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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended Commission file number 0-1026
September 30, 2002
WHITNEY HOLDING CORPORATION
(Exact name of registrant as specified in its charter)
Louisiana 72-6017893
(State of incorporation) (I.R.S. Employer
Identification No.)
228 St. Charles Avenue
New Orleans, Louisiana 70130
(Address of principal executive offices)
(504) 586-7272
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days:
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at October 31, 2002
----- ---------------------------------
Common Stock, no par value 40,027,309
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WHITNEY HOLDING CORPORATION
TABLE OF CONTENTS
Page
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PART I. Financial Information
Item 1: Financial Statements:
Consolidated Balance Sheets 1
Consolidated Statements of Operations 2
Consolidated Statements of Changes in Shareholders' Equity 3
Consolidated Statements of Cash Flows 4
Notes to Consolidated Financial Statements 5
Selected Financial Data 10
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
Item 3: Quantitative and Qualitative Disclosures about Market Risk 27
Item 4: Controls and Procedures 27
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PART II. Other Information
Item 1: Legal Proceedings 28
Item 2: Changes in Securities and Use of Proceeds 28
Item 3: Defaults upon Senior Securities 28
Item 4: Submission of Matters to a Vote of Security Holders 28
Item 5: Other Information 28
Item 6: Exhibits and Reports on Form 8-K 28
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
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September 30 December 31
(dollars in thousands) 2002 2001
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ASSETS
Cash and due from financial institutions $ 271,528 $ 271,512
Investment in securities
Securities available for sale 1,693,874 1,440,527
Securities held to maturity, fair values of $168,041 and
$195,712, respectively 159,345 191,813
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Total investment in securities 1,853,219 1,632,340
Federal funds sold and short-term investments 170,641 494,908
Loans, net of unearned income 4,400,312 4,554,538
Allowance for loan losses (68,240) (71,633)
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Net loans 4,332,072 4,482,905
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Bank premises and equipment 152,916 167,419
Goodwill 69,164 68,952
Other intangible assets 30,269 34,653
Accrued interest receivable 29,277 32,461
Other assets 56,785 58,500
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Total assets $ 6,965,871 $ 7,243,650
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LIABILITIES
Noninterest-bearing demand deposits $ 1,615,810 $ 1,634,258
Interest-bearing deposits 4,074,062 4,315,902
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Total deposits 5,689,872 5,950,160
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Short-term borrowings 423,442 511,517
Accrued interest payable 8,192 14,946
Accrued expenses and other liabilities 61,775 49,139
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Total liabilities 6,183,281 6,525,762
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SHAREHOLDERS' EQUITY
Common stock, no par value
Authorized - 100,000,000 shares
Issued - 40,012,966 and 39,667,248 shares, respectively 2,800 2,800
Capital surplus 165,107 154,397
Retained earnings 594,113 556,241
Accumulated other comprehensive income 28,185 10,104
Treasury stock at cost - -
Unearned restricted stock compensation (7,615) (5,654)
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Total shareholders' equity 782,590 717,888
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Total liabilities and shareholders' equity $ 6,965,871 $ 7,243,650
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The accompanying notes are an integral part of these financial statements.
Share data gives effect to the 3-for-2 stock split effective April 9, 2002.
1
WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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Three Months Ended Nine Months Ended
September 30 September 30
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(dollars in thousands, except per share data) 2002 2001 2002 2001
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INTEREST INCOME
Interest and fees on loans $67,742 $84,835 $207,202 $266,009
Interest and dividends on investments
Mortgage-backed securities 14,258 11,591 42,114 28,373
U.S. agency securities 5,209 7,105 17,211 24,880
Obligations of states and political subdivisions 1,622 1,849 5,050 5,908
U.S. Treasury securities 1,588 1,485 4,545 4,862
Other securities 620 521 1,824 1,440
Interest on federal funds sold and short-term investments 789 2,406 4,239 7,769
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Total interest income 91,828 109,792 282,185 339,241
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INTEREST EXPENSE
Interest on deposits 16,932 35,566 57,413 118,666
Interest on short-term borrowings 932 3,287 3,027 13,431
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Total interest expense 17,864 38,853 60,440 132,097
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NET INTEREST INCOME 73,964 70,939 221,745 207,144
PROVISION FOR LOAN LOSSES 1,500 8,000 7,000 13,000
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NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 72,464 62,939 214,745 194,144
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NONINTEREST INCOME
Service charges on deposit accounts 9,539 8,763 28,682 25,556
Credit card income 2,083 3,981 6,010 12,021
Trust service fees 2,130 2,403 6,732 7,172
Secondary mortgage market operations 2,069 2,199 5,969 4,743
Other noninterest income 6,474 7,656 15,491 21,270
Securities transactions (15) - 411 69
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Total noninterest income 22,280 25,002 63,295 70,831
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NONINTEREST EXPENSE
Employee compensation 27,242 25,805 79,399 78,570
Employee benefits 5,576 4,687 16,472 14,220
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Total personnel expense 32,818 30,492 95,871 92,790
Equipment and data processing expense 4,510 5,331 14,491 17,737
Net occupancy expense 5,208 5,075 15,131 15,312
Credit card processing services 541 2,447 1,597 7,579
Telecommunication and postage 2,140 2,181 6,192 6,476
Legal and professional fees 1,431 1,674 4,601 6,441
Amortization of intangibles 1,461 1,818 4,384 5,456
Ad valorem taxes 1,894 1,739 5,683 5,312
Other noninterest expense 8,227 8,109 25,030 25,357
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Total noninterest expense 58,230 58,866 172,980 182,460
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INCOME BEFORE INCOME TAXES 36,514 29,075 105,060 82,515
INCOME TAX EXPENSE 12,198 9,719 34,867 26,491
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NET INCOME $24,316 $19,356 $70,193 $56,024
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EARNINGS PER SHARE
Basic $ .61 $ .49 $ 1.76 $ 1.42
Diluted .60 .48 1.75 1.41
WEIGHTED-AVERAGE SHARES OUTSTANDING
Basic 40,050,014 39,626,288 39,894,294 39,508,473
Diluted 40,244,282 40,071,824 40,129,111 39,742,281
CASH DIVIDENDS PER SHARE $ .27 $ .25 $ .81 $ .76
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The accompanying notes are an integral part of these financial statements.
Share and per share data give effect to the 3-for-2 stock split effective April 9, 2002.
2
WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
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Accumulated Unearned
Other Restricted
Common Capital Retained Comprehensive Treasury Stock
(dollars in thousands, except per share data) Stock Surplus Earnings Income Stock Compensation Total
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Balance at December 31, 2000 $ 2,800 $ 158,083 $ 521,220 $ 1,657 $ (13,680) $ (4,316) $ 665,764
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Comprehensive income:
Net income - - 56,024 - - - 56,024
Other comprehensive income:
Cumulative effect of accounting change - - - (4,175) - - (4,175)
Unrealized net holding gain on
securities, net of reclassification
adjustments and taxes - - - 24,038 - - 24,038
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Total comprehensive income - - 56,024 19,863 - - 75,887
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Cash dividends, $.76 per share - - (30,025) - - - (30,025)
Cash dividends, pooled entity - - (202) - - - (202)
Stock sold to dividend reinvestment and
employee retirement plans - 1,650 - - 702 - 2,352
Long-term incentive plan stock activity:
Restricted grants and related activity - 5,057 - - (934) (2,052) 2,071
Options exercised - 1,463 - - - - 1,463
Directors' compensation plan stock activity - 11 - - 101 - 112
Treasury stock issued in pooling
business combination - (12,978) - - 12,978 - -
Stock options from pooled entities exercised - 146 - - - - 146
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Balance at September 30, 2001 $ 2,800 $ 153,432 $ 547,017 $ 21,520 $ (833) $ (6,368) $ 717,568
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Balance at December 31, 2001 $ 2,800 $ 154,397 $ 556,241 $ 10,104 $ - $ (5,654) $ 717,888
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Comprehensive income:
Net income - - 70,193 - - - 70,193
Other comprehensive income:
Unrealized net holding gain on
securities, net of reclassification
adjustments and taxes - - - 18,081 - - 18,081
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Total comprehensive income - - 70,193 18,081 - - 88,274
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Cash dividends, $.81 per share - - (32,321) - - - (32,321)
Stock sold to dividend reinvestment and
employee retirement plans - 1,065 - - - - 1,065
Long-term incentive plan stock activity:
Restricted grants and related activity - 3,923 - - (243) (1,961) 1,719
Options exercised - 5,312 - - 31 - 5,343
Directors' compensation plan stock activity - 123 - - 212 - 335
Stock options from pooled entities exercised - 287 - - - - 287
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Balance at September 30, 2002 $ 2,800 $ 165,107 $ 594,113 $ 28,185 $ - $ (7,615) $ 782,590
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The accompanying notes are an integral part of these financial statements. Per
share data gives effect to the 3-for-2 stock split effective April 9, 2002.
3
WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Nine Months Ended
September 30
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(dollars in thousands) 2002 2001
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OPERATING ACTIVITIES
Net income $ 70,193 $ 56,024
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of bank premises and equipment 11,895 14,574
Amortization of purchased intangibles 4,384 5,456
Restricted stock compensation earned 3,733 2,827
Premium amortization (discount accretion), net 2,565 (128)
Provision for loan losses 7,000 13,000
Provision for losses on foreclosed assets 74 63
Net gains on sales and other dispositions of foreclosed assets (678) (611)
Net gains on sales and other dispositions of surplus property (538) (3,948)
Net gains on sales of investment securities (411) (69)
Deferred tax benefit (4) (2,615)
Increase in accrued income taxes 359 11,647
Decrease in accrued interest receivable and prepaid expenses 1,699 2,688
Decrease in accrued interest payable and other accrued expenses (2,960) (168)
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Net cash provided by operating activities 97,311 98,740
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INVESTING ACTIVITIES
Proceeds from maturities of investment securities held to maturity 32,245 137,689
Proceeds from maturities of investment securities available for sale 385,563 451,909
Proceeds from sales of investment securities available for sale 56,375 53,533
Purchases of investment securities available for sale (669,581) (797,992)
Net decrease in loans 141,338 85,471
Net (increase) decrease in federal funds sold and short-term investments 324,267 (192,248)
Proceeds from sales of foreclosed assets 2,839 1,229
Proceeds from sales of surplus banking property 7,359 5,983
Purchases of bank premises and equipment (5,577) (8,463)
Other, net 4,547 (1,428)
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Net cash provided by (used in) investing activities 279,375 (264,317)
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FINANCING ACTIVITIES
Net increase (decrease) in transaction account and savings account deposits (32,973) 330,614
Net decrease in time deposits (227,315) (96,896)
Net decrease in short-term borrowings (88,075) (68,614)
Proceeds from issuance of common stock 6,038 3,774
Purchases of common stock (2,256) (847)
Cash dividends (32,089) (28,771)
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Net cash provided by (used in) financing activities (376,670) 139,260
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Increase (decrease) in cash and cash equivalents 16 (26,317)
Cash and cash equivalents at beginning of period 271,512 273,121
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Cash and cash equivalents at end of period $ 271,528 $ 246,804
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Cash received during the period for:
Interest income $ 285,369 $ 346,590
Cash paid during the period for:
Interest expense $ 67,194 $ 135,718
Income taxes 33,100 18,068
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The accompanying notes are an integral part of these financial statements.
4
WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Whitney
Holding Corporation and its subsidiaries (the "Company" or "Whitney.") All
significant intercompany balances and transactions have been eliminated. The
Company reports the balances and results of operations from businesses acquired
in purchase transactions from the respective acquisition dates. Certain
financial information for prior periods has been reclassified to conform to the
current presentation.
In preparing the consolidated financial statements, the Company is
required to make estimates and assumptions that affect the amounts reported in
the consolidated financial statements and accompanying notes. Actual results
could differ from those estimates. The consolidated financial statements reflect
all adjustments which are, in the opinion of management, necessary for a fair
statement of the financial condition, results of operations, changes in
shareholders' equity and cash flows for the interim periods presented. These
adjustments are of a normal recurring nature and include appropriate estimated
provisions.
