       ------------------------------------------------------- -------------------------------
                                            Due to                       Due to                       Due to
                                          Change in       Total         Change in      Total         Change in      Total
                                       ----------------  Increase   ----------------  Increase   ----------------  Increase
(dollars in thousands)                 Volume     Rate  (Decrease)  Volume     Rate  (Decrease)  Volume     Rate  (Decrease)
------------------------------------------------------------------------------------------------------------------------------
INTEREST INCOME (TE)
Loans (TE)                             $2,336   $3,120    $5,456    $7,090  $(1,265)  $5,825    $18,735  $(13,887)  $ 4,848
------------------------------------------------------------------------------------------------------------------------------

Mortgage-backed securities               (799)     301      (498)    2,888      319    3,207      8,080        22     8,102
U.S. agency securities                   (172)      32      (140)   (1,175)    (592)  (1,767)    (1,540)   (1,946)   (3,486)
U.S. Treasury securities                  (99)     (10)     (109)     (916)     191     (725)    (1,752)      455    (1,297)
Obligations of states and political
    subdivisions (TE)                     122      (23)       99       755     (239)     516      2,245      (570)    1,675
Other securities                            5       28        33       (67)     (29)     (96)      (335)     (213)     (548)
------------------------------------------------------------------------------------------------------------------------------
    Total investment securities          (943)     328      (615)    1,485     (350)   1,135      6,698    (2,252)    4,446
------------------------------------------------------------------------------------------------------------------------------
Federal funds sold and
    short-term investments                (20)      15        (5)     (287)      69     (218)      (514)      (21)     (535)
------------------------------------------------------------------------------------------------------------------------------
    Total interest income (TE)          1,373    3,463     4,836     8,288   (1,546)   6,742     24,919   (16,160)    8,759
------------------------------------------------------------------------------------------------------------------------------

INTEREST EXPENSE
NOW account deposits                       18       64        82        88      147      235        302      (415)     (113)
Money market deposits                      16       48        64       (80)      57      (23)      (124)   (2,137)   (2,261)
Savings deposits                           30       99       129        83      155      238        248      (479)     (231)
Other time deposits                        47       88       135      (226)    (585)    (811)    (1,065)   (3,179)   (4,244)
Time deposits $100,000 and over           238      321       559       568      (53)     515      1,107    (1,768)     (661)
------------------------------------------------------------------------------------------------------------------------------
    Total interest-bearing deposits       349      620       969       433     (279)     154        468    (7,978)   (7,510)
------------------------------------------------------------------------------------------------------------------------------
Short-term and other borrowings          (258)     269        11        67      492      559        951       822     1,773
------------------------------------------------------------------------------------------------------------------------------
    Total interest expense                 91      889       980       500      213      713      1,419    (7,156)   (5,737)
------------------------------------------------------------------------------------------------------------------------------
    Change in net interest income (TE) $1,282   $2,574    $3,856    $7,788  $(1,759)  $6,029    $23,500   $(9,004)  $14,496
------------------------------------------------------------------------------------------------------------------------------

(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.

The rate on short-term and other borrowings, which are more sensitive to market rate changes, increased 39 basis points in 2004's third quarter compared to the same period in 2003 and 19 basis points compared to the second quarter of 2004.
The overall funding mix shifted only slightly in the third quarter of 2004. Average noninterest-bearing deposits funded 27% of average earning assets in the third quarter of 2004, up from 26% in 2003's third quarter, and the percentage of funding from all noninterest-bearing sources was steady at approximately 32% between these periods. Lower-cost interest-bearing deposits supported 39% of earning assets, down slightly from 40% in the year-earlier quarter. Higher-cost sources of funds, which include time deposits and short-term borrowings, increased to 29% of average earning assets from 28% in the third quarter of 2003, including the impact of additional public funds deposits.
For the first nine months of 2004, net interest income (TE) increased 6%, or $14.5 million, compared to the same period in 2003, driven by 9% growth in average earning assets between these periods. The net interest margin (TE) was 4.39% for the 2004 period and 4.48% for the prior year's period. The yield on average earning assets decreased 26 basis points, with the loan portfolio yield down 39 basis points and the rate earned on the investment portfolio down 8 basis points. The total interest cost of funding earning assets declined 17 basis points compared to the first nine months of 2003. Substantially the same factors that affected the mix and rates for earning assets and funding sources in the third quarter of 2004 were evident for the year-to-date period.

