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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 September 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
----- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at October 31, 2003
----- -------------------------------
Common Stock, no par value 40,387,588
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 27
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Signature 28
Exhibit Index 29
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
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September 30 December 31
(dollars in thousands) 2003 2002
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ASSETS
Cash and due from financial institutions $ 282,619 $ 326,124
Federal funds sold and short-term investments 72,913 4,327
Loans held for sale 32,916 65,572
Investment in securities
Securities available for sale 1,766,695 1,773,591
Securities held to maturity, fair values of $211,414 and $209,506, respectively 205,480 202,107
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Total investment in securities 1,972,175 1,975,698
Loans, net of unearned income 4,669,536 4,455,412
Allowance for loan losses (61,401) (66,115)
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Net loans 4,608,135 4,389,297
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Bank premises and equipment 147,328 151,620
Goodwill 69,164 69,164
Other intangible assets 24,765 28,807
Accrued interest receivable 27,863 28,649
Other assets 72,463 58,623
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Total assets $ 7,310,341 $ 7,097,881
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LIABILITIES
Noninterest-bearing demand deposits $ 1,815,163 $ 1,692,939
Interest-bearing deposits 4,149,094 4,089,940
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Total deposits 5,964,257 5,782,879
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Short-term and other borrowings 449,374 453,415
Accrued interest payable 5,051 7,383
Accrued expenses and other liabilities 60,614 53,721
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Total liabilities 6,479,296 6,297,398
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SHAREHOLDERS' EQUITY
Common stock, no par value
Authorized - 100,000,000 shares
Issued - 40,354,170 and 40,067,783 shares, respectively 2,800 2,800
Capital surplus 177,433 167,235
Retained earnings 645,720 607,235
Accumulated other comprehensive income 14,456 30,104
Treasury stock at cost - -
Unearned restricted stock compensation (9,364) (6,891)
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Total shareholders' equity 831,045 800,483
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Total liabilities and shareholders' equity $ 7,310,341 $ 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 Nine Months Ended
September 30 September 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 $ 63,147 $ 67,742 $190,526 $207,202
Interest and dividends on investments
Mortgage-backed securities 11,382 14,258 37,487 42,114
U.S. agency securities 4,449 5,209 12,323 17,211
U.S. Treasury securities 1,980 1,588 5,465 4,545
Obligations of states and political subdivisions 2,225 1,622 6,382 5,050
Other securities 414 620 1,443 1,824
Interest on federal funds sold and short-term investments 259 789 652 4,239
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Total interest income 83,856 91,828 254,278 282,185
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INTEREST EXPENSE
Interest on deposits 8,875 16,932 32,569 57,413
Interest on short-term and other borrowings 698 932 2,110 3,027
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Total interest expense 9,573 17,864 34,679 60,440
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NET INTEREST INCOME 74,283 73,964 219,599 221,745
PROVISION FOR LOAN LOSSES (4,000) 1,500 (3,500) 7,000
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NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 78,283 72,464 223,099 214,745
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NONINTEREST INCOME
Service charges on deposit accounts 9,698 9,539 28,325 28,682
Secondary mortgage market operations 3,373 2,069 9,097 5,969
Credit card income 2,272 2,083 6,921 6,010
Trust service fees 1,997 2,130 6,104 6,732
Other noninterest income 5,335 6,474 16,849 15,491
Securities transactions 863 (15) 863 411
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Total noninterest income 23,538 22,280 68,159 63,295
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NONINTEREST EXPENSE
Employee compensation 29,096 27,242 85,226 79,399
Employee benefits 6,587 5,576 20,734 16,472
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Total personnel expense 35,683 32,818 105,960 95,871
Net occupancy expense 5,052 5,208 14,550 15,131
Equipment and data processing expense 4,444 4,510 12,967 14,491
Telecommunication and postage 2,221 2,140 6,366 6,192
Legal and professional fees 1,463 1,431 4,504 4,601
Corporate value and franchise taxes 1,727 1,894 5,253 5,683
Amortization of intangibles 1,290 1,461 4,042 4,384
Other noninterest expense 9,452 8,768 27,629 26,627
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Total noninterest expense 61,332 58,230 181,271 172,980
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INCOME BEFORE INCOME TAXES 40,489 36,514 109,987 105,060
INCOME TAX EXPENSE 12,987 12,198 35,265 34,867
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NET INCOME $ 27,502 $ 24,316 $ 74,722 $ 70,193
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EARNINGS PER SHARE
Basic $ .69 $ .61 $ 1.87 $ 1.76
Diluted .68 .60 1.85 1.75
WEIGHTED-AVERAGE SHARES OUTSTANDING
Basic 39,993,350 40,050,014 39,882,839 39,894,294
Diluted 40,383,047 40,244,282 40,320,434 40,129,111
CASH DIVIDENDS PER SHARE $ .30 $ .27 $ .90 $ .81
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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 - - 70,193 - - - 70,193
Other comprehensive income:
Unrealized net holding gain on
securities, net of reclassification
adjustments and taxes - - - 18,081 - - 18,081
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Total comprehensive income - - 70,193 18,081 - - 88,274
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Cash dividends, $.81 per share - - (32,321) - - - (32,321)
Stock issued to dividend reinvestment
and employee retirement plans - 1,065 - - - - 1,065
Long-term incentive plan stock activity:
Restricted grants and related activity - 3,923 - - (243) (1,961) 1,719
Options exercised - 5,312 - - 31 - 5,343
Directors' compensation plan
stock activity - 123 - - 212 - 335
Stock transactions, pooled entities - 287 - - - - 287
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Balance at September 30, 2002 $ 2,800 $ 165,107 $ 594,113 $ 28,185 $ - $ (7,615) $ 782,590
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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 - - 74,722 - - - 74,722
Other comprehensive income:
Unrealized net holding loss on
securities, net of reclassification
adjustments and taxes - - - (15,648) - - (15,648)
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Total comprehensive income - - 74,722 (15,648) - - 59,074
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Cash dividends, $.90 per share - - (36,237) - - - (36,237)
Stock issued to dividend reinvestment
and employee retirement plans - 832 - - 487 - 1,319
Long-term incentive plan stock activity:
Restricted grants and related activity - 6,460 - - (1,084) (2,473) 2,903
Options exercised - 2,481 - - 430 - 2,911
Directors' compensation plan
stock activity - 425 - - 167 - 592
