Annual Report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC  20549


FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2007
            Commission file number 0-1026


WHITNEY HOLDING CORPORATION
(Exact name of registrant as specified in its charter)
Louisiana
72-6017893
(State of incorporation)
(I.R.S. Employer Identification No.)
   
228 St. Charles Avenue
(504) 586-7272
New Orleans, Louisiana 70130
(Registrant’s telephone number
(Address of principal executive offices)
 


SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

Title of Each Class
Name of Exchange on Which Registered
Common Stock, no par value
 Nasdaq Global Select Market

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   Yes X    No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.   Yes     No X

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes X     No  

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form
        10-K.   __

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company"  in Rule 12b-2 of the Exchange Act.

Large accelerated filer X
Accelerated filer _
Non-accelerated filer _
 Smaller reporting company _

Indicate by check mark if the resgistrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  No X
 
As of December 31, 2007, the aggregate market value of the registrant’s common stock (all shares are voting shares) held by nonaffiliates was approximately $1.88 billion (based on the closing price of the stock on June 30, 2007).

At February 28, 2008, 64,753,309 shares of the registrant’s no par value common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
Certain specifically identified parts of the registrant’s Proxy Statement for the 2008 Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission are incorporated by reference into Part III of this Form 10-K.




 
WHITNEY HOLDING CORPORATION
 
     
TABLE OF CONTENTS
   
   
                             Page
     

     
PART I
   
 
Item 1:
Business
1
 
Item 1A:
Risk Factors
8
 
Item 1B:
Unresolved Staff Comments
9
 
Item 2:
Properties
9
 
Item 3:
Legal Proceedings
9
 
Item 4:
Submission of Matters to a Vote of Security Holders
9

     
PART II
   
 
Item 5:
Market for the Registrant’s Common Equity, Related Stockholder Matters and
   Issuer Purchases of Equity Securities
10
 
Item 6:
Selected Financial Data
12
 
Item 7:
Management’s Discussion and Analysis of Financial Condition and Results of Operations
13
 
Item 7A:
Quantitative and Qualitative Disclosures about Market Risk
41
 
Item 8:
Financial Statements and Supplementary Data
42
 
Item 9:
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
81
 
Item 9A:
Controls and Procedures
81
 
Item 9B:
Other Information
81

     
PART III
   
 
Item 10:
Directors and Executive Officers and Corporate Governance
82
 
Item 11:
Executive Compensation
82
 
Item 12:
Security Ownership of Certain Beneficial Owners and Management
  And Related Stockholder Matters
83
 
Item 13:
Certain Relationships and Related Transactions, and Director Independence
84
 
Item 14:
Principal Accounting Fees and Services
84

     
PART IV
   
 
Item 15:
Exhibits and Financial Statement Schedules
85
       
 
Signatures
 
89


PART I
Item 1:  BUSINESS

ORGANIZATION AND RECENT DEVELOPMENTS
 
     Whitney Holding Corporation (the Company or Whitney) is a Louisiana corporation that is registered as a bank holding company under the Bank Holding Company Act of 1956, as amended (BHCA).  The Company began operations in 1962 as the parent of Whitney National Bank (the Bank).  The Bank is a national banking association headquartered in New Orleans, Louisiana, that has been in continuous operation in the greater New Orleans area since 1883.  The Company has at times operated as a multi-bank holding company when it established new entities in connection with business acquisitions.  The Company has merged all banking operations into the Bank and intends to continue merging the operations of future acquisitions at the earliest possible dates.
 
     During 2007, Whitney completed its acquisition of Signature Financial Holdings, Inc. (Signature), headquartered in St. Petersburg, Florida, the parent of Signature Bank.  Signature Bank operated seven banking centers in the Tampa Bay metropolitan area.  Since early 1994 , Whitney has acquired 20 separate banking operations involving over $3.7 billion of assets, with the more recent strategic focus on banks in faster-growing markets such as those in certain parts of Florida and Texas.  The Company will continue to seek opportunities to leverage its current operations through acquisitions that expand existing market share or provide it access to new parts of its market area with attractive deposit bases and economic fundamentals.

NATURE OF BUSINESS AND MARKETS
 
     The Company, through the Bank, engages in community banking and serves a market area that covers the five-state Gulf Coast region stretching from Houston, Texas, across southern Louisiana and the coastal region of Mississippi, to central and south Alabama, the western panhandle of Florida, and to the Tampa Bay metropolitan area of Florida.  The Bank also maintains a foreign branch on Grand Cayman in the British West Indies.
 
     The Bank provides a broad range of community banking services to commercial, small business and retail customers, offering a variety of transaction and savings deposit products, treasury management services, secured and unsecured loan products, including revolving credit facilities, and letters of credit and similar financial guarantees.  The Bank also provides trust and investment management services to retirement plans, corporations and individuals and, together with its subsidiary, Whitney Securities, L.L.C., offers investment brokerage services and annuity products.  Southern Coastal Insurance Agency, Inc., another Bank subsidiary, currently offers personal and business lines of insurance to customers mainly in northwest Florida.
 
     The Company also owns Whitney Community Development Corporation (WCDC).  WCDC was formed to provide financial support to corporations or projects that promote community welfare in areas with mainly low or moderate incomes.  WCDC’s main activity has been to provide financing for the development of affordable housing.

THE BANK
 
     All material funds of the Company are invested in the Bank.  The Bank has a large number of customer relationships that have been developed over a period of many years.  The loss of any single customer or a few customers would not have a material adverse effect on the Bank or the Company.  The Bank has customers in a number of foreign countries, however, the revenue derived from these foreign customers is not a material portion of its overall revenues.

1

COMPETITION
 
        There is significant competition within the financial services industry in general as well as with respect to the particular financial services provided by the Company and the Bank.  Within its market, the Bank competes directly with major banking institutions of comparable or larger size and resources, as well as with various other smaller banking organizations.  The Bank also has numerous local and national nonbank competitors, including savings and loan associations, credit unions, mortgage companies, personal and commercial finance companies, investment brokerage and financial advisory firms, and mutual fund companies.  Entities that deliver financial services and access to financial products and transactions exclusively through the Internet are another source of competition.  Technological advances have allowed the Bank and other financial institutions to provide electronic and Internet-based services that enhance the value of traditional financial products.  Continued consolidation within the financial services industry will most likely change the nature and intensity of competition that Whitney faces, but can also create opportunities for Whitney to demonstrate and exploit competitive advantages.
 
     The participants in the financial services industry are subject to varying degrees of regulation and governmental supervision.  The following section summarizes certain important aspects of the supervision and regulation of banks and bank holding companies.  Some of Whitney’s competitors that are not banks or bank holding companies may be subject to less regulation than the Company and the Bank, and this may give them a competitive advantage.  The current system of laws and regulations can change over time and this would influence the competitive positions of the participants in the financial services industry.  We cannot predict whether these changes will be favorable or unfavorable to the Company and the Bank.

SUPERVISION AND REGULATION
 
     The Company and the Bank are subject to comprehensive supervision and regulation that affect virtually all aspects of their operations.  This supervision and regulation is primarily designed to protect depositors and the Bank, and not the Company or its shareholders.  The following summarizes certain of the more important statutory and regulatory provisions.

Supervisory Authorities
     Whitney is a bank holding company, registered with and regulated by the Federal Reserve Board (FRB).  The Bank is a national bank and, as such, is subject to supervision, regulation and examination by the Office of the Comptroller of the Currency (OCC) and secondarily by the Federal Deposit Insurance Corporation (FDIC).  Ongoing supervision is provided through regular examinations by the OCC and FRB and other means that allow the regulators to gauge management’s ability to identify, assess and control risk in all areas of operations in a safe and sound manner and to ensure compliance with laws and regulations.  As a result, the scope of routine examinations of the Company and the Bank is rather extensive.  To facilitate supervision, the Company and the Bank are required to file periodic reports with the regulatory agencies, and much of this information is made available to the public by the agencies.

Capital
     The FRB and the OCC require that the Company and the Bank meet certain minimum ratios of capital to assets in order to conduct their activities.  Two measures of regulatory capital are used in calculating these ratios – Tier 1 Capital and Total Capital.  Tier 1 Capital generally includes common equity, retained earnings, a limited amount of qualifying preferred stock, and qualifying minority interests in consolidated subsidiaries, reduced by goodwill and certain other intangible assets, such as core deposit intangibles, and certain other assets.  Total Capital generally consists of Tier 1 Capital plus the allowance for loan losses, preferred stock that did not qualify as Tier 1 Capital, certain types of subordinated debt and a limited amount of other items.


2
 
The Tier 1 Capital ratio and the Total Capital ratio are calculated against an asset total weighted for risk.  Certain assets, such as cash and U. S. Treasury securities, have a zero risk weighting.  Others, such as commercial and consumer loans, often have a 100% risk weighting.  Assets also include amounts that represent the potential funding of off-balance sheet obligations such as loan commitments and letters of credit.  These potential assets are assigned to risk categories in the same manner as funded assets.  The total assets in each category are multiplied by the appropriate risk weighting to determine risk-adjusted assets for the capital calculations.  The leverage ratio also provides a measure of the adequacy of Tier 1 Capital, but assets are not risk-weighted for this calculation.  Assets deducted from regulatory capital, such as goodwill and other intangible assets, are also excluded from the asset base used to calculate capital ratios.  The minimum capital ratios for both the Company and the Bank are generally 8% for Total Capital, 4% for Tier 1 Capital and 4% for leverage.
 
      To be eligible to be classified as “well-capitalized, ” the Bank must generally maintain a Total Capital ratio of 10% or greater, a Tier 1 Capital ratio of 6% or greater, and a leverage ratio of 5% or more.  If an institution fails to remain well-capitalized, it will be subject to a series of restrictions that increase as the capital condition worsens.  For instance, federal law generally prohibits a depository institution from making any capital distribution, including the payment of a dividend or paying any management fee to its holding company, if the depository institution would be undercapitalized as a result.  Undercapitalized depository institutions may not accept brokered deposits absent a waiver from the FDIC, are subject to growth limitations, and must submit a capital restoration plan that is guaranteed by the institution’s parent holding company.  Significantly undercapitalized depository institutions may be subject to a number of requirements and restrictions, including orders to sell sufficient voting stock to become adequately capitalized, requirements to reduce total assets, and cessation of receipt of deposits from correspondent banks.  Critically undercapitalized institutions are subject to the appointment of a receiver or conservator.
 
     The capital ratios for both the Company and the Bank exceed the required minimums, and the capital ratios for the Bank make it eligible for classification as “well-capitalized” under current regulatory criteria.
 
     The federal bank regulatory authorities recently adopted risk-based capital rules known as “Basel II” which impose complex requirements on the largest U.S. banking organizations with more than $250 billion in assets or more than $10 billion in foreign exposures.  Regulators have also proposed “Basel 1A” whose goal is to make the capital rules to which the Company and the Bank are subject more risk sensitive, without creating a system that is too complex and expensive.  An adoption or effective date for Basel 1A rules is uncertain at this time.