Pursuant to rules and regulations of the Securities and Exchange
Commission, certain financial information and disclosures have been condensed or
omitted in preparing the consolidated financial statements presented in this
quarterly report on Form 10-Q. These financial statements should be read in
conjunction with the Company's 2001 annual report on Form 10-K.
In the first quarter of 2002, Whitney declared a three-for-two split of
its common stock that was effective April 9, 2002. All share and per share data
in this quarterly report give effect to this stock split.
NOTE 2 - EARNINGS PER SHARE
The components used to calculate basic and diluted earnings per share
were as follows:
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Three Months Ended Nine Months Ended
September 30 September 30
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(dollars in thousands, except per share data) 2002 2001 2002 2001
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Numerator:
Net income $24,316 $19,356 $70,193 $56,024
Effect of dilutive securities - - - -
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Numerator for diluted earnings per share $24,316 $19,356 $70,193 $56,024
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Denominator:
Weighted-average shares outstanding 40,050,014 39,626,288 39,894,294 39,508,473
Effect of dilutive stock options 194,268 445,536 234,817 233,808
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Denominator for diluted earnings per share 40,244,282 40,071,824 40,129,111 39,742,281
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Earnings per share:
Basic $.61 $.49 $1.76 $1.42
Diluted .60 .48 1.75 1.41
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Antidilutive stock options 597,075 234,375 366,795 442,997
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5
NOTE 3 - GOODWILL AND OTHER INTANGIBLE ASSETS
Whitney has recognized certain intangible assets in connection with its
purchase business combinations and other acquisitions. Identifiable intangible
assets acquired by the Company have mainly represented the value of the deposit
relationships purchased in these transactions. Goodwill represents the purchase
price premium over the fair value of the net assets acquired in a business
combination, including identifiable intangible assets. In certain
banking-industry acquisitions, accounting principles in effect at the time
required the recognition of an unidentifiable intangible asset. See Note 8 for a
discussion of a recently issued accounting standard related to such
unidentifiable intangibles.
Note 8 also discusses a new accounting standard that eliminated
goodwill amortization beginning in 2002. The following table shows net income
and earnings per share adjusted to show the impact of the elimination of
goodwill amortization.
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Three Months Ended Nine Months Ended
September 30 September 30
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(dollars in thousands, except per share data) 2002 2001 2002 2001
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Net income $24,316 $19,356 $70,193 $56,024
Eliminate goodwill amortization, net of tax - 806 - 2,421
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Adjusted net income $24,316 $20,162 $70,193 $58,445
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Basic earnings per share $.61 $.49 $1.76 $1.42
Effect of eliminating goodwill amortization - .02 - .06
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Adjusted basic earnings per share $.61 $.51 $1.76 $1.48
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Diluted earnings per share $.60 $.48 $1.75 $1.41
Effect of eliminating goodwill amortization - .02 - .06
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Adjusted diluted earnings per share $.60 $.50 $1.75 $1.47
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Beginning in 2002, goodwill must be tested for impairment at least
annually. The initial assessment required by the new accounting standard
indicated no goodwill impairment as of January 1, 2002.
The remaining unamortized cost of intangible assets other than goodwill
at September 30, 2002 consisted of deposit relationship intangibles and other
identifiable intangibles totaling $21.7 million, with a weighted-average
remaining life of approximately six years, and unidentified intangibles totaling
$8.6 million, with a remaining life of approximately five years. At December 31,
2001, these totals were $24.8 million and $9.9 million, respectively.
Amortization of other intangible assets totaled $1.5 million in the
third quarter of 2002 and $4.4 million year-to-date through September 30, 2002.
The following shows estimated amortization expense for the full year ending
December 31, 2002 and the five succeeding years calculated based on current
amortization schedules.
(dollars in thousands)
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2002 $ 5,846
2003 5,332
2004 5,152
2005 5,113
2006 5,107
2007 4,419
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6
NOTE 4 - STOCK-BASED INCENTIVE COMPENSATION
Whitney maintains a long-term incentive plan for key employees and a
directors' compensation plan, each of which allows for the awarding of stock
grants, stock options and other stock-based compensation. During June 2002,
annual awards were made under each of these plans as follows:
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Stock Grant Stock Option Award
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(dollars in thousands, except per share data) Shares Market Value Shares Exercise Price
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Long-term incentive plan for key employees 137,775 $4,666 388,825 $33.87
Directors' compensation plan 6,750 $207 45,000 $30.79
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The stock grant awarded to employees is subject to forfeiture if the
recipient's employment is terminated within three years of the grant date and
any disposition of the shares received is restricted during this period. The
employee grant can be adjusted based on Whitney's financial performance in
relation to that of a designated peer group over the restriction period. The
ultimate number of shares awarded can range from 0% to 200% of the initial
grant. Compensation expense, initially measured as the market value of the
restricted shares on the grant date, is recognized ratably over the restriction
period. Periodic adjustments are made to reflect changes in the expected
performance adjustment and in the market value of the Company's stock.
The stock options are fixed awards, all of which are fully exercisable
after six months from the grant date. The exercise price is set at the market
price on the grant date. Although Whitney does not recognize compensation
expense with respect to such fixed awards of stock options, accounting
principles require an annual disclosure of the pro forma decrease in net income
and earnings per share as if compensation had been measured and recognized in
expense based on an estimate of the options' fair value. Using the Black-Sholes
option-pricing model to calculate fair value, the pro forma decrease in net
income for 2002 related to the awards granted in June 2002 is estimated at $3.0
million, net of tax. This represents a pro forma decrease in earnings per share,
both basic and diluted, of $.08 per share, calculated using weighted-average
shares for the nine months ended September 30, 2002. In the annual disclosure
for 2001, the pro forma decrease in net income of applying this same method was
estimated to be $2.1 million, or $.05 per split-adjusted share, both basic and
diluted. A weighted-average fair value of $7.91 per optioned share was
calculated for the 2002 awards, compared to $6.40 per share on a split-adjusted
basis for the awards in 2001.
The Company made the following significant assumptions in applying the
option-pricing model: (a) an expected annualized volatility for Whitney's common
stock of 25.25% in 2002 and 24.17% in 2001; (b) an average option life of seven
years; (c) an expected annual dividend yield of 3.44% in 2002 and 3.64% in 2001;
and (d) a weighted-average risk-free interest rate of 4.94% in 2002 and 5.28% in
2001.
NOTE 5 - CONTINGENCIES
The Company and its subsidiaries are parties to various legal
proceedings arising in the ordinary course of business. After reviewing pending
and threatened actions with legal counsel,
7
management believes that the ultimate resolution of these actions will not have
a material effect on the Company's financial condition or results of operations.
NOTE 6 - INCOME TAXES
In January 2001, Whitney acquired a bank that had elected to be taxed
under Subchapter S of the Internal Revenue Code. Under this election, the bank
was not subject to income tax at the corporate level and reported no income tax
expense; rather, its shareholders were taxed on their proportionate shares of
corporate taxable income.
The acquisition by the Company, which was accounted for as a pooling of
interests, terminated the Subchapter S election, and income tax expense has been
provided for earnings derived from the acquired banking operations subsequent to
that date. In addition, the Company recorded a net deferred tax asset, and a
corresponding deferred tax benefit, of approximately $1 million in the first
quarter of 2001 to reflect the expected tax effects of the resolution of
temporary differences between the tax bases of the acquired bank's assets and
liabilities and their reported amounts that had accumulated through the
termination date.
NOTE 7 - COMPREHENSIVE INCOME
Comprehensive income for a period encompasses net income and all other
changes in a company's equity other than from transactions with its owners.
Whitney's comprehensive income was as follows:
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Three Months Ended Nine Months Ended
September 30 September 30
- -------------------------------------------------------------------------------------------------------------
(dollars in thousands) 2002 2001 2002 2001
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Net income $24,316 $19,356 $70,193 $56,024
Other comprehensive income:
Cumulative effect of accounting change - - - (4,175)
Unrealized holding gain on securities,
net of reclassification adjustments and taxes 8,564 15,133 18,081 24,038
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Comprehensive income $32,880 $34,489 $88,274 $75,887
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NOTE 8 - ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill
and Other Intangible Assets," was issued in June 2001. Under this accounting
standard, goodwill is no longer amortized, although amortization continued for
existing goodwill through the end of 2001. Beginning in 2002, goodwill is
subject to at least an annual assessment for impairment. In transitioning to
this new guidance, the Company was required to assess whether there was an
indication that goodwill in its reporting unit was impaired at the date of
adoption. See Note 3 for the results of this transitional assessment. Impairment
losses identified after this transition period are charged to operating expense.
Under SFAS No. 142, identifiable intangible assets other than goodwill
continue to be amortized over their estimated useful lives to their estimated
residual values, if any. They are reviewed for impairment in accordance with
SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets."
8
When SFAS No. 142 and SFAS No. 141, "Business Combinations," were
issued, questions arose concerning the continued appropriateness of the
accounting for unidentifiable intangible assets that had been recognized in
certain banking-industry acquisitions under existing accounting principles. SFAS
No. 147, "Acquisitions of Certain Financial Institutions," which was issued in
October 2002, brings all acquisitions completed after October 1, 2002, except
for transactions between mutual enterprises, under the guidance of SFAS Nos. 141
and 142. It also requires reclassification to goodwill of any unidentifiable
intangible asset that was acquired in a business combination. If an
unidentifiable intangible asset was recognized in the purchase of net assets and
activities not constituting a business, it is not reclassified to goodwill and
continues to be amortized in accordance with the previous guidance. Implementing
SFAS No. 147 will not impact Whitney's current accounting for unidentifiable
intangibles.
9
WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(Unaudited)
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Third Second Third Nine Months Ended
Quarter Quarter Quarter September 30
(dollars in thousands, except per share data) 2002 2002 2001 2002 2001
- -------------------------------------------------------------------------------------------- ------------------------------
QUARTER-END BALANCE SHEET DATA
Total assets $6,965,871 $6,909,293 $6,878,148 $6,965,871 $6,878,148
Earning assets 6,424,172 6,397,054 6,361,118 6,424,172 6,361,118
Loans 4,400,312 4,300,658 4,509,222 4,400,312 4,509,222
Investment in securities 1,853,219 1,875,855 1,644,378 1,853,219 1,644,378
Deposits 5,689,872 5,633,757 5,566,192 5,689,872 5,566,192
Shareholders' equity 782,590 758,533 717,568 782,590 717,568
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AVERAGE BALANCE SHEET DATA
Total assets $6,883,963 $6,986,870 $6,825,004 $7,036,546 $6,763,101
Earning assets 6,373,798 6,460,942 6,306,997 6,507,286 6,235,876
Loans 4,341,830 4,357,118 4,488,933 4,374,482 4,507,767
Investment in securities 1,849,743 1,863,359 1,548,679 1,803,432 1,482,414
Deposits 5,634,831 5,757,493 5,548,850 5,780,268 5,488,533
Shareholders' equity 773,326 745,352 702,134 750,087 688,755
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INCOME STATEMENT DATA
Interest income $91,828 $94,674 $109,792 $282,185 $339,241
Interest expense 17,864 19,500 38,853 60,440 132,097
Net interest income 73,964 75,174 70,939 221,745 207,144
Net interest income (TE) 75,162 76,381 72,258 225,376 211,217
Provision for loan losses 1,500 2,500 8,000 7,000 13,000
Noninterest income, excluding securities
transactions 22,295 20,220 25,002 62,884 70,762
Securities transactions (15) 426 - 411 69
Noninterest expense 58,230 57,773 58,866 172,980 182,460
Net income 24,316 23,785 19,356 70,193 56,024
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KEY RATIOS
Return on average assets 1.40% 1.37% 1.13% 1.33% 1.11%
Return on average shareholders' equity 12.47 12.80 10.94 12.51 10.88
Net interest margin 4.69 4.74 4.56 4.63 4.52
Average loans to average deposits 77.05 75.68 80.90 75.68 82.13
Efficiency ratio 59.75 59.81 60.52 60.01 62.99
Allowance for loan losses to loans 1.55 1.67 1.45 1.55 1.45
Nonperforming assets to loans plus foreclosed assets
and surplus property .94 .93 .70 .94 .70
Average shareholders' equity to average assets 11.23 10.67 10.29 10.66 10.18
Shareholders' equity to total assets 11.23 10.98 10.43 11.23 10.43
Leverage ratio 9.65 9.27 9.11 9.65 9.11
- ----------------------------------------------------------------------------------------------------------------------------
COMMON SHARE DATA
Earnings Per Share
Basic $.61 $.60 $.49 $1.76 $1.42
Diluted .60 .59 .48 1.75 1.41
Dividends
Cash dividends per share $.27 $.27 $.25 $.81 $.76
Dividend payout ratio 44.43% 45.37% 51.83% 46.05% 53.95%
Book Value Per Share $19.56 $18.97 $18.12 $19.56 $18.12
Trading Data
High closing price $34.00 $38.52 $32.56 $38.52 $32.56
Low closing price 28.09 30.51 26.84 28.09 24.00
End-of-period closing price 32.08 30.74 28.67 32.08 28.67
Trading volume 5,078,531 8,115,882 3,230,252 16,152,515 10,777,484
Average Shares Outstanding
Basic 40,050,014 39,888,693 39,626,288 39,894,294 39,508,473
Diluted 40,244,282 40,176,705 40,071,824 40,129,111 39,742,281
- ----------------------------------------------------------------------------------------------------------------------------
Share and per share data give effect to the 3-for-2 stock split effective April 9, 2002.