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Balance at September 30, 2003 $ 2,800 $ 177,433 $ 645,720 $ 14,456 $ - $ (9,364) $ 831,045
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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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Nine Months Ended
September 30
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(dollars in thousands) 2003 2002
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OPERATING ACTIVITIES
Net income $ 74,722 $ 70,193
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization of bank premises and equipment 9,924 11,895
Amortization of purchased intangibles 4,042 4,384
Restricted stock compensation earned 4,276 3,733
Premium amortization (discount accretion), net 6,987 2,565
Provision for losses on loans and foreclosed assets (3,452) 7,074
Net gains on sales of foreclosed assets and surplus property (777) (1,216)
Net gains on sales of investment securities (863) (411)
Deferred tax benefit (769) (4)
Net decrease in loans originated and held for sale 5,195 32,467
Increase in accrued income taxes 3,591 359
Decrease in accrued interest receivable and prepaid expenses 1,741 1,570
Increase (decrease) in accrued interest payable and other accrued expenses 4,887 (2,960)
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Net cash provided by operating activities 109,504 129,649
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INVESTING ACTIVITIES
Proceeds from maturities of investment securities held to maturity 20,063 32,245
Purchases of investment securities held to maturity (23,819) -
Proceeds from maturities of investment securities available for sale 591,752 385,563
Proceeds from sales of investment securities available for sale 278,752 56,375
Purchases of investment securities available for sale (893,220) (669,581)
Net (increase) decrease in loans (187,453) 108,871
Net (increase) decrease in federal funds sold and short-term investments (68,586) 324,267
Proceeds from sales of foreclosed assets and surplus property 4,459 10,198
Purchases of bank premises and equipment (6,942) (5,577)
Other, net (12,051) 4,676
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Net cash provided by (used in) investing activities (297,045) 247,037
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FINANCING ACTIVITIES
Net increase (decrease) in transaction account and savings account deposits 228,776 (32,973)
Net decrease in time deposits (47,398) (227,315)
Net decrease in short-term and other borrowings (4,041) (88,075)
Proceeds from issuance of common stock 4,367 6,038
Purchases of common stock (1,528) (2,256)
Cash dividends (36,140) (32,089)
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Net cash provided by (used in) financing activities 144,036 (376,670)
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Increase (decrease) in cash and cash equivalents (43,505) 16
Cash and cash equivalents at beginning of period 326,124 271,512
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Cash and cash equivalents at end of period $ 282,619 $ 271,528
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Cash received during the period for:
Interest income $ 255,064 $ 285,369
Cash paid during the period for:
Interest expense $ 37,011 $ 67,194
Income taxes 31,600 33,100
Noncash investing activities:
Foreclosed assets received in settlement of loans $ 2,137 $ 2,652
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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 Nine Months Ended
September 30 September 30
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(dollars in thousands, except per share data) 2003 2002 2003 2002
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Numerator:
Net income $27,502 $24,316 $74,722 $70,193
Effect of dilutive securities - - - -
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Numerator for diluted earnings per share $27,502 $24,316 $74,722 $70,193
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Denominator:
Weighted-average shares outstanding 39,993,350 40,050,014 39,882,839 39,894,294
Effect of potentially dilutive securities
and contingently issuable shares 389,697 194,268 437,595 234,817
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Denominator for diluted earnings per share 40,383,047 40,244,282 40,320,434 40,129,111
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Earnings per share:
Basic $.69 $.61 $1.87 $1.76
Diluted .68 .60 1.85 1.75
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Antidilutive stock options 162,750 597,075 463,824 366,795
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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) Market Exercise
Shares Value Shares 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 for 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 Nine Months Ended
September 30 September 30
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(dollars in thousands, except per share data) 2003 2002 2003 2002
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Net income $27,502 $24,316 $74,722 $70,193
Stock-based compensation expense included
in net income, net of related tax effects 937 726 2,779 2,426
Stock-based compensation expense determined
under SFAS No. 123, net of related tax effects (803) (621) (5,189) (4,842)
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Pro forma net income $27,636 $24,421 $72,312 $67,777
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Earnings per share:
Basic - as reported $.69 $.61 $1.87 $1.76
Basic - pro forma .69 .61 1.81 1.70
Diluted - as reported .68 .60 1.85 1.75
Diluted - pro forma .68 .61 1.79 1.69
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Weighted-average fair value of options awarded $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. This impact is reflected in the
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, Whitney National Bank
(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 September 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:
September 30 December 31
(dollars in thousands) 2003 2002
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Commitments to extend credit $1,760,209 $1,532,160
Standby and other letters of credit 301,080 263,220
Credit card and related lines 383,520 338,463
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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 Nine Months Ended
September 30 September 30
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(dollars in thousands) 2003 2002 2003 2002
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Net income $27,502 $24,316 $74,722 $70,193
Other comprehensive income:
Unrealized holding gain (loss) on securities,
net of reclassification adjustments and taxes (12,535) 8,564 (15,648) 18,081
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Comprehensive income $14,967 $32,880 $59,074 $88,274
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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 September 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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Nine Months Ended
Third Second Third September 30
Quarter Quarter Quarter -----------------------------
(dollars in thousands, except per share data) 2003 2003 2002 2003 2002
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QUARTER-END BALANCE SHEET DATA
Total assets $7,310,341 $7,284,531 $6,965,871 $7,310,341 $6,965,871
Earning assets 6,747,540 6,714,784 6,424,172 6,747,540 6,424,172
Loans 4,669,536 4,628,728 4,373,326 4,669,536 4,373,326
Investment in securities 1,972,175 2,009,226 1,853,219 1,972,175 1,853,219
Deposits 5,964,257 5,960,436 5,689,872 5,964,257 5,689,872
Shareholders' equity 831,045 825,610 782,590 831,045 782,590
