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.
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 2005 annual report on Form 10-K. Financial information
reported in these financial statements is not necessarily indicative of the
financial condition, results of operations or cash flows of any other interim
or
annual periods.
All
share
and per share data in this quarterly report reflect the three-for-two split
of
the Company’s common stock that was effective May 25, 2005.
NOTE
2
UPDATE
ON IMPACT OF NATURAL DISASTERS
Two
strong
hurricanes struck portions of Whitney’s service area during the third quarter of
2005. The following sections summarize the more significant continuing financial
repercussions of these natural disasters for the Company and on its major
subsidiary, Whitney National Bank (the Bank).
Credit
Quality and Allowance for Loan Losses
Relationship
officers continued to closely monitor the performance of storm-impacted loan
customers during the first quarter of 2006, and data became available on the
performance of consumer credits that had been under payment deferral programs.
This information was factored into management’s determination of the allowance
for loan losses at March 31, 2006. Although the identification and initial
evaluation of storm-impacted credits has been substantially completed,
management’s assessment of the storms’ impact is still subject to significant
uncertainties, both those specific to some individual customers, such as the
resolution of insurance claims, and those applicable to the overall economic
prospects of the storm-impact area as a whole. With the resolution of these
uncertainties and the ongoing collection of information on individual customers
and statistics on the consumer segment of the loan portfolio, the loss estimate
will be revised as needed.
Disaster
Response Costs, Casualty Losses, Business Interruption and Related
Insurance
The
Bank has incurred a variety of
costs to operate in disaster response mode, and a number of facilities and
their
contents were damaged by the storms, including sixteen that require replacement,
relocation or major renovation. Whitney maintains insurance for casualty losses
as well as for reasonable and necessary disaster response costs and certain
revenue lost through business interruption. Most of the significant disaster
response costs had been incurred by the end of the first quarter of 2006 and
included where appropriate in an insurance claim receivable based on
management’s understanding of the underlying coverage. The bulk of costs to
replace or renovate facilities will be incurred in future periods, and these
will be included in the insurance claims as appropriate. Management projects
that future casualty claims arising from the 2005 storms will be within policy
limits, and that gains will be recognized with respect to these claims in future
periods, but this is contingent upon reaching agreement with insurance carriers.
An insurance claim receivable of $13.7 million was included in other assets
at
March 31, 2006, and Whitney has expensed $6.9 million of storm-related disaster
response costs and casualty losses, including $2.5 million charged to operations
in the first quarter of 2006.
NOTE
3
MERGERS
AND ACQUISITIONS
On
April 13, 2006, Whitney completed its acquisition of First
National Bancshares, Inc. (First National) and its subsidiary, 1
st
National Bank & Trust. 1
st
National Bank & Trust operates in
the Tampa Bay area of Florida and had approximately $380 million in total
assets, including a loan portfolio of $290 million, and approximately $320
million in deposits at the acquisition date. The Company expects to merge
1
st
National into Whitney National Bank during the third quarter of
2006 upon completion of systems-integration work. The transaction was valued
at
approximately $116 million, with $41 million paid to First National shareholders
in cash and the remainder in Whitney stock totaling approximately 2.2 million
shares. Whitney’s financial statements for the second quarter of 2006 will
include the results from First National’s operations since the acquisition date.
The purchase price allocation for this transaction has not yet been
completed.
In
April 2005, Whitney acquired Destin Bancshares, Inc. (Destin).
Destin’s major subsidiary was Destin Bank which operated ten banking centers in
the Destin, Fort Walton Beach and Pensacola areas of the Florida panhandle,
with
approximately $540 million in total assets, including a loan portfolio of $390
million, and $440 million in deposits on the acquisition date. Destin Bank
was
merged into Whitney National Bank on the acquisition date. The transaction
was
valued at $115 million, with $58 million paid to Destin shareholders in cash
and
the remainder in Whitney stock totaling approximately 1.9 million shares (1.3
million shares before adjustment for the three-for-two stock split in May 2005).
Applying purchase accounting to this transaction, the Company recorded goodwill
of $88 million and a $9 million intangible asset for the estimated value of
deposit relationships with an estimated weighted-average life of approximately
3.0 years.
NOTE
4
FEDERAL
FUNDS SOLD AND SHORT-TERM INVESTMENTS
The
balance of federal funds sold and short-term investments included
the following:
|
|
March
31
|
December
31
|
|
(in
thousands)
|
2006
|
2005
|
|
Federal
funds sold
|
$
276,000
|
$304,500
|
|
U.
S. Treasury bills
|
895,530
|
-
|
|
U.
S. government agency discount notes
|
99,976
|
499,013
|
|
Other
short-term interest-bearing investments
|
2,811
|
2,245
|
|
Total
|
$1,274,317
|
$805,758
|
Federal
funds were
sold on an overnight basis. The U. S. Treasury bills and government agency
discount notes all have maturities of less than three months.
NOTE
5
LOANS
The
composition of the Company’s loan portfolio follows:
|
|
March
31
|
December
31
|
|
(in
thousands)
|
2006
|
2005
|
|
Commercial,
financial and agricultural
|
$
|
2,595,056
|
|
40
|
%
|
$
|
2,685,894
|
|
41
|
%
|
|
Real
estate - commercial, construction and other
|
|
2,780,340
|
|
43
|
|
|
2,743,486
|
|
42
|
|
|
Real
estate - residential mortgage
|
|
771,547
|
|
12
|
|
|
774,124
|
|
12
|
|
|
Individuals
|
|
341,696
|
|
5
|
|
|
357,093
|
|
5
|
|
|
Total
|
$
|
6,488,639
|
|
100
|
%
|
$
|
6,560,597
|
|
100
|
%
|
NOTE
6
ALLOWANCE
FOR LOAN LOSSES, IMPAIRED LOANS AND NONPERFORMING LOANS
A
summary
analysis of changes in the allowance for loan losses follows:
|
|
Three
Months Ended
|
|
|
March
31
|
|
(in
thousands)
|
|
2006
|
|
|
2005
|
|
|
Balance
at beginning of year
|
$
|
90,028
|
|
$
|
54,345
|
|
|
Provision
for loan losses
|
|
2,000
|
|
|
1,500
|
|
|
Loans
charged off
|
|
(
3,629
|
)
|
|
(3,676
|
)
|
|
Recoveries
|
|
810
|
|
|
1,751
|
|
|
Net
charge-offs
|
|
(2,819
|
)
|
|
(1,925
|
)
|
|
Balance
at end of year
|
$
|
89,209
|
|
$
|
53,920
|
|
Information
on loans evaluated for possible impairment loss follows:
|
|
|
March
31
|
December
31
|
|
(in
thousands)
|
|
2006
|
2005
|
|
Impaired
loans
|
|
|
|
|
Requiring
a loss allowance
|
|
$54,667
|
$54,994
|
|
Not
requiring a loss allowance
|
|
5,811
|
4,789
|
|
Total
recorded investment in impaired
loans
|
|
$60,478
|
$59,783
|
|
Impairment
loss allowance required
|
|
$19,749
|
$17,334
|
The
following is a summary of nonperforming loans:
|
|
|
March
31
|
December
31
|
|
(in
thousands)
|
|
2006
|
2005
|
|
Loans
accounted for on a nonaccrual basis
|
|
$65,494
|
$65,565
|
|
Restructured
loans
|
|
28
|
30
|
|
Total
nonperforming loans
|
|
$65,522
|
$65,595
|
NOTE
7
DEPOSITS
The
composition of deposits was as follows:
|
|
|
March
31
|
December
31
|
|
(in
thousands)
|
|
2006
|
2005
|
|
Noninterest-bearing
demand deposits
|
|
$3,189,552
|
$3,301,227
|
|
Interest-bearing
deposits:
|
|
|
|
|
NOW
account deposits
|
|
1,090,894
|
1,116,000
|
|
Money
market deposits
|
|
1,095,554
|
1,103,510
|
|
Savings
deposits
|
|
1,214,840
|
1,120,078
|
|
Other
time deposits
|
|
716,833
|
717,938
|
|
Time
deposits $100,000 and over
|
|
1,376,103
|
1,246,083
|
|
Total
interest-bearing
deposits
|
|
5,494,224
|
5,303,609
|
|
Total
deposits
|
|
$8,683,776
|
$8,604,836
|
Time
deposits of $100,000 or more
include balances in treasury-management deposit products for commercial and
certain other larger deposit customers. Balances maintained in such products
totaled $611 million at March 31, 2006 and $504 million at December 31, 2005.
Most of these deposits mature on a daily basis.
