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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 June 30, 2003 Commission file number 0-1026
WHITNEY HOLDING CORPORATION
(Exact name of registrant as specified in its charter)
Louisiana 72-6017893
(State of incorporation) (I.R.S. Employer Identification No.)
228 St. Charles Avenue
New Orleans, Louisiana 70130
(Address of principal executive offices)
(504) 586-7272
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act). Yes X No
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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 July 31, 2003
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Common Stock, no par value 40,341,527
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WHITNEY HOLDING CORPORATION
TABLE OF CONTENTS
Page
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PART I. Financial Information
Item 1: Financial Statements:
Consolidated Balance Sheets 1
Consolidated Statements of Income 2
Consolidated Statements of Changes in Shareholders' Equity 3
Consolidated Statements of Cash Flows 4
Notes to Consolidated Financial Statements 5
Selected Financial Data 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 26
Item 4: Controls and Procedures 26
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PART II. Other Information
Item 1: Legal Proceedings 27
Item 2: Changes in Securities and Use of Proceeds 27
Item 3: Defaults upon Senior Securities 27
Item 4: Submission of Matters to a Vote of Security Holders 27
Item 5: Other Information 27
Item 6: Exhibits and Reports on Form 8-K 28
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Signature 29
Exhibit Index 30
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
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June 30 December 31
(dollars in thousands) 2003 2002
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ASSETS
Cash and due from financial institutions $ 236,492 $ 326,124
Federal funds sold and short-term investments 11,170 4,327
Loans held for sale 65,660 65,572
Investment in securities
Securities available for sale 1,808,203 1,773,591
Securities held to maturity, fair values of $210,852 and $209,506, respectively 201,023 202,107
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Total investment in securities 2,009,226 1,975,698
Loans, net of unearned income 4,628,728 4,455,412
Allowance for loan losses (66,243) (66,115)
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Net loans 4,562,485 4,389,297
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Bank premises and equipment 148,189 151,620
Goodwill 69,164 69,164
Other intangible assets 26,056 28,807
Accrued interest receivable 27,592 28,649
Other assets 128,497 58,623
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Total assets $ 7,284,531 $ 7,097,881
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LIABILITIES
Noninterest-bearing demand deposits $ 1,805,861 $ 1,692,939
Interest-bearing deposits 4,154,575 4,089,940
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Total deposits 5,960,436 5,782,879
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Short-term and other borrowings 445,178 453,415
Accrued interest payable 6,604 7,383
Accrued expenses and other liabilities 46,703 53,721
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Total liabilities 6,458,921 6,297,398
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SHAREHOLDERS' EQUITY
Common stock, no par value
Authorized - 100,000,000 shares
Issued - 40,337,764 and 40,067,783 shares, respectively 2,800 2,800
Capital surplus 176,092 167,235
Retained earnings 630,323 607,235
Accumulated other comprehensive income 26,991 30,104
Treasury stock at cost - 21,528 shares in 2003 (720) -
Unearned restricted stock compensation (9,876) (6,891)
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Total shareholders' equity 825,610 800,483
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Total liabilities and shareholders' equity $ 7,284,531 $ 7,097,881
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The accompanying notes are an integral part of these financial statements.
1
WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
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Three Months Ended Six Months Ended
June 30 June 30
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(dollars in thousands, except per share data) 2003 2002 2003 2002
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INTEREST INCOME
Interest and fees on loans $ 63,610 $ 69,073 $ 127,379 $ 139,460
Interest and dividends on investments
Mortgage-backed securities 12,417 15,023 26,105 27,856
U.S. agency securities 3,722 5,643 7,874 12,002
U.S. Treasury securities 1,872 1,637 3,485 2,957
Obligations of states and political subdivisions 2,046 1,646 4,157 3,428
Other securities 486 621 1,029 1,204
Interest on federal funds sold and short-term investments 232 1,031 393 3,450
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Total interest income 84,385 94,674 170,422 190,357
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INTEREST EXPENSE
Interest on deposits 11,151 18,534 23,694 40,481
Interest on short-term and other borrowings 712 966 1,412 2,095
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Total interest expense 11,863 19,500 25,106 42,576
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NET INTEREST INCOME 72,522 75,174 145,316 147,781
PROVISION FOR LOAN LOSSES - 2,500 500 5,500
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NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 72,522 72,674 144,816 142,281
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NONINTEREST INCOME
Service charges on deposit accounts 9,330 9,598 18,627 19,143
Secondary mortgage market operations 2,987 1,850 5,724 3,900
Credit card income 2,443 2,071 4,649 3,927
Trust service fees 2,058 2,345 4,107 4,602
Other noninterest income 6,308 4,356 11,514 9,017
Securities transactions - 426 - 426
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Total noninterest income 23,126 20,646 44,621 41,015
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NONINTEREST EXPENSE
Employee compensation 28,298 26,451 56,130 52,157
Employee benefits 7,489 5,628 14,147 10,896
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Total personnel expense 35,787 32,079 70,277 63,053
Net occupancy expense 4,902 4,867 9,498 9,923
Equipment and data processing expense 4,318 4,607 8,523 9,981
Telecommunication and postage 2,066 1,951 4,145 4,052
Legal and professional fees 1,486 1,792 3,041 3,170
Corporate value and franchise taxes 1,653 1,912 3,526 3,789
Amortization of intangibles 1,291 1,462 2,752 2,923
Other noninterest expense 9,142 9,103 18,177 17,859
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Total noninterest expense 60,645 57,773 119,939 114,750
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INCOME BEFORE INCOME TAXES 35,003 35,547 69,498 68,546
INCOME TAX EXPENSE 11,253 11,762 22,278 22,669
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NET INCOME $ 23,750 $ 23,785 $ 47,220 $ 45,877
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EARNINGS PER SHARE
Basic $ .60 $ .60 $ 1.19 $ 1.15
Diluted .59 .59 1.17 1.14
WEIGHTED-AVERAGE SHARES OUTSTANDING
Basic 39,867,549 39,888,693 39,826,668 39,815,143
Diluted 40,360,070 40,176,705 40,288,610 40,070,570
CASH DIVIDENDS PER SHARE $ .30 $ .27 $ .60 $ .54
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The accompanying notes are an integral part of these financial statements.
2
WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
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Accumulated Unearned
Other Restricted
(dollars in thousands, Common Capital Retained Comprehensive Treasury Stock
except per share data) Stock Surplus Earnings Income Stock Compensation Total
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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 - - 45,877 - - - 45,877
Other comprehensive income:
Unrealized net holding gain on
securities, net of
reclassification
adjustments and taxes - - - 9,517 - - 9,517
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Total comprehensive income - - 45,877 9,517 - - 55,394
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Cash dividends, $.54 per share - - (21,517) - - - (21,517)
Stock issued to dividend reinvestment
and employee retirement plans - 685 - - - - 685
Long-term incentive plan stock activity:
Restricted grants and related activity - 3,359 - - (243) (2,548) 568
Options exercised - 4,862 - - 31 - 4,893
Directors' compensation plan
stock activity - 123 - - 212 - 335
Stock transactions, pooled entities - 287 - - - - 287
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Balance at June 30, 2002 $ 2,800 $ 163,713 $ 580,601 $ 19,621 $ - $ (8,202) $ 758,533
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Balance at December 31, 2002 $ 2,800 $ 167,235 $ 607,235 $ 30,104 $ - $ (6,891) $ 800,483
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Comprehensive income:
Net income - - 47,220 - - - 47,220
Other comprehensive income:
Unrealized net holding loss on
securities, net of
reclassification
adjustments and taxes - - - (3,113) - - (3,113)
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Total comprehensive income - - 47,220 (3,113) - - 44,107
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Cash dividends, $.60 per share - - (24,132) - - - (24,132)
Stock issued to dividend reinvestment
and employee retirement plans - 854 - - - - 854
Long-term incentive plan stock activity:
Restricted grants and related activity - 5,489 - - (1,084) (2,985) 1,420
Options exercised - 2,283 - - 197 - 2,480
Directors' compensation plan
stock activity - 231 - - 167 - 398
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Balance at June 30, 2003 $ 2,800 $ 176,092 $ 630,323 $ 26,991 $ (720) $ (9,876) $ 825,610
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The accompanying notes are an integral part of these financial statements.