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AVERAGE BALANCE SHEET DATA
Total assets $7,293,393 $7,191,244 $6,883,963 $7,187,081 $7,036,546
Earning assets 6,772,338 6,686,717 6,373,798 6,670,593 6,507,286
Loans 4,620,970 4,564,160 4,326,383 4,549,576 4,356,944
Investment in securities 1,974,230 1,997,090 1,849,743 1,982,290 1,803,432
Deposits 5,949,378 5,898,219 5,634,831 5,870,668 5,780,268
Shareholders' equity 822,678 824,584 773,326 819,578 750,087
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INCOME STATEMENT DATA
Interest income $83,856 $84,385 $91,828 $254,278 $282,185
Interest expense 9,573 11,863 17,864 34,679 60,440
Net interest income 74,283 72,522 73,964 219,599 221,745
Net interest income (TE) 75,696 73,857 75,162 223,769 225,376
Provision for loan losses (4,000) - 1,500 (3,500) 7,000
Noninterest income, excluding
securities transactions 22,675 23,126 22,295 67,296 62,884
Securities transactions 863 - (15) 863 411
Noninterest expense 61,332 60,645 58,230 181,271 172,980
Net income 27,502 23,750 24,316 74,722 70,193
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KEY RATIOS
Return on average assets 1.50% 1.32% 1.40% 1.39% 1.33%
Return on average shareholders' equity 13.26 11.55 12.47 12.19 12.51
Net interest margin 4.45 4.43 4.69 4.48 4.63
Average loans to average deposits 77.67 77.38 76.78 77.50 75.38
Efficiency ratio 62.35 62.53 59.75 62.28 60.01
Allowance for loan losses to loans 1.31 1.43 1.56 1.31 1.56
Nonperforming assets to loans plus foreclosed assets
and surplus property .73 .87 .95 .73 .95
Net annualized charge-offs (recoveries) to
average loans .07 (.03) .46 .04 .32
Average shareholders' equity to average assets 11.28 11.47 11.23 11.40 10.66
Shareholders' equity to total assets 11.37 11.33 11.23 11.37 11.23
Leverage ratio 10.04 9.91 9.65 10.04 9.65
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COMMON SHARE DATA
Earnings Per Share
Basic $.69 $.60 $.61 $1.87 $1.76
Diluted .68 .59 .60 1.85 1.75
Dividends
Cash dividends per share $.30 $.30 $.27 $.90 $.81
Dividend payout ratio 44.01% 50.93% 44.43% 48.50% 46.05%
Book Value Per Share $20.59 $20.48 $19.56 $20.59 $19.56
Trading Data
High closing price $35.74 $34.07 $34.00 $35.74 $38.52
Low closing price 31.94 31.67 28.09 31.62 28.09
End-of-period closing price 34.00 32.00 32.08 34.00 32.08
Trading volume 5,300,892 8,201,397 5,078,531 19,847,169 16,152,515
Average Shares Outstanding
Basic 39,993,350 39,867,549 40,050,014 39,882,839 39,894,294
Diluted 40,383,047 40,360,070 40,244,282 40,320,434 40,129,111
- -----------------------------------------------------------------------------------------------------------------------
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 third quarters of 2003 and 2002 and during the nine-month periods
through September 30 in each year. Virtually all of the Company's operations are
contained in its banking subsidiary, Whitney National Bank (the "Bank"). This
discussion and analysis 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 $.69 per basic share, or $27.5 million, in the third
quarter of 2003, including the impact of a $4 million pretax negative provision
for loan losses ($2.6 million after tax or $.07 per share). These quarterly
results represented a 13% increase from the $.61 per basic share, or $24.3
million, earned in the third quarter of 2002. Year-to-date earnings in 2003 of
$1.87 per basic share, or $74.7 million, were 6% higher than year-to-date
earnings in 2002 on both a per-share and dollar basis.
Selected highlights from the third quarter's results follow:
o Positive developments on several larger problem credit
relationships and a favorable direction to overall credit quality
during the quarter helped reduce the allowance for loan losses
needed at September 30, 2003 to a level $4.8 million below that at
June 30, 2003. This reduction led to a $4 million negative
provision for loan losses in the third quarter of 2003, compared
to no provision in 2003's second quarter and a provision of $1.5
million in the third quarter of 2002.
o Whitney's net interest income (TE) increased 1%, or $.5 million,
from the third quarter of 2002, as the favorable impact of 6%
growth in earning assets between these periods was largely offset
by compression in the net interest margin (TE). The longstanding
environment of low market rates continued to exert pressure on the
margin in the third quarter of 2003, although an improved mix of
funding sources provided some relief.
o Noninterest income, excluding securities transactions, increased
2%, or $.4 million, from the third quarter of 2002. Excluding net
gains on dispositions of surplus banking property and foreclosed
assets, noninterest income was 8%, or $1.6 million, higher than in
the year-earlier quarter. Income from secondary mortgage market
operations, which increased 63%, or $1.3 million, was the major
contributor. Low rates have stimulated the refinancing of home
mortgages and helped sustain demand for new home purchases.
o Noninterest expense increased 5%, or $3.1 million, from the 2002's
third quarter. Total personnel expense was up 9%, or $2.9 million,
reflecting, in part, higher
11
levels of incentive pay and a rise in the cost of retirement
benefits. Most other major expense categories compared favorably
with the third quarter of 2002.
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) statements of the results of net
interest income simulations run by the Company to measure interest rate
sensitivity, (b) comments about the performance of Whitney's net interest income
and net interest margin assuming certain future conditions, (c) discussion of
the settlement of a dispute between Visa USA and merchants and its expected
impact on Whitney, (d) comments about possible future levels of income from
secondary mortgage market operations, and (e) 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 $214 million, or close to 5%, from year-end 2002
to the end of 2003's third quarter, and were up 7%, or $296 million, from the
end of 2002's third quarter. Beginning in the latter half of 2002, 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 September 30, 2003 and at the end of the four prior quarters.
TABLE 2. LOANS
- ---------------------------------------------------------------------------------------------------------------
2003 2002
- ------------------------------------------------------------------------------ -------------------------------
(dollars in thousands) September 30 June 30 March 31 December 31 September 30
- ---------------------------------------------------------------------------------------------------------------
Commercial, financial and
agricultural loans $2,041,629 $2,022,159 $1,957,036 $1,917,859 $1,813,474
Real estate loans -
commercial and other 1,705,289 1,667,838 1,617,929 1,584,099 1,562,303
Real estate loans -
retail mortgage 610,795 615,742 630,519 638,703 683,669
Loans to individuals 311,823 322,989 319,952 314,751 313,880
- ---------------------------------------------------------------------------------------------------------------
Total loans $4,669,536 $4,628,728 $4,525,436 $4,455,412 $4,373,326
- ---------------------------------------------------------------------------------------------------------------
The portfolio of commercial loans, other than those secured by real
property, was up 6%, or $124 million, at September 30, 2003, compared to
year-end 2002, and has grown 13%, or $228 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
third 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 seen increased
lending opportunities in the exploration and production sector during 2003.