FDICIA and Prompt Corrective Action
     The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) established a “prompt corrective action” program in which every depository institution is placed in one of five regulatory categories, depending primarily on its regulatory capital levels.  The FDIC and the other federal banking regulators are permitted to take increasingly harsh action as a bank’s capital position or financial condition declines.  Regulators are also empowered to place in receivership or require the sale of a bank to another depository institution when a bank’s leverage ratio reaches two percent.  Better capitalized institutions are generally subject to less onerous regulation and supervision than banks with lesser amounts of capital.  The regulations also establish procedures for “downgrading” an institution to a lower capital category based on supervisory factors other than capital, such as when the regulatory agency finds that the institution is engaging in an unsafe or unsound practice.

Expansion and Activity Limitations
     With prior regulatory approval, Whitney may acquire other banks or bank holding companies and the Bank may merge with other banks.  Acquisitions of banks domiciled in states other than Louisiana may be subject to certain restrictions, including restrictions related to the percentage of deposits that the resulting bank may hold in that state and nationally and the number of years that the bank to be acquired must have been operating.  Whitney may also engage in or acquire an interest in a company that engages in activities that the FRB has determined by regulation or order to be so closely related to banking as to be a proper incident to banking activities.  The FRB normally requires some form of notice or application to engage in or acquire companies engaged in such activities.  Under the BHCA, Whitney is generally prohibited from engaging in or acquiring direct or indirect control of more than 5% of the voting shares of any company engaged in activities other than those referred to above.

3
 
Under the Gramm-Leach-Bliley Act (GLB Act), adopted in 1999, bank holding companies that are well-capitalized and well-managed and meet other conditions can elect to become financial holding companies.  As financial holding companies, they and their subsidiaries are permitted to acquire or engage in certain activities that were not previously permitted for bank holding companies.  These activities include insurance underwriting, securities underwriting and distribution, travel agency activities, broad insurance agency activities, merchant banking, and other activities that the FRB determines to be financial in nature or complementary to these activities.  Whitney has not elected to become a financial holding company, but may elect to do so in the future.  The GLB Act also permits well-capitalized and well-managed banks to establish financial subsidiaries that may engage in activities not previously permitted for banks.  The Bank has established two financial subsidiaries for insurance agency activities.

Support of Subsidiary Banks by Holding Companies
     Under current FRB policy, Whitney is expected to act as a source of financial strength for the Bank and to commit resources to support the Bank in circumstances where it might not do so absent such a policy.  In addition, any loans by a bank holding company to a subsidiary bank are subordinate in right of payment to depositors and certain other indebtedness of the subsidiary bank.  In the event of a bank holding company’s bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank at a certain level would be assumed by the bankruptcy trustee and entitled to priority of payment.

Limitations on Acquisitions of Bank Holding Companies
     As a general proposition, other companies seeking to acquire control of a bank holding company such as Whitney would require the approval of the FRB under the BHCA.  In addition, individuals or groups of individuals seeking to acquire control of a bank holding company would need to file a prior notice with the FRB (which the FRB may disapprove under certain circumstances) under the Change in Bank Control Act.  Control is conclusively presumed to exist if an individual or company acquires 25% or more of any class of voting securities of the bank holding company.  Control may exist under the Change in Bank Control Act if the individual or group of individuals acquires 10% or more of any class of voting securities of the bank holding company.  A company may be presumed to have control under the BHCA if it acquires 5% or more of any class of voting securities of the bank holding company.

Deposit Insurance
     The Bank is a member of the FDIC, and its deposits are insured by the FDIC up to the amount permitted by law.  The Bank is thus subject to FDIC deposit insurance premium assessments.  In November 2006, the FDIC adopted final regulations that set the deposit insurance assessment rates that took effect in 2007.  The FDIC uses a risk-based assessment system that assigns insured depository institutions to one of four risk categories based on three primary sources of information – supervisory risk ratings for all institutions, financial ratios for most institutions, and long-term debt issuer ratings for large institutions that have such ratings.  The new premium rate structure imposes a minimum assessment of from five to seven cents for every $100 of domestic deposits on institutions that are assigned to the lowest risk category.  This category currently encompasses substantially all insured institutions, including the Bank.  A one-time assessment credit was available to offset 100% of the 2007 assessment.  The $1.6 million remaining credit can be used to offset up to 90% of subsequent annual assessments through 2010, but it should be fully used in 2008.  For institutions assigned to higher risk categories, the premiums that took effect in 2007 ranged from ten cents to forty-three cents per $100 of deposits.
 
     The FDIC also collects a deposit-based assessment from insured financial institutions on behalf of The Financing Corporation (FICO).  The funds from these assessments are used to service debt issued by FICO in its capacity as a financial vehicle for the Federal Savings & Loan Insurance Corporation.  The FICO assessment rate is set quarterly and in 2007 ranged from 1.22 cents to 1.14 cents per $100 of assessable deposits.


4

Other Statutes and Regulations
     The Company and the Bank are subject to a myriad of other statutes and regulations affecting their activities.  Some of the more important are:
 
     Anti-Money Laundering.   Financial institutions must maintain anti-money laundering programs that include established internal policies, procedures, and controls; a designated compliance officer; an ongoing employee training program; and testing of the program by an independent audit function.  The Company and the Bank are also prohibited from entering into specified financial transactions and account relationships and must meet enhanced standards for due diligence and customer identification in their dealings with foreign financial institutions and foreign customers.  Financial institutions must take reasonable steps to conduct enhanced scrutiny of account relationships to guard against money laundering and to report any suspicious transactions, and law enforcement authorities have been granted increased access to financial information maintained by banks.  Anti-money laundering obligations have been substantially strengthened as a result of the USA Patriot Act, enacted in 2001 and renewed in 2006.  Bank regulators routinely examine institutions for compliance with these obligations and they must consider an institution’s compliance in connection with the regulatory review of applications.  The regulatory authorities have imposed “cease and desist” orders and money penalty sanctions against institutions found to be violating these obligations.
 
     Sections 23A and 23B of the Federal Reserve Act.   The Bank is limited in its ability to lend funds or engage in transactions with the Company or other non-bank affiliates of the Company, and all such transactions must be on an arms-length basis and on terms at least as favorable to the Bank as those prevailing at the time for transactions with unaffiliated companies.  Outstanding loans from the Bank to the Company or other non-bank affiliates of the Company may not exceed 10% of the Bank’s capital stock and surplus, and the total of such transactions between the Bank and all of its non-subsidiary affiliates may not exceed 20% of the Bank’s capital stock and surplus.  These loans must be fully or over-collateralized.
 
     Dividends.   Whitney’s principal source of cash flow, including cash flow to pay dividends to its shareholders, is the dividends that it receives from the Bank.  Statutory and regulatory limitations apply to the Bank’s payment of dividends to the Company as well as to the Company’s payment of dividends to its shareholders.  The Bank would need prior regulatory approval to pay the Company a dividend that exceeded the Bank’s current net income and retained net income from the two previous years.  The Bank may not pay any dividend that would cause it to become undercapitalized or if it already is undercapitalized.  The federal banking agencies may prevent the payment of a dividend if they determine that the payment would be an unsafe and unsound banking practice.  Moreover, the federal agencies have issued policy statements that provide that bank holding companies and insured banks should generally only pay dividends out of current operating earnings.
 
     Community Reinvestment Act.   The Bank is subject to the provisions of the Community Reinvestment Act of 1977, as amended (CRA), and the related regulations issued by federal banking agencies.  The CRA states that all banks have a continuing and affirmative obligation, consistent with safe and sound operation, to help meet the credit needs for their entire communities, including low- and moderate-income neighborhoods.  The CRA also charges a bank’s primary federal regulator, in connection with the examination of the institution or the evaluation of certain regulatory applications filed by the institution, with the responsibility to assess the institution’s record in fulfilling its obligations under the CRA.  The regulatory agency’s assessment of the institution’s record is made available to the public.  The Bank received an “outstanding” rating following its most recent CRA examination.

5
 
Consumer Regulation.   Activities of the Bank are subject to a variety of statutes and regulations designed to protect consumers.  These laws and regulations include provisions that:
·  
limit the interest and other charges collected or contracted for by the Bank;
·  
govern the Bank’s disclosures of credit terms to consumer borrowers;
·  
require the Bank to provide information to enable the public and public officials to determine whether it is fulfilling its obligation to help meet the housing needs of the community it serves;
·  
prohibit the Bank from discriminating on the basis of  race, creed or other prohibited factors when it makes decisions to extend credit;
·  
require that the Bank safeguard the personal nonpublic information of its customers, provide annual notices to consumers regarding the usage and sharing of such information, and limit disclosure of such information to third parties except under specific circumstances; and
·  
govern the manner in which the Bank may collect consumer debts.
 
     As a result of the turmoil in the residential real estate and mortgage lending markets, there are several legislative and regulatory initiatives currently under discussion at both the federal and state levels that could, if adopted, alter the terms of existing mortgage loans, impose restrictions on future mortgage loan originations, diminish lenders’ rights against delinquent borrowers or otherwise change the ways in which lenders make and administer residential mortgage loans.  If made final, any or all of these proposals could have a negative effect on the financial performance of Whitney’s mortgage lending operations, by, among other things, reducing the volume of mortgage loans that the Bank can originate and sell into the secondary market and impairing the Bank’s ability to proceed against certain delinquent borrowers with timely and effective collection efforts.
 
     The deposit operations of the Bank are also subject to laws and regulations that:
·  
require the Bank to adequately disclose the interest rates and other terms of consumer deposit accounts;
·  
impose a duty on the Bank to maintain the confidentiality of consumer financial records and prescribe procedures for complying with administrative subpoenas of financial records; and
·  
govern automatic deposits to and withdrawals from deposit accounts with the Bank and the rights and liabilities of customers who use automated teller machines and other electronic banking services.

EMPLOYEES
 
     At the end of 2007, the Company and the Bank had a total of 2,542 employees, or 2,474 employees on a full-time equivalent basis.  Whitney affords its employees a variety of competitive benefit programs including retirement plans and group health, life and other insurance programs.  The Company also supports training and educational programs designed to ensure that employees have the types and levels of skills needed to perform at their best in their current positions and to help them prepare for positions of increased responsibility.

AVAILABLE INFORMATION
 
     The Company’s filings with the Securities and Exchange Commission (SEC), including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, are available on Whitney’s website as soon as reasonably practicable after the Company files the reports with the SEC.  Copies can be obtained free of charge by visiting the Company’s website at www.whitneybank.com .  The Company’s website is not incorporated into this annual report on Form 10-K and it should not be considered part of this report.