NOTE
8
OTHER
ASSETS AND OTHER LIABILITIES
The
more significant components of other assets and other liabilities
at March 31, 2006 and December 31, 2005 were as follows:
|
Other
Assets
|
|
|
|
|
|
|
March
31
|
December
31
|
|
(in
thousands)
|
|
2006
|
2005
|
|
Net
deferred income tax asset
|
|
$
60,017
|
$
53,065
|
|
Low-income
housing tax credit fund investments
|
|
17,407
|
17,986
|
|
Insurance
claim receivable
|
|
13,675
|
21,895
|
|
Prepaid
pension asset
|
|
13,475
|
15,271
|
|
Cash
surrender value of life insurance
|
|
9,640
|
9,575
|
|
Prepaid
expenses
|
|
4,405
|
4,713
|
|
Miscellaneous
investments, receivables and other assets
|
|
24,304
|
32,039
|
|
Total
other assets
|
|
$142,923
|
$154,544
|
|
Other
Liabilities
|
|
|
|
|
|
|
March
31
|
December
31
|
|
(in
thousands)
|
|
2006
|
2005
|
|
Accrued
taxes and expenses
|
|
$
61,987
|
$57,538
|
|
Dividend
payable
|
|
13,315
|
12,159
|
|
Liability
for postretirement benefits other than
pensions
|
|
12,483
|
11,877
|
|
Miscellaneous
payables, deferred income and other
liabilities
|
|
18,437
|
17,665
|
|
Total
other liabilities
|
|
$106,222
|
$99,239
|
See
Note
2 for information on the natural disasters that affected Whitney during 2005,
including a discussion of related insurance matters. As part of its
response to the disasters, the federal government allowed corporations to defer
federal income tax payments otherwise due in 2005 until the third quarter of
2006.
NOTE
9
EMPLOYEE
BENEFIT PLANS
Retirement
Plans
Whitney
has a noncontributory qualified defined benefit pension plan
covering substantially all of its employees, subject to minimum age and
service-related requirements. Based on currently available information, the
Company does not anticipate making a contribution to the plan during 2006.
The
components of net pension expense were as follows:
|
|
|
|
Three
Months Ended
|
|
|
|
|
March
31
|
|
(in
thousands)
|
|
|
2006
|
|
|
2005
|
|
|
Service
cost for benefits during the period
|
|
$
|
1,925
|
|
$
|
1,809
|
|
|
Interest
cost on benefit obligation
|
|
|
1,931
|
|
|
1,766
|
|
|
Expected
return on plan assets
|
|
|
(2,463
|
)
|
|
(2,060
|
)
|
|
Amortization
of:
|
|
|
|
|
|
|
|
|
Unrecognized net actuarial losses
|
|
|
409
|
|
|
187
|
|
|
Unrecognized prior service cost
|
|
|
(27
|
)
|
|
(27
|
)
|
|
Net
periodic benefit expense
|
|
$
|
1,775
|
|
$
|
1,675
|
|
Whitney
also has an unfunded nonqualified defined benefit pension plan that provides
retirement benefits to designated executive officers. The net pension expense
for nonqualified plan benefits was approximately $.3 million for the first
quarter of 2006 and $.2 million for the first quarter of 2005.
Health
and Welfare Plans
Whitney
maintains health care and life insurance benefit plans for retirees and their
eligible dependents. Participant contributions are required under the health
plan. The Company funds its obligations under these plans as contractual
payments come due to health care organizations and insurance
companies.
Whitney
recognized a net periodic expense for postretirement benefits of approximately
$.8 million in the first quarter of 2006 and $.6 million in the first quarter
of
2005. None of the individual components of the net periodic expense was
individually significant for either period.
NOTE
10
STOCK-BASED
COMPENSATION
Whitney
maintains incentive compensation plans that incorporate stock-based
compensation. The plans for both employees and directors have been approved
by
the Company’s shareholders. Descriptions of these plans, including the terms of
awards and the number of Whitney shares authorized and available for issuance,
were included in the Company’s Form 10-K for the year ended December 31, 2005.
There was no substantive change to this information as of March 31, 2006. No
stock-based compensation awards were made during the first quarter of 2006.
The
stock issued for awards may come from unissued shares or shares held in
treasury.
In
December 2004, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 123 (revised 2004) (SFAS No. 123R),
Share-Based Payment
. SFAS No. 123R replaced SFAS No. 123,
Accounting for Stock-Based Compensation
, as amended by SFAS No. 148.
Whitney must apply SFAS No. 123R to all awards granted after December 31, 2005
and to awards modified, repurchased, or cancelled after that date. The
revised standard established the fair value-based method as the exclusive method
of accounting for stock-based compensation, with only limited exceptions. Under
SFAS No. 123R, the grant-date fair value of equity instruments, including stock
options, awarded to employees determines the cost of the services received
in
exchange, and the cost associated with awards that are expected to vest is
recognized over the required service period. The revised standard also clarifies
and expands existing guidance on measuring fair value, including considerations
for selecting and applying an option-pricing model, on classifying an award
as
equity or a liability, and on attributing compensation cost to reporting
periods, and adds to required disclosures.
For
outstanding awards for which the required service period extends beyond December
31, 2005, SFAS No. 123R requires Whitney to recognize compensation after that
date based on the grant-date fair value of those awards as calculated for pro
forma disclosure under the original SFAS No. 123. As of December 31, 2005,
all
stock options awarded by the Company were fully vested and exercisable and
there
were no continuing service requirements. The service requirements for certain
performance-based restricted stock awards do extend beyond December 31, 2005.
Compensation expense of $4.2 million was recognized in the first quarter of
2006. Unrecognized stock-based compensation related to restricted stock totaled
$13.3 million at March 31, 2006. This compensation will be recognized over
an
expected weighted-average period of 1.8 years. At March 31, 2006, 1,038,754
shares with a weighted-average grant-date fair value of $28.13 per share were
expected to ultimately become vested under performance-based stock awards.
At
December 31, 2005, the total was 875,685 shares with a per share value of
$27.81. During the first quarter of 2006, updated performance expectations
added
172,819 shares with a weighted-average grant-date fair value of $29.78 per
share
to the total of shares expected to become vested. In the same period,
participants forfeited their rights to 9,750 shares with a per share value
of
$28.03. No performance-based restricted stock awards vested during the first
quarter of 2006.
For
the
first quarter of 2005, Whitney recognized $2.5 million of compensation expense
with respect to restricted stock awards under Accounting Principles Board
Opinion (APB) No. 25 and related interpretations. The expense recognized under
APB No. 25 was also based on fair value, but the timing of when fair value
was
determined and the method of allocating expense over time differed in certain
respects from what was 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 to recognize stock-based compensation
expense in the first quarter of 2005. No compensation expense for stock options
would have been recognized under SFAS No. 123 during that period.
|
|
|
Three
Montths Ended
|
|
|
(dollars
in thousands, except per share data)
|
|
March
31, 2005
|
|
|
Net
income
|
$
|
28,756
|
|
|
Stock-based
compensation expense included
|
|
|
|
|
in
reported net income, net of related tax effects
|
|
1,643
|
|
|
Stock-based
compensation expense determined
|
|
|
|
|
under
SFAS No. 123, net of related tax
effects
|
|
(1,328
|
)
|
|
Pro
forma net income
|
$
|
29,071
|
|
|
Earnings
per share:
|
|
|
|
|
Basic
- as reported
|
$
|
.47
|
|
|
Basic
- pro forma
|
|
.48
|
|
|
Diluted
- as reported
|
|
.47
|
|
|
Diluted
- pro forma
|
|
.47
|
|
The
following table summarizes stock option activity for the first quarter of 2006.
All options outstanding at the December 31, 2005 and March 31, 2006 were
exercisable.
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
Average
|
|
|
|
|
|
|
|
|
Average
|
|
|
Years
to
|
|
|
|
|
|
Number
|
|
|
Exercise
Price
|
|
|
Expiration
|
|
|
Outstanding
at December 31, 2005
|
|
|
2,908,044
|
|
$
|
24.38
|
|
|
6.6
|
|
|
Options
granted
|
|
|
-
|
|
|
-
|
|
|
|
|
|
Options
exercised
|
|
|
(137,034
|
)
|
|
22.46
|
|
|
|
|
|
Options
forfeited
|
|
|
(1,000
|
)
|
|
29.54
|
|
|
|
|
|
Outstanding
at March 31, 2006
|
|
|
2,770,010
|
|
$
|
24.48
|
|
|
6.4
|
|
The
options held by employees and directors at
March 31, 2006 had an intrinsic value of $30.4 million based on the closing
market price for Whitney’s stock on that date. The intrinsic value of options
exercised during the first quarter of 2006 totaled $1.3 million as of the
exercise dates. The Company received exercise proceeds totaling $3.0 million
and
realized a tax benefit of $.5 million with respect to these exercises. During
the first quarter of 2005, options to acquire 218,733 shares were exercised
with
a total intrinsic value of $2.2 million. These exercises yielded $4.1 million
of
cash proceeds and Whitney realized a tax benefit of $.7 million. The tax benefit
in each period was credited to capital surplus. The impact of the tax benefit
was reported as a cash flow from financing activities in the consolidated
statement of cash flows for the first quarter of 2006 and as a cash flow from
operations in the first quarter of 2005.