3
WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Six Months Ended
June 30
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(dollars in thousands) 2003 2002
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OPERATING ACTIVITIES
Net income $ 47,220 $ 45,877
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization of bank premises and equipment 6,607 8,368
Amortization of purchased intangibles 2,752 2,923
Restricted stock compensation earned 2,836 2,616
Premium amortization (discount accretion), net 4,963 1,511
Provision for losses on loans and foreclosed assets 527 5,544
Net (gains) losses on sales of foreclosed assets and surplus property (778) 37
Net gains on sales of investment securities - (426)
Deferred tax benefit (1,108) (567)
Net (increase) decrease in loans originated and held for sale (27,549) 41,929
Net increase in trading account securities (60,447) (27)
Increase in accrued income taxes (1,579) (1,425)
(Increase) decrease in accrued interest receivable and prepaid expenses 200 (2,467)
Increase (decrease) in accrued interest payable and other accrued expenses 2,570 (3,858)
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Net cash provided by (used in) operating activities (23,786) 100,035
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INVESTING ACTIVITIES
Proceeds from maturities of investment securities held to maturity 8,741 21,519
Purchases of investment securities held to maturity (7,965) -
Proceeds from maturities of investment securities available for sale 427,325 227,674
Proceeds from sales of investment securities available for sale - 13,745
Purchases of investment securities available for sale (471,409) (492,964)
Net (increase) decrease in loans (146,838) 204,843
Net (increase) decrease in federal funds sold and short-term investments (6,843) 274,367
Proceeds from sales of foreclosed assets and surplus property 2,617 3,473
Purchases of bank premises and equipment (3,960) (4,276)
Other, net (2,494) 2,899
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Net cash provided by (used in) investing activities (200,826) 251,280
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FINANCING ACTIVITIES
Net increase (decrease) in transaction account and savings account deposits 179,907 (96,555)
Net decrease in time deposits (2,350) (219,848)
Net decrease in short-term and other borrowings (8,237) (62,672)
Proceeds from issuance of common stock 3,329 5,263
Purchases of common stock (1,528) (2,256)
Cash dividends (36,141) (21,298)
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Net cash provided by (used in) financing activities 134,980 (397,366)
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Decrease in cash and cash equivalents (89,632) (46,051)
Cash and cash equivalents at beginning of period 326,124 271,512
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Cash and cash equivalents at end of period $ 236,492 $ 225,461
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Cash received during the period for:
Interest income $ 171,479 $ 190,267
Cash paid during the period for:
Interest expense $ 25,885 $ 46,525
Income taxes 24,100 23,500
Noncash investing activities:
Foreclosed assets received in settlement of loans $ 2,090 $ 1,799
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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. Certain
financial information for prior periods has been reclassified to conform to the
current presentation, including the segregation of information relating to loans
held for sale.
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 2002 annual report on Form 10-K.
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 June 30 Six Months Ended June 30
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(dollars in thousands, except per share data) 2003 2002 2003 2002
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Numerator:
Net income $23,750 $23,785 $47,220 $45,877
Effect of dilutive securities - - - -
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Numerator for diluted earnings per share $23,750 $23,785 $47,220 $45,877
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Denominator:
Weighted-average shares outstanding 39,867,549 39,888,693 39,826,668 39,815,143
Effect of potentially dilutive securities
and contingently issuable shares 492,521 288,012 461,942 255,427
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Denominator for diluted earnings per share 40,360,070 40,176,705 40,288,610 40,070,570
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Earnings per share:
Basic $.60 $.60 $1.19 $1.15
Diluted .59 .59 1.17 1.14
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Antidilutive stock options 870,802 266,433 728,355 249,747
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5
NOTE 3 - STOCK-BASED INCENTIVE COMPENSATION
Whitney maintains two incentive compensation plans that incorporate
stock-based compensation, one for key employees and one for directors. During
June 2003, annual stock-based compensation 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 149,125 $5,020 411,000 $33.67
Directors' compensation plan 6,750 $216 45,000 $31.99
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Employees forfeit their stock grants if they terminate employment
within three years of the award date and they are prohibited from transferring
or otherwise disposing of the shares received during this period. In addition,
the employee grants can be adjusted based on Whitney's financial performance
over the restriction period in relation to that of a designated peer group.
Depending on the performance adjustment, the actual number of shares that vest
can range from 0% to 200% of the initial grants. 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 directors' shares are awarded without any
significant restrictions and are not subject to adjustment.
The stock options are fixed awards. The exercise price for options is
set at the market price of Whitney's stock on the grant date. All options are
fully exercisable after six months from the grant date and expire after ten
years. Unexercised options are subject to earlier expiration if a recipient
terminates service with the Company.
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting
for Stock-Based Compensation," as amended by SFAS No. 148, established a fair
value-based method of accounting for all stock-based compensation, among other
provisions. As provided for in SFAS No. 123, however, the Company elected to
continue to follow Accounting Principles Board Opinion (APB) No. 25 and related
interpretations to measure and recognize stock-based compensation expense. Under
this Opinion, Whitney recognizes no compensation expense with respect to fixed
awards of stock options. The Company grants options with an exercise price equal
to the stock's market price. As such, the options have no intrinsic value on the
award date, which is also the measurement date for compensation expense. The
compensation expense recognized under APB No. 25 for the Company's
performance-based restricted stock grants reflects their fair value, but the
timing of when fair value is determined and the method of allocating expense
over time differ in certain respects from what is required under SFAS No. 123,
as amended.
6
The following shows the effect on net income and earnings per share if
Whitney had applied the provisions of SFAS No. 123 to measure and recognize
stock-based compensation expense for all awards.
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Three Months Ended June 30 Six Months Ended June 30
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(dollars in thousands, except per share data) 2003 2002 2003 2002
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Net income $23,750 $23,785 $47,220 $45,877
Stock-based compensation expense included
in net income, net of related tax effects 797 777 1,843 1,700
Stock-based compensation expense determined
under SFAS No. 123, net of related tax effects (3,373) (3,598) (4,385) (4,221)
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Pro forma net income $21,174 $20,964 $44,678 $43,356
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Earnings per share:
Basic - as reported $.60 $.60 $1.19 $1.15
Basic - pro forma .53 .53 1.12 1.09
Diluted - as reported .59 .59 1.17 1.14
Diluted - pro forma .52 .52 1.11 1.08
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Weighted-average fair value of options awarded $6.55 $7.91 $6.55 $7.91
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The fair values of the stock options were estimated as of the grant
dates using the Black-Sholes option-pricing model. The estimated option value
totaled $3.0 million for the 2003 award and $3.4 million for the 2002 award. If
expensed, the after-tax impact would have been to reduce net income by $2.6
million in 2003 and $3.0 million in 2002. The full impact is reflected in both
the quarterly and year-to-date pro forma information in the table above. The
Company made the following significant assumptions in applying the
option-pricing model: (a) an expected annualized volatility for Whitney's common
stock of 25.55% in 2003 and 25.25% in 2002; (b) an average option life of seven
years; (c) an expected annual dividend yield of 3.56% in 2003 and 3.44% in 2002;
and (d) a weighted-average risk-free interest rate of 3.01% in 2003 and 4.94% in
2002.
NOTE 4 - CONTINGENCIES
The Company and its subsidiaries are parties to various legal
proceedings arising in the ordinary course of business. After reviewing pending
and threatened actions with legal counsel, management believes that the ultimate
resolution of these actions will not have a material effect on Whitney's
financial condition, results of operations or cash flows.
NOTE 5 - OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS AND GUARANTEES
To meet the financing needs of its customers, the Bank issues financial
instruments which represent conditional obligations that are not recognized on
the consolidated balance sheets. These financial instruments include commitments
to extend credit under loan facilities and guarantees under standby and other
letters of credit. Such instruments expose the Bank to varying degrees of credit
and interest rate risk in much the same way as funded loans.
Commitments under loan facilities, including credit card and related
lines, obligate the Bank to make loans to customers as long as there is no
violation of the conditions established in the underlying contracts. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Substantially all of the letters of credit are
7
standby agreements that obligate the Bank to fulfill a customer's financial
commitments to a third party if the customer is unable to perform. The Bank
issues standby letters of credit primarily to provide credit enhancement to its
customers' commercial or public financing arrangements and to help customers
demonstrate the financial capacity required to obtain essential goods and
services, such as insurance services. The majority of standby letters of credit
at June 30, 2003 have a term of one year or less.