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 merger-related items.
10
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The purpose of this discussion and analysis is to focus on significant
changes in the financial condition of Whitney Holding Corporation and its
subsidiaries ( the "Company" or "Whitney") and on their results of operations
during the third quarters of 2002 and 2001 and during the nine-month periods
through September 30 in each year. Virtually all of the Company's operations are
contained in its banking subsidiary, Whitney National Bank (the "Bank.") This
discussion and analysis highlights and supplements information contained
elsewhere in this quarterly report on Form 10-Q, particularly the preceding
consolidated financial statements, notes and selected financial data. This
discussion and analysis should be read in conjunction with the Company's 2001
annual report on Form 10-K.
The Company reports the balances and results of operations from
businesses acquired in purchase transactions from the respective acquisition
dates. Certain financial information for prior periods has been reclassified to
conform to the current presentation.
OVERVIEW
Whitney earned $.61 per share for the third quarter of 2002 and $1.76
per share for the nine months ended September 30, 2002, each a 24% increase over
per share earnings for the comparable periods of 2001. Net income of $24.3
million in the most recent quarter was 26%, or $5.0 million, higher than the
year-earlier period. Year-to-date net income of $70.2 million in 2002 was up
25%, or $14.2 million, from the prior year.
New accounting standards issued in 2001 eliminated goodwill
amortization starting in 2002. The amortization of other purchased intangible
assets continues. Comparative earnings information excluding the after-tax
effect of the amortization of goodwill is presented in Note 3 to the
consolidated financial statements.
Selected highlights from the third quarter's results follow:
o Net interest income (TE) increased 4%, or $2.9 million, from the
third quarter of 2001, on the strength of an improved net interest
margin, but only limited growth in average earning assets.
Whitney's net interest margin increased to 4.69%, or 13 basis
points above the year-earlier quarter. Although sharply lower
market rates reduced both asset yields and funding costs, there
was a deeper reduction in the cost of funds. Funding costs, which
decreased 133 basis points, benefited from an increase in the
percentage of earning assets funded by noninterest-bearing
sources. At the same time, the generally fixed-rate investment
portfolio helped moderate the decline in overall asset yields,
which totaled 120 basis points.
o Noninterest income, excluding securities transactions, decreased
11% in the third quarter of 2002, reflecting the impact of
Whitney's sale of its agreements to process merchants' credit card
transactions in 2001's third quarter. Adjusting for this impact,
noninterest income was 16%, or $3.0 million, higher than in the
year-earlier quarter. Service charges from deposit accounts
increased 9%, or $.8 million, during the third quarter of 2002.
Other contributors to income growth from recurring sources
included fees on letters of credit and unused loan commitments and
student loan sale incentive fees, while trust service fees were
lower on renewed weakness in the capital markets. Whitney also
recognized an additional $1.0 million in net gains on
11
dispositions of surplus banking property and foreclosed assets
in the most recent quarter.
o Noninterest expense was down 1% from 2001's third quarter, but
would have increased 2%, or $1.2 million, after adjusting for the
impact from the merchant business sale. Total personnel expense
increased 8%, or $2.3 million, including approximately $.6 million
of recurring and nonrecurring costs associated with acquired bank
personnel. Close control over capital expenditures helped reduce
equipment and data processing expense by 15%, or $.8 million, in
2002's third quarter. The change in accounting for goodwill
contributed to a $.4 million net decrease in amortization of
purchased intangibles compared to the year-earlier quarter.
o Whitney provided $1.5 million for loan losses in the third quarter
of 2002, compared to $2.5 million in 2002's second quarter, and
$8.0 million in 2001's third quarter. The provision in last year's
third quarter reflected, among other factors, economic uncertainty
in the aftermath of the September 11 terrorist attacks.
Nonperforming assets totaled $42 million at September 30, 2002, or
.94% of loans plus foreclosed assets and surplus bank property,
little changed from the end of 2002's second quarter, but up from
$32 million, or .70%, a year earlier. Net charge-offs and an
improvement in the total of loans identified internally as having
above-normal credit risk led to a reduction in the allowance for
loan losses by $3.4 million from the end of 2002's second quarter.
The allowance for loan losses was 1.55% of total loans at
September 30, 2002, compared to 1.67% at June 30, 2002, and 1.45%
a year earlier.
12
FORWARD-LOOKING STATEMENTS
This discussion contains forward-looking statements as that term is
defined by the Private Securities Litigation Reform Act of 1995. Such statements
include, but may not be limited to, (a) comments regarding the expected growth
rate of the loan portfolio, (b) comments about future changes in the mix of
deposits, (c) statements of the results of net interest income simulations run
by the Company to measure interest rate sensitivity, (d) comments about the
performance of Whitney's net interest income and net interest margin assuming
certain future conditions, (e) remarks about possible future benefits to be
derived from the alliance Whitney formed to provide credit card sale processing
services to its merchant customers, and (f) comments about anticipated
production levels for secondary mortgage market operations.
Forward-looking statements, which Whitney makes in good faith, are
based on numerous assumptions, certain of which may be referred to specifically
in connection with a particular statement. Some of the more important
assumptions include:
o expectations about overall economic strength and the performance
of the economies in Whitney's market area,
o expectations about the movement of interest rates, including
actions that may be taken by the Federal Reserve Board in response
to changing economic conditions,
o reliance on existing or anticipated changes in laws or regulations
affecting the activities of the banking industry and other
financial service providers, and
o expectations regarding the nature and level of competition,
changes in customer behavior and preferences, and Whitney's
ability to execute its plans to respond effectively.
Because it is uncertain whether future conditions and events will
confirm these assumptions, there is a risk that Whitney's future results will
differ materially from what is stated in or implied by such forward-looking
statements. Whitney cautions the reader to consider this risk.
Whitney undertakes no obligation to update any forward-looking
statement included in this discussion, whether as a result of new information,
future events or developments, or for any other reason.
13
FINANCIAL CONDITION
LOANS AND ALLOWANCE FOR LOAN LOSSES
Total loans decreased 3%, or $154 million, from year-end 2001 to the
end of 2002's third quarter. Average loans in the third quarter of 2002 were
also 3%, or $147 million, lower than the third quarter of 2001. The major
portion of these reductions came from the residential mortgage loan portfolio,
prompted by increased refinancing activity and management's continuing decision
to sell most current production in the secondary market. Although there was some
recent growth in the commercial loan portfolio, demand for business credit in
general has been restrained for over a year during a period of reduced economic
activity and uncertainty regarding future economic conditions. Over this same
period, the rate environment has continued to present real estate developers
with favorable permanent financing opportunities. Recent growth reflected some
increased economic activity for certain industry sectors as well as new customer
development. Conditions that would support accelerated loan growth, however, are
not yet evident.
The portfolio of commercial loans, other than those secured by real
property, was down $39 million at September 30, 2002, compared to year-end 2001,
and the average portfolio balance for the third quarter of 2002 was below the
level in the year-earlier quarter by less than 1%. Since June 30, 2002, however,
this portfolio grew $94 million. Approximately half of this increase came from
loans to customers related to the oil and gas industry. Whitney's customer base
in this industry mainly provides services and products to support exploration
and production activities. Overall, there have been no major trends or changes
in the concentration mix of this portfolio category from year-end 2001.
Outstanding balances under participations in syndicated loan commitments totaled
$266 million at the end of 2002's third quarter compared to $200 million at the
end of 2001, including approximately $100 million and $80 million, respectively,
related to the oil and gas industry. Substantially all syndicated loans are with
customers operating in Whitney's market area.
The commercial real estate portfolio, which includes loans secured by
properties used in commercial or industrial operations, has been relatively
stable. Whitney has been able to develop new business in this highly competitive
market, including a recent increase in activity at its Houston operations. The
overall pace of new real estate project development, however, has slowed with
the general economy and heightened economic uncertainty, and growth from new
business has for the most part been offset by expected paydowns on and permanent
financing of seasoned projects. In recent years, activity in this portfolio
segment has been mainly driven by apartment and condominium projects,
particularly in the eastern Gulf Coast region, development of retail, small
office and commercial facilities throughout Whitney's market area, and hotel and
other hospitality industry projects, largely in the New Orleans metropolitan
area.
The impact of refinancings and the continuing policy of selling most
retail mortgage production was evident in the 13%, or $110 million, decrease in
the retail mortgage loan portfolio from December 31, 2001, as well as the 18%,
or $160 million, decrease in average retail mortgage loans from 2001's third
quarter. The moderate 3% growth in loans to individuals between the third
quarters of 2002 and 2001 and since year-end 2001 came mainly from the promotion
of secured personal credit lines.
14
Table 2, which is based on regulatory reporting codes, shows loan
balances at September 30, 2002 and at the end of the four prior quarters.
TABLE 2. LOANS
- ------------------------------------------------------------------------------------------------------------------
2002 2001
- ----------------------------------------------------------------------------------- ------------------------------
(dollars in thousands) September 30 June 30 March 31 December 31 September 30
- ------------------------------------------------------------------------------------------------------------------
Commercial, financial and
agricultural loans $1,813,474 $1,719,674 $1,753,979 $1,852,497 $1,806,218
Real estate loans - commercial
and other 1,562,303 1,535,446 1,568,782 1,576,817 1,543,307
Real estate loans - retail mortgage 710,655 724,429 740,448 820,808 857,701
Loans to individuals 313,880 321,109 315,821 304,416 301,996
- ------------------------------------------------------------------------------------------------------------------
Total loans $4,400,312 $4,300,658 $4,379,030 $4,554,538 $4,509,222
- ------------------------------------------------------------------------------------------------------------------
TABLE 3. SUMMARY OF ACTIVITY IN THE ALLOWANCE FOR LOAN LOSSES
- ---------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30 September 30
- ------------------------------------------------------------------------------ --------------------------
(dollars in thousands) 2002 2001 2002 2001
- ---------------------------------------------------------------------------------------------------------
Balance at the beginning of period $71,667 $62,265 $71,633 $61,017
Allowance on loans transferred to held for sale - - - (651)
Provision for loan losses 1,500 8,000 7,000 13,000
Loans charged to the allowance:
Commercial, financial and agricultural (644) (5,578) (5,267) (10,343)
Real estate (4,965) (313) (6,595) (449)
Loans to individuals (682) (680) (2,464) (2,064)
- ---------------------------------------------------------------------------------------------------------
Total charge-offs (6,291) (6,571) (14,326) (12,856)
- ---------------------------------------------------------------------------------------------------------
Recoveries of loans previously charged off:
Commercial, financial and agricultural 737 903 1,930 2,323
Real estate 186 243 655 1,156
Loans to individuals 441 511 1,348 1,362
- ---------------------------------------------------------------------------------------------------------
Total recoveries 1,364 1,657 3,933 4,841
- ---------------------------------------------------------------------------------------------------------
Net charge-offs (4,927) (4,914) (10,393) (8,015)
- ---------------------------------------------------------------------------------------------------------
Balance at the end of period $68,240 $65,351 $68,240 $65,351
- ---------------------------------------------------------------------------------------------------------
Ratios:
Net annualized charge-offs
to average loans .45% .44% .32% .24%
Gross annualized charge-offs to average loans .58 .59 .44 .38
Recoveries to gross charge-offs 21.68 25.22 27.45 37.66
Allowance for loan losses to loans
at end of period 1.55 1.45 1.55 1.45
- ---------------------------------------------------------------------------------------------------------
Each loan carries a degree of credit risk. Management's evaluation of
this risk is ultimately reflected in their estimate of probable loan losses
which is reported in the Company's financial statements as the allowance for
loan losses. Changes in this ongoing evaluation over time are reflected in the
provision for loan losses charged to operating expense. Table 3 above compares
third quarter 2002 activity in the allowance for loan losses with the third
quarter of 2001 and also compares nine-month activity for each year.
