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March 28, 1997
Securities and Exchange Commission
450 Fifth St., N.W.
Judiciary Plaza
Washington, D.C. 20549-1004
Via Edgar Electronic Filing System
In Re: File Number 0-1026
-------------------
Gentlemen:
Pursuant to regulations of the Securities and Exchange
Commission, submitted herewith for filing on behalf of Whitney Holding
Corporation (the "Company") is the Company's Report on Form 10-K for the
period ended December 31, 1996.
This filing is being effected by direct transmission to the
Commission's EDGAR System.
Sincerely,
/s/ Edward B. Grimball
----------------------------
Edward B. Grimball
Executive Vice President &
Chief Financial Officer
(504) 586-7570
EBG/drm
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
[ X ] Annual report pursuant to Section 13 or 15 (d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 1996
OR
[ ] Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the transition period from to
----------------------- ----------------------
Commission file number 0-1026
WHITNEY HOLDING CORPORATION
Incorporated in Louisiana I.R.S. Employer Identification
No. 72-6017893
228 St. Charles Avenue, New Orleans, Louisiana 70130
Registrant's telephone number, including area code (504) 586-7272
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of the Form 10-K or any
amendment to this Form 10-K. [ X ]
State the aggregate market value of the voting stock held by
nonaffiliates of the Registrant as of February 27, 1997
Approximately $692,152,923*
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date.
Common Stock, no par value, 17,977,998 shares outstanding as of
February 27, 1997.
Documents Incorporated by Reference
Definitive Proxy Statement dated March 18, 1997, Part III.
An Exhibit Index appears on page 63.
* For the purposes of this computation, shares owned by directors and executive
officers of the Registrant, even though all such persons may not be affiliates
as defined in SEC Rule 405, have been excluded.
Page
- - --------------------------------------------------------------------------------------------------------------------------
PART I
Item 1: Business 3
Item 2: Properties 3
Item 3: Legal Proceedings 4
Item 4: Submission of Matters to a Vote of Security Holders 4
Item 4a: Executive Officers of the Registrant 4
- - --------------------------------------------------------------------------------------------------------------------------
PART II
Item 5: Market for the Registrant's Common Stock and Related Shareholder Matters 5
Item 6: Selected Financial Data 6
Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations 7
Item 8: Financial Statements and Supplementary Data 27
Item 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 62
- - --------------------------------------------------------------------------------------------------------------------------
PART III
Item 10: Directors and Executive Officers of the Registrant 62
Item 11: Executive Compensation 62
Item 12: Security Ownership of Certain Beneficial Owners and Management 62
Item 13: Certain Relationships and Related Transactions 62
- - --------------------------------------------------------------------------------------------------------------------------
PART IV
Item 14: Exhibits, Financial Statement Schedules and Reports on Form 8-K 63
- - --------------------------------------------------------------------------------------------------------------------------
Signatures 65
Page 2 of 69 Pages
PART I
Item 1: BUSINESS
Whitney Holding Corporation (the "Company") is a Louisiana bank holding
company registered pursuant to the Bank Holding Company Act of 1956. The Company
began operations in 1962 as the parent of Whitney National Bank (the "Louisiana
Bank") which has been in continuous operation since 1883. In December 1994, the
Company established the Whitney Bank of Alabama (the "Alabama Bank") and,
through this new banking subsidiary, acquired the Mobile area operations of The
Peoples Bank, Elba, Alabama on February 17, 1995. During 1995, the Company also
established the Whitney Community Development Corporation ("WCDC"), which is
authorized to make equity and debt investments in corporations or projects
designed primarily to promote community welfare, including the economic
rehabilitation and development of low-income areas by providing housing,
services, or jobs for residents, or promoting small businesses that service
low-income areas. In August 1996, the Company established the Whitney National
of Florida (the "Florida Bank") and subsequently acquired American Bank and
Trust and Liberty Bank, both of Pensacola, Florida on October 25, 1996.
The Company, through its banking subsidiaries, engages in commercial
and retail banking and in trust business, including the taking of deposits, the
making of secured and unsecured loans, the financing of commercial transactions,
the issuance of credit cards, the delivery of corporate, pension and personal
trust services, and certain limited investment services. The Louisiana Bank is
active as a correspondent for other banks. The Banks render specialized services
of different kinds in connection with all of the foregoing, and operate
sixty-one offices in south Louisiana, ten offices in south Alabama, five offices
in the Pensacola, Florida area, and a foreign branch on Grand Cayman in the
British West Indies.
There is significant competition within the financial services industry
in general as well as with respect to the particular financial services provided
by the Banks. Within their market areas, the Banks compete directly with major
banking institutions of comparable or larger size and resources as well as with
various other smaller banking organizations and local and national "non-bank"
competitors, including savings and loans, credit unions, mortgage companies,
personal and commercial finance companies, investment brokerage firms, and
registered investment companies.
In recent years there has been a significant consolidation within the
financial services industry, particularly with respect to the banking and
savings and loan segments of this industry. This consolidation has been driven
both by the large number of S&L and bank failures experienced during the late
1980s and early 1990s as well as more recently by general competitive pressures.
All of the Banks' major direct banking competitors have been relatively active
in expansion through acquisition. In recent years, the Company has entered into
four acquisitions of banking operations involving approximately $540 million of
assets and completed a merger with a fifth bank having approximately $235
million of assets in February 1997. The trend toward industry consolidation is
expected to continue in the near term.
All material funds of the Company are invested in the Banks. The Banks
have a large number of customer relationships which have been developed over a
period of many years and are not dependent upon any single customer or upon a
few customers. The loss of any single customer or a few customers would not have
a material adverse effect on the Banks or the Company. The Louisiana Bank has
customers in a number of foreign countries, but the portion of revenue derived
from these foreign customers is not a material portion of its overall revenues.
The Company and the Banks and their related operations are subject to
federal, state and local laws applicable to banks and bank holding companies and
to the regulations of the Board of Governors of the Federal Reserve System, the
Office of the Comptroller of Currency, the Federal Deposit Insurance Corporation
and the Alabama State Banking Department.
Item 2: PROPERTIES
The Company owns no real estate in its own name. The Company's and the
Louisiana Bank's executive offices are located in downtown New Orleans in the
Bank's main office facilities, which it owns. A portion of these facilities, as
well as portions of certain other facilities in Louisiana, are available for
lease to third parties, although such leasing activity is not material to the
Company's overall operations. The Louisiana, Alabama and Florida Banks own
approximately three-quarters of the total number of branch banking facilities
currently in operation. The remaining branch facilities are subject to leases,
each of which management
Page 3 of 69 Pages
considers to be reasonable and appropriate to its location. All facilities,
whether owned or leased, are being maintained in a manner so as to ensure that
they continue to be suitable for their intended banking operations.
In 1997, the Company plans to open or begin construction on twenty-four
additional branch locations throughout the market areas of the Banks and to
complete the construction of a main office for the Alabama Bank. Total capital
expenditures for these new facilities are estimated at $40 million.
The Banks hold a variety of property interests acquired through the
years in settlement of loans. Reference is made to Note 8 to the financial
statements included in Item 8 for further information regarding such property
interests as of December 31, 1996.
Item 3: LEGAL PROCEEDINGS
There are no material pending legal proceedings, other than routine
litigation incidental to the business, to which the Company or its subsidiaries
is a party or to which any of their property is subject.
Item 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
Item 4a: EXECUTIVE OFFICERS OF THE REGISTRANT
William L. Marks, 53, Director of Whitney National Bank of Florida,
Chairman of the Board and Chief Executive Officer of the Louisiana Bank and the
Company since February, 1990.
R. King Milling, 56, Director since 1979, Director of Whitney Bank of
Alabama and Director and President of the Louisiana Bank and the Company since
December, 1984.
G. Blair Ferguson, 53, Executive Vice President of the Louisiana Bank
and the Company since July, 1993. Former Executive Vice President and Regional
Director of First City, Dallas, Texas.
Edward B. Grimball, 52, Director, Chief Financial Officer and
Investment Officer of Whitney National Bank of Florida, Chief Financial Officer
and Investment Officer of Whitney Bank of Alabama, Vice President and Chief
Financial Officer from September, 1990 to October, 1991, and Executive Vice
President and Chief Financial Officer of the Louisiana Bank and the Company
since October, 1991.
Kenneth A. Lawder, Jr., 55, Executive Vice President of the Louisiana
Bank and the Company since December, 1991.
Joseph W. May, 51, Executive Vice President of the Louisiana Bank and
the Company since December, 1993. Former Executive Vice President and Chief
Credit Policy Officer, Comerica, Inc., then a $27 billion bank holding company
headquartered in Detroit, Michigan.
John C. Hope, III, 48, Director of Whitney National Bank of Florida,
Chairman of the Board and Chief Executive Officer of Whitney Bank of Alabama,
and Executive Vice President of the Company since October, 1994. Former
Executive Vice President and Manager, Southern Area of AmSouth Bank of Alabama.
Robert C. Baird, Jr., 46, Executive Vice President of the Louisiana
Bank and the Company since July, 1995. Former Chairman of the Board, Chief
Executive Officer and President of Union Bank and Trust, then a $500 million
bank headquartered in Montgomery, Alabama.
Rodney D. Chard, 54, Executive Vice President of the Louisiana Bank and
Company since July 1996. Former Consultant, EDS Management Consulting Services
in Toronto, Ontario, Canada. Former Independent Consultant, Chard Consulting
Limited in Toronto, Ontario, Canada.
Page 4 of 69 Pages
PART II
Item 5: MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER
MATTERS
a) The Company's stock price is reported on the National
Association of Securities Dealers Automated Quotation (NASDAQ)
system under the symbol WTNY. The following table shows the
range of closing prices of the Company's stock for each
calendar quarter of 1996 and 1995 as reported on the NASDAQ
National Market System.
1996 1995
---------------- -----------------
1st Quarter 29 3/4- 31 3/4 22 - 25 3/4
2nd Quarter 29 3/4- 31 3/4 24 - 27 3/8
3rd Quarter 29 1/2- 32 3/4 26 3/4- 34
4th Quarter 31 3/4- 35 7/8 29 3/4- 31 1/2
b) The approximate number of shareholders of record of the
Company, as of February 27, 1997, is as follows:
Title of Class Shareholders of Record
-------------------------- ----------------------
Common Stock, no par value 3,415
c) During 1996 and 1995, the Company declared dividends as
follows:
1996 1995
----------- ------------
1st Quarter $ 0.22 $ 0.20
2nd Quarter 0.25 0.20
3rd Quarter 0.25 0.20
4th Quarter 0.25 0.22
Page 5 of 69 Pages
Item 6: SELECTED FINANCIAL DATA
WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA
YEAR ENDED DECEMBER 31,
1996 1995 1994 1993 1992
---------------------------------------------------------------
BALANCE SHEET DATA (dollars in thousands, except per-share data, unaudited)
AT YEAR-END:
Total assets........................................ $3,774,501 $3,512,711 $3,224,529 $3,304,906 $3,262,090
Total investment in securities...................... 1,326,294 1,475,896 1,627,497 1,731,811 1,582,439
Total loans......................................... 2,064,912 1,649,436 1,242,539 1,138,141 1,197,621
Total earning assets................................ 3,404,606 3,154,269 2,895,916 2,997,652 2,925,794
Total deposits...................................... 2,861,881 2,882,170 2,689,738 2,776,509 2,819,435
AVERAGE BALANCE:
Total assets........................................ $3,576,681 $3,292,574 $3,263,890 $3,194,181 $3,134,850
Total investment in securities...................... 1,446,923 1,535,826 1,716,532 1,648,913 1,372,064
Total loans......................................... 1,778,074 1,379,587 1,151,750 1,106,631 1,274,674
Total earning assets................................ 3,252,217 2,975,057 2,950,064 2,885,083 2,825,865
Total deposits...................................... 2,795,222 2,720,116 2,725,461 2,689,519 2,660,719
INCOME DATA
Total interest income.................................... $241,706 $221,660 $198,753 $191,550 $200,757
Total interest expense................................... (89,895) (75,941) (59,519) (56,722) (75,300)
---------------------------------------------------------------
Net interest income...................................... 151,811 145,719 139,234 134,828 125,457
Reduction in reserve (provision) for possible loan
losses............................................... 5,000 9,380 25,869 59,295 (4,640)
Gains on sale of securities.............................. 11 3 46 112 5,601
Non-interest income...................................... 37,311 33,966 34,964 34,143 30,292
Non-interest expense..................................... (134,394) (122,680) (115,661) (111,475) (123,837)
---------------------------------------------------------------
Income (Loss) before income tax and effect of accounting
changes............................................... $59,739 $66,388 $84,452 $116,903 $32,873
Income tax expense (benefit)............................. 19,118 20,855 26,862 37,321 9,969
---------------------------------------------------------------
Income (Loss) before effect of accounting changes........ $40,621 $45,533 $57,590 $79,582 $22,904
Cumulative effect of accounting changes, net............. - - - 345 -
---------------------------------------------------------------
Net income (loss)........................................ $40,621 $45,533 $57,590 $79,927 $22,904
===============================================================
COMMON STOCK DATA
Earnings (Loss) per share................................ $2.26 $2.57 $3.32 $4.67 $1.35
Earnings per share before merger related expenses........ $2.45 - - - -
Dividends per share...................................... $0.97 $0.82 $0.64 $0.43 $0.07
Dividend payout ratio.................................... 41.75% 28.63% 17.61% 8.58% 6.40%
Book value per share, end of period...................... $22.53 $21.28 $18.89 $16.83 $12.34
Weighted average number of shares outstanding............ 17,954,676 17,683,987 17,364,103 17,096,827 16,997,697
SELECTED RATIOS
Return on average assets ................................ 1.14% 1.38% 1.76% 2.50% 0.73%
Return on average shareholders' equity .................. 10.45% 13.05% 18.78% 33.35% 11.85%
Net interest margin, taxable-equivalent.................. 4.81% 5.03% 4.86% 4.79% 4.55%
Tier 1 risk-based capital ratio.......................... 14.87% 17.19% 20.45% 18.77% 13.44%
Total risk-based capital ratio........................... 16.12% 18.45% 21.72% 20.04% 14.76%
Tier 1 leverage capital ratio............................ 10.19% 10.06% 9.85% 8.25% 6.04%
Average shareholders' equity to average assets........... 10.87% 10.60% 9.39% 7.50% 6.35%
Shareholders' equity to total assets..................... 10.72% 10.70% 10.21% 8.72% 6.47%
Note: All share and per-share figures give effect to the three-for-two stock
splits effective February 22, 1993 and November 29, 1993.
Page 6 of 69 Pages
Item 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SUMMARY
Whitney Holding Corporation earned $40.6 million in 1996, or $2.26 per
share. These results include the effects of a $5.0 million reduction in the
level of the reserve for possible loan losses, which contributed $3.3 million or
$0.18 per share to earnings on an after-tax basis. The 1996 earnings also
reflect the impact $4.2 million of merger-related expenses, which represent an
after-tax reduction in earnings of $3.5 million or $0.19 per share. For 1995,
the Company earned $45.5 million or $2.57 per share, including an after-tax
contribution to earnings of $6.1 million or $0.34 per share resulting from a
total of $9.4 million in loan loss reserve reductions during that period.
Taxable-equivalent net interest income increased $6.6 million or 4.4%
between 1995 and 1996. Non-interest income increased $3.4 million or 9.9% from
1995 to 1996, with gains shown in most of the income categories. Non-interest
expense was $11.7 million or 9.5% higher in 1996 compared to 1995, with
non-recurring merger-related expenses accounting for approximately $4.2 million
of the total increase.
Average earning assets increased $277 million or 9.3% to $3.25 billion
in 1996 compared with $2.98 billion in 1995. Average loans increased $398
million in 1996 or 29% to $1.78 billion from $1.38 billion in 1995. This loan
growth is attributable to strengthened demand for both commercial and consumer
credit in the Company's market areas and to more aggressive solicitation of the
Banks' customers. The increase in loan activity was funded in part by maturing
investment securities and short term investments which declined $121 million or
8.2% in 1996. At December 31, 1996, total loans outstanding were $2.06 billion,
an increase of $415 million or 25% over the $1.65 billion total at the end of
1995.
Average total deposits increased slightly in 1996 to $2.80 billion from
$2.72 billion in 1995. Banks nationwide continue to feel the impact of
depositors seeking higher yielding investment instruments from non-bank sources.
As of December 31, 1996, total deposits were $2.86 billion compared to $2.88
billion at the end of 1995.
Non-performing assets continued their steady decrease of the past
several years in 1996. At December 31, 1996, non-performing assets were $12.3
million, down $2.4 million or 16% from $14.7 million at December 31, 1995. The
reserve for possible loan losses was $39.3 million on December 31, 1996, an
amount which represented 547% of nonaccruing loans and 1.9% of total loans. At
year end 1995, the reserve coverage was 410% of non-performing loans and 2.4% of
total loans.
The Company is scheduled to complete a merger, pending all necessary
regulatory and shareholder approvals, early in the second quarter of 1997 with
Merchants Bancshares, Inc. ("MB"), the parent company of Merchants Bank and
Trust Company ("MB&T"). MB&T, which will merge into Whitney National Bank of
Mississippi, a newly formed subsidiary of the Company, operates thirteen branch
locations along the Mississippi Gulf Coast. MB has total assets of approximately
$208 million, $83 million in loans, total deposits of $188 million, and
shareholders' equity of $17 million. MB shareholders are expected to receive
Whitney Holding Corporation common stock with a value of approximately $52
million. The merger is expected to be accounted for as a pooling of interests.
On February 28, 1997, the Company completed a merger with First
National Bankshares, Inc. ("FNB"), the parent of First National Bank of Houma
("FNBH"). FNBH operates five banking offices in Terrebonne Parish, Louisiana and
has total assets of approximately $235 million, $126 million in loans, total
deposits of $210 million, and shareholders' equity of $18 million. The price of
this transaction was $41 million. FNBH shareholders received approximately 1.13
million shares of Whitney Holding Corporation common stock at the closing. This
merger will also be accounted for as a pooling of interests.
On October 25, 1996, the Company completed a merger with American Bank
& Trust ("AB&T") of Pensacola, Florida and with Liberty Holding Company ("LHC"),
the parent of Liberty Bank, also of Pensacola, Florida. AB&T, with assets of $57
million, and Liberty Bank, with assets of $48 million, were merged into a
newly-chartered wholly-owned banking subsidiary of the Company, Whitney National
Bank of Florida. Each of these mergers was accounted for as a pooling of
interests.
Page 7 of 69 Pages
On March 8, 1996, the Company completed a merger with First Citizens
BancStock, Inc. ("FCB"), the parent of The First National Bank in St. Mary
Parish ("FNB"). FNB, which was merged into Whitney National Bank (the "Louisiana
Bank"), had total assets of approximately $243 million, including $147 million
in loans, and total deposits of $214 million at the closing date. The merger was
accounted for as a pooling of interests.
Whitney Holding Corporation declared quarterly dividends in 1996
totaling $0.97 per share compared with $0.82 per share in 1995, an increase of
$0.15 per share or 18%. On February 26, 1997, the Company declared a quarterly
dividend of $0.28 per share to shareholders of record on March 14, 1997.