NOTE
11
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.
See
Note
2 for information on the impact of natural disasters that struck Whitney’s
market area in 2005, including comments about contingencies surrounding the
resolution of insurance claims.
NOTE
12
OFF-BALANCE-SHEET
FINANCIAL INSTRUMENTS
To
meet
the financing needs of its customers, the Bank issues financial instruments
which represent conditional obligations that are not recognized, wholly or
in
part, in 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.
Revolving
loan commitments are issued primarily 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 and has not violated other contractual conditions. Many
such
commitments are used only partially or, in some cases, not at all before they
expire. Nonrevolving loan commitments are issued mainly to provide financing
for
the acquisition and development or construction of real property, both
commercial and residential, although many are not expected to lead to permanent
financing by the Bank. Loan commitments generally have fixed expiration dates
and may require payment of a fee. 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.
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 of essential goods and services. A substantial majority of standby
letters of credit outstanding at March 31, 2006 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. The Bank follows its standard credit policies
in
approving loan facilities and financial guarantees and requires collateral
support if warranted. The required collateral 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:
|
|
|
March
31
|
December
31
|
|
(in
thousands)
|
|
2006
|
2005
|
|
Commitments
to extend credit - revolving
|
|
$1,925,487
|
$1,834,415
|
|
Commitments
to extend credit - nonrevolving
|
|
565,825
|
593,667
|
|
Credit
card and personal credit lines
|
|
527,141
|
507,733
|
|
Standby
and other letters of credit
|
|
390,826
|
365,582
|
NOTE
13
EARNINGS
PER SHARE
The
components used to calculate basic and diluted earnings per share were as
follows:
|
|
Three
Months Ended
|
|
|
March
31
|
|
(dollars
in thousands, except per share data)
|
|
2006
|
|
|
2005
|
|
|
Numerator:
|
|
|
|
|
|
|
|
Net
income
|
$
|
36,149
|
|
$
|
28,756
|
|
|
Effect
of dilutive securities
|
|
-
|
|
|
-
|
|
|
Numerator
for diluted earnings per
share
|
$
|
36,149
|
|
$
|
28,756
|
|
|
Denominator:
|
|
|
|
|
|
|
|
Weighted-average
shares outstanding
|
|
62,835,144
|
|
|
60,567,867
|
|
|
Effect
of potentially dilutive
securities
|
|
|
|
|
|
|
|
and
contingently issuable
shares
|
|
1,115,399
|
|
|
1,028,334
|
|
|
Denominator
for diluted earnings per share
|
|
63,950,543
|
|
|
61,596,201
|
|
|
Earnings
per share:
|
|
|
|
|
|
|
|
Basic
|
$
|
.58
|
|
$
|
.47
|
|
|
Diluted
|
|
.57
|
|
|
.47
|
|
|
Antidilutive
stock options
|
|
-
|
|
|
-
|
|
NOTE
14
ACCOUNTING
PRONOUNCEMENTS
In
December 2004, the FASB issued SFAS No. 123 (revised 2004),
Share-Based
Payment
. This statement replaced SFAS No. 123,
Accounting for
Stock-Based Compensation
. Whitney adopted the provisions of SFAS No. 123R
beginning January 1, 2006. Information about the more significant provisions
of
this standard is presented in Note 10.
|
|
|
|
SELECTED FINANCIAL
DATA
|
|
|
(Unaudited)
|
|
|
|
|
2006
|
|
2005
|
|
|
(dollars in thousands, except per share
data)
|
|
First
Quarter
|
Fourth
Quarter
|
Third
Quarter
|
Second
Quarter
|
First
Quarter
|
|
|
QUARTER-END BALANCE SHEET
DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
10,301,742
|
|
$
|
10,109,006
|
|
$
|
9,431,253
|
|
$
|
8,920,289
|
|
$
|
8,275,949
|
|
|
Earning assets
|
|
|
9,518,326
|
|
|
9,054,484
|
|
|
8,247,993
|
|
|
8,145,344
|
|
|
7,660,403
|
|
|
Loans
|
|
|
6,488,639
|
|
|
6,560,597
|
|
|
6,462,623
|
|
|
6,284,625
|
|
|
5,642,031
|
|
|
Investment securities
|
|
|
1,725,357
|
|
|
1,641,451
|
|
|
1,719,026
|
|
|
1,761,875
|
|
|
1,995,541
|
|
|
Deposits
|
|
|
8,683,776
|
|
|
8,604,836
|
|
|
7,478,921
|
|
|
7,169,236
|
|
|
6,721,086
|
|
|
Shareholders' equity
|
|
|
980,755
|
|
|
961,043
|
|
|
945,229
|
|
|
955,583
|
|
|
869,375
|
|
|
AVERAGE BALANCE SHEET DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
10,162,685
|
|
$
|
9,539,789
|
|
$
|
8,999,177
|
|
$
|
8,833,445
|
|
$
|
8,225,375
|
|
|
Earning assets
|
|
|
9,249,232
|
|
|
8,524,522
|
|
|
8,158,377
|
|
|
8,104,745
|
|
|
7,597,501
|
|
|
Loans
|
|
|
6,510,471
|
|
|
6,512,421
|
|
|
6,332,291
|
|
|
6,102,380
|
|
|
5,591,349
|
|
|
Investment securities
|
|
|
1,701,467
|
|
|
1,669,861
|
|
|
1,752,317
|
|
|
1,947,260
|
|
|
1,979,796
|
|
|
Deposits
|
|
|
8,542,554
|
|
|
7,973,830
|
|
|
7,229,462
|
|
|
7,086,179
|
|
|
6,593,001
|
|
|
Shareholders' equity
|
|
|
975,456
|
|
|
952,579
|
|
|
966,771
|
|
|
933,976
|
|
|
887,059
|
|
|
INCOME STATEMENT DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
141,992
|
|
$
|
130,983
|
|
$
|
120,910
|
|
$
|
114,003
|
|
$
|
102,189
|
|
|
Interest expense
|
|
|
28,755
|
|
|
24,557
|
|
|
23,225
|
|
|
19,434
|
|
|
13,770
|
|
|
Net interest income
|
|
|
113,237
|
|
|
106,426
|
|
|
97,685
|
|
|
94,569
|
|
|
88,419
|
|
|
Net interest income (TE)
|
|
|
114,744
|
|
|
107,907
|
|
|
99,116
|
|
|
96,023
|
|
|
89,933
|
|
|
Provision for loan losses
|
|
|
2,000
|
|
|
-
|
|
|
34,000
|
|
|
1,500
|
|
|
1,500
|
|
|
Noninterest income
|
|
|
21,176
|
|
|
18,328
|
|
|
20,305
|
|
|
22,211
|
|
|
21,391
|
|
|
Net securities gains in noninterest
income
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
68
|
|
|
-
|
|
|
Noninterest expense
|
|
|
79,100
|
|
|
76,657
|
|
|
71,678
|
|
|
72,382
|
|
|
66,261
|
|
|
Net income
|
|
|
36,149
|
|
|
35,149
|
|
|
9,123
|
|
|
29,321
|
|
|
28,756
|
|
|
KEY RATIOS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets
|
|
|
1.44
|
%
|
|
1.46
|
%
|
|
.40
|
%
|
|
1.33
|
%
|
|
1.42
|
%
|
|
Return on average shareholders' equity
|
|
|
15.03
|
|
|
14.64
|
|
|
3.74
|
|
|
12.59
|
|
|
13.15
|
|
|
Net interest margin
|
|
|
5.02
|
|
|
5.03
|
|
|
4.83
|
|
|
4.75
|
|
|
4.78
|
|
|
Average loans to average deposits
|
|
|
76.21
|
|
|
81.67
|
|
|
87.59
|
|
|
86.12
|
|
|
84.81
|
|
|
Efficiency ratio
|
|
|
58.20
|
|
|
60.73
|
|
|
60.02
|
|
|
61.25
|
|
|
59.52
|
|
|
Allowance for loan losses to loans
|
|
|
1.37
|
|
|
1.37
|
|
|
1.41
|
|
|
.93
|
|
|
.96
|
|
|
Nonperforming assets to loans plus foreclosed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
assets and surplus property
|
|
|
1.02
|
|
|
1.03
|
|
|
.69
|
|
|
.31
|
|
|
.43
|
|
|
Annualized net charge-offs to average loans
|
|
|
.17
|
|
|
.06
|
|
|
.11
|
|
|
.03
|
|
|
.14
|
|
|
Average shareholders' equity to average assets
|
|
|
9.60
|
|
|
9.99
|
|
|
10.74
|
|
|
10.57
|
|
|
10.78
|
|
|
Shareholders' equity to total assets
|
|
|
9.52
|
|
|
9.51
|
|
|
10.02
|
|
|
10.71
|
|
|
10.50
|
|
|
Leverage ratio
|
|
|
7.99
|
|
|
8.21
|
|
|
8.45
|
|
|
8.63
|
|
|
9.27
|
|
|
COMMON SHARE DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
.58
|
|
$
|
.56
|
|
$
|
.15
|
|
$
|
.47
|
|
$
|
.47
|
|
|
Diluted
|
|
|
.57
|
|
|
.55
|
|
|
.14
|
|
|
.46
|
|
|
.47
|
|
|
Dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends per share
|
|
$
|
.27
|
|
$
|
.25
|
|
$
|
.25
|
|
$
|
.25
|
|
$
|
.23
|
|
|
Dividend payout ratio
|
|
|
47.41
|
%
|
|
45.05
|
%
|
|
173.41
|
%
|
|
53.89
|
%
|
|
49.43
|
%
|
|
Book Value Per Share
|
|
$
|
15.45
|
|
$
|
15.17
|
|
$
|
14.94
|
|
$
|
15.11
|
|
$
|
14.27
|
|
|
Trading Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High sales price
|
|
$
|
36.17
|
|
$
|
29.93
|
|
$
|
33.69
|
|
$
|
33.00
|
|
$
|
31.09
|
|
|
Low sales price
|
|
|
27.27
|
|
|
24.14
|
|
|
26.60
|
|
|
28.65
|
|
|
28.44
|
|
|
End-of-period closing price
|
|
|
35.46
|
|
|
27.56
|
|
|
27.04
|
|
|
32.63
|
|
|
29.67
|
|
|
Trading volume
|
|
|
14,411,128
|
|
|
16,175,745
|
|
|
18,314,726
|
|
|
6,531,000
|
|
|
9,412,595
|
|
|
Average Shares Outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
62,835,144
|
|
|
62,729,336
|
|
|
62,699,332
|
|
|
62,004,132
|
|
|
60,567,867
|
|
|
Diluted
|
|
|
63,960,543
|
|
|
63,533,521
|
|
|
63,579,123
|
|
|
63,076,155
|
|
|
61,596,201
|
|
|
Share and per share data give effect to the
3-for-2
stock split effective May 25, 2005.