15
Net charge-offs totaled $4.9 million in the third quarters of both 2002
and 2001. The most recent total included a $4.6 million full charge-off of a
related group of loans that had been identified as impaired in this year's first
quarter. The impact of net charge-offs and improvements in overall credit risk
measurements as discussed below led to a $3.4 million reduction in the level of
the allowance for loans losses compared to June 30, 2002 and year-end 2001 and
helped lower the provision recorded for the most recent quarter. The allowance
for loan losses was 1.55% of total loans at September 30, 2002, compared to
1.67% at June 30, 2002 and 1.45% a year-earlier.
As indicated in the following credit quality statistics, the overall
credit risk profile of the Company's customers improved during the third quarter
of 2002, after holding relatively stable through the first half of the year.
Credit risk had increased moderately during 2001, and, during that period,
Whitney's allowance for loan losses grew steadily as a percent of loans as
economic conditions softened and uncertainty increased.
TABLE 4. NONPERFORMING ASSETS
- -----------------------------------------------------------------------------------------------------------------
2002 2001
- --------------------------------------------------------------------------------------- ------------------------
September June March December September
(dollars in thousands) 30 30 31 31 30
- -----------------------------------------------------------------------------------------------------------------
Loans accounted for on a nonaccrual basis $38,663 $37,442 $42,279 $33,412 $30,032
Restructured loans 347 358 371 383 396
- -----------------------------------------------------------------------------------------------------------------
Total nonperforming loans 39,010 37,800 42,650 33,795 30,428
Foreclosed assets and surplus property 2,543 2,340 3,281 991 1,287
- -----------------------------------------------------------------------------------------------------------------
Total nonperforming assets $41,553 $40,140 $45,931 $34,786 $31,715
- -----------------------------------------------------------------------------------------------------------------
Loans 90 days past due still accruing $9,532 $9,390 $6,812 $6,916 $8,512
- -----------------------------------------------------------------------------------------------------------------
Ratios:
Nonperforming assets to loans
plus foreclosed assets and surplus property .94% .93% 1.05% .76% .70%
Allowance for loan losses to
nonperforming loans 174.93 189.60 168.04 211.96 214.77
Loans 90 days past due still accruing to
loans .22 .22 .16 .15 .19
- -----------------------------------------------------------------------------------------------------------------
Table 4 above shows total nonperforming assets at September 30, 2002
and at the end of the preceding four quarters. Nonperforming assets increased to
..94% of loans plus foreclosed assets and surplus bank property at the end of
2002's third quarter, up from .76% at year-end 2001, and .70% at September 30,
2001. The total of nonperforming assets was, however, little changed from the
end of 2002's second quarter, and the increases over the prior year levels are
not indicative of any significant underlying trends relating to industries or
markets.
The total of loans internally classified as having above-normal credit
risk, however, decreased approximately $34 million from the end of 2002's second
quarter, and was down $98 million compared to December 31, 2001, and $111
million from the end of 2001's third quarter. The decrease from the end of
2002's second quarter came largely from a credit with a customer in the health
care industry that has demonstrated sustained improved performance. The decrease
from the levels in 2001 also reflected in part improved outlooks for two larger
credits that had been downgraded during the third quarter of that year and
included in the shared national credit review process by Federal banking
regulators. Loans warranting special attention because of risk
16
characteristics that indicate potential weaknesses have been reduced by $104
million during the first nine months of 2002 to a total of $50 million at
September 30, 2002. The total of loans classified as having well-defined
weaknesses that, if not corrected, would likely result in some loss remained at
$134 million. Loans for which full repayment is doubtful increased $5 million to
a total of $16 million.
INVESTMENT IN SECURITIES
Strong demand for deposit products during a period of restrained loan
demand led to a significant increase in liquidity in 2001. Information on
changes in deposits and other funding sources is presented in the following
section. Over time, management directed more of this liquidity to the investment
portfolio, particularly to mortgage-backed securities with relatively short
duration, based on its expectations regarding the stability of the funding
sources and the near-term prospects for loan demand.
At September 30, 2002, total securities were $1.85 billion, compared to
$1.63 billion at December 31, 2001 and $1.64 billion at September 30, 2001. The
average investment in securities in 2002's third quarter was up 19%, or $301
million, from the third quarter of 2001, and mortgage-backed securities grew to
58% of the total portfolio from 50% in the year-earlier period. Short-term
liquidity investments, including federal funds sold, totaled $171 million at the
end of 2002's third quarter, compared to $495 million at year-end 2001 and $208
million at September 30, 2001. On average, liquidity investments in the third
quarter of 2002 were $87 million, or 32%, below the level in the year-earlier
quarter.
In recent years, Whitney steadily built its investment in securities
classified as available for sale, primarily as a means to increase liquidity
management flexibility. Effective January 1, 2001, the Company reclassified
securities with a carrying value of $528 million, and an unrealized net loss of
$6.4 million, as available for sale in connection with the adoption of SFAS No.
133. The unrealized loss at the effective date of the reclassification was
reported net of tax in other comprehensive income in the first quarter of 2001.
Securities available for sale constituted 91% of the total investment portfolio
at September 30, 2002. The quarter-end net unrealized gain on this portfolio
segment totaled $43.2 million, or 2.4% of amortized cost, compared to $15.8
million, or 1.0% of amortized cost, at year-end 2001. The increase in the net
unrealized gain mainly reflected the impact on fixed income security prices of
shifts in the slope of the yield curve.
DEPOSITS AND SHORT-TERM BORROWINGS
At September 30, 2002, deposits were 4%, or $260 million, below the
level at December 31, 2001, mainly because of seasonality in the Company's
deposit flows and an influx of temporary funds from local governmental entities
at the end of 2001 and during the first quarter of 2002. Average deposits were
up 2%, or $86 million, in the third quarter of 2002 compared to the year-earlier
quarter, but would have been slightly lower if the impact of deposits associated
with bank operations purchased late in 2001 is factored out. Short-term
borrowings, the major part of which represent liabilities under repurchase
agreements with customers, decreased 17%, or $88 million, from year-end 2001,
and were down a comparable amount and percent on average for the third quarter
of 2002 compared to the year-earlier quarter.
Increased demand for the safety and liquidity of deposit products
helped fuel accelerated growth throughout 2001. Many of the factors that
prompted the increased availability of deposit
17
funds continued to influence customer behavior in the third quarter of 2002.
Noninterest-bearing demand deposits in 2002's third quarter were up 9%, or $126
million, including approximately $40 million from acquired operations. Average
interest-bearing deposits, however, declined 1%, or $40 million, compared to the
year-earlier period, despite the addition of approximately $90 million of
deposits associated with acquired operations. The lack of further growth in
interest-bearing deposits during 2002 was largely a reaction to steadily
declining renewal rates for time deposits and, to a lesser degree, reduced
yields on other deposit products.
The shift in the mix of interest-bearing deposits between the third
quarters of 2001 and 2002 was partly a function of funds flows between deposit
products, and to deposits from short-term borrowings, in response to the reduced
yields. Average money market deposits grew 18%, or $205 million, compared to
2001's third quarter; and regular savings deposits were up 11%, or $52 million,
at least temporarily reversing a trend away from this more traditional deposit
product. NOW account deposits were also up over the third quarter of 2001, by
13%, or $72 million on average. Total time deposits, however, decreased 19%, or
$369 million on average, compared to the third quarter of 2001. The maturity of
approximately $490 million of time deposits in the fourth quarter of 2002 will
likely contribute to further shifts in the mix of deposits.
LIQUIDITY
The object 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. The Company develops its liquidity management
strategies and measures and monitors liquidity risk as part of its overall
asset/liability management process.
On the liability side, liquidity management focuses on growing the base
of stable 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 Short-term Borrowings discusses changes in these liability funding
sources in the third quarter of 2002. Liquidity management on the asset side
primarily addresses the composition and maturity structure of the loan and
investment securities portfolios and their impact on the Company's ability to
generate cash flows.
Cash generated from operations is another important source of funds to
meet liquidity needs. The consolidated statements of cash flows present
operating cash flows and summarize all significant sources and uses of funds for
the first nine months of 2002 and 2001.
The Bank had over $1.5 billion in unfunded loan commitments outstanding
at September 30, 2002, up 18% from 2001's year-end. Because loan commitments
may, and many times do, expire without being drawn upon, unfunded balances
should not be used as a projection of actual future liquidity requirements.
ASSET/LIABILITY MANAGEMENT
The objective of the Company's asset/liability management is to
implement strategies for the funding and deployment of its financial resources
that are expected to maximize soundness and profitability over time at
acceptable levels of risk.
Interest rate sensitivity is the potential impact of changing rate
environments on both net interest income and cash flows. The Company measures
interest rate sensitivity primarily by
18
running net interest income simulations and monitoring the economic value of
equity. The net interest income simulations run at the end of 2002's third
quarter indicated that Whitney continued to be moderately asset sensitive over
the near term, similar to its position at year-end 2001. Based on these
simulations, annual net interest income would be expected to increase $13
million, or 4.6%, and decrease $15 million, or 5.1%, if interest rates
instantaneously increased or decreased, respectively, from current rates by 100
basis points. These changes are measured against the results of a base
simulation run that uses current growth forecasts and assumes a stable rate
environment and structure. The actual impact of changing interest rates on net
interest income is dependent on many factors including the growth in earning
assets and the demand for deposit products, the mix of earning assets and
interest-bearing liabilities, the timing of repricing of assets and liabilities,
the magnitude of interest rate changes, interest rate spreads and the level of
success of asset/liability management strategies implemented.
SHAREHOLDERS' EQUITY AND CAPITAL ADEQUACY
At September 30, 2002, shareholders' equity totaled $783 million
compared to $718 million at year-end 2001. The major factors in this $65 million
increase were earnings, net of dividends declared, of approximately $38 million,
and an $18 million increase in the tax-effected net unrealized holding gain on
securities available for sale.
The ratios in Table 5 indicate that the Company remained strongly
capitalized at September 30, 2002.
TABLE 5. RISK-BASED CAPITAL AND CAPITAL RATIOS
- --------------------------------------------------------------------------------------------
September 30 December 31
(dollars in thousands) 2002 2001
- --------------------------------------------------------------------------------------------
Tier 1 regulatory capital $654,973 $604,179
Tier 2 regulatory capital 64,803 63,878
- --------------------------------------------------------------------------------------------
Total regulatory capital $719,776 $668,057
- --------------------------------------------------------------------------------------------
Risk-weighted assets $5,180,836 $5,102,470
- --------------------------------------------------------------------------------------------
Ratios
Leverage (Tier 1 capital to average assets) 9.65% 8.72%
Tier 1 capital to risk-weighted assets 12.64 11.84
Total capital to risk-weighted assets 13.89 13.09
Shareholders' equity to total assets 11.23 9.91
- --------------------------------------------------------------------------------------------
The regulatory capital ratios for Whitney National Bank exceed the
minimum required ratios, and the Bank has been categorized as "well-capitalized"
in the most recent notice received from its regulatory agency.