Page 8 of 69 Pages
AVERAGE BALANCE SHEETS
- - -------------------------------------------------------------------------------------------------------------------
(in thousands)
AVERAGE ASSETS 1996 1995 1994
---------------------------------------------------------------
Cash and due from financial institutions.... $ 189,731 $ 192,399 $ 198,875
U.S. Treasury and agency securities......... 1,051,699 1,202,711 1,354,106
Mortgage-backed securities ................. 255,440 181,664 194,543
State and municipal securities.............. 135,019 131,394 129,503
Federal Reserve stock and other corporate
securities................................ 4,765 20,057 38,380
Federal funds sold and short-term deposits.. 27,220 59,644 81,782
Loans, net of reserve for possible loan
losses of $42,741 in 1996, $40,271 in
1995 and $45,826 in 1994 .................. 1,735,333 1,339,316 1,105,924
Bank premises and equipment, net............ 98,714 77,779 71,644
All other assets .......................... 78,760 87,610 89,133
---------------------------------------------------------------
Total assets $3,576,681 $3,292,574 $3,263,890
===============================================================
AVERAGE LIABILITIES
Deposits:
Non-interest-bearing demand deposits..... $ 842,168 $ 827,348 $ 806,914
Savings deposits, NOW account
and money market account deposits..... 1,073,006 1,125,598 1,241,023
Time deposits............................ 880,048 767,170 677,524
---------------------------------------------------------------
Total deposits..................... $2,795,222 2,720,116 2,725,461
Federal funds purchased and
repurchase agreements.................... 362,534 194,478 200,063
All other liabilities....................... 30,070 29,020 31,800
---------------------------------------------------------------
Total liabilities.................. $3,187,826 $2,943,614 $2,957,324
AVERAGE SHAREHOLDERS' EQUITY
Total capital accounts...................... 388,855 348,960 306,566
---------------------------------------------------------------
Total liabilities and shareholders'
equity .......................... $3,576,681 $3,292,574 $3,263,890
===============================================================
FINANCIAL CONDITION
Loans
In 1996, the Company's average loans outstanding increased $398 million
or 29% as compared to 1995. Since 1994, the Company achieved growth in average
loans outstanding of $626 million or 54%, from $1.15 billion in 1994 to $1.78
billion in 1996. The loan growth over this period reflects both the Company's
expansion into the Alabama Gulf Coast markets in early 1995 and the continued
favorable economic conditions in the Company's overall market area, which
includes the southern portions of Louisiana, Mississippi and Alabama, and the
western Florida panhandle, as well as the impact of a focused effort to market
the Banks' retail and commercial loan products.
All categories of loans experienced solid growth from year end 1995 to
year end 1996. Commercial loans other than those secured by real estate
increased $176 million or 22% in 1996, while loans secured by commercial and
other non-retail residential mortgage loans increased $134 million or 28%. Loans
to entities involved in manufacturing, wholesaling and retailing exhibited the
strongest growth, although the overall increase was well distributed.
In 1996, the Company continued to direct increased attention to
developing and promoting attractive and competitive loan products for its retail
markets. Retail mortgage loans increased $92 million or 41% in 1996, in large
part as a result of the continued
Page 9 of 69 Pages
successful promotion of new retail loan products that have been introduced in
recent years as an alternative to the conventional mortgage loan product that
the Company originates for sale in the secondary market. During 1996, the
Company also increased its portfolio of loans granted under its
affordable-housing program by approximately $10 million. Loans to individuals,
which include various consumer installment and credit line loan products,
increased $13.9 million or 11.4% in 1996, largely as the result of enhanced
promotional efforts.
The accompanying table of loan maturities reflects contractual
maturities, unadjusted for scheduled principal reductions or prepayments.
Approximately 85% of the loans with maturities greater than one year bear fixed
rates of interest.
LOAN PORTFOLIO BALANCES AT DECEMBER 31,
- - ---------------------------------------------------------------------------------------------------------------------------
(in thousands)
1996 1995 1994 1993 1992
--------------------------------------------------------------------------------
Commercial, financial,
and agricultural loans............. $ 980,825 $ 804,471 $ 634,994 $ 629,453 $ 628,098
Real estate loans -
commercial and other............... 620,197 486,092 355,374 308,773 335,330
Real estate loans - retail
mortgage........................... 315,945 223,528 134,507 103,554 118,981
Loans to individuals................ 135,667 121,739 107,935 88,065 107,293
Lease financing receivable.......... 12,278 13,606 9,729 8,296 7,919
--------------------------------------------------------------------------------
Total loans................ $2,064,912 $1,649,436 $1,242,539 $1,138,141 $1,197,621
================================================================================
LOAN MATURITIES AT DECEMBER 31, 1996
- - -------------------------------------------------------------------------------------------------
(in thousands)
ONE
ONE YEAR THROUGH MORE THAN
OR LESS FIVE YEARS FIVE YEARS TOTAL
-------------------------------------------------------------
Commercial, financial,
and agricultural loans.............$581,639 $355,588 $ 43,598 $ 980,825
Real estate loans -
commercial and other............... 125,886 331,151 163,160 620,197
Real estate loans - retail
mortgage........................... 39,001 116,489 160,455 315,945
Loans to individuals................ 101,897 29,827 3,943 135,667
Lease financing receivable.......... 2,938 9,340 - 12,278
-------------------------------------------------------------
Total loans................$851,361 $842,395 $371,156 $2,064,912
=============================================================
Deposits and Short-Term Borrowings
The Company's average deposits increased $75 million or 2.8% to $2.80
billion in 1996 from $2.72 billion in 1995.
As shown in the table of average balance sheets, non-interest-bearing
demand deposits have been relatively stable between 1995 and 1996, increasing
$14.8 million or 1.8%. This table also shows that average time deposits, which
includes both core deposits and certificates of deposit and other time deposits
of $100,000 and over, increased $113 million or 15% between 1995 and 1996.
The growth within the time deposit category came both from core deposits of
under $100,000, which increased $39 million, and from a $68 million increase in
time deposits of $100,000 and over.
Average savings, NOW and money market account deposits decreased $53
million or 4.7% between 1995 and 1996.
Despite a moderate decline in market interest rates during 1995 to a relatively
stable level in 1996, higher-rate investment alternatives
Page 10 of 69 Pages
which have been available to holders of these accounts during the past year have
fostered disintermediation of some deposit funds.
The Company's short-term borrowings consist of purchases of federal
funds and sales of securities under repurchase agreements. Such borrowings are
both a source of funding for certain short-term lending facilities and part of
the Company's services to correspondent banks and other customers. The Company's
average short-term borrowing increased $168 million or 86% between 1995 and
1996. The Company has used short-term borrowings, particularly repurchase
agreements, to provide funds to support the growth in the loan portfolio. The
rise in short-term borrowings is also partly attributable to the promotion of
repurchase agreements in connection with an expansion of the Banks' cash
management services. The Company's average short-term borrowing position, net of
federal funds sold and short-term deposits, was approximately $335 million in
1996 and $135 million in 1995.
INVESTMENT IN SECURITIES
- - -----------------------------------------------------------------------------------------------------------
(dollars in thousands)
Book Value at December 31 1996 1995 1994
---------------------------------------------------------------
U S. Treasury securities:
Held to maturity...........................$ 557,606 $ 803,632 $ 999,505
Available for sale......................... 544 5,598 8,373
Securities of U.S. government agencies:
Held to maturity........................... 329,713 250,905 248,572
Available for sale......................... 33,083 44,567 27,037
Mortgage-backed securities:
Held to maturity........................... 145,045 56,707 1,834
Available for sale......................... 112,273 173,068 177,480
State and municipal securities:
Held to maturity........................... 141,972 135,716 134,899
Available for sale......................... 1,072 1,074 -
Corporate bonds, held to maturity........... - - 25,160
Federal Reserve stock and other
corporate securities...................... 4,986 4,629 4,637
---------------------------------------------------------------
Total..............................$1,326,294 $1,475,896 $1,627,497
===============================================================
Distribution of Remaining Over One Over Five
Maturity and Yield by One Year Through Through Over
Range and Less Five Years Ten Years Ten Years Total
at December 31, 1996 --------------------------------------------------------------------------------------
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
--------------------------------------------------------------------------------------
Securities held to maturity:
U.S. Treasury securities............$322,383 5.24% $235,223 6.45% $ - -% $ - -% $557,606 5.75%
Mortgage-backed securities(2)....... 1,600 7.34 18,205 6.59 120,284 6.39 4,956 6.68 145,045 6.44
U.S. government agency
securities......................... 25,028 6.03 289,605 6.45 15,080 6.47 - - 329,713 6.47
State and municipal
securities(1)..................... 14,452 7.64 52,120 7.82 58,811 8.28 16,589 7.97 141,972 8.01
Equity securities(3)................ - - - - - - 4,986 - 4,986 -
Securities available for sale:(4)
U.S. Treasury securities............ - - 544 7.02 - - - - 544 7.02
U.S. government agency
securities......................... 13,906 4.56 3,225 5.36 14,910 6.98 1,042 8.12 33,083 5.84
Mortgage-backed securities(2)....... 32,578 6.73 71,288 6.35 2,597 7.26 5,810 8.13 112,273 6.59
State and municipal
securities(1)..................... - - 160 6.50 354 7.43 558 8.15 1,072 7.56
(1) Tax exempt yields are expressed on a fully taxable equivalent basis.
(2) Distributed by contractual maturity without regard to repayment schedules or projected prepayments.
(3) These securities have no stated maturities or guaranteed dividends.
(4) These securities are classified as available for sale before maturity. The actual timing of any such sales, however, is
not determinable at year end.
Page 11 of 69 Pages
Investment in Securities
At December 31, 1996, the Company's total investment in securities was
$1.33 billion, a decrease of $150 million or 10% from the December 31, 1995
total of $1.48 billion.
The average total investment portfolio outstanding decreased $89
million or 5.8% between 1995 and 1996. Funds from investment maturities, in
particular U.S. Treasury securities, have been used to partially satisfy
increased loan demand in recent years. In 1996, maturities of U.S. Treasury
securities have also been reinvested in higher-yielding U.S.
government agency securities and mortgage-backed issues.
The weighted average maturity of the overall portfolio of securities
was 36 months at year end 1996 as compared to 34 months at year end 1995. The
weighted average taxable-equivalent portfolio yield was 6.32% at December 31,
1996, an increase of 40 basis points from 5.92% at December 31, 1995.
Securities classified as available for sale constituted approximately
11% of the total investment portfolio at year end 1996 and 15% as of year end
1995. These securities are reported at their estimated fair values in the
consolidated statements of condition. The net unrealized gain on available for
sale securities was $0.4 million at year end 1996 compared to $2.3 million at
1995's year end. These gains are reported, net of tax, as a separate component
of shareholders' equity for each period. The remaining portfolio securities are
classified as held to maturity and are reported at amortized cost. The Company
maintains no securities trading portfolio.
At December 31, 1996, the Company held no investment in securities of a
single issuer, other than U.S. Treasury and government agency securities and
mortgage-backed securities issued or guaranteed by government agencies, that
exceeded 10% of its shareholders' equity. The Company maintains no material
investment or participation in financial instruments or agreements whose value
is linked to or derived from changes in the value of some underlying asset or
index. Such instruments or agreements include futures, forward contracts, option
contracts, interest-rate swap agreements, and other financial arrangements with
similar characteristics, and are commonly referred to as derivatives.
Bank Premises and Equipment
The net investment in bank premises and equipment at December 31, 1996
of $109 million represents a $24 million or 29% increase from the level at year
end 1995. Beginning in 1995 and continuing in 1996, the Company has accelerated
the expansion of its branch and automated teller machine networks, the
renovation or replacement of existing branch facilities, and the enhancement of
its facilities for its support operations. During 1996, the Company completed or
began construction on thirteen new branch locations throughout its market area
and opened a new operations center.
Asset Quality
Overall asset quality has shown significant improvement over the past
five years. Non-performing assets totalled $12.3 million at December 31, 1996, a
decrease of $2.4 million or 16% from $14.7 million at year end 1995. In the four
years since 1992 non-performing assets have fallen a total of $102 million or
89%. Over this same period, loans internally classified as having above-normal
credit risk decreased approximately $148 million or 61% to $94.5 million or 4.6%
of total loans at year end 1996. At December 31, 1996, the classification totals
were as follows: loans as to which there are serious doubts as to full
repayment, $6.7 million; substandard loans with well-defined weaknesses that, if
not corrected, would likely result in some loss, $39.3 million; and loans with
risk characteristics that indicate a potential weakness and that warrant special
attention, $48.5 million.
The Company was successful in recovering $10.3 million of previously
charged-off loans in 1996 and $14.2 million in 1995. In 1996, the Company
identified $6.1 million of loans to be charged off as uncollectible against the
reserve for possible loans losses as compared to $3.5 million of charge-offs in
1995. The increase in charge-offs is mainly attributable to certain credit
quality issues that developed with respect to a segment of the portfolio
acquired in the merger with one of the pooled institutions as well as to the
downgrade in the credit rating of one commercial customer. Management has
addressed the issues identified in the acquired portfolio and has assessed the
potential for additional
Page 12 of 69 Pages
losses in this portfolio and with the troubled commercial customer in evaluating
the adequacy of the loan loss allowance.
The reserve for possible loan losses is maintained at a level believed
by management to be adequate to absorb potential losses in the portfolio. In the
early 1990s, the economic conditions in the Company's primary market areas
stabilized and began to improve after a period of severe decline, and management
began implementing a program to strengthen its policies and procedures related
to the measurement and control of credit risk in its loan portfolio. In 1993,
the improvement in the economy and the success of management's program led to a
dramatic reduction in the Company's measures of overall loan credit risk and
allowed management to authorize a $59.3 million reduction in the allowance for
possible loan losses. With continued economic strength, continued improvements
in overall measures of asset quality, and significant net recoveries in the
following years, the Company was able to return $25.9 million of the loan loss
allowance to income in 1994, $9.4 million in 1995, and $5.0 million in 1996. The
reserve for possible loan losses represented 411% of non-performing loans at
December 31, 1996 and 1.9% of total loans on that date. At year end 1995 this
reserve coverage was 410% of non-performing loans and 2.4% of total loans.
During 1996, the Company disposed of OREO properties with a carrying
value at the time of sale totalling approximately $3.1 million. The value of
properties acquired in settlement of loan claims during the year was $1.2
million.
NON-PERFORMING ASSETS AT DECEMBER 31
- - ---------------------------------------------------------------------------------------------------------------
(in thousands)
1996 1995 1994 1993 1992
-------------------------------------------------------------------------------
Loans accounted for on
a nonaccrual basis $ 7,191 $ 8,161 $ 16,292 $ 34,271 $ 72,913
Restructured loans 2,375 1,622 - - -
-------------------------------------------------------------------------------
Total non-performing loans 9,566 9,783 16,292 34,271 72,913
Other real estate owned 2,765 4,925 7,034 16,783 41,395
Other foreclosed assets - - 3 174 420
-------------------------------------------------------------------------------
Total non-performing
assets $ 12,331 $ 14,708 $ 23,329 $ 51,228 $ 114,728
===============================================================================
Loans 90 days past due still
accruing $ 2,040 $ 688 $ 250 $ 1,659 $ 2,037
===============================================================================
Non-performing assets as a
percentage of:
Total assets 0.3% 0.4% 0.7% 1.6% 3.5%
Total loans and
foreclosed assets 0.6% 0.9% 1.9% 4.4% 9.3%
Whitney National Bank has several property interests which were
acquired through routine banking transactions generally prior to 1933 and which
are recorded in its financial records at a nominal value. Management continually
investigates ways to maximize the return on these assets. Operating income from
these property interests, primarily from oil and gas royalties and real estate
operations, was approximately $897 thousand in 1996, including $360 thousand
which related to the sale of seventy-seven acres of vacant land. This compares
with $166 thousand of operating income in 1995 and $151 thousand in 1994. Future
dispositions may result in the recognition of substantial gains.
The Company has not extended any credit in connection with what would
be defined under regulatory guidelines as highly leveraged transactions, nor has
it acquired any investment securities arising from such transactions. The
Company's foreign lending and investing activities are currently immaterial.
Note 4 to the consolidated financial statements discusses credit concentrations
in the loan portfolio.
Page 13 of 69 Pages
SUMMARY OF ACTIVITY IN THE RESERVE FOR POSSIBLE LOAN LOSSES
- - ----------------------------------------------------------------------------------------------------------------
(dollars in thousands)
1996 1995 1994 1993 1992
-----------------------------------------------------------------------------
Reserve for possible loan
losses at beginning of period $40,144 $37,069 $47,228 $101,510 $110,205
Reserves provided through
acquisitions - 1,772 - - -
Loans charged off during period:
Commercial, financial, and
agricultural loans $ 3,404 $2,273 $2,092 $ 5,372 $13,322
Real estate loans 24 138 572 872 5,056
Loans to individuals 829 921 1,480 1,368 4,082
Lease financing receivables 1,849 200 132 301 594
-----------------------------------------------------------------------------
Total $ 6,106 $3,532 $4,276 $7,913 $23,054
-----------------------------------------------------------------------------
Recoveries of loans previously
charged off:
Commercial, financial, and
agricultural loans $ 3,495 $4,833 $4,868 $7,474 $ 4,434
Real estate loans 5,383 6,908 11,964 3,816 2,245
Loans to individuals 1,404 2,416 3,084 1,492 2,954
Lease financing receivables 23 58 70 144 86
-----------------------------------------------------------------------------
Total $10,305 $14,215 $19,986 $12,926 $ 9,719
-----------------------------------------------------------------------------
Net loans recovered (charged off)
during period $ 4,199 $10,683 $15,710 $5,013 $(13,335)
Addition to (reduction of)
reserve for possible loan
losses charged (credited)
to operations (5,000) (9,380) (25,869) (59,295) 4,640
-----------------------------------------------------------------------------
Reserve for possible loan
losses at end of period $39,343 $40,144 $37,069 $47,228 $101,510
=============================================================================
Reserve as a percentage of:
Total non-performing loans 411% 410% 228% 138% 139%
Total loans 1.9% 2.4% 3.0% 4.1% 8.5%
Ratio of net charge-off (recoveries)
to average loans outstanding 0.2% 0.8% 1.4% 0.5% (1.0%)
Page 14 of 69 Pages
ALLOCATION OF THE RESERVE FOR POSSIBLE LOAN LOSSES
- - --------------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993
-----------------------------------------------------------------------------------------------
% of % of % of % of
% of Total % of Total % of Total % of Total
Allowance Loans Allowance Loans Allowance Loans Allowance Loans
-----------------------------------------------------------------------------------------------
Commercial,
financial and
agricultural
loans 43.2% 49.4% 42.1% 48.8% 45.5% 51.1% 45.2% 55.3%
Real estate
loans -
commercial
and other 27.0% 30.0% 23.5% 29.5% 27.7% 28.6% 22.5% 27.1%
Real estate
loans - retail
mortgage 13.5% 13.4% 10.9% 13.6% 9.7% 10.8% 6.0% 9.1%
Loans to
individuals 6.3% 6.6% 7.5% 7.3% 9.1% 8.7% 5.9% 7.8%
Lease financing
receivables 2.5% 0.6% 2.0% 0.8% 0.5% 0.8% 0.4% 0.7%
Unallocated 7.5% - 14.0% - 7.5% - 20.0% -
----------------------------------------------------------------------------------------------
Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
==============================================================================================
Capital Adequacy
The Company's risk-based regulatory capital ratios decreased between
December 31, 1995 and December 31, 1996, although all ratios remained well in
excess of the minimum requirements. The decreases are consistent with the growth
between these periods in total risk-weighted assets. Loan growth that was partly
funded by maturities of generally lower risk-weighted investment securities was
the main factor contributing to the rise in total risk-weighted assets.
The regulatory capital ratios for the Company and its significant
banking subsidiary are shown as follows compared to the minimums that are
currently required under capital adequacy standards imposed by their regulators
and those that the Banks must maintain to be eligible for a "well capitalized"
classification under the prompt corrective action framework. With the exception
of the newly-formed Florida Bank, which has not yet been subject to a regulatory
examination, each of the Banks had been capitalized as "well capitalized" in the
most recent classification notice received from its respective regulatory
agency.
Regulatory banking agencies assess an institution's exposure to
interest rate risk as part of the overall procedures performed to evaluate an
institution's capital adequacy, but these agencies have not yet incorporated a
specific measure of interest rate risk into an institution's required level of
regulatory capital. Management believes that implementation of a specific
capital charge for interest rate risk will not have a significant impact on the
Company's or the Banks' regulatory capital requirements.
Page 15 of 69 Pages
REGULATORY CAPITAL RATIOS AND RISK-WEIGHTED ASSETS
- - ---------------------------------------------------------------------------------------------------------------
(dollars in thousands)
December 31, Minimum Minimum For
Capital Adequacy "Well-Capitalized"
1996 1995 Standard Classification
- - ---------------------------------------------------------------------------------------------------------------
Tier 1 risk-based capital:
Company 14.87% 17.19% 4.00% n/a
Louisiana Bank 14.38% 16.91% 4.00% 6.00%
Total risk-based capital:
Company 16.12% 18.45% 8.00% n/a
Louisiana Bank 15.64% 18.17% 8.00% 10.00%
Tier 1 leverage capital:
Company 10.19% 10.06% 4.00% n/a
Louisiana Bank 9.39% 9.55% 4.00% 5.00%
Total risk-weighted assets:
Company $2,573,219 $2,041,967
Louisiana Bank $2,273,450 $1,824,148
RESULTS OF OPERATIONS
Net Interest Income
Taxable-equivalent net interest income increased $6.6 million or 4.4%
in 1996 as compared to 1995, and the net interest margin declined to 4.81% from
5.03%. In 1995 net interest income had increased $6.5 million or 4.5% over 1994
as the net interest margin rose to 5.03% from 4.86%. The factors which
contributed to these changes are detailed in the following tables analyzing
changes in interest income and expense.