6

EXECUTIVE OFFICERS OF THE COMPANY

Name and Age                                         
Position Held and Recent Business Experience                                                         
   
William L. Marks, 64
Chief Executive Officer and Chairman of the Board of the Company
 
and the Bank since 1990
   
John C. Hope III, 59
President and Chief Operating Officer of the Company and the Bank since
 
2007; Executive Vice President of the Company from 1994 to 2007 and of the
 
Bank from 1998 to 2007
   
R. King Milling, 67
Vice-chairman of the Board of the Company and the Bank since 2007;
 
President of the Company and the Bank from 1994 to 2007;
 
Director of the Company and the Bank since 1978
   
Robert C. Baird, Jr., 57
Executive Vice President of the Company and the Bank since 1995,
 
Banking Services
   
Thomas L. Callicutt, Jr., 60
Executive Vice President and Chief Financial Officer of the Company
 
and the Bank since 1999 and Treasurer of the Company since 2001
   
Rodney D. Chard, 65
Executive Vice President of the Company and the Bank since 1996,
 
Strategic Project Implementation
   
Francisco DeArmas, 46
Executive Vice President of the Company and the Bank since 2007,
 
Operations & Technology
   
Joseph S. Exnicios, 51
Executive Vice President of the Company and the Bank since 2004,
 
Senior Vice President of the Bank from 1994 to 2004,
 
New Orleans Banking
   
Kevin P. Reed, 47
Executive Vice President of the Company and the Bank since 2004,
 
Senior Vice President of the Bank from 1998 to 2004,
 
Trust & Wealth Management
   
Lewis P. Rogers, 55
Executive Vice President of the Company and the Bank since 2004,
 
Senior Vice President of the Bank from 1998 to 2004,
 
Credit Administration
   
John M. Turner, Jr., 46
Executive Vice President of the Company and the Bank since 2005,
 
Senior Vice President of the Bank from 1994 to 2005,
 
Banking Division
   
Joseph S. Schwertz, Jr., 51
Corporate Secretary of the Company and the Bank since 1993,
 
Senior Vice President of the Bank since 1994,
 
General Counsel


7

Item 1A: RISK FACTORS
 
     Whitney must recognize and attempt to manage a number of risks as it implements its strategies to successfully compete with other companies in the financial services industry.  Some of the more important risks common to the industry and Whitney are:

·  
credit risk, which is the risk that borrowers will be unable to meet their contractual obligations, leading to loan losses and reduced interest income;
·  
market risk, which is the risk that changes in market rates and prices will adversely affect the results of operations or financial condition;
·  
liquidity risk, which is the risk that funds will not be available at a reasonable cost to meet operating and strategic needs; and
·  
operational risk, which is the risk of loss resulting from inadequate or failed internal processes, people and systems, or external events, such as natural disasters.
 
     Although Whitney generally is not significantly more susceptible to adverse effects from these or other common risk factors than other industry participants, there are certain aspects of Whitney’s business model that may expose it to somewhat higher levels of risk.  In addition to the other information contained in or incorporated by reference into this annual report on Form 10-K, these risk factors should be considered carefully in evaluating the Company's overall risk profile.  Additional risks not presently known, or that are currently deemed immaterial, may also adversely affect Whitney's business, financial condition or results of operations.

Whitney’s profitability depends in substantial part on net interest income and on our ability to manage interest rate risk.
 
     Whitney’s net interest income represented more than 75% of total revenues in each of the last five years.  Net interest income is the difference between the interest earned on loans, investment securities and other earning assets, and interest owed on deposits and borrowings.  Numerous and often interrelated factors influence Whitney’s ability to maintain and grow net interest income, and a number of these factors are addressed in  Management’s Discussion and Analysis of Financial Condition and Results of Operations located in Item 7 of this annual report on Form 10-K.  One of the most important factors is changes in market interest rates and in the relationship between these rates for different financial instruments and products and at different maturities.  Such changes are generally outside the control of management and cannot be predicted with certainty.  Although management applies significant resources to anticipating these changes and to developing and executing strategies for operating in an environment of change, they cannot eliminate the possibility that interest rate risk will negatively affect our net interest income and lead to earnings volatility.
 
     For several years, Whitney has been positioned to be moderately asset sensitive over the near term, which would point to an expected improvement in net interest income in a rising rate environment and a reduction in net interest income as rates declined, holding other factors constant.  Recent economic conditions have led to lower market rates toward the end of 2007 and into 2008, prompted in part by aggressive moves by the Federal Reserve as it attempts to counteract an economic slowdown associated in large part with the continued downturn in the housing market.  These and possible further future rate reductions could have a negative impact on Whitney’s net interest income and net income.

Whitney’s market area is susceptible to hurricanes and tropical storms, which may increase the Company’s exposure to credit risk, operational risk and liquidity risk.
 
     Most of Whitney’s market area lies within the coastal region of the five states bordering the Gulf of Mexico. This is a region that is susceptible to hurricanes and tropical storms.  The two strong hurricanes that struck in 2005 had a major impact on the greater New Orleans area, southwest Louisiana and the Mississippi coast, with lesser impacts on coastal Alabama and the western panhandle of Florida.  Within its broader market area, the greater New

 
8
 
Orleans area is Whitney’s primary base of operations and is home to branches and relationship officers that service approximately 40% of the Bank’s total loans and 50% of total deposits at December 31, 2007.  The 2005 storms caused widespread property damage, required temporary or permanent relocations of a large number of residents and business operations, and severely disrupted normal economic activity in the impacted areas.  Although the Bank was able to operate successfully in the aftermath of these storms, management carefully studied its risk posture and has taken a number of steps to reduce the Bank’s exposure to future natural disasters and make its disaster recovery plans and operating arrangement more resilient.  Details of the storms’ impact on Whitney, both operationally and with respect to credit risk and liquidity, has been chronicled in Item 7 of the Company’s annual reports on Forms 10-K for 2006 and 2005 as well as in Item 2 of Part I of quarterly reports on Form 10-Q filed since the storms struck.
 
     Whitney cannot predict the extent to which future storms may impact its exposure to credit risk, operational risk or liquidity risk.

The composition of Whitney’s loan portfolio could increase the volatility of our credit quality metrics and provisions for credit losses.
 
     Whitney’s loan portfolio contains individual relationships, primarily with commercial customers, with outstanding balances that are relatively large in relation to our asset size.  Changes in the credit quality of one or a few of these relationships could lead to increased volatility in our reported totals of loans with above-normal credit risk and in our provisions for credit losses over time.

Item 1B: UNRESOLVED STAFF COMMENTS
 
     None.

Item 2:  PROPERTIES
 
     The Company does not directly own any real estate, but it does own real estate indirectly through its subsidiaries.  The Company’s executive offices are located in downtown New Orleans in the main office facility owned by the Bank.  The Bank also owns an operations center in the greater New Orleans area.  The Bank makes portions of its main office facility and certain other facilities available for lease to third parties, although such incidental leasing activity is not material to Whitney’s overall operations.  The Bank maintained approximately 155 banking facilities in five states at December 31, 2007.  The Bank owns approximately 70% of these facilities, and the remaining banking facilities are subject to leases, each of which management considers to be reasonable and appropriate for its location.  Management ensures that all properties, whether owned or leased, are maintained in suitable condition.  Management also evaluates its banking facilities on an ongoing basis to identify possible under-utilization and to determine the need for functional improvements, relocations or possible sales.  
 
     The Bank and a subsidiary of the Bank hold a variety of property interests acquired through the years in settlement of loans.  Note 8 to the consolidated financial statements included in Item 8 of this annual report on Form 10-K provides further information regarding such property interests and is incorporated here by reference.

Item 3: LEGAL PROCEEDINGS
 
     There are no material pending legal proceedings to which the Company or its subsidiaries is a party or to which any of their property is subject, other than ordinary routine litigation incidental to the Company’s business.

Item 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
     None.

9

PART II

 
Item 5:  MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
                EQUITY SECURITIES
 
     The Company’s stock trades on The Nasdaq Global Select Market under the ticker symbol “WTNY.”  The Summary of Quarterly Financial Information appearing in Item 8 of this annual report on Form 10-K shows the high and low sales prices of the Company’s stock for each calendar quarter of 2007 and 2006, as reported on The Nasdaq Global Select Market, and is incorporated here by reference.
 
     The approximate number of shareholders of record of the Company, as of February 29, 2008, was as follows:

          Title of Class                                                                                            Shareholders of Record
Common Stock, no par value                                                                                   5,353               
 
     Dividends declared by the Company are listed in the Summary of Quarterly Financial Information appearing in Item 8 of this annual report on Form 10-K, which is incorporated here by reference.  For a description of certain restrictions on the payment of dividends see the section entitled “Supervision and Regulation” that appears in Item 1 of this annual report on Form 10-K.
 
     The following table provides information with respect to purchases made by or on behalf of the Company or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended) of the Company’s common stock during the three months ended December 31, 2007.
 
 
 
 
 
Period
 
Total
Number of
Shares
Purchased
 
 
Average
Price Paid  
per Share
Total Number of
Shares Purchased as
 Part of Publicly
Announced Plans or
Programs (1)
 
Maximum Number of
Shares that May Yet
Be Purchased under
the Plans or Programs (1)
October 2007
4,425 (2)
 $26.78
-
-
November 2007
956,794
$25.55
956,794
3,043,206
December 2007
938,297
$26.71
938,297
2,104,909

(1)   
In November 2007, the Board of Directors authorized the Company to repurchase up to 4 million shares of its common stock.  The program extends through December 2008.
(2)   
Represents shares that were tendered to the Company as consideration for the exercise price of employee stock options.

10

STOCK PERFORMANCE GRAPH
 
     The following performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, each as amended, except to the extent the Company specifically incorporates it by reference into such filing.
 
     The performance graph compares the cumulative five-year shareholder return on the Company’s common stock, assuming an investment of $100 on December 31, 2002 and the reinvestment of dividends thereafter, to that of the common stocks of United States companies reported in the Nasdaq Total Return Index and the common stocks of the KBW 50 Total Return Index.  The KBW 50 Total Return Index is a proprietary stock index of Keefe, Bruyette & Woods, Inc., that tracks the returns of 50 large banking companies throughout the United States.