Outstanding balances under participations in larger shared-credit loan
commitments totaled $329 million at the end of 2003's third quarter compared to
approximately $300 million at year-end 2002, including approximately $139
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 8%, or $121
million, from December 31, 2002, and has increased 9%, or $143 million, since
the end of the third quarter of 2002. Whitney has been able to develop new
business in this highly competitive market, including increased activity at its
13
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 11%, or $73 million, decrease in
the retail mortgage loan portfolio from September 30, 2002. Increased promotion
of tailored mortgage products that are held in the portfolio helped limit the
decrease in this portfolio segment to $28 million from year-end 2002.
TABLE 3. SUMMARY OF ACTIVITY IN THE ALLOWANCE FOR LOAN LOSSES
- ---------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30 September 30
- ---------------------------------------------------------------------------------------------------------------
(dollars in thousands) 2003 2002 2003 2002
- ---------------------------------------------------------------------------------------------------------------
Balance at the beginning of period $66,243 $71,667 $66,115 $71,633
Provision for loan losses charged to operations (4,000) 1,500 (3,500) 7,000
Loans charged to the allowance:
Commercial, financial and agricultural (1,241) (644) (6,059) (5,267)
Real estate - commercial and other (396) (3,927) (694) (5,022)
Real estate - retail mortgage (209) (1,038) (532) (1,573)
Individuals (582) (682) (1,999) (2,464)
- ---------------------------------------------------------------------------------------------------------------
Total charge-offs (2,428) (6,291) (9,284) (14,326)
- ---------------------------------------------------------------------------------------------------------------
Recoveries of loans previously charged off:
Commercial, financial and agricultural 429 737 1,563 1,930
Real estate - commercial and other 652 87 3,291 381
Real estate - retail mortgage 33 99 1,780 274
Individuals 472 441 1,436 1,348
- ---------------------------------------------------------------------------------------------------------------
Total recoveries 1,586 1,364 8,070 3,933
- ---------------------------------------------------------------------------------------------------------------
Net charge-offs (842) (4,927) (1,214) (10,393)
- ---------------------------------------------------------------------------------------------------------------
Balance at the end of period $61,401 $68,240 $61,401 $68,240
- ---------------------------------------------------------------------------------------------------------------
Ratios:
Net annualized charge-offs to average loans .07% .46% .04% .32%
Gross annualized charge-offs to average loans .21 .58 .27 .44
Recoveries to gross charge-offs 65.32 21.68 86.92 27.45
Allowance for loan losses to loans at period end 1.31 1.56 1.31 1.56
- ---------------------------------------------------------------------------------------------------------------
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 expense. Positive developments on several
larger problem credit relationships and a favorable direction to overall credit
quality during the quarter helped reduce the allowance for loan losses needed at
September 30, 2003 to a level $4.8 million below that at June 30, 2003 and $4.7
million below the level at December 31, 2002. Table 3 above compares third
quarter 2003 activity in the allowance for loan losses with the third quarter of
2002 and also compares nine-month activity for each year.
Net charge-offs were a moderate $.8 million in the third quarter of
2003 following a small net recovery in 2003's second quarter. For the first nine
months of 2003, net charge-offs totaled only $1.2 million. In 2002, net
charge-offs totaled $4.9 million in the third quarter and $10.4 million for the
year-to-date period.
14
TABLE 4. NONPERFORMING ASSETS
- --------------------------------------------------------------------------------------------------------------
2003 2002
- ------------------------------------------------------------------------------------- ------------------------
September June March December September
(dollars in thousands) 30 30 31 31 30
- --------------------------------------------------------------------------------------------------------------
Loans accounted for on a nonaccrual basis $30,533 $35,622 $41,050 $37,959 $38,663
Restructured loans 215 224 243 336 347
- --------------------------------------------------------------------------------------------------------------
Total nonperforming loans 30,748 35,846 41,293 38,295 39,010
Foreclosed assets and surplus property 3,255 4,556 3,283 3,854 2,543
- --------------------------------------------------------------------------------------------------------------
Total nonperforming assets $34,003 $40,402 $44,576 $42,149 $41,553
- --------------------------------------------------------------------------------------------------------------
Loans 90 days past due still accruing $2,725 $3,445 $3,926 $5,817 $9,532
- --------------------------------------------------------------------------------------------------------------
Ratios:
Nonperforming assets to loans
plus foreclosed assets and surplus property .73% .87% .98% .95% .95%
Allowance for loan losses to
nonperforming loans 199.69 184.80 159.54 172.65 174.93
Loans 90 days past due still accruing to
loans .06 .07 .09 .13 .22
- --------------------------------------------------------------------------------------------------------------
Table 4 above shows total nonperforming assets at September 30, 2003
and at the end of the preceding four quarters. The payoff of a larger credit
previously categorized as impaired was a major factor in the $5 million
reduction in total nonperforming loans from the end of 2003's second quarter.
Nonperforming loans, which are included in the criticized loan total discussed
below and encompass substantially all loans separately evaluated for impairment,
decreased $7.5 million from the end of 2002. The allowance required for impaired
loans at September 30, 2003, was $1.5 million below the level determined at June
30, 2003 and $2.8 million below the level at December 31, 2002.
The payoff of a larger impaired loan mentioned earlier and improved
outlooks for several other larger credits contributed to an $18 million
reduction, to $114 million, in the total of loans internally classified as
having well-defined weaknesses or doubtful prospects for full repayment from the
end of the second quarter of 2003. Such loans were down $20 million from the end
of 2002. Criticized loans at September 30, 2003 included $85 million of loans
warranting special attention, $104 million of loans identified as having
well-defined weaknesses that would likely result in some loss if not corrected,
and $10 million of loans whose full repayment is in doubt. The total of
criticized loans at September 30, 2003 was up slightly from June 30, 2003 and $6
million higher than the level at year-end 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 September 30, 2003, total securities were $1.97 billion, compared to
$1.98 billion at December 31, 2002 and $1.85 billion at September 30, 2002.
During 2002, management directed excess liquidity from strong deposit flows and
restrained loan demand to the investment portfolio. With continued demand for
deposit products and some more recent steady growth in the loan portfolio, the
investment portfolio has been maintained at a fairly stable level during 2003.
