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EX-23 - EX-23 - WHITNEY HOLDING CORP | h69683exv23.htm |
EX-99.2 - EX-99.2 - WHITNEY HOLDING CORP | h69683exv99w2.htm |
EX-31.2 - EX-31.2 - WHITNEY HOLDING CORP | h69683exv31w2.htm |
EX-31.1 - EX-31.1 - WHITNEY HOLDING CORP | h69683exv31w1.htm |
EX-99.1 - EX-99.1 - WHITNEY HOLDING CORP | h69683exv99w1.htm |
EX-12 - EX-12 - WHITNEY HOLDING CORP | h69683exv12.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2009
Commission file number 0-1026
WHITNEY HOLDING CORPORATION
(Exact name of registrant as specified in its charter)
Louisiana (State of incorporation) |
72-6017893 (I.R.S. Employer Identification No.) |
|
228 St. Charles Avenue New Orleans, Louisiana 70130 (Address of principal executive offices) |
(504) 586-7272 (Registrants telephone number) |
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of Each Class | Name of Exchange on Which Registered | |
Common Stock, no par value | Nasdaq Global Select Market |
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes þ No o
Indicate by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes o No þ
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 þ No o
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
registrants knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See the
definitions of large accelerated filer, accelerated filer and smaller reporting
company in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes o No þ
As of December 31, 2009, the aggregate market value of the registrants common stock
(all shares are voting shares) held by nonaffiliates was approximately $856 million (based
on the closing price of the stock on June 30, 2009).
At February 26, 2010, 96,452,136 shares of the registrants no par value common stock
were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Certain specifically identified parts of the registrants Proxy Statement for the 2010 Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission are incorporated by reference into Part III of this Form 10-K. |
WHITNEY HOLDING CORPORATION
TABLE OF CONTENTS
Table of Contents
PART I
Item 1: | BUSINESS |
ORGANIZATION AND RECENT DEVELOPMENTS
Whitney Holding Corporation (the Company or Whitney) is a Louisiana corporation registered
under the Bank Holding Company Act of 1956, as amended (BHCA). The Company began operations in
1962 as the parent of Whitney National Bank (the Bank). The Bank is a national banking association
headquartered in New Orleans, Louisiana, that has engaged in the general banking business in the
greater New Orleans area continuously since 1883. The Company has at times operated as a
multi-bank holding company when it established or acquired new entities in connection with business
acquisitions. To achieve the synergies and efficiencies of operating as a single-bank holding
company, the Company has merged all banking operations into the Bank and intends to continue
merging the operations of any future acquisitions at the earliest possible date.
NATURE OF BUSINESS AND MARKETS
The Company, through the Bank, engages in community banking activities and serves a market
area that covers the five-state Gulf Coast region stretching from Houston, Texas, across southern
Louisiana and the coastal region of Mississippi, to central and south Alabama, the western
panhandle of Florida, and to the metropolitan area of Tampa Bay, Florida. The Bank also maintains
a foreign branch on Grand Cayman in the British West Indies.
The Bank provides a broad range of community banking services to commercial, small business
and retail customers, offering a variety of transaction and savings deposit products, treasury
management services, investment brokerage services, secured and unsecured loan products, including
revolving credit facilities, and letters of credit and similar financial guarantees. The Bank also
provides trust and investment management services to retirement plans, corporations and
individuals. Through its subsidiaries, the Bank also offers personal and business lines of
insurance and annuity products to its customers.
The Company also owns Whitney Community Development Corporation (WCDC). WCDC was formed to
provide financial support to corporations or projects that promote community welfare in areas with
mainly low or moderate incomes. WCDCs primary activity has been to provide financing for the
development of affordable housing.
THE BANK
All material funds of the Company are invested in the Bank. The Bank has a large number of
customer relationships that have been developed over a period of many years. In 2008, the Bank
celebrated its 125th anniversary of continuous operations in the greater New Orleans
area. The loss of any single customer or a few customers would not have a material adverse effect
on the Bank or the Company. The Bank has customers in a number of foreign countries; however, the
revenue derived from these foreign customers is not a material portion of its overall revenues.
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COMPETITION
There is significant competition within the financial services industry in general as well as
with respect to the particular financial services provided by the Company and the Bank. Within its
market, the Bank competes directly with major banking institutions of comparable or larger size and
resources and with various other smaller banking organizations. The Bank also has numerous local
and national nonbank competitors, including savings and loan associations, credit unions, mortgage
companies, personal and commercial finance companies, investment brokerage and financial advisory
firms, and mutual fund companies. Entities that deliver financial services and access to financial
products and transactions exclusively through the Internet are another source of competition.
Technological advances have allowed the Bank and other financial institutions to provide electronic
and Internet-based services that enhance the value of traditional financial products. Continued
consolidation within the financial services industry will most likely change the nature and
intensity of competition that Whitney faces, but can also create opportunities for Whitney to
demonstrate and exploit competitive advantages.
The participants in the financial services industry are subject to varying degrees of
regulation and governmental supervision. The following section summarizes certain important
aspects of the supervision and regulation of banks and bank holding companies. Some of Whitneys
competitors that are neither banks nor bank holding companies may be subject to less regulation
than the Company and the Bank, and this may give them a competitive advantage. The system of laws
and regulations affecting the financial services industry has been changing recently with the
implementation of laws such as the Emergency Economic Stabilization Act (EESA) and the American
Recovery and Reinvestment Act (ARRA) and will continue to change as the government attempts to
respond to financial crises that have affected the banking system and financial markets. These
changes, as well as future changes, in the laws and regulations governing the financial industry
could and likely will influence the competitive positions of the participants in this industry. We
cannot predict whether the changes will be favorable or unfavorable to the Company and the Bank.
SUPERVISION AND REGULATION
The Company and the Bank are subject to comprehensive supervision and regulation that affect
virtually all aspects of their operations. This supervision and regulation is designed primarily
to protect depositors and the Deposit Insurance Fund (DIF) of the Federal Deposit Insurance
Corporation (FDIC), and generally is not intended for the protection of the Companys shareholders.
The following summarizes certain of the more important statutory and regulatory provisions. As of
the date of this document, substantial changes to the regulatory framework applicable to Whitney
and its subsidiaries are being considered by Congress and by U.S. bank regulatory agencies. For a
discussion of such proposed changes, please see Recent Regulatory Developments below. Changes in
applicable law or regulation, and in their application by regulatory agencies, cannot be predicted,
but they may have a material effect on the business and results of Whitney and its subsidiaries.
Recent Regulatory Developments
U.S. Treasury Capital Purchase Program. Pursuant to the U.S. Department of the Treasurys
(the U.S. Treasury) Capital Purchase Program (the CPP), on December 19, 2008, Whitney issued and
sold 300,000 shares of Whitneys Fixed Rate Cumulative Perpetual Preferred Stock Series A (Series A
Preferred Stock) and a warrant to purchase up to 2,631,579 shares of our common stock to the U.S.
Treasury as part of the CPP (the Warrant). This senior preferred stock bears quarterly dividends
at an annual rate of five percent for the first five years and nine percent thereafter. The
Company may redeem the preferred stock from the Treasury at any time without penalty, subject to
the Treasurys consultation with the Companys primary regulatory agency. So long as
the senior
preferred stock is outstanding, certain restrictions are placed on Whitneys ability to pay
other
dividends or repurchase stock. In addition, CPP participants are subject to certain executive
compensation limitations. Further, under the EESA, Congress has the ability to impose
after-the-fact terms and conditions on participants in the CPP. As a participant
in the CPP,
Whitney may be subject to any such retroactive terms and conditions. The Company cannot predict
whether, or in what form, additional terms or conditions may be imposed or the extent to which the
Companys business may be affected.
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Comprehensive Financial Stability Plan of 2009. On February 10, 2009, Treasury Secretary
Timothy Geithner announced a new comprehensive financial stability plan (the Financial Stability
Plan), which earmarked the second $350 billion of unused funds originally authorized under the
Emergency Economic Stabilization Act of 2008.
The major elements of the Financial Stability Plan included: (i) a capital assistance program
that has invested in convertible preferred stock of certain qualifying institutions, (ii) a
consumer and business lending initiative to fund new consumer loans, small business loans and
commercial mortgage asset-backed securities issuances, (iii) a public-private investment fund
intended to leverage public and private capital with public financing to purchase up to $500
billion to $1 trillion of legacy toxic assets from financial institutions, and (iv) assistance
for homeowners by providing up to $75 billion to reduce mortgage payments and interest rates and
establishing loan modification guidelines for government and private programs.
Regulatory Reform. In June of 2009, the current administration proposed a wide range of
regulatory reforms that, if enacted, may have significant effects on the financial services
industry in the United States. Significant aspects of the current administrations proposals
included, among other things, proposals (i) that any financial firm whose combination of size,
leverage and interconnectedness could pose a threat to financial stability (known as Tier 1 FHCs)
be subject to certain enhanced regulatory requirements, as discussed below, (ii) that federal bank
regulators require loan originators or sponsors to retain part of the credit risk of securitized
exposures, (iii) that there be increased regulation of broker-dealers and investment advisers, (iv)
that a federal consumer financial protection agency be created that would have broad authority to
regulate providers of credit, savings, payment and other consumer financial products and services,
(v) that there be comprehensive regulation of OTC derivatives, (vi) that the controls on the
ability of banking institutions to engage in transactions with affiliates be tightened, and (vii)
that financial holding companies be required to be well-capitalized and well managed on a
consolidated basis.
The U.S. Congress, state lawmaking bodies and federal and state regulatory agencies continue
to consider a number of wide-ranging and comprehensive proposals for altering the structure,
regulation and competitive relationships of the nations financial institutions, including rules
and regulations related to the broad range of reform proposals set forth by the current
administration described above. The House of Representatives passed a bill in December 2009 that
covered many elements of the administration proposal discussed above. The Senate Banking Committee
currently is considering counterpart legislation to bring to the Senate floor. In addition, both
the U.S. Treasury Department and the Basel Committee on Banking Supervision (the Basel Committee)
have issued policy statements regarding proposed significant changes to the regulatory capital
framework applicable to banking organizations. For a discussion of such proposals, please see
Capital below.
It cannot be predicted whether or in what form further legislation and/or regulations may be
adopted or the extent to which Whitneys business may be affected thereby.
Tier 1 FHC Status. As noted above, the current administration has proposed that so-called
Tier 1 FHCs be subject to certain enhanced regulatory requirements. The House bill contains a
similar concept. If Whitney were deemed to be a Tier 1 FHC, it would be subject to such
requirements. Among other things, Tier 1 FHCs would be subject to stricter and more conservative
capital, liquidity and risk management standards, a new prompt corrective action regime (similar to
that which already exists for insured depository institutions), enhanced public disclosures, and a
requirement that they have in place a credible plan for the rapid resolution of the firm in the
event of severe financial distress. There would also be a focus on the sufficiency of high-quality
capital in stressed economic scenarios. Moreover, Tier 1 FHC subsidiaries (whether regulated or
unregulated) would be subject to consolidated supervision by the Federal Reserve, although
functionally regulated subsidiaries (such as banks and broker-dealers) would continue to be
supervised by their primary federal regulators.
Incentive Compensation. On October 22, 2009, the Federal Reserve issued a comprehensive
proposal on incentive compensation policies (the Incentive Compensation Proposal) intended to
ensure that the incentive compensation policies of banking organizations do not undermine the
safety and soundness of such organizations by encouraging excessive risk-taking. The Incentive
Compensation Proposal, which covers all employees that have the ability to materially affect the
risk profile of an organization, either individually or as part of a group, is based upon the key
principles that a banking organizations incentive compensation arrangements should (i) provide
incentives
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that do not encourage risk-taking beyond the organizations ability to effectively identify
and manage risks, (ii) be compatible with effective internal controls and risk management, and
(iii) be supported by strong corporate governance, including active and effective oversight by the
organizations board of directors. Any deficiencies in compensation practices that are identified
may be incorporated into the organizations supervisory ratings, which can affect its ability to
make acquisitions or perform other actions. The Incentive Compensation Proposal provides that
enforcement actions may be taken against a banking organization if its incentive compensation
arrangements or related risk-management control or governance processes pose a risk to the
organizations safety and soundness and the organization is not taking prompt and effective
measures to correct the deficiencies. In addition, on January 12, 2010, the FDIC announced that it
would seek public comment on whether banks with compensation plans that encourage risky behavior
should be charged higher deposit assessment rates than such banks would otherwise be charged.