11

Item 6:  SELECTED FINANCIAL DATA
                             
WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
                         
   
Years Ended December 31                    
(dollars in thousands, except per share data)
 
2007
 
2006  
 
2005  
 
2004  
 
2003  
YEAR-END BALANCE SHEET DATA
                             
  Total assets
 
$
11,027,264
   
$
10,185,880
   
$
10,109,006
   
$
8,222,624
   
$
7,754,982
 
  Earning assets
   
10,122,071
     
9,277,554
     
9,054,484
     
7,648,740
     
7,193,709
 
  Loans
   
7,585,701
     
7,050,416
     
6,560,597
     
5,626,276
     
4,882,610
 
  Investment securities
   
1,985,237
     
1,886,093
     
1,641,451
     
1,991,244
     
2,281,405
 
  Noninterest-bearing deposits
   
2,740,019
     
2,947,997
     
3,301,227
     
2,111,703
     
1,943,248
 
  Total deposits
   
8,583,789
     
8,433,308
     
8,604,836
     
6,612,607
     
6,158,582
 
  Shareholders' equity
   
1,228,736
     
1,112,962
     
961,043
     
904,765
     
840,313
 
AVERAGE BALANCE SHEET DATA
                                       
  Total assets
 
$
10,512,422
   
$
10,242,838
   
$
8,903,321
   
$
7,890,183
   
$
7,238,022
 
  Earning assets
   
9,636,586
     
9,349,262
     
8,098,998
     
7,327,233
     
6,717,863
 
  Loans
   
7,344,889
     
6,776,794
     
6,137,676
     
5,179,734
     
4,595,868
 
  Investment securities
   
1,893,866
     
1,824,646
     
1,836,228
     
2,120,594
     
2,004,245
 
  Noninterest-bearing deposits
   
2,708,353
     
3,033,978
     
2,439,229
     
1,977,515
     
1,759,414
 
  Total deposits
   
8,397,778
     
8,476,954
     
7,224,426
     
6,347,503
     
5,913,186
 
  Shareholders' equity
   
1,209,923
     
1,065,303
     
935,362
     
881,477
     
823,698
 
INCOME STATEMENT DATA
                                       
  Interest income
 
$
661,105
   
$
616,371
   
$
468,085
   
$
360,772
   
$
338,069
 
  Interest expense
   
196,314
     
145,160
     
80,986
     
40,682
     
43,509
 
  Net interest income
   
464,791
     
471,211
     
387,099
     
320,090
     
294,560
 
  Net interest income (TE)
   
470,868
     
477,423
     
392,979
     
326,237
     
300,115
 
  Provision for credit losses
   
17,000
     
3,720
     
37,580
     
2,000
      (3,500 )
  Noninterest income
   
126,681
     
84,791
     
82,235
     
82,523
     
89,504
 
    Net securities gain (loss) in noninterest income
    (1 )    
-
     
68
     
68
     
863
 
  Noninterest expense
   
349,108
     
338,473
     
286,398
     
260,278
     
242,923
 
  Net income
   
151,054
     
144,645
     
102,349
     
97,137
     
98,542
 
KEY RATIOS
                                       
  Return on average assets
    1.44 %     1.41 %     1.15 %     1.23 %     1.36 %
  Return on average shareholders' equity
   
12.48
     
13.58
     
10.94
     
11.02
     
11.96
 
  Net interest margin
   
4.89
     
5.11
     
4.85
     
4.45
     
4.47
 
  Average loans to average deposits
   
87.46
     
79.94
     
84.96
     
81.60
     
77.72
 
  Efficiency ratio
   
58.42
     
60.20
     
60.28
     
63.69
     
62.49
 
  Allowance for loan losses to loans
   
1.16
     
1.08
     
1.37
     
.97
     
1.22
 
  Nonperforming assets to loans plus foreclosed
                                       
     and surplus property
   
1.64
     
.81
     
1.03
     
.46
     
.62
 
  Net charge-offs to average loans
   
.11
     
.29
     
.08
     
.06
     
.07
 
  Average shareholders' equity to average assets
   
11.51
     
10.40
     
10.51
     
11.17
     
11.38
 
  Shareholders' equity to total assets
   
11.14
     
10.93
     
9.51
     
11.00
     
10.84
 
  Tangible common equity as a percentage of
                                       
    tangible assets, end of period
   
8.24
     
8.08
     
7.40
     
9.46
     
9.76
 
  Leverage ratio
   
8.79
     
8.76
     
8.21
     
9.56
     
10.13
 
COMMON SHARE DATA
                                       
  Earnings Per Share
                                       
      Basic
 
$
2.26
   
$
2.24
   
$
1.65
   
$
1.59
   
$
1.65
 
      Diluted
   
2.23
     
2.20
     
1.63
     
1.56
     
1.63
 
  Dividends
                                       
      Cash dividends per share
 
$
1.16
   
$
1.08
   
$
.98
   
$
.89
   
$
.82
 
      Dividend payout ratio
    52.05 %     48.85 %     60.26 %     56.99 %     50.32 %
  Book Value Per Share
 
$
18.67
   
$
16.88
   
$
15.17
   
$
14.57
   
$
13.85
 
  Trading Data
                                       
      High price
 
$
33.26
   
$
37.26
   
$
33.69
   
$
30.83
   
$
27.55
 
      Low price
   
22.46
     
27.27
     
24.14
     
26.35
     
20.50
 
      End-of-period closing price
   
26.15
     
32.62
     
27.56
     
29.99
     
27.33
 
      Trading volume
   
88,480,468
     
52,778,191
     
50,434,066
     
27,662,252
     
34,386,386
 
  Average Shares Outstanding
                                       
      Basic
   
66,953,343
     
64,687,363
     
62,008,004
     
61,122,581
     
59,894,147
 
      Diluted
   
67,858,307
     
65,853,149
     
62,953,293
     
62,083,043
     
60,594,201
 
                                         
Tax-equivalent (TE) amounts are calculated using a marginal federal income tax rate of 35%.
         
The efficiency ratio is noninterest expense to total net interest (TE) and noninterest income (excluding securities transactions).
 
 

12

Item 7:  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) and on their results of operations during 2007, 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 annual report on Form 10-K, particularly the consolidated financial statements and related notes appearing in Item 8.

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 conditions impacting certain sectors of the loan portfolio; (b) information about changes in the duration of the investment portfolio with changes in market rates; (c) statements of the results of net interest income simulations run by the Company to measure interest rate sensitivity; (d) discussion of the performance of Whitney’s net interest income assuming certain conditions; (e) expectations about Whitney’s operational resiliency in the event of natural disasters; (f) comments on expected trends or changes in expense levels for retirement benefits; and (g) comments on expected benefits from cost control programs.
 
     Whitney’s ability to accurately project results or predict the effects of plans or strategies is inherently limited.  Although Whitney believes that the expectations reflected in its forward-looking statements are based on reasonable assumptions, actual results and performance could differ materially from those set forth in the forward-looking statements.
 
     Factors that could cause actual results to differ from those expressed in the Company’s forward-looking statements include, but are not limited to:

·  
Whitney’s ability to effectively manage interest rate risk and other market risk, credit risk and operational risk;
·  
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;
·  
Whitney’s ability to manage fluctuations in the value of its assets and liabilities and off-balance sheet exposure so as to maintain sufficient capital and liquidity to support its business;
·  
possible changes in general economic and business conditions, including the real estate and financial markets, in the United States and in the region and communities Whitney serves;
·   the occurrence of natural disasters or acts of war or terrorism that directly or indirectly affect the financial health of Whitney’s customer base;
·  
changes in laws and regulations that significantly affect the activities of the banking industry and its 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;
·  
Whitney’s ability to develop competitive new products and services in a timely manner and the acceptance of such products and services by the Bank’s customers;
·  
Whitney’s ability to effectively expand into new markets;
·  
the cost and other effects of material contingencies;

13

·  
the failure to attract or retain key personnel;
·  
the failure to capitalize on growth opportunities and to realize cost savings in connection with business acquisitions; and
·  
management’s inability to develop and execute plans for Whitney to effectively respond to unexpected changes.
 
     You are cautioned not to place undue reliance on these forward-looking statements.  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, except as required by law.

OVERVIEW
 
     Whitney earned $151 million for the year ended December 31, 2007, compared with annual net income of $145 million in 2006.  Earnings were $2.23 per diluted share in 2007, compared to $2.20 for 2006.

Insurance Settlement
     During the third quarter of 2007, Whitney reached a final settlement on insurance claims primarily arising from the hurricanes that struck portions of its market area in the late summer of 2005.  With this settlement, the Company recognized a gain of $31.3 million ($19.9 million after-tax, or $.29 per diluted share.)

Mergers and Acquisitions
     On March 2, 2007, Whitney completed its acquisition of Signature Financial Holdings, Inc. (Signature), the parent of Signature Bank.  Signature Bank operated seven banking centers in the Tampa Bay metropolitan area with approximately $270 million in total assets, including $220 million of loans, and $210 million in deposits at acquisition.  The transaction was valued at approximately $61 million, with $13 million paid to Signature’s shareholders in cash and the remainder in Whitney common stock totaling 1.49 million shares.  Whitney’s financial information includes the results from these acquired operations since the acquisition date.

Loans and Earning Assets
     Total loans at the end of 2007 were up 8%, or $535 million, from year-end 2006, with approximately 3%, or $203 million, associated with the operations acquired with Signature.  Loan demand and customer development activity in Texas and Whitney’s Louisiana markets outside the metropolitan New Orleans area were the major contributors to the organic loan growth over this period.  Market conditions continued to restrain the pace of new real estate financing in Florida and, since the end of 2006, have contributed to a decrease of approximately $100 million in loans serviced from Florida operations, excluding those acquired with Signature.
 
     Loans, including loans held for sale, comprised 76% of average earning assets in 2007 compared to 73% in 2006.  There was a similar decrease in the percentage of short-term investments in the earning-asset mix in 2007 compared to 2006 when the Company’s liquidity was still impacted by the deposit build-up following the 2005 hurricanes.

14

Deposits and Funding
     Total deposits at December 31, 2007 were up 2%, or $150 million, compared to the end of 2006, mainly reflecting the deposits from the Signature acquisition.  After some further reduction in the post-storm deposit accumulation in early 2007, Whitney has been returning to more normal deposit trends.  Average deposits in 2007 declined 1% compared to 2006.  Average noninterest-bearing deposits funded approximately 28% of average earning assets in 2007, and the percentage of funding from all noninterest-bearing sources was 33% for the year.  These percentages, while down from 32% and 36%, respectively, in 2006, are comparable to pre-storm levels.  Higher-cost interest-bearing funds, which include time deposits and borrowings, funded 34% of average earning assets in 2007, compared to 29% in 2006, and up somewhat from pre-storm levels.  This reflected a number of factors, including the relative attractiveness of rates on the underlying deposit products in response to market rates, increased use of the Company’s treasury-management deposit products by commercial customers with excess liquidity, and the issuance by the Bank of $150 million in long-term subordinated debt in late March 2007.

Net Interest Income
     Whitney’s net interest income (TE) for 2007 decreased $6.6 million, or 1%, from 2006.  Average earning assets increased 3% between these years, and there was some favorable shift in the mix of assets.  The net interest margin (TE) was 4.89% for 2007, down 22 basis points from 2006.  The overall yield on earning assets in 2007 was up 26 basis points from 2006, mainly reflecting the shift in asset mix.  The cost of funds increased 48 basis points between these years, mainly in response to the customer-driven shift in the funding mix to higher-cost sources.

Provision for Credit Losses and Credit Quality
     Whitney provided $17.0 million for credit losses in 2007 compared to $3.7 million in 2006.  Whitney’s nonperforming loans and loans criticized through its credit-risk rating process increased during 2007, mainly reflecting weaknesses identified in residential-related credits.  In 2007, loan charge-offs, net of recoveries, were $8.4 million, or .11% of average loans, compared to $19.4 million, or .29% of average loans, in 2006.