|
|
|
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.
|
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, 2005 to March 31, 2006 and on their
results of operations during the first quarters of 2006 and 2005. 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
appearing in Item 1. This discussion and analysis should be read in conjunction
with the Company’s 2005 annual report on Form 10-K. All share and per share data
in this quarterly report reflect the three-for-two split of Whitney’s common
stock that was effective May 25, 2005.
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. Forward-looking statements provide projections
of results of operations or of financial condition or state other
forward-looking information, such as expectations about future conditions and
descriptions of plans and strategies for the future. Forward-looking statements
often contain words such as “anticipate,” “believe,” “could,” “continue,”
“estimate,” “expect,” “forecast,” “goal,” “intend,” “plan,” “predict,” “project”
or other words of similar meaning.
The
forward-looking statements made in this discussion include, but may not be
limited to, (a) comments on the financial repercussions of natural disasters
and
Whitney’s response, including the impact on the allowance for loan losses and
related provision, deposit balances, liquidity and on certain categories of
noninterest expense; (b) expectations expressed about insurance recoveries
of
storm-related casualty losses and repair and rebuilding costs; (c) comments
on
conditions impacting certain sectors of the loan portfolio; (d) information
about changes in the duration of the investment portfolio with changes in market
rates; (e) comments about the impact of acquisitions on future regulatory
capital ratios; (f) statements of the results of net interest income simulations
run by the Company to measure interest rate sensitivity; (g) discussion of
the
performance of Whitney’s net interest income assuming certain conditions; and
(h) comments on expected trends or changes in expense levels for retirement
benefits.
Whitney’s
ability to accurately project results or predict the effects of future plans
or
strategies is inherently limited. Although Whitney believes that the
expectations reflected in forward-looking statements are based on reasonable
assumptions, actual results and performance could differ materially from those
set forth in the forward-looking statements.
The
natural disasters that struck portions of Whitney’s service area in 2005 are
discussed below in the “Overview” section and in various other sections. These
events caused significant uncertainties, the outcome of which will impact the
Company’s future results. Additional factors that could cause actual results to
differ from those expressed in the Company’s forward-looking statements include,
but are not limited to:
|
·
|
Changes
in economic and business conditions, including those caused by natural
disasters or by acts of war or terrorism, that directly or indirectly
affect the financial health of Whitney’s customer base.
|
|
·
|
Changes
in interest rates that affect the pricing of Whitney’s financial products,
the demand for its financial services and the valuation of its financial
assets and liabilities.
|
|
·
|
Changes
in laws and regulations that significantly affect the activities
of the
banking industry and the industry’s competitive position relative to other
financial service providers.
|
|
·
|
Technological
changes affecting the nature or delivery of financial products or
services
and the cost of providing them.
|
|
·
|
The
failure to capitalize on growth opportunities and to realize cost
savings
in connection with business acquisitions.
|
|
·
|
Management’s
inability to develop and execute plans for Whitney to effectively
respond
to unexpected changes.
|
Whitney
does not intend, and undertakes no obligation, to update or revise any
forward-looking statements, whether as a result of differences in actual
results, changes in assumptions or changes in other factors affecting such
statements.
OVERVIEW
UPDATE
ON IMPACT OF NATURAL DISASTERS
Two strong hurricanes struck portions of Whitney’s service area during the third
quarter of 2005. The following sections summarize the more significant
continuing financial repercussions of these natural disasters for the Company
and the Bank.
Credit
Quality and Allowance for Loan Losses
Relationship
officers continued to closely monitor the performance of storm-impacted loan
customers during the first quarter of 2006, and data became available on the
performance of consumer credits that had been under payment deferral programs.
This information was factored into management’s determination of the allowance
for loan losses at March 31, 2006, but it did not cause any significant net
change in the level of the allowance from that determined at December 31, 2005.
Although the identification and initial evaluation of storm-impacted credits
has
been substantially completed, significant uncertainties remain, both those
specific to some individual customers, such as the resolution of insurance
claims, and those applicable to the overall economic prospects of the
storm-impact area as a whole. The resolution of these uncertainties, together
with the ongoing collection of information on individual customers and
statistics on the consumer segment of the loan portfolio, could lead to
significant changes in management’s assessment of storm-related credit risk and
the allowance for loan losses.
Disaster
Response Costs, Casualty Losses, Business
Interruption and Related Insurance
The Bank has incurred a variety of costs to operate in disaster
response mode, and a number of facilities and their contents were damaged by
the
storms, including sixteen that require replacement, relocation or major
renovation. Whitney maintains insurance for casualty losses as well as for
reasonable and necessary disaster response costs and certain revenue lost
through business interruption. Most of the significant disaster response costs
had been incurred by the end of the first quarter of 2006 and included where
appropriate in an insurance claim receivable based on management’s understanding
of the underlying coverage. The bulk of costs to replace or renovate facilities
will be incurred in future periods, and these will be included in the insurance
claims as appropriate. Through March 31, 2006, Whitney had expensed $6.9 million
of storm-related disaster response costs and casualty losses, including $2.5
million charged to operations in the first quarter of 2006.
Deposit
Growth and Liquidity Management
The
Bank experienced a rapid
accumulation of deposits in the months following the storms, and these funds
have for the most part been retained through the end of the first quarter
of
2006. Total deposits at March 31, 2006 were up $79 million, or 1%, from December
31, 2005, but the total has grown $1.5 billion, or 21%, since June 30, 2005,
largely concentrated in noninterest-bearing demand deposits and personal
savings
account deposits. A number of storm-related factors contributed to this
accumulation, including the settlement of insurance claims, payments under
disaster-recovery contracts, the distribution of relief funds, deferrals
granted
on income tax installments and a more conservative approach to discretionary
spending by many customers in the face of significant uncertainties such
as
those pertaining to the rebuilding process.
Although
management expects the
balances accumulated by deposit customers in the storm-affected areas to
reduce
over time, it is difficult to predict when and to what degree. After first
reducing short-term wholesale borrowings, Whitney has invested most of the
accumulated funds in short-term liquidity management securities. A portion
of
the deposit growth also helped fund the increase in float that resulted from
storm-forced changes to the Bank’s normal processing and collection of cash
items. Balances of cash in other banks and in process of collection for the
first quarter of 2006 were higher by approximately $152 million on average
compared to 2005’s first quarter. Balances returned to more normal levels by
March 31, 2006.