The Bank's exposure to credit losses from these financial instruments
is represented by their contractual amounts. Because loan commitments and
letters of credit may, and many times do, expire without being drawn upon,
however, the contractual amounts should not be understood to represent expected
future funding requirements. The Bank follows its standard credit policies in
making loan commitments and issuing letters of credit and requires collateral
support if warranted. The collateral required could include cash instruments,
marketable securities, accounts receivable, inventory, property, plant and
equipment, and income-producing commercial property.
A summary of off-balance-sheet financial instruments follows:
June 30 December 31
(dollars in thousands) 2003 2002
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Commitments to extend credit $1,542,989 $1,532,160
Standby and other letters of credit 303,561 263,220
Credit card and related lines 357,404 338,463
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NOTE 6 - 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 Six Months Ended
June 30 June 30
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(dollars in thousands) 2003 2002 2003 2002
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Net income $23,750 $23,785 $47,220 $45,877
Other comprehensive income:
Unrealized holding gain (loss) on securities,
net of reclassification adjustments and taxes (855) 14,556 (3,113) 9,517
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Comprehensive income $22,895 $38,341 $44,107 $55,394
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8
NOTE 7 - ACCOUNTING PRONOUNCEMENTS
In May 2003, the Financial Accounting Standards Board (FASB) issued
SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics
of both Liabilities and Equity." The issuer of financial instruments that fall
within the scope of this statement, many of which were previously classified as
equity, must now classify these financial instruments as liabilities (or assets
in certain circumstances). Such instruments include equity shares with mandatory
redemption features, and instruments, other than outstanding equity shares, that
represent an obligation to repurchase equity shares or an obligation that must
or may be settled by issuing a variable number of equity shares. Whitney has
issued no financial instruments that fall within the scope of SFAS No. 150.
In late 2002 and early 2003 the FASB issued two interpretations of
existing accounting principles. FASB Interpretation (FIN) No. 45 elaborated on
disclosures an entity should make about its obligations under certain guarantees
and clarified that a guarantor should recognize a liability for the fair value
of the obligations when a guarantee is first issued. The only significant
guarantees issued by Whitney that have been identified as subject to the
guidance in FIN No. 45 are its standby letters of credit. Note 5 provides
information, including the FIN No. 45 disclosures, on these and other guarantees
and off-balance-sheet financial instruments. The requirement to recognize a
liability was effective for those guarantees issued or modified beginning in
2003. Given the current volume and type of guarantees issued, the liability
recorded at June 30, 2003 was insignificant.
FIN No. 46 was issued in response to perceived weaknesses in the
accounting for special-purpose entities, in particular the possibility that a
controlling financial interest in such an entity might not result in
consolidation of the entity with the holder of the interest. The specific
entities to which FIN No. 46 refers are called "variable interest entities," and
the interpretation explains how to identify a variable interest entity and how
an enterprise should assess its interest in such an entity to decide whether
consolidation is appropriate. Whitney has no interests that would require
consolidation under the guidance of FIN No. 46.
9
WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(Unaudited)
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Second First Second Six Months Ended
Quarter Quarter Quarter June 30
(dollars in thousands, except per share data) 2003 2003 2002 2003 2002
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QUARTER-END BALANCE SHEET DATA
Total assets $7,284,531 $7,183,424 $6,909,293 $7,284,531 $6,909,293
Earning assets 6,714,784 6,656,438 6,397,054 6,714,784 6,397,054
Loans 4,628,728 4,525,436 4,283,134 4,628,728 4,283,134
Investment in securities 2,009,226 2,000,804 1,875,855 2,009,226 1,875,855
Deposits 5,960,436 5,896,760 5,633,757 5,960,436 5,633,757
Shareholders' equity 825,610 812,551 758,533 825,610 758,533
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AVERAGE BALANCE SHEET DATA
Total assets $7,191,244 $7,074,196 $6,986,870 $7,133,044 $7,114,101
Earning assets 6,686,717 6,550,281 6,460,942 6,618,877 6,575,132
Loans 4,564,160 4,461,849 4,344,882 4,513,287 4,372,475
Investment in securities 1,997,090 1,975,563 1,863,359 1,986,387 1,779,891
Deposits 5,898,219 5,762,353 5,757,493 5,830,662 5,854,195
Shareholders' equity 824,584 811,347 745,352 818,002 738,275
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INCOME STATEMENT DATA
Interest income $84,385 $86,037 $94,674 $170,422 $190,357
Interest expense 11,863 13,243 19,500 25,106 42,576
Net interest income 72,522 72,794 75,174 145,316 147,781
Net interest income (TE) 73,857 74,216 76,381 148,073 150,214
Provision for loan losses - 500 2,500 500 5,500
Noninterest income, excluding
securities transactions 23,126 21,495 20,220 44,621 40,589
Securities transactions - - 426 - 426
Noninterest expense 60,645 59,294 57,773 119,939 114,750
Net income 23,750 23,470 23,785 47,220 45,877
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KEY RATIOS
Return on average assets 1.32% 1.35% 1.37% 1.33% 1.30%
Return on average shareholders' equity 11.55 11.73 12.80 11.64 12.53
Net interest margin 4.43 4.57 4.74 4.50 4.59
Average loans to average deposits 77.38 77.43 75.46 77.41 74.69
Efficiency ratio 62.53 61.95 59.81 62.24 60.14
Allowance for loan losses to loans 1.43 1.46 1.67 1.43 1.67
Nonperforming assets to loans plus foreclosed
assets and surplus property .87 .98 .94 .87 .94
Net charge-offs (recoveries) to average loans (.03) .07 .23 .02 .25
Average shareholders' equity to average assets 11.47 11.47 10.67 11.47 10.38
Shareholders' equity to total assets 11.33 11.31 10.98 11.33 10.98
Leverage ratio 9.91 9.86 9.27 9.91 9.27
- ---------------------------------------------------------------------------------------------------------------------
COMMON SHARE DATA
Earnings Per Share
Basic $.60 $.59 $.60 $1.19 $1.15
Diluted .59 .58 .59 1.17 1.14
Dividends
Cash dividends per share $.30 $.30 $.27 $.60 $.54
Dividend payout ratio 50.93% 51.29% 45.37% 51.11% 46.90%
Book Value Per Share $20.48 $20.25 $18.97 $20.48 $18.97
Trading Data
High closing price $34.07 $34.39 $38.52 $34.39 $38.52
Low closing price 31.67 31.62 30.51 31.62 29.13
End-of-period closing price 32.00 34.20 30.74 32.00 30.74
Trading volume 8,201,397 6,344,880 8,115,882 14,546,277 11,073,984
Average Shares Outstanding
Basic 39,867,549 39,785,332 39,888,693 39,826,668 39,815,143
Diluted 40,360,070 40,216,355 40,176,705 40,288,610 40,070,570
- ---------------------------------------------------------------------------------------------------------------------
Tax-equivalent (TE) amounts are calculated using a marginal federal income tax rate of 35%.
The efficiency ratio is noninterest expense to total net interest (TE) and noninterest income,
excluding securities transactions.
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 second quarters of 2003 and 2002 and during the six-month periods
through June 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 is intended to highlight and supplement information
presented elsewhere in this quarterly report on Form 10-Q, particularly the
consolidated financial statements and related notes in Item 1. This discussion
and analysis should be read in conjunction with the Company's 2002 annual report
on Form 10-K.
Certain financial information for prior periods has been reclassified
to conform to the current presentation.
OVERVIEW
Whitney earned $.60 per share in the second quarter of 2003, the same
as in the second quarter of 2002. Net income of $23.8 million for 2003's second
quarter was also essentially unchanged from the year-earlier period.
Year-to-date earnings in 2003 of $1.19 per share, or $47.2 million, were 3%
higher than year-to-date earnings in 2002 on both a per-share and dollar basis.
Selected highlights from the second quarter's results follow:
o Whitney's net interest income (TE) decreased 3%, or $2.5 million,
from the second quarter of 2002, as compression in the net
interest margin (TE) offset the impact of 3% growth in average
earning assets between these periods. Improvements in the mix of
both earning assets and funding sources offset some of the
pressure on the margin from the prevailing environment of
sustained low market rates.
o Whitney made no provision for loan losses in the second quarter of
2003, compared to a $.5 million provision in the first quarter of
2003 and a provision of $2.5 million in the second quarter of
2002. Credit quality statistics for the second quarter of 2003
were generally favorable. The allowance for loan losses was little
changed from year-end 2002 in dollar terms and decreased slightly
as a percentage of loans, to 1.43%, reflecting recent portfolio
growth.
o Noninterest income, excluding securities transactions, increased
14%, or $2.9 million, from the second quarter of 2002. Income from
secondary mortgage market operations, which increased 61%, or $1.1
million, was the major contributor from recurring sources, as low
rates continued to stimulate the refinancing of home mortgages and
sustain demand for new home purchases. Whitney also recognized a
$1.4 million gain on the sale of loans originated under
affordable-housing programs in 2003's second quarter.
o Noninterest expense increased 5%, or $2.9 million, from the second
quarter of 2002. Total personnel expense was up 12%, or $3.7
million, reflecting, in part, higher levels of incentive pay and a
rise in the cost of retirement benefits. Most other major expense
categories compared favorably with the second quarter of 2002.