Taxable-equivalent loan interest income increased $24.2 million or 18%
in 1996 as compared to 1995. This increase was driven by the $398 million growth
in average loans outstanding between 1995 and 1996. The increase in interest
income from loan growth was partially offset by the impact of a decrease in
effective loan yields between these periods, from 9.51% in 1995 to 8.74% in
1996. The 77 basis point decrease in effective loan yields reflects the impact
of variable and short-term fixed-rate loans repricing in a moderating interest
rate environment, some increase in competitive pressure on the pricing of loans
to new and existing relationships, and cash basis and cost recovery interest
income recognized in 1995 from nonaccrual loans and loans previously in workout
status. Market interest rates trended lower throughout 1995 and early 1996, and
over this period weighted-average bank prime lending rates decreased 55 basis
points, to 8.28% in 1996 from 8.83% in 1995. Approximately a third of the
Company's loan portfolio reprices with changes in prime.
Comparing 1995 and 1994, taxable-equivalent loan interest income
increased $30.5 million or 30%, an increase that was also largely driven by loan
growth which on average totalled $228 million between these periods. A 77 basis
point increase in the effective yield on the Company's loan portfolio to 9.51%
in 1995 from 8.74% in 1994 also contributed to the increase in interest income.
Although market interest rates had moderated in 1995 after rising in 1994, bank
prime lending rates were on average approximately 150 basis points higher in
1995 than in 1994.
In 1996, taxable-equivalent interest income on investment securities
decreased $1.5 million or 1.7% when compared with 1995. This follows a decrease
in investment income of $8.0 million or 8.1% in 1995 compared with 1994. These
decreases are consistent with reductions in the average investment in securities
over this period, which totalled $88.9 million between 1995 and 1996 and $181
million between 1994 and 1995. Because of its maturity structure, the effective
yield on the Company's investment securities portfolio is not as responsive to
rising or falling market rates as are its loan yields. As a result of this and a
moderate shift in the portfolio mix toward mortgage-backed issue and U.S.
government
Page 16 of 69 Pages
agency securities and from U.S. Treasury securities, the effective portfolio
yield was 6.17% in 1996, an increase of 25 basis points from 5.92% in 1995,
despite the overall decline in market rates between these periods. Between 1994
and 1995, the effective investment portfolio yield increased 16 basis points,
from 5.76% to 5.92%.
The net increase in total taxable-equivalent interest income between
1996 and 1995 was $20.6 million or 9.1% on growth in total earning assets of
$277 million or 9.3%. The overall effective earning-asset yield in 1996 remained
relatively unchanged at 7.57% compared to 7.59% in 1995. Total
taxable-equivalent interest income in 1995 was $22.9 million or 11% higher than
in 1994, as total earning assets grew $25 million or 0.8%. The overall effective
earning-asset yield in 1995 was 7.59%, an increase of 72 basis points from 6.87%
in 1994.
Interest expense increased $14.0 million or 18% in 1996 as compared to
1995. Approximately $13.0 million of this increase can be attributed to the $228
million increase in interest-bearing liabilities, particularly short-term
borrowings, between these periods. The remaining increase reflects mainly the
impact of the greater emphasis on short-term borrowings as a funding source in
1996 and the continued shift of the deposit mix toward time deposits. The
overall rate on interest-bearing liabilities was 3.88% in 1996 and 3.64% in
1995, an increase of 24 basis points.
Interest expense increased approximately $16.4 million or 28% in 1995
as compared to 1994, despite a $31.3 million decrease in average
interest-bearing liabilities outstanding between these periods. The increase
reflects the lingering impact of rising rates during 1994, the rate structures
of the markets in which the Company made purchase acquisitions in 1994 and 1995,
and the shift in the deposit mix toward time deposits, a shift also partly
attributable to acquisitions. The overall rate on interest-bearing liabilities
was 3.64% in 1995 as compared to 2.81% in 1994, an increase of 83 basis points.
Page 17 of 69 Pages
ANALYSIS OF CHANGES IN INTEREST INCOME AND INTEREST EXPENSE
YIELDS ON AVERAGE EARNING ASSETS AND RATES ON AVERAGE INTEREST-BEARING LIABILITIES
- - ----------------------------------------------------------------------------------
(dollars in thousands)
1996 1995 1994
------------------------------------------------------------------------------------------
AVERAGE REVENUE/ YIELD/ AVERAGE REVENUE/ YIELD/ AVERAGE REVENUE/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE BALANCE EXPENSE RATE
------------------------------------------------------------------------------------------
ASSETS
Loans (tax equivalent)u(1)(2)$1,778,074 $155,424 8.74 % $1,379,587 $131,223 9.51 % $1,151,750 $100,699 8.74 %
------------------------------------------------------------------------------------------
U.S. Treasury securities.....$ 693,722 $ 39,114 5.64 % $ 927,466 $ 51,013 5.50 % $1,015,985 $ 54,748 5.39 %
U.S. government agency
securities.................. 357,977 22,351 6.24 % 275,245 15,956 5.80 % 338,121 18,436 5.45 %
Mortgage-backed securities .. 255,440 16,481 6.45 % 181,664 11,986 6.60 % 194,543 12,623 6.49 %
State and municipal
securities(1)............... 135,019 11,085 8.21 % 131,394 10,818 8.23 % 129,503 10,697 8.26 %
Federal reserve stock and
other corporate securities 4,765 293 6.15 % 20,057 1,093 5.45 % 38,380 2,342 6.10 %
------------------------------------------------------------------------------------------
Total investment
in securities...........$1,446,923 $ 89,324 6.17 % $1,535,826 $ 90,866 5.92 % $1,716,532 $ 98,846 5.76 %
------------------------------------------------------------------------------------------
Federal funds sold and
short term deposits......... 27,220 1,501 5.51 % 59,644 3,581 6.00 % 81,782 3,215 3.93 %
------------------------------------------------------------------------------------------
Total interest-earning
assets..................$3,252,217 $246,249 7.57 % $2,975,057 $225,670 7.59 % $2,950,064 $202,760 6.87 %
------------------------------------------------------------------------------------------
Cash and due from banks...... 189,731 192,399 198,875
Bank premises and
equipment,net............... 98,714 77,779 71,644
Other real estate owned, net. 3,965 6,390 11,004
Other assets................. 74,795 81,220 78,129
Reserve for possible loan.
losses................. (42,741) (40,271) (45,826)
--------- ---------- ----------
Total assets...............$3,576,681 $3,292,574 $3,263,890
========= ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Savings account deposits.....$ 449,750 $ 12,100 2.69 % $ 489,844 $ 13,224 2.70 % $ 568,577 $ 15,378 2.70 %
NOW account and MMDA deposits 623,256 13,800 2.21 % 635,754 13,767 2.17 % 672,446 13,028 1.94 %
Time deposits................ 880,048 45,946 5.22 % 767,170 38,916 5.07 % 677,524 24,281 3.58 %
------------------------------------------------------------------------------------------
Total interest-bearing
deposits...............$1,953,054 $ 71,846 3.68 % $1,892,768 $ 65,907 3.48 % $1,918,547 $ 52,687 2.75 %
------------------------------------------------------------------------------------------
Federal funds purchased
repurchase agreements...... 362,534 18,049 4.98 % 194,478 10,034 5.16 % 200,063 6,832 3.41 %
------------------------------------------------------------------------------------------
Total interest-bearing
liabilities............$2,315,588 $ 89,895 3.88 % $2,087,246 $ 75,941 3.64 % $2,118,610 $ 59,519 2.81 %
------------------------------------------------------------------------------------------
Demand deposits.............. 842,168 827,348 806,914
Other liabilities............ 30,070 29,020 31,800
Shareholders' equity......... 388,855 348,960 306,566
--------- ---------- ----------
Total liabilities and
shareholders' equity...$3,576,681 $3,292,574 $3,263,890
========= ========== ==========
Net interest income/margin
(tax equivalent)....... $156,354 4.81 % $149,729 5.03 % $143,241 4.86 %
======== ====== ======== ====== ======== ======
(1) Tax equivalent amounts are calculated using a marginal federal income tax rate of 35% for 1996 and 1995 and 1994.
(2) Average balance includes nonaccruing loans of $8,530, $12,841 and $24,173 respectively, in 1996, 1995 and 1994.
(3) Average balance excludes unrealized gain or loss on securities available for sale.
Page 18 of 69 Pages
ANALYSIS OF CHANGES IN INTEREST INCOME AND INTEREST EXPENSE
VOLUME AND YIELD/RATE VARIANCE
- - ----------------------------------------------------------------------------------------------------------------------------
( in thousands)
1996 COMPARED TO 1995 1995 COMPARED TO 1994
------------------------------------------------------------------------------
CHANGE DUE TO CHANGE DUE TO
YIELD/ YIELD/
VOLUME RATE NET VOLUME RATE NET
------------------------------------------------------------------------------
INTEREST EARNED ON
Loans (tax equivalent)u(1)u(2)............... $ 33,635 $ (9,434) $ 24,201 $ 21,132 $ 9,392 $ 30,524
------------------------------------------------------------------------------
U.S. Treasury securities..................... $ (13,215) $ 1,316 $ (11,899) $ (4,900) $ 1,165 $ (3,735)
U.S. government agency securities............ 5,090 1,305 6,395 (3,756) 1,276 (2,480)
Mortgage-backed securities .................. 4,754 (259) 4,495 (855) 218 (637)
State and municipal
securities (tax equivalent)u(1)........ 298 (31) 267 156 (35) 121
Federal Reserve stock and
other corporate securities.............. (962) 162 (800) (1,020) (229) (1,249)
------------------------------------------------------------------------------
Total investment in securities............. $ (4,035) $ 2,493 $ (1,542) $ (10,375) $ 2,395 $ (7,980)
------------------------------------------------------------------------------
Federal funds sold and short-term deposits... (1,809) (271) (2,080) (386) 752 366
------------------------------------------------------------------------------
Total interest-earning assets.............. $ 27,791 $ (7,212) $ 20,579 $ 10,371 $ 12,539 $ 22,910
------------------------------------------------------------------------------
INTEREST ACCRUED ON
Savings account deposits..................... $ (1,079) $ (45) $ (1,124) $ (262) $ (1,892) $ (2,154)
NOW account and MMDA deposits................ (228) 261 33 39 700 739
Time deposits................................ 5,865 1,165 7,030 3,535 11,100 14,635
------------------------------------------------------------------------------
Total interest-bearing deposits............ $ 4,558 $ 1,381 $ 5,939 $ 3,312 $ 9,908 $ 13,220
------------------------------------------------------------------------------
Federal funds purchased and
repurchase agreements.................... 8,354 (339) 8,015 87 3,115 3,202
------------------------------------------------------------------------------
Total interest-bearing liabilities......... $ 12,912 $ 1,042 $ 13,954 $ 3,399 $ 13,023 $ 16,422
------------------------------------------------------------------------------
Net interest income (tax equivalent)u(1)... $ 14,879 $ (8,254) $ 6,625 $ 6,972 $ (484) $ 6,488
==============================================================================
u(1) Tax equivalent amounts are calculated using a marginal federal income tax rate of 35% for all years.
u(2) Interest recognized on a cash basis on nonaccruing loans and prior cost recovery interest currently recognized
on nonaccruing and certain accruing loans was $3,647, $6,425 and $6,803 in 1996, 1995 and 1994, respectively.
Page 19 of 69 Pages
Other Income and Expense
Non-interest income, adjusted to exclude securities gains and net gains
from sales of foreclosed real estate and other foreclosed assets, increased $2.0
million or 6.2% to $34.8 million in 1996 from $32.8 million in 1995. This
followed an increase in 1995 of $1.3 million or 4.2% from $31.4 million in 1994.
Income from service charges on deposits accounts, which accounted for
more than half of adjusted non-interest income in 1996, 1995 and 1994, decreased
sightly over this three year period. The reduction in the Company's FDIC deposit
insurance premiums in the second half of 1995, as discussed below, enabled the
Company to reduce the deposit insurance assessment charged on business accounts,
which was partly responsible for the overall decrease in service charge income
since 1994. The decrease in 1995 also resulted partly from an increase in the
earnings credit rate applied to business account balances that accompanied the
generally higher than average interest rates experienced in that year.
Fee income from credit card related operations increased 11.8% in 1996
compared to 1995, after increase 10.5% in 1995 compared to 1994. These
improvement reflect both the economic conditions as well as successful marketing
efforts. Increased fees from trust investment management services, reflecting in
part the strong performance of the financial markets in 1996 and 1995, supported
overall year-to-year increases in trust services income of 10.1% in 1996 and
22.3% in 1995.
The Company continued to expand its automated teller facilities in 1995
and 1996 and fees generated from ATM operations, which are included with other
fees and charges in the accompanying table of non-interest income, registered
increases of 56% or approximately $700 thousand in 1996 and 72% or $500 thousand
in 1995 . Also included with other fees and charges is income from the Company's
secondary mortgage loan operations. This income category increased approximately
$400 thousand in 1996 reflecting in part a more favorable interest rate
environment. This income category was little changed between 1994 and 1995.
Non-interest operating expenses, adjusted to exclude provisions for,
and recoveries of, losses on OREO and other problem assets, were $134 million in
1996, an increase of $11.5 million or 9.4% over 1995's total of $123 million.
Between 1994 and 1995, the increase in adjusted non-interest operating expenses
was $5.9 million or 5.1% from $116 million in 1994.
As is shown in the table of non-interest expense, salaries and employee
benefits expense increased $4.0 million or 6.3% in 1996 as compared to 1995.
Approximately $0.8 million of this increase related to nonrecurring personnel
costs incurred in connection with the merger completed in March 1996. An
additional $0.4 million of this increase was related to the Alabama bank
acquisition in February of 1995. The remaining increase of $2.8 million was
attributable to merit salary increases and staff additions and to the net change
in cost of various benefit and incentive programs for employees and management.
In 1995, salaries and employee benefits expense increased $4.1 million
or 6.8% as compared to 1994. Approximately $2.1 million of this increase was
related to the new banking operations in Alabama. The remaining increase of $2.0
million is attributable to merit salary increases and staff additions.
Non-interest expenses other than personnel-related expenses increased
$7.5 million or 12.7% between 1995 and 1996 and $1.9 million or 3.2% between
1994 and 1995. Contributing to the increase in 1996 were non-recurring merger
expenses totalling approximately $3.5 million, which included legal services and
other professional services, particularly those related to system conversions,
and investment banker fees. Also contributing to the 1996 increase was
approximately $1.0 million in expenses incurred in connection with the
relocation of the Company's data processing and operational support departments
to the newly-opened operations center. Excluding these merger and relocation
expenses, the 1996 increase in non-personnel expenses was approximately $3.0
million or 5.0% over 1995.
Occupancy expense increased $1.9 million or 22.3% in 1996 compared to
1995. This increase reflects both the expansion of the Company's branch and ATM
networks, as well as the ongoing program to upgrade the appearance and
functionality of its administrative offices, operations facilities and a
significant number of the Company's existing
Page 20 of 69 Pages
branches. Within the past year, the Company opened seven new branch locations,
completed the renovation of two additional branch locations as well as the main
office branch facility, and moved into its newly-constructed operations center.
The increase of $0.8 million or 10.3% in this expense category in 1995 as
compared to 1994 was attributable in part to the Alabama bank acquisition early
in 1995.
The expense of furnishings and equipment, including data processing
systems, increased $2.0 million or 19.0% in 1996 following an increase of $2.4
million or 29.7% in 1995. These increases are directly related to the additions
to the branch network and the opening of the new operations center, to various
enhancements in the Company's data processing and communications systems
impacting both customer service capabilities as well as internal bank
operations, and to the continuing expansion of the Company's ATM network which
has grown from fewer than ten locations in 1990 to over one hundred today. Also
contributing to the increase in 1996 was approximately $0.2 million in
non-recurring data processing equipment expense associated with the relocation
to the new operations facility. The increase in 1995 was also partly
attributable to the Alabama acquisition.
Of the $2.2 million or 64.0% increase in the 1996 expense for legal and
other professional services, approximately $1.8 million represent s
merger-related expenses as noted above. An additional $0.7 million of consulting
fees was incurred in 1996 for services rendered in connection with the new
operations center project. Excluding these items, this expense category would
have shown a net decrease in 1996 of approximately $0.3 million when compared
with 1995, as increases in professional service fees for data system upgrades
and process improvements were offset by a $0.7 million recovery of collection
costs from a legal settlement. The increase in this expense category from 1994
to 1995 was also related to system upgrade activities.
Fluctuations in taxes and insurance expense in recent years have mainly
followed the fluctuations in the state ad valorem tax assessment that is based
on a calculated estimate of the Company's value. Changes in the level of prior
year earnings and equity and in the market conditions for bank stocks in general
all impact the annual assessment calculations.
Credit card operating expenses for 1996 and 1995 grew at rates that are
generally consistent with the growth in revenue from these operations as
discussed above.
The costs of operating the Company's growing branch and ATM networks
and the new operations center as well as the cost associated with the expansion
into the Alabama market in early 1995 are also reflected in increases in various
other expense categories during 1996 and 1995. These include security and other
services, postage and communications, stationery and supplies, and advertising.
The added expense from amortizing intangible assets acquired in
purchase transactions in 1995 and 1994 was more than offset in 1995 by a $2.4
million decrease in the amortization of intangibles from earlier acquisitions
resulting in a net decrease of $1.3 million in this expense category from 1994.
During the second half of 1995 there was a dramatic decrease in the
premium rate charged by the FDIC for deposit insurance. This led to a reduction
in this expense category of $2.8 million or 42% in 1995 followed by a $3.0
million or 80% reduction in 1996.
The expense of maintaining and operating OREO declined in both 1996 and
1995 with the continued improvement in asset quality.
Merger-related costs together with costs associated with the relocation
of the operations center comprised approximately $1.3 million of the total $1.9
million increase in other operating expenses in 1996 as compared to 1995. The
increase in this expense category for 1995 was partly the result of the Alabama
expansion.
Page 21 of 69 Pages
NON-INTEREST INCOME
- - -----------------------------------------------------------------------------------------------------------
1996 % Change 1995 % Change 1994
---------------------------------------------------------------
Service charges on deposit accounts.........$ 17,470 (0.2)% $ 17,512 (1.9)% $ 17,851
Trust service fees.......................... 3,738 10.1 3,394 22.3 2,775
Credit card income.......................... 5,737 11.8 5,131 10.5 4,645
International services income............... 1,822 (6.1) 1,941 8.9 1,783
Investment services income.................. 1,080 16.5 927 (16.9) 1,115
Other fees and charges...................... 3,815 20.2 3,173 22.7 2,586
Net gains on sales of OREO
and other foreclosed assets................ 2,537 107.4 1,223 (65.5) 3,542
Other operating income...................... 1,112 67.2 665 (0.3) 667
---------------------------------------------------------------
Total other non-interest income.............$ 37,311 9.9 $ 33,966 (2.9) $ 34,964
Gain on sale of securities.................. 11 266.7 3 (93.5) 46
---------------------------------------------------------------
Total non-interest income..................$ 37,322 9.9% $ 33,969 (3.0)% $ 35,010
===============================================================
NON-INTEREST EXPENSE
- - -----------------------------------------------------------------------------------------------------------
1996 % Change 1995 % Change 1994
--------------------------------------------------------------
Salaries and benefits.......................$ 67,493 6.3% $ 63,520 6.8% $ 59,462
Occupancy of bank premises, net............. 10,142 22.3 8,292 10.3 7,515
Furnishings and equipment, including
data processing systems.................... 12,418 19.0 10,434 29.7 8,047
Legal and other professional services....... 5,762 64.0 3,513 16.0 3,028
Security and other outside services......... 5,006 21.9 4,108 (12.5) 4,694
Taxes and insurance, other than real estate. 4,420 (4.0) 4,603 27.3 3,617
Postage and communications.................. 4,367 23.9 3,523 17.9 2,987
Credit card processing services............. 4,337 14.2 3,797 11.7 3,399
Stationery and supplies..................... 3,223 16.2 2,773 9.3 2,537
Amortization of intangible assets........... 2,802 (3.0) 2,888 (30.6) 4,161
Advertising................................. 2,381 5.4 2,260 28.4 1,760
Deposit insurance and regulatory fees....... 767 (79.8) 3,802 (42.4) 6,596
OREO maintenance and operations, net........ 345 (9.2) 380 (61.7) 993
Provision for (recovery of) losses on
OREO and other problem assets, net......... 325 273.6 87 108.2 (1,024)
Other operating expense..................... 10,606 21.9 8,700 10.3 7,889
--------------------------------------------------------------
Total non-interest
expense.................................$ 134,394 9.5% $ 122,680 6.1% $115,661
==============================================================
Income Taxes
The Company provided for income taxes at an overall effective rate of
32.0% in 1996, up from a 31.4% rate in 1995 and a 31.8% rate in 1994. The
effective rates in each period differ from the statutory rate of 35% primarily
because of the tax exempt income earned on investments in state and municipal
bonds. The increase in the effective rate in 1996 mainly reflects the impact of
non-deductible merger-related expenses.