HIGHLIGHTS
OF FINANCIAL RESULTS
Whitney
earned $36.1 million in the quarter ended March 31, 2006, a
26% increase compared to net income of $28.8 million reported for the first
quarter of 2005. Per share earnings were $.58 per basic share and $.57 per
diluted share in 2006’s first quarter, up 23% and 21%, respectively, from $.47
per share, both basic and diluted, in the year-earlier period.
Selected
first quarter highlights follow:
|
·
|
Whitney’s
net interest income (TE) for the first quarter of 2006 increased
$24.8
million, or 28%, compared to the first quarter of 2005, driven by
both the
22% increase in average earning assets and a wider net interest margin.
The net interest margin (TE) was 5.02% for the first quarter of 2006,
up
24 basis points from the year-earlier period.
|
|
·
|
Average
total loans for the quarter, including loans held for sale, were
up 17%
compared to the first quarter of 2005, with approximately 8% associated
with the Destin Bank acquisition in April 2005. Average investment
securities decreased 14% from the first quarter of 2005 to 2006’s first
quarter in support of loan growth. As noted earlier, Whitney invested
a
significant portion of the funds from the rapid post-storm build-up
of
deposits in liquidity management securities, and average short-term
investments for the first quarter of 2006 increased by $986 million
compared to the first quarter of 2005. Total average earning assets
for
the quarter were up a net 22%, or $1.65 billion, compared to the
first
quarter of 2005.
|
|
·
|
Whitney
provided $2.0 million for loan losses in the first quarter of 2006,
compared to a $1.5 million provision in the first quarter of 2005.
As
noted earlier, new information gathered during the first quarter
of 2006
on storm-related credit risk prompted little net change in the
determination of the allowance for loan losses at quarter end compared
to
year-end 2005. The total of loans criticized through the internal
credit
risk classification process decreased by $17 million during the
first
quarter of 2006, although the total of nonperforming loans at March
31,
2006 was little changed from December 31, 2005. Net-charge offs
totaled
$2.8 million in 2006’s first quarter, compared to net charge-offs of $1.9
million in the first quarter of 2005.
|
|
·
|
Noninterest
income decreased 1% from the first quarter of 2005, when Whitney
received
a $1.0 million distribution related to its membership in an electronic
payment network that was sold. While the results for the first
quarter of
2006 showed improvement in a number of income categories, reflecting
both
internal growth and contributions from acquired operations, revenue
from
service charges on deposit accounts was down 19%, or $1.5 million,
compared to the year-earlier period. The accumulation of deposit
account
balances after the storms served to reduce revenue from charges
related to
these accounts. Another important factor was the earnings credit
allowed
against service charges on certain business deposit accounts that
has
grown with the rise in short-term market rates.
|
|
·
|
Noninterest
expense increased 19%, or $12.8 million, from
2005’s first quarter. Incremental operating costs associated with Destin
Bank totaled approximately $2.2 million in the first quarter of
2006, and
the amortization of intangibles acquired in this transaction added
$.7
million to expense for the current year’s period. Personnel expense
increased 13%, or $5.1 million, in total, including approximately
$1.2
million for the Destin staff. Compensation expense under management
incentive programs in the first quarter of 2006 was up $2.1 million
compared to the year-earlier period, mainly on revised expectations
about
the performance factors for unvested performance-based stock grants.
As
noted earlier, Whitney expensed $2.5 million of disaster-related
costs and
operating losses in the first quarter of
2006.
|
FINANCIAL
CONDITION
LOANS,
CREDIT RISK MANAGEMENT AND ALLOWANCE FOR LOAN LOSSES
Loan
Portfolio Developments
Total
loans decreased $72 million, or 1%, from year-end 2005 to the end of 2006’s
first quarter, and were up 15%, or $847 million, from the end of 2005’s first
quarter. Whitney acquired a $390 million loan portfolio with Destin Bank in
April 2005. Table 1 shows loan balances by type of loan at March 31, 2006 and
at
the end of the four prior quarters. The following discussion provides a brief
overview of the composition of the different portfolio segments and the
customers served in each as well as recent changes.
|
TABLE
1. LOANS
|
|
|
|
|
|
|
|
|
2006
|
|
2005
|
|
(dollars
in thousands)
|
March
31
|
|
December
31
|
September
30
|
June
30
|
March
31
|
|
Commercial,
financial and
|
|
|
|
|
|
|
|
agricultural
|
$2,595,056
|
|
$2,685,894
|
$2,614,414
|
$2,506,878
|
$2,355,929
|
|
Real
estate - commercial,
|
|
|
|
|
|
|
|
construction
and other
|
2,780,340
|
|
2,743,486
|
2,684,353
|
2,637,708
|
2,273,158
|
|
Real
estate -
|
|
|
|
|
|
|
|
residential
mortgage
|
771,547
|
|
774,124
|
790,823
|
779,178
|
676,250
|
|
Individuals
|
341,696
|
|
357,093
|
373,033
|
360,861
|
336,694
|
|
Total
loans
|
$6,488,639
|
|
$6,560,597
|
$6,462,623
|
$6,284,625
|
$5,642,031
|
The
portfolio of commercial loans, other than those secured by real property,
decreased 3%, or $91 million, between year-end 2005 and March 31, 2006, as
loan
repayments, including some seasonal reductions and the application of
storm-related insurance proceeds, outweighed new advances during the period.
This portfolio sector grew 10%, or $239 million, from the end of 2005’s first
quarter, including approximately $36 million from the Destin Bank acquisition.
Overall the portfolio has remained diversified, with customers in a range of
industries, including oil and gas exploration and production, marine
transportation and maritime construction, wholesale and retail trade in various
durable and nondurable products and the manufacture of such 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 2005.
Loans
outstanding to oil and gas industry customers represented approximately 9%
of
total loans at March 31, 2006, little changed from the percentage at year-end
2005. The major portion of Whitney’s customer base in this industry provides
transportation and other services and products to support exploration and
production activities. With expectations of sustained higher commodity prices,
Whitney has increased its attention to lending opportunities in the exploration
and production sector in recent years.
Outstanding
balances under participations in larger shared-credit loan commitments totaled
$360 million at the end of 2006’s first quarter, including approximately $99
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 includes loans for construction and real estate
development, both commercial and residential, loans secured by multi-family
residential properties and other income-producing properties, and loans secured
by properties used in commercial or industrial operations. This portfolio sector
grew 1%, or $37 million, from December 31, 2005, and has increased 22%, or
$507
million, since the end of the first quarter of 2005. The Destin Bank acquisition
added approximately $240 million to this category in 2005, with construction
and
real estate development loans making up over three quarters of the total.
Whitney continues to develop new business in this highly competitive sector
throughout its market area in addition to financing new projects for its
established customer base. The more recent activity in this portfolio
sector has been driven by condominium and apartment projects and single-family
residential development, particularly in the eastern Gulf Coast region, and
by
the development of retail, office and industrial properties by customers
throughout Whitney’s market area. The future pace of new real estate project
financing will reflect the level of confidence by Whitney and its customers
in
the sustainability of favorable economic conditions. The rate of portfolio
growth in a given period will also be affected by the refinancing of seasoned
income properties in the secondary market and payments on residential
development loans as inventory is sold.
The
residential mortgage loan portfolio was essentially stable from the end of
2005
to March 31, 2006, but was up 14%, or $95 million, from a year earlier. Growth
in this category has mostly come from acquisitions. Whitney continues to sell
most conventional residential mortgage loan production in the secondary
market.
Loans
to
individuals include various consumer installment and credit line products.
Storm-related factors are evident in the decrease in this portfolio category
since September 30, 2005, including the application of insurance proceeds and
some reduction in credit demand associated with the ongoing disruption of normal
routines for individuals from the most affected areas.
Credit
Risk Management and Allowance for Loan Losses
General
Discussion of Credit Risk Management and Determination of
Allowance
Whitney
manages credit risk mainly through adherence to 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
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 groups of homogeneous loans not
individually rated; and (3) allowances based on general economic conditions
and
other qualitative risk factors internal and external to the Company. The
allowance for criticized loans includes any specific allowances determined
for
loans that are deemed impaired under the definition in Statement of Financial
Accounting Standards No. 114. The allowance for the remainder of criticized
loans is calculated by applying loss factors to loan balances aggregated by
severity of the internal risk rating.