The scope and content of the U.S. banking regulators policies on executive compensation are
continuing to develop and are likely to continue evolving in the near future. It cannot be
determined at this time whether compliance with such policies will adversely affect the ability of
Whitney and its subsidiaries to hire, retain and motivate their key employees.
Financial Crisis Responsibility Fees. On January 14, 2010, the current administration
announced a proposal to impose a fee (the Financial Crisis Responsibility Fee) on those financial
institutions that benefited from recent actions taken by the U.S. government to stabilize the
financial system. If implemented as initially proposed, the Financial Crisis Responsibility Fee
will be applied to firms with over $50 billion in consolidated assets, and, therefore, by its
current proposed terms would not apply to Whitney. There can be no assurance that the proposal
will not be revised and will not apply to Whitney in the future. The Financial Crisis
Responsibility Fee would be collected by the Internal Revenue Service and would be approximately
fifteen basis points, or 0.15%, of an amount calculated by subtracting a covered institutions Tier
1 capital and FDIC-assessed deposits (and/or an adjustment for insurance liabilities covered by
state guarantee funds) from such institutions total assets.
The Financial Crisis Responsibility Fee, if implemented as proposed by the current
administration, would go into effect on June 30, 2010 and remain in place for at least ten years.
The U.S. Treasury would be asked to report after five years on the effectiveness of the Financial
Crisis Responsibility Fee as well as its progress in repaying projected losses to the U.S.
government as a result of the TARP. If losses to the U.S. government as a result of TARP have not
been recouped after ten years, the Financial Crisis Responsibility Fee would remain in place until
such losses have been recovered.
Supervisory Authorities
Whitney is a bank holding company, registered with and regulated by the Federal Reserve. The
Bank is a national bank and, as such, is subject to supervision, regulation and examination by the
Office of the Comptroller of the Currency (OCC) as its chartering authority and secondarily by the
FDIC as its deposit insurer. Ongoing supervision is provided through regular examinations by the
OCC and Federal Reserve and other means that allow the regulators to gauge managements ability to
identify, assess and control risk in all areas of operations in a safe and sound manner and to
ensure compliance with laws and regulations. As a result, the scope of routine examinations of the
Company and the Bank is rather extensive. To facilitate supervision, the Company and the Bank are
required to file periodic reports with the regulatory agencies, and much of this information is
made available to the public by the agencies.
Capital
The Federal Reserve and the OCC require that the Company and the Bank meet certain minimum
ratios of capital to assets in order to conduct their activities. Two measures of regulatory
capital are used in calculating these ratios Tier 1 Capital and Total Capital. Tier 1 Capital
generally includes common equity, retained earnings, a limited amount of qualifying preferred
stock, and qualifying minority interests in consolidated subsidiaries, reduced by goodwill and
certain other intangible assets, such as core deposit intangibles, and certain other assets. Total
Capital generally consists of Tier 1 Capital plus a limited amount of the allowance for loan
losses, preferred stock that does not qualify as Tier 1 Capital, certain types of subordinated debt
and a limited amount of other items.
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The Tier 1 Capital ratio and the Total Capital ratio are calculated against an asset total
weighted for risk. Certain assets, such as cash and U.S. Treasury securities, have a zero risk
weighting. Others, such as commercial and consumer loans, often have a 100% risk weighting. The
asset total also includes amounts that represent the potential funding of off-balance sheet
obligations such as loan commitments and letters of credit. These potential assets are assigned to
risk categories in the same manner as funded assets. The total assets in each category are
multiplied by the appropriate risk weighting to determine risk-adjusted assets for the capital
calculations. The leverage ratio also provides a measure of the adequacy of Tier 1 Capital, but
assets are not risk-weighted for this calculation. Assets deducted from regulatory capital, such
as goodwill and other intangible assets, are also excluded from the asset base used to calculate
capital ratios.
The minimum regulatory capital ratios for both the Company and the Bank are generally 8% for
Total Capital, 4% for Tier 1 Capital and 4% for leverage. To be eligible to be classified as
well-capitalized, the Bank must generally maintain a Total Capital ratio of 10% or greater, a
Tier 1 Capital ratio of 6% or greater, and a leverage ratio of 5% or more. At December 31, 2009,
both Whitney and the Bank had the required capital levels to qualify as well-capitalized.
The OCC, the Federal Reserve, and the FDIC have authority to compel or restrict certain
actions if the Banks capital should fall below adequate capital standards as a result of operating
losses, or if its regulators otherwise determine that it has insufficient capital. Among other
matters, the corrective actions may include, but are not limited to, requiring the Bank to enter
into informal or formal enforcement orders, including memoranda of understanding, written
agreements, supervisory letters, commitment letters, and consent or cease and desist orders to take
corrective action and refrain from unsafe and unsound practices; removing officers and directors;
assessing civil monetary penalties; and taking possession of and closing and liquidating the Bank.
As a result of the current difficult operating environment and the Companys recent operating
losses, the Banks primary regulator has required the Bank to implement plans to (i) maintain
regulatory capital at a level sufficient to meet specific minimum regulatory capital ratios set by
the regulator; (ii) make several improvements to the Banks oversight of its lending operations;
and (iii) assess the adequacy of the Banks allowance for loan and lease losses and improve related
policies and procedures. The Banks specified minimum regulatory capital ratios are a leverage
ratio of 8%, a Tier 1 Capital ratio of 9%, and a Total Capital ratio of 12%.
As of December 31, 2009, the Banks regulatory ratios exceeded all three of these minimum ratios
with an 8.90% leverage ratio, a 10.48% Tier 1 Capital ratio, and a
13.31% Total Capital ratio. In addition to meeting these capital requirements, we believe that the
Bank has made significant progress in meeting its commitments, including (i) the adoption of
amendments to various credit policies to provide for (a) the development of a written action plan
for criticized assets of $1 million or greater and (b) the timely and accurate risk ratings of
loans and timely placement of loans on nonaccrual; (ii) the establishment of training programs for
lending officers to ensure completion of written action plans for criticized assets and accurate
risk ratings of loans and the proper financial analysis of borrowers and guarantors; and (iii)
completion of an assessment of and enhancement to the methodology for determining its allowance for
loan losses.
The Companys primary regulator, the Federal Reserve, has also required us to take
certain actions in addition to the foregoing, which include (i) obtaining regulatory approval prior
to repurchasing its common stock or incurring, guaranteeing additional debt or increasing its cash
dividends, (ii) providing a plan to strengthen risk management reporting and practices and (iii)
providing a capital plan to maintain a sufficient capital position and updating the plan quarterly
with capital projections and stress tests. We believe that the Company has met and will continue
to meet its obligations under this commitment.
The regulatory capital framework under which the Company and the Bank operate is in a period
of change with likely legislation or regulation that will revise the current standards and very
likely increase capital requirements for the entire banking industry, including the Company and the
Bank. The resulting capital requirements are yet to be determined. The Company and the Bank are
now governed by a set of capital rules known as Basel I that the Federal Reserve and the OCC have
had in place since 1988, with some subsequent amendments and revisions.
Before the recent financial crisis began to have a dramatic effect on the banking industry,
the U.S. regulators had participated in an effort by the Basel Committee on Banking Supervision to
develop
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Basel II. Basel II provides several options for determining capital requirements for credit
and operational risk. In December 2007, the agencies adopted a final rule implementing Basel IIs
advanced approach for core banksU.S. banking organizations with over $250 billion in banking
assets or on-balance-sheet foreign exposures of at least $10 billion. For other banking
organizations, including the Company and the Bank, the U.S. banking agencies proposed a rule in
July 2008 that would have enabled these organizations to adopt the Basel II standardized
approach. The proposed rule has not been finalized. In September 2009, as a result of the
financial crisis that has adversely affected global credit markets and increased credit, liquidity,
interest rate and other risks, the Treasury Department issued principles for international
regulatory reform, which included recommendations for higher capital standards for all banking
organizations to be implemented as part of a broader reconsideration of international risk-based
capital standards developed by Basel II. In December 2009, the Basel Committee requested comment on
a series of proposals that would have the effect of increasing capital requirements.
FDICIA and Prompt Corrective Action
The Federal Deposit Insurance Improvement Act of 1991 (FDICIA), among other things, identifies
five capital categories for insured depository institutions (well-capitalized, adequately
capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized.) and
requires the federal banking agencies, including the FDIC, to implement systems for prompt
corrective action for insured depository institutions that do not meet minimum capital
requirements within these categories. The FDICIA imposes progressively more restrictive restraints
on operations, management and capital distributions, depending on the category in which an
institution is classified.
Failure to meet the capital guidelines also could subject a depository institution to capital
raising requirements. An undercapitalized bank must develop a capital restoration plan and its
parent holding company must guarantee the banks compliance with the plan. The liability of the
parent holding company under any such guarantee is limited to the lesser of 5% of the banks assets
at the time it became undercapitalized or the amount needed to comply with the plan.
Furthermore, in the event of the bankruptcy of the parent holding company, such guarantee would
take priority over the parents general unsecured creditors.
Within the prompt corrective action regulations, the federal banking agencies also have
established procedures for downgrading an institution to a lower capital category based on
supervisory factors other than capital. Specifically, a federal banking agency may, after notice
and an opportunity for a hearing, reclassify a well-capitalized institution as adequately
capitalized and may require an adequately capitalized institution or an undercapitalized
institution to comply with supervisory actions as if it were in the next lower category if the
institution is deemed to be operating in an unsafe or unsound condition or engaging in an unsafe or
unsound practice. The FDIC may not, however, reclassify a significantly undercapitalized
institution as critically undercapitalized.
In addition to the prompt corrective action directives, failure to meet capital guidelines
may subject a banking organization to a variety of other enforcement remedies, including additional
substantial restrictions on its operations and activities, termination of deposit insurance by the
FDIC and, under certain conditions, the appointment of a conservator or receiver.
Expansion and Activity Limitations
With prior regulatory approval, a bank holding company may acquire other banks or bank holding
companies, and a national bank may participate in FDIC-assisted transactions or merge with other
banks. Acquisitions of banks domiciled in states other than the national banks home
state may be subject to certain
restrictions, including restrictions related to the percentage of deposits that the resulting bank
may hold in that state and nationally and the number of years that the bank to be acquired must
have been operating. A bank holding company may also engage in or acquire an interest in a company
that engages in activities that the Federal Reserve has determined by regulation or order to be so
closely related to banking as to be a proper incident to banking activities. The Federal Reserve
normally requires a notice or application to engage in or acquire companies engaged in such
activities. Under the
BHCA, a bank holding company
is generally prohibited from engaging in or acquiring direct or indirect control
of more than 5% of the voting shares of any company engaged in activities other than those referred
to above.
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Under the Gramm-Leach-Bliley Act (GLB Act), adopted in 1999, bank holding companies that are
well-capitalized and well-managed and meet other conditions can elect to become financial holding
companies. As financial holding companies, they and their subsidiaries are permitted to acquire or
engage in certain financial activities that were not previously permitted for bank holding
companies. These activities include insurance underwriting, securities underwriting and
distribution, travel agency activities, broad insurance agency activities, merchant banking, and
other activities that the Federal Reserve determines to be financial in nature or complementary to
these activities. Whitney has not elected to become a financial holding company, but may elect to
do so in the future. The GLB Act also permits qualifying banks to establish financial subsidiaries
that may engage in certain financial activities not previously permitted for banks. The Bank
currently controls two financial subsidiaries, where it conducts its insurance agency activities.
Whitney is currently subject to a consent order requiring it to take certain actions to
enhance its Bank Secrecy Act/Anti-Money Laundering (BSA/AML) program. The 2001 US Patriot Act,
which substantially revised the BSA laws, includes a provision that requires the Federal Reserve
and the OCC, the Companys primary regulators, to consider Whitneys BSA/AML compliance, among
other factors, when reviewing bank mergers, acquisitions and other applications for business
combinations.
Support of Subsidiary Banks by Holding Companies
Under current Federal Reserve policy, Whitney is expected to act as a source of financial
strength for the Bank and to commit resources to support the Bank in circumstances where it might
not do so absent such a policy. In addition, any loans by a bank holding company to a subsidiary
bank are subordinate in right of payment to depositors and certain other indebtedness of the
subsidiary bank. In the event of a bank holding companys bankruptcy, any commitment by the bank
holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank at
a certain level would be assumed by the bankruptcy trustee and entitled to priority of payment.