Noninterest Income
     Noninterest income in 2007 increased 9%, or $7.6 million, over 2006, excluding the insurance settlement gain and income associated with foreclosed assets and surplus property in each period.  Improvement was noted in most all recurring revenue sources.  Deposit service charge income grew by 9% compared to 2006, reflecting improved pricing and increased fee potential from business customers in 2007 as well as reduced charging opportunities in 2006 from the higher post-storm liquidity in the deposit base.  Increases were also registered for bank card fees, trust service fees, and fees from investment services, mainly reflecting internal growth and contributions from acquired operations.

Noninterest Expense
     Noninterest expense increased 3%, or $10.6 million, in 2007.  Incremental operating costs associated with acquired operations, including amortization of intangibles, totaled approximately $8.5 million.  Whitney’s personnel expense increased 7%, or $13.3 million, in total, including approximately $3.7 million for acquired staff.  Compensation expense under management incentive programs increased by $2.7 million in 2007, largely related to share-based compensation.  The cost of employee benefits decreased by $1.3 million compared to 2006, mainly reflecting the impact of the substantial elimination of postretirement health and life insurance benefits in 2007.  The total of all other noninterest expense unrelated to personnel decreased a net $2.7 million, or 2%, compared to 2006.  Whitney incurred nonrecurring or periodic expenses associated with the 2005 storms that totaled approximately $2 million in 2007 and $11 million in 2006.

15

CRITICAL ACCOUNTING POLICIES
 
     Whitney prepares its financial statements in accordance with accounting principles generally accepted in the United States of America.  A discussion of certain accounting principles and methods of applying those principles that are particularly important to this process is included in Note 2 to the consolidated financial statements located in Item 8 of this annual report on Form 10-K.  The Company is required to make estimates, judgments and assumptions in applying these principles to determine the amounts and other disclosures that are presented in the financial statements and discussed in this section.
 
     Whitney believes that the determination of its estimate of the allowance for loan losses involves a higher degree of judgment and complexity than its application of other significant accounting policies.  Factors considered in this determination and management’s process are discussed in Note 2 and in the following section on “Loans, Credit Risk Management and Allowance and Reserve for Credit Losses.”  Although management believes it has identified appropriate factors for review and designed and implemented adequate procedures to support the estimation process that are consistently followed, the allowance remains an estimate about the effect of matters that are inherently uncertain.  Over time, changes in economic conditions or the actual or perceived financial condition of Whitney’s credit customers or other factors can materially impact the allowance estimate, potentially subjecting the Company to significant earnings volatility.
 
     Management makes a variety of assumptions in applying principles that govern the accounting for benefits under the Company’s defined benefit pension plans and other postretirement benefit plans.  These assumptions are essential to the actuarial valuation that determines the amounts Whitney recognizes and certain disclosures it makes in the consolidated financial statements related to the operation of these plans (see Note 15 in Item 8).  Two of the more significant assumptions concern the expected long-term rate of return on plan assets and the rate needed to discount projected benefits to their present value.  Changes in these assumptions impact the cost of retirement benefits recognized in net income and comprehensive income.  Certain assumptions are closely tied to current conditions and are generally revised at each measurement date.  For example, the discount rate is reset annually with reference to market yields on high quality fixed-income investments.  Other assumptions, such as the rate of return on assets, are determined, in part, with reference to historical and expected conditions over time and are not as susceptible to frequent revision.  Holding other factors constant, the cost of retirement benefits will move opposite to changes in either the discount rate or the rate of return on assets.   Recent trends in the cost of retirement benefits are discussed in the section on “Noninterest Expense.”

16

FINANCIAL CONDITION

LOANS, CREDIT RISK MANAGEMENT AND ALLOWANCE AND RESERVE FOR CREDIT LOSSES

Loan Portfolio Developments
 
     Total loans at the end of 2007 were up 8%, or $535 million, from year-end 2006, with approximately 3%, or $203 million, associated with the operations acquired with Signature.  Loan demand and customer development activity in Texas and Whitney’s Louisiana markets outside the metropolitan New Orleans area were the major contributors to organic loan growth over this period, with a smaller contribution from the Alabama market.  Loans serviced by Whitney Bankers in Houston grew by 20% year over year, and those serviced in Louisiana markets outside New Orleans, grew by 14%.  At December 31, 2007, the percentage of loans serviced from the Company’s geographic markets was as follows:  metropolitan New Orleans, 37%; other Louisiana markets, 18%; Texas, 15%; Alabama and Mississippi, 12%; the Florida panhandle, 7%; and the Tampa Bay metropolitan area, 11%.  Market conditions continue to restrain the pace of new real estate project financing in Florida and, since the end of 2006, have contributed to a decrease of approximately $100 million in loans serviced from Florida operations, excluding those acquired with Signature.
 
     Table 1 shows loan balances by type of loan at December 31, 2007 and at the end of the previous four years.  The following discussion provides an overview of the composition of the different portfolio sectors and the customers served in each as well as additional information on recent changes.

TABLE 1.  LOANS OUTSTANDING BY TYPE
 
December 31,
(in thousands)
2007
2006
2005
2004
2003
Commercial, financial and agricultural
$2,822,752
$2,725,531
$2,685,894
$2,399,794
$2,213,207
Real estate – commercial, construction and other
3,477,558
3,094,004
2,743,486
2,209,975
    1,726,212
Real estate – residential mortgage
933,797
893,091
774,124
685,732
       619,869
Individuals
351,594
337,790
357,093
330,775
    323,322
    Total loans
$7,585,701
$7,050,416
$6,560,597
$5,626,276
$4,882,610
 
     The portfolio of commercial loans, other than those secured by real property, increased 4%, or $97 million, between year-end 2006 and 2007, with only a limited contribution from the Signature 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.  The organic growth in market areas outside of metropolitan New Orleans has increased the geographic diversification of customers represented in the commercial portfolio.  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.
 
     Loans outstanding to oil and gas industry customers represented approximately 10% of total loans at December 31, 2007, up from approximately 9% at year-end 2006.  The majority of Whitney’s customer base in this industry provides transportation and other services and products to support exploration and production activities.  The Bank seeks service and supply customers who are quality operators that can manage through volatile commodity price cycles.  With expectations of sustained higher commodity prices, Whitney has increased its attention to lending opportunities in the exploration and production sector in recent years, and loans outstanding to this sector comprised over one-third of the oil and gas industry portfolio at December 31, 2007 and 2006.  The Bank contracts with a petroleum engineer who supports the underwriting of loans to exploration and production customers.  Management, through the Bank’s Credit Policy Committee, monitors both industry fundamentals and portfolio performance and credit quality on a formal ongoing basis and establishes and adjusts internal exposure guidelines as a percent of capital both for the industry as a whole and for individual sectors within the industry.  The level of activity in this

17

 industry continues to have an important impact on the economies of certain portions of Whitney’s market area, particularly Houston and southern Louisiana.
 
     Outstanding balances under participations in larger shared-credit loan commitments totaled $444 million at the end of 2007, including approximately $194 million related to the oil and gas industry.  The total outstanding is up $61 million from year-end 2006.  Substantially all of the 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 12%, or $384 million, during 2007.  The Signature acquisition initially added approximately $140 million to this portfolio sector, mainly related to commercial mortgages.  The Bank’s Credit Policy Committee has also set exposure guidelines for the overall portfolio of commercial real estate loans as well as for loans to developers or owner-users that are secured by various subcategories of property.  As with lending to the oil and gas industry, management regularly monitors real estate industry fundamentals and portfolio credit quality.
 
     Project financing is an important component of the activity in this portfolio sector, and sector growth is impacted by the availability of new projects as well as the anticipated refinancing of seasoned income properties in the secondary market and payments on residential development loans as inventory is sold.  Whitney continues to develop new business in this highly competitive sector throughout its market area, although the pace of new financing has been restrained by recent weaknesses primarily affecting condominium and single-family residential development, particularly in certain parts of Florida.   Much of this sector’s growth during 2007 came from customers in Louisiana markets outside the New Orleans metropolitan area and in the Houston market, and involved a variety of retail, commercial and industrial facilities, as well as some multi-family and single-family residential development.  The future pace of new real estate project financing in Whitney’s market area will reflect the level of confidence by Whitney and its customers in the sustainability of economic conditions favorable to successful project completion.
 
     At December 31, 2007, the percentage of the commercial real estate portfolio serviced from the Company’s geographic markets was as follows: metropolitan New Orleans, 25%; other Louisiana markets, 16%; Texas, 18%; Alabama and Mississippi, 13%; the Florida panhandle, 10%; and the Tampa Bay metropolitan area, 19%.  Within the combined portfolios for Alabama, Mississippi and Florida, loans to investors or developers totaled approximately $360 million for construction project financing, $210 million to finance developed and undeveloped land for future construction projects, and $390 million to finance other commercial real estate holdings.
 
     The residential mortgage loan portfolio increased 5%, or $41 million, from the end of 2006 to year-end 2007.  Growth in this portfolio sector has mainly come both from acquisitions and from the promotion of tailored home mortgage loan products generally targeted to the private client and higher net worth customer base.  The Bank continues to sell most conventional residential mortgage loan production in the secondary market.  Whitney has no meaningful exposure to sub-prime home mortgage loans.
 
     Loans to individuals include various consumer installment and credit line products.  The 5% growth in this portfolio sector during 2007 came largely through the Signature acquisition.

18
 
Table 2 reflects contractual loan maturities, unadjusted for scheduled principal reductions, prepayments or repricing opportunities.  Approximately 60% of the value of loans with a maturity greater than one year carries a fixed rate of interest.

TABLE 2.  LOAN MATURITIES BY TYPE
 
December 31, 2007
 
One year
One through
More than
 
(in thousands)
or less
five years
five years
Total
Commercial, financial and agricultural
$1,971,868
$   777,254
$  73,630
$2,822,752
Real estate – commercial, construction and other
1,411,137
1,693,592
372,829
3,477,558
Real estate – residential mortgage
168,452
517,581
247,764
933,797
Individuals
174,261
148,893
28,440
351,594
    Total
$3,725,718
$3,137,320
$722,663
$7,585,701

Credit Risk Management and Allowance and Reserve for Credit Losses
 
      General Discussion of Credit Risk Management and Determination of Credit Loss Allowance and Reserve
     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.  Written credit policies define underwriting criteria, concentration guidelines, and lending approval processes that cover individual authority and the appropriate involvement of regional loan committees and a senior loan committee.  The senior loan committee includes the Bank’s senior lenders, senior officers in Credit Administration, the Chief Operating Officer and the Chief Executive Officer.
 
     Commercial credits, including commercial real estate loans, are underwritten principally based upon cash flow coverage, but additional support is regularly obtained through collateralization and guarantees.  Commercial loans are typically relationship-based rather than transaction-driven.  Loan concentrations are monitored monthly by management and the Board of Directors.  Consumer loans are centrally underwritten with reference to the customer’s debt capacity and with the support of automated credit scoring tools, including appropriate secondary review procedures.
 
     A strong monitoring process is the key to early identification of problem credits.  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 processes.  Once a problem relationship over a certain size threshold is identified, a quarterly watch committee process is initiated.  The watch committee, composed of senior lending and credit administration management, must approve any substantive changes to identified problem credits and will assign relationships to a special credits department when appropriate.
 