Short-term liquidity investments, including federal funds sold, totaled $73
million at the end of 2003's third quarter, compared to $171 million at
September 30, 2002.
Securities available for sale constituted 90% of the total investment
portfolio at September 30, 2003. The quarter-end net unrealized gain on this
portfolio segment totaled $22 million, or 1.3% of amortized cost, compared to a
gain of $46 million, or 2.7% of amortized cost, at year-end 2002. The reduction
in the net unrealized gain is consistent with some recent upward movement in
market interest rates and the corresponding decline in fixed-income security
prices.
During the third quarter of 2003, Whitney sold $276 million in
mortgage-backed securities experiencing accelerated prepayments and repositioned
the proceeds in other mortgage-backed issues with a higher and more stable yield
and duration more consistent with overall investment and asset/liability
management strategies.
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.
DEPOSITS AND BORROWINGS
At September 30, 2003, deposits were 3%, or $181 million, above the
level at December 31, 2002. Many of the factors that prompted the increased
availability of deposit funds in 2001 and 2002 have continued to influence
customer behavior throughout 2003. Compared to the year-earlier quarter, average
deposits were up 6%, or $315 million, in the third quarter of 2003. Short-term
and other borrowings, the major part of which represents liabilities under
repurchase agreements with customers, were little changed from year-end 2002,
but were up 12%, or $47 million, on average in the third 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 third quarter of 2003 were 7%, or $105 million, below 2002's third
quarter on average, with some funds flowing to other deposit products. Total
lower-cost deposits increased 10%, or $420 million, on average, between these
periods, with noninterest-bearing demand deposits up 13%, or $206 million, and
deposits in lower-cost interest-bearing products up 9%, or $214 million.
Average money market deposits grew 8%, or $100 million, compared to
2002's third quarter; and regular savings deposits were also up 8%, or $42
million, at least temporarily continuing the reversal of a trend away from this
more traditional deposit product. NOW account deposits increased 11%, or $71
million, on average.
16
SHAREHOLDERS' EQUITY AND CAPITAL ADEQUACY
At September 30, 2003, shareholders' equity totaled $831 million
compared to $800 million at year-end 2002. The main factors in this net increase
were earnings, net of dividends declared, of approximately $38 million, and a
$16 million decrease in the tax-effected net unrealized holding gain on
securities available for sale. The reduction in the net unrealized securities
gain in the third quarter of 2003 led to an overall decrease in average
shareholders' equity in that period compared to the 2003's second quarter.
Whitney's dividend payout ratio of 49% for the first nine months 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 September 30, 2003. The increase in risk-weighted assets since
year-end 2002 mainly reflects loan growth.
TABLE 5. RISK-BASED CAPITAL AND CAPITAL RATIOS
- --------------------------------------------------------------------------------------------
September 30 December 31
(dollars in thousands) 2003 2002
- --------------------------------------------------------------------------------------------
Tier 1 regulatory capital $722,660 $672,408
Tier 2 regulatory capital 61,401 66,115
- --------------------------------------------------------------------------------------------
Total regulatory capital $784,061 $738,523
- --------------------------------------------------------------------------------------------
Risk-weighted assets $5,536,831 $5,301,764
- --------------------------------------------------------------------------------------------
Ratios
Leverage (Tier 1 capital to average assets) 10.04% 9.76%
Tier 1 capital to risk-weighted assets 13.05 12.68
Total capital to risk-weighted assets 14.16 13.93
Shareholders' equity to total assets 11.37 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 Borrowings discusses changes in these liability funding sources in
the third 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 nine months of 2003 and 2002.
The Bank had over $1.7 billion in unfunded loan commitments, excluding
personal credit lines, outstanding at September 30, 2003, an increase of $228
million from 2002's year-end. Note
17
5 details these and other unfunded commitments at September 30, 2003 and
December 31, 2002. Because loan commitments may, and many times do, expire
without being drawn upon, unfunded balances should not be used as a projection
of actual future liquidity requirements.
ASSET/LIABILITY MANAGEMENT
The objective of the Company's asset/liability management is to
implement strategies for the funding and deployment of its financial resources
that are expected to maximize soundness and profitability over time at
acceptable levels of risk.
Interest rate sensitivity is the potential impact of changing rate
environments on both net interest income and cash flows. The Company measures
interest rate sensitivity primarily by running net interest income simulations.
The net interest income simulations run at the end of 2003's third 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 $18 million, or 5.8%, and decrease a comparable amount and percentage,
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.
To be able to accommodate the maturity/rate preferences of certain
potential borrowers, in the third quarter of 2003 the Bank began to employ
interest rate swaps to bring the market risk associated with these
longer-duration fixed-rate loans in line with Whitney's asset/liability
management objectives. At September 30, 2003, only one swap with a notional
amount of $22 million had been executed, essentially converting the related
fixed-rate commercial loan into a floating-rate loan. The swap has been
structured to be a highly effective hedge against changes in the loan's fair
value, and there was no ineffectiveness to be recognized in earnings during the
quarter.
18
RESULTS OF OPERATIONS
NET INTEREST INCOME
Whitney's net interest income (TE) increased 1%, or $.5 million, from
the third quarter of 2002. The favorable impact of 6% growth in earning assets
was largely offset by compression in the net interest margin (TE) between these
periods. Third quarter net interest income (TE) in 2003 was up slightly from the
second quarter of 2003.
As discussed earlier, Whitney is moderately asset sensitive, which
implies that its net interest margin would tend to compress in a declining rate
environment, holding other factors constant, but tend to widen in a rising rate
environment. The net interest margin is net interest income (TE) as a percent of
average earning assets. Whitney's net interest margin (TE) remained a healthy
4.45% in 2003's third quarter, but this was down 24 basis points from the
year-earlier quarter and little changed from the second quarter of 2003. Tables
6 and 7 show the components of changes in the Company's net interest income and
net interest margin.
The longstanding environment of low market interest rates prevailed
again in 2003's third quarter, although there was some upward movement for
longer maturities. In this environment, both funding costs and asset yields have
trended lower during 2003 as they did throughout 2002. Funding costs decreased
55 basis points between the third quarters of 2002 and 2003, as Whitney
implemented deposit pricing strategies in response to market conditions and the
mix of funds shifted in favor of noninterest-bearing and lower-cost
interest-bearing sources. The rate on interest-bearing deposits other than time
deposits decreased by 66 basis points from the third quarter of 2002. Because of
their maturity structure, the average rate on time deposits decreased further,
falling 94 basis points below the rate in 2002's third quarter.