11
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 about future changes in the mix
of deposits, (b) statements of the results of net interest income simulations
run by the Company to measure interest rate sensitivity, (c) comments about the
performance of Whitney's net interest income and net interest margin assuming
certain future conditions, (d) discussion of the settlement of a dispute between
Visa USA and merchants and its expected impact on Whitney, (e) comments about
possible future levels of income from secondary mortgage market operations, and
(f) comments on changes or trends in expense levels for retirement benefits and
for equipment and data processing.
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.
12
FINANCIAL CONDITION
LOANS AND ALLOWANCE FOR LOAN LOSSES
Total loans increased $173 million, or close to 4%, from year-end 2002
to the end of 2003's second quarter, and were up 8%, or $345 million, from the
end of 2002's second quarter. During the latter half of 2002 and continuing into
2003, the commercial loan portfolio has shown some steady growth, with strong
support from new customer development. Partly offsetting this growth was a
decrease in the residential mortgage loan portfolio, prompted by refinancing
activity and management's continuing decision to sell most current production in
the secondary market. At the end of 2002, management also decided to market a
portfolio of affordable-housing loans, reclassifying this portfolio as held for
sale.
Table 2, which is based on regulatory reporting codes, shows loan
balances at June 30, 2003 and at the end of the four prior quarters.
TABLE 2. LOANS
- -------------------------------------------------------------- -----------------------------------------------
2003 2002
- -------------------------------------------------------------- -----------------------------------------------
(dollars in thousands) June 30 March 31 December 31 September 30 June 30
- -----------------------------------------------------------------------------------------------------------------
Commercial, financial and
agricultural loans $2,022,159 $1,957,036 $1,917,859 $1,813,474 $1,719,674
Real estate loans -
commercial and other 1,667,838 1,617,929 1,584,099 1,562,303 1,535,446
Real estate loans -
retail mortgage 615,742 630,519 638,703 683,669 706,905
Loans to individuals 322,989 319,952 314,751 313,880 321,109
- -----------------------------------------------------------------------------------------------------------------
Total loans $4,628,728 $4,525,436 $4,455,412 $4,373,326 $4,283,134
- -----------------------------------------------------------------------------------------------------------------
The portfolio of commercial loans, other than those secured by real
property, was up 5%, or $104 million, at June 30, 2003, compared to year-end
2002, and has grown 18%, or $302 million, from the end of the year-earlier
quarter. Overall the portfolio remained well-diversified, with customers in a
wide range of industries, including oil and gas exploration and production,
marine transportation, wholesale and retail trade in and manufacture of various
durable and nondurable products, financial services, and professional services.
There have been no major trends or changes in the concentration mix of this
portfolio category from year-end 2002. Outstanding loans to oil and gas industry
customers were approximately 9% of total loans at the end of 2003's second
quarter, the same as at year-end 2002. Whitney's customer base in this industry
mainly provides transportation and other services and products to support
exploration and production activities, but the Bank has recently seen increased
lending opportunities in the exploration and production sector.
Outstanding balances under participations in larger shared-credit loan
commitments totaled $324 million at the end of 2003's second quarter compared to
approximately $300 million at year-end 2002, including approximately $136
million and $118 million, respectively, related to the oil and gas industry.
Substantially all such shared credits are with customers operating in Whitney's
market area.
The commercial real estate portfolio, which includes loans secured by
properties used in commercial or industrial operations, grew 5%, or $84 million,
from December 31, 2002, and has increased 9%, or $132 million, since the end of
the second quarter of 2002. Whitney has been
13
able to develop new business in this highly competitive market, including
increased activity at its Houston operations. The growth achieved through new
business development has in part been offset by expected paydowns on and
permanent takeouts of seasoned projects.
The impact of refinancings and the continuing policy of selling most
retail mortgage production was evident in the 13%, or $91 million, decrease in
the retail mortgage loan portfolio from June 30, 2002. Increased promotion of
tailored mortgage products that are held in the portfolio helped limit the
decrease in this portfolio segment to $23 million from year-end 2002.
TABLE 3. SUMMARY OF ACTIVITY IN THE ALLOWANCE FOR LOAN LOSSES
- ---------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30 June 30
- ---------------------------------------------------------------------------------------------------------------
(dollars in thousands) 2003 2002 2003 2002
- ---------------------------------------------------------------------------------------------------------------
Balance at the beginning of period $65,878 $71,669 $66,115 $71,633
Provision for loan losses charged to operations - 2,500 500 5,500
Loans charged to the allowance:
Commercial, financial and agricultural (3,677) (1,617) (4,818) (4,623)
Real estate - commercial and other (298) (811) (298) (1,095)
Real estate - retail mortgage (186) (457) (323) (535)
Individuals (689) (786) (1,417) (1,782)
- ---------------------------------------------------------------------------------------------------------------
Total charge-offs (4,850) (3,671) (6,856) (8,035)
- ---------------------------------------------------------------------------------------------------------------
Recoveries of loans previously charged off:
Commercial, financial and agricultural 787 579 1,134 1,193
Real estate - commercial and other 2,358 86 2,639 294
Real estate - retail mortgage 1,667 47 1,747 175
Individuals 403 457 964 907
- ---------------------------------------------------------------------------------------------------------------
Total recoveries 5,215 1,169 6,484 2,569
- ---------------------------------------------------------------------------------------------------------------
Net (charge-offs) recoveries 365 (2,502) (372) (5,466)
- ---------------------------------------------------------------------------------------------------------------
Balance at the end of period $66,243 $71,667 $66,243 $71,667
- ---------------------------------------------------------------------------------------------------------------
Ratios:
Net annualized charge-offs (recoveries)
to average loans (.03)% .23% .02% .25%
Gross annualized charge-offs to average loans .43 .34 .30 .37
Recoveries to gross charge-offs 107.53 31.84 94.57 31.97
Allowance for loan losses to loans at period end 1.43 1.67 1.43 1.67
- ---------------------------------------------------------------------------------------------------------------
Each loan carries a degree of credit risk. Management's evaluation of
this risk is ultimately reflected in its 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. At June 30, 2003, the
allowance for loan losses was $66.2 million, little changed from the end of
2002. The allowance was 1.43% of total loans at the end of 2003's second
quarter, compared to 1.48% at year-end 2002, with the small decrease largely
attributable to recent loan growth. Table 3 above compares second quarter 2003
activity in the allowance for loan losses with the second quarter of 2002 and
also compares six-month activity for each year.
14
Credit quality statistics for the second quarter of 2003 were generally
favorable. There was a small net recovery of $.4 million in the second quarter
of 2003, when a $4.0 million recovery on a group of related loans that had been
fully charged off in the third quarter of 2002 helped offset an additional $2.5
million charge-off taken on a longstanding problem credit with diminishing
prospects of collection. Net charge-offs reported in the first quarter of 2003
and 2002's second quarter, totaled $.7 million and $2.5 million, respectively.
Criticized loans totaled $198 million at June 30, 2003, up $5 million
from year-end 2002, but $20 million below the level at March 31, 2003 and $37
million below the total a year earlier. Loans with well-defined weaknesses or
for which full repayment is doubtful decreased approximately $3 million in total
from the end of 2002, including a $.6 million reduction in the second quarter of
2003, and were $18 million below the level at June 30, 2002. Loans with
indications of potential weaknesses and warranting special attention increased
close to $8 million from year-end 2002, but were down approximately $20 million
from both March 31, 2003 and June 30, 2002. Criticized loans at June 30, 2003
included $66 million of loans warranting special attention, $116 million of
loans identified as having well-defined weaknesses that would likely result in
some loss if not corrected, and $16 million of loans whose full repayment is in
doubt.