     Management’s evaluation of credit risk in the loan portfolio is 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 credit 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 key 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.

19
 
Criticized loans are credits with above-average weaknesses as identified through the internal risk-rating process.  Criticized loans include those that are deemed to be impaired because all contractual amounts probably will not be collected as they become due.  Specific allowances are determined for impaired loans based on the present value of expected future cash flows discounted at the loan’s contractual interest rate, the fair value of the collateral if the loan is collateral dependent, or, when available, the loan’s observable market price.  The allowance for the remainder of criticized loans is calculated by applying loss factors to loan balances aggregated by the severity of the internal risk rating.  The loss factors applied to criticized loans are determined with reference to the results of migration analysis, which analyzes the charge-off experience over time for loans within each rating category.
 
     For the second element of the allowance, loans assessed as having average or better credit quality with similar risk ratings and homogeneous loans not subject to individual rating, such as residential mortgage loans, consumer installment loans and draws under consumer credit lines, are grouped together and individual loss factors are applied to each group.  The loss factors for homogeneous loan groups are based on average historical charge-off information.  Industry-based factors are applied to other portfolio segments for which a migration analysis has not been implemented.
 
     Determining the final element of the allowance involves assessing how other current factors, both internal and external, impact the accuracy of results obtained for the other two elements.  Internally, management must consider whether trends have been identified in the quality of underwriting and loan administration as well as in the timely identification of credit quality issues.  Management also monitors shifts in portfolio concentrations and other changes in portfolio characteristics that indicate levels of risk not fully captured in the loss factors.  External factors include local and national economic trends, as well as changes in the economic fundamentals of specific industries that are well-represented in Whitney’s customer base.  Management has established procedures to help ensure a consistent approach to this inherently judgmental process over time.
 
     The monitoring of credit risk also extends to unfunded credit commitments, such as unused commercial credit lines and letters of credit, and management establishes reserves as needed for its estimate of probable losses on such commitments.
 
      Credit Quality Statistics and Components of Credit Loss Allowance and Reserve
 
     The total of loans criticized through the Company’s credit risk-rating process increased $78 million during 2007 to $305 million at December 31, 2007, or 4% of the total loan portfolio.  Loans for residential development, investment and other residential purposes comprised approximately 40% of the criticized total at year-end 2007 and produced most of the overall net increase in criticized loans during the year.  Nonresidential real estate loans accounted for approximately 30% of the criticized total, with the underlying collateral fairly evenly divided between income-producing properties and owner-occupied properties.  Loans to traditional commercial and industrial relationships comprised approximately 25% of the criticized total, with no significant concentrations related to industries or markets.  Whitney has no meaningful exposure to sub-prime home mortgage loans.
 
     The criticized loan total at December 31, 2007 included $202 million of loans identified as having well-defined weaknesses that would likely result in some loss if not corrected, an increase of $45 million from the end of 2006.  There was a $30 million increase in the total of loans warranting special attention since the end of 2006.  The total for this rating category at year-end 2007 was $91 million.  Loans for which full repayment is in doubt totaled $11 million at December 31, 2007, up $3 million from the end of 2006.  The changes in each of these rating categories during 2007 mainly reflected weaknesses in residential-related loans.  The allowance determined for criticized loans at December 31, 2007, including those separately evaluated for impairment, increased $12 million from year-end 2006.

20
 
Included in the total of criticized loans at December 31, 2007 is $120 million of nonperforming loans, which is up $64 million from year-end 2006.  This increase also came predominantly from residential-related loans, mainly in Florida and Alabama, including one $13 million credit for a Florida development with project-specific issues not directly related to overall market conditions.  Approximately 43% of the total of nonperforming loans at December 31, 2007 was from Whitney’s Florida operations and 14% from Alabama.  Another 38% of the total was from Louisiana operations, mainly concentrated in commercial and industrial credits.  Table 3 provides information on nonperforming loans and other nonperforming assets at the end of each of the five years in the period ended December 31, 2007.  Nonperforming loans encompass substantially all loans separately evaluated for impairment.

TABLE 3.  NONPERFORMING ASSETS
                             
   
December 31  
(dollars in thousands)
 
2007
   
2006
   
2005
   
2004
   
2003
 
Loans accounted for on a nonaccrual basis
 
$
120,096
   
$
55,992
   
$
65,565
   
$
23,597
   
$
26,776
 
Restructured loans
   
-
     
-
     
30
     
49
     
114
 
   Total nonperforming loans
   
120,096
     
55,992
     
65,595
     
23,646
     
26,890
 
Foreclosed assets and surplus banking property
   
4,624
     
800
     
1,708
     
2,454
     
3,490
 
   Total nonperforming assets
 
$
124,720
   
$
56,792
   
$
67,303
   
$
26,100
   
$
30,380
 
Loans 90 days past due still accruing
 
$
8,711
   
$
7,574
   
$
13,728
   
$
3,533
   
$
3,385
 
Ratios:
                                       
   Nonperforming assets to loans plus foreclosed
                                       
        assets and surplus property
    1.64 %     .81 %     1.03 %     .46 %     .62 %
   Allowance for loan losses to
                                       
        nonperforming loans
   
73
     
136
     
137
     
230
     
221
 
   Loans 90 days past due still accruing to loans
   
.11
     
.11
     
.21
     
.06
     
.07
 
 
     A comparison of contractual interest income on nonperforming loans with the cash-basis and cost-recovery interest actually recognized on these loans for 2007, 2006 and 2005 is presented in Note 8 to the consolidated financial statements located in Item 8 of this annual report on Form 10-K.  Whitney’s policy for placing loans on nonaccrual status is presented in Note 2 to the consolidated financial statements.
 
     The overall allowance determined as of December 31, 2007 was $12.0 million above the allowance at year-end 2006, mainly reflecting the increase in the allowance determined for criticized loans noted above.  The allowance for loans with average or better credit quality ratings and loans not subject to individual rating increased $1.5 million from the end of 2006 to December 31, 2007, mainly driven by loan growth.  During 2007, Whitney reversed the remaining $1.1 million component of the allowance that had reflected the estimate of the incremental impact of the 2005 storms on losses in the consumer credit sectors of the portfolio.  The performance of these portfolio sectors, which were not subject to individual detailed storm-impact reviews, proved better than anticipated and did not exhibit the delayed credit problems seen in the aftermath of similar disasters.  Management’s relative assessment of economic and other qualitative risk factors between these dates had little impact, as reduced uncertainty regarding surrounding post-storm economic progress was offset by concerns over more recent economic trends, including both the severe downturn in the housing market and growing signs of a broader economic slowdown.
 
     Table 4 recaps activity in the allowance for loan losses and in the reserve for losses on unfunded credit commitments over the past five years.  The allocation of the allowance to loan categories is included in Table 5, together with the percentage of total loans in each category.

21


TABLE 4. SUMMARY OF ACTIVITY IN THE ALLOWANCE FOR LOAN LOSSES AND
 
                 RESERVE FOR LOSSES ON UNFUNDED CREDIT COMMITMENTS
 
(dollars in thousands)
 
2007
   
2006
   
2005
   
2004
   
2003
 
ALLOWANCE FOR LOAN LOSSES
                             
Balance at beginning of year
 
$
75,927
   
$
90,028
   
$
54,345
   
$
59,475
   
$
66,115
 
Allowance of acquired banks
   
2,791
     
2,908
     
3,648
     
2,461
     
-
 
Provision for credit losses
   
17,600
     
2,400
     
37,000
     
2,000
      (3,500 )
Loans charged off:
                                       
   Commercial, financial and agricultural
    (9,452 )     (15,841 )     (7,047 )     (9,680 )     (7,286 )
   Real estate – commercial, construction and other
    (4,370 )     (6,535 )     (438 )     (932 )     (963 )
   Real estate – residential mortgage
    (1,726 )     (555 )     (295 )     (619 )     (1,176 )
   Individuals
    (2,408 )     (2,297 )     (2,876 )     (2,799 )     (3,509 )
      Total charge-offs
    (17,956 )     (25,228 )     (10,656 )     (14,030 )     (12,934 )
Recoveries on loans previously charged off:
                                       
   Commercial, financial and agricultural
   
7,703
     
3,409
     
2,707
     
2,488
     
2,273
 
   Real estate – commercial, construction and other
   
179
     
234
     
932
     
223
     
3,666
 
   Real estate – residential mortgage
   
407
     
270
     
571
     
246
     
1,873
 
   Individuals
   
1,258
     
1,906
     
1,481
     
1,482
     
1,982
 
      Total recoveries
   
9,547
     
5,819
     
5,691
     
4,439
     
9,794
 
Net loans charged off
    (8,409 )     (19,409 )     (4,965 )     (9,591 )     (3,140 )
Balance at end of year
 
$
87,909
   
$
75,927
   
$
90,028
   
$
54,345
   
$
59,475
 
Ratios
                                       
   Net charge-offs to average loans
    .11 %     .29 %     .08 %     .19 %     .07 %
   Gross charge-offs to average loans
   
.24
     
.37
     
.17
     
.27
     
.28
 
   Recoveries to gross charge-offs
   
53.17
     
23.07
     
53.41
     
31.64
     
75.72
 
   Allowance for loan losses to loans at end of year
   
1.16
     
1.08
     
1.37
     
.97
     
1.22
 
RESERVE FOR LOSSES ON UNFUNDED CREDIT COMMITMENTS
                         
Reserve at beginning of year
 
$
1,900
   
$
580
   
$
-
   
$
-
   
$
-
 
Provision for credit losses
    (600 )    
1,320
     
580
     
-
     
-
 
Reserve at end of year
 
$
1,300
   
$
1,900
   
$
580
   
$
-
   
$
-
 

TABLE 5. ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
 
   
2007  
 
2006  
 
2005  
 
2004  
 
2003  
         
%  
       
%  
       
%  
       
%  
       
%  
(dollars in millions)
 
Balance  
 
Loans  
 
Balance  
 
Loans  
 
Balance  
 
Loans  
 
Balance  
 
Loans  
 
Balance  
 
Loans  
Commercial, financial
                                                           
  and agricultural
 
$
34.4
      37 %  
$
31.4
      38 %  
$
40.6
      41 %  
$
24.3
      43 %  
$
29.2
      45 %
Real estate – commercial,
                                                                               
  construction and other
   
40.6
     
46
     
31.8
     
44
     
29.8
     
42
     
21.2
     
39
     
19.2
     
35
 
Real estate –
                                                                               
   residential mortgage
   
5.4
     
12
     
4.0
     
13
     
7.3
     
12
     
4.2
     
12
     
5.0
     
13
 
Individuals
   
2.3
     
5
     
3.8
     
5
     
7.3
     
5
     
2.7
     
6
     
2.6
     
7
 
Unallocated
   
5.2
     
-
     
4.9
     
-
     
5.0
     
-
     
1.9
     
-
     
3.5
     
-
 
  Total
 
$
87.9
      100 %  
$
75.9
      100 %  
$
90.0
      100 %  
$
54.3
      100 %  
$
59.5
      100 %


22

INVESTMENT SECURITIES
 
     The investment securities portfolio balance of $1.99 billion at December 31, 2007 was up $99 million, or 5%, compared to December 31, 2006.  Average investment securities increased $69 million, or 4%, between 2006 and 2007.  The composition of the average portfolio in investment securities and effective yields are shown in Table 12.
 