Page 22 of 69 Pages
Accounting Changes
In October, 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation," which was effective for the Company's fiscal year
ended December 31, 1996. Among other provisions, this statement establishes a
fair value based method of accounting for stock-based compensation, including
the award of stock options. As provided for in SFAS No. 123, the Company elected
not to adopt the fair value based method for measuring compensation costs to be
included in its results of operations, but is continuing to follow prior
generally accepted accounting principles. Pro forma disclosures of net income
and earnings per share determined as if the fair value method had been applied
and certain other required disclosures are included in the notes to the
consolidated financial statements.
SFAS No. 125, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities," was issued in June, 1996, mainly to
provide consistent standards for distinguishing transfers of financial assets
that are sales from transfers that are secured borrowings, and it establishes
measurement, reporting and disclosure standards with respect to the assets and
liabilities that are obtained or incurred in such transfers. SFAS No. 125 is
generally effective for transfers, servicing and extinguishments occurring after
December 31, 1996, although application of certain provisions of the statement
has been delayed to 1998. Adoption of SFAS No. 125 with respect to transfer
transactions or servicing activities currently engaged in by the Company will
not result in a material impact on its financial position or results of
operations.
ASSET/LIABILITY MANAGEMENT
The asset/liability management process has as its focus the development
and implementation of strategies in the funding and deployment of the Company's
financial resources which are expected to maximize soundness and profitability
over time. These strategies reflect the goals set by the Company for capital
adequacy, liquidity, and the acceptable levels of risk established in Company
policies.
Interest Rate Risk/Interest Rate Sensitivity
The Company's financial assets and liabilities are subject to scheduled
and unscheduled repricing opportunities over time. Both the Company's potential
for generating net interest income and the current market values of its
financial assets and liabilities depend in part upon the prevailing levels of
market interest rates when these repricing opportunities arise. Interest rate
risk is a measure of this potential change in earnings ability and market
values. As part of the asset/liability management process the Company uses a
variety of tools, including an earnings simulation model, to measure interest
rate risk and to evaluate the impact of possible changes in rates on its
internal strategies.
The interest rate sensitivity gap analysis shown in the accompanying
table compares the volume of repricing assets against repricing liabilities over
time. This analysis is a relatively straight forward tool which is useful mainly
in highlighting significant short-term repricing volume mismatches. The table
presents the rate sensitivity gap analysis at December 31, 1996. The interest
rates on a substantial portion of the outstanding commercial loans vary with
changes in the Banks' prime lending rates or the prime rates of certain
money-center banks. These loans are assigned to the earliest repricing period in
the rate sensitivity analysis. A sizable portion of loans shown in the analysis
as repricing after one year is made up of fixed-rate real estate loans.
Certain interest-bearing deposit funding sources, such as savings, NOW
and money market account deposits, have characteristics of both demand deposits
and deposits made for investment return purposes. Although these deposits are
technically subject to immediate repricing, historical customer behavior
indicates that their rate-sensitivity is significantly less. In preparing the
analysis, these deposits are allocated among the repricing periods in a manner
that reflects expected customer behavior so as to present a more meaningful
point-in-time estimate of short-term asset/liability repricing mismatches. In
the twelve-month period from December 31, 1996, the analysis shows that the
Company is in a moderately asset-sensitive position on a cumulative basis, which
indicates that the Company's net interest margin would benefit somewhat from a
near-term increase in market interest rates but would suffer somewhat in a
declining interest rate
Page 23 of 69 Pages
market.
Recognizing the limitations of the static rate sensitivity gap
analysis, the Company uses the earnings simulation model to more accurately
forecast how its net interest income would change in response to changes in
market interest rates. The simulation model incorporates management's
expectations regarding loan demand, deposit product preferences, pricing and
funds availability, prepayment rates, and the spread of rates between different
financial instruments, among other factors. At December 31, 1996, the simulation
model yielded changes in net interest income in response to various
instantaneous and gradual market rate changes that were all well in compliance
with established policy guidelines and that did not involve any significant
negative impact on the Company's liquidity position.
INTEREST RATE SENSITIVITY
- - -------------------------------------------------------------------------------------------------------------------------
December 31, 1996
(dollars in millions)
TIME TO MATURITY OR NEXT REPRICING
-------------------------------------------------------------------------------------------
0-30 31-90 91-180 181-365 1 THROUGH OVER 5
DAYS DAYS DAYS DAYS 5 YEARS YEARS TOTAL
-------------------------------------------------------------------------------------------
ASSETS
Securities held
to maturity $ 60 $ 34 $ 89 $ 197 $ 638 $ 161 $ 1,179
Securities available
for sale 2 24 12 24 63 22 147
Loans 728 94 81 115 666 381 2,065
Federal funds
sold and short-
term deposits 13 - - - - - 13
------------------------------------------------------------------------------------------
Total earning assets $ 803 $ 152 $ 182 $ 336 $ 1,367 $ 564 $ 3,404
SOURCES OF FUNDS
Demand deposits $ - $ - $ - $ - $ - $ 935 $ 935
Savings deposits 8 24 12 25 369 - 438
Money market
account deposits 10 12 21 23 196 - 262
NOW account deposits 12 6 24 16 320 - 378
Eurodollar deposits 24 - - - - - 24
Certificates of deposit 181 184 194 130 136 - 825
Funds purchased and
repurchase agreements 473 6 - - - - 479
------------------------------------------------------------------------------------------
Total funding liabilites $ 708 $ 232 $ 251 $ 194 $ 1,021 $ 935 $ 3,341
INTEREST RATE
SENSITIVITY GAP $ 95 $ (80) $ (69) $ 142 $ 346 $ (371) $ 63
CUMULATIVE INTEREST
RATE SENSITIVITY
GAP $ 95 $ 15 $ (54) $ 88 $ 434 $ 63
CUMULATIVE INTEREST RATE
SENSITIVITY GAP AS A
PERCENT OF TOTAL EARNING
ASSETS 2.8% 0.5% (1.6%) 2.6% 12.7% 1.9%
Page 24 of 69 Pages
LIQUIDITY AND OTHER MATTERS
The Company and the Banks manage their liquidity positions to ensure
their ability to satisfy customer demand for credit, to fund deposit
withdrawals, to meet operating and other corporate obligations, and to take
advantage of investment opportunities, all in a timely and cost-effective
manner. Traditionally these liquidity needs have been met by maintaining a
strong base of core deposits and by carefully managing the maturity structure of
the investment portfolios. The funds provided by current operations and
forecasts of loan repayments are also considered in the liquidity management
process.
The Banks enter into short-term borrowing arrangements by purchasing
federal funds and selling securities under repurchase agreements, both as a
source of funding for certain short-term lending facilities and as part of their
services to correspondent banks and certain other customers. Neither the Company
nor the Banks have accessed long-term debt markets as part of liquidity
management.
The consolidated statements of cash flows provides a summarized view of
the Company's uses and sources of liquidity over the three-year period ended
December 31, 1996. The funding of loan growth was by far the major use of
liquidity in 1996, requiring a total of $411 million. Unreinvested proceeds from
maturities and sales of investment securities during 1996 provided $139 million
of the liquidity needed to fund this loan growth. The net cash flow used in
investing activities for 1996 totalled $287 million, including capital
expenditures for retail network expansion and other purposes totalling $34
million.
The Company financed this investment in large part through an increase
of $252 million in short-term borrowings of federal funds and sales of
securities under repurchase agreements. Total deposits, which are analyzed in
more detail below, were relatively stable in 1996 and were not a significant new
source or use of funds during 1996. The Company generated $53 million in liquid
funds during 1996 from operations and paid total dividends, including those of
pooled entities, of approximately $16 million.
The accompanying tables present information concerning deposits and
short-term borrowings for the years 1996, 1995 and 1994. Average core deposits,
defined as all deposits other than time deposits of $100,000 or more, were
stable between 1995 and 1996 at approximately $2.41 billion. Growth in average
non-interest-bearing demand deposits of $15 million and in core time deposits of
$39 million was offset by a $48 million decrease in interest-bearing checking
and savings deposit products. Non-core time deposits grew on average by $64
million between these periods.
Approximately 77% of core and 91% of non-core time deposits at December
31, 1996 mature within one year. Although these time deposits, in particular the
non-core time deposits, are more volatile than the transaction and savings
deposit products, management does not anticipate any significant near-term
negative impact on liquidity from maturities.
At December 31, 1996, approximately $258 million of the total $479
million in short-term borrowings was related to cash management services
provided by the Banks to their downstream correspondents and other customers.
The remaining $218 million in short-term borrowed funds was obtained primarily
through repurchase agreements with broker/dealers. While brokered short-term
borrowings are a viable means of leveraging the investment portfolio to provide
liquidity, the Company is striving to increase its core deposit base through the
expansion of its retail network, the promotion of existing and new products, and
strategically suitable acquisitions.
As of December 31, 1996, approximately $363 million or 31% of the
portfolio of investment securities held to maturity was scheduled to mature
within one year. An additional $147 million of investment securities was
classified as available for sale at the end of 1996, although management's
assignment of this classification is not based primarily on liquidity
considerations.
The Banks had approximately $990 million in unfunded loan commitments
outstanding at December 31, 1996, an increase of $68 million from the level at
December 31, 1995. Contingent obligations under letters of credit and financial
guarantees decreased by approximately $13 million between these dates to a total
of $69 million at December 31, 1996. Available credit card and related lines
were $77 million at December 31, 1996, and increase of $18 million from
Page 25 of 69 Pages
December 31, 1995. Because commitments and unused credit lines may, and many
times do, expire without being drawn upon, unfunded balances do not represent
actual future liquidity requirements. Draws by customers against these
commitments should not place any unusual strain on the Company's liquidity
position.
In 1997, the Company plans to open or begin construction on twenty-four
additional branch locations throughout the market areas of the Banks and to
complete the construction of a main office for the Alabama Bank. Total capital
expenditures for these new facilities are estimated at $40 million.
DEPOSITS
- - ----------------------------------------------------------------------------------------------------------
(in thousands)
1996 1995 1994
--------------------------------------------
Average non-interest-bearing demand deposits in domestic
bank offices $ 842,168 $827,348 $ 806,914
Average NOW account deposits in domestic offices 380,513 419,650 411,865
Average savings and money market account deposits in domestic
bank offices 692,493 705,948 829,158
Average time deposits in domestic bank offices 868,042 760,249 673,424
Average time deposits in foreign banking offices 12,006 6,921 4,100
Remaining maturity of time certificates of deposit of
$100,000 or more issued by domestic offices as of
December 31, 1996:
3 months or less $ 211,952
Over 3 through 12 months 109,554
Over 12 months 33,642
---------
Total certificates of deposit of $100,000 or more $ 355,148
---------
Remaining maturity of time certificates of deposit of
less than $100,000 issued by domestic offices as of
December 31, 1996:
3 months or less $ 149,635
Over 3 through 12 months 213,540
Over 12 months 106,569
---------
Total certificates of deposit of less than $100,000 $ 469,744
---------
Total time certificates of deposit $ 824,892
=========
FEDERAL FUNDS PURCHASED AND BORROWINGS UNDER REPURCHASE AGREEMENTS
(in thousands)
1996 1995 1994
---------------------------------------------------------
Amount outstanding at year end $ 478,662 $ 227,094 $ 179,806
Weighted average interest rate at year end 5.03% 5.15% 2.91%
Average outstanding during the year $ 362,534 $ 194,478 $ 200,063
Weighted average interest rate for the year 4.98% 5.16% 3.41%
Maximum amount outstanding at any month end $ 478,662 $ 234,558 $ 262,970
Page 26 of 69 Pages
Item 8: FINANCIAL STATEMENT AND SUPPLEMENTAL DATA
WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands) December 31,
1996 1995
-------------------------
ASSETS
Cash and due from financial institutions.................... $ 221,091 $ 235,221
Investment in securities:
Securities available for sale.......................... 146,972 224,307
Securities held to maturity (fair value of $1,188,186
in 1996 and $1,269,300 in 1995)................... 1,179,322 1,251,589
Federal funds sold and short-term deposits.................. 13,400 28,937
Loans....................................................... 2,064,912 1,649,436
Less reserve for possible loan losses....................... 39,343 40,144
-------------------------
Loans, net............................................... 2,025,569 1,609,292
Bank premises and equipment, net............................ 109,428 85,031
Other real estate owned, net................................ 2,765 4,925
Accrued income receivable................................... 29,746 30,420
Other assets................................................ 46,208 42,989
-------------------------
TOTAL ASSETS...................................... $ 3,774,501 $ 3,512,711
=========================
LIABILITIES
Deposits:
Non-interest-bearing demand deposits................... $ 934,980 $ 905,010
Interest-bearing deposits.............................. 1,926,901 1,977,160
-------------------------
Total deposits..................................... 2,861,881 2,882,170
Federal funds purchased and securities sold under
repurchase agreements.................................. 478,662 227,094
Dividends payable........................................... 4,489 3,273
Other liabilities........................................... 24,818 24,311
-------------------------
TOTAL LIABILITIES................................. $ 3,369,850 $ 3,136,848
-------------------------
SHAREHOLDER'S EQUITY
Common stock, no par value: 40,000,000 shares authorized,
18,445,331 shares issued and 17,951,551 shares
outstanding in 1996, 18,228,222 shares issued and
17,663,918 shares outstanding in 1995, after deduction
of treasury stock........................................ $ 2,800 $ 2,800
Capital surplus............................................. 78,081 71,765
Retained earnings........................................... 331,232 307,572
Net unrealized gain (loss) on securities available for sale
or transferred to held to maturity, net of tax effect of
($169) in 1996 and ($824) in 1995........................ 312 1,501
-------------------------
Total............................................. 412,425 383,638
Treasury stock at cost, 493,780 shares in 1996 and 564,304
shares in 1995, and unearned restricted stock
compensation........................................... 7,774 7,775
-------------------------
TOTAL SHAREHOLDERS' EQUITY........................ $ 404,651 $ 375,863
-------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY........................ $ 3,774,501 $ 3,512,711
=========================
The accompanying notes are an integral part of these financial statements
Page 27 of 69 Pages
W H I T N E Y H O L D I N G C O R P O R A T I O N A N D S U B S I D I A R I E S
C O N S O L I D A T E D S T A T E M E N T S O F O P E R A T I O N S
(in thousands, except per-share amounts) Year Ended December 31,
1996 1995 1994
------------------------------------------
INTEREST INCOME
Interest and fees on loans...........................$ 154,761 $ 130,998 $ 100,425
Interest and dividends on investments-
U.S. Treasury and agency securities............ 61,465 66,969 73,184
Mortgage-backed securities......................... 16,481 11,986 12,623
Obligations of states and political
subdivisions .................................. 7,205 7,033 6,964
Federal Reserve and corporate securities....... 293 1,093 2,342
Interest on federal funds sold....................... 1,501 3,581 3,215
------------------------------------------
TOTAL.....................................$ 241,706 $ 221,660 $ 198,753
------------------------------------------
INTEREST EXPENSE
Interest on deposits.................................$ 71,846 $ 65,919 $ 52,687
Interest on federal funds purchased and securities
sold under repurchase agreements............... 18,049 10,022 6,832
------------------------------------------
TOTAL....................................$ 89,895 $ 75,941 $ 59,519
------------------------------------------
Net interest income..................................$ 151,811 $ 145,719 $ 139,234
Reduction of reserve for possible loan losses........ 5,000 9,380 25,869
------------------------------------------
Net interest income after reduction of reserve for
possible loan losses...........................$ 156,811 $ 155,099 $ 165,103
------------------------------------------
NON-INTEREST INCOME
Gain on sale of securities...........................$ 11 $ 3 $ 46
Other non-interest income............................ 37,311 33,966 34,964
------------------------------------------
TOTAL....................................$ 37,322 $ 33,969 $ 35,010
------------------------------------------
NON-INTEREST EXPENSE
Salaries and employee benefits.......................$ 67,493 $ 63,520 $ 59,462
Occupancy of bank premises, net...................... 10,142 8,292 7,515
Other non-interest expenses.......................... 56,759 50,868 48,684
------------------------------------------
TOTAL....................................$ 134,394 $ 122,680 $ 115,661
------------------------------------------
Income before income taxes...........................$ 59,739 $ 66,388 $ 84,452
Income tax expense................................... 19,118 20,855 26,862
------------------------------------------
Net Income...........................................$ 40,621 $ 45,533 $ 57,590
==========================================
Earnings per share:
Primary........................................$ 2.26 $ 2.57 $ 3.32
Fully-diluted..................................$ 2.26 $ 2.56 $ 3.32
Weighted- average shares outstanding for calculation:
Primary........................................ 17,954,676 17,683,987 17,364,103
Fully-diluted.................................. 17,981,555 17,761,494 17,373,868
The accompanying notes are an integral part of these financial statements.
Page 28 of 69 Pages
W H I T N E Y H O L D I N G C O R P O R A T I O N A N D S U B S I D I A R I E S
C O N S O L I D A T E D S T A T E M E N T S O F C H A N G E S I N
S H A R E H O L D E R S ' E Q U I T Y
(in thousands, except share and per-share amounts)
Net
Unrealized Unearned
Gain(Loss) on Restricted
Securities Stock
Common Capital Retained Available Treasury Compen-
Stock Surplus Earnings For Sale Stock sation Total
-------------------------------------------------------------------------------
Balance at December 31, 1993.................... $2,800 $58,882 $229,936 $4,027 ($6,302) ($973) $288,370
Net income for 1994........................ 57,590 57,590
Cash dividends declared, $0.64 per share... (9,330) (9,330)
Cash dividends declared by pooled
entities, pre-merger..................... (815) (815)
Stock dividend of pooled entity, pre-merger 2,302 (2,302)
Common stock issued:
Acquisition of Baton Rouge Bank
and Trust Company, 90,909 shares........ 2,000 2,000
Employee savings plan, 16,768 shares...... 407 407
Dividend reinvestment plan,
10,093 shares........................... 269 269
Employee stock grants, net of forfeitures. 891 466 (1,357)
Director stock grants...................... 63 63
Stock options exercised.................... 82 174 256
Pooled entries, pre-merger................. 902 902
Amortization of unearned restricted
stock compensation...................... 340 340
Change in net unrealized gain (loss)
on securities .......................... (10,787) (10,787)
-------------------------------------------------------------------------------
Balance at December 31, 1994.................... $2,800 $65,798 $275,079 ($6,760) ($5,662) ($1,990) $329,265
-------------------------------------------------------------------------------
Net income for 1995........................ 45,533 45,533
Cash dividends declared, $0.82 per share... (12,158) (12,158)
Cash dividends declared by pooled
entities, pre-merger..................... (882) (882)
Common stock issued:
Employee savings plan, 148,177 shares...... 3,764 3,764
Dividend reinvestment plan,
50,291 shares........................... 1,325 1,325
Employee stock grants, net of forfeitures. 766 360 (1,126)
Director stock grants...................... 56 56
Stock options exercised.................... 41 45 86
Pooled entries, pre-merger................. 15 15
Amortization of unearned restricted
stock compensation...................... 598 598
Change in net unrealized gain (loss)
on securities .......................... 8,261 8,261
-------------------------------------------------------------------------------
Balance at December 31, 1995.................... $2,800 $71,765 $307,572 $1,501 ($5,257) ($2,518) $375,863
-------------------------------------------------------------------------------
Net income for 1996........................ 40,621 40,621
Cash dividends declared, $0.97 per share... (16,796) (16,796)
Cash dividends declared by pooled
entities, pre-merger..................... (165) (165)
Common stock issued:
Employee savings plan, 26,604 shares....... 828 828
Dividend reinvestment plan,
59,285 shares........................... 1,857 1,857
Employee stock grants, net of forfeitures. 1,107 354 (1,461)
Director stock grants...................... 59 59
Stock options exercised, including tax
benefit from non-qualified options
exercise................................ 2,155 210 2,365
Pooled entries, pre-merger................. 310 310
Amortization of unearned restricted
stock compensation...................... 898 898
Change in net unrealized gain (loss)
on securities .......................... (1,189) (1,189)
-------------------------------------------------------------------------------
Balance at December 31, 1996.................... $2,800 $78,081 $331,232 $312 ($4,693) ($3,081) $404,651
===============================================================================
The accompanying notes are an integral part of these financial statements.