TABLE 4. NONPERFORMING ASSETS
- ------------------------------------------------------------------------------------------------------------------
2003 2002
- --------------------------------------------------------------------------- --------------------------------------
June March December September June
(dollars in thousands) 30 31 31 30 30
- --------------------------------------------------------------------------- --------------------------------------
Loans accounted for on a nonaccrual basis $35,622 $41,050 $37,959 $38,663 $37,442
Restructured loans 224 243 336 347 358
- -----------------------------------------------------------------------------------------------------------------
Total nonperforming loans 35,846 41,293 38,925 39,010 37,800
Foreclosed assets and surplus property 4,556 3,283 3,854 2,543 2,340
- --------------------------------------------------------------------------- --------------------------------------
Total nonperforming assets $40,402 $44,576 $42,149 $41,553 $40,140
- --------------------------------------------------------------------------- --------------------------------------
Loans 90 days past due still accruing $3,445 $3,926 $5,817 $9,532 $9,390
- --------------------------------------------------------------------------- --------------------------------------
Ratios:
Nonperforming assets to loans
plus foreclosed assets and surplus property .87% .98% .95% .95% .94%
Allowance for loan losses to
nonperforming loans 184.80 159.54 172.65 174.93 189.60
Loans 90 days past due still accruing to
loans .07 .09 .13 .22 .22
- ------------------------------------------------------------------------------------------------------------------
Table 4 above shows total nonperforming assets at June 30, 2003 and at
the end of the preceding four quarters. Nonperforming assets have fluctuated
within a relatively tight range over this period, both in dollars and as a
percentage of loans plus foreclosed assets. Nonperforming loans, which are
included in the criticized loan total discussed above and encompass
substantially all loans separately evaluated for impairment, decreased $2.4
million from the end of 2002 and were down more than $5 million from the end of
2003's first quarter. The allowance required for impaired loans at June 30,
2003, was $1.3 million below the level determined at both March 31, 2003 and
December 31, 2002. There have been no significant trends relating to industries
or markets underlying the changes in nonperforming and criticized loans.
15
INVESTMENT IN SECURITIES
At June 30, 2003, total securities were $2.01 billion, compared to
$1.98 billion at December 31, 2002 and $1.88 billion at June 30, 2002. During
2002, management directed excess liquidity from strong deposit flows and
restrained loan demand to the investment portfolio, particularly to
mortgage-backed securities with relatively short duration. With continued demand
for deposit products and some recent steady growth in the loan portfolio, the
investment portfolio has been maintained at a fairly stable level during 2003.
Mortgage-backed securities grew to 60% of the total portfolio at the end of
2003's second quarter from 58% at the end of 2002's second quarter. Short-term
liquidity investments, including federal funds sold, totaled $11 million at the
end of 2003's second quarter, compared to $221 million at June 30, 2002.
Securities available for sale constituted 90% of the total investment
portfolio at June 30, 2003. The quarter-end net unrealized gain on this
portfolio segment totaled $41 million, or 2.3% of amortized cost, slightly lower
than the net unrealized gain of $46 million, or 2.7% of amortized cost, at
year-end 2002.
The Company does not normally maintain a trading portfolio, although
the Bank holds generally immaterial balances of trading account securities for
short periods while buying and selling securities for customers. Such securities
are included in other assets in the consolidated balance sheets. The June 30,
2003 total for trading account securities was $61 million, reflecting a customer
transaction that was completed the following day.
DEPOSITS AND BORROWINGS
At June 30, 2003, deposits were 3%, or $178 million, above the level at
December 31, 2002. Many of the factors that prompted the increased availability
of deposit funds in 2001 and 2002 continued to influence customer behavior in
the first half of 2003. Compared to the year-earlier quarter, average deposits
were up 2%, or $141 million, in the second quarter of 2003. Short-term and other
borrowings, the major part of which represent liabilities under repurchase
agreements with customers, decreased 2%, or $8 million, from year-end 2002, and
were down 3% on average for the second quarter of 2003 compared to the
year-earlier quarter.
Deposit pricing strategies implemented during 2002 and sustained demand
for deposit products helped improve the mix of deposits throughout that year,
and these improvements have been preserved in 2003. Higher-cost time deposits
for the second quarter of 2003 were 8%, or $137 million, below 2002's second
quarter on average, with some funds flowing to other deposit products. Total
lower-cost deposits increased 7%, or $278 million, on average, with
noninterest-bearing demand deposits up 8%, or $125 million, and deposits in
lower-cost interest-bearing products up 6%, or $153 million.
Average money market deposits grew 5%, or $71 million, compared to
2002's second quarter; and regular savings deposits were up 7%, or $37 million,
at least temporarily continuing the reversal of a trend away from this more
traditional deposit product. NOW account deposits increased 7%, or $45 million
on average. The maturity of approximately $519 million of time deposits in the
third quarter of 2003 could contribute to further shifts in the mix of deposits.
16
SHAREHOLDERS' EQUITY AND CAPITAL ADEQUACY
At June 30, 2003, shareholders' equity totaled $826 million compared to
$800 million at year-end 2002. The main factor in this increase was earnings,
net of dividends declared, of approximately $23 million. The dividend payout
ratio of 51% for the first half of 2003 was up slightly from 47% for the full
year in 2002.
The ratios in Table 5 indicate that the Company remained strongly
capitalized at June 30, 2003. The increase in risk-weighted assets since
year-end 2002 mainly reflects loan growth.
TABLE 5. RISK-BASED CAPITAL AND CAPITAL RATIOS
- --------------------------------------------------------------------------------------------
June 30 December 31
(dollars in thousands) 2003 2002
- --------------------------------------------------------------------------------------------
Tier 1 regulatory capital $703,399 $672,408
Tier 2 regulatory capital 66,243 66,115
- --------------------------------------------------------------------------------------------
Total regulatory capital $769,642 $738,523
- --------------------------------------------------------------------------------------------
Risk-weighted assets $5,488,663 $5,301,764
- --------------------------------------------------------------------------------------------
Ratios
Leverage (Tier 1 capital to average assets) 9.91% 9.76%
Tier 1 capital to risk-weighted assets 12.82 12.68
Total capital to risk-weighted assets 14.02 13.93
Shareholders' equity to total assets 11.33 11.28
- --------------------------------------------------------------------------------------------
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.
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. Whitney develops its liquidity management strategies
and measures and monitors liquidity risk as part of its overall asset/liability
management process.
On the liability side, liquidity management focuses on growing the base
of more 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 second quarter of 2003. 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 six months of 2003 and 2002.
The Bank had over $1.5 billion in unfunded loan commitments, excluding
personal credit lines, outstanding at June 30, 2003, an increase of $11 million
from 2002's year-end. Note 5 details these and other unfunded commitments at
June 30, 2003 and December 31, 2002. Because loan
17
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 running net interest income simulations.
The net interest income simulations run at the end of 2003's second quarter
indicated that Whitney continued to be moderately asset sensitive over the near
term, similar to its position at year-end 2002 and throughout that year. Based
on these simulations, annual net interest income (TE) would be expected to
increase $16 million, or 5.6%, and decrease $13 million, or 4.6%, if interest
rates instantaneously increased or decreased, respectively, from current rates
by 100 basis points. These changes are measured against the results of a base
simulation run that uses current growth forecasts and assumes a stable rate
environment and structure. The comparable simulation run at year-end 2002
produced results that ranged from a positive impact on net interest income (TE)
of $13 million, or 4.3%, to a negative impact of $15 million, or 4.9%. The
actual impact of changing interest rates on net interest income is dependent on
many factors. These include Whitney's ability to achieve growth in earning
assets and maintain a desired mix of earning assets and interest-bearing
liabilities, the actual timing 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.
18
RESULTS OF OPERATIONS
NET INTEREST INCOME
Net interest income (TE) for the second quarter of 2003 decreased 3%,
or $2.5 million, from the second quarter of 2002, as compression in the net
interest margin (TE) offset the impact of growth in average earning assets
between these periods. Second quarter net interest income (TE) in 2003 was down
less than 1% compared with the first quarter of 2003.
As discussed earlier, Whitney is moderately asset sensitive, which
implies that it would experience some compression in its net interest margin in
a declining rate environment, holding other factors constant. The net interest
margin is net interest income (TE) as a percent of average earning assets.