Limitations on Acquisitions of Banks and Bank Holding Companies
As a general proposition, other companies seeking to acquire control of a bank such as the
Bank or a bank holding company such as Whitney would require the approval of the Federal Reserve
under the BHCA. In addition, individuals or groups of individuals seeking to acquire control of a
bank or bank holding company would need to file a prior notice with the Federal Reserve (which the
Federal Reserve may disapprove under certain circumstances) under the Change in Bank Control Act.
Control is conclusively presumed to exist if an individual or company acquires 25% or more of any
class of voting securities of the bank holding company. Control may exist under the Change in Bank
Control Act if the individual or group of individuals acquires 10% or more of any class of voting
securities of the bank or bank holding company. A company may be presumed to have control under
the BHCA if it acquires 5% or more of any class of voting securities of the bank or bank holding
company.
Deposit Insurance
The Bank is a member of the FDIC, and its deposits are insured by the DIF of the FDIC up to
the amount permitted by law. The Bank is thus subject to FDIC deposit insurance premium
assessments. The FDIC uses a risk-based assessment system that assigns insured depository
institutions to one of four risk categories based on three primary sources of information
supervisory risk ratings for all institutions, financial ratios for most institutions, including
the Bank, and long-term debt issuer ratings for large institutions that have such ratings. In
February 2009, the FDIC issued new risk based assessment rates that took effect April 1, 2009. For
insured depository institutions in the lowest risk category, the annual assessment rate ranges from
7 to 24 cents for every $100 of domestic deposits. For institutions assigned to higher risk
categories, the new assessment rates range from 17 to 77.5 cents per $100 of domestic deposits.
These ranges reflect a possible downward adjustment for unsecured debt outstanding and possible
upward adjustments for secured liabilities and, in the case of institutions outside the lowest risk
category, brokered deposits.
The
FDICs assessment rates are intended to result in a DIF reserve ratio of at least 1.15%. As
part of an effort to remedy the decline in the ratio from recent bank failures, the FDIC, on
September 30, 2009, collected a one-time special assessment of five basis points of an
institutions assets minus Tier 1 capital as of June 30, 2009. Later in
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2009, the FDIC ruled that
nearly all FDIC-insured depositor-institutions must prepay their estimated DIF assessments for the
next three years on December 31, 2009. This ruling also provided for maintaining the assessment
rates at their current levels through the end of 2010, with a uniform increase of 3 cents per $100
of covered deposits effective January 1, 2011. The ruling did not affect how the Bank determines
and recognizes its expense for deposit insurance.
The FDIC also collects a deposit-based assessment from insured financial institutions on
behalf of The Financing Corporation (FICO). The funds from these assessments are used to service
debt issued by FICO in its capacity as a financial vehicle for the Federal Savings & Loan Insurance
Corporation. The FICO assessment rate is set quarterly and was approximately 1 cent per $100 of
assessable deposits in 2009. These assessments will continue until the debt matures in 2017
through 2019.
Effective November 21, 2008 and until June 30, 2010, the FDIC expanded deposit insurance
limits for certain accounts under the FDICs Temporary Liquidity Guarantee Program (TLG Program).
Provided an institution does not opt out of the TLG Program, the FDIC fully guarantees funds
deposited in noninterest-bearing transaction accounts, including (i) interest on Lawyer Trust
Accounts or IOLTA accounts, and (ii) negotiable order of withdrawal or NOW accounts with rates no
higher than .50 percent if the institution has committed to maintain the interest rate at or below
that rate. A separate assessment was imposed for this expanded coverage. The Bank did not opt out
of the TLG Program.
Other Statutes and Regulations
The Company and the Bank are subject to a myriad of other statutes and regulations affecting
their activities. Some of the more important include:
Bank Secrecy Act Anti-Money Laundering. Financial institutions must maintain anti-money
laundering programs that include established internal policies, procedures and controls; a
designated compliance officer; an ongoing employee training program; and testing of the program by
an independent audit function. The Company and the Bank are also prohibited from entering into
specified financial transactions and account relationships and must meet enhanced standards for due
diligence and customer identification in their dealings with foreign financial institutions and
foreign customers. Financial institutions must take reasonable steps to conduct enhanced scrutiny
of account relationships to guard against money laundering and to report any suspicious
transactions, and law enforcement authorities have been granted increased access to financial
information maintained by banks. Anti-money laundering obligations have been substantially
strengthened as a result of the USA Patriot Act, enacted in 2001 and renewed in 2006. Bank
regulators routinely examine institutions for compliance with these obligations and they must
consider an institutions compliance in connection with the regulatory review of applications. The
regulatory authorities have imposed cease and desist orders and money penalty sanctions against
institutions found to be violating these obligations.
On February 19, 2010, Whitney announced that the Bank consented and agreed to the issuance of
an order by the OCC addressing certain compliance matters relating to BSA and anti-money laundering
items. The Order requires the Bank, among other things: (i) to establish a compliance committee to
monitor and coordinate compliance with the Order within 30 days and to provide a written report to
the OCC; (ii) to engage a consultant to assist the Board of Directors in reviewing the Banks BSA
compliance personnel within 90 days and to review previous account and transaction activity for the
Bank; (iii) to develop, implement and ensure adherence to a comprehensive written program of
policies and procedures that provide for BSA compliance within 150 days; and (iv) to develop and
implement a written, institution-wide and on-going BSA risk assessment to accurately identify risks
within 150 days. Any material failure to comply with the provisions of the Order could result in
enforcement actions by the OCC. Prior to the issuance of the Order, the Company had already
commenced and implemented initiatives and strategies to address the issues noted in the Order. The
Bank continues to work cooperatively with its
regulators and expects to fully satisfy the items contained in the Order.
OFAC. The Office of Foreign Assets Control (OFAC) is responsible for helping to insure that
U.S. entities do not engage in transactions with certain prohibited parties, as defined by various
Executive Orders and Acts of Congress. OFAC sends bank regulatory agencies lists of persons and
organizations suspected of aiding, harboring or
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engaging in terrorist acts, known as Specially
Designated Nationals and Blocked Persons. If the Company or the Bank find a name on any
transaction, account or wire transfer that is on an OFAC list, the Company or the Bank must freeze
such account, file a suspicious activity report and notify the appropriate authorities.
Sections 23A and 23B of the Federal Reserve Act. The Bank is limited in its ability to lend
funds or engage in transactions with the Company or other nonbank affiliates of the Company, and
all such transactions must be on an arms-length basis and on terms at least as favorable to the
Bank as those prevailing at the time for transactions with unaffiliated companies. The Bank is
also prohibited from purchasing low quality assets from the Company or other nonbank affiliates of
the Company. Outstanding loans from the Bank to the Company or other nonbank affiliates of the
Company may not exceed 10% of the Banks capital stock and surplus, and the total of such
transactions between the Bank and all of its nonsubsidiary affiliates may not exceed 20% of the
Banks capital stock and surplus. These loans must be fully or over-collateralized.
Loans to Insiders. The Bank also is subject to restrictions on extensions of credit to
executive officers, directors, principal shareholders and their related interests. Such extensions
of credit (i) must be made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with third parties, (ii)
must not involve more than the normal risk of repayment or present other unfavorable terms and
(iii) may require approval by the Banks board of directors. Loans to executive officers are
subject to certain additional restrictions.
Dividends. Whitneys principal source of cash flow, including cash flow to pay dividends to
its shareholders, has been the dividends that it receives from the Bank. Statutory and regulatory
limitations apply to the Banks payment of dividends to the Company as well as to the Companys
payment of dividends to its shareholders. The Bank needs prior regulatory approval to pay the
Company a dividend that exceeds the Banks current net income and retained net income from the two
previous years. The Bank may not pay any dividend that would cause it to become undercapitalized
or if it already is undercapitalized. The federal banking agencies may prevent the payment of a
dividend if they determine that the payment would be an unsafe and unsound banking practice.
Moreover, regulatory policy statements by the OCC and the Federal Reserve provide that generally
bank holding companies and insured banks should only pay dividends out of current operating
earnings. Whitney must currently obtain regulatory approval before increasing the common dividend
rate above the current quarterly level of $.01 per share.
In addition to these regulatory requirements and restrictions, Whitneys ability to pay
dividends is also limited by its participation in the CPP. Prior to December 19, 2011, unless
Whitney has redeemed the preferred stock issued to the Treasury in the CPP or the Treasury has
transferred the preferred stock to a third party, Whitney cannot increase its quarterly dividend
above $.31 per share of common stock. Furthermore, if Whitney is not current in the payment of
quarterly dividends on the Series A preferred stock, it cannot pay dividends on its common stock.
Community Reinvestment Act. The Bank is subject to the provisions of the Community
Reinvestment Act of 1977, as amended (CRA), and the related regulations issued by the OCC. The CRA
states that all banks have a continuing and affirmative obligation, consistent with safe and sound
operation, to help meet the credit needs for their entire communities, including low- and
moderate-income neighborhoods. The CRA also charges a banks primary federal regulator, in
connection with the examination of the institution or the evaluation of certain regulatory
applications filed by the institution, with the responsibility to assess the institutions record
of fulfilling its obligations under the CRA. The regulatory agencys assessment of the
institutions record is made available to the public. The Bank received an outstanding rating
following its most recent CRA examination.
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Privacy and Data Security. The GLB Act imposed new requirements on financial institutions
with respect to consumer privacy. The GLB Act generally prohibits disclosure of consumer
information to nonaffiliated third parties unless the consumer has been given the opportunity to
object and has not objected to such disclosure. Financial institutions are further required to
disclose their privacy policies to consumers annually. Financial institutions, however, will be
required to comply with state law if it is more protective of consumer privacy than the GLB Act.
The GLB Act also directed federal regulators, including the FDIC, to prescribe standards for the
security of consumer information. The Bank is subject to such standards, as well as standards for
notifying consumers in the event of a security breach. Under federal law, the Company must
disclose its privacy policy to consumers, permit consumers to opt out of having nonpublic customer
information disclosed to third parties, and allow customers to opt out of receiving marketing
solicitations based on information about the customer received from another subsidiary. States may
adopt more extensive privacy protections. The Company is similarly required to have an information
security program to safeguard the confidentiality and security of customer information and to
ensure proper disposal. Customers must be notified when unauthorized disclosure involves sensitive
customer information that may be misused.
Consumer Regulation. Activities of the Bank are subject to a variety of statutes and
regulations designed to protect consumers. These laws and regulations include provisions that:
| limit the interest and other charges collected or contracted for by the Bank; | ||
| govern the Banks disclosures of credit terms to consumer borrowers; | ||
| require the Bank to provide information to enable the public and public officials to determine whether it is fulfilling its obligation to help meet the housing needs of the community it serves; | ||
| prohibit the Bank from discriminating on the basis of race, creed or other prohibited factors when it makes decisions to extend credit; and | ||
| govern the manner in which the Bank may collect consumer debts. |
As a result of the turmoil in the residential real estate and mortgage lending markets, there
are several concepts currently under discussion at both the federal and state government levels
that could, if adopted, alter the terms of existing mortgage loans, impose restrictions on future
mortgage loan originations, diminish lenders rights against delinquent borrowers or otherwise
change the ways in which lenders make and administer residential mortgage loans. If made final,
any or all of these proposals could have a negative effect on the financial performance of the
Banks mortgage lending operations, by, among other things, reducing the volume of mortgage loans
that the Bank can originate and sell into the secondary market and impairing the Banks ability to
proceed against certain delinquent borrowers with timely and effective collection efforts.
The deposit operations of the Bank are also subject to laws and regulations that:
| require the Bank to adequately disclose the interest rates and other terms of consumer deposit accounts; | ||
| impose a duty on the Bank to maintain the confidentiality of consumer financial records and prescribe procedures for complying with administrative subpoenas of financial records; | ||
| require escheatment of unclaimed funds to the appropriate state agencies after the passage of certain statutory time frames; and | ||
| govern automatic deposits to and withdrawals from deposit accounts with the Bank and the rights and liabilities of customers who use automated teller machines and other electronic banking services. |
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Commercial Real Estate Lending. Lending operations that involve concentrations of commercial
real estate loans are subject to enhanced scrutiny by federal banking regulators. Regulators have
issued guidance with respect to the risks posed by commercial real estate lending concentrations.