During the first quarter, Whitney announced a three-for-two split of
its common stock that was effective April 9, 2002. The Company declared a
dividend of $.27 per post-split share in each of the first three quarters of
2002. These dividends are comparable to the split-adjusted rate in the fourth
quarter of 2001 and represent more than a 6% increase over the $.25 per share
split-adjusted dividend declared for the first three quarters of 2001.
19
RESULTS OF OPERATIONS
NET INTEREST INCOME
Net interest income (TE) for the third quarter of 2002 increased 4%, or
$2.9 million, from the third quarter of 2001, on average earning asset growth of
1%. Compared to 2002's second quarter, net interest income (TE) was down 2%, or
$1.2 million, as average earning assets declined 1%. Whitney's net interest
margin of 4.69% in the third quarter of 2002 was 13 basis points above the
year-earlier quarter and 5 basis points below the second quarter of 2002. Tables
6 and 7 show the components of changes in the Company's net interest income and
net interest margin. Maintaining the net interest margin at current levels and
generating growth in net interest income during a period of continued low
interest rates, economic uncertainty and limited asset growth cannot be assured.
There was a 3% decrease in average loans in the third quarter of 2002
compared to the year-earlier quarter, and average loans declined to 68% of
earning assets from 71% in the third quarter of 2001. Liquidity generated by
loan reductions and a sustained demand for deposit products was gradually
deployed in the investment portfolio, which increased to 29% of earning assets
in 2002's third quarter from 25% a year earlier.
Market rates have been relatively stable during 2002, after having
declined steadily throughout 2001. The average prime rate in the most recent
quarter was more than 182 basis points lower than in the third quarter of 2001.
Fixed-rate components of the loan portfolio and discipline in loan pricing in
the face of restrained demand and heightened competition helped limit the
decrease in the loan portfolio yield (TE) between these periods to 131 basis
points. The average rate earned on the predominantly fixed-rate investment
portfolio decreased 86 basis points. Low market rates have stimulated home
mortgage refinancing activity and accelerated prepayments on mortgage-backed
securities. This has offset some of the benefit to the portfolio return from the
fixed-rate structure of the investment portfolio. The overall yield on earning
assets in 2002's third quarter was 120 basis points lower than the year-earlier
quarter.
The total interest cost of funding earning assets in 2002's third
quarter decreased 133 basis points from the third quarter of 2001. Increased
demand for the safety and liquidity of deposit products has had a favorable
impact on the mix of funding sources. The percent of earning assets funded by
noninterest-bearing sources rose to almost 30% in the third quarter of 2002,
from 27% in 2001's third quarter. Higher-cost sources of funds, which include
time deposits and short-term borrowings, fell to 31% of average earning assets
over this same period, from 39% in the third quarter of 2001. Total time
deposits decreased 19% in response to steadily declining renewal rates, shifting
in part to lower-cost products. Short-term borrowings were also 19% lower than
2001's third quarter.
Although money market rates became relatively stable in 2002, the
maturity structure of time deposits was such that their cost has continued to
decline. The average rate on time deposits in the third quarter of 2002 was 152
basis points lower than 2001's fourth quarter, including a 34 basis point
decrease from the second quarter of 2002. At current market conditions, time
deposit maturities should lead to further rate reductions in the fourth quarter
of 2002. Consistent with the relatively stable rate environment, however, the
rate on other non-term interest-bearing funds
20
TABLE 6. SUMMARY OF AVERAGE BALANCE SHEETS, NET INTEREST INCOME(TE)(a) AND INTEREST RATES
- -----------------------------------------------------------------------------------------------------------------------------------
Third Quarter 2002 Second Quarter 2002 Third Quarter 2001
- -----------------------------------------------------------------------------------------------------------------------------------
Average Average Average
(dollars in thousands) Balance Interest Rate Balance Interest Rate Balance Interest Rate
- -----------------------------------------------------------------------------------------------------------------------------------
ASSETS
EARNING ASSETS
Loans (TE)(a),(b) $4,341,830 $68,066 6.22% $4,357,118 $69,394 6.39% $4,488,933 $ 85,159 7.53%
- -----------------------------------------------------------------------------------------------------------------------------------
Mortgage-backed securities 1,063,983 14,258 5.36 1,066,158 15,023 5.64 772,763 11,591 6.00
U.S. agency securities 428,373 5,209 4.86 435,538 5,643 5.18 474,683 7,105 5.99
Obligations of states and political
subdivisions (TE) (a) 144,542 2,496 6.91 145,999 2,532 6.94 160,192 2,844 7.10
U.S. Treasury securities 156,779 1,588 4.02 159,763 1,637 4.11 97,406 1,485 6.05
Other securities 56,066 620 4.42 55,901 621 4.44 43,635 521 4.78
- -----------------------------------------------------------------------------------------------------------------------------------
Total investment in securities 1,849,743 24,171 5.22 1,863,359 25,456 5.47 1,548,679 23,546 6.08
- -----------------------------------------------------------------------------------------------------------------------------------
Federal funds sold and short-term
investments 182,225 789 1.72 240,465 1,031 1.72 269,385 2,406 3.54
- -----------------------------------------------------------------------------------------------------------------------------------
Total earning assets 6,373,798 $93,026 5.80% 6,460,942 $95,881 5.95% 6,306,997 $111,111 7.00%
- -----------------------------------------------------------------------------------------------------------------------------------
NONEARNING ASSETS
Other assets 582,789 598,456 582,242
Allowance for loan losses (72,624) (72,528) (64,235)
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets $6,883,963 $6,986,870 $6,825,004
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES
NOW account deposits $ 635,576 $ 1,179 .74% $ 653,014 $ 1,183 .73% $ 563,182 $ 1,851 1.30%
Money market deposits 1,316,705 4,854 1.46 1,332,376 4,920 1.48 1,111,291 7,586 2.71
Savings deposits 518,199 1,074 .82 516,484 1,038 .81 466,298 1,703 1.45
Other time deposits 890,595 5,865 2.61 933,329 6,986 3.00 1,108,811 14,480 5.18
Time deposits $100,000 and over 699,707 3,960 2.24 707,128 4,407 2.50 850,833 9,946 4.64
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 4,060,782 16,932 1.65 4,142,331 18,534 1.79 4,100,415 35,566 3.44
- -----------------------------------------------------------------------------------------------------------------------------------
Short-term borrowings 410,108 932 .90 422,461 966 .92 503,607 3,287 2.59
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing
liabilities 4,470,890 $17,864 1.59% 4,564,792 $19,500 1.71% 4,604,022 $ 38,853 3.35%
- -----------------------------------------------------------------------------------------------------------------------------------
NONINTEREST-BEARING LIABILITIES
AND SHAREHOLDERS' EQUITY
Demand deposits 1,574,049 1,615,162 1,448,435
Other liabilities 65,698 61,564 70,413
Shareholders' equity 773,326 745,352 702,134
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities and
shareholders' equity $6,883,963 $6,986,870 $6,825,004
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest income and
margin (TE) (a) $75,162 4.69% $76,381 4.74% $ 72,258 4.56%
Net earning assets and spread $1,902,908 4.21% $1,896,150 4.24% $1,702,975 3.65%
Interest cost of funding earning
assets 1.11% 1.21% 2.44%
- -----------------------------------------------------------------------------------------------------------------------------------
(a) Tax-equivalent (TE) amounts are calculated using a marginal federal income tax rate of 35%.
(b) Average balance includes nonaccruing loans of $36,984, $38,902 and $29,619, respectively, in the third and second quarters of
2002 and the third quarter of 2001.
21
TABLE 6. SUMMARY OF AVERAGE BALANCE SHEETS, NET INTEREST INCOME(TE)(a) AND INTEREST RATES (continued)
- ----------------------------------------------------------------------------------------------------------------------------------
Nine Months Ended Nine Months Ended
September 30, 2002 September 30, 2001
- ----------------------------------------------------------------------------------------------------------------------------------
Average Average
(dollars in thousands) Balance Interest Rate Balance Interest Rate
- ----------------------------------------------------------------------------------------------------------------------------------
ASSETS
EARNING ASSETS
Loans (TE)(a),(b) $4,374,482 $208,113 6.36% $4,507,767 $266,923 7.92%
- ----------------------------------------------------------------------------------------------------------------------------------
Mortgage-backed securities 1,006,021 42,114 5.58 621,531 28,373 6.09
U.S. agency securities 448,853 17,211 5.11 551,315 24,880 6.02
Obligations of states and political
subdivisions (TE) (a) 148,838 7,770 6.96 167,076 9,067 7.24
U.S. Treasury securities 145,010 4,545 4.19 107,050 4,862 6.07
Other securities 54,710 1,824 4.45 35,442 1,440 5.42
- ----------------------------------------------------------------------------------------------------------------------------------
Total investment in securities 1,803,432 73,464 5.43 1,482,414 68,622 6.17
- ----------------------------------------------------------------------------------------------------------------------------------
Federal funds sold and short-term investments 329,372 4,239 1.72 245,695 7,769 4.23
- ----------------------------------------------------------------------------------------------------------------------------------
Total earning assets 6,507,286 $285,816 5.87% 6,235,876 $343,314 7.36%
- ----------------------------------------------------------------------------------------------------------------------------------
NONEARNING ASSETS
Other assets 601,930 590,058
Allowance for loan losses (72,670) (62,833)
- ----------------------------------------------------------------------------------------------------------------------------------
Total assets $7,036,546 $6,763,101
- ----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES
NOW account deposits $ 701,560 $ 4,487 .85% $ 580,769 $ 6,041 1.39%
Money market deposits 1,315,815 14,957 1.52 1,016,814 24,634 3.24
Savings deposits 512,087 3,118 .81 457,968 5,912 1.73
Other time deposits 934,907 21,322 3.05 1,131,956 47,255 5.58
Time deposits $100,000 and over 720,261 13,529 2.51 876,327 34,824 5.31
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 4,184,630 57,413 1.83 4,063,834 118,666 3.90
- ----------------------------------------------------------------------------------------------------------------------------------
Short-term borrowings 442,437 3,027 .91 514,664 13,431 3.49
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 4,627,067 $ 60,440 1.75% 4,578,498 $132,097 3.86%
- ----------------------------------------------------------------------------------------------------------------------------------
NONINTEREST-BEARING LIABILITIES
AND SHAREHOLDERS' EQUITY
Demand deposits 1,595,638 1,424,699
Other liabilities 63,754 71,149
Shareholders' equity 750,087 688,755
- ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $7,036,546 $6,763,101
- ----------------------------------------------------------------------------------------------------------------------------------
Net interest income and margin (TE) (a) $225,376 4.63% $211,217 4.52%
Net earning assets and spread $1,880,219 4.12% $1,657,378 3.50%
Interest cost of funding earning assets 1.24% 2.84%
- ----------------------------------------------------------------------------------------------------------------------------------
(a) Tax-equivalent (TE) amounts are calculated using a marginal federal income tax rate of 35%.
(b) Average balance includes nonaccruing loans of $36,849 and $26,531, respectively, in the first nine months of 2002 and 2001.