The overall yield on average earning assets in the third quarter of
2003 was 79 basis points lower than in 2002's third quarter. The gradual
repricing of fixed-rate instruments during this sustained period of low interest
rates impacted both loan and investment yields. Pricing discipline on loans
helped to limit the decline in loan yields to 87 basis points in the current
year's third 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. The 107 basis point decline in the yield on mortgage-backed
securities was the major factor behind the overall 84 basis point decrease in
the yield on the investment portfolio. As noted earlier, Whitney sold certain
mortgage-backed securities with accelerated prepayments in the third quarter of
2003 and reinvested the proceeds in other mortgage-backed issues with a higher
and more stable yield and duration more consistent with overall investment and
asset/liability management strategies. The sale generated a gain of
approximately $.9 million.
No significant shift in asset mix accompanied the 6% overall growth in
average earning assets compared to the third quarter of 2002. Average loans,
including loans held for sale, grew to 69% of earning assets from 68% in the
third quarter of 2002. Investment securities held steady at 29% of average
earning assets.
19
TABLE 6. SUMMARY OF AVERAGE BALANCE SHEETS, NET INTEREST INCOME(TE)(a) AND INTEREST RATES
- ------------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands) Third Quarter 2003 Second Quarter 2003 Third Quarter 2002
- ------------------------------------------------------------------------------------------------------------------------------------
Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
EARNING ASSETS
Loans (TE)(b),(c) $4,697,344 $63,360 5.35% $4,615,620 $63,844 5.55% $4,341,830 $68,066 6.22%
- ------------------------------------------------------------------------------------------------------------------------------------
Mortgage-backed securities 1,061,425 11,382 4.29 1,198,002 12,417 4.15 1,063,983 14,258 5.36
U.S. agency securities 460,044 4,449 3.87 368,823 3,722 4.04 428,373 5,209 4.86
U.S. Treasury securities 209,897 1,980 3.74 197,629 1,872 3.80 156,779 1,588 4.02
Obligations of states and political
subdivisions (TE) 201,740 3,425 6.79 186,749 3,147 6.74 144,542 2,496 6.91
Other securities 41,124 414 4.03 45,887 486 4.24 56,066 620 4.42
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment in securities 1,974,230 21,650 4.38 1,997,090 21,644 4.34 1,849,743 24,171 5.22
- ------------------------------------------------------------------------------------------------------------------------------------
Federal funds sold and
short-term investments 100,764 259 1.02 74,007 232 1.25 182,225 789 1.72
- ------------------------------------------------------------------------------------------------------------------------------------
Total earning assets 6,772,338 $85,269 5.01% 6,686,717 $85,720 5.14% 6,373,798 $93,026 5.80%
- ------------------------------------------------------------------------------------------------------------------------------------
NONEARNING ASSETS
Other assets 587,646 571,934 582,789
Allowance for loan losses (66,591) (67,407) (72,624)
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $7,293,393 $7,191,244 $6,883,963
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND
SHAREHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES
NOW account deposits $ 706,851 $ 544 .31% $ 698,456 $ 820 .47% $ 635,576 $ 1,179 .74%
Money market deposits 1,416,716 2,299 .64 1,403,139 3,143 .90 1,316,705 4,854 1.46
Savings deposits 560,469 380 .27 553,511 655 .47 518,199 1,074 .82
Other time deposits 790,238 3,236 1.62 813,893 3,793 1.87 890,595 5,865 2.61
Time deposits $100,000 and over 694,675 2,416 1.38 689,112 2,740 1.60 699,707 3,960 2.24
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 4,168,949 8,875 .84 4,158,111 11,151 1.08 4,060,782 16,932 1.65
- ------------------------------------------------------------------------------------------------------------------------------------
Short-term and other borrowings 457,508 698 .61 408,410 712 .70 410,108 932 .90
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing
liabilities 4,626,457 $9,573 .82% 4,566,521 $11,863 1.04% 4,470,890 $17,864 1.59%
- ------------------------------------------------------------------------------------------------------------------------------------
NONINTEREST-BEARING
LIABILITIES AND
SHAREHOLDERS' EQUITY
Demand deposits 1,780,429 1,740,108 1,574,049
Other liabilities 63,829 60,031 65,698
Shareholders' equity 822,678 824,584 773,326
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and
shareholders' equity $7,293,393 $7,191,244 $6,883,963
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income and margin (TE) $75,696 4.45% $73,857 4.43% $75,162 4.69%
Net earning assets and spread $2,145,881 4.19% $2,120,196 4.10% $1,902,908 4.21%
Interest cost of funding earning assets .56% .71% 1.11%
- ------------------------------------------------------------------------------------------------------------------------------------
(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 $32,360, $39,189 and $36,984 respectively, in the third and second
quarters of 2003 and the third quarter of 2002.