Commercial real estate loans generally include land development, construction loans and loans
secured by multifamily property and nonfarm, nonresidential real property where the primary source
of repayment is derived from rental income associated with the property. The guidance prescribes
the following guidelines for examiners to help identify institutions that are potentially exposed
to concentration risk and may warrant greater supervisory scrutiny:
| total reported loans for construction, land development and other land represent 100 percent or more of the institutions total capital, or | ||
| total commercial real estate loans represent 300 percent or more of the institutions total capital, and the outstanding balance of the institutions commercial real estate loan portfolio has increased by 50 percent or more during the prior 36 months. |
American Recovery and Reinvestment Act (ARRA). The ARRA, which was signed into law in
February 2009, includes a wide variety of programs intended to stimulate the economy and to provide
for extensive infrastructure, energy, health and education needs. In addition, the ARRA imposes
certain new executive compensation and corporate expenditure limits on all current and future TARP
recipients, including Whitney. These limits are in addition to those previously announced by the
Treasury and apply until the institution has repaid the Treasury.
EMPLOYEES
At the end of 2009, the Company and the Bank had a total of 2,730 employees, or 2,661
employees on a full-time equivalent basis. Whitney affords its employees a variety of competitive
benefit programs including retirement plans and group health, life and other insurance programs.
The Company also supports training and educational programs designed to ensure that employees have
the types and levels of skills needed to perform at their best in their current positions and to
help them prepare for positions of increased responsibility.
AVAILABLE INFORMATION
The Companys filings with the Securities and Exchange Commission (SEC), including annual
reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments
to those reports, are available on Whitneys website as soon as reasonably practicable after the
Company files or furnishes the reports with the SEC. Copies can be obtained free of charge by
visiting the Investor Relations section of the Companys website at www.whitneybank.com.
These reports are also available on the SECs website at www.sec.gov. The Companys
website is not incorporated into this annual report on Form 10-K and it should not be considered
part of this report.
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EXECUTIVE OFFICERS OF THE COMPANY
Name and Age | Position Held and Recent Business Experience | |
John C. Hope, III, 61
|
Chairman of the Board and Chief Executive Officer of the Company and the Bank since 2008, President and Chief Operating Officer of the Company and the Bank from 2007 to 2008, Executive Vice President of the Company from 1994 to 2007 and of the Bank from 1998 to 2007 | |
John M. Turner, Jr., 48
|
President of the Company and the Bank since 2008, Executive Vice President of the Company and the Bank from 2005 to 2008, Senior Vice President of the Bank from 1994 to 2005 | |
Robert C. Baird, Jr., 59
|
Senior Executive Vice President of the Company and the Bank since 2009, Executive Vice President of the Company and the Bank from 1995 to 2009 Banking Services | |
Thomas L. Callicutt, Jr., 62
|
Senior Executive Vice President of the Company and the Bank since 2009, Chief Financial Officer of the Company and the Bank since 1999, Executive Vice President of the Company and the Bank from 1999 to 2009, and Treasurer of the Company since 2001 | |
Joseph S. Exnicios, 54
|
Senior Executive Vice President and Chief Risk Officer of the Company and the Bank since 2009, Executive Vice President of the Company and the Bank from 2004 to 2009, Senior Vice President of the Bank from 1994 to 2004 | |
Elizabeth L. Cowell, 51
|
Executive Vice President of the Company and the Bank since 2009 Retail & Business Banking; Senior Vice President and Director of De Novo Execution Retail & Small Business Bank from 2007 to 2009, Director Sales & Service Execution from 2006 to 2007, Director Deposit & Access Services from 1999 to 2006, Wachovia Corporation | |
Francisco DeArmas, 49
|
Executive Vice President of the Company and the Bank since 2007 Operations & Technology; Chief Administrative Officer Global Applications and Architecture from 2003 to 2007, General Motors Acceptance Corporation | |
C. Mark Duthu, 54
|
Executive Vice President of the Company and the Bank since 2008 Trust & Wealth Management; Regional Managing Director Trust Division of Wachovia Bank from 2005 to 2006; Executive Vice President Trust Division of SouthTrust Bank from 1998 to 2005 | |
Joseph S. Schwertz, Jr., 53
|
Executive Vice President of the Company and the Bank since 2009, Corporate Secretary of the Company and the Bank since 1993, Senior Vice President of the Bank from 1994 to 2009 General Counsel |
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Item 1A: | RISK FACTORS |
Making or continuing an investment in securities issued by Whitney, including our common
stock, involves certain risks that you should carefully consider. Whitney must recognize and
attempt to manage these risks as it implements its strategies to successfully compete with other
companies in the financial services industry. Some of the more important risks common to the
industry and Whitney are:
| credit risk, which is the risk that borrowers will be unable to meet their contractual obligations, leading to loan losses and reduced interest income; | ||
| market risk, which is the risk that changes in market rates and prices will adversely affect the results of operations or financial condition; | ||
| liquidity risk, which is the risk that funds will not be available at a reasonable cost to meet operating and strategic needs; | ||
| compliance risk, which is the risk of failure to comply with requirements imposed by regulators; | ||
| reputation risk, which is the risk that negative perceptions of a business will adversely affect operations and financial performance; and | ||
| operational risk, which is the risk of loss resulting from inadequate or failed internal processes, people and systems, or external events, such as natural disasters. |
Although Whitney generally is not significantly more susceptible to adverse effects from these
or other common risk factors than other industry participants, there are certain aspects of
Whitneys business model that may expose it to somewhat higher levels of risk. In addition to the
other information contained in or incorporated by reference into this annual report on Form 10-K,
these risk factors should be considered carefully in evaluating Whitneys overall risk profile.
Additional risks not presently known, or that Whitney currently deems immaterial, may also
adversely affect Whitneys business, financial condition or results of operations.
The recession in the broader economy, both nationally and internationally, could have an adverse
affect on Whitneys financial condition, results of operations and cash flows.
Recessionary conditions and a subsequent period of slow recovery in the broader economy could
adversely affect the financial capacity of businesses and individuals in Whitneys market area.
These conditions could, among other consequences, increase the credit risk inherent in the current
loan portfolio, restrain new loan demand from creditworthy borrowers, prompt Whitney to tighten its
underwriting criteria, and reduce the liquidity in Whitneys customer base and the level of
deposits that they maintain. These economic conditions could also delay the correction of the
imbalance of supply and demand in certain real estate markets as discussed below. Legislative and
regulatory actions taken in response to these conditions could impose additional restrictions and
requirements on Whitney and others in the financial industry.
The impact on Whitneys financial results could include continued high levels of problem
credits, provisions for credit losses and expenses associated with loan collection efforts, the
possible impairment of certain intangible or deferred tax assets, the need for Whitney to replace
core deposits with higher-cost sources of funds, and an inability to produce loan growth or overall
growth in earning assets. Noninterest income from sources that are dependent on financial
transactions and market valuations could also be reduced.
The current and further deterioration in the residential construction and commercial real estate
markets may lead to increased nonperforming assets in Whitneys loan portfolio and increased
provision for losses on loans, which could have a material adverse effect on our capital, financial
condition and results of operations.
Since the third quarter of 2007, the residential construction and commercial real
estate markets have experienced a variety of difficulties and changed economic conditions. In
particular, conditions in Whitneys Florida and Alabama residential-related real estate markets
have led to continued declines in credit quality since the end of 2007. Our nonperforming loans
were $414 million at December 31, 2009, compared to $301 million at December 31, 2008.
Nonperforming loans in our Florida and Alabama markets represented approximately 59% and 18%,
respectively, of our total nonperforming loans at December 31, 2009. More recently, we have begun
to see some
deterioration in our commercial real estate loan portfolio across all of our markets,
particularly in Texas.
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Commercial real estate loans, which include residential-related
construction loans, comprised $2.8 billion or 33% of Whitneys loan portfolio as of December 31,
2009. The continued deterioration in market conditions could lead to additional loss provisions
with respect to our real estate loan portfolios and the valuation of real estate we have obtained
through foreclosure as well as to further additions to nonperforming real estate loans. A
sustained weak economy could also result in higher levels of nonperforming loans in other
categories, such as commercial and industrial loans, which may result in additional losses.
Management continually monitors market conditions and economic factors throughout our footprint for
indications of change in other markets. If these economic conditions and market factors negatively
and/or disproportionately affect some of our larger loans, then we could see a sharp increase in
our total net charge-offs and also be required to significantly increase our allowance for loan
losses. Any further increase in our nonperforming assets and related increases in our provision
for losses on loans could negatively affect our business and could have a material adverse effect
on our capital, financial condition and results of operations.
Whitney has credit exposure in the oil and gas industry.
At December 31, 2009, the Bank had approximately $894 million in loans to borrowers in the oil
and gas industry, representing approximately 11% of its total loans outstanding as of that date.
The majority of the Banks customer base in this industry provides transportation and other
services and products to support exploration and production activities. If there is a significant
downturn in the oil and gas industry generally, the cash flows of Whitneys customers in this
industry would be adversely impacted. This in turn could impair their ability to service their
debt to the Bank with adverse consequences to the Companys earnings.
The composition of Whitneys loan portfolio could increase the volatility of its credit quality
metrics and provisions for credit losses.
Whitneys loan portfolio contains individual relationships, primarily with commercial
customers, with outstanding balances that are relatively large in relation to its asset size.
Changes in the credit quality of one or a few of these relationships could lead to increased
volatility in the Companys reported totals of loans with above-normal credit risk and in its
provisions for credit losses over time.
Whitneys allowance for loan losses may not be adequate to cover actual losses, and we may be
required to materially increase our allowance, which may adversely affect our capital, financial
condition and results of operations.
The Company maintains an allowance for loan losses, which is a reserve established through a
provision for loan losses charged to expense. The allowance represents managements best estimate
of probable loan losses that have been incurred within the existing portfolio of loans. The
determination of the appropriate level of the allowance for loan losses inherently involves a high
degree of subjectivity and requires us to make significant estimates of current credit risks using
existing qualitative and quantitative information, all of which may undergo material changes. We
have recently completed an assessment of and made enhancements to our
Banks allowance methodology. Changes
in economic conditions affecting borrowers, new information regarding existing loans,
identification of additional problem loans, and other factors, both within and outside of our
control, may require an increase in the allowance for loan losses. In addition, bank regulatory
agencies periodically review our allowance for loan losses and may require an increase in the
provision for loan losses or the recognition of additional loan charge offs, based on judgments
different than those of management. An increase in the allowance for loan losses results in a
decrease in net income, and possibly regulatory capital, and may have a material adverse effect on
our capital, financial condition and results of operations.
Impairment of goodwill associated with acquisitions would result in a charge to earnings.
Goodwill is tested for impairment at least annually and the impairment test compares the
estimated fair value of a reporting unit with its net book value. Given the current economic
environment and potential for volatility in the fair value estimate, management is updating the
impairment test for goodwill quarterly. No indication of goodwill impairment was identified by the
annual test as of September 30, 2009 or the interim test as of December
31, 2009; however, it is possible that a noncash goodwill impairment charge may be required in
the future. Such a charge could result in a material reduction in earnings in the period in which
goodwill is determined to be impaired,
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but an impairment charge would not have an effect on
tangible common equity or regulatory capital.
Additional losses may result in a valuation allowance to deferred tax assets.
If Whitney is unable to continue to generate, or is unable to demonstrate that it can continue
to generate, sufficient taxable income in the near future, then the Company may not be able to
fully realize the benefits of our deferred tax assets and may be required to recognize a valuation
allowance, similar to an impairment of those assets, if it is more likely than not that some
portion of the deferred tax assets will not be realized. Any such valuation allowance would have a
negative effect on Whitneys results of operations, financial condition and capital position.
Whitneys
ability to pay dividends is subject to certain regulatory considerations.
Whitney
must currently obtain regulatory approval before increasing the
common dividend rate above the current quarterly level of $0.1 per
share. Regulatory policy statements provide that generally bank
holding companies should only pay dividends out of current operating
earnings and the level of dividends, if any, must be consistent with
current and expected capital requirements. There are also various
regulatory restrictions on the ability of the Bank to pay dividends
to the Company. Dividends received from the Bank have traditionally
been Whitneys principal source of cash flow. Because of recent
losses, the Bank currently has no capacity to declare dividends to
the Company without prior regulatory approval. For additional
information regarding the regulatory restrictions applicable to the
Company and Bank, see Supervision and Regulation under
Item 1.