Page 29 of 69 Pages
WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended December 31,
1996 1995 1994
--------------------------------------
Cash flows from operating activities:
Net income.............................................................. $ 40,621 $ 45,532 $ 57,589
Adjustments to reconcile net income to cash provided by (used in)
operating activities:
Depreciation......................................................... 10,266 8,234 7,089
Reduction of reserves for possible loan losses....................... (5,000) (9,380) (25,869)
Provision for(Reduction of) losses on OREO and other problem assets.. 329 87 (1,057)
Amortization of intangible assets and unearned restricted stock
compensation...................................................... 3,700 3,486 4,500
Amortization of premiums and discounts on investment securities, net. 7,260 13,092 14,427
Net gains on sales of OREO and other property........................ (2,537) (1,223) (3,512)
Net gains on sales of investment securities.......................... (11) (4) (48)
Deferred tax expense (benefit)....................................... (1,425) 1,954 6,093
Increase (Decrease) in accrued income taxes.......................... (128) 51 (837)
(Increase) Decrease in accrued income receivable and other assets.... (364) 3,848 (1,312)
Increase (Decrease) in accrued expenses and other liabilities........ 229 954 (182)
--------------------------------------
Net cash provided by operating activities............................ $ 52,940 $ 66,631 $ 56,881
--------------------------------------
Cash flows from investing activities:
Proceeds from maturities of investment securities held to maturity...... $ 400,565 $ 352,837 $ 827,572
Proceeds from maturities of investment securities available for sale.... 30,813 32,200 66,952
Proceeds from sales of investment securities available for sale......... 35,066 3,262 515
Purchases of investment securities held to maturity..................... (323,889) (193,914) (782,923)
Purchases of investment securities available for sale................... (3,321) (29,201) (27,795)
Net (increase) decrease in loans........................................ (410,728) (352,156) (26,462)
Net (increase) decrease in federal funds sold and short-term deposits... 15,537 22,649 93,611
Proceeds from sales of OREO and other property.......................... 5,315 3,717 12,966
Capital expenditures.................................................... (34,412) (17,681) (7,286)
Net cash (paid) received in business acquisition........................ - (3,695) 35,659
Other................................................................... (2,005) (4,528) (3,537)
--------------------------------------
Net cash provided by (used in) investing activities..................... $ (287,059)$ (186,510)$ 189,272
--------------------------------------
Cash flows from financing activities:
Net increase (decrease) in non-interest-bearing demand deposits......... $ 29,970 $ 74,994 $ (38,710)
Net increase (decrease) in interest-bearing deposits other than
certificates of deposit.............................................. (20,104) (103,422) (185,562)
Net increase (decrease) in certificates of deposit...................... (30,155) 131,352 19,607
Net increase (decrease) in federal funds purchased and securities sold
under repurchase agreements.......................................... 251,568 47,288 (35,412)
Sale of common stock under employee savings plan and dividend
reinvestment plan.................................................... 2,685 5,090 676
Exercise of stock option.............. 1,657 86 256
Stock issued by pooled entities, pre-merger...................... 310 15 902
Dividends paid including pooled entities............................... (15,942) (12,234) (9,583)
--------------------------------------
Net cash provided by (used in) financing activities..................... $ 219,989 $ 143,169 $ (247,826)
--------------------------------------
Net increase (decrease) in cash and cash equivalents....................... $ (14,130)$ 23,290 $ (1,673)
Cash and cash equivalents at the beginning of the period................... 235,221 211,931 213,604
--------------------------------------
Cash and cash equivalents at the end of the period......................... $ 221,091 $ 235,221 $ 211,931
======================================
Interest income received................................................... $ 242,380 $ 218,425 $ 189,645
======================================
Interest expense paid...................................................... $ 90,370 $ 71,466 $ 56,986
======================================
Net federal income taxes paid.............................................. $ 20,550 $ 18,588 $ 21,470
======================================
The accompanying notes are an integral part of these financial statements.
Page 30 of 69 Pages
Notes To Financial Statements
(1) Nature of Business
Whitney Holding Corporation (the "Company") is a Louisiana bank holding
company registered pursuant to the Bank Holding Company Act of 1956. The Company
began operations in 1962 as the parent of Whitney National Bank (the "Louisiana
Bank") which has been in continuous operation since 1883. In December, 1994, the
Company established the Whitney Bank of Alabama (the "Alabama Bank") and,
through this new banking subsidiary, acquired the Mobile area operations of The
Peoples Bank, Elba, Alabama in February 1995. During 1995, the Company also
established the Whitney Community Development Corporation ("WCDC"), which is
authorized to make equity and debt investments in corporations or projects
designed primarily to promote community welfare, including the economic
rehabilitation and development of low-income areas by providing housing,
services, or jobs for residents, or promoting small businesses that service
low-income areas. In August 1996, the Company established Whitney National Bank
of Florida (the "Florida Bank") and subsequently acquired American Bank and
Trust and Liberty Bank, both of Pensacola, Florida, on October 25, 1996.
The Company, through its banking subsidiaries, engages in commercial
and retail banking and in trust business, including the taking of deposits, the
making of secured and unsecured loans, the financing of commercial transactions,
the issuance of credit cards, the delivery of corporate, pension and personal
trust services, and certain limited investment services. The Louisiana Bank is
active as a correspondent for other banks. The Banks render specialized services
of different kinds in connection with all of the foregoing, and operate
sixty-one offices in south Louisiana, ten offices primarily in south Alabama,
five offices in the Pensacola, Florida area, and a foreign branch on Grand
Cayman in the British West Indies.
There is significant competition within the financial services industry
in general as well as with respect to the particular financial services provided
by the Banks. Within their market areas, the Banks compete directly with major
banking institutions of comparable or larger size and resources as well as with
various other smaller banking organizations and local and national "non-bank"
competitors, including savings and loans, credit unions, mortgage companies,
personal and commercial finance companies, investment brokerage firms, and
registered investment companies.
In recent years there has been a significant consolidation within the
financial services industry, particularly with respect to the banking and
savings and loan segments of this industry. This consolidation has been driven
both by the large number of S&L and bank failures experienced during the crisis
of the late 1980s and early 1990s as well as more recently by general
competitive pressures. All of the Banks' major direct banking competitors have
been relatively active in expansion through acquisition. In recent years, the
Company has entered into four acquisitions of banking operations involving
approximately $540 million of assets and completed a merger with a fifth bank
having approximately $235 million of assets in February 1997. The trend toward
industry consolidation is expected to continue in the near term.
All material funds of the Company are invested in the Banks. The Banks
have a large number of customer relationships which have been developed over a
period of many years and are not dependent upon any single customer or upon a
few customers. The loss of any single customer or a few customers would not have
a material adverse effect on the Banks or the Company. The Louisiana Bank has
customers in a number of foreign countries, but the portion of revenue derived
from these foreign customers is not a material portion of its overall revenues.
The Company and the Banks and their related operations are subject to
federal, state and local laws applicable to banks and bank holding companies and
to the regulations of the Board of Governors of the Federal Reserve System, the
Office of the Comptroller of Currency, the Federal Deposit Insurance Corporation
and the Alabama State Banking Department.
Page 31 of 69 Pages
(2) Summary of Significant Accounting Policies
The accounting and reporting policies of Whitney Holding Corporation
and its subsidiaries follow generally accepted accounting principles and
policies within the banking industry. The following is a summary of the more
significant policies.
CONSOLIDATION
The consolidated financial statements of the Company include the
accounts of Whitney Holding Corporation and its wholly-owned subsidiaries,
Whitney National Bank, Whitney Bank of Alabama, Whitney National Bank of Florida
and Whitney Community Development Corporation.
Certain balances in prior years have been reclassified to conform with
this year's presentation.
USE OF ESTIMATES
To prepare financial statements in conformity with generally accepted
accounting principles, management is required to develop estimates that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
CASH AND DUE FROM FINANCIAL INSTITUTIONS
The Company considers cash on hand and balances due from financial
institutions as cash and cash equivalents for purposes of the consolidated
statement of cash flows.
INVESTMENT IN SECURITIES
Debt securities which the Company both positively intends and has the
ability to hold to maturity are carried at amortized cost. These criteria are
not considered satisfied when a security is available to be sold in response to
changes in interest rates, prepayment rates, liquidity needs or other reasons as
part of an overall asset/liability management strategy.
Debt securities and equity securities with readily determinable fair
values that are acquired with the intention of being resold in the near term are
classified as trading securities and are carried at fair value, with unrealized
holding gains and losses recognized in current earnings. The Company does not
currently hold any securities for trading purposes.
Securities not meeting the criteria of either trading securities or
securities held to maturity are classified as available for sale and carried at
fair value. Unrealized holding gains and losses for these securities are
recognized, net of related tax effects, as a separate component of shareholders'
equity.
Interest and dividend income earned on securities either held to
maturity or available for sale is included in current earnings, including the
amortization of premiums and the accretion of discounts using the interest
method. The gain or loss realized on the sale of a security held to maturity or
available for sale is computed with reference to its amortized cost and is also
included in current earnings.
LOANS
Loans are generally carried at the principal amounts outstanding, less
unearned income and the reserve for possible loan losses.
Interest on loans is accrued and credited to income based on the
outstanding loan principal amounts. The accrual of interest on loans is
discontinued when, in management's judgement, there is an indication that a
borrower will be unable to meet contractual payments as they become due. For
commercial and real estate loans, this generally occurs when a loan falls
90-days past due as to principal or interest, and the loan is not otherwise both
well secured and in the process of
Page 32 of 69 Pages
collection. Upon discontinuance, accrued but uncollected interest is reversed
against current income. Interest payments received on nonaccrual loans are used
to reduce the reported loan principal under the cost recovery method when the
collectibility of the remaining principal is not reasonably assured; otherwise,
these payments are recognized as interest income.
A nonaccrual loan may be reinstated to accrual status when full payment
of contractual principal and interest is expected and this expectation is
supported by current performance.
Page 33 of 69 Pages
RESERVE FOR POSSIBLE LOAN LOSSES
The reserve for possible loan losses is maintained at a level which, in
management's judgement, is considered adequate to absorb potential losses
inherent in the loan portfolio. The adequacy of the reserve is evaluated by
management on an ongoing basis. As adjustments to the level of reserves become
necessary, they are reported in current earnings. The factors considered in this
evaluation include the estimated potential losses from specific lending
relationships, including unused loan commitments and credit guarantees; general
economic conditions; economic conditions affecting specific classes of borrowers
or types of loan collateral; historical loss experience; and various trends in
loan portfolio characteristics, such as volume, maturity, customer mix,
delinquencies and nonaccruals.
As actual losses are incurred, they are charged against the reserve.
Recoveries on loans previously charged off are added back to the reserve.
Effective January 1, 1995, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for Impairment
of a Loan," as amended by SFAS No. 118. Under this standard, a loan is
considered impaired when it is probable that all contractual amounts will not be
collected as they become due. The extent of impairment is measured based on a
comparison of the recorded investment in the loan with either the expected cash
flows discounted using the loan's original effective interest rate or, in the
case of certain collateral-dependent loans, the fair value of the underlying
collateral. The measure of impairment is included in the reserve for possible
loan losses.
The provisions of SFAS No. 114 are not applied by the Company to
measure impairment for large groups of similar loans with relatively small
balances, such as consumer credit line loans and consumer installment loans. As
allowed under the standard, these loans are collectively evaluated for
impairment.
The guidance in SFAS No. 114 did not represent a significant departure
from existing procedures followed by the Company in evaluating the overall
adequacy of the reserve for possible loan losses. Furthermore, loans evaluated
for impairment in most all cases met the criteria already in use by the Company
to identify loans on which the accrual of interest should be discontinued. As
such, the adoption of this standard had no significant impact on the Company's
financial position or results of operations.
FORECLOSED ASSETS
Collateral acquired through foreclosure or in settlement of loans is
classified as either other real estate owned ("OREO") or other assets and is
carried at its fair value, net of estimated costs to sell, or the remaining
investment in the loan, whichever is lower. At acquisition, any excess of the
recorded loan value over the estimated fair value of the collateral is charged
against the reserve for possible loan losses. After acquisition, valuation
allowances are established with a charge to current earnings to adjust the
reported value of foreclosed assets to reflect changes in the estimate of a
property's fair value or selling costs. Revenues and expenses associated with
the management of foreclosed assets prior to sale are included in current
earnings.
BANK PREMISES AND EQUIPMENT
Bank premises and equipment are carried at cost, net of accumulated
depreciation and amortization.
Provisions for depreciation and amortization included in non-interest
expenses are computed primarily on the straight-line method over the estimated
useful lives of the assets. Estimated useful lives range from fifteen to
forty-five years for buildings and improvements and from three to fifteen years
for furnishings and equipment.
In March, 1995, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 121 which prescribes the accounting for impairment of long-lived
assets used in operations, such as bank premises and equipment, certain
identifiable intangibles, and any goodwill related to these assets. In general,
the statement requires recognition of an impairment loss when the undiscounted
cash flows estimated to be derived from the use of these assets exceeds their
carrying value. The statement also prescribes the accounting to be followed when
an entity plans to dispose of such long
Page 34 of 69 Pages
- - -lived assets. The Company's adoption of SFAS No. 121 in 1996 had no material
impact on the Company's financial position or results of operations.
INCOME TAXES
Effective January 1, 1993, the Company adopted SFAS No. 109,
"Accounting for Income Taxes." In general, under this accounting standard the
tax consequences of all temporary differences that arise between the tax bases
of assets or liabilities and their reported amounts in the financial statements
represent either tax liabilities to be settled in the future or tax assets that
will be realized as a reduction of future taxes. The change in net deferred tax
assets or liabilities between periods is recognized as a deferred tax expense or
benefit in the consolidated statement of operations or, for certain temporary
differences, reflected directly in shareholders' equity.
EARNINGS PER SHARE
Earnings per share is calculated using the weighted average number of
shares outstanding during each period presented plus dilutive common stock
equivalents. Potentially dilutive common stock equivalents consist of stock
options which have been granted to certain officers and directors. The treasury
method is applied to determine the dilutive common stock equivalents to be added
for both the primary and fully-dilutive earnings per share calculations.
RECENT PRONOUNCEMENTS
SFAS No. 125, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities," was issued in June, 1996, mainly to
provide consistent standards for distinguishing transfers of financial assets
that are sales from transfers that are secured borrowings, and it establishes
measurement, reporting and disclosure standards with respect to the assets and
liabilities that are obtained or incurred in such transfers. SFAS No. 125 is
generally effective for transfers, servicing and extinguishments occurring after
December 31, 1996, although application of certain provisions of the statement
has been delayed to 1998. Adoption of the provisions of SFAS No. 125 with
respect to transfer transactions or servicing activities currently engaged in by
the Company will not result in a material impact on its financial position or
results of operations.
Page 35 of 69 Pages
(3) INVESTMENT IN SECURITIES
Summary information regarding securities available for sale and
securities held to maturity follows:
(dollars in thousands) SECURITIES AVAILABLE FOR SALE
---------------------------------------------------------------------
WEIGHTED GROSS GROSS ESTIMATED
AVERAGE AMORTIZED UNREALIZED UNREALIZED FAIR
DECEMBER 31, 1996 MATURITY COST GAIN LOSS VALUE
---------------------------------------------------------------------
U.S. Treasury securities 41 mos. $ 527 $ 17 $ - $ 544
U.S. government agency
securities 52 mos. 33,221 135 273 33,083
Mortgage-backed
securities 42 mos. 111,770 890 387 112,273
State and municipal
securities 110 mos. 1,044 28 - 1,072
---------------------------------------------------------------------
TOTAL 45 mos. $ 146,56 $ 1,070 $ 660 $ 146,972
=====================================================================
DECEMBER 31, 1995
U.S. Treasury securities 13 mos. $ 5,568 $ 43 $ 13 $ 5,598
U.S. government agency
securities 58 mos. 44,533 517 483 44,567
Mortgage-backed
securities 69 mos. 170,838 2,633 403 173,068
State and municipal
securities 122 mos. 1,044 30 - 1,074
---------------------------------------------------------------------
TOTAL 66 mos. $ 221,983 $ 3 ,223 $ 899 $ 224,307
=====================================================================
Page 36 of 69 Pages
(dollars in thousands) SECURITIES HELD TO MATURITY
---------------------------------------------------------------------
WEIGHTED GROSS GROSS ESTIMATED
AVERAGE AMORTIZED UNREALIZED UNREALIZED FAIR
DECEMBER 31, 1996 MATURITY COST GAIN LOSS VALUE
---------------------------------------------------------------------
U.S. Treasury securities 12 mos. $ 557,606 $ 3,580 $ 851 $ 560,335
U.S. government agency
securities 45 mos. 329,713 2,232 1,453 330,492
Mortgage-backed
securities 72 mos. 145,045 414 868 144,591
State and municipal
securities 66 mos. 141,972 3,946 277 145,641
Federal Reserve stock
and other corporate
securities - 4,986 2,141 - 7,127
---------------------------------------------------------------------
TOTAL 35 mos. $1,179,322 $ 12,313 $ 3,449 $1,188,186
=====================================================================
DECEMBER 31, 1995
U.S. Treasury securities 18 mos. $ 803,632 $ 8,541 $ 1,477 $ 810,696
U.S. government agency
securities 32 mos. 250,905 3,937 230 254,612
Mortgage-backed
securities 69 mos. 56,707 461 - 57,168
State and municipal
securities 62 mos. 135,716 5,144 337 140,523
Federal Reserve stock
and other corporate
securities - 4,629 1,672 - 6,301
---------------------------------------------------------------------
TOTAL 28 mos. $1,251,589 $ 19,755 $ 2,044 $1,269,300
=====================================================================
At December 31, 1996 and 1995, U.S. Treasury and agency securities with
a carrying value of approximately $807,997,000 and $568,626,000, respectively,
were sold under repurchase agreements, pledged to secure public funds and trust
deposits or pledged for other purposes.
During 1996, approximately $12,000,000 of securities that had been
classified by a pooled entity as available for sale prior to its merger with the
Company were transferred to the held to maturity category in accordance with the
investment policies and practices of the combined institution. This transfer was
recorded at fair value. The unrealized gains and losses at the transfer date,
which are included net of tax as a component of shareholders' equity, were
insignificant.
The amortized cost and estimated fair value of securities, other than
equity securities, held to maturity and available for sale at December 31, 1996
are shown as follows by contractual maturity. The actual maturities of certain
securities, in particular mortgage-backed securities and municipal securities,
may differ from contractual maturities because of principal amortization,
prepayments and the exercise of call options.
AVAILABLE FOR SALE
---------------------------------------
(in thousands) ESTIMATED
MATURITY DISTRIBUTION AMORTIZED FAIR
DECEMBER 31, 1996 COST VALUE
---------------------------------------
One year or less $ 46,403 $ 46,484
One to five years 75,032 75,217
Five to ten years 17,838 17,861
Over ten years 7,289 7,410
---------------------------------------
$ 146,562 $ 146,972
=======================================
Page 37 of 69 Pages
HELD TO MATURITY
---------------------------------------
(in thousands) ESTIMATED
MATURITY DISTRIBUTION AMORTIZED FAIR
DECEMBER 31, 1996 COST VALUE
---------------------------------------
One year or less $ 363,463 $ 363,236
One to five years 595,153 600,377
Five to ten years 194,175 195,704
Over ten years 21,545 21,742
---------------------------------------
$ 1,174,336 $ 1,181,059
========================================
(4) LOANS AND RESERVE FOR POSSIBLE LOAN LOSSES
The composition of the Company's loan portfolio at December 31, 1996
and 1995 was as follows (in thousands):
1996 1995
------------------------------------------------
Commercial, financial and
agricultural loans...........................................$ 980,825 $ 804,471
Real estate loans - commercial and other...................... 620,197 486,092
Real estate loans - retail mortgage........................... 315,945 223,528
Loans to individuals.......................................... 135,667 121,739
Lease financing receivables................................... 12,278 13,606
------------------------------------------------
$ 2,064,912 $ 1,649,436
================================================
The Company's lending activity, both commercial and retail, is
conducted primarily among customers in Louisiana, Mississippi and southern
Alabama and the western Florida panhandle. In its market area, the Company
serves a broad base of commercial customers in diverse industries.