Management’s
Assessment of Storms’ Impact on Credit
Quality
Management
has been confronted with a significant and unfamiliar
degree of uncertainty in estimating the impact of the 2005 storms on credit
quality and inherent losses. Based on information as of March 31, 2006,
management had estimated that loans to customers with some level of operations
in or resident in the impacted areas totaled $2.2 billion, with over 80% in
commercial and commercial real estate loans. By March 31, 2006, loan officers
had made individual assessments of the immediate and near-term impact of the
storms on a substantial number of commercial and commercial real estate
customers in the affected areas and had initiated risk rating changes as needed,
with confirmation of the conclusions by the credit review function. The results
from this large-scale review were extrapolated to the portion of the
storm-impacted portfolio not reviewed, mainly consisting of relatively
low-balance credits.
The
detailed review process applied to commercial and commercial real
estate loans was not logistically feasible for the residential mortgage and
consumer credit components of the storm-impacted portfolio, which was estimated
to total $260 million as of March 31, 2006. These portfolios were segmented
using risk characteristics such as credit scores and the type of collateral
securing the loans, if any. Management assumed different levels of storm-related
credit deterioration for the various segments and applied incremental loss
factors to loans totaling approximately $105 million out of the total identified
for the storm-impacted portfolio.
Because
the disaster-recovery process will be lengthy and the
long-term economic impact will remain unclear for some time, management will
continue its process for assessing the storms’ impact on credit quality until
the significant remaining uncertainties are resolved. With additional
information, management’s estimate of the storms’ impact on loan losses will be
refined, and any related revisions in the allowance calculation will be
reflected in the provision for loan losses as they occur.
Credit
Quality Statistics and Components of Allowance
for Loan Losses
Table
2 provides information on nonperforming loans and other
nonperforming assets at March 31, 2006 and at the end of the previous four
quarters. Nonperforming loans are included in the criticized loan total
discussed below and encompass substantially all loans separately evaluated
for
impairment. The allowance for impaired loans increased by $2.4 million between
December 31, 2005 and March 31, 2006, of which approximately $2.0 million was
attributable to storm-impacted credits. Overall there have been no significant
trends related to industries or markets underlying the changes in nonperforming
assets.
|
TABLE
2. NONPERFORMING ASSETS
|
|
|
|
|
|
|
|
|
2006
|
|
2005
|
|
(dollars
in thousands)
|
March
31
|
|
December
31
|
September
30
|
June
30
|
March 31
|
|
Loans
accounted for on a nonaccrual basis
|
$65,494
|
|
$65,565
|
$43,763
|
$18,521
|
$21,912
|
|
Restructured
loans
|
28
|
|
30
|
30
|
32
|
36
|
|
Total
nonperforming loans
|
65,522
|
|
65,595
|
43,793
|
18,553
|
21,948
|
|
Foreclosed
assets and surplus property
|
652
|
|
1,708
|
794
|
1,014
|
2,547
|
|
Total
nonperforming assets
|
$66,174
|
|
$67,303
|
$44,587
|
$19,567
|
$24,495
|
|
Loans
90 days past due still accruing
|
$3,956
|
|
$13,728
|
$5,358
|
$3,185
|
$1,559
|
|
Ratios:
|
|
|
|
|
|
|
|
Nonperforming
assets to loans
|
|
|
|
|
|
|
|
plus
foreclosed assets and
surplus property
|
1.02%
|
|
1.03%
|
.69%
|
.31%
|
.43%
|
|
Allowance
for loan losses to
|
|
|
|
|
|
|
|
nonperforming
loans
|
136
|
|
137
|
208
|
317
|
246
|
|
Loans
90 days past due still accruing to
loans
|
.06
|
|
.21
|
.08
|
.05
|
.03
|
During
the first quarter of 2006, there was a $17 million decrease in the total of
loans criticized through the internal credit risk classification process.
Criticized loans at March 31, 2006 included $19 million of loans whose full
repayment is in doubt, including one $12 million storm-impacted credit. The
total for this rating classification was down $1 million from year-end 2005.
Loans identified as having well-defined weaknesses that would likely result
in
some loss if not corrected increased a net $5 million during the current
quarter, to a total of $144 million at March 31, 2006. Loans warranting special
attention totaled $99 million at March 31, 2006, down $20 million from December
31, 2005. The allowance determined for criticized loans at March 31, 2006,
other
than those separately evaluated for impairment, decreased $.5 million from
that
determined at year-end 2005. With additional information, management was able
to
reduce by $1.4 million the allowance with respect to unidentified criticized
loans and other rating downgrades that were estimated by extrapolation from
the
results of the ongoing storm-impact reviews.
Before
adjustment for management’s assessment of the storms’ impact, the allowance for
loans with average or better credit quality ratings and loans not subject to
individual rating decreased $.9 million from year-end 2005 to March 31, 2006.
Management’s storm-impact assessment reduced the allowance for these components
of the portfolio by approximately $1.4 million, mainly related to unsecured
consumer loans.
The
overall allowance determined as of March 31, 2006 was $.8 million less than
the
allowance at year-end 2005. The net change included approximately $1.0 million
added to the allowance related to management’s relative assessment of economic
and other qualitative risk factors between these dates.
Table
3
compares first quarter activity in the allowance for loan losses for 2006 with
the comparable period of 2005.
|
TABLE
3.
SUMMARY
OF ACTIVITY IN THE ALLOWANCE FOR LOAN LOSSES
|
|
|
|
Three
Months Ended
|
|
|
|
March
31
|
|
(dollars
in thousands)
|
|
|
2006
|
|
|
2005
|
|
|
Balance
at the beginning of period
|
|
$
|
90,028
|
|
$
|
54,345
|
|
|
Provision
for loan losses charged to operations
|
|
|
2,000
|
|
|
1,500
|
|
|
Loans
charged to the allowance:
|
|
|
|
|
|
|
|
|
Commercial,
financial and agricultural
|
|
|
(1,409
|
)
|
|
(2,775
|
)
|
|
Real
estate - commercial, construction and
other
|
|
|
(1,325
|
)
|
|
(57
|
)
|
|
Real
estate - residential mortgage
|
|
|
(278
|
)
|
|
(154
|
)
|
|
Individuals
|
|
|
(617
|
)
|
|
(690
|
)
|
|
Total
charge-offs
|
|
|
(3,629
|
)
|
|
(3,676
|
)
|
|
Recoveries
of loans previously charged off:
|
|
|
|
|
|
|
|
|
Commercial,
financial and agricultural
|
|
|
347
|
|
|
1,092
|
|
|
Real
estate - commercial, construction and
other
|
|
|
82
|
|
|
142
|
|
|
Real
estate - residential mortgage
|
|
|
104
|
|
|
113
|
|
|
Individuals
|
|
|
277
|
|
|
404
|
|
|
Total
recoveries
|
|
|
810
|
|
|
1,751
|
|
|
Net
charge-offs
|
|
|
(2,819
|
)
|
|
(1,925
|
)
|
|
Balance
at the end of period
|
|
$
|
89,209
|
|
$
|
53,920
|
|
|
Ratios:
|
|
|
|
|
|
|
|
|
Annualized
net charge-offs to average
loans
|
|
|
.17
|
%
|
|
.14
|
%
|
|
Annualized
gross charge-offs to average
loans
|
|
|
.22
|
|
|
.26
|
|
|
Recoveries
to gross charge-offs
|
|
|
22.32
|
|
|
47.63
|
|
|
Allowance
for loan losses to loans at period
end
|
|
|
1.37
|
|
|
.96
|
|
INVESTMENT
SECURITIES
The
investment securities portfolio balance increased by $84 million, or 5%, from
year-end 2005 to March 31, 2006. Average investment securities decreased 14%,
or
$278 million, from the first quarter of 2005 to 2006’s first quarter. The
composition of the average portfolio of investment securities and effective
yields are shown in Table 7.
The
mix
of investments in the portfolio did not change significantly in the first
quarter of 2006. The duration of the overall investment portfolio was 3.1 years
at March 31, 2006, and would extend to 3.7 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. At December 31, 2005, the
portfolio’s estimated duration was 3.0 years.
Securities
available for sale made up the bulk of the total investment portfolio at March
31, 2006. Gross unrealized losses on securities available for sale totaled
$43
million at March 31, 2006 and were mainly related to mortgage-backed securities
and certain longer-maturity U. S. government agency securities. The gross losses
represented approximately 3% of the total amortized cost of the underlying
securities. Substantially all the unrealized losses at March 31, 2006 resulted
from increases in market interest rates over the yields available at the time
the underlying securities were purchased. Management identified no value
impairment related to credit quality in the portfolio, and no value impairment
was evaluated as other than temporary.
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, 2006 were up 1%, or $79 million, from the level at year-end 2005.
Compared to March 31, 2005, deposits were up 29%, or $1.96 billion. The Destin
Bank locations acquired in April 2005 held approximately $286 million in
deposits at March 31, 2006. As discussed earlier in the “Overview” section,
there was a rapid accumulation of deposits in the months following the storms.