Whitneys continued participation in the Capital Purchase Program may adversely affect our ability
to retain customers, attract investors, compete for new business opportunities and retain high
performing employees.
Several financial institutions which participated in the CPP received approval from the
Treasury to exit the program during the second half of 2009. These institutions have, or are in
the process of, repurchasing the preferred stock and repurchasing or auctioning the warrant issued
to the Treasury as part of the CPP. Whitney has not yet requested approval to repurchase the
preferred stock and warrant from the Treasury. In order to repurchase one or both securities, in
whole or in part, we must establish that we have satisfied all of the conditions to repurchase, and
there can be no assurance that we will be able to repurchase these securities from the Treasury.
Our customers, employees, counterparties in our current and future business relationships, and
the media may draw negative implications regarding the strength of Whitney as a financial
institution based on our continued participation in the CPP following the exit of one or more of
our competitors or other financial institutions. Any such negative perceptions may impair our
ability to effectively compete with other financial institutions for business. In addition, because
we have not yet repurchased the Treasurys CPP investment, we remain subject to the restrictions on
incentive compensation contained in the ARRA. Financial institutions which have repurchased the
Treasurys CPP investment are relieved of the restrictions imposed by the ARRA and its implementing
regulations. Due to these restrictions, we may not be able to successfully compete with financial
institutions that have repurchased the Treasurys investment to retain and attract high performing
employees. If this were to occur, our business, financial condition and results of operations may
be adversely affected, perhaps materially.
The failure of other financial institutions could adversely affect Whitney.
Whitneys ability to engage in routine funding transactions could be adversely affected by the
actions and potential failures of other financial institutions. Financial institutions are
interrelated as a result of trading, clearing, counterparty and other relationships. As a result,
defaults by, or even rumors or concerns about, one or more financial institutions or the financial
services industry generally have led to market-wide liquidity problems and could lead to losses or
defaults by the Company or by other institutions.
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Concern by customers over deposit insurance may cause a decrease in deposits and changes in the mix
of funding sources available to Whitney.
With recent increased bank failures, customers increasingly are concerned about the extent to
which their deposits are insured by the FDIC. Customers may withdraw deposits in an effort to
ensure that the amount they have on deposit with their bank is fully insured and some may seek
deposit products or other bank savings and investment products that are collateralized. Decreases
in deposits and changes in the mix of funding sources may adversely affect the Companys funding
costs and net income.
Whitneys profitability depends in substantial part on net interest income and on its ability to
manage interest rate risk.
Whitneys net interest income represented more than 75% of total revenues in each of the last
five years. Net interest income is the difference between the interest earned on loans, investment
securities and other earning assets, and interest owed on deposits and borrowings. Numerous and
often interrelated factors influence Whitneys ability to maintain and grow net interest income,
and a number of these factors are addressed in Managements Discussion and Analysis of Financial
Condition and Results of Operations located in Item 7 of this annual report on Form 10-K. One of
the most important factors is changes in market interest rates and in the relationship between
these rates for different financial instruments and products and at different maturities. Such
changes are generally outside the control of management and cannot be predicted with certainty.
Although management applies significant resources to anticipating these changes and to developing
and executing strategies for operating in an environment of change, they cannot eliminate the
possibility that interest rate risk will negatively affect the Companys net interest income and
lead to earnings volatility.
Whitneys business is highly regulated. Our compliance with existing and proposed banking
legislation and regulation, including our compliance with regulatory and supervisory actions, could
adversely limit or restrict our activities and adversely affect our business, operating flexibility
and financial condition.
Whitney is subject to extensive regulation, supervision and legislation that govern almost all
aspects of our operations and limit the businesses in which we may engage. The Company and the
Bank are subject to regular examinations, supervision and comprehensive regulation by various
federal authorities with regard to compliance with such laws and regulations
impacting financial institutions. For additional information, see Supervision and Regulation in
Item 1. These laws and regulations may change from time to time and are primarily intended for the
protection of consumers, depositors and the deposit insurance funds. The cost of compliance with
such laws and regulations can be substantial and adversely affect our ability to operate
profitably. Current economic conditions, particularly in the financial and real estate markets,
have resulted in bank regulatory agencies placing increased focus and scrutiny on participants in
the financial services industry, including Whitney.
As a result of the difficult operating environment and the Companys operating losses, the
Companys and the Banks primary regulators have required certain actions. See above Supervision
and Regulation. While the Company has already commenced and implemented initiatives and
strategies to address these regulatory issues and the Company believes that it has made significant
progress in the adoption and implementation of plans and policies, the Company will likely devote
significant time and resources of our management team, which may increase our costs, impede the
efficiency of our internal business processes and adversely affect our profitability in the near
term.
If the Company or the Bank are unable to implement these plans in a timely manner and
otherwise meet the commitments outlined above or if we fail to adequately resolve any other matters
that any of our regulators may require us to address in the future, we could become subject to more
stringent supervisory actions, up to and including a cease and desist order. If our regulators
were to take such supervisory action, we could, among other things, become subject to significant
restrictions on our existing business or on our ability to develop any new business. We also could
be required to raise additional capital in the future, restrict or reduce our dividends or dispose
of certain assets and liabilities within a prescribed period of time. The terms of any such
supervisory action could have a material negative effect on our business, operating flexibility and
financial condition.
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Reductions in the Companys or the Banks credit ratings could reduce access to funding sources in
the credit and capital markets and increase funding costs.
Numerous rating agencies regularly evaluate our creditworthiness and assign credit
ratings to the debt of the Company and the Bank. The agencies ratings are based on a number of
factors, some of which are not within our control. In addition to factors specific to the financial
strength and performance of the Company and the Bank, the rating agencies also consider conditions
affecting the financial services industry generally. During 2009, several rating agencies
downgraded select ratings for both the Company and the Bank, which was also the case for a number
of other financial services industry entities. All of the Banks debt ratings remain investment
grade. All of the Companys ratings remain investment grade, with the exception of the Standard &
Poors long-term debt rating, which is one level below investment grade. The agencies have also
reported either a stable or negative ratings outlook for both the Company and the Bank.
In light of the difficulties confronting the financial services industry generally, and
the Company and the Bank specifically, including, among others, the weak global economic
conditions, credit market disruptions, and the severe stress on residential and commercial real
estate markets, there can be no assurance that the Company and the Bank will not receive further
downgrades or that any of our ratings will remain investment grade. Further rating reductions by
one or more rating agencies could adversely affect our access to funding sources and the cost and
other terms of obtaining funding. Long-term debt ratings also factor into the calculation of
deposit insurance premiums, and a reduction in the Banks ratings may increase premiums and
expenses.
The Companys financial condition and outlook may be adversely affected by damage to Whitneys
reputation.
Our financial condition and outlook is highly dependent upon perceptions of our business
practices and reputation. Our ability to attract and retain customers and employees could be
adversely affected to the extent our reputation is damaged. Negative public opinion could result
from our actual or alleged conduct in any number of activities, including lending practices,
corporate governance, regulatory compliance, mergers and acquisitions, disclosure, existing or
future litigation, sharing or inadequate protection of customer information and from actions taken
by government regulators and community organizations in response to that conduct. Damage to our
reputation could give rise to legal risks, which, in turn, could increase the size and number of
litigation claims and damages asserted or subject us to regulatory enforcement actions, fines and
penalties and cause us to incur related costs and expenses.
The costs and effects of litigation, derivative suits, investigations or similar matters, or
adverse facts and developments related thereto, could materially affect Whitneys business,
operating results and financial condition.
Whitney may be involved from time to time in a variety of litigation, derivative suits,
investigations or similar matters arising out of our business. In 2009, we received, like many
other financial institutions, a demand letter from a shareholder asserting that the Companys
incentive compensation between 2004 and 2008 was excessive and that the performance goals under its
compensation plans were only achieved through imprudent business
practices. The Board of Directors formed a special committee of independent directors to investigate this shareholder claim. The
special committee conducted a thorough review of the demand allegations and concluded in its
investigation that the there is no substantiation for the claims of wrongful conduct referenced in
the shareholder demand and recommended that the demand be rejected. The Board adopted the special
committees conclusions and recommendation.
Neither management nor the special committee can predict at this time whether the shareholder
will file a derivative lawsuit notwithstanding the special committees conclusion and Boards
adoption of the special committees recommendation. The Companys insurance may not cover all
claims that may be asserted against us, including the claim set forth above, and indemnification
rights to which we are entitled may not be honored, and any claims asserted against us, regardless
of merit or eventual outcome, may harm our reputation. Should the ultimate judgments or
settlements in any litigation or investigation significantly exceed our insurance coverage, they
could have a material adverse effect on our business, financial condition and results of
operations. In addition, premiums
for insurance covering the financial and banking sectors are rising. We may not be able to
obtain appropriate types
17
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or levels of insurance in the future, nor may we be able to obtain
adequate replacement policies with acceptable terms or at historic rates, if at all.
We rely on our systems and employees, and any errors or fraud could materially adversely affect our
operations.
Whitney is exposed to many types of operational risk, including the risk of fraud by employees
and outsiders, clerical and recordkeeping errors, and computer/telecommunications systems
malfunctions. The Banks business is dependent on its ability to process a large number of
increasingly complex transactions. We have committed to make significant investments of time and
resources into changing and improving our core systems and processes. We refer to this program
internally as our Project Genesis program. If the operations of, or any of the changes to, our
financial, accounting, or other data processing systems, including our Project Genesis program,
fail or have other significant shortcomings, we could be materially adversely affected. We are
similarly dependent on our employees. We could be materially adversely affected if one of our
employees causes a significant operational breakdown or failure, either as a result of human error
or where an individual purposefully sabotages or fraudulently manipulates our operations or
systems. Third parties with which we do business also could be sources of operational risk to us
due to breakdowns or failures of such parties own systems or employees. Any of these occurrences
could diminish our ability to operate our business and result in potential liability to customers, reputation
damage and regulatory intervention, which could materially adversely affect us.
We may also be subject to disruptions of our operating systems arising from events that are
wholly or partially beyond our control, which may include, for example, computer viruses or
electrical or telecommunications outages or natural disasters. Such disruptions may give rise to
losses in service to customers and loss or liability to us. In addition, there is a risk that our
business continuity and data security systems prove to be inadequate. Any such failure could
affect our operations and could materially adversely affect our results of operations by requiring
us to expend significant resources to correct the defect, as well as by exposing us to litigation
or losses not covered by insurance.
The senior preferred stock issued to the Treasury impacts net income available to Whitneys common
shareholders and its earnings per share.
On December 19, 2008, the Company issued senior preferred stock (Series A preferred stock) to
the Treasury in an aggregate amount of $300 million, along with a warrant for 2,631,579 shares of
common stock. As long as shares of the Companys Series A preferred stock issued under the CPP are
outstanding, no dividends may be paid on the Companys common stock unless all dividends on the
Series A preferred stock have been paid in full. Additionally, the Company is not permitted to pay cash dividends in
excess of $.31 per share per quarter on its common stock for three
years from the preferred stock issue date without the Treasurys
consent, unless Treasury no longer owns the preferred stock. The dividends declared on shares of the Companys Series A preferred stock reduce the net
income available to common shareholders and the Companys earnings per common share. Additionally,
warrants to purchase the Companys common stock issued to the Treasury may be dilutive to the
Companys earnings per share.
There can be no assurance when the Series A preferred stock can be redeemed and the Warrant can be
repurchased.
Subject to consultation with the Companys banking regulators, Whitney intends to repurchase
the Series A preferred stock and the Warrant issued to the Treasury when we believe the credit
metrics in our loan portfolio have improved for the long-term and the overall economy has
rebounded. However, there can be no assurance when the Series A preferred stock and the Warrant
can be repurchased, if at all. Until such time as the Series A preferred stock and the Warrant are
repurchased, we will remain subject to the terms and conditions of those instruments, which, among
other things, require Whitney to obtain regulatory approval to repurchase or redeem common stock or
our other preferred stock or increase the dividends on the Companys common stock over $.31 per
share, except in limited circumstances. Further, Whitneys continued participation in the CPP
subjects us to increased regulatory and legislative oversight, including with respect to executive
compensation. These new and any future oversight and legal requirements and implementing standards
under the CPP may have unforeseen or unintended adverse effects on the financial services industry
as a whole, and particularly on CPP participants such as Whitney.