     Information about the contractual maturity structure of investment securities at December 31, 2007, including the weighted-average yield on such securities, is shown in Table 6.  The carrying value of securities with explicit call options totaled $163 million at year-end 2007.  These call options and the scheduled principal reductions and projected prepayments on mortgage-backed securities are not reflected in Table 6.  Including expected principal reductions on mortgage-backed securities, the weighted-average maturity of the overall securities portfolio was approximately 32 months at December 31, 2007, compared to 37 months at year-end 2006.
 
     The weighted-average taxable-equivalent portfolio yield was approximately 4.88% at December 31, 2007, compared to 4.74% at December 31, 2006.  A substantial majority of the securities in the investment portfolio bear fixed interest rates.  The investment in mortgage-backed securities with final contractual maturities beyond ten years shown in Table 6 included approximately $225 million of adjustable-rate issues with a weighted-average yield of 4.42%.  The initial reset dates on these securities are predominantly within three years of year-end 2007.
 
     The mix of investments in the portfolio did not change significantly during 2007.  The duration of the overall investment portfolio was 2.1 years at December 31, 2007, and would extend to 3.5 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, 2006, the portfolio’s estimated duration was 2.4 years.

TABLE 6. DISTRIBUTION OF INVESTMENT MATURITIES
 
December 31, 2007  
         
Over one through
   
Over five through
             
(dollars in thousands)
 
One year and less
   
five years
   
ten years
   
Over ten years
   
Total
 
   
Amount
   
Yield  
 
Amount
   
Yield  
 
Amount
   
Yield  
 
Amount
   
Yield  
 
Amount
   
Yield  
Securities Available for Sale
 
Mortgage-backed
                                                           
  securities (a)
 
$
2,208
      5.09 %  
$
210,756
      4.61 %  
$
243,883
      5.09 %  
$
861,334
      4.80 %  
$
1,318,181
      4.82 %
U. S. agency securities
   
230,398
     
3.90
     
104,311
     
4.49
     
-
     
-
     
-
     
-
     
334,709
     
4.08
 
Obligations of states and
                                                                               
  political subdivisions (b)
   
1,209
     
5.67
     
5,971
     
6.03
     
3,089
     
6,23
     
-
     
-
     
10,269
     
6.05
 
Other debt securities
   
1,198
     
6.69
     
3,643
     
5.63
     
250
     
5.10
     
-
     
-
     
5,091
     
5.85
 
Equity securities (c)
   
-
     
-
     
-
     
-
     
-
     
-
     
30,545
     
5.84
     
30,545
     
5.84
 
    Total
 
$
235,013
      3.93 %  
$
324,681
      4.61 %  
$
247,222
      5.10 %  
$
891,879
      4.84 %  
$
1,698,795
      4.71 %
Securities Held to Maturity
 
Obligations of states and
                                                                               
  political subdivisions (b)
 
$
71,190
      5.62 %  
$
79,153
      5.76 %  
$
77,495
      5.94 %  
$
58,604
      6.30 %  
$
286,442
      5.88 %
    Total
 
$
71,190
      5.62 %  
$
79,153
      5.76 %  
$
77,495
      5.94 %  
$
58,604
      6.30 %  
$
286,442
      5.88 %
(a) Distributed by contractual maturity without regard to repayment schedules or projected prepayments.
 
(b) Tax exempt yields are expressed on a fully taxable-equivalent basis.
 
(c) These securities have no stated maturities or guaranteed dividends. Yield estimated based on expected near-term returns.
 

23
 
Securities available for sale made up the bulk of the total investment portfolio at December 31, 2007.  Gross unrealized losses on securities available for sale totaled $10.4 million at December 31, 2007 and were mainly related to mortgage-backed securities.  The gross losses represented 1.2% of the total amortized cost of the underlying securities.  Note 5 to the consolidated financial statements located in Item 8 of this annual report on Form 10-K provides information on the process followed by management to evaluate whether unrealized losses on securities, both those available for sale and those held to maturity, represent impairment that is other than temporary and that should be recognized with a charge to operations.  Substantially all the unrealized losses at December 31, 2007 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 Whitney holds no securities that are tied to sub-prime home mortgage loans.  In addition, management has the intent and ability to hold these securities until the market-based impairment is recovered; therefore, no value impairment was determined to be 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.
 
     Apart from securities issued or guaranteed by the U. S. government or its agencies, Whitney held no investment in the securities of a single issuer at December 31, 2007 that exceeded 10% of its shareholders’ equity.

DEPOSITS AND BORROWINGS
 
     Total deposits at December 31, 2007 were up 2%, or $150 million, compared to a year earlier, mainly reflecting the deposits added with the Signature acquisition.  This followed a decrease of 2%, or $172 million, from year-end 2005 to the end of 2006.  The surge in deposits after the late-summer hurricanes of 2005 peaked around the end of the first quarter of 2006, and anticipated reductions became evident mainly over the second half of 2006.  After some further reduction in early 2007 in the post-storm deposit accumulation, Whitney has been returning to more normal deposit trends later in the year, both with respect to seasonal fluctuations and overall growth rates.  On average, total deposits decreased 1%, or approximately $79 million, in 2007 compared to 2006.  Table 7 shows the composition of deposits at December 31, 2007 and at the end of the two previous years.  The composition of average deposits and the effective rate paid on interest-bearing deposits for each of these years is presented in Table 12.

TABLE 7.  DEPOSIT COMPOSITION
                 
(dollars in thousands)
 
2007  
 
2006  
 
2005  
Noninterest-bearing demand deposits
 
$
2,740,019
      32 %  
$
2,947,997
      35 %  
$
3,301,227
      38 %
Interest-bearing deposits:
                                               
  NOW account deposits
   
1,151,988
     
13
     
1,099,408
     
13
     
1,116,000
     
13
 
  Money market deposits
   
1,229,715
     
14
     
1,185,610
     
14
     
1,103,510
     
13
 
  Savings deposits
   
879,609
     
10
     
965,652
     
11
     
1,120,078
     
13
 
  Other time deposits
   
823,884
     
10
     
750,165
     
9
     
717,938
     
8
 
  Time deposits $100,000 and over
   
1,758,574
     
21
     
1,484,476
     
18
     
1,246,083
     
15
 
    Total interest-bearing
   
5,843,770
     
68
     
5,485,311
     
65
     
5,303,609
     
62
 
     Total
 
$
8,583,789
      100 %  
$
8,433,308
      100 %  
$
8,604,836
      100 %
 
     The post-storm influx of deposits was initially concentrated in noninterest-bearing and certain other lower-cost deposit products, particularly personal savings accounts.  The anticipated reductions to these storm-related deposits as well as some migration to higher-yielding products contributed to a 3%, or $197 million, decrease in lower-cost deposits from December 31, 2006 to the end of 2007, and a decrease of 10%, or $639 million, in the two years since December 31, 2005.  Noninterest-bearing demand deposits comprised 32% of total deposits at December 31, 2007, comparable to pre-storm levels, but down from 35% a year earlier and 38% at the end of 2005.

24
 
Higher-cost time deposits at December 31, 2007 were up 16%, or $348 million, compared to year-end 2006, with approximately $47 million associated with Signature.  A portion of this growth reflected efforts to attract new customers in certain parts of Whitney’s market area where banking relationships were disrupted by mergers of competitors.  Time deposits of $100,000 or more 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 $705 million of funds in treasury-management deposit products at December 31, 2007, up $219 million from the total held at December 31, 2006.  Strong liquidity among Whitney’s commercial customers, particularly those in the oil and gas industry and in heavy construction, has supported this growth.  Public fund time deposits totaled $251 million at year-end 2007, which was $12 million lower than the end of 2006.

TABLE 8.  MATURITIES OF TIME DEPOSITS
     
 
Deposits of
 Deposits of
 
 
$100,000
 less than
 
(in thousands)
or more
 $100,000
Total
Three months or less
$1,184,157
$267,904
$1,452,061
Over three months through six months
315,616
239,574
555,190
Over six months through twelve months
231,872
224,273
456,145
Over twelve months
26,929
92,133
119,062
  Total
$1,758,574
$823,884
$2,582,458
 
     Short-term and other borrowings at December 31, 2007 were up 82%, or $410 million, from year-end 2006. The main source of short-term borrowings has been the sale of securities under repurchase agreements to customers using Whitney’s treasury management sweep product.    Total borrowings from customers under repurchase agreements increased approximately 76%, or $333 million, from year-end 2006 to the end of 2007, reflecting in part certain large customer transactions at the end of the current year.  Average borrowings under repurchase agreements increased 19%, or $92 million, between 2006 and 2007.  The strong liquidity in the commercial customer base has also supported the growth in this source of funds.  Because of the underlying customer relationship, these borrowings can be a relatively stable source of funds.  Additional information on borrowings, including yields and maximum amounts borrowed, is presented in Note 12 to the consolidated financial statements located in Item 8 of this annual report on Form 10-K.
 
     In late March 2007, the Bank issued $150 million in ten-year subordinated notes to augment the Bank’s regulatory capital and enhance its capacity for future growth.

25

SHAREHOLDERS’ EQUITY AND CAPITAL ADEQUACY
 
     Shareholders’ equity totaled $1.23 billion at December 31, 2007, which represented an increase of $116 million from the end of 2006.  The 1.49 million shares issued in the acquisition of Signature in March 2007 were valued at $48 million.  Whitney repurchased 1.90 million of its common shares during 2007 at a cost of $50 million under a program announced in November 2007 to repurchase up to four million shares.  The Company retained $72 million of earnings, net of dividends declared, and recognized other comprehensive income of $18 million representing an unrealized net holding gain on securities available for sale during 2007.  Whitney recognized $19 million in additional equity during 2007 from activity in share-based compensation plans for employees and directors, including option exercises.  Total shareholders’ equity grew $152 million in 2006, to $1.11 billion at December 31, 2006.  Whitney issued 2.16 million shares in the acquisition of First National Bancshares, Inc. in April 2006 that were valued at $75 million.  During 2006, the Company retained $74 million of earnings, net of dividends declared, but this was partly offset by a $22 million charge to accumulated comprehensive income on the adoption of SFAS No. 158 as discussed in Note 15 in Item 8.  Activity in share-based compensation plans during 2006 generated $20 million in additional equity for the year. The Company declared dividends during 2007 that represented a payout totaling 52% of earnings for the year.  The dividend payout ratio was 49% in 2006 and 60% in 2005.
 