PROVISION FOR LOAN LOSSES
Whitney recorded no provision for loan losses in the third quarter of 2004, compared to a $2 million provision in 2004's second quarter and a negative provision of $4 million in the third quarter of 2003. Net charge-offs totaled $4.3 million in the third quarter of 2004, of which $3.2 million was from one credit that had been first identified as impaired in the second quarter of 2004. Net charge-offs totaled $3.2 million in second quarter of 2004 and $.8 million in 2003's third 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 $20.1 million for the third quarter of 2004. This represented a decrease of 15%, or $3.5 million, from the third quarter of 2003, mainly reflecting a $2.2 million decline in fee income from Whitney's secondary mortgage market operations and a $.8 million decrease in gains realized on securities transactions. The rate environment for home loans during 2004, though still low from a historical perspective, was unable to stimulate refinancing activity at the levels seen in recent years, and Whitney's production of loans held for sale during the third quarter of 2004 was less than one-third of that produced in the year-earlier period. Given the current rate environment and rate expectations over the near term, both loan production levels and secondary mortgage market fee income for the fourth quarter of 2004 are expected to be below the results for the comparable period of 2003.

The earnings credit allowed against service charges on certain business deposit accounts has increased with rising short-term market rates, contributing to a 3%, or $.3 million, decrease in deposit service charge income compared to the third quarter of 2003. Improved pricing and the addition of new services, however, offset some of the impact on income from larger earnings credits and from reduced charging opportunities on both commercial and personal accounts.
Bank card fees, both credit and debit cards, increased a combined 12%, or $.3 million, compared to 2003's third quarter, reflecting both higher transaction volumes and improvement in the effective fee rates realized. 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.
Trust service fees increased 10%, or $.2 million, compared to the third quarter of 2003 from new business and improved equity market valuations relative to the year-earlier period. Other noninterest income categories decreased a net $.6 million, or 12%, with investment service fees down $.3 million mainly on reduced demand for fixed-income securities in the third quarter of 2004 among Whitney's customer base.
During the third quarter of 2003, Whitney sold $276 million in mortgage-backed securities experiencing accelerated prepayments and repositioned the proceeds in issues with characteristics more consistent with overall investment strategies. The sale generated a gain of approximately $.9 million.
Noninterest income was $62.4 million through the first nine months of 2004, a decrease of 9%, or $5.8 million, from the same period in 2003. Year-to-date changes in individual income categories from the prior year were for the most part consistent with the quarterly changes discussed above and were driven by substantially the same factors. Year-to-date other noninterest income was down 5%, or $.8 million, from the comparable period in 2003. Net gains on asset sales were lower by $.9 million year-to-date in 2004. The assets sold included surplus banking property and foreclosed assets and, in 2003, a portfolio of seasoned loans originated under affordable-housing programs. The results posted by recurring revenue sources included in other noninterest income were on the whole stable between the first nine months of 2003 and 2004.