Table 4 presents the composition of deposits at March 31, 2006 and at the end
of
the previous four quarters. The composition of average deposits and the
effective yields on interest-bearing deposits for the first quarter of 2006
and
the fourth and first quarters of 2005 are presented in Table 7
below.
|
TABLE
4. DEPOSIT COMPOSITION
|
|
|
|
2006
|
|
|
2005
|
|
|
(dollars
in thousands)
|
March
31
|
|
|
December
31
|
|
September
30
|
|
June
30
|
|
March
31
|
|
|
Noninterest-bearing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
demand deposits
|
$
|
3,189,552
|
|
|
37
|
%
|
|
$
|
3,301,227
|
|
|
38
|
%
|
$
|
2,668,493
|
|
|
36
|
%
|
$
|
2,301,989
|
|
|
32
|
%
|
$
|
2,165,751
|
|
|
32
|
%
|
|
Interest-bearing
deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW account deposits
|
|
1,090,894
|
|
|
12
|
|
|
|
1,116,000
|
|
|
13
|
|
|
917,861
|
|
|
12
|
|
|
883,453
|
|
|
12
|
|
|
861,389
|
|
|
13
|
|
|
Money market deposits
|
|
1,095,554
|
|
|
13
|
|
|
|
1,103,510
|
|
|
13
|
|
|
1,146,188
|
|
|
15
|
|
|
1,204,013
|
|
|
17
|
|
|
1,190,772
|
|
|
18
|
|
|
Savings deposits
|
|
1,214,840
|
|
|
14
|
|
|
|
1,120,078
|
|
|
13
|
|
|
847,628
|
|
|
11
|
|
|
803,076
|
|
|
11
|
|
|
771,547
|
|
|
11
|
|
|
Other time deposits
|
|
716,833
|
|
|
8
|
|
|
|
717,938
|
|
|
8
|
|
|
728,539
|
|
|
10
|
|
|
754,315
|
|
|
11
|
|
|
677,509
|
|
|
10
|
|
|
Time deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$100,000 and over
|
|
1,376,103
|
|
|
16
|
|
|
|
1,246,083
|
|
|
15
|
|
|
1,170,212
|
|
|
16
|
|
|
1,222,390
|
|
|
17
|
|
|
1,054,118
|
|
|
16
|
|
|
Total interest-bearing
|
|
5,494,224
|
|
|
63
|
|
|
|
5,303,609
|
|
|
62
|
|
|
4,810,428
|
|
|
64
|
|
|
4,867,247
|
|
|
68
|
|
|
4,555,335
|
|
|
68
|
|
|
Total
|
$
|
8,683,776
|
|
|
100
|
%
|
|
$
|
8,604,836
|
|
|
100
|
%
|
$
|
7,478,921
|
|
|
100
|
%
|
$
|
7,169,236
|
|
|
100
|
%
|
$
|
6,721,086
|
|
|
100
|
%
|
The
post-storm influx of deposits was concentrated in noninterest-bearing and
certain other lower-cost deposit products, which helped maintain the Company’s
favorable mix of deposit funds. Noninterest-bearing demand deposits increased
to
37% of total deposits at March 31, 2006 from 32% a year earlier, and total
lower-cost deposits, which exclude time deposits, made up nearly three-quarters
of deposits at the end of each period. Noninterest-bearing demand deposits
increased 47%, or $1.02 billion, since March 31, 2005, with $888 million coming
since the end of the second quarter of 2005. The movement of some of these
funds
into interest-bearing products contributed to a 3% decrease in this deposit
category from year-end 2005 to March 31, 2006. Lower-cost interest-bearing
deposits at March 31, 2006 were up 20%, or $578 million, from the end of 2005’s
first quarter. Growth subsequent to June 30, 2005 totaled $511 million,
including $62 million during the first quarter of 2006, with growth in personal
savings accounts the most significant component. At March 31, 2006, the Destin
Bank locations held approximately $195 million in total lower-cost
deposits.
Higher-cost
time
deposits at March 31, 2006 were up 7%, or $129 million, compared to year-end
2005, and 21%, or $361 million, compared to March 31, 2005. Time deposits at
the
acquired Destin Bank locations totaled approximately $91 million at March 31,
2006. Time deposits of $100,000 and over include competitively bid public funds
and excess funds of certain commercial and private banking customers that are
maintained in treasury-management deposit products pending redeployment for
corporate or investment purposes. Whitney has attracted these funds partly
as an
alternative to other short-term borrowings. Customers held $611 million of
funds
in treasury-management deposit products at March 31, 2006, up $107 million
from
December 31, 2005 and $235 million from a year earlier. Public fund time
deposits totaled approximately $197 million at the end of the first quarter
of
2006, which was up approximately $25 million from both year-end 2005 and March
31, 2005.
Short-term
and other borrowings at March 31, 2006 were up $86 million from year-end 2005.
The main source of short-term borrowings continues to be the sale of securities
under repurchase agreements to customers using Whitney’s treasury management
sweep product. The total of borrowings from customers under repurchase
agreements increased $127 million since the end of 2005, including the movement
of some funds from noninterest-bearing demand and other lower-cost deposit
categories.
SHAREHOLDERS’
EQUITY AND CAPITAL ADEQUACY
Shareholders’
equity totaled $981 million at March 31, 2006, which was an increase of $20
million from the end of 2005. For the first quarter of 2006, the Company
retained $19 million of earnings, net of dividends declared, and recognized
$8
million in additional equity from activity in stock-based compensation plans
for
employees and directors, including option exercises. These additions to capital
were partly offset by an $8 million decrease in other comprehensive income
representing an unrealized net holding loss on securities available for sale
during the period. The Company declared a dividend for the first quarter of
2006
that represented a payout totaling 47% of earnings for the period, compared
to a
49% payout ratio in 2005’s first quarter and 60% for the full year in
2005.
The
ratios in Table 5 indicate that the Company remained strongly capitalized at
March 31, 2006. The increase in regulatory capital and a decrease in
risk-weighted assets compared to year-end 2005 led to higher regulatory capital
ratios at the end of the current quarter. The lack of growth in risk-weighted
assets from the end of 2005 reflected mainly the reduction in loans and a
significant increase in short-term investments with a zero risk
weighting. The acquisition of First National Bancshares, Inc. for cash and
stock in April 2006 will lower the Company’s regulatory capital ratios over the
near term compared to the level at March 31, 2006, but all ratios are expected
to remain well above regulatory minimums.
|
TABLE
5. RISK-BASED CAPITAL AND CAPITAL
RATIOS
|
|
|
|
March
31
|
December
31
|
|
(dollars
in thousands)
|
|
2006
|
2005
|
|
Tier
1 regulatory capital
|
|
$795,511
|
|
$765,881
|
|
|
Tier
2 regulatory capital
|
|
89,749
|
|
90,608
|
|
|
Total
regulatory capital
|
|
$885,260
|
|
$856,489
|
|
|
Risk-weighted
assets
|
|
$7,717,111
|
|
$7,746,046
|
|
|
Ratios
|
|
|
|
|
Leverage
(Tier 1 capital to average
assets)
|
|
7.99
|
%
|
8.21
|
%
|
|
Tier
1 capital to risk-weighted assets
|
|
10.31
|
|
9.89
|
|
|
Total
capital to risk-weighted assets
|
|
11.47
|
|
11.06
|
|
|
Shareholders’
equity
to total assets
|
|
9.52
|
|
9.51
|
|
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.
Liquidity
management on the asset side primarily addresses the composition and maturity
structure of the loan portfolio and the portfolio of investment securities
and
their impact on the Company’s ability to generate cash flows from scheduled
payments, contractual maturities, and prepayments, through use as collateral
for
borrowings, and through possible sale or securitization.
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 earlier “Overview” section and the section above
on “Deposits and Borrowings” discuss changes in these liability-funding sources
in the first quarter of 2006.
As
noted earlier, the Bank experienced
a rapid accumulation of deposits in the months following the storms, and these
funds have for the most part been retained through the end of the first quarter
of 2006. After first reducing short-term wholesale borrowings, Whitney has
invested most of the accumulated funds in short-term liquidity management
securities. Although management expects the balances accumulated by deposit
customers in the storm-affected areas to reduce over time, it is difficult
to
predict when and to what degree, and there will likely be some further
storm-related deposit inflows as remaining insurance claims are resolved and
additional disaster-recovery funds are distributed. Management continues to
monitor changes in this portion of the deposit base as part of its liquidity
management process.
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 three
months of 2006 and 2005.
At
March
31, 2006, Whitney Holding Corporation had approximately $76 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.
The dividend payable at March 31, 2006 totaled $13 million. On April 13, 2006,
Whitney completed its acquisition of First National Bancshares, Inc. for stock
and cash with a total value of approximately $116 million. The cash component
of
the purchase price totaled approximately $41 million.