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Holders of the Series A preferred stock have rights that are senior to those of Whitneys common
shareholders.
The Series A preferred stock that the Company has issued to the Treasury is senior to its
shares of common stock, and holders of the Series A preferred stock have certain rights and
preferences that are senior to holders of the Companys common stock. The restrictions on the
Companys ability to declare and pay dividends to common shareholders are discussed above. In
addition, the Company and its subsidiaries may not purchase, redeem or otherwise acquire for
consideration any shares of the Companys common stock unless the Company has paid in full all
accrued dividends on the Series A preferred stock for all prior dividend periods, other than in
certain circumstances. Furthermore, the Series A preferred stock is entitled to a liquidation
preference over shares of the Companys common stock in the event of liquidation, dissolution or
winding up.
Holders of the Series A preferred stock may, under certain circumstances, have the right to elect
two directors to Whitneys board of directors.
In the event that the Company fails to pay dividends on the Series A preferred stock for an
aggregate of six quarterly dividend periods or more (whether or not consecutive), the authorized
number of directors then constituting the Companys board of directors will be increased by two.
Holders of the Series A preferred stock, together with the holders of any outstanding parity stock
with like voting rights, will be entitled to elect the two additional members of the board of
directors at the next annual meeting (or at a special meeting called for this purpose) and at each
subsequent annual meeting until all accrued and unpaid dividends for all past dividend periods have
been paid in full.
Holders of the Series A preferred stock have limited voting rights.
Except in connection with the election of directors to the Companys board of directors as
discussed immediately above and as otherwise required by law, holders of the Series A preferred
stock have limited voting rights. In addition to any other vote or consent of shareholders required
by law or Whitneys amended and restated charter, the vote or consent of holders owning at least 66
2/3% of the shares of Series A preferred stock outstanding is required for (1) any authorization or
issuance of shares ranking senior to the Series A preferred stock; (2) any amendment to the rights
of the Series A preferred stock that adversely affects the rights, preferences, privileges or
voting power of the Series A preferred stock; or (3) consummation of any merger, share exchange or
similar transaction unless the shares of Series A preferred stock remain outstanding or are
converted into or exchanged for preference securities of the surviving entity other than the
Company and have such rights, preferences, privileges and voting power as are not materially less
favorable than those of the holders the Series A preferred stock.
Whitney may issue additional common stock or other equity securities in the future which could
dilute the ownership interest of existing shareholders.
In order to maintain the Companys or the Banks capital at desired or regulatorily-required
levels or to replace existing capital such as the Series A preferred stock, the Company may be
required to issue additional shares of common stock, or securities convertible into, exchangeable
for or representing rights to acquire shares of common stock. The Company may sell these shares at
prices below the current market price of shares, and the sale of these shares may significantly
dilute shareholder ownership. The Company could also issue additional shares in connection with
acquisitions of other financial institutions.
New banking laws and regulations could materially affect our operations and our cost of doing
business.
Legislation
is now pending in Congress that would, if enacted, substantially change the regulatory
framework for the banking industry, limit certain activities, impose new operational requirements,
and increase consumer compliance obligations. The OCC and the federal bank regulatory agencies
already have authority to impose many of these changes. If any new laws or regulations take
effect, such changes could materially affect the way we do business and increase our compliance
requirements.
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The short-term and long-term impact of a likely new capital framework, whether through the current
proposal for non-Basel II U.S. banking institutions or through another set of capital standards, is
uncertain.
For U.S. banking institutions with assets of less than $250 billion and foreign exposures of
less than $10 billion, including the Company and the Bank, a proposal is currently pending that
would apply to them the standardized approach of the new risk-based capital standards developed
by the Basel Committee on Banking Supervision (Basel II). As a result of the deterioration in the
global credit markets and increases in credit, liquidity, interest rate, and other risks, the U.S.
banking regulators have discussed possible increases in capital requirements, separate from the
current proposal for the standardized approach of Basel II. Furthermore, in September 2009, the
Treasury issued principles for international regulatory reform, which included recommendations for
higher capital standards for all banking organizations to be implemented as part of a broader
reconsideration of international risk-based capital standards developed by Basel II. Any new
capital framework is likely to affect the cost and availability of different types of credit. U.S.
banking organizations are likely to be required to hold higher levels of capital and could incur
increased compliance costs. It is unclear at this time if similar increases in capital standards
will be incorporated into a revised Basel II proposal that would be adopted by international
financial institutions. Any of these developments, including increased capital requirements, could
have a material negative effect on our business, results of operations and financial condition.
Whitneys market area is susceptible to hurricanes and tropical storms, which may increase the
Companys exposure to credit risk, operational risk and liquidity risk.
Most of Whitneys market area lies within the coastal region of the five states bordering the
Gulf of Mexico. This is a region that is susceptible to hurricanes and tropical storms. The two
strong hurricanes that struck in 2005 had a major impact on the greater New Orleans area, southwest
Louisiana and the Mississippi coast, with lesser impacts on coastal Alabama and the western
panhandle of Florida. Within its broader market area, the greater New Orleans area is Whitneys
primary base of operations and is home to branches and relationship officers that service
approximately 40% of the Banks total loans and 50% of total deposits at December 31, 2009. The
2005 storms caused widespread property damage, required temporary or permanent relocations of a
large number of residents and business operations, and severely disrupted normal economic activity
in the impacted areas. Although the Bank was able to operate successfully in the aftermath of
these storms, management carefully studied its risk posture and has taken a number of steps to
reduce the Banks exposure to future natural disasters and make its disaster recovery plans and
operating arrangements more resilient. Details of the storms impact on Whitney, both
operationally and with respect to credit risk and liquidity, has been chronicled in Item 7 of the
Companys annual reports on Forms 10-K for 2007, 2006 and 2005.
Whitney cannot predict the extent to which future storms may impact its exposure to credit
risk, operational risk or liquidity risk.
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Item 1B: | UNRESOLVED STAFF COMMENTS |
None.
Item 2: | PROPERTIES |
The Company does not directly own any real estate, but it does own real estate indirectly
through its subsidiaries. The Companys executive offices are located in downtown New Orleans in
the main office facility owned by the Bank. The Bank also maintains operations centers in the
greater New Orleans area and in Prattville, Alabama. The Bank makes portions of its main office
facility and certain other facilities available for lease to third parties, although such
incidental leasing activity is not material to Whitneys overall operations. The Bank maintained
approximately 161 banking facilities in five states at December 31, 2009. The Bank owns
approximately 80% of these facilities, and the remaining banking facilities are subject to leases,
each of which management considers to be reasonable and appropriate for its location. Management
ensures that all properties, whether owned or leased, are maintained in suitable condition.
Management also evaluates its banking facilities on an ongoing basis to identify possible
under-utilization and to determine the need for functional improvements, relocations or possible
sales.
The Bank and subsidiaries of the Bank hold a variety of property interests acquired through
the years in settlement of loans. Note 8 to the consolidated financial statements included in Item
8 of this annual report on Form 10-K provides further information regarding such property interests
and is incorporated here by reference.
Item 3: | LEGAL PROCEEDINGS |
Whitney and its affiliates are subject to litigation and claims arising in the ordinary course
of business. Whitney evaluates these contingencies based on information currently available,
including advice of counsel. Management is currently of the opinion that the outcome of pending
and threatened litigation would not have a material effect on Whitneys consolidated financial
position or results of operations.
Item 4: | RESERVED |
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PART II
Item 5: | MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
The Companys common stock trades on The Nasdaq Global Select Market under the ticker symbol
WTNY. The Summary of Quarterly Financial Information appearing in Item 8 of this annual report
on Form 10-K shows the high and low sales prices of the Companys stock for each calendar quarter
of 2009 and 2008, as reported on The Nasdaq Global Select Market, and is incorporated here by
reference.
The approximate number of shareholders of record of the Company, as of February 26, 2010, was
as follows:
Title of Class | Shareholders of Record | |||
Common Stock, no par value |
5,433 |
Dividends declared by the Company are listed in the Summary of Quarterly Financial Information
appearing in Item 8 of this annual report on Form 10-K, which is incorporated here by reference.
Holders of Whitneys common stock are subject to the prior dividend rights of any holders of
Whitney preferred stock then outstanding. For a description of certain restrictions on the payment
of dividends see the section entitled Supervision and Regulation that appears in Item 1 of this
annual report on Form 10-K, the section entitled Shareholders Equity and Capital Adequacy located
in Item 7, and Note 17 to the consolidated financial statements located in Item 8.
The following table provides information with respect to purchases made by or on behalf of the
Company or any affiliated purchaser (as defined in Rule 10b-18(a)(3) under the Securities
Exchange Act of 1934, as amended) of the Companys common stock during the three months ended
December 31, 2009.
Total Number of | ||||||||
Total | Shares Purchased as | Maximum Number of | ||||||
Number of | Average Price | Part of Publicly | Shares that May Yet | |||||
Shares | Paid | Announced Plans or | Be Purchased under the | |||||
Period | Purchased | per Share | Programs (1) | Plans or Programs (1) | ||||
October 2009 |
| | | | ||||
November 2009 |
| | | | ||||
December 2009 |
| | | | ||||
Total |
| | | |
No repurchase plans were in effect during the fourth quarter of 2009. Under the CPP, prior to
the earlier of (i) December 19, 2011 or (ii) the date on which the Series A Preferred Stock is
redeemed in whole or the U.S. Treasury has transferred all of the Series A Preferred Stock to
unaffiliated third parties, the consent of the U.S. Treasury is required to repurchase any shares
of common stock, except in connection with benefit plans in the ordinary course of business and
certain other limited exceptions.
There have been no recent sales of unregistered securities.
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STOCK PERFORMANCE GRAPH
The following performance graph and related information shall not be deemed soliciting
material or to be filed with the SEC, nor shall such information be incorporated by reference
into any future filings under the Securities Act of 1933 or the Securities Exchange Act of 1934,
each as amended, except to the extent the Company specifically incorporates it by reference into
such filing.
The performance graph compares the cumulative five-year shareholder return on the Companys common
stock, assuming an investment of $100 on December 31, 2004 and the reinvestment of dividends
thereafter, to that of the common stocks of United States companies reported in the Nasdaq Total
Return Index and the common stocks of the KBW 50 Total Return Index. The KBW 50 Total Return Index
is a proprietary stock index of Keefe, Bruyette & Woods, Inc., that tracks the returns of 50 large
banking companies throughout the United States.