Although Whitney's net interest margin (TE) remained a healthy 4.43% in 2003's
second quarter, this was down 31 basis points from the year-earlier quarter and
14 basis points from the first quarter of 2003. Sustained low interest rates
will continue to put pressure on net interest margins throughout the banking
industry and pose challenges to improving banks' net interest income. Tables 6
and 7 show the components of changes in the Company's net interest income and
net interest margin.
The prevailing environment of low market rates lowered both funding
costs and asset yields in the first half of 2003 as it had throughout 2002.
Funding costs decreased 50 basis points between the second quarters of 2002 and
2003, reflecting deposit pricing strategies implemented in response to market
conditions and some favorable shift in the mix of funds to lower-cost and
noninterest-bearing sources. Consistent with a moderately lower market rate
environment, the rate on interest-bearing deposits other than time deposits
decreased by 44 basis points from the second quarter of 2002, and was down 11
basis points from 2003's first quarter. Because of their maturity structure, the
average rate on time deposits decreased further, falling 105 basis points below
the rate in 2002's second quarter, including a 24 basis point reduction from the
first quarter of 2003. In current market conditions, time deposit maturities
should lead to some further cost reductions in the third quarter of 2003.
Loan and investment portfolio yields also decreased this quarter as
expected, and the overall yield on average earning assets was 81 basis points
lower than in 2002's second quarter. Both loan and investment yields were
impacted by the gradual repricing of fixed-rate instruments during this
sustained period of low rates. Pricing discipline on loans helped to limit the
decline in loan yields to 84 basis points in the current year's second quarter
as compared to the same period in 2002. Low market rates have also stimulated
home mortgage refinancing activity leading to significant prepayments and
additional repricing opportunities on mortgage-backed securities as well as
accelerated premium amortization on these securities. The 149 basis point
decline in the yield on mortgage-backed securities was the major factor behind
the overall 113 basis point decrease in the yield on the investment portfolio.
An improved earning asset mix helped moderate the decline in the overall earning
asset yield.
The 3% growth in average earning assets compared to the second quarter
of 2002 was concentrated in the loan portfolio. Average loans, including loans
held for sale, were 6% higher in the current quarter compared to the
year-earlier quarter, and grew to 69% of earning assets from 67% in the second
quarter of 2002. Investment securities increased to 30% of average earning
assets from 29% in the year-earlier period.
19
TABLE 6. SUMMARY OF AVERAGE BALANCE SHEETS, NET INTEREST INCOME(TE)(a) AND INTEREST RATES
- ------------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands) Second Quarter 2003 First Quarter 2003 Second Quarter 2002
- ------------------------------------------------------------------------------------------------------------------------------------
Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
EARNING ASSETS
Loans (TE)(b),(c) $4,615,620 $63,844 5.55% $4,521,129 $64,055 5.74% $4,357,118 $69,394 6.39%
- ------------------------------------------------------------------------------------------------------------------------------------
Mortgage-backed securities 1,198,002 12,417 4.15 1,163,458 13,688 4.71 1,066,158 15,023 5.64
U.S. agency securities 368,823 3,722 4.04 391,987 4,152 4.24 435,538 5,643 5.18
U.S. Treasury securities 197,629 1,872 3.80 176,932 1,613 3.70 159,763 1,637 4.11
Obligations of states and political
subdivisions (TE) 186,749 3,147 6.74 191,651 3,247 6.78 145,999 2,532 6.94
Other securities 45,887 486 4.24 51,535 543 4.21 55,901 621 4.44
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment in securities 1,997,090 21,644 4.34 1,975,563 23,243 4.71 1,863,359 25,456 5.47
- ------------------------------------------------------------------------------------------------------------------------------------
Federal funds sold and
short-term investments 74,007 232 1.25 53,589 161 1.22 240,465 1,031 1.72
- ------------------------------------------------------------------------------------------------------------------------------------
Total earning assets 6,686,717 $85,720 5.14% 6,550,281 $87,459 5.39% 6,460,942 $95,881 5.95%
- ------------------------------------------------------------------------------------------------------------------------------------
NONEARNING ASSETS
Other assets 571,934 590,508 598,456
Allowance for loan losses (67,407) (66,593) (72,528)
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $7,191,244 $7,074,196 $6,986,870
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND
SHAREHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES
NOW account deposits $ 698,456 $ 820 .47% $ 687,573 $ 893 .53% $ 653,014 $ 1,183 .73%
Money market deposits 1,403,139 3,143 .90 1,381,507 3,599 1.06 1,332,376 4,920 1.48
Savings deposits 553,511 655 .47 538,379 742 .56 516,484 1,038 .81
Other time deposits 813,893 3,793 1.87 834,169 4,385 2.13 933,329 6,986 3.00
Time deposits $100,000 and over 689,112 2,740 1.60 662,523 2,924 1.79 707,128 4,407 2.50
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 4,158,111 11,151 1.08 4,104,151 12,543 1.24 4,142,331 18,534 1.79
- ------------------------------------------------------------------------------------------------------------------------------------
Short-term and other borrowings 408,410 712 .70 439,948 700 .65 422,461 966 .92
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing
liabilities 4,566,521 $11,863 1.04% 4,544,099 $13,243 1.18% 4,564,792 $19,500 1.71%
- ------------------------------------------------------------------------------------------------------------------------------------
NONINTEREST-BEARING
LIABILITIES AND
SHAREHOLDERS' EQUITY
Demand deposits 1,740,108 1,658,202 1,615,162
Other liabilities 60,031 60,548 61,564
Shareholders' equity 824,584 811,347 745,352
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and
shareholders' equity $7,191,244 $7,074,196 $6,986,870
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income and margin (TE) $73,857 4.43% $74,216 4.57% $76,381 4.74%
Net earning assets and spread $2,120,196 4.10% $2,006,182 4.21% $1,896,150 4.24%
Interest cost of funding earning assets .71% .82% 1.21%
- ------------------------------------------------------------------------------------------------------------------------------------
(a) Tax-equivalent (TE) amounts are calculated using a marginal federal income tax rate of 35%.
(b) Includes loans held for sale.
(c) Average balance includes nonaccruing loans of $39,189, $38,050 and $38,902 respectively, in the second and first quarters of
2003 and the second quarter of 2002.
20
TABLE 6. SUMMARY OF AVERAGE BALANCE SHEETS, NET INTEREST INCOME(TE)(a)
AND INTEREST RATES (continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Ended Six Months Ended
(dollars in thousands) June 30, 2003 June 30, 2002
- ------------------------------------------------------------------------------------------------------------------------------------
Average Average
Balance Interest Rate Balance Interest Rate
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
EARNING ASSETS
Loans (TE)(b),(c) $4,568,636 $127,899 5.64% $4,391,076 $140,047 6.43%
- ------------------------------------------------------------------------------------------------------------------------------------
Mortgage-backed securities 1,180,826 26,105 4.42 976,559 27,856 5.70
U.S. agency securities 380,342 7,874 4.14 459,262 12,002 5.23
U.S. Treasury securities 187,338 3,485 3.75 139,028 2,957 4.29
Obligations of states and political
subdivisions (TE) 189,186 6,394 6.76 151,022 5,274 6.98
Other securities 48,695 1,029 4.23 54,020 1,204 4.46
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment in securities 1,986,387 44,887 4.52 1,779,891 49,293 5.54
- ------------------------------------------------------------------------------------------------------------------------------------
Federal funds sold and
short-term investments 63,854 393 1.24 404,165 3,450 1.72
- ------------------------------------------------------------------------------------------------------------------------------------
Total earning assets 6,618,877 $173,179 5.26% 6,575,132 $192,790 5.90%
- ------------------------------------------------------------------------------------------------------------------------------------
NONEARNING ASSETS
Other assets 581,169 611,663
Allowance for loan losses (67,002) (72,694)
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $7,133,044 $7,114,101
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND
SHAREHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES
NOW account deposits $ 693,045 $ 1,713 .50% $ 735,101 $ 3,308 .91%
Money market deposits 1,392,383 6,742 .98 1,315,363 10,103 1.55
Savings deposits 545,986 1,397 .52 508,980 2,044 .81
Other time deposits 823,975 8,178 2.00 957,430 15,457 3.26
Time deposits $100,000 and over 675,891 5,664 1.69 730,709 9,569 2.64
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 4,131,280 23,694 1.16 4,247,583 40,481 1.92
- ------------------------------------------------------------------------------------------------------------------------------------
Short-term and other borrowings 424,092 1,412 .67 458,870 2,095 .92
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 4,555,372 $ 25,106 1.11% 4,706,453 $ 42,576 1.82%
- ------------------------------------------------------------------------------------------------------------------------------------
NONINTEREST-BEARING
LIABILITIES AND
SHAREHOLDERS' EQUITY
Demand deposits 1,699,382 1,606,612
Other liabilities 60,288 62,761
Shareholders' equity 818,002 738,275
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and
shareholders' equity $7,133,044 $7,114,101
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income and margin (TE) $148,073 4.50% $150,214 4.59%
Net earning assets and spread $2,063,505 4.15% $1,868,679 4.08%
Interest cost of funding earning assets .76% 1.31%
- ------------------------------------------------------------------------------------------------------------------------------------
(a) Tax-equivalent (TE) amounts are calculated using a marginal federal income tax rate of 35%.