22
TABLE 7. SUMMARY OF CHANGES IN NET INTEREST INCOME(TE)(a),(b)
- ------------------------------------------------------------------------------------------------------------------------------------
Third Quarter 2002 Compared to: Nine Months Ended September 30,
Second Quarter 2002 Third Quarter 2001 2002 Compared to 2001
--------------------------------------------------------------------- --------------------------------
Due To Total Due To Total Due To Total
Change In Increase Change In Increase Change In Increase
(dollars in thousands) Volume Rate (Decrease) Volume Rate (Decrease) Volume Rate (Decrease)
- ------------------------------------------------------------------------------------------------------------------------------------
INTEREST INCOME(TE)
Loans (TE)(a) $(160) $(1,168) $(1,328) $(2,714) $(14,379) $ (17,093) $ (7,689) $(51,121) $(58,810)
- ------------------------------------------------------------------------------------------------------------------------------------
Mortgage-backed securities (31) (734) (765) 4,021 (1,354) 2,667 16,268 (2,527) 13,741
U.S. agency securities (92) (342) (434) (649) (1,247) (1,896) (4,240) (3,429) (7,669)
Obligations of states and
political subdivisions
(TE) (a) (25) (11) (36) (272) (76) (348) (962) (335) (1,297)
U.S. Treasury securities (22) (27) (49) 709 (606) 103 1,439 (1,756) (317)
Other securities 2 (3) (1) 140 (41) 99 677 (293) 384
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment in
securities (168) (1,117) (1,285) 3,949 (3,324) 625 13,182 (8,340) 4,842
- ------------------------------------------------------------------------------------------------------------------------------------
Federal funds sold and
short-term investments (241) (1) (242) (624) (993) (1,617) 2,074 (5,604) (3,530)
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest income
(TE) (a) (569) (2,286) (2,855) 611 (18,696) (18,085) 7,567 (65,065) (57,498)
- ------------------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
NOW account deposits (23) 19 (4) 214 (886) (672) 1,087 (2,641) (1,554)
Money market deposits (32) (34) (66) 1,217 (3,949) (2,732) 5,873 (15,550) (9,677)
Savings deposits 5 31 36 173 (802) (629) 631 (3,425) (2,794)
Other time deposits (292) (829) (1,121) (2,448) (6,167) (8,615) (7,191) (18,742) (25,933)
Time deposits $100,000
and over (42) (405) (447) (1,533) (4,453) (5,986) (5,376) (15,919) (21,295)
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing
deposits (384) (1,218) (1,602) (2,377) (16,257) (18,634) (4,976) (56,277) (61,253)
- ------------------------------------------------------------------------------------------------------------------------------------
Short-term borrowings (22) (12) (34) (522) (1,833) (2,355) (1,663) (8,741) (10,404)
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest expense (406) (1,230) (1,636) (2,899) (18,090) (20,989) (6,639) (65,018) (71,657)
- ------------------------------------------------------------------------------------------------------------------------------------
Change in net interest
income (TE)(a) $(163) $(1,056) $(1,219) $ 3,510 $ (606) $ 2,904 $14,206 $ (47) $ 14,159
- ------------------------------------------------------------------------------------------------------------------------------------
(a) Tax-equivalent (TE) amounts are calculated using a marginal federal income tax rate of 35%.
(b) The change in interest shown as due to changes in either volume or rate includes an allocation of the amount that reflects the
interaction of volume and rate changes. This allocation is based on the absolute dollar amounts of change due solely to changes
in volume or rate.
23
decreased by a more moderate 36 basis points from the fourth quarter of 2001,
and was unchanged from the current year's second quarter.
For the first nine months of 2002, net interest income (TE) increased
7%, or $14. 2 million, over the same period in 2001, on earning asset growth of
4%. The net interest margin was 4.63% for the 2002 period and 4.52% for the
prior year's period. The average yield on earning assets decreased 149 basis
points, with loan yields down 156 basis points in 2002 and the average rate
earned on the investment portfolio 74 basis points below the rate earned in
2001. The total interest cost of funding earning assets declined 160 basis
points compared to the first nine months of 2001. The same factors that affected
the mix and rates for earning assets and funding sources in the third quarter of
2002 were evident for the year-to-date period.
PROVISION FOR LOAN LOSSES
Whitney provided $1.5 million for loan losses in the third quarter of
2002, compared to $2.5 million in 2002's second quarter, and $8.0 million in the
third quarter of 2001. Last year's quarterly provision reflected, among other
factors, economic uncertainty in the aftermath of the September 11 terrorist
attacks. The $7.0 million year-to-date provision in 2002 compares to a $13.0
million provision for the same period in 2001. Net charge-offs totaled $4.9
million for both the current quarter and the year-earlier period, compared to
$2.5 million in the second quarter of 2002. Net charge-offs were $10.4 million
for the first nine months of 2002 and $8.0 million for the comparable period in
2001.
Recent improvements in the Company's overall credit risk profile and
the impact of net charge-offs led to a reduction in the level of the allowance
for loan losses and helped lower the provision for the third quarter of 2002.
For a discussion of changes in the allowance for loan losses, nonperforming
assets and general asset quality, see the earlier section on Loans and Allowance
for Loan Losses. The future level of the allowance and provisions for loan
losses will reflect management's ongoing evaluation of credit risk, based on
established internal policies and practices.
NONINTEREST INCOME
Noninterest income, excluding securities transactions, totaled $22.3
million for the third quarter of 2002, a decrease of $2.7 million from the third
quarter of 2001. Late in the third quarter of 2001, Whitney sold its agreements
to process merchants' credit card transactions to a firm specializing in this
business and recognized a gain of $3.6 million in that period. Excluding the
gain on this merchant business sale, which was reported with other noninterest
income, and adjusting for the estimated $2.1 million related impact on recurring
credit card income, noninterest income was 16%, or $3.0 million, higher than in
the year-earlier quarter. The Company maintained an interest in the ongoing
revenues generated through an alliance formed with the specialist, and, over
time, expects to benefit from the specialist's operating efficiencies and from
added growth in the merchant customer base through focused sales management and
enhanced customer service.
Quarterly income from service charges on deposit accounts was up 9%, or
$.8 million, in 2002. Lower market rates have had a favorable impact on deposit
service fees by reducing the earnings credit that is allowed as an offset to
charges on certain business accounts. Benefits from pricing policy refinements
and automated decision tools that were introduced in 2001 also contributed to
this increase.
Income from secondary mortgage market operations was down moderately
from the level in the third quarter of 2001. Production levels during the most
recent quarter were bolstered by a
24
strong refinancing market, but were still below the peak levels reached during
the fourth quarter of 2001. The rate environment is expected to continue to spur
refinancing activity and production in 2002's fourth quarter.
Adjusting for the impact of the merchant business sale, revenue from
credit and debit card transactions rose 15%, or close to $.3 million, in the
third quarter of 2002, on wider distribution and increased use of Whitney's card
products.
Excluding the $3.6 million gain on the merchant business sale in the
third quarter of 2001 mentioned above, other noninterest income increased $2.4
million in the third quarter of 2002. Whitney recognized net gains on
dispositions of surplus banking property and foreclosed assets of over $1.2
million in 2002's third quarter, compared to $.2 million in the year-earlier
quarter. Other contributors to growth in other noninterest income included fees
on letters of credit and unused loan commitments, student loan sale incentive
fees, revenue from a recently implemented agreement to outsource the bank's
official checks, and some increased revenue from ATM network participation
agreements.
Noninterest income, excluding securities transactions, was $62.9
million through the first nine months of this year, compared to $70.8 million in
the same period in 2001. Service charges on deposit accounts increased 12%, or
$3.1 million, with the year-to-date results reflecting a more pronounced benefit
from pricing policy and system changes first introduced in 2001's second
quarter. Secondary mortgage market operations posted a $1.2 million, or 26%,
increase for the first nine months of 2002. Credit card income declined $6.0
million, but was up $.9 million, or 18%, after adjusting for the $6.9 million
year-to-date impact of the merchant business sale. Lower asset values in the
capital markets contributed to a 6%, or $.4 million, decrease in trust services
income, although a modification of fee schedules helped limit the negative
impact from capital market turmoil.
The $5.8 million decrease in other noninterest income reflected the
$3.6 million gain on the merchant business sale in 2001 and a $3.1 million
reduction in net gains from dispositions of surplus property and foreclosed
assets. Whitney recognized approximately $4.3 million of net gains on such
dispositions during the first nine months of 2001. For the same period in 2002,
net gains totaled $1.2 million.
NONINTEREST EXPENSE
Total noninterest expense of $58.2 million in the third quarter of 2002
was 1% less than the total for the third quarter of 2001. Adjusting for the
impact of the merchant business sale, noninterest expense for 2002's third
quarter would have increased 2%, or $1.2 million, from the year-earlier period.
Total personnel expense was 8%, or $2.3 million, higher than in the
third quarter of 2001. Employee compensation increased 6%, or $1.4 million,
including approximately $.4 million in nonrecurring costs associated with
acquired bank personnel. Employee benefits were up 19%, or $.9 million. Base
salaries and the cost of various targeted employee incentive pay plans increased
5%, or approximately $1.1 million, over the level in 2001's third quarter,
including the impact of recurring costs of bank operations purchased in late
2001. The successful integration of operations and employees from this fourth
quarter acquisition and continued attention to efficient management of human
resources helped the Company end the third quarter of 2002 with its overall
staff level little changed from a year earlier.
Higher costs of providing both retirement and health benefits drove the
increase in employee benefits expense. For the third quarter of 2002, the
expense of providing benefits
25
under the defined benefit pension plan rose $.6 million. A weak investment
performance by the pension trust fund or a decline in market yields on
fixed-income securities will cause the actuarially determined periodic pension
expense to increase in following periods, holding other variables constant. Each
of these conditions was present in 2001 and at the end of 2002's third quarter.
Equipment and data processing expense in the third quarter of 2002 was
15%, or $.8 million, less than the level in the year-earlier quarter. Close
control over capital expenditures, for both new projects and the replacement of
fully-depreciated assets, has been the major factor that provided an offset to
costs that have been added for applications to support expanded customer
services and enhanced management tools and for purchased operations.
Amortization of purchased intangibles decreased $.4 million compared to
the year-earlier quarter. The $.9 million benefit from the elimination of
goodwill amortization in 2002 was partly offset by amortization of the deposit
relationship intangible purchased in the Northwest Bank acquisition in 2001's
fourth quarter and adjustments to the amortization schedule for certain other
purchased intangibles. Based on current schedules, amortization of purchased
intangibles other than goodwill will total $5.8 million in 2002. For 2001, total
amortization was $7.4 million, including $3.6 million of goodwill amortization
of which $2.5 million was not deductible for income tax purposes.
Noninterest expense totaled $173 million for the nine months ended
September 30, 2002. This was a 5%, or $9.5 million, decrease compared to the
same period in 2001. Excluding $5.5 million of merger-related costs in the
earlier period and adjusting for the impact of the merchant business sale, there
would have been an increase of close to 1%.
Personnel expense increased 7%, or $5.9 million, through the first nine
months of 2002, after excluding $2.8 million of merger-related costs from the
prior year's total. The major factors behind the year-to-date increase were the
same as those cited above in the discussion of the quarterly results. In
addition, stock-based compensation, which fluctuates with changes in Whitney's
stock price, was $.9 million higher in 2002 compared to the first nine months of
2001.
Equipment and data processing expense decreased 13%, or $2.2 million,
year-to-date in 2002, after excluding $1.1 million of merger-related costs in
2001. Legal and professional service fees in 2002 would have been little changed
from the prior year, before consideration of merger-related costs in 2001 that
totaled $1.9 million. Changes in major noninterest expense categories between
the first nine months of 2001 and 2002 were generally consistent with the
quarter-to-quarter changes and were mainly the result of the same factors.
INCOME TAXES
The Company provided for income tax expense at an effective rate of
33.41% in the third quarter of 2002 compared to a rate of 33.43% in the
year-earlier period. Year-to-date the effective rate was 33.19% in 2002 and
32.10% in 2001. In the first quarter of 2001, Whitney recorded a deferred tax
benefit of approximately $1 million related to the termination of an acquired
bank's Subchapter S election, as discussed in Note 6 to the consolidated
financial statements. Whitney's effective rates have been lower than the 35%
federal statutory rate primarily because of tax-exempt interest income from the
financing of state and local governments.
26
CHANGES IN ACCOUNTING STANDARDS
SFAS No. 147, "Acquisitions of Certain Financial Institutions," was
issued in October 2002. Implementing this new accounting standard, which is
discussed in Note 8 to the consolidated financial statements, will have no
impact on Whitney's current accounting practices.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required for this item is included in the section
entitled Asset/Liability Management on page 18 of Management's Discussion and
Analysis of Financial Condition and Results of Operations.