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Item 6: | SELECTED FINANCIAL DATA |
WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
Years Ended December 31 | ||||||||||||||||||||
(dollars in thousands, except per share data) | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||
YEAR-END BALANCE SHEET DATA |
||||||||||||||||||||
Total assets |
$ | 11,892,141 | $ | 12,380,501 | $ | 11,027,264 | $ | 10,185,880 | $ | 10,109,006 | ||||||||||
Earning assets |
10,699,847 | 11,209,246 | 10,122,071 | 9,277,554 | 9,054,484 | |||||||||||||||
Loans |
8,403,443 | 9,081,850 | 7,585,701 | 7,050,416 | 6,560,597 | |||||||||||||||
Investment securities |
2,050,440 | 1,939,355 | 1,985,237 | 1,886,093 | 1,641,451 | |||||||||||||||
Noninterest-bearing deposits |
3,301,354 | 3,233,550 | 2,740,019 | 2,947,997 | 3,301,227 | |||||||||||||||
Total deposits |
9,149,894 | 9,261,594 | 8,583,789 | 8,433,308 | 8,604,836 | |||||||||||||||
Shareholders equity |
1,681,064 | 1,525,478 | 1,228,736 | 1,112,962 | 961,043 | |||||||||||||||
AVERAGE BALANCE SHEET DATA |
||||||||||||||||||||
Total assets |
$ | 11,955,596 | $ | 11,080,342 | $ | 10,512,422 | $ | 10,242,838 | $ | 8,903,321 | ||||||||||
Earning assets |
10,867,461 | 10,122,620 | 9,636,586 | 9,349,262 | 8,098,998 | |||||||||||||||
Loans |
8,775,662 | 8,066,639 | 7,344,889 | 6,776,794 | 6,137,676 | |||||||||||||||
Investment securities |
1,946,241 | 1,967,375 | 1,893,866 | 1,824,646 | 1,836,228 | |||||||||||||||
Noninterest-bearing deposits |
3,134,811 | 2,786,003 | 2,708,353 | 3,033,978 | 2,439,229 | |||||||||||||||
Total deposits |
9,106,002 | 8,368,937 | 8,397,778 | 8,476,954 | 7,224,426 | |||||||||||||||
Shareholders equity |
1,542,293 | 1,225,177 | 1,209,923 | 1,065,303 | 935,362 | |||||||||||||||
INCOME STATEMENT DATA |
||||||||||||||||||||
Interest income |
$ | 519,298 | $ | 575,866 | $ | 661,105 | $ | 616,371 | $ | 468,085 | ||||||||||
Interest expense |
75,866 | 120,221 | 196,314 | 145,160 | 80,986 | |||||||||||||||
Net interest income |
443,432 | 455,645 | 464,791 | 471,211 | 387,099 | |||||||||||||||
Net interest income (TE) |
448,115 | 460,662 | 470,868 | 477,423 | 392,979 | |||||||||||||||
Provision for credit losses |
259,000 | 134,000 | 17,000 | 3,720 | 37,580 | |||||||||||||||
Noninterest income |
119,950 | 107,172 | 126,681 | 84,791 | 82,235 | |||||||||||||||
Net securities gain (loss) in noninterest income |
334 | 67 | (1 | ) | | 68 | ||||||||||||||
Noninterest expense |
416,394 | 351,094 | 349,108 | 338,473 | 286,398 | |||||||||||||||
Net income (loss) |
(62,146 | ) | 58,585 | 151,054 | 144,645 | 102,349 | ||||||||||||||
Net income (loss) to common shareholders |
(78,372 | ) | 57,997 | 151,054 | 144,645 | 102,349 | ||||||||||||||
KEY RATIOS |
||||||||||||||||||||
Return on average assets |
(.52 | )% | .53 | % | 1.44 | % | 1.41 | % | 1.15 | % | ||||||||||
Return on average common shareholders equity |
(6.28 | ) | 4.77 | 12.48 | 13.58 | 10.94 | ||||||||||||||
Net interest margin |
4.12 | 4.55 | 4.89 | 5.11 | 4.85 | |||||||||||||||
Average loans to average deposits |
96.37 | 96.39 | 87.46 | 79.94 | 84.96 | |||||||||||||||
Efficiency ratio |
73.34 | 61.84 | 58.42 | 60.20 | 60.28 | |||||||||||||||
Expense to average assets |
3.48 | 3.17 | 3.32 | 3.30 | 3.22 | |||||||||||||||
Allowance for loan losses to loans |
2.66 | 1.77 | 1.16 | 1.08 | 1.37 | |||||||||||||||
Net charge-offs to average loans |
2.22 | .88 | .11 | .29 | .08 | |||||||||||||||
Nonperforming assets to loans plus foreclosed
assets and surplus property |
5.52 | 3.61 | 1.64 | .81 | 1.03 | |||||||||||||||
Average shareholders equity to average assets |
12.90 | 11.06 | 11.51 | 10.40 | 10.51 | |||||||||||||||
Tangible common equity to tangible assets |
8.18 | 6.49 | 8.24 | 8.08 | 7.40 | |||||||||||||||
Leverage ratio |
11.05 | 9.87 | 8.79 | 8.76 | 8.21 | |||||||||||||||
COMMON SHARE DATA |
||||||||||||||||||||
Earnings (loss) per share |
||||||||||||||||||||
Basic |
$ | (1.08 | ) | $ | .89 | $ | 2.23 | $ | 2.21 | $ | 1.63 | |||||||||
Diluted |
(1.08 | ) | .88 | 2.21 | 2.18 | 1.62 | ||||||||||||||
Cash dividends per share |
$ | 0.04 | $ | 1.13 | $ | 1.16 | $ | 1.08 | $ | .98 | ||||||||||
Book value per share |
$ | 14.37 | $ | 18.29 | $ | 18.67 | $ | 16.88 | $ | 15.17 | ||||||||||
Tangible book value per share |
$ | 9.71 | $ | 11.48 | $ | 13.37 | $ | 12.10 | $ | 11.54 | ||||||||||
Trading data |
||||||||||||||||||||
High price |
$ | 16.16 | $ | 33.02 | $ | 33.26 | $ | 37.26 | $ | 33.69 | ||||||||||
Low price |
7.78 | 13.96 | 22.46 | 27.27 | 24.14 | |||||||||||||||
End-of-period closing price |
9.11 | 15.99 | 26.15 | 32.62 | 27.56 |
Tax-equivalent (TE) amounts are calculated using a marginal federal income tax rate of 35%.
The efficiency ratio is noninterest expense divided by total net interest (TE) and noninterest income (excluding securities transactions). The tangible common equity to tangible assets ratio is total shareholders equity less preferred stock and intangible assets divided by total assets less intangible assets. |
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Item 7: | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The purpose of this discussion and analysis is to aid in understanding significant changes in
the financial condition of Whitney Holding Corporation and its subsidiaries (the Company or
Whitney) and on their results of operations during 2009, 2008 and 2007. Nearly all of the
Companys operations are contained in its banking subsidiary, Whitney National Bank (the Bank).
This discussion and analysis is intended to highlight and supplement information presented
elsewhere in this annual report on Form 10-K, particularly the consolidated financial statements
and related notes appearing in Item 8.
FORWARD-LOOKING STATEMENTS
This discussion contains forward-looking statements within the meaning of section 27A of the
Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as
amended, and these statements are intended to be covered by the safe harbor provided by the same.
Forward-looking statements provide projections of results of operations or of financial condition
or state other forward-looking information, such as expectations about future conditions and
descriptions of plans and strategies for the future. Forward-looking statements often contain
words such as anticipate, believe, could, continue, estimate, expect, forecast,
goal, intend, plan, predict, project or other words of similar meaning.
The forward-looking statements made in this discussion include, but may not be limited to, (a)
comments on conditions impacting certain sectors of the loan portfolio, including economic
conditions; (b) information about changes in the duration of the investment portfolio with changes
in market rates; (c) discussion of the results of a voluntary stress test of the loan portfolio;
(d) statements of the results of net interest income simulations run by the Company to measure
interest rate sensitivity; (e) comments on the anticipated dividend capacity of the Company and the
Bank; (f) discussion of the performance of Whitneys net interest income assuming certain
conditions; (g) discussion of factors affecting trends in certain categories of noninterest income;
and (h) comments on expected changes in certain categories of noninterest expense.
Whitneys ability to accurately project results or predict the effects of plans or strategies
is inherently limited. Although Whitney believes that the expectations reflected in its
forward-looking statements are based on reasonable assumptions, actual results and performance
could differ materially from those set forth in the forward-looking statements.
Factors that could cause actual results to differ from those expressed in the Companys
forward-looking statements include, but are not limited to:
| the continued deterioration of general economic and business conditions in the United States and in the regions and the communities Whitney serves; | ||
| further declines in the values of residential and commercial real estate, which may increase Whitneys credit losses; | ||
| Whitneys ability to effectively manage interest rate risk and other market risk, credit risk, operational risk, legal risk, liquidity risk, and regulatory and compliance risk; | ||
| changes in interest rates that affect the pricing of Whitneys financial products, the demand for its financial services and the valuation of its financial assets and liabilities; | ||
| Whitneys ability to manage fluctuations in the value of its assets and liabilities and off-balance sheet exposure so as to maintain sufficient capital and liquidity to support its business; | ||
| Whitneys ability to manage disruptions in the credit and lending markets, including the impact on its business and on the businesses of its customers as well as other financial institutions with which Whitney has commercial relationships; | ||
| Whitneys ability to comply with any requirements imposed on the Company and the Bank by their respective regulators, and the potential negative consequences that may result; | ||
| the occurrence of natural disasters or acts of war or terrorism that directly or indirectly affect the financial health of Whitneys customer base; |
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| changes in laws and regulations, including increases in regulatory capital requirements, that significantly affect the activities of the banking industry and its competitive position relative to other financial service providers; | ||
| technological changes affecting the nature or delivery of financial products or services and the cost of providing them; | ||
| Whitneys ability to develop competitive new products and services in a timely manner and the acceptance of such products and services by the Banks customers; | ||
| Whitneys ability to effectively expand into new markets; | ||
| the cost and other effects of material contingencies, including litigation contingencies; | ||
| the failure to attract or retain key personnel; | ||
| the failure to capitalize on growth opportunities and to realize cost savings in connection with business acquisitions; | ||
| the effectiveness of Whitneys responses to unexpected changes; and | ||
| those other factors identified and discussed in this annual report on Form 10-K and in Whitneys other public filings with the SEC. |
You are cautioned not to place undue reliance on these forward-looking statements. Whitney
does not intend, and undertakes no obligation, to update or revise any forward-looking statements,
whether as a result of differences in actual results, changes in assumptions or changes in other
factors affecting such statements, except as required by law.
OVERVIEW
The year ended December 31, 2009 was another difficult year for the U.S. economy and for the
financial services industry. High credit costs, primarily the result of loan portfolio pressure
stemming from ongoing deterioration in real estate values, as well as increasing unemployment and
other factors, continued to negatively impact earnings. Property value declines, which began in
late 2007, continued throughout 2008 and 2009. While Whitney did not have material exposure to
many of the issues that originally plagued the industry (e.g., sub-prime loans, structured
investment vehicles and collateralized debt obligations), the Companys exposure to the residential
housing sector, primarily residential development activity in the Florida market, pressured its
loan portfolio, resulting in increased credit costs and foreclosed asset expenses. As the economic
downturn continued, consumer confidence and weak economic conditions began to impact areas of the
economy outside of the housing sector. Under these conditions, Whitney reported a net loss to
common shareholders of $78.4 million for the year ended December 31, 2009, or $1.08 per diluted
share, compared with earnings to common shareholders of $58.0 million for 2008, or $.88 per diluted
share.
Common Stock Offering
During the fourth quarter of 2009, Whitney announced and completed an underwritten public
offering of the Companys common stock. The underwriters purchased 28.75 million shares at a
public offering price of $8.00 per share. The net proceeds to the Company after deducting offering
expenses and underwriting discounts and commissions were $218 million.
Mergers and Acquisitions
On November 7, 2008, Whitney completed its acquisition of Parish National Corporation
(Parish), the parent of Parish National Bank. Parish National Bank operated 16 banking centers,
primarily on the north shore of Lake Pontchartrain and other parts of the metropolitan New Orleans
area, and had $771 million in total assets, including a loan portfolio of $606 million, and $636
million in deposits at the acquisition date. Whitneys financial statements include the results
from these acquired operations since the acquisition date.
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Loans and Earning Assets
Total loans at the end of 2009 were down $678 million, or 7%, from December 31, 2008, with
reduction in all of the Banks geographic regions and most portfolio segments. Total earning
assets at December 31, 2009 were down approximately 5% from the end of 2008. The decline in total
loans included charge-offs of $204 million and foreclosures of approximately $59 million. As was
anticipated and previously disclosed, economic conditions restrained loan demand through 2009.
Whitney continues to seek and fund new credit relationships and to renew existing ones, but the
level of overall demand has been insufficient to cover repayments and maturities along with
charge-offs, foreclosures and other problem loan resolutions. Management believes this situation
will continue for the first half of 2010 with hope for some slow growth during the second half of
2010 in an economy beginning to recover and strengthen.
Deposits and Funding
Total deposits at December 31, 2009 decreased approximately 1%, or $112 million, from December
31, 2008, but with a favorable shift in the deposit mix. Noninterest-bearing demand deposits grew
2%, or $68 million, from year-end 2008, and comprised 36% of total deposits at December 31, 2009.
Lower-cost interest-bearing deposits grew 13%, or $466 million, over the same period, reflecting
funds attracted to a special money market deposit product introduced in the first half of 2009.
Higher-cost time deposits at December 31, 2009 were down 25%, or $645 million, compared to year-end
2008, mainly from declines in competitively bid public fund deposits and deposits held in
treasury-management sweep products used by corporate customers. The sustained period of low market
interest rates has tended to reduce the attractiveness of time deposits compared to alternative
deposit products and investments.
The balance of short-term borrowings at December 31, 2009, was down 42%, or $542 million, from
year-end 2008, reflecting mainly restrained loan demand and the overall reduced level of earning
assets.
Net Interest Income
Whitneys net interest income (TE) for 2009 decreased $12.5 million, or 3%, from 2008.