(b) Includes loans held for sale.
(c) Average balance includes nonaccruing loans of $38,623 and $36,781, respectively, in the first six months of 2003 and 2002.
21
TABLE 7. SUMMARY OF CHANGES IN NET INTEREST INCOME(TE)(a),(b)
- ------------------------------------------------------------------------------------------------------------------------------------
Second Quarter 2003 Compared to: Six Month Ended June 30,
First Quarter 2003 Second Quarter 2002 2003 Compared to 2002
---------------------------------------------------------------- ------------------------------
Due To Due To Due To
Change In Total Change In Total Change In Total
----------------- Increase ----------------- Increase ------------------ Increase
(dollars in thousands) Volume Rate (Decrease) Volume Rate (Decrease) Volume Rate (Decrease)
- ------------------------------------------------------------------------------------------------------------------------------------
INTEREST INCOME (TE)
Loans (TE) $1,592 $(1,803) $ (211) $4,010 $(9,560) $(5,550) $5,491 $(17,639) $(12,148)
- ------------------------------------------------------------------------------------------------------------------------------------
Mortgage-backed securities 395 (1,666) (1,271) 1,722 (4,328) (2,606) 5,195 (6,946) (1,751)
U.S. agency securities (239) (191) (430) (786) (1,135) (1,921) (1,868) (2,260) (4,128)
U.S. Treasury securities 194 65 259 368 (133) 235 933 (405) 528
Obligations of states and political
subdivisions (TE) (83) (17) (100) 690 (75) 615 1,295 (175) 1,120
Other securities (60) 3 (57) (107) (28) (135) (115) (60) (175)
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment in securities 207 (1,806) (1,599) 1,887 (5,699) (3,812) 5,440 (9,846) (4,406)
- ------------------------------------------------------------------------------------------------------------------------------------
Federal funds sold and
short-term investments 64 7 71 (574) (225) (799) (2,296) (761) (3,057)
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest income (TE) 1,863 (3,602) (1,739) 5,323 (15,484) (10,161) 8,635 (28,246) (19,611)
- ------------------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
NOW account deposits 14 (87) (73) 79 (442) (363) (180) (1,415) (1,595)
Money market deposits 56 (512) (456) 254 (2,031) (1,777) 562 (3,923) (3,361)
Savings deposits 20 (107) (87) 71 (454) (383) 140 (787) (647)
Other time deposits (104) (488) (592) (809) (2,384) (3,193) (1,934) (5,345) (7,279)
Time deposits $100,000 and over 113 (297) (184) (110) (1,557) (1,667) (673) (3,232) (3,905)
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 99 (1,491) (1,392) (515) (6,868) (7,383) (2,085) (14,702) (16,787)
- ------------------------------------------------------------------------------------------------------------------------------------
Short-term and other borrowings (52) 64 12 (31) (223) (254) (149) (534) (683)
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest expense 47 (1,427) (1,380) (546) (7,091) (7,637) (2,234) (15,236) (17,470)
- ------------------------------------------------------------------------------------------------------------------------------------
Change in net interest income(TE) $1,816 $(2,175) $ (359) $5,869 $(8,393) $(2,524) $10,869 $(13,010) $ (2,141)
- ------------------------------------------------------------------------------------------------------------------------------------
(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.
22
Sustained higher demand for deposit products and the implementation of
deposit pricing strategies had a favorable impact on the mix of funding sources
in the second quarter of 2003 compared to the year-earlier period.
Noninterest-bearing deposits funded 26% of average earning assets in the second
quarter of 2003, up from a healthy 25% in 2002's second quarter, and the funding
percentage of all noninterest-bearing sources rose to 32% from 29% in 2002's
second quarter. Lower-cost interest-bearing deposits supported 40% of earning
assets, up from 39% in the year-earlier period. Higher-cost sources of funds,
which include time deposits and short-term borrowings, declined to 29% of
average earning assets over this same period, from 32% in the second quarter of
2002.
For the first six months of 2003, net interest income (TE) decreased
1%, or $2.1 million, from the same period in 2002, while average earning assets
rose 1%. The net interest margin was 4.50% for the 2003 period and 4.59% for the
prior year's period. The yield on average earning assets decreased 64 basis
points, with the loan portfolio yield down 79 basis points and the rate earned
on the investment portfolio down 102 basis points. The total interest cost of
funding earning assets declined 55 basis points compared to the first six months
of 2002. The same factors that affected the mix and rates for earning assets and
funding sources in the second quarter of 2003 were evident for the year-to-date
period.
PROVISION FOR LOAN LOSSES
Whitney made no provision for loan losses in the second quarter of
2003, compared to provisions of $.5 million in the first quarter of 2003 and
$2.5 million in the second quarter of 2002. There was a small net recovery in
the second quarter of 2003, compared to net charge-offs of $.7 million in the
first quarter of 2003 and $2.5 million in 2002's second quarter.
For a more detailed discussion of changes in the allowance for loans
losses, nonperforming assets and general credit quality, see the earlier section
on Loans 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 $23.1
million for the second quarter of 2003, an increase of $2.9 million, or 14%,
from the second quarter of 2002.
Income from secondary mortgage market operations, which increased 61%,
or $1.1 million, was the major contributor from recurring sources. Whitney
functions essentially as a mortgage broker and its loan production volume has
benefited as low rates stimulated refinancing of home mortgages and sustained
demand for new home purchases. Loan production in the second quarter of 2003
reached a record level for recent years that should provide some support to this
income stream in 2003's third quarter.
Transactions from bank-issued debit cards continue to grow and drove
the 18%, or $.4 million, quarterly increase in the credit card income category
between 2002 and 2003. Whitney issues Visa credit and check cards to both
individuals and businesses. In the second quarter of 2003, Visa USA announced it
had reached a settlement in principle with merchants over a dispute that
centered on Visa's policy requiring merchants who honor its credit cards to also
accept its check or debit card product. Visa USA has agreed to reduce the Visa
debit interchange fee for five months starting August 2003, to modify this
"honor all cards" policy
23
beginning in January 2004, and to make a cash settlement to the merchants. The
impact of the interchange fee reduction will offset much of the expected annual
growth in Whitney's debit card revenue for 2003. Revenues under the new fee
structure will be approximately 30% less than under the current fee structure
over the affected period in 2003. Whitney's debit interchange revenue totaled
$1.3 million in the second quarter of 2003 and $4.4 million for all of 2002. The
modified policy will allow merchants to choose whether or not to accept Visa
debit cards. Although the implementation of this policy is not expected to
significantly impact transaction volumes, it will likely lead to lower
interchange fees relative to current levels in future years.
At the end of 2002, management decided to market a portfolio of
seasoned loans originated under affordable-housing programs and reclassified
these loans as held for sale at that time. During the second quarter of 2003,
Whitney completed the sale of this $23 million portfolio, recognizing a gain of
$1.4 million. Excluding this gain, second quarter other noninterest income
increased 13%, or $.6 million, between 2002 and 2003, with contributions from
several sources, including fees on unused loan commitments and investment
services income.
Service charges from deposit accounts were 3%, or $.3 million, lower in
the second quarter of 2003, as the bank saw reduced charging opportunities on
both commercial and personal accounts. Trust service fees declined 12%, or $.3
million, compared to the second quarter of 2002, but have stabilized in recent
periods with improving capital market valuations.
Noninterest income, excluding securities transactions, was $44.6
million through the first six months of this year, an increase of $4.0 million,
or 10%, from the first half of 2002. Year-to-date changes in individual income
categories from the prior year were consistent with the quarterly changes
discussed above and were driven by substantially the same factors.
NONINTEREST EXPENSE
Total noninterest expense of $60.6 million in the second quarter of
2003 was $2.9 million, or 5%, higher than the total for the year-earlier period.