     The ratios in Table 9 indicate that the Company remained strongly capitalized at December 31, 2007.  Tier 2 and total regulatory capital at December 31, 2007 include $150 million in subordinated debt issued by the Bank in the first quarter of 2007.  The increase in risk-weighted assets from the end of 2006 mainly reflected the impact of the Signature acquisition and organic loan growth.  The 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 thereby serve to offset the addition to capital for the value of shares issued as consideration for the acquisition.

TABLE 9. RISK-BASED CAPITAL AND CAPITAL RATIOS
 
(dollars in thousands)
 
2007  
 
2006  
 
2005  
 
2004  
 
2003  
Tier 1 regulatory capital
 
$
911,141
   
$
853,774
   
$
765,881
   
$
767,717
   
$
739,236
 
Tier 2 regulatory capital
   
238,967
     
77,827
     
90,608
     
54,345
     
59,475
 
  Total regulatory capital
 
$
1,150,108
   
$
931,601
   
$
856,489
   
$
822,062
   
$
798,711
 
Risk-weighted assets
 
$
9,023,862
   
$
8,340,926
   
$
7,746,046
   
$
6,527,821
   
$
5,777,094
 
Ratios
                                       
  Leverage ratio (Tier 1 capital to average assets)
    8.79 %     8.76 %     8.21 %     9.56 %     10.13 %
  Tier 1 capital to risk-weighted assets
   
10.10
     
10.24
     
9.89
     
11.76
     
12.80
 
  Total capital to risk-weighted assets
   
12.75
     
11.17
     
11.06
     
12.59
     
13.83
 
  Shareholders’ equity to total assets
   
11.14
     
10.93
     
9.51
     
11.00
     
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.

26

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, making full use of quantitative modeling tools available to project cash flows under a variety of possible scenarios.  Projections are also made assuming credit-stressed conditions, although such conditions are not currently anticipated.
 
     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.  Table 2 above presents the contractual maturity structure of the loan portfolio and Table 6 presents contractual investment maturities.
 
     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 2007.  The Bank is a member of the Federal Home Loan Bank (FHLB) system, which provides the Bank access to a variety of FHLB advance products as an alternative source of funds.  In addition, both the Company and the Bank have access to external funding sources in the financial markets, and the Bank has developed the ability to gather deposits at a nationwide level, although it has not used this ability to date.
 
     Cash generated from operations is another important source of funds to meet liquidity needs.  The consolidated statements of cash flows located in Item 8 of this annual report on Form 10-K present operating cash flows and summarize all significant sources and uses of funds for each year in the three-year period ended December 31, 2007.
 
     At December 31, 2007, Whitney Holding Corporation had approximately $126 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.  During 2008, the Bank will have available an amount equal to approximately $113 million plus its current net income to declare as dividends to the Company without prior regulatory approval.

Contractual Obligations
     Table 10 summarizes payments due from the Company and the Bank under specified long-term and certain other contractual obligations as of December 31, 2007.  Obligations under deposit contracts and short-term borrowings are not included.  The maturities of time deposits are scheduled in Table 8 above in the section on “Deposits and Borrowings.”  Purchase obligations represent legal and binding contracts to purchase services or goods that cannot be settled or terminated without paying substantially all of the contractual amounts.  Not included are a number of contracts entered into to support ongoing operations that either do not specify fixed or minimum amounts of goods or services or are cancelable on short notice without cause and without significant penalty.  The consolidated statements of cash flows provide a picture of Whitney’s ability to fund these and other more significant cash operating expenses, such as interest expense and compensation and benefits, out of current operating cash flows.

27


TABLE 10.  CONTRACTUAL OBLIGATIONS
 
Payments due by period from December 31, 2007
   
Less than
1 - 3
3 – 5
More than
(in thousands)
Total
1 year
years
years
5 years
Operating lease obligations
$  84,593
$10,082
$16,239
$11,924
$46,348
Purchase obligations
26,910
12,804
9,648
4,458
-
Long-term debt service (a)
248,721
17,629
17,625
23,811
189,656
Other long-term liabilities (b) (c)
-
-
-
-
-
   Total
$360,224
$40,515
$43,512
$40,193
$236,004
(a)   Principal payments on callable subordinated debentures are scheduled by expected call dates.
(b)   Obligations under the qualified defined benefit pension plan are not included.  Whitney anticipates making a pension
        contribution of approximately $8 million during 2008.  No significant near-term payments are expected under the
        unfunded nonqualified pension plan.  A $10.8 million nonqualified plan obligation was recorded at year-end 2007.
(c)  The recorded obligation for postretirement benefits other than pensions was $15.2 million at December 31, 2007.
       The funding to purchase benefits for current retirees, net of retiree contributions, has not been significant.

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.  Certain of these arrangements, such as noncancelable operating leases, are reflected in Table 10 above.  The most significant off-balance sheet obligations are the Bank’s commitments under traditional credit-related financial instruments.  Table 11 schedules these commitments as of December 31, 2007 by the periods in which they expire.  Commitments under credit card and personal credit lines generally have no stated maturity.

TABLE 11.  CREDIT-RELATED COMMITMENTS
 
 
Commitments expiring by period from December 31, 2007
   
Less than
1 - 3
3 - 5
More than
 (in thousands)
Total
1 year
years
years
5 years
Loan commitments – revolving
$2,475,656
$1,740,114
$308,981
$393,552
$33,009
Loan commitments – nonrevolving
534,673
304,270
229,604
799
-
Credit card and personal credit lines
551,748
551,748
-
-
-
Standby and other letters of credit
391,922
308,990
35,408
47,524
-
   Total
$3,953,999
$2,905,122
$573,993
$441,875
$33,009
 
     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.  A number of 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.


28
 
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 has developed a model to measure its interest rate sensitivity over the near term by running net interest income simulations and monitors longer-term interest rate risk by modeling the sensitivity of its economic value of equity.  The model can be used to test the Company’s sensitivity in various economic environments.  The model incorporates management’s assumptions and expectations regarding such factors as loan and deposit growth, pricing, prepayment speeds and spreads between interest rates.  Assumptions can also be entered into the model to evaluate the impact of possible strategic responses to changes in the competitive environment.  Management, through the Company’s Investment and Asset & Liability Committee, monitors simulation results against rate sensitivity guidelines specified in Whitney’s asset/liability management policy.
 
     The net interest income simulations run at the end of 2007 indicated that Whitney was moderately asset sensitive over the near term, similar to its position at year-end 2006.  Based on these simulations, annual net interest income (TE) would be expected to increase $24.3 million, or 5.2%, and decrease $26.5 million, or 5.6%, 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 that assumes a stable rate environment and structure.  The comparable simulation run at year-end 2006 produced results that ranged from a positive impact on net interest income (TE) of $21.1 million, or 4.4%, to a negative impact of $22.1 million, or 4.6%.
 
     The actual impact that changes in interest rates have on net interest income will depend on many factors.  These factors 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 that are implemented.
 
     Changes in interest rates affect the fair values of financial instruments.  The earlier section on Investment Securities and Notes 5 and 19 to the consolidated financial statements located in Item 8 of this annual report on Form 10-K contain information regarding fair values.
 
     The Company has made minimal use of investments in financial instruments or participations in agreements with values that are linked to or derived from changes in the value of some underlying asset or index.  These are commonly referred to as derivatives and include such instruments as interest rate swaps, futures, forward contracts, option contracts, and other financial arrangements with similar characteristics.  Management continues to evaluate whether to make additional use of derivatives as part of its asset/liability and liquidity management processes.


29

RESULTS OF OPERATIONS

NET INTEREST INCOME (TE)
 
     Whitney’s net interest income (TE) decreased $6.6 million, or 1%, in 2007 compared to 2006.  Average earning assets were 3%, or $287 million, higher in 2007, while the net interest margin (TE) contracted 22 basis points to 4.89% from 2006.  The net interest margin is net interest income (TE) as a percent of average earning assets.  Tables 12 and 13 provide details on the components of the Company’s net interest income (TE) and net interest margin (TE).
 
     The overall yield on earning assets increased 26 basis points to 6.92% in 2007, mainly reflecting the shift in the asset mix.  Loans, which in Table 12 include loans held for sale, comprised 76% of average earning assets for 2007 compared to 73% in 2006.  There was a similar decrease in the percentage of short-term investments in the earning-asset mix in 2007 compared to 2006, when the Company’s liquidity position was still impacted by the deposit build-up following the 2005 hurricanes.  Loan yields (TE) for 2007 were up 14 basis points compared to 2006.  Whitney’s loan portfolio includes a large variable-rate segment, and the underlying benchmark rates in 2007 were relatively stable on average compared to 2006, with declines noted toward the end of the 2007 and continuing into early 2008.  The rates on approximately 28%, or $2.1 billion, of the loan portfolio at year-end 2007 were tied to changes in Libor benchmarks, with another 25%, or $1.9 billion, tied to prime.  Declines in Libor-based indices lagged as overall market rates eased in the latter part of 2007, but have resumed more normal patterns in early 2008. The yield (TE) on the largely fixed-rate investment portfolio improved 22 basis points between 2006 and 2007.
 
     The overall cost of funds for 2007 increased 48 basis points from 2006, mainly in response to the shift in the funding mix toward higher-cost sources coupled with continued pressure from competitive market rates.  Average deposits in 2007 declined 1% compared to 2006.  Average noninterest-bearing deposits funded approximately 28% of average earning assets in 2007, and the percentage of funding from all noninterest-bearing sources was 33% for the year.  These percentages, while down from 32% and 36%, respectively, in 2006, are comparable to pre-storm levels.  Higher-cost interest-bearing funds, which include time deposits and borrowings, funded 34% of average earning assets in 2007, compared to 29% in 2006, and up somewhat from pre-storm levels.  This reflected a number of factors, including the relative attractiveness of rates on the underlying deposit products in response to market rates, increased use of the Company’s treasury-management deposit products by commercial customers with excess liquidity, and the issuance of $150 million in long-term subordinated Bank debt in late March 2007.
 
     Overall, Whitney continues to be moderately asset sensitive over the near term.  As the overall economic outlook has weakened, management has anticipated downward pressure on market interest rates and is continuing to aggressively manage its deposit and loan rates to mitigate the impact of the rate environment on its net interest income.

30

                                                       
TABLE 12. SUMMARY OF AVERAGE BALANCE SHEETS, NET INTEREST INCOME(TE) (a) AND YIELDS AND RATES
 
   
Year Ended        
 
Year Ended        
 
Year Ended        
(dollars in thousands)
 
December 31, 2007        
 
December 31, 2006        
 
December 31, 2005        
   
Average
         
Yield/
   
Average
         
Yield/
   
Average
         
Yield/
 
   
Balance
   
Interest
   
Rate
   
Balance
   
Interest
   
Rate
   
Balance
   
Interest
   
Rate
 
ASSETS
                                                     
EARNING ASSETS
                                                     
Loans (TE) (b) (c)
 
$
7,364,777
   
$
556,170
      7.55 %  
$
6,803,228
   
$
504,162
      7.41 %   $
6,174,972
   
$
390,835
      6.33 %
Mortgage-backed securities
   
1,236,977
     
58,625