NONINTEREST EXPENSE
Total noninterest expense of $68.3 million in the third quarter of 2004 was 11%, or $6.9 million, higher than the total for the year-earlier period. Incremental costs associated with Madison Bank operations totaled approximately $1.1 million in the third quarter of 2004, including $.5 million for system conversion services and other merger-related expenses that are reported with legal and professional fees.
Personnel expense increased 5%, or $1.7 million, in total, including $.4 million associated with Madison Bank employees. Base pay and compensation earned under sales-based and other employee incentive programs increased a combined 3%, or $.8 million. Compensation expense under management incentive programs was up 11%, or $.3 million, with stock-based compensation driving this increase. Stock-based compensation will vary with changes in Whitney's stock price, which was up 24% at the end of 2004's third quarter from a year earlier. The rising cost of providing current health benefits was the main factor behind the 9%, or $.6 million, increase in employee benefits.

Net occupancy expense in the third quarter of 2004 was up 6%, or $.3 million, from the comparable period in 2003. Ignoring the cost of operating the Madison Bank facilities, the increase was closer to 4%. 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 2004, including three additional locations to serve the Houston market. To reduce costs over the long term and enhance productivity, certain operations in Houston were moved to one of the new locations and out of space that is subject to noncancelable leases. Whitney recognized a loss of $1.6 million in the third quarter of 2004 related to its remaining obligation under the leases. This loss is reported with other noninterest expense. Also included in other noninterest expense for the most recent quarter is a $.6 million casualty loss for property damage from Hurricane Ivan that struck the Florida-Alabama coastal border during the period. Storm-related disruptions to banking operations were minimal.
Equipment and data processing expense increased nominally in the third quarter of 2004 compared to 2003's third quarter, although a moderate increase is expected for the full year. The data processing system's capacity was upgraded in the second half of 2003 and applications and capabilities have been added to support expanded customer service. Upgrades to the capacity and functionality of branch communication lines have increased telecommunication expense in 2004, but this was largely offset in the third quarter of 2004 by savings realized on a recent change in service provider.
Amortization of intangibles increased in the third quarter of 2004 with the August 2004 acquisition of Madison Bank and the branch purchase in June 2004. The amortization of deposit relationship intangibles acquired in these transactions will add approximately $.5 million to annual expense in 2004.
As noted earlier, other noninterest expense in the third quarter of 2004 included $2.2 million related to a loss on the abandonment of certain noncancelable facility leases and a casualty loss for storm damage. Ignoring these items, the categories making up other noninterest expense increased $1.8 million, or 19%. A number of factors contributed to this increase, the largest of which were an increase in marketing activities and the amortization of expanded affordable housing investments. Management has directed additional resources to marketing activities in 2004 to support new product introductions and broaden market recognition. Tax credits associated with the affordable housing investments helped lower the effective tax rate as noted in the following section.
For the nine-month period ended September 30, 2004, noninterest expense totaled $195 million. This was a 7%, or $13.3 million, increase compared to the same period in 2003. Similar to the quarterly comparison, year-to-date personnel expense was up 5% from 2003, or $5.0 million in total. Employee compensation rose 4%, or $3.4 million, with $2.3 million in additional stock-based management incentive compensation. Base pay and sales-based incentive compensation increased less that 2%, reflecting the impact of the sharp reduction in mortgage origination commissions with lower loan production in 2004. Employee benefits were up 8%, or $1.6 million, year-to-date in 2004, including a 12%, or $.7 million, increase in the cost of providing current health benefits compared to 2003. Defined benefit pension expense and the cost of providing health benefits to retirees increased a net $.5 million for the year-to-date period.
The changes in other major noninterest expense categories between the first nine months of 2003 and 2004 were generally consistent with the quarter-to-quarter changes and were influenced mainly by the same factors cited in the discussion of quarterly results above.

INCOME TAXES
The Company provided for income tax expense at an effective rate of 31.0% in the third quarter of 2004 compared to a rate of 32.1% in the 2003's third quarter. Year-to-date, the rate was 30.9% in 2004 and 32.1% in 2003. Whitney's effective tax rate has been lower than the 35% federal statutory rate primarily because of tax-exempt interest income from the financing of state and local governments. Additional investment in projects that generate affordable housing tax credits helped lower the effective tax rate in 2004 compared to 2003.