ITEM 4. CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures that are
designed to ensure that information required to be disclosed in the reports it
files under the Securities Exchange Act of 1934, as amended, is recorded,
processed, summarized and reported within the time periods specified in the
Commission's rules and forms. Such controls include those designed to ensure
that material information is communicated to management, including the Chief
Executive Officer (CEO) and Chief Financial Officer (CFO), as appropriate to
allow timely decisions regarding required disclosure.
The CEO and CFO, with the participation of management, have evaluated
the effectiveness of Whitney's disclosure controls and procedures as of a date
within ninety days before the filing date of this quarterly report on Form 10-Q.
Based on their evaluation, they have concluded that the disclosure controls and
procedures are effective. There were no significant changes in the Company's
internal controls or in other factors subsequent to the date of the evaluation
that could significantly affect the operation of the disclosure controls and
procedures.
27
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 3.1 - Copy of the Company's Composite Charter (filed as Exhibit
3.1 to the Company's quarterly report on Form 10-Q for the quarter
ended September 30, 2000 (Commission file number 0-1026) and
incorporated by reference).
Exhibit 3.2 - Copy of the Company's Bylaws (filed as Exhibit 3.2 to the
Company's quarterly report on Form 10-Q for the quarter ended September
30, 2000 (Commission file number 0-1026) and incorporated by
reference).
Exhibit 10.1 - Executive agreement between Whitney Holding Corporation,
Whitney National Bank and William L. Marks (filed as Exhibit 10.3 to
the Company's quarterly report on Form 10-Q for the quarter ended June
30, 1993 (Commission file number 0-1026) and incorporated by
reference).
Exhibit 10.2 - Executive agreement between Whitney Holding Corporation,
Whitney National Bank and R. King Milling (filed as Exhibit 10.4 to the
Company's quarterly report on Form 10-Q for the quarter ended June 30,
1993 (Commission file number 0-1026) and incorporated by reference).
28
Exhibit 10.3 - Executive agreement between Whitney Holding Corporation,
Whitney National Bank and G. Blair Ferguson (filed as Exhibit 10.7 to
the Company's quarterly report on Form 10-Q for the quarter ended
September 30, 1993 (Commission file number 0-1026) and incorporated by
reference).
Exhibit 10.4 - Executive agreement between Whitney Holding Corporation,
Whitney Bank of Alabama (now Whitney National Bank) and John C. Hope
III (filed as Exhibit 10.8 to the Company's annual report on Form 10-K
for the year ended December 31, 1994 (Commission file number 0-1026)
and incorporated by reference).
Exhibit 10.5 - Executive agreement between Whitney Holding Corporation,
Whitney National Bank and Robert C. Baird, Jr. (filed as Exhibit 10.9
to the Company's quarterly report on Form 10-Q for the quarter ended
June 30, 1995 (Commission file number 0-1026) and incorporated by
reference).
Exhibit 10.6 - Long-term incentive program (filed as Exhibit 10.7 to
the Company's annual report on Form 10-K for the year ended December
31, 1991 (Commission file number 0-1026) and incorporated by
reference).
Exhibit 10.6a - Long-term incentive plan (filed as a Proposal in the
Company's Proxy Statement dated March 18, 1997 (Commission file number
0-1026) and incorporated by reference).
Exhibit 10.7 - Executive compensation plan (filed as Exhibit 10.8 to
the Company's annual report on Form 10-K for the year ended December
31, 1991 (Commission file number 0-1026) and incorporated by
reference).
Exhibit 10.8 - Form of restricted stock agreement between Whitney
Holding Corporation and certain of its officers (filed as Exhibit 19.1
to the Company's quarterly report on Form 10-Q for the quarter ended
June 30, 1992 (Commission file number 0-1026) and incorporated by
reference).
Exhibit 10.8a - Form of amendment to restricted stock agreement between
Whitney Holding Corporation and certain of its officers (filed as
Exhibit 10.9a to the Company's annual report on Form 10-K for the year
ended December 31, 2000 (Commission file number 0-1026) and
incorporated by reference).
Exhibit 10.8b - Form of amendment to restricted stock agreement between
Whitney Holding Corporation and certain of its officers (filed as
Exhibit 10.8b to the Company's annual report on Form 10-K for the year
ended December 31, 2001 (Commission file number 0-1026) and
incorporated by reference).
29
Exhibit 10.8c - Form of restricted stock agreement between Whitney
Holding Corporation and certain of its officers (filed as Exhibit
10.8c to the Company's quarterly report on Form 10-Q for the quarter
ended June 30, 2002 (commission file number 0-1026) and incorporated by
reference).
Exhibit 10.9 - Form of stock option agreement between Whitney Holding
Corporation and certain of its officers (filed as Exhibit 19.2 to the
Company's quarterly report on Form 10-Q for the quarter ended June 30,
1992 (Commission file number 0-1026) and incorporated by reference).
Exhibit 10.9a - Form of amendment to stock option agreement between
Whitney Holding Corporation and certain of its officers (filed as
Exhibit 10.10a to the Company's annual report on Form 10-K for the year
ended December 31, 2000 (Commission file number 0-1026) and
incorporated by reference).
Exhibit 10.9b - Form of amendment to stock option agreement between
Whitney Holding Corporation and certain of its officers (filed as
Exhibit 10.9b to the Company's annual report on Form 10-K for the year
ended December 31, 2001 (Commission file number 0-1026) and
incorporated by reference).
Exhibit 10.10 - Directors' Compensation Plan (filed as Exhibit A to the
Company's Proxy Statement dated March 24, 1994 (Commission file number
0-1026) and incorporated by reference).
Exhibit 10.10a - Amendment No. 1 to the Whitney Holding Corporation
Directors' Compensation Plan (filed as Exhibit A to the Company's Proxy
Statement dated March 15, 1996 (Commission file number 0-1026) and
incorporated by reference).
Exhibit 10.10b - Whitney Holding Corporation 2001 Directors'
Compensation Plan (filed as Appendix B to the Company's Proxy Statement
dated March 15, 2001 (Commission file number 0-1026) and incorporated
by reference).
Exhibit 10.11 - Retirement Restoration Plan effective January 1, 1995
(filed as Exhibit 10.16 to the Company's annual report on Form 10-K for
the year ended December 31, 1995 (Commission file number 0-1026) and
incorporated by reference).
Exhibit 10.12 - Executive agreement between Whitney Holding
Corporation, Whitney National Bank and Rodney D. Chard (filed as
Exhibit 10.17 to the Company's quarterly report on Form 10-Q for the
quarter ended September 30, 1996 (Commission file number 0-1026) and
incorporated by reference).
Exhibit 10.13 - Form of Amendment to Section 2.1e of the executive
agreements filed as Exhibits 10.1 through 10.5 herein (filed as Exhibit
10.18 to the Company's annual report on Form 10-K for the year ended
December 31, 1996 (Commission file number 0-1026) and incorporated by
reference).
30
Exhibit 10.14 - Form of Amendment adding subsection 2.1g to the
executive agreements filed as Exhibits 10.1 through 10.5 and Exhibit
10.12 herein (filed as Exhibit 10.19 to the Company's quarterly report
on Form 10-Q for the quarter ended March 31, 1998 (Commission file
number 0-0126) and incorporated by reference).
Exhibit 10.15 - Executive agreement between Whitney Holding
Corporation, Whitney National Bank and Thomas L. Callicutt, Jr. (filed
as Exhibit 10.20 to the Company's quarterly report on form 10-Q for the
quarter ended September 30, 1999 (Commission file number 0-1026) and
incorporated by reference).
Exhibit 10.16 - Form of officer agreement between Whitney Holding
Corporation, Whitney National Bank and Joseph S. Exnicios, executed May
11, 1993, and amended March 27, 1998, and Lewis P. Rogers, executed
June 23, 1999, each of whom became a reportable executive during the
quarter ended September 30, 2002.
Exhibit 21 - Subsidiaries
Whitney Holding Corporation owns 100% of Whitney National
Bank. All other subsidiaries considered in the aggregate would not
constitute a significant subsidiary.
Exhibit 99.1 - Certification by the Company's Chief Executive Officer
and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K
On a Form 8-K dated July 18, 2002, the registrant reported
under Item 5 the release of its financial results for the quarter ended
June 30 2002. The news release covering the financial results was filed
as an exhibit under Item 7.
On a Form 8-K dated August 14, 2002, the registrant reported
under Item 9 the text of the certification from its Chief Executive
Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
This certification accompanied the registrant's Quarterly Report on
Form 10-Q for the period ended June 30, 2002 that was filed with the
Commission on the same date.
31
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
WHITNEY HOLDING CORPORATION
(Registrant)
By:/s/Thomas L. Callicutt, Jr.
--------------------------------------
[Signature]
Thomas L. Callicutt, Jr.
Executive Vice President and
Chief Financial Officer
(Principal Accounting Officer)
November 14, 2002
--------------------------------------
Date
32
CERTIFICATIONS
I, William L. Marks, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Whitney Holding
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: November 14, 2002
-----------------
/s/William L. Marks
---------------------------------
William L. Marks
Chief Executive Officer
33
I, Thomas L. Callicutt, Jr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Whitney Holding
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: November 14, 2002
-----------------
/s/Thomas L. Callicutt, Jr.
---------------------------------
Thomas L. Callicutt, Jr.
Chief Financial Officer
34
Exhibit 10.16
WHITNEY HOLDING CORPORATION
and
WHITNEY NATIONAL BANK
OFFICER AGREEMENT
-----------------
THIS AGREEMENT (the "Agreement") is made, effective as of the ______
day of ___________, by and between WHITNEY HOLDING CORPORATION, a corporation
organized and existing under the laws of the State of Louisiana (the "Holding
Corporation"), WHITNEY NATIONAL BANK, a financial institution organized and
existing under the laws of the United States (the "Bank"), and _________________
(the "Officer").
WHEREAS, the Officer is presently employed by the Bank as a SENIOR VICE
PRESIDENT;
WHEREAS, the Holding Corporation and the Bank desire to retain the
services of the Officer by providing certain assurances in the event the
officer's employment with the Bank is terminated under the circumstances set
forth in this Agreement;
NOW, THEREFORE, the Holding Corporation, the Bank and the Officer agree
to the following terms and conditions:
SECTION I
DEFINITIONS
1.1 "Change in Duties" means the occurrence of one of the
following events in connection with a Change in Control:
a. A diminution in the nature or scope of the officer's
authorities or duties, a change in his reporting
responsibilities or titles or the assignment of the Officer to
any duties or responsibilities that are inconsistent with his
position, duties, responsibilities or status immediately
preceding such assignment;
b. A reduction in the officer's compensation during the Covered
Period. For this purpose, "compensation" means the fair market
value of all remuneration paid to the Officer by the Employer
during the immediately preceding calendar year, including,
without limitation, deferred compensation, stock options and
other forms of incentive compensation awards, coverage under
any employee benefit plan (such as a pension, thrift, medical,
dental, life insurance or long-term disability plan) and other
perquisites;
c. The transfer of the Officer to a location requiring a change
in his residence or a material increase in the amount of
travel ordinarily required of the Officer in the performance
of his duties; or
d. A good faith determination by the Officer that his position,
duties, responsibilities or status has been affected, whether
directly or indirectly, in any manner which prohibits the
effective discharge of any such duties or responsibilities.