20
TABLE 6. SUMMARY OF AVERAGE BALANCE SHEETS, NET INTEREST INCOME(TE)(a) AND INTEREST RATES (continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Nine Months Ended Nine Months Ended
(dollars in thousands) September 30, 2003 September 30, 2002
- ------------------------------------------------------------------------------------------------------------------------------------
Average Average
Balance Interest Rate Balance Interest Rate
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
EARNING ASSETS
Loans (TE)(b),(c) $4,612,010 $191,259 5.54% $4,374,482 $208,113 6.36%
- ------------------------------------------------------------------------------------------------------------------------------------
Mortgage-backed securities 1,140,588 37,487 4.38 1,006,021 42,114 5.58
U.S. agency securities 407,201 12,323 4.04 448,853 17,211 5.11
U.S. Treasury securities 194,940 5,465 3.75 145,010 4,545 4.19
Obligations of states and political
subdivisions (TE) 193,417 9,819 6.77 148,838 7,770 6.96
Other securities 46,144 1,443 4.17 54,710 1,824 4.45
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment in securities 1,982,290 66,537 4.48 1,803,432 73,464 5.43
- ------------------------------------------------------------------------------------------------------------------------------------
Federal funds sold and
short-term investments 76,293 652 1.14 329,372 4,239 1.72
- ------------------------------------------------------------------------------------------------------------------------------------
Total earning assets 6,670,593 $258,448 5.18% 6,507,286 $285,816 5.87%
- ------------------------------------------------------------------------------------------------------------------------------------
NONEARNING ASSETS
Other assets 583,351 601,930
Allowance for loan losses (66,863) (72,670)
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $7,187,081 $7,036,546
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND
SHAREHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES
NOW account deposits $ 697,697 $ 2,257 .43% $ 701,560 $ 4,487 .85%
Money market deposits 1,400,583 9,041 .86 1,315,815 14,957 1.52
Savings deposits 550,867 1,777 .43 512,087 3,118 .81
Other time deposits 812,606 11,414 1.88 934,907 21,322 3.05
Time deposits $100,000 and over 682,221 8,080 1.58 720,261 13,529 2.51
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 4,143,974 32,569 1.05 4,184,630 57,413 1.83
- ------------------------------------------------------------------------------------------------------------------------------------
Short-term and other borrowings 435,354 2,110 .65 442,437 3,027 .91
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 4,579,328 $34,679 1.01% 4,627,067 $ 60,440 1.75%
- ------------------------------------------------------------------------------------------------------------------------------------
NONINTEREST-BEARING
LIABILITIES AND
SHAREHOLDERS' EQUITY
Demand deposits 1,726,694 1,595,638
Other liabilities 61,481 63,754
Shareholders' equity 819,578 750,087
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and
shareholders' equity $7,187,081 $7,036,546
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income and margin (TE) $223,769 4.48% $225,376 4.63%
Net earning assets and spread $2,091,265 4.17% $1,880,219 4.12%
Interest cost of funding earning assets .70% 1.24%
- ------------------------------------------------------------------------------------------------------------------------------------
(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 $36,512 and $36,849, respectively, in the first nine months of 2003 and 2002.
21
TABLE 7. SUMMARY OF CHANGES IN NET INTEREST INCOME(TE)(a),(b)
- -------------------------------------------------------------------------------------------------------------------------------
Third Quarter 2003 Compared to: Nine Month Ended September 30,
Second Quarter 2003 Third 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) $1,337 $(1,821) $ (484) $5,215 $(9,921) $(4,706) $10,869 $(27,723) $(16,854)
- -------------------------------------------------------------------------------------------------------------------------------
Mortgage-backed securities (1,451) 416 (1,035) (34) (2,842) (2,876) 5,169 (9,796) (4,627)
U.S. agency securities 887 (160) 727 363 (1,123) (760) (1,494) (3,394) (4,888)
U.S. Treasury securities 132 (24) 108 505 (113) 392 1,439 (519) 920
Obligations of states and political
subdivisions (TE) 254 24 278 972 (43) 929 2,268 (219) 2,049
Other securities (49) (23) (72) (154) (52) (206) (273) (108) (381)
- -------------------------------------------------------------------------------------------------------------------------------
Total investment in securities (227) 233 6 1,652 (4,173) (2,521) 7,109 (14,036) (6,927)
- -------------------------------------------------------------------------------------------------------------------------------
Federal funds sold and
short-term investments 75 (48) 27 (278) (252) (530) (2,496) (1,091) (3,587)
- -------------------------------------------------------------------------------------------------------------------------------
Total interest income (TE) 1,185 (1,636) (451) 6,589 (14,346) (7,757) 15,482 (42,850) (27,368)
- -------------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
NOW account deposits 10 (286) (276) 117 (752) (635) (25) (2,205) (2,230)
Money market deposits 31 (875) (844) 337 (2,892) (2,555) 910 (6,826) (5,916)
Savings deposits 8 (283) (275) 80 (774) (694) 221 (1,562) (1,341)
Other time deposits (101) (456) (557) (604) (2,025) (2,629) (2,517) (7,391) (9,908)
Time deposits $100,000 and over 23 (347) (324) (28) (1,516) (1,544) (682) (4,767) (5,449)
- -------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits (29) (2,247) (2,276) (98) (7,959) (8,057) (2,093) (22,751) (24,844)
- -------------------------------------------------------------------------------------------------------------------------------
Short-term and other borrowings 84 (98) (14) 97 (331) (234) (48) (869) (917)
- -------------------------------------------------------------------------------------------------------------------------------
Total interest expense 55 (2,345) (2,290) (1) (8,290) (8,291) (2,141) (23,620) (25,761)
- -------------------------------------------------------------------------------------------------------------------------------
Change in net interest income(TE) $1,130 $ 709 $ 1,839 $6,590 $(6,056) $ 534 $17,623 $(19,230) $ (1,607)
- -------------------------------------------------------------------------------------------------------------------------------
(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 third quarter of 2003 compared to the year-earlier period.
Noninterest-bearing deposits funded 26% of average earning assets in the third
quarter of 2003, up from a healthy 25% in 2002's third quarter, and the
percentage of funding from all noninterest-bearing sources rose to 32% from 30%
over this same period. Lower-cost interest-bearing deposits supported close to
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 less than 29% of average earning assets over this period, from 31%
in the third quarter of 2002.
For the first nine months of 2003, net interest income (TE) decreased
less than 1%, or $1.6 million, from the same period in 2002, while average
earning assets rose somewhat under 3%. The net interest margin (TE) was 4.48%
for the 2003 period and 4.63% for the prior year's period. The yield on average
earning assets decreased 69 basis points, with the loan portfolio yield down 82
basis points and the rate earned on the investment portfolio down 95 basis
points. The total interest cost of funding earning assets declined 54 basis
points compared to the first nine months of 2002. The same factors that affected
the mix and rates for earning assets and funding sources in the third quarter of
2003 were evident for the year-to-date period.
PROVISION FOR LOAN LOSSES
Whitney recorded a $4 million negative provision for loan losses in the
third quarter of 2003, compared to no provision in 2003's second quarter and a
provision of $1.5 million in the third quarter of 2002. Net charge-offs were a
moderate $.8 million in the third quarter of 2003, following a small net
recovery in 2003's second quarter, and for the first nine months of 2003, net
charge-offs totaled only $1.2 million. In 2002, net charge-offs totaled $4.9
million in the third quarter and $10.4 million for the year-to-date period.