Contractual
Obligations
Payments
due from the Company and the Bank under specified long-term and certain other
binding contractual obligations, other than obligations under deposit contracts
and short-term borrowings, were scheduled in Whitney’s annual report on Form
10-K for the year ended December 31, 2005. The most significant obligations
included operating leases for banking facilities and various multi-year
contracts for outsourced services and software licenses. As of March 31, 2006,
the Bank had entered into operating leases for two new bank branches as well
as
for space needed to implement initiatives to make Whitney’s operations more
resilient in the face of natural disasters of any type. Also in connection
with
these initiatives, the Bank had contracted to purchase or lease new equipment
and related software. Obligations under the facility leases total approximately
$7 million to be paid over terms ranging from three to twenty years. Other
contractual obligations total approximately $5 million, of which $3 million
will
be paid over three years. Management expects that most of the funds needed
to
repair or replace banking premises and equipment damaged or destroyed by the
storms that struck in the summer of 2005 will be provided by
insurance.
OFF-BALANCE
SHEET ARRANGEMENTS
As
a
normal part of its 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,
2006
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
|
|
(in
thousands)
|
Commitments
expiring by period from March 31, 2006
|
|
|
|
Less
than
|
1
-
3
|
3
-
5
|
More
than
|
|
|
Total
|
1
year
|
years
|
years
|
5
years
|
|
Loan
commitments - revolving
|
$1,925,487
|
$1,429,025
|
$332,849
|
$157,524
|
$6,089
|
|
Loan
commitments - nonrevolving
|
565,825
|
363,235
|
202,590
|
-
|
-
|
|
Credit
card and personal credit lines
|
527,141
|
527,141
|
-
|
-
|
-
|
|
Standby
and other letters of credit
|
390,826
|
339,662
|
51,164
|
-
|
-
|
|
Total
|
$3,409,279
|
$2,659,063
|
$586,603
|
$157,524
|
$6,089
|
Revolving
loan commitments are issued primarily 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 and has not violated other contractual conditions. Many
such
commitments are used only partially or, in some cases, 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 development or 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 2006’s first quarter indicated
that Whitney was moderately asset sensitive over the near term, similar to
its
position at year-end 2005. Based on these simulations, annual net interest
income (TE) would be expected to increase $28.5 million, or 5.7%, and decrease
$30.1 million, or 6.0%, if interest rates instantaneously increased or
decreased, respectively, from current rates by 100 basis points. These changes
are measured against the results of a base simulation run that uses growth
forecasts as of the measurement date and assumes a stable rate environment
and
structure. The comparable simulation run at year-end 2005 produced results
that ranged from a positive impact on net interest income (TE) of $28.9 million,
or 6.2%, to a negative impact of $31.9 million, or 6.8%. 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 expected 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 and corresponding movement in interest rate
spreads and the level of success of asset/liability management strategies
implemented.
RESULTS
OF OPERATIONS
NET
INTEREST INCOME (TE)
Whitney’s
net interest income (TE) for the first quarter of 2006 increased $24.8 million,
or 28%, compared to the first quarter of 2005. Average earning assets were
22%
higher in the first quarter of 2006 and the net interest margin (TE) improved
24
basis points to 5.02% from the year-earlier period. The net interest margin
(TE)
is net interest income (TE) as a percent of average earning assets. The most
important factors behind the increase in net interest income between these
periods were loan growth, including growth through acquisitions, higher
short-term market interest rates, growth in lower-cost funding sources and
the
continued active management of the pricing structure for both loans and
deposits. First quarter net interest income (TE) in 2006 was $6.8 million,
or
6%, higher than in the 2005’s fourth quarter on a 9% increase in average earning
assets between these periods. The net interest margin for the current quarter
was little changed from the 5.03% margin in 2005’s fourth quarter. Tables 7 and
8 provide details on the components of the Company’s net interest income (TE)
and net interest margin (TE).
Average
total loans, which in Table 7 include loans held for sale, were up 17%, or
$944
million, for the quarter as compared to the first quarter of 2005, with
approximately 8%, or $440 million, associated with the Destin Bank acquisition
in April 2005. Rising benchmark rates for the large variable-rate segment of
Whitney’s loan portfolio led to an increase of 112 basis points in loan yields
(TE) for the first quarter of 2006 as compared to 2005’s first quarter and 33
basis points as compared to the fourth quarter of 2005. The yield on the largely
fixed-rate investment portfolio is less responsive to changes in market rates
and the investment portfolio yield (TE) has fluctuated within a narrow range
from the first quarter of 2005 through the current year’s first quarter,
increasing 7 basis points between these periods. The overall earning asset
yield
increased 76 basis points between the first quarters of 2005 and 2006 and was
up
11 basis points in the current period from the fourth quarter of 2005. The
increase in the overall earning asset yield was restrained by a shift in the
mix
of assets to lower-yielding short-term investments with the deployment of funds
from the post-storm deposit build-up. Liquidity-management investments increased
to 11% of earning assets in the current period as compared to 3% in 2005’s
fourth quarter and less than 1% in the first quarter of 2005. Loans comprised
71% of average earning assets for the first quarter of 2006, down from 77%
in
the fourth quarter of 2005 and 74% in the year-earlier quarter.
Earning
asset growth for the first quarter of 2006 as compared to the first quarter
of
2005 was funded primarily by an increase in average deposits of 30%, or $1.95
billion, with much of the deposit increase coming from the rapid accumulation
of
lower-cost deposits following 2005’s late summer storms. The percentage of
earning assets funded by noninterest-bearing deposits was 35% for the current
quarter, up from 28% in 2005’s first quarter. Higher-cost sources of funds,
which include time deposits and short-term borrowings, decreased to 27% of
average earning assets in the most recent quarter from 30% in the first quarter
of 2005.
|
TABLE
7. SUMMARY OF AVERAGE BALANCE SHEETS, NET INTEREST
INCOME(TE)
(a)
AND INTEREST
RATES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars
in thousands)
|
First
Quarter 2006
|
|
Fourth
Quarter 2005
|
|
First
Quarter 2005
|
|
|
|
Average
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Balance
|
|
|
Interest
|
|
|
Rate
|
|
Balance
|
|
Interest
|
|
Rate
|
|
Balance
|
|
Interest
|
|
Rate
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNING
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
(TE)
(b) (c)
|
$
|
6,545,179
|
|
$
|
113,745
|
|
|
7.05
|
%
|
$
|
6,566,241
|
|
$
|
111,257
|
|
|
6.72
|
%
|
$
|
5,601,179
|
|
$
|
81,887
|
|
|
5.93
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed
securities
|
|
1,098,376
|
|
|
12,184
|
|
|
4.44
|
|
|
1,064,565
|
|
|
11,534
|
|
|
4.33
|
|
|
1,310,291
|
|
|
14,210
|
|
|
4.34
|
|
|
U.S.
agency securities
|
|
293,754
|
|
|
2,515
|
|
|
3.42
|
|
|
290,538
|
|
|
2,380
|
|
|
3.28
|
|
|
296,511
|
|
|
2,368
|
|
|
3.19
|
|
|
U.S.
Treasury securities
|
|
49,374
|
|
|
348
|
|
|
2.86
|
|
|
48,187
|
|
|
355
|
|
|
2.92
|
|
|
87,317
|
|
|
812
|
|
|
3.77
|
|
|
Obligations
of states and political
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
subdivisions (TE)
|
|
227,447
|
|
|
3,464
|
|
|
6.09
|
|
|
228,558
|
|
|
3,481
|
|
|
6.09
|
|
|
249,000
|
|
|
3,909
|
|
|
6.28
|
|
|
Other
securities
|
|
32,516
|
|
|
451
|
|
|
5.55
|
|
|
38,013
|
|
|
492
|
|
|
5.18
|
|
|
36,677
|
|
|
418
|
|
|
4.56
|
|
|
Total investment in securities
|
|
1,701,467
|
|
|
18,962
|
|
|
4.46
|
|
|
1,669,861
|
|
|
18,242
|
|
|
4.37
|
|
|
1,979,796
|
|
|
21,717
|
|
|
4.39
|
|
|
Federal
funds sold and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
short-term investments
|
|
1,002,586
|
|
|
10,792
|
|
|
4.37
|
|
|
288,420
|
|
|
2,965
|
|
|
4.08
|
|
|
16,526
|
|
|
99
|
|
|
2.43
|
|
|
Total earning assets
|
|
9,249,232
|
|
$
|
143,499
|
|
|
6.28
|
%
|
|
8,524,522
|
|
$
|
132,464
|
|
|
6.17
|
%
|
|
7,597,501
|
|
$
|
103,703
|
|
|
5.52
|
%
|
|
NONEARNING
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|