Within the portfolio, the Company maintains a moderate concentration of
outstanding credits and loan commitments to customers involved in the oil and
gas industry. At December 31, 1996, outstanding loans to this industry totalled
approximately $127,000,000, and unused loan commitments and letters of credit
and guarantees were approximately $130,000,000 and $16,000,000, respectively.
The operations of this industry have stabilized and improved in recent years
after a period of severe decline and major restructuring which had adversely
impacted the overall economy of a large portion of the Company's market area.
Management continues to closely monitor its lending relationships in this
industry.
The total of commercial and other real estate loans shown in the
accompanying table includes both those for which the primary source of repayment
is the operation or sale of the underlying project, as well as those secured by
real estate employed in other operations of the customer. Unfunded commitments
for loans secured by commercial or other real estate were approximately
$178,000,000 at December 31, 1996. The Company's portfolio of commercial and
other real estate loans is diversified as to both the types of collateral
property and the industries in which the properties are employed.
Non-performing loans at December 31, 1996 and 1995 are summarized as
follows (in thousands):
1996 1995
---------------------------------------
Loans accounted for on a nonaccrual basis $ 7,191 $ 8,161
Restructured loans 2,375 1,622
---------------------------------------
Total non-performing loans $ 9,566 $ 9,783
=======================================
Page 38 of 69 Pages
Information on loans evaluated for possible impairment losses follows
(in thousands):
1996 1995
--------------------------------------
Impaired loans at year end requiring a loss allowance..................$ 3,287 $ 6,502
Impaired loans at year end not requiring a loss allowance.............. 6,850 3,542
--------------------------------------
Total recorded investment in impaired loans at year end................$ 10,137 $ 10,044
======================================
Total impairment loss allowance required at year end...................$ 1,308 $ 2,117
======================================
Average recorded investment in impaired loans during year..............$ 10,200 $ 7,900
======================================
With respect to certain nonaccrual loans, interest income is recognized as
cash interest payments are received. Interest payments on current or previous
nonaccrual loans that had been accounted for under the cost recovery method may
also subsequently be recognized as interest income when loan collections exceed
previous expectations or when workout efforts result in fully rehabilitated
credits. The following compares contractual interest income on nonaccrual loans
and restructured loans with both the interest income reported on a cash basis
with respect to such loans and the prior cost recovery interest currently
recognized on nonaccrual loans and certain accruing loans (in thousands):
YEAR ENDED DECEMBER 31,
1996 1995 1994
--------------------------------------------------------------------------
Contractual interest $ 1,005 $ 1,554 $ 2,662
Interest recognized 3,647 6,425 6,803
--------------------------------------------------------------------------
Impact on reported
interest income,
increase (decrease) $ 2,642 $ 4,871 $ 4,141
==========================================================================
Changes in the reserve for possible loan losses for the three years in
the period ended December 31, 1996 were as follows (in thousands):
1996 1995 1994
--------------------------------------------------------------------------
Balance at beginning of year $ 40,144 $ 37,069 $ 47,228
Reserves provided through
acquisition - 1,772 -
Reduction of reserve (5,000) (9,380) (25,869)
Recoveries 10,305 14,215 19,986
Loans charged off (6,106) (3,532) (4,276)
--------------------------------------------------------------------------
Balance at end of year $ 39,343 $ 40,144 $ 37,069
==========================================================================
The reductions in the reserve for possible loan losses in 1996, 1995
and 1994 reflect improved asset quality, successful recovery efforts and
management's determination that efforts to deal with asset quality issues have
yielded lasting positive results.
The Banks have made loans in the normal course of business to certain
directors and executive officers of the Company and to their associates (related
parties). The aggregate amount of these loans was $92,133,000 and $53,081,000 at
December 31, 1996 and 1995, respectively. During 1996, $403,724,000 of new loan
advances were made, and repayments totalled $364,672,000. Outstanding
commitments and letters of credit to related parties totaled $63,813,000 and
$68,095,000 at December 31, 1996 and 1995, respectively. Related party loans are
made on substantially the same terms, including interest rates and collateral,
as those prevailing at the time for comparable transactions with unrelated
persons, and do not involve more than the normal risk of collectibility.
Page 39 of 69 Pages
(5) INCOME TAXES
Income tax expense (benefit) consisted of the following components for
the three years in the period ended December 31, 1996 (in thousands):
Included in net income: 1996 1995 1994
--------------------------------------------------------------------------
Current tax expense $ 20,543 $ 18,901 $ 20,769
Deferred tax expense (benefit) (1,425) 1,954 6,093
--------------------------------------------------------------------------
$ 19,118 $ 20,855 $ 26,862
==========================================================================
Included in shareholders' equity:
Deferred tax expense (benefit)
related to the change in the
net unrealized gain (loss) on
securities $ (655) $ 4,457 $ (5,780)
Current tax benefit related to
nonqualified stock options
exercised (708) - -
--------------------------------------------------------------------------
$ (1,363) $ 4,457 $ (5,780)
==========================================================================
The net deferred income tax asset, which is included in other assets on
the consolidated balance sheets, was approximately $13,811,000 and $11,731,000
at December 31, 1996 and 1995, respectively. The components of the net deferred
tax assets were as follows (in thousands):
1996 1995
------------------------------------------------
Deferred tax assets:
Reserves for losses on loans, OREO, and
other problem assets $ 14,249 $ 14,101
Unrecognized interest income 742 674
Employee benefit plan liabilities 3,525 3,148
Other 717 552
------------------------------------------------
Total deferred tax assets $ 19,233 $ 18,475
================================================
Deferred tax liabilities:
Accumulated depreciation and
amortization $ (4,484) $ (5,027)
Net unrealized gain on securities available
for sale or transferred to held to maturity (169) (824)
Other (769) (893)
------------------------------------------------
Total deferred tax liabilities $ (5,422) $ (6,744)
================================================
Net deferred tax asset $ 13,811 $ 11,731
================================================
Page 40 of 69 Pages
The Company is required to establish a valuation allowance against the
deferred tax asset if, based on all available evidence, it is more likely than
not that some or all of the asset will not be realized. Management has weighed
the evidence, including current earnings performance, taxable income generated
during available carryback periods, and the nature of significant deductible
temporary differences, and believes that no valuation reserve is required as of
December 31, 1996. Rules issued by regulatory agencies impose additional
limitations on the amount of the deferred tax asset that may be recognized when
calculating regulatory capital ratios. The Company's ratio calculations were not
affected by these rules at December 31, 1996.
The effective tax rate is less than the statutory federal income tax
rate in each of the three years in the period ended December 31, 1996 because of
the following:
PERCENT OF INCOME
BEFORE INCOME TAX
1996 1995 1994
----------------------------------------------------
Tax at statutory rate 35.0% 35.0% 35.0%
Adjustments in rate resulting from:
Tax exempt income (4.8) (4.0) (3.0)
Non-deductible merger-related expenses 1.1 - -
Miscellaneous items 0.7 0.4 (0.2)
----------------------------------------------------
Effective tax rate 32.0% 31.4% 31.8%
====================================================
(6) EMPLOYEE BENEFIT PLANS
Retirement Plans
The Company has a noncontributory qualified defined benefit pension
plan covering substantially all of its employees. The benefits are based on an
employee's total years of service and his or her highest five-year level of
compensation during the final ten years of employment. Contributions are made in
amounts sufficient to meet funding requirements set forth in federal employee
benefit and tax laws plus such additional amounts as the Company may determine
to be appropriate from time to time.
Page 41 of 69 Pages
The following table sets forth the plan's funded status and amounts
recognized in the Company's consolidated balance sheets (in thousands):
DECEMBER 31,
1996 1995
---------------------------------------------
Actuarial present value of benefit obligation:
Accumulated benefit obligation :
Vested $ (45,681) $ (39,067)
Non-vested (3,675) (3,394)
---------------------------------------------
Total accumulated benefit obligation $ (49,356) $ (42,461)
Benefit obligation related to assumed future pay
increases (10,464) (8,077)
---------------------------------------------
Projected benefit obligation (59,820) (50,538)
Plan assets at fair value, primarily U.S. Treasury
and agency securities and listed stocks $ 73,548 $ 67,869
---------------------------------------------
Plan assets in excess of projected benefit
obligations 13,728 17,331
Unrecognized net actuarial gains (8,711) (11,086)
Unrecognized net implementation asset (2,714) (3,119)
Unrecognized prior service cost resulting
from plan amendments (1,576) (2,874)
---------------------------------------------
Prepaid pension cost $ 727 $ 252
=============================================
The net pension expense (benefit) recognized for 1996, 1995, and 1994
is comprised of the following components (in thousands):
1996 1995 1994
------------------------------------------------------------------------------
Service costs for benefits
during the period $ 1,669 $ 1,635 $ 1,900
Interest cost on projected
benefit obligation 3,797 3,564 3,428
Actual (return) loss on
plan assets (9,116) (14,480) 1,430
Net amortization and
deferral 3,175 9,483 (6,983)
------------------------------------------------------------------------------
Net pension expense
(benefit) $ (475) $ 202 $ (225)
==============================================================================
The weighted-average discount rate used in determining the actuarial
present value of the projected benefit obligation was 7.25% in 1996 and 1995 and
8.25% in 1994. For all periods presented, the Company assumed an 8.0% expected
long-term rate of return on plan assets. The annual rate of increase in future
compensation levels was assumed to be 4.0% in 1996 and 1995 and 5.0% in 1994.
In 1995, the Company adopted a nonqualified defined benefit plan
effective as of January 1, 1995. This unfunded plan provides to designated
executive officers retirement benefits calculated using the qualified plan's
formula, but without the restrictions imposed on qualified plans by certain
specified provisions of the Internal Revenue Code. Benefits that become payable
under the nonqualified plan would be reduced by amounts paid from the qualified
plan. The Company previously maintained a nonqualified excess benefit retirement
plan which was terminated effective January 1, 1993 with accrued benefits
preserved for participants. Designated executives participating in the recently
adopted nonqualified plan were required to relinquish their benefits under the
terminated plan. At December 31, 1996, the actuarial present value of projected
benefit obligations under the nonqualified plans was approximately $2,093,000
and the recorded accrued pension liability was $1,532,000. The net pension
expense was not material in 1996 or 1995.
Page 42 of 69 Pages
The Company sponsors an employee savings plan under Section 401(k) of
the Internal Revenue Code. Under this plan, which covers substantially all
full-time employees, the Company matches the savings of each participant up to
3% of his or her compensation. Annual participant savings are limited by tax
law. Participants are fully vested in their savings and in the matching Company
contributions at all times. The expense of the Company's matching contributions
was approximately $1,085,000 in 1996, $946,000 in 1995 and $922,000 in 1994.
Health and Welfare Plans
The Company also maintains certain health care and life insurance
benefit plans for retirees and their eligible dependents. Participant
contributions are required under the health plan, and the Company has
established annual and lifetime maximum health care benefit limits. Under SFAS
No. 106, "Employers' Accounting for Postretirement Benefits Other than
Pensions," the Company is required to recognize the expected cost of providing
these postretirement benefits during the period employees are actively working.
The Company continues to fund its obligations under the postretirement benefit
plans as the benefit payments are made.
At December 31, 1996, the net postretirement benefit liability reported
with other liabilities in the consolidated balance sheets was approximately
$6,154,000. The net periodic postretirement benefit expense recognized under
SFAS No. 106 for 1996, 1995 and 1994 was $416,000, $168,000, and $300,000,
respectively. The net periodic benefit expense includes components for the
portion of the expected benefit obligation attributed to current service, for
interest on the accumulated benefit obligation, and for amortization of
unrecognized actuarial gains or losses. No component was individually
significant for any period reported.
For the actuarial calculation of its postretirement benefit obligations
at December 31, 1996, 1995 and 1994, the Company assumed annual health care cost
increases beginning at 9.50%, 10.0% and 11.0%, respectively, with each
decreasing to a 5.50% rate over a seven to ten year period. Discount rates of
7.25% in 1996 and 1995 and 8.25% in 1994 were used in determining the present
value of projected benefits. A 1.0% rise in the assumed health care cost trend
rates would not materially impact the accumulated benefit obligation or the
periodic net benefit expense.
Stock-Based Incentive Compensation Plans and Other Stock-Based Compensation
The Company maintains two stock-based compensation plans. The long-term
incentive program for key employees is administered by the Compensation
Committee of the Board of Directors, which designates the participants and
authorizes the granting of any awards. Under this program, participants may be
awarded stock options, restricted stock, performance shares and phantom shares.
To date, only stock options and restricted stock grants have been awarded. The
current directors' compensation plan, which was adopted in 1994 and amended in
1996, provides for, among other matters, the annual award of common stock and
the annual grant of options to purchase the Company's common stock to each
director who is not an employee of the Company or its subsidiaries.
Page 43 of 69 Pages
The following schedule summarizes the common stock awards granted under
these plans during 1996, 1995 and 1994:
Market Value
Shares of Award on
Year Plan Awarded Grant Date
--------------------------------------------------------
1996 Employee 53,500 $ 1,605,000
Director 5,100 $ 156,000
1995 Employee 40,000 $ 1,155,000
Director 2,100 $ 56,000
1994 Employee 50,100 $ 1,357,000
Director 1,800 $ 47,000
Shares awarded to employees in 1996 are subject to possible forfeiture
if a recipient's employment is terminated within three years of the grant date
and the transfer or other disposition of the shares is prohibited during this
period. In addition, the 1996 grant is subject to adjustment based on the
performance of the Company, as measured by its return on assets and return on
equity, in relation to that of a designated peer group over the restriction
period, with the ultimate award ranging from 0% to 200% of the initial grant.
The shares granted to employees in 1995 and 1994 are subject to possible
forfeiture and transfer restrictions for five-year periods but not to
performance-based adjustments. The directors' shares are awarded without any
significant restriction and are not subject to future adjustment.
The Company recognizes the market value of the shares awarded on the
grant date as compensation expense ratably over the restriction periods, if any.
Adjustments are made for forfeitures as they occur. Subsequent changes in the
estimate of the unrestricted shares to which employees will ultimately become
entitled under performance-based grants will be reflected in compensation
expense prospectively over the remaining restriction periods. The total
compensation expense recognized during 1996, 1995 and 1994 related to common
stock awards was $1,014,000, $651,000 and $363,000, respectively.
The following table summarizes stock option activity under the
long-term incentive program for employees and the directors' compensation plan
for the three-year period ended December 31, 1996. The exercise price for all
options is set at the market price on the grant date. All options are fully
exercisable six months after the date of grant and expire after ten years.
Page 44 of 69 Pages
Employees Directors
-----------------------------------------------------------------
Weighted- Weighted-
Average Average
Exercise Exercise
Number Price Number Price
-----------------------------------------------------------------
Balance, December 31, 1993 129,025 $ 16.81 - -
Options granted 72,500 $ 28.00 12,000 $ 26.25
Options exercised (18,674) $ 13.72 - -
-----------------------------------------------------------------
Balance, December 31, 1994 182,851 $ 21.60 12,000 $ 26.25
Options granted 82,750 $ 28.88 14,000 $ 26.75
Options exercised (3,750) $ 15.70 (1,000) $ 26.25
Options forfeited (1,000) $ 28.00 - $ -
-----------------------------------------------------------------
Balance, December 31, 1995 260,851 $ 23.97 25,000 $ 26.53
Options granted 103,500 $ 30.00 17,000 $ 30.50
Options exercised (21,524) $ 18.98 (1,000) $ 26.75
Options forfeited (3,000) $ 29.00 - $ -
-----------------------------------------------------------------
Balance, December 31, 1996 339,827 $ 26.08 41,000 $ 28.17
=================================================================
The following table summarizes certain information about the stock
options outstanding at December 31, 1996:
Range of Number of Weighted-average Weighted-average
Exercise Shares under Remaining Years Exercise
Prices Option to Expiration Price
- - ----------------------------------------------------------------------------------------------
$13.22 - $19.42 88,077 6.22 $ 17.45
$26.25 - $28.88 173,750 8.21 $ 28.21
$30.00 - $30.50 119,000 9.68 $ 30.07
-------------------------------------------------------------------
$13.22 - $30.50 380,827 8.21 $ 26.30
===================================================================
In 1990, an executive officer was granted options to purchase 33,750
shares of common stock of the Company at a price of $18.11. If this officer
terminates his employment with the Company, the options will be exercisable for
six months after his date of termination. The options will also be exercisable
up to one year past the date of his death, but in no event beyond February 28,
2000. At December 31, 1996, none of these options had been exercised.
As discussed in Note 16, First Citizens BancStock, Inc. ("FCB") was
merged with the Company in March 1996. FCB maintained stock option plans for
certain employees and its directors. Options to purchase 55,000 shares of FCB
common stock had been previously granted to FCB employees and 65,000 shares to
the directors. Prior to the merger date, none of the options granted under these
plans had been exercised. Upon the merger, holders of FCB stock options received
options to buy 88,252 shares of Company stock at a price of $10.13 per share,
96,276 shares at a price of $12.78 per share, and 8,023 shares at a price of
$14.57 per share. At December 31, 1996, options for 48,587 shares exercisable at
$10.13 remained unexercised. These options expire in approximately seven years.
In October, 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation," which is effective for years beginning after December
15, 1995. Among other provisions, this statement establishes a fair value based
method of accounting for stock-based compensation, including the award of stock
options. As provided for in SFAS No. 123, the Company has elected not to adopt
the fair value based method for measuring stock-based compensation cost to be
included in its results of operations, but is continuing to follow prior
generally accepted accounting principles.
Page 45 of 69 Pages
SFAS No. 123 requires the following disclosure of pro forma net income
and earnings per share determined as if the fair value method had been applied
in measuring compensation cost related to stock option grants (in thousands,
except per share amounts):
1996 1995
-----------------------------------
Net income $ 40,621 $ 45,533
Pro forma stock-based
compensation expense,
net of tax 770 577
-----------------------------------
Pro forma net income $ 39,851 $ 44,956
===================================
Pro forma earnings per share:
Primary $ 2.22 $ 2.54
Fully-diluted $ 2.22 $ 2.53
Weighted-average fair value
of options granted
during the year $ 7.67 $ 7.14
The fair value of the stock options granted in 1996 and 1995 was
estimated as of the grant dates using the Black- Scholes option-pricing model.
The Company made the following significant assumptions in applying the option
pricing model: (a) an expected annualized volatility of 17.70% for the Company's
common stock; (b) an average option life of seven years before exercise; (c) an
expected annual dividend yield of 2.90%; and (d) a weighted-average risk-free
interest rate of 7.01% in 1996 and 6.77% in 1995. The Company options issued in
connection with the merger with FCB, as discussed above, were not included in
the fair value calculation because the FCB options exchanged in the merger
transaction had been issued prior to 1995.
(7) BANK PREMISES AND EQUIPMENT
Bank premises and equipment at December 31, 1996 and 1995 are
summarized as follows, net of accumulated depreciation and amortization (in
thousands):
1996 1995
--------------------------------------------
Land $ 27,910 $ 24,787
Buildings and improvements 57,237 44,924
Furnishings and equipment 24,281 15,320
--------------------------------------------
$ 109,428 $ 85,031
============================================
Accumulated depreciation was $87,648,000 in 1996 and $79,267,000 in 1995.
Provisions for depreciation and amortization included in non-interest expense
for the three years in the period ended December 31, 1996 were as follows (in
thousands):
1996 1995 1994
----------------------------------------------------------------------
Buildings and improvements $ 3,283 $ 2,698 $ 2,578
Furnishings and equipment 6,983 5,536 4,511
----------------------------------------------------------------------
$ 10,266 $ 8,234 $ 7,089
======================================================================
Page 46 of 69 Pages
(8) OTHER REAL ESTATE OWNED
Other real estate owned ("OREO") comprises real property collateral
acquired through foreclosure or in settlement of loans and surplus banking
property. With the exception of the pre-1933 property interests discussed below,
these properties are reported at their fair values, less expected disposition
costs, or the recorded investment in the related loan, whichever is lower.