Total personnel expense increased 12%, or $3.7 million, while most other major
expense categories compared favorably with the second quarter of 2002.
Underlying the rise in total personnel expense were a 7%, or $1.8
million, increase in employee compensation, and a 33%, or $1.9 million, increase
in employee benefits. Although base pay increased approximately 3%, or close to
$.7 million, targeted employee incentive pay rose more sharply, mainly
reflecting the impact of higher loan production volumes on retail mortgage
origination incentives. Management incentive plan expense, which includes
certain stock-based compensation, increased 10%, or $.3 million.
An increase of $1.0 million in defined benefit pension plan expense and
a $.4 million increase in the cost of providing health benefits to retirees were
the main components of the overall rise in employee benefits expense. 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. Declines in market yields and negative trends in actual benefit
outlays will also have an unfavorable impact on actuarial valuation results for
postretirement health benefits. All of these conditions were present in 2002.
For each of the last two quarters of 2003, the combined expense of providing
these retirement benefits will be $.8 million higher than the comparable period
in 2002. The annual increase will be a combined $4.1 million. The Company has
also
24
experienced an expected increase in the cost of providing current health
benefits in 2003, with the second quarter up 12% from the year-earlier period.
Benefits from the elimination of underutilized facilities helped limit
the increase in occupancy expense to less than 1%, although several new or
replacement branches are scheduled to open in the second half of 2003, including
three locations to serve the Houston market.
Equipment and data processing expense in the second quarter of 2003 was
6%, or $.3 million, below the level in the year-earlier quarter, reflecting
mainly the beneficial impact of close control over capital expenditures in
recent years. The costs associated with applications and capabilities that have
been and will be added to support expanded customer services and enhanced
management tools will narrow and eventually eliminate this favorable
year-over-year comparison during the remaining quarters of 2003. Full-year
equipment and data processing expense for 2003 is expected to be little changed
from 2002.
The resolution of loan collection efforts that led to the $4.0 million
recovery discussed earlier helped reduce the expense for legal and professional
services in 2003's second quarter by 17%, or $.3 million, compared to the
year-earlier period. Corporate value and franchise taxes were also down
approximately $.3 million compared to the second quarter of 2002, reflecting in
part management's efforts to improve the efficiency of the Bank's capital
structure.
The expense categories included in other noninterest expense were up
less than 1% on a combined basis. The Company experienced a sharp jump in its
insurance premiums when certain coverages were renewed in an insurance market
much harder than was present at the beginning of the prior contract, which
covered a three-year policy term. The required amortization of new affordable
housing project investments was also a factor behind the increase in other
noninterest expense in 2003, while the related tax credits reduced income tax
expense as noted in the following section. The most significant reduction in
other noninterest expense was for advertising, partly associated with the
completion in 2002 of a two-year multi-faceted advertising campaign featuring a
celebrity spokesperson.
For the six-month period, noninterest expense totaled $120 million.
This was a 5%, or $5.2 million, increase compared to the first half of 2002.
Similar to the quarterly comparison, total personnel expense was up 11%, or $7.2
million, while most other major expense categories posted favorable results in
comparison to the year-earlier period.
Employee compensation rose 8%, or $4.0 million, as the increase in
targeted employee incentive compensation exceeded the 3% increase in base pay.
Employee benefits increased 30%, or $3.2 million, including the $2.3 million
increase in the cost of providing pension and postretirement health benefits.
The changes in other major noninterest expense categories between the
first six months of 2002 and 2003 were generally consistent with the
quarter-to-quarter changes and were influenced mainly by the same factors cited
in the discussion of quarterly results above.
25
INCOME TAXES
The Company provided for income tax expense at an effective rate of
32.15% in the second quarter of 2003 compared to a rate of 33.09% in the
year-earlier period. Year-to-date, the rate was 32.06% in 2003 and 33.07% in
2002. Whitney's effective tax 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. Additional investment in projects that
generate affordable housing credits helped lower the effective tax rate for the
quarterly and year-to-date periods in 2003.
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 included in Item 2.
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 Company's management, with the participation of the CEO and CFO,
has evaluated the effectiveness of the Company's disclosure controls and
procedures as of the end of the period covered by this quarterly report on Form
10-Q. Based on that evaluation, the CEO and CFO have concluded that the
disclosure controls and procedures as of the end of the period covered by this
quarterly report are effective. There were no changes in the Company's internal
control over financial reporting during the fiscal quarter covered by this
quarterly report that have materially affected, or are reasonably likely to
materially affect, the Company's internal control over financial reporting.
26
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
(a) The annual meeting of Whitney Holding Corporation's
shareholders was held on April 23, 2003.
(b),(c) Proxies for the meeting were solicited pursuant to Section
14(a) of the Securities and Exchange Act of 1934. There was no
solicitation in opposition to the nominees for election to the
Company's Board for Directors as listed in the proxy
statement.
The nominees for director, all of whom were elected, and the
voting results were as follows:
Nominee For Withhold
--------------------------------------------------------------
Michael L. Lomax 31,348,013 85,676
Dean E. Taylor 30,925,652 508,037
E. James Kock, Jr. 31,351,954 81,735
R. King Milling 31,350,960 82,729
John G. Phillips 31,346,627 87,062
Thomas D. Westfeldt 31,356,548 77,141
Item 5. Other Information
None
27
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
The exhibits listed on the accompanying Exhibit Index, located
on page 30, are filed (or furnished, as applicable) as part of this
report. This Exhibit Index is incorporated herein by reference in
response to this Item 6(a).
(b) Reports on Form 8-K
On a Form 8-K dated April 17, 2003, the registrant reported
under Items 5 and 12 the release of its financial results for the
quarter ended March 31, 2003. The news release covering the financial
results was filed as an exhibit under Item 7.
28
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
WHITNEY HOLDING CORPORATION
(Registrant)
By:/s/Thomas L. Callicutt, Jr.
------------------------------
Thomas L. Callicutt, Jr.
Executive Vice President and
Chief Financial Officer
(in his capacities as a duly
authorized officer of the
registrant and as
principal accounting officer)
August 14, 2003
---------------
Date
29
EXHIBIT INDEX
Exhibit Description
- -------------- --------------------------------------------------------------
Exhibit 3.1 Copy of the Company's Composite Charter (filed as Exhibit
3.1 to the Company's quarterly report on Form 10-Q for the
quarter ended September 30, 2000 (Commission file number
0-1026) and incorporated by reference).
Exhibit 3.2 Copy of the Company's Bylaws (filed as Exhibit 3.2 to the
Company's quarterly report on Form 10-Q for the quarter ended
September 30, 2000 (Commission file number 0-1026) and
incorporated by reference).
Exhibit 31.1 Certification by the Company's Chief Executive Officer
pursuant to Rule 13a-14(a) or Rule 15d-14(a), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2003.
Exhibit 31.2 Certification by the Company's Chief Financial Officer
pursuant to Rule 13a-14(a) or Rule 15d-14(a), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2003.
Exhibit 32 Certification by the Company's Chief Executive Officer and
Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
30
Exhibit 31.1
CERTIFICATION
-------------
I, William L. Marks, certify that:
1. I have reviewed this quarterly report on Form 10-Q for the period
ended June 30, 2003 of Whitney Holding Corporation;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such
evaluation; and
(c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonable likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
/s/William L. Marks
--------------------------
William L. Marks
Chief Executive Officer
Date: August 14, 2003
--------------------
31
Exhibit 31.2
CERTIFICATION
-------------
I, Thomas L. Callicutt, Jr., certify that:
1. I have reviewed this quarterly report on Form 10-Q for the period
ended June 30, 2003 of Whitney Holding Corporation;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such
evaluation; and
(c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonable likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
/s/Thomas L. Callicutt, Jr.
---------------------------
Thomas L. Callicutt, Jr.
Chief Financial Officer
Date: August 14, 2003
---------------------
32
Exhibit 32
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,
(1) the Company's Quarterly Report on Form 10-Q for the period ended
June 30, 2003 (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: August 14, 2003 By:/s/William L. Marks
--------------------- ----------------------------------
William L. Marks
Chairman of the Board and
Chief Executive Officer
Dated: August 14, 2003 By:/s/Thomas L. Callicutt, Jr.
--------------------- ----------------------------------
Thomas L. Callicutt, Jr.
Executive Vice President and
Chief Financial Officer
33