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 $22.7
million for the third quarter of 2003, an increase of 2%, or $.4 million, from
the third quarter of 2002. Excluding net gains on dispositions of surplus
banking property and foreclosed assets, which totaled over $1.2 million in
2002's third quarter, noninterest income was 8%, or $1.6 million, higher than in
the year-earlier quarter.
The strong results posted by Whitney's mortgage broker activities
during the first half of 2003 continued in the third quarter, with income from
secondary mortgage market operations up 63%, or $1.3 million, compared to the
third quarter of 2002. Low rates have benefited loan production volumes by
stimulating homeowners to refinance and by helping sustain demand for new home
purchases. Recent rate movements contributed to a slowdown in production toward
the end of the third quarter of 2003, and fourth quarter results for secondary
mortgage market operations will likely lag those posted in the third quarter of
2003 and 2002's fourth quarter.
Credit card income was up 9%, or $.2 million, compared to 2002's third
quarter. This increase does not fully reflect the underlying growth in
transaction volumes on bank-issued credit
23
and debit cards, because debit transaction rates were reduced beginning in
August 2003 under the terms of the settlement between Visa USA and merchants.
Revenues under the reduced interchange fee structure, which is effective through
the end of 2003, could be as much as 30% less than under the prior fee
structure. Whitney's debit interchange revenue totaled $1.1 million in the third
quarter of 2003 and $4.4 million for all of 2002. As part of the settlement,
VISA USA also agreed to modify its policy requiring merchants who honor its
credit cards to also accept its check or debit card product. Although the
implementation of this policy in January 2004 is not expected to significantly
impact transaction volumes, it will likely lead to lower interchange fees per
transaction relative to pre-settlement levels in future years.
Service charges from deposit accounts have been relatively stable
between 2002 and 2003, as improved pricing and the addition of new services
helped offset the impact of reduced charging opportunities on both commercial
and personal accounts. For the third quarter of 2003, service charges were up
2%, or $.2 million, from the year-earlier period. Trust service fees declined
6%, or $.1 million, compared to the third quarter of 2002, but they have begun
to stabilize in recent periods with improved capital market valuations.
Excluding net gains on surplus banking property and foreclosed assets,
other noninterest income increased 2% between the third quarters of 2002 and
2003, mainly reflecting growth in fees on commercial credit facilities.
Noninterest income, excluding securities transactions, was $67.3
million through the first nine months of this year, an increase of $4.4 million,
or 7%, from the comparable period in 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. Other
noninterest income includes net gains on dispositions of surplus banking
property and foreclosed assets of $.5 million in 2003 and $1.2 million in 2002.
The 2003 total also includes a gain of $1.4 million recognized in the second
quarter on the sale of a portfolio of seasoned loans originated under
affordable-housing programs.
NONINTEREST EXPENSE
Total noninterest expense of $61.3 million in the third quarter of 2003
was 5%, or $3.1 million, higher than the total for the year-earlier period.
Personnel expense increased 9%, or $2.9 million, while most other major expense
categories compared favorably with the third quarter of 2002.
Underlying the rise in personnel expense were a 7%, or $1.9 million,
increase in employee compensation, and an 18%, or $1.0 million, increase in
employee benefits. Base pay increased 3%, or close to $.7 million, but payments
under targeted employee incentive programs rose more sharply, driven mainly by
the impact of higher loan production volumes on retail mortgage origination
incentives. Management incentive plan expense, which includes certain
stock-based compensation, increased $.7 million.
A combined increase of $.9 million in defined benefit pension plan
expense and the cost of providing health benefits to retirees was the main
factor behind 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
24
2002. The combined expense of providing these retirement benefits will be up a
comparable amount in the fourth quarter of 2003 compared with the year-earlier
period, and the annual increase will total $4.1 million. The Company has also
experienced an expected increase in the cost of providing current health
benefits in 2003.
Benefits from the elimination of underutilized facilities helped reduce
occupancy expense by 3% compared to the third quarter of 2002, although several
new or replacement branches are scheduled to open through the first half of
2004, including three additional locations to serve the Houston market.
Equipment and data processing expense decreased 1% in the third quarter
of 2003, but recent capacity upgrades to the data processing system and new
applications and capabilities that have been or will be added to support
expanded customer service will likely lead to a moderate year-over-year increase
in 2003's fourth quarter. Upgrades to the capacity and functionality of branch
communication lines were the main factor behind the 4% increase in the
telecommunication and postage expense category.
The expense for legal and professional services was little changed
between the third quarters of 2002 and 2003. Legal fees were down 16% aided by
the resolution of several relatively significant loan collection efforts in
2003's second and third quarters. This reduction offset higher costs in the
current year's quarter for professional assistance with data system
enhancements. Corporate value and franchise taxes were down 9% compared to the
third 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 8%
in the third quarter of 2003 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 nine-month period, noninterest expense totaled $181 million.
This was a 5%, or $8.3 million, increase compared to the comparable period of
2002. Similar to the quarterly comparison, total personnel expense was up 11%,
or $10.1 million, while most other major expense categories posted favorable
results in comparison to the year-earlier period.
Employee compensation rose 7%, or $5.8 million, as the increase in
targeted employee incentive compensation exceeded the 3% increase in base pay.
Employee benefits increased 26%, or $4.3 million, including the $3.2 million
increase in the cost of providing pension and postretirement health benefits.
The changes in other major noninterest expense categories between the
first nine 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
32.08% in the third quarter of 2003 compared to a rate of 33.41% in the
year-earlier period. Year-to-date, the rate was 32.06% in 2003 and 33.19% 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
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
The exhibits listed on the accompanying Exhibit Index, located
on page 29, 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 July 17, 2003, the registrant reported
under Items 5 and 12 the release of its financial results for the
quarter ended June 30, 2003. The news release covering the financial
results was filed as an exhibit under Item 7.
27
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)
November 14, 2003
-------------------------------
Date
28
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 2002.
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 2002.
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.
29
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 September 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 reasonably 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: November 14, 2003
-------------------------------
30
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 September 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 reasonably 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: November 14, 2003
-------------------------------
31
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 on the 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
September 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: November 14, 2003 By:/s/William L. Marks
--------------------- ------------------------------
William L. Marks
Chairman of the Board and
Chief Executive Officer
Dated: November 14, 2003 By:/s/Thomas L. Callicutt, Jr.
--------------------- ------------------------------
Thomas L. Callicutt, Jr.
Executive Vice President and
Chief Financial Officer
32