1.2 "Change in Control" means and shall be deemed to have occurred
if:
35
a. Any "person," including any "group," determined in accordance
with Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended, becomes the beneficial owner, directly or
indirectly, of securities of the Holding Corporation
representing 20% or more of the combined voting power of the
Holding Corporation's then outstanding securities, without the
approval, recommendation, or support of the Board of Directors
of the Holding Corporation as constituted immediately prior to
such acquisition;
b. The Federal Deposit Insurance Corporation or any other
regulatory agency negotiates and implements a plan for the
merger, transfer of assets and liabilities, reorganization,
and/or liquidation of the Bank;
c. Either of the Holding Corporation or the Bank is merged into
another corporate entity or consolidated with one or more
corporations, other than a wholly owned subsidiary of the
Holding Corporation, unless before the effective date of such
merger or consolidation the board of directors of the
surviving corporation agrees, in writing, to assume the
obligations and liabilities of the Holding Corporation and the
Bank under this Agreement;
d. A change in the members of the Board of Directors of the
Holding Corporation which results in the exclusion of a
majority of the "continuing board." For this purpose, the term
"continuing board" means the members of the Board of Directors
of the Holding Corporation, determined as of the date on which
this Agreement is executed and subsequent members of such
board who are elected by or on the recommendation of a
majority of such "continuing board"; or
e. The sale or other disposition of all or substantially all of
the stock or the assets of the Bank by the Holding Corporation
(or any successor corporation thereto), unless before the
effective date of such sale or other disposition the board of
directors of the acquiring corporation agrees, in writing, to
assume the obligations of the Holding Corporation and the Bank
under this Agreement.
1.3 "Company" means the Holding Corporation and the Bank.
1.4 "Covered Period" means the one-year period immediately
preceding and the three-year period immediately following
the occurrence of a Change in Control.
1.5 "Employer" means the Holding Corporation or the Bank or both, as
the case may be.
1.6 "Severance Amount" means 200% of the Officer's "annual salary."
For this purpose, "annual salary" means the average of all compensation paid
to the Officer by the Company which is includible in the Officer's gross income
for the highest 3 of the 5 calendar years immediately preceding the calendar
year in which a Change in Control occurs, including the amount of any
compensation which the Officer elected to defer under any plan or arrangement
of the Company with respect to such years. If the Officer has been employed less
than 5 years prior to the calendar year in which a Change in Control occurs,
"annual salary" shall be determined by averaging the compensation (as
defined in the preceding sentence) for the
36
Officer's actual period of employment. Further, if the Officer has been employed
less than 12 months prior to the occurrence of a Change in control, the actual
compensation of the Officer shall be annualized for purposes of this Section
1.6. In the event of dispute between the Officer and the Company, the
determination of the "annual salary" shall be made by an independent public
accounting firm agreed upon by the Officer and the Company.
1.7 "Termination" or "Terminated" means (a) termination of the
employment of the Officer with the Employer for any reason, other than cause, or
(b) the resignation of the Officer following a Change in Duties. In no event,
however, shall the Officer's voluntary separation from service with the Employer
on account of death, disability, or resignation on or after the attainment of
the normal retirement age specified in any qualified employee benefit plan
maintained by the Employer constitute a Termination. For purposes of determining
whether a Termination has occurred, "cause" means fraud, misappropriation of or
intentional material damage to the property or business of the Employer or the
commission of a felony by the Officer.
SECTION II
----------
TERMINATION RIGHTS AND OBLIGATIONS
----------------------------------
2.1 Severance Awards. If the Officer's employment is Terminated during
the Covered Period, then no later than 30 days after the later of (a) the date
of such Termination, or (b) the occurrence of a Change in Control, the Company
shall:
a. Pay to the Officer the Severance Amount;
b. Transfer to the Officer the ownership of all club memberships,
automobiles and other perquisites which were assigned to the
Officer as of the day immediately preceding such Termination;
c. In accordance with Section 2.2 hereof, provide for the benefit
of the Officer, his spouse, and his dependents, if any,
coverage under the plans, policies or programs (as the same
may be amended from time to time) maintained by the Company
for the purpose of providing medical benefits and life
insurance to other Officers of the Company with comparable
duties; provided, however, that in no event shall the coverage
provided under this paragraph be substantially less than the
coverage provided to the Officer as of the date immediately
preceding a Termination;
d. Pay to the Officer an amount equal to the contributions by the
Company to the Whitney National Bank of New Orleans Thrift
Incentive Plan, or a successor arrangement, that would have
been made for the lesser of (i) three years following the date
of Termination, or (ii) the number of years until the
Officer's normal retirement age under such plan;
e. Pay to the Officer an amount equal to the present value of the
additional retirement benefit which would have accrued under
the Whitney National Bank of New Orleans Retirement Plan, or a
successor arrangement, that would have made for the lesser of
(i) three years following the date of Termination, or (ii) the
number of years until the Officer's normal retirement age
under such plan; and
f. Pay to the Officer the amount to which the Officer would be
entitled under the 1991 Officer Compensation Plan, or a
successor thereto, for the calendar year in
37
which a Change in Control occurs determined as if all
performance goals applicable to the Company and the Officer
were achieved.
g. Pay to the Officer an amount equal to the present value of any
benefit accrued under the Whitney National Bank Retirement
Plan, or any successor thereto, that would have been payable
under the terms of such plan, including any additional accrual
provided under Section 2.1e hereto, but was forfeited on
account of the application of the vesting provisions contained
in such plan.
2.2 Special Rules Governing Group Benefits. Coverage under Section
2.1c, hereof, shall (a) commence as of the later of the date of Termination or
the occurrence of a Change in Control, and (b) end as of the earlier of the
Officer's coverage under Medicare Part B or the date on which the Officer is
covered under group plans providing substantially similar benefits maintained by
another employer. For this purpose, the Company shall provide coverage during
any period in which the payment of benefits is limited by any form of
pre-existing condition clause.
Coverage under Section 2.1c, hereof, may be provided under a group
policy or program maintained by the Company or the Company, in its sole
discretion, may acquire or adopt an individual plan, policy or program providing
coverage solely for the benefit of the Officer, his spouse, and his dependents,
if any.
If coverage commences as of a Change in Control, the Company shall (a)
retroactively reinstate the Officer, his spouse, and dependents, if any, as of
the date of Termination, and (b) reimburse to the Officer his cost of obtaining
similar coverage for the period commencing on the date of Termination and ending
on the occurrence of a Change in Control. As to medical claims incurred during
such period, any coverage actually obtained by the Officer shall be designated
as the Officer's primary coverage, and the reinstated coverage shall operate as
secondary coverage.
2.3 Other Plans and Agreements. To the maximum extent permitted by law
and not withstanding any provision to the contrary contained in any plan, grant,
program, contract or other arrangement under which the Officer and the Employer
are parties, if the Officer's employment is Terminated during the Covered
Period, then any vesting schedule or other restriction on the ownership of any
benefits payable to the Officer under the terms of any such plan, grant,
contract, or arrangement shall be accelerated or lapse, as the case may be.
Notwithstanding any provision to the contrary contained in any plan,
grant, program, contract, or arrangement under which the Officer and the
Employer are parties, in the event the Officer has elected to defer the payment
of any benefit under any such plan, grant, contract, or arrangement, the payment
of such benefit shall be accelerated and paid to the Officer in the form of a
single-sum no later than 30 days after the Officer's Termination during the
Covered Period.
2.4 Taxes. The Officer shall be responsible for applicable income tax
and the Company shall have the right to withhold from any payment made under
this Agreement, or to collect as a condition of any payment, any income taxes
required by law to be withheld.
Notwithstanding the preceding paragraph, the Company shall pay any
excise tax or similar penalty imposed by Section 4999 of the Internal Revenue
Code of 1986, as amended (the "Code") or any comparable successor provision, on
the Officer as a consequence of any "excess parachute payment" within the
meaning of Section 280G of the Code (or a comparable successor
38
provision) payable under this Agreement or any plan, grant, program, contract
or other arrangement under which the Officer and the Employer are parties.
The Officer shall submit to the Company the calculation of the amount
to be paid by the Company under this Section 2.4, together with supporting
documentation. If the Officer and the Company disagree as to such amount, an
independent public accounting firm agreed upon by the Officer and the Company
shall make such determination.
SECTION III
-----------
MISCELLANEOUS
-------------
3.1 Notices. Notices and other communication required under this
Agreement shall be made to the Company at 228 St. Charles Avenue, New Orleans,
Louisiana 70130 and to the Officer at 228 St. Charles Avenue, New Orleans,
Louisiana 70130 or, as to each party, at such other address as may be designated
by written notice to the other. All such notices and communications shall be
effective when deposited in the United States mail, postage prepaid, or
delivered to the affected party.
3.2 Employment Rights. The terms of this Agreement shall not be
deemed to confer on the Officer any right to continue in the employ of the
Employer for any period or any right to continue his present or any other rate
of compensation.
3.3 Assignment. The Officer shall not sell, assign, pledge, transfer or
otherwise convey the right to receive any form of payment or benefit provided
under the Agreement, except by will or the laws of intestacy.
3.4 Inurement. This Agreement shall be binding upon and inure to the
benefit of the Holding Corporation, the Bank and the Officer and their
respective heirs, executors, administrators, successors and assigns.
3.5 Payment of Expenses. In the event that it is necessary or desirable
for the Officer to retain legal counsel and/or incur other cost and expenses in
connection with the enforcement of the terms of the Agreement, the Company shall
pay (or the Officer shall be entitled to reimbursement of) reasonable attorneys'
fees, costs, and expenses actually incurred, without regard to the final
outcome, unless there is no reasonable basis for the Officer's action.
3.6 Amendment and Termination. This Agreement shall not be amended
or terminated by any act of the Company, except as may be expressly agreed upon,
in writing, by the Company and the Officer.
3.7 Nature of Obligation. The Company intends that its obligations
hereunder be construed in the nature of severance pay. The Company's obligations
under Section 2 are absolute and unconditional and shall not be affected by any
circumstance, including. without limitation, any right of offset, counterclaim,
recoupment, defense, or other right which the Company may have against the
Officer or others. All amounts payable by the Company hereunder shall be paid
without notice or demand.
39
3.8 Choice of Law. The Agreement shall be governed and construed in
accordance with the laws of the State of Louisiana.
3.9 No Effect on Other Benefits. Any other compensation paid or
benefits provided to the Officer shall be in addition to and not in lieu of the
benefits provided to such Officer under this Agreement. Except as may be
expressly provided herein, nothing in this Agreement shall be construed as
limiting, varying or reducing the provision of any benefit available to the
Officer (or to such Officer's estate or other beneficiary) pursuant to any
employment agreement, group plan, including any qualified pension or
profit-sharing plan, health, disability or life insurance plan, or any other
form of agreement or arrangement between the Company and the Officer.
3.10 Entire Agreement. This Agreement constitutes the entire agreement
between the Officer and the Holding Corporation and the Bank and is intended to
supersede all prior written or oral understandings with respect to the subject
matter of this Agreement.
3.11 Invalidity. In the event that any one or more provisions of this
Agreement shall, for any reason, be held invalid, illegal or unenforceable in
any manner, such invalidity, illegality or unenforceability shall not affect any
other provision of such Agreement.
3.12 Mitigation. Notwithstanding any provision of this Agreement to the
contrary and to the maximum extent permitted by law, the Officer shall not be
subject to any duty to mitigate the severance awards received hereunder by
seeking other employment. No severance award received under this Agreement shall
be offset by any compensation the Officer receives from future employment, and
the Officer shall not be required to perform any service as a condition of this
Agreement.
EXECUTED in multiple counterparts as of the dates set forth below, each
of which shall be deemed as original, and effective as of the date first set
forth above.
Officer WHITNEY HOLDING CORPORATION
WHITNEY NATIONAL BANK
- ------------------------------
By:
--------------------------------
Date:
------------------------- Title:
-----------------------------
Date:
------------------------------
40
Exhibit 99.1
Certification Pursuant to 18 U.S.C Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Each of the undersigned officers of Whitney Holding Corporation (the
"Company"), in the capacities and dates indicated below, hereby certify pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my
knowledge,
(1) the Company's Quarterly Report on Form 10-Q for the period ended September
30, 2002 (the "Report") fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
Dated: November 14, 2002 By:/s/William L. Marks
--------------------- ----------------------------------
William L. Marks
Chairman of the Board and
Chief Executive Officer
Dated: November 14, 2002 By:/s/Thomas L. Callicutt, Jr.
--------------------- ----------------------------------
Thomas L. Callicutt, Jr.
Executive Vice President and
Chief Financial Officer
41