Activity in the OREO valuation reserve for the three years in the period ended
December 31, 1996 was as follows (in thousands):
1996 1995 1994
----------------------------------------------
Balance, beginning of year $ 633 $ 943 $ 3,790
Provisions for valuation
adjustments 323 87 (1,073)
Charge-offs (66) (397) (1,774)
-----------------------------------------------
Balance, at end of year $ 890 $ 633 $ 943
==============================================
The Louisiana bank owns a variety of property interests which were
acquired though routine banking transactions generally prior to 1933 and for
which there existed no ready market. These were subsequently written down to a
nominal holding value in accordance with general banking practice at that time.
These property interests include a few commercial and residential site locations
principally in the New Orleans area, ownership interests in scattered
undeveloped acreage and various mineral interests.
The following summarizes the revenues and direct expenses related to
these property interests that are included in the statements of operations (in
thousands):
1996 1995 1994
--------------------------------------------
Revenues $ 955 $ 200 $ 224
============================================
Direct expenses $ 58 $ 34 $ 73
============================================
(9) NON-INTEREST INCOME
The components of non-interest income were as follows for the three
years in the period ended December 31, 1996 (in thousands):
1996 1995 1994
----------------------------------------------------------------------
Service charges on deposit
accounts $ 17,470 $ 17,512 $ 17,851
Credit card income 5,737 5,131 4,645
Trust service fees 3,738 3,394 2,775
International services income 1,822 1,941 1,783
Investment services income 1,080 927 1,115
Other fees and charges 3,815 3,173 2,586
Net gains on sales of OREO
and other foreclosed assets 2,537 1,223 3,542
Other operating income 1,112 665 667
----------------------------------------------------------------------
Total other non-interest income $ 37,311 $ 33,966 $ 34,964
Gain on sale of securities 11 3 46
----------------------------------------------------------------------
Total non-interest income $ 37,322 $ 33,969 $ 35,010
======================================================================
Page 47 of 69 Pages
(10) NON-INTEREST EXPENSE
The components of non-interest expense were as follows for the three
years in the period ended December 31, 1996 (in thousands):
1996 1995 1994
----------------------------------------------------------------------
Salaries and benefits $ 67,493 $ 63,520 $ 59,462
Occupancy of bank premises, net 10,142 8,292 7,515
Furnishings and equipment, including
data processing 12,418 10,434 8,047
Legal and other professional services 5,762 3,513 3,028
Security and other outside services 5,006 4,108 4,694
Taxes and insurance, other than real estate 4,420 4,603 3,617
Postage and communications 4,367 3,523 2,987
Credit card processing services 4,337 3,797 3,399
Stationery and supplies 3,223 2,773 2,537
Amortization of intangible assets 2,802 2,888 4,161
Advertising 2,381 2,260 1,760
Deposit insurance and regulatory fees 767 3,802 6,596
OREO maintenance and operations, net 345 380 993
Provision for (recovery of) losses on OREO
and other problem assets, net 325 87 (1,024)
Other operating expense 10,606 8,700 7,889
----------------------------------------------------------------------
Total non-interest expense $ 134,394 $ 122,680 $ 115,661
======================================================================
(11) OTHER ASSETS AND OTHER LIABILITIES
The significant components of other assets and other liabilities at
December 31, 1996 and 1995 were as follows (in thousands):
OTHER ASSETS
1996 1995
------------------------------------------
Net deferred tax asset $ 13,811 $ 11,731
Costs in excess of net
tangible assets acquired 21,336 24,138
Other 11,061 7,120
------------------------------------------
Total other assets $ 46,208 $ 42,989
==========================================
Costs in excess of the net tangible assets acquired in prior years'
business combinations are being amortized over remaining lives ranging from one
to fourteen years as of December 31, 1996. Accumulated amortization totalled
approximately $8,560,000 at December 31, 1996.
OTHER LIABILITIES
1996 1995
------------------------------------------
Accrued interest payable $ 9,000 $ 9,518
Obligation for postretirement
benefits other than pensions 6,154 6,314
Accrued taxes and expenses 5,783 5,618
Other 3,881 2,861
------------------------------------------
Total other liabilities $ 24,818 $ 24,311
==========================================
Page 48 of 69 Pages
(12) SHORT-TERM BORROWINGS
Short-term borrowings consisted of the following at December 31, 1996
and 1995 (in thousands):
1996 1995
------------------------------------------------
Federal funds purchased $ 82,384 $ 105,674
Securities sold under
repurchase agreements 396,278 121,420
------------------------------------------------
Total short-term borrowings $ 478,662 $ 227,094
================================================
The carrying value and market value of securities sold under repurchase
agreements at December 31, 1996 is shown below by the term of the underlying
borrowing agreement (in thousands):
UP TO 30 TO
OVERNIGHT 30 DAYS 90 DAYS
----------------------------------------------------------------------
Book value:
U.S. Treasury securities $ 42,154 $ 228,860 $ 6,400
U.S. government agency securities 118,219 - -
----------------------------------------------------------------------
Total book value $ 160,373 $ 228,860 $ 6,400
======================================================================
Fair value:
U.S. Treasury securities $ 42,184 $ 230,274 $ 6,419
U.S. government agency securities 117,809 - -
----------------------------------------------------------------------
Total fair value $ 159,993 $ 230,274 $ 6,419
======================================================================
Outstanding borrowings $ 160,394 $ 229,480 $ 6,404
======================================================================
(13) ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure is made in accordance with the requirements of
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments." In cases where quoted market prices are not
available, fair values have been estimated using present value or other
valuation techniques. The results of these techniques are highly sensitive to
the assumptions used, such as those concerning appropriate discount rates and
estimates of future cash flows, which require considerable judgement.
Accordingly, estimates presented herein are not necessarily indicative of the
amounts the Company could realize in a current settlement of the underlying
financial instruments. SFAS No. 107 excludes certain financial instruments and
all nonfinancial instruments from its disclosure requirements. These disclosures
should not be interpreted as representing an aggregate measure of the underlying
value of the Company.
Page 49 of 69 Pages
The Company does not maintain any investment or participation in
financial instruments or agreements whose value is linked to, or derived from,
changes in the value of some underlying asset or index. Such instruments or
agreements include futures, forward contracts, option contracts, interest-rate
swap agreements and other financial arrangements with similar characteristics,
and are commonly referred to as derivatives.
DECEMBER 31, 1996 DECEMBER 31, 1995
(in thousands)
----------------------------------------------------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
----------------------------------------------------------------------
ASSETS:
Cash and due from financial
institutions $ 221,091 $ 221,091 $ 235,221 $ 235,221
Federal funds sold and
short-term deposits 13,400 13,400 28,937 28,937
Investment in securities 1,326,294 1,335,158 1,475,896 1,493,607
Loans, net 2,025,569 2,022,531 1,609,292 1,637,848
Interest receivable and
other assets 31,488 31,488 31,766 31,766
LIABILITIES:
Deposits $2,861,881 $2,861,709 $2,882,170 $2,884,684
Federal funds and
other short-term borrowings 478,662 478,662 227,094 227,094
Interest payable and
other liabilities 17,918 17,918 16,704 16,704
The following significant methods and assumptions were used by the
Company in estimating the fair value of financial instruments.
Cash and short-term investments - The carrying value of highly liquid
instruments, such as cash on hand, interest- and non-interest-bearing deposits
in financial institutions, and federal funds sold provides a reasonable estimate
of their fair value.
Investment securities - Substantially all of the Company's investment securities
are traded in active markets. Fair value estimates for these securities are
based on quoted market prices obtained from independent pricing services. The
carrying amount of accrued interest on securities approximates its fair value.
Loans, net - For loans with rates that are repriced in coordination with
movements in market rates and with no significant change in credit risk, fair
value estimates are based on carrying values. The fair values for other loans
are estimated through discounted cash flow analysis, using current rates at
which loans with similar terms would be made to borrowers of similar credit
quality. Appropriate adjustments are made to reflect probable credit losses. The
carrying amount of accrued interest on loans approximates it fair value.
Deposits - SFAS No. 107 specifies that the fair value of deposit liabilities
with no defined maturity is to be disclosed as the amount payable on demand at
the reporting date, i.e., at their carrying or book value. These deposits, which
include interest and non-interest checking, passbook savings and money market
accounts, represented approximately 71% and 70% of total deposits at December
31, 1996 and 1995, respectively. The fair value of fixed maturity deposits is
estimated using a discounted cash flow calculation that applies rates currently
offered for time deposits of similar remaining maturities. The carrying amount
of accrued interest payable on deposits approximates its fair value.
The economic value attributable to the relationship with depositors who
provide low-cost funds to the Company is viewed as a separate intangible asset
and is excluded in SFAS No. 107 from the definition of a financial instrument.
Short-term borrowings - The carrying amounts of federal funds purchased,
borrowings under repurchase agreements, and other short-term borrowings
approximate their fair values.
Page 50 of 69 Pages
Off-balance-sheet instruments - Off-balance-sheet financial instruments include
commitments to extend credit, letters of credit and other financial guarantees.
The fair value of such instruments is estimated using fees currently charged for
similar arrangements in the marketplace, adjusted for changes in terms and
credit risk as appropriate. The estimated fair value for these instruments was
insignificant at December 31, 1996 and 1995.
Page 51 of 69 Pages
(14) FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
In order to meet the financing needs of its customers, the Company
deals in financial instruments that expose it to off-balance-sheet risk. These
financial instruments include commitments to extend credit, letters of credit,
and other financial guarantees. Such instruments involve, to varying degrees,
elements of credit and interest rate risk in excess of the amount recognized in
the statements of financial position.
The Company's exposure to credit loss in the event of nonperformance by
other parties for commitments to extend credit and letters of credit and other
financial guarantees written is represented by the contractual amount of those
instruments. The Company follows the same credit policies in making commitments
and conditional obligations as it does for on-balance-sheet instruments.
CONTRACTUAL AMOUNT
December 31,
1996 1995
--------------------------------------------
(in thousands)
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit $ 990,035 $ 922,372
Letters of credit and
financial guarantees written 68,957 81,941
Credit card and related lines 76,684 58,842
Commitments to extend credit and credit card and related lines are
agreements to make a loan to a customer as long as there is no violation of any
condition established in the commitment or credit line contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amount outstanding does not
necessarily represent total future cash outlay requirements. Of the total
commitments outstanding at December 31, 1996, approximately 40% carried a fixed
rate of interest over their terms.
The amount of collateral, if any, required by the Company upon issuance
of a commitment is based on management's credit evaluation of the borrower.
Required collateral varies, but may include accounts receivable, inventory,
property, plant and equipment, and income-producing commercial properties.
Letters of credit and financial guarantees written are conditional
agreements issued by the Company to guarantee the performance of a customer to a
third party. These agreements are primarily issued to support commercial trade.
The credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loan facilities to customers. The Company holds
marketable securities as collateral to support those letters of credit and
guarantees for which collateral is deemed necessary. Letters of credit and
financial guarantees outstanding at December 31, 1996, range from unsecured to
fully secured.
Page 52 of 69 Pages
(15) REGULATORY MATTERS
Regulatory Capital Requirements
Measures of regulatory capital are an important tool used by regulators
to monitor the financial health of insured financial institutions. The primary
quantitative measures used by the regulators to gauge capital adequacy are the
ratios of Tier 1 and total regulatory capital to risk-weighted assets and the
ratio of Tier 1 capital to total assets, also known as the Tier 1 leverage
ratio. For the Company and the Banks, Tier 1 capital is essentially equivalent
to total shareholders' equity less goodwill and other intangible assets acquired
in business combinations, while total regulatory capital represents the sum of
Tier 1 capital and the reserve for possible loan losses, subject to certain
limitations. Risk-weighting percentages for assets are assigned by the
regulatory agencies and are applied to both reported balances as well as to
certain off- balance-sheet items.
To evaluate capital adequacy, regulators compare an institution's
regulatory capital ratios with their agency guidelines as well as with the
guidelines established as part of the uniform regulatory framework for prompt
corrective supervisory action toward insured institutions. In reaching an
overall conclusion on capital adequacy or assigning an appropriate capital
adequacy classification under the uniform framework, regulators must also
consider other subjective and quantitative assessments of risk associated with
the institution, such as interest-rate risk. Institutions not judged to be
adequately capitalized are subject to certain mandatory and possible additional
discretionary actions by regulators that could materially impact the
institution's financial position and results of operations.
Management believes, as of December 31, 1996, that the Company and the
Banks meet all capital adequacy requirements imposed by their respective
regulatory agencies. At December 31, 1996, the Louisiana and Alabama Banks had
been classified as "well capitalized" in the most recent classification notice
received from their regulators. There are no conditions or events since the
notifications that management believes would change the classifications. The
Florida Bank has not yet been subject to a regulatory examination and therefore
has not received a classification notice. The Florida Bank was capitalized at a
level above the minimum required for a "well-capitalized" classification.
Page 53 of 69 Pages
The accompanying table shows the actual regulatory capital ratios and
amounts for the Company and its significant banking subsidiaries at December 31,
1996 and 1995 as well as both the minimum capital adequacy standard currently
imposed by their regulators and the minimum amounts and ratios that the Banks
must maintain to be eligible for a "well capitalized" classification under the
prompt corrective action framework.
Minimum Minimum
Capital Adequacy for "Well capitalized"
Actual Standard Classification
--------------------------------------------------------------------------
Amount Ratio Amount Ratio Amount Ratio
--------------------------------------------------------------------------
(dollars in thousands)
December 31, 1996:
Tier 1 risk-based capital:
Company $ 382,648 14.87% $ 102,929 4.00% n/a n/a
Louisiana Bank $ 326,972 14.38% $ 90,938 4.00% $ 136,407 6.00%
Total risk-based capital:
Company $ 414,902 16.12% $ 205,858 8.00% n/a n/a
Louisiana Bank $ 355,486 15.64% $ 181,876 8.00% $ 227,345 10.00%
Tier 1 leverage capital:
Company $ 382,648 10.19% $ 150,221 4.00% n/a n/a
Louisiana Bank $ 326,972 9.39% $ 139,227 4.00% $ 174,097 5.00%
December 31, 1995:
Tier 1 risk-based capital:
Company $ 350,942 17.19% $ 81,679 4.00% n/a n/a
Louisiana Bank $ 308,527 16.91% $ 72,966 4.00% $ 109,449 6.00%
Total risk-based capital:
Company $ 376,647 18.45% $ 163,357 8.00% n/a n/a
Louisiana Bank $ 331,507 18.17% $ 145,932 8.00% $ 182,415 10.00%
Tier 1 leverage capital:
Company $ 350,942 10.06% $ 139,594 4.00% n/a n/a
Louisiana Bank $ 308,527 9.55% $ 129,218 4.00% $ 161,523 5.00%
Other Regulatory Matters
Dividends received from the subsidiary Banks are the primary source of
funds available to Whitney Holding Corporation for the declaration and payment
of dividends to the Company's shareholders. There are various regulatory and
statutory provisions that limit the amount of dividends that the subsidiary
Banks may distribute to the Company. Without prior regulatory approvals, the
Banks will have available an amount equal to approximately $35,000,000 plus
their current net income to distribute as dividends in 1997.
Under current Federal Reserve regulations, the Banks are limited in the
amounts they may lend to the Company to a maximum of 10% of their capital and
surplus, as defined in the regulations. Any such loans must be collateralized at
from 100% to 130% of the loan amount, depending on the nature of the underlying
collateral.
Banks are required to maintain currency and coin or a
non-interest-bearing balance with the Federal Reserve Bank to meet reserve
requirements. The average balance required to be maintained by the Banks with
the Federal Reserve Bank in excess of currency and coin on hand was
approximately $39,000,000 in 1996 and $51,000,000 in 1995.
Page 54 of 69 Pages
(16) MERGERS AND ACQUISITIONS
On February 28, 1997, the Company completed a merger with First
National Bankshares, Inc. ("FNB"), the parent of First National Bank of Houma
("FNBH"). FNBH operates five banking offices in Terrebonne Parish, Louisiana and
has total assets of approximately $235 million, $126 million in loans, total
deposits of $210 million and shareholders' equity of $18 million. The merger is
intended to qualify as a tax-free reorganization and will be accounted for as a
pooling of interests. The price of this transaction was $41 million. FNBH
shareholders received approximately 1.13 million shares of Whitney Holding
Corporation common stock at the closing. Selected proforma financial information
for the pooled companies, assuming this merger had been completed at the
beginning of the earliest year presented, is a follows (unaudited, in thousands
except per-share data):
. 1996 1995 1994
---------------------------------------------------------------------
Interest income $ 257,049 $ 236,987 $ 212,010
Interest expense (96,487) (82,052) (64,292)
---------------------------------------------------------------------
Net interest income $ 160,562 $ 154,935 $ 147,718
=====================================================================
Net income $ 42,721 $ 47,925 $ 63,470
=====================================================================
Earnings per share:
Primary $2.24 $2.55 $3.43
Fully-diluted $2.23 $2.54 $3.43
Near the end of April 1997, the Company anticipates completing its
merger with Merchants Bancshares, Inc., the parent of Merchants Bank and Trust
Company ("MB&T"). MB&T, with operations along the Mississippi Gulf Coast, has
total assets of approximately $208 million, deposits of $188 million and
shareholders' equity of $17 million. This transaction is priced at approximately
$52 million. The Company expects to account for this merger as a pooling of
interests.
In October 1996, the Company completed a merger with American Bank &
Trust ("ABT") of Pensacola, Florida and with Liberty Holding Corporation
("LHC"), the parent of Liberty Bank, also of Pensacola. ABT, with assets of $57
million, and Liberty Bank, with assets of $48 million, were merged into a
newly-chartered wholly-owned banking subsidiary of the Company, Whitney National
Bank of Florida. Shareholders of ABT received 318,000 shares of Whitney Holding
Corporation common stock with a market value at the time of approximately $10.3
million. LHC shareholders received 436,000 shares of Company stock with an
approximate value of $14.1 million. Each of these mergers was accounted for as a
pooling of interests.
In March 1996, the Company completed a merger with First Citizens
BancStock, Inc. ("FCB"), the parent of The First National Bank in St. Mary
Parish ("FNB"). FNB, which was merged into the Louisiana Bank, had total assets
of approximately $243 million, including $147 million in loans, total deposits
of $214 million and shareholders' equity of $27 million. The merger was
accounted for as a pooling of interests. FCB shareholders received 2.03 million
shares of Whitney Holding Corporation common stock with a market value at the
time of approximately $63 million. Holders of FCB stock options at the closing
date received options to buy approximately 192,000 shares of the Company's
common stock at a weighted-average exercise price of $11.64.
In February 1995, Whitney Bank of Alabama purchased the assets and
assumed the deposit liabilities of the five Mobile branch offices of The Peoples
Bank, Elba, Alabama. The fair value of the tangible assets acquired totalled
approximately $90 million, including $47 million in loans. The Alabama Bank
assumed non-interest-bearing demand deposits of $14 million and interest-bearing
transaction, savings and time deposits totaling $76 million. The purchase price
was approximately $12 million. Operating results from this acquisition are
included in the accompanying consolidated statements of operations from the date
of acquisition.
In March 1994, the Company and the Louisiana Bank purchased
substantially all of the assets and assumed the deposits and certain other
liabilities of Baton Rouge Bank and Trust Company. The tangible assets acquired,
whose fair
Page 55 of 69 Pages
value totalled approximately $118 million, included $59 million in loans. The
deposits assumed included approximately $24 million in non-interest-bearing
demand deposits and $94 million in interest-bearing transaction, savings and
time deposit accounts. As part of the acquisition price, which totalled
approximately $9 million, Whitney Holding Corporation issued 90,909 shares of
its common stock with a value of $2 million. The operating results from this
acquisition are reflected in the Company's consolidated statements of operations
from the acquisition date.
(17) COMMITMENTS AND CONTINGENCIES
In 1992, the Company discovered and reported to the United States
Department of Education ("DOE") that in earlier years it had not in all cases
followed some collection procedures related to guaranteed student loans under
the Federal Family Education Loan Program. At that time, a reserve for potential
settlement with DOE was established and internal procedures were revised for
future compliance with the Program. The Company believes the ultimate settlement
will not have a material effect on its results of operations or financial
condition in 1997 or beyond.
The Company and its subsidiaries are parties to various legal
proceedings arising in the ordinary course of business. After reviewing with
outside legal counsel pending and threatened actions, management is of the
opinion that the ultimate resolution of these actions will not have a material
effect on the Company's financial condition and results of operations.
Management also does not believe that compliance with existing federal,
state or local environmental laws and regulations will impose any material
financial obligation on the Company or materially affect the realizable value of
its assets.
Neither the Company nor the Banks have entered into material
commitments under non-cancelable leases for facilities or equipment.
Page 56 of 69 Pages
(18) PARENT COMPANY FINANCIAL STATEMENTS
Summarized parent-company-only financial statements of
Whitney Holding Corporation follow (in thousands):
December 31,
1996 1995
------------------------
BALANCE SHEETS
Investment in and advances to the Banks............... $ 398,359 $ 365,979
Investment in non-bank subsidiaries................... 1,021 1,003
Dividends receivable.................................. 4,858 3,642
Other assets.......................................... 5,772 9,020
------------------------
Total assets.......................................... $ 410,010 $ 379,644
========================
Dividends payable and other liabilities............... $ 5,359 $ 3,781
Shareholders' equity, net of treasury shares and
unearned restricted stock compensation.......... 404,651 375,863
------------------------
Total liabilities and shareholders' equity............ $ 410,010 $ 379,644
========================
FOR YEAR ENDED DECEMBER 31,
STATEMENT OF OPERATIONS 1996 1995 1994
--------------------------------------
Dividend income from the Banks......................... $ 24,455 $ 26,418 $ 33,361
Equity in net undistributed earnings of the Banks...... 17,409 19,013 24,316
Equity in net undistributed earnings of non-bank
subsidiaries.......................................... 18 2 -
Other income (expense), net............................ (1,261) 100 (87)
-------------------------------------
Net income............................................. $ 40,621 $ 45,533 $ 57,590
=====================================
STATEMENT OF CASH FLOWS
Cash flows from operating activities:
Net income........................................... $ 40,621 $ 45,533 $ 57,590
Adjustment to reconcile net income to net cash
provided by operating activities:
Equity in net undistributed earnings of the Banks.... (17,409) (19,013) (24,316)
Equity in undistributed earnings of non-bank
subsidiaries...................................... (18) (2) -
(Increase) Decrease in dividends receivable.......... (1,216) (788) (563)
Other, net.......................................... 818 (285) 35
--------------------------------------
Net cash provided by operating activities........... $ 22,796 $ 25,445 $ 32,746
--------------------------------------
Cash flows from investing activities:
Investment in Whitney National Bank of Florida...... $ (15,015)$ - $ -
Investment in and advances to Whitney Bank of
Alabama.......................................... - (12,752) (22,162)
Investment in Whitney Community Development
Corporation...................................... - (1,000) -
Other, net.......................................... 3,224 (4,657) (2,534)
--------------------------------------
Net cash provided by (used in) investing activities. $ (11,791)$ (18,409)$ (24,696)
--------------------------------------
Cash flows from financing activities:
Dividends paid, including pooled entities........... (15,942) (12,234) (9,583)
Sale of common stock under employee savings plan
and dividend reinvestment plan.................... 2,685 5,090 675
Exercise of stock options........................... 1,657 86 256
Stock issued by pooled entities, pre-merger......... 310 15 902
--------------------------------------
Net cash provided by (used in) financing activities. $ (11,290)$ (7,043)$ (7,750)
--------------------------------------
Net increase (decrease) in cash ....................... $ (285)$ (7)$ 300
Cash at the beginning of the year...................... 331 338 38
--------------------------------------
Cash at the end of the year............................ $ 46 $ 331 $ 338
======================================
Page 57 of 69 Pages
MANAGEMENT REPORT ON RESPONSIBILITY FOR FINANCIAL REPORTING
The management of Whitney Holding Corporation is responsible for the
preparation of the financial statements, related financial data and other
information in this annual report. The financial statements are prepared in
accordance with generally accepted accounting principles and include amounts
based on management's estimates and judgement where appropriate. Financial
information appearing throughout this annual report is consistent with the
financial statements.
The Company's financial statements have been audited by Arthur Andersen
LLP, independent public accountants. Management has made available to Arthur
Andersen LLP all of the Company's financial records and related data, as well as
the minutes of shareholders' and directors' meetings. Furthermore, management
believes that all representations made to Arthur Andersen LLP during its audit
were valid and appropriate.
Management of the Company has established and maintains a system of
internal control that provides reasonable assurance as to the integrity and
reliability of the financial statements, the protection of assets from
unauthorized use or disposition, and the prevention and detection of fraudulent
financial reporting. The system of internal control provides for appropriate
division of responsibility and is documented by written policies and procedures
that are communicated to employees with significant roles in the financial
reporting process and updated as necessary. Management continually monitors the
system of internal control for compliance. The Company maintains a strong
internal control auditing program that independently assesses the effectiveness
of the internal controls and recommends possible improvements thereto. As part
of their audit of the Company's 1996 financial statements, Arthur Andersen LLP
considered the Company's system of internal control to the extent they deemed
necessary to determine the nature, timing and extent of their audit tests.
Management has considered the recommendations of the internal auditors and
Arthur Andersen LLP concerning the Company's system of internal control and has
taken actions that it believes are cost-effective in the circumstances to
respond appropriately to these recommendations. Management believes that, as of
December 31, 1996, the Company's system of internal control is adequate to
accomplish the objectives discussed herein.
Page 58 of 69 Pages
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF WHITNEY HOLDING CORPORATION:
We have audited the accompanying consolidated balance sheets of Whitney
Holding Corporation and subsidiaries (a Louisiana corporation) as of December
31, 1996 and 1995, and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Whitney
Holding Corporation and subsidiaries as of December 31, 1996 and 1995, and the
results of its operations and cash flows for each of the three years in the
period ended December 31, 1996, in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
New Orleans, Louisiana January 16, 1997 (except with respect to the first
paragraph of Note 16 as to which the date is February 28, 1997)
Page 59 of 69 Pages
SUMMARY OF QUARTERLY FINANCIAL INFORMATION
The following quarterly financial information is unaudited. In the
opinion of management, all normal recurring adjustments necessary to present
fairly the results of operations for such periods are reflected.
1996 - UNAUDITED
(in thousands, except per-share amounts)
----------------------------------------------------------------------------
4TH 3RD 2ND 1ST
QUARTER QUARTER QUARTER QUARTER
----------------------------------------------------------------------------
Interest income $ 62,377 $ 61,126 $ 59,076 $ 59,127
Net interest income 38,997 38,890 36,938 36,986
Reduction in reserve for possible loan losses 5,000 - - -
Income before income tax 16,600 15,766 15,208 12,165
Net income 11,058 10,780 10,390 8,393
Earnings per share for the three-month periods
(based on weighted average of number of shares
outstanding) $ 0.61 $ 0.60 $ 0.58 $ 0.47
Dividend declared per share, historical $ 0.25 $ 0.25 $ 0.25 $ 0.22
Range of closing stock prices 31.75-35.875 29.50-32.75 29.75-31.75 29.75-31.75
1995 - UNAUDITED
(in thousands, except per-share amounts)
----------------------------------------------------------------------------
4TH 3RD 2ND 1ST
QUARTER QUARTER QUARTER QUARTER
----------------------------------------------------------------------------
Interest income $ 59,313 $ 56,717 $ 54,166 $ 51,464
Net interest income 38,879 36,942 35,057 34,841
Reduction in reserve (provision)
for possible loan losses (350) 9,900 (50) (120)
Income before income tax 15,275 24,805 12,690 13,618
Net income 10,633 16,351 9,322 9,227
Earnings per share for the three-month periods
(based on weighted average of number of shares
outstanding) $ 0.60 $ 0.92 $ 0.53 $ 0.53
Dividend declared per share, historical $ 0.22 $ 0.20 $ 0.20 $ 0.20
Range of closing stock prices 29.75-31.50 26.75-34.00 24.00-27.375 22.00-25.75
Page 60 of 69 Pages
Item 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
Item 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
In response to this item, registrant incorporates by reference the
sections entitled "Election of Directors," "Certain Transactions" and
"Compliance with Section 16(A) of the Exchange Act" of its Proxy Statement dated
March 18, 1997.
Item 11: EXECUTIVE COMPENSATION
In response to this item, registrant incorporates by reference the
sections entitled "Proposal to Amend and Restate the Long-Term Incentive
Program," "Compensation of Directors" and "Executive Compensation" of its Proxy
Statement dated March 18, 1997.
Item 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
In response to this item, registrant incorporates by reference the
sections entitled "Voting Securities and Principal Holders Thereof" and
"Election of Directors" of its Proxy Statement dated March 18, 1997.
Item 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In response to this item, registrant incorporates by reference the
section entitled "Certain Transactions" of its Proxy Statement dated March 18,
1997.
Page 61 of 69 Pages
PART IV
Item 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) The following consolidated financial statements of the Company and its
subsidiaries are included in Part II Item 8:
Page Number
-----------
Consolidated Balance Sheets --
December 31, 1996 and 1995 27
Consolidated Statements of Operations --
Years Ended December 31, 1996, 1995, and 1994 28
Consolidated Statements of Changes in Shareholders' Equity --
Years Ended December 31, 1996, 1995, and 1994 29
Consolidated Statements of Cash Flows --
Years Ended December 31, 1996, 1995, and 1994 30
Notes to Financial Statements 31
Report of Independent Public Accountants 59
Summary of Quarterly Financial Information 60
(a) (2) All schedules have been omitted because they are either not applicable
or the required information has been included in the financial statements or
notes to the financial statements.
(a) (3) Exhibits:
Exhibit 3.1 - Copy of Composite Charter, incorporated by reference to
the Company's March 31, 1993 Form 10- Q
Exhibit 3.2 - Copy of Bylaws, as amended
Exhibit 10.1 - Stock Option Agreement between Whitney Holding
Corporation and William L. Marks, incorporated by reference to the
Company's 1990 Form 10-K
Exhibit 10.2 - Executive agreement between Whitney Holding Corporation,
Whitney National Bank and William L. Marks, incorporated by reference
to the Company's June 30, 1993 Form 10-Q
Exhibit 10.3 - Executive agreement between Whitney Holding Corporation,
Whitney National Bank and R. King Milling, incorporated by reference to
the Company's June 30, 1993 Form 10-Q
Exhibit 10.4 - Executive agreement between Whitney Holding Corporation,
Whitney National Bank and Edward B. Grimball, incorporated by reference
to the Company's June 30, 1993 Form 10-Q
Exhibit 10.5 - Executive agreement between Whitney Holding Corporation,
Whitney National Bank and Kenneth A. Lawder, Jr., incorporated by
reference to the Company's June 30, 1993 Form 10-Q
Page 62 of 69 Pages
Exhibit 10.6 - Executive agreement between Whitney Holding Corporation,
Whitney National Bank and G. Blair Ferguson, incorporated by reference
to the Company's September 30, 1993 Form 10-Q
Exhibit 10.7 - Executive agreement between Whitney Holding Corporation,
Whitney National Bank and Joseph W. May, effective December 13, 1993,
incorporated by reference to the Company's 1993 Form 10-K
Exhibit 10.8 - Executive agreement between Whitney Holding Corporation,
Whitney Bank of Alabama and John C. Hope, III, incorporated by
reference to the Company's 1994 10-K
Exhibit 10.9 - Executive agreement between Whitney Holding Corporation,
Whitney National Bank and Robert C. Baird, Jr., incorporated by
reference to the Company's June 30, 1995 Form 10-Q effective July 26,
1995
Exhibit 10.10a - Long-term incentive program, incorporated by reference
to the Company's 1991 Form 10-K
Exhibit 10.10b - Long-term incentive plan, incorporated by reference to
the Company's Proxy Statement dated March 18, 1997
Exhibit 10.11 - Executive compensation plan, incorporated by reference
to the Company's 1991 Form 10-K
Exhibit 10.12 - Form of restricted stock agreement between Whitney
Holding Corporation and certain of its officers, incorporated by
reference to the Company's June 30, 1992 Form 10-Q
Exhibit 10.13 - Form of stock option agreement between Whitney Holding
Corporation and certain of its officers, incorporated by reference to
the Company's June 30, 1992 Form 10-Q
Exhibit 10.14 - Directors' Compensation Plan, incorporated by reference
to the Company's Proxy Statement dated March 24, 1994
Exhibit 10.14a - Amendment No. 1 to the Whitney Holding Corporation
Directors' Compensation Plan, incorporated by reference to the
Company's Proxy Statement dated March 15, 1996
Exhibit 10.15 - Amended and restated Agreement and Plan of Merger
between Whitney Holding Corporation and First Citizens Bancstock, Inc.,
dated December 15, 1995, incorporated by reference to the Company's
1995 Form 10-K
Exhibit 10.16 - Retirement Restoration Plan effective January 1, 1995,
incorporated by reference to the Company's 1995 Form 10-K
Exhibit 10.17 - Executive agreement between Whitney Holding
Corporation, Whitney National Bank and Rodney D. Chard, incorporated by
reference to the Company's September 30, 1996 Form 10-Q
Exhibit 10.18 - Form of Amendment to the Executive agreements set forth
in Exhibits 10.2 through 10.9
Exhibit 21 - Subsidiaries
Whitney Holding Corporation owns 100% of the capital stock of Whitney
National Bank and First National Bank of Houma, both in Louisiana,
Whitney Bank of Alabama and Whitney National Bank of Florida All other
subsidiaries considered in the aggregate would not constitute a
significant subsidiary.
Exhibit 23 - Consent of Independent Public Accountants
Exhibit 27 - Financial Data Schedule
Page 63 of 69 Pages
(b) No report on Form 8-K was required to be filed by the Registrant during
the last quarter of 1996.
Pursuant to the requirements of the Section 13 or 15(d) 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/ William L. Marks
----------------------------------------
William L. Marks
Chairman of the Board and
Chief Executive Officer March 28, 1997
-----------------
Date
Page 64 of 69 Pages
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
/s/ William L. Marks , Chairman of the Board and Chief Executive
- - ------------------------------- Officer and Director March 28, 1997
William L. Marks -----------------------
/s/ R. King Milling , President and Director March 28, 1997
- - ------------------------------- ----------------------
R. King Milling
/s/ Edward B. Grimball , Executive Vice President & C.F.O.
- - ------------------------------- (Principal Accounting Officer) March 28, 1997
Edward B. Grimball ---------------
/s/ John G. Phillips , Director March 28, 1997
- - ------------------------------- -------------------------------------
John G. Phillips
, Director
- - ------------------------------- -------------------------------------
W.P. Snyder III
/s/ Robert H. Crosby, Jr. , Director March 28, 1997
- - ------------------------------- -------------------------------------
Robert H. Crosby, Jr.
/s/ Richard B. Crowell , Director March 28, 1997
- - ------------------------------- -------------------------------------
Richard B. Crowell
/s/ James M. Cain , Director March 28, 1997
- - ------------------------------- -------------------------------------
James M. Cain
/s/ Harry J. Blumenthal, Jr., Director March 28, 1997
- - ------------------------------- -------------------------------------
Harry J. Blumenthal, Jr.
/s/ Robert E. Howson , Director March 28, 1997
- - ------------------------------- -------------------------------------
Robert E. Howson
/s/ Warren K. Watters , Director March 28, 1997
- - ------------------------------- -------------------------------------
Warren K. Watters
, Director
- - ------------------------------- -------------------------------------
John K. Roberts, Jr.
/s/ Willam A. Hines , Director March 28, 1997
- - ------------------------------- -------------------------------------
William A. Hines
/s/ E. James Kock, Jr. , Director March 28, 1997
- - ------------------------------- -------------------------------------
E. James Kock, Jr.
- - ------------------------------- , Director
John J. Kelly -------------------------------------
/s/ Angus R. Cooper, II , Director March 28, 1997
- - ------------------------------- -------------------------------------
Angus R. Cooper, II
/s/ Joel B. Bullard, Jr. , Director March 28, 1997
- - ------------------------------- -------------------------------------
Joel B. Bullard, Jr.
Page 65 of 69 Pages
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
- - ------------------------------- , Director
Camille A. Cutrone -------------------------------------
/s/ Carroll W. Suggs , Director March 28, 1997
- - ------------------------------- -------------------------------------
Carroll W. Suggs
/s/ Alfred S. Lippman , Director March 28, 1997
- - ------------------------------- -------------------------------------
Alfred S. Lippman
Page 66 of 69 Pages
EXHIBIT 3.2
BY-LAWS
OF
WHITNEY HOLDING CORPORATION
Section 1. Meetings of the Board of Directors of this corporation may be held by
means of conference telephone or similar communications equipment.
Section 2. A. Without limiting in any way the indemnification by the corporation
of persons as provided in its charter and the existing applicable law, the
corporation shall have authority to indemnify persons in accordance with
Louisiana Revised Statutes 12:83 as it may from time to time become amended,
supplemented or replaced.
B. The corporation shall have authority to procure or maintain
insurance or other similar arrangement in accordance with Louisiana Revised
Statutes 12:83(F) and (G) as they may from time to time become amended,
supplemented or replaced.
Section 3. The Company may issue stock certificates signed by the Chief
Executive Officer and Secretary of the Company. In addition to the Chief
Executive Officer and Secretary of the Company, the President, any Vice
President and any Assistant Secretary, respectively, of the Company may sign the
Company's stock certificates. All stock certificates representing shares of the
Company's stock, whether currently outstanding or that may be issued in the
future, may bear facsimile signatures of the Company's Chief Executive Officer
and Secretary, or other authorized officers, provided such certificates are or
have been countersigned by a transfer agent or registrar other than the Company
itself or an employee of the Company.
Section 4. There shall be a standing committee of this Corporation, appointed by
the Board, to be known as the Executive Committee, consisting of the Chairman of
the Board, the President, and such other Directors as may be appointed from time
to time, each to serve a 12 months' term, four (4) members of which shall
constitute a quorum for the transaction of business. This committee shall have
power to direct and transact all business of the Corporation, which properly
might come before the Board of Directors, except such as the Board only, by law,
is authorized to perform. The Executive Committee shall report its actions in
writing at each regular meeting of the Board of Directors, which shall approve
or disapprove the report and record such action in the minutes of the meeting.
Page 67 of 69 Pages
EXHIBIT 10.18
AMENDMENT
WHITNEY HOLDING CORPORATION
and
WHITNEY NATIONAL BANK
EXECUTIVE AGREEMENT
-------------------
THIS AMENDMENT relates to an Executive Agreement (The
"Agreement") entered into between WHITNEY HOLDING CORPORATION, a corporation
organized and existing under the laws of the State of Louisiana (the "Holding
Corporation"), WHITNEY NATIONAL BANK, a financial institution organized and
existing under the laws of the United States (the "Bank") and John C. Hope, III
(the "Executive") which was first effective as of March 16, 1995.
WHEREAS, the Executive is presently employed by each of the
Holding Corporation and the Bank as a Executive Vice President and Whitney Bank
of Alabama as Chairman and Chief Executive Officer;
WHEREAS, the Holding Corporation adopted the Whitney Holding
Corporation Retirement Restoration Plan, effective as of January 1, 1995, and
the Executive is designated as a participant in such plan;
WHEREAS, the parties to the Agreement now desire to amend the
Agreement to take into account the Whitney Holding Corporation Retirement
Restoration Plan;
NOW, THEREFORE, effective as of July 23, 1996, Section 2.1e of
the Agreement shall be amended and restated to read in its entirety as follows:
e. Pay to the Executive an amount equal to the present
value of the additional benefits which would have
accrued under the Whitney National Bank Retirement
Plan and the Whitney Holding Corporation Retirement
Restoration Plan, or any successors thereto, that
would have been made for the lesser of (i) three
years following the Date of Termination, or (ii) the
number of years until the Executive's normal
retirement age under such plans; and
THIS AMENDMENT was executed in multiple counterparts as of the
date set forth below, each of which shall be deemed an original, and shall be
effective as of the date first set forth above.
EXECUTIVE: WHITNEY NATIONAL BANK and
WHITNEY HOLDING CORPORATION
/s/ John C. Hope, III /s/ Robert E. Howson
- - ----------------------------------- ------------------------------
Date: July 23, 1996 By: Robert E. Howson
------------------------------ Title: Director & Chairman
Compensation Committee
of Board of Directors
Date: July 23, 1996
-------------------------
Page 68 of 69 Pages