Average earning assets were up 7% between these periods, while the net interest margin (TE)
contracted 43 basis points to 4.12%. Asset yields decreased 92 basis points in 2009 mainly from a
steep reduction in benchmark rates for the large variable-rate segment of Whitneys loans
portfolio. The cost of funds decreased 49 basis points from 2008 mainly from the impact of the
sustained low rate environment on both deposit and short-term borrowing rates and a favorable shift
in the funding mix. The lost interest on nonaccruing loans reduced the net interest margin by
approximately 20 basis points in 2009 compared to approximately 10 basis points in 2008.
Provision for Credit Losses and Credit Quality
Whitney increased its provision for credit losses to $259 million in 2009 compared to $134
million in 2008. Provisions related to impaired loans accounted for approximately half of the total
provision for credit losses in 2009. More than $100 million of the impaired loan provisions came
from Whitneys Florida and Alabama markets and reflected in large part the continued decline in the
value of underlying real estate collateral. The remainder of the provision for credit losses for
2009 was related to the increase in total criticized loans, the impact of elevated charge-off
levels on historical loss factors, smaller consumer charge-offs and qualitative adjustments.
Net loan charge-offs were $195 million, or 2.22%, of average loans in 2009, compared to $71.3
million, or .88% of average loans, in 2008. Florida loans generated approximately $140 million of
the $204 million of gross charge-offs for 2009. These were heavily concentrated in
residential-related real estate loans. The provision for loan losses exceeded net charge-offs by
$62.6 million during 2009, which increased the allowance for loan losses to 2.66% of total loans at
December 31, 2009 from 1.77% at December 31, 2008.
The total of loans criticized through the Companys credit risk-rating process was $1.06
billion at December 31, 2009. This represented 13% of total loans and a net increase of $288
million from December 31, 2008, although the criticized total at year-end 2009 was down $124
million from its peak at September 30, 2009. Criticized commercial and industrial (C&I)
relationships increased $122 million from year-end 2008. This increase came mainly from loans to
oil and gas industry customers, although less than 1% of the O&G portfolio was
considered to be nonperforming at December 31, 2009. Criticized commercial real estate loans
increased $114
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million during 2009, but the year-end total was down $79 million from the highpoint
at the end of third quarter of 2009.
Noninterest Income
Noninterest income in 2009 increased 15%, or $15.4 million, over 2008, excluding a $2.3
million gain recognized in 2008 from the mandatory redemption of Visa shares and income associated
with foreclosed assets and surplus property in each period. Parishs operations contributed
approximately $8.0 million to the increase for 2009. Deposit service charge income grew by 11%, or
$3.6 million, compared to 2008 on higher commercial account fees and the impact of Parish. The
growth in commercial fees was driven in large part by reduced earnings credits in the low market
rate environment. Fee income from Whitneys secondary mortgage market operations grew $4.5 million
in 2009, nearly double the level in 2008. Increased refinancing activity prompted by low rates and
the addition of Parishs operations both contributed. The results for 2009 also benefited from the
earnings on a bank-owned life insurance program implemented midway through 2008.
Noninterest Expense
Noninterest expense increased 19%, or $65.3 million, in 2009. Incremental operating costs
associated with Parishs operations, including amortization of intangibles, totaled approximately
$23.8 million for 2009. Loan collection costs, including legal services, and foreclosed asset
expenses and provisions for valuation losses totaled approximately $28 million for 2009, up
approximately $21 million from 2008. The expense for deposit insurance and other regulatory fees
was up $18.9 million compared to 2008, reflecting mainly steps taken by the FDIC to maintain the
integrity of the deposit insurance fund as it absorbs recent bank failures. Whitneys personnel
expense increased 5%, or $9.0 million, before considering the cost of acquired staff. Employee
compensation was stable as increases from normal salary adjustments and higher sales-based
incentives were offset by a reduction in management incentive compensation from tightened
performance criteria and the difficult operating environment. The cost of employee benefits grew
approximately $9.0 million, before considering Parishs impact, driven mainly by pension benefits.
CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT ESTIMATES
Whitney prepares its financial statements in accordance with accounting principles generally
accepted in the United States of America. A discussion of certain accounting principles and
methods of applying those principles that are particularly important to this process is included in
Note 2 to the consolidated financial statements located in Item 8 of this annual report on Form
10-K. The Company is required to make estimates, judgments and assumptions in applying these
principles to determine the amounts and other disclosures that are presented in the financial
statements and discussed in this section.
Allowance for Credit Losses
Whitney believes that the determination of its estimate of the allowance for credit losses
involves a higher degree of judgment and complexity than its application of other significant
accounting policies. Factors considered in this determination and managements process are
discussed in Note 2 and in the section below entitled Loans, Credit Risk Management and Allowance
and Reserve for Credit Losses. Although management believes it has identified appropriate factors
for review and designed and implemented adequate procedures to support the estimation process, the
allowance remains an estimate about the effect of matters that are inherently uncertain. Over
time, changes in national and local economic conditions or the actual or perceived financial
condition of Whitneys credit customers or other factors can materially impact the allowance
estimate, potentially subjecting the Company to significant earnings volatility.
28
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Goodwill Impairment Test
Goodwill is assessed for impairment both annually and when events or circumstances occur that
make it more likely than not that impairment has occurred. The impairment test compares the
estimated fair value of a reporting unit with its net book value. Whitney has assigned all
goodwill to one reporting unit that represents the overall banking operations. The fair value of
the reporting unit is based on valuation techniques that market participants would use in an
acquisition of the whole unit, such as estimated discounted cash flows, the quoted market price of
Whitneys stock including an estimated control premium, and observable average price-to-earnings
and price-to-book multiples of our competitors. If the units fair value is less than its carrying
value, an estimate of the implied fair value of the goodwill is compared to the goodwills carrying
value. Given the volatility in market prices due in part to significant uncertainty about the
financial services industry as a whole and limited activity of healthy bank acquisitions,
management has placed greater reliance on the discounted cash flow analysis for the annual test.
This analysis requires significant assumptions about the economic environment, expected net
interest margins, growth rates and the rate at which cash flows are discounted.
No impairment was indicated when the annual test was performed on September 30, 2009. Given
the current economic environment and potential for volatility in the fair value estimate,
management has been updating the impairment test for goodwill quarterly throughout 2009. No
indication of goodwill impairment was identified in these interim tests. For the most recent
impairment test as of December 31, 2009, the discounted cash flow analysis resulted in a fair value
estimate approximately 7% higher than book value. Either a 10 basis point reduction in the
expected net interest margin, a .50% lower projected growth rate or a .50% higher discount rate
would reduce the estimated fair value by approximately 7%.
Accounting for Retirement Benefits
Management makes a variety of assumptions in applying principles that govern the accounting
for benefits under the Companys defined benefit pension plans and other postretirement benefit
plans. These assumptions are essential to the actuarial valuation that determines the amounts
Whitney recognizes and certain disclosures it makes in the consolidated financial statements
related to the operation of these plans (see Note 15 in Item 8). Two of the more significant
assumptions concern the expected long-term rate of return on plan assets and the rate needed to
discount projected benefits to their present value. Changes in these assumptions impact the cost
of retirement benefits recognized in net income and comprehensive income. Certain assumptions are
closely tied to current conditions and are generally revised at each measurement date. For
example, the discount rate is reset annually with reference to market yields on high quality
fixed-income investments. Other assumptions, such as the rate of return on assets, are determined,
in part, with reference to historical and expected conditions over time and are not as susceptible
to frequent revision. Holding other factors constant, the cost of retirement benefits will move
opposite to changes in either the discount rate or the rate of return on assets.
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FINANCIAL CONDITION
LOANS, CREDIT RISK MANAGEMENT AND ALLOWANCE AND RESERVE FOR CREDIT LOSSES
Loan Portfolio Developments
Total loans at the end of 2009 were down $678 million, or 7%, from December 31, 2008, with
reduction in all of the Banks geographic regions and most portfolio segments. Included in this
decline were charge-offs of $204 million and foreclosures of approximately $59 million. As was
anticipated and previously disclosed, economic conditions restrained loan demand throughout 2009.
Whitney continues to seek and fund new credit relationships and to renew existing ones, but the
level of overall demand has been insufficient to cover repayments and maturities along with
charge-offs, foreclosures and other problem loan resolutions. Management believes this situation
will continue for the first half of 2010 with hope for some slow growth during the second half of
2010 in an economy beginning to recover and strengthen.
Table 1 shows loan balances by type of loan at December 31, 2009 and at the end of the
previous four years. Table 2 distributes the loan portfolio as of December 31, 2009 by the
geographic region from which the loans are serviced. The following discussion provides an overview
of the composition of the different portfolio sectors and the customers served in each, as well as
recent changes.
TABLE 1. LOANS OUTSTANDING BY TYPE
December 31, | ||||||||||||||||||||
(in thousands) | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||
Commercial & industrial |
$ | 3,075,340 | $ | 3,436,461 | $ | 2,822,752 | $ | 2,725,531 | $ | 2,685,894 | ||||||||||
Owner-occupied real estate |
1,079,487 | 1,013,919 | 740,977 | 604,196 | 608,407 | |||||||||||||||
Total commercial & industrial |
4,154,827 | 4,450,380 | 3,563,729 | 3,329,727 | 3,294,301 | |||||||||||||||
Construction, land & land development |
1,537,155 | 1,887,480 | 1,770,824 | 1,580,209 | 1,395,314 | |||||||||||||||
Other commercial real estate |
1,246,353 | 1,254,329 | 965,757 | 909,599 | 739,765 | |||||||||||||||
Total commercial real estate |
2,783,508 | 3,141,809 | 2,736,581 | 2,489,808 | 2,135,079 | |||||||||||||||
Residential mortgage |
1,035,110 | 1,079,270 | 933,797 | 893,091 | 774,124 | |||||||||||||||
Consumer |
429,998 | 410,391 | 351,594 | 337,790 | 357,093 | |||||||||||||||
Total loans |
$ | 8,403,443 | $ | 9,081,850 | $ | 7,585,701 | $ | 7,050,416 | $ | 6,560,597 | ||||||||||
The portfolio of C&I loans, including real estate loans secured by properties used in the
borrowers business, decreased $296 million, or 7%, between year-end 2008 and 2009, mainly
reflecting economic conditions noted above. The C&I portfolio is diversified over a range of
industries, including oil and gas (O&G), wholesale and retail trade in various durable and
nondurable products and the manufacture of such products, marine transportation and maritime
construction, hospitality, financial services and professional services.
Loans outstanding to O&G industry customers declined approximately $167 million during 2009,
but still represented approximately 11%, or $894 million, of total loans at December 31, 2009.
Management monitors both industry fundamentals and portfolio performance and credit quality on a
formal ongoing basis and establishes and adjusts internal exposure guidelines as a percent of
capital both for the industry as a whole and for individual sectors within the industry. The
majority of Whitneys customer base in this industry provides transportation and other services and
products to support exploration and production activities. The Bank seeks service and supply
customers who are quality operators that can manage through volatile commodity price cycles. Loans
outstanding to the exploration and production sector comprised approximately 32% of the O&G
portfolio at December 31, 2009. Management continues to monitor the impact of weak global economic
activity on commodity prices and has made what it believes to be appropriate adjustments to
Whitneys credit underwriting guidelines with respect to O&G loans and the management of existing
relationships.
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Outstanding balances under participations in larger shared-credit loan commitments totaled
$680 million at the end of 2009, compared to $772 million outstanding at year-end 2008. The total
at December 31, 2009 included approximately $247 million related to the O&G industry.
Substantially all of the shared credits are with customers operating in Whitneys market area.
TABLE 2. GEOGRAPHIC DISTRIBUTION OF LOAN PORTFOLIO AT DECEMBER 31, 2009
Alabama/ | Percent | |||||||||||||||||||||||
(dollars in millions) | Louisiana | Texas | Florida | Mississippi | Total | of total | ||||||||||||||||||
Commercial & industrial |
$ | 2,182 | $ | 548 | $ | 95 | $ | 250 | $ | 3,075 | 37 | % | ||||||||||||
Owner-occupied real estate |
667 | 119 | 205 | 89 | 1,080 | 13 | ||||||||||||||||||
Total commercial & industrial |
2,849 | 667 | 300 | 339 | 4,155 | 50 | ||||||||||||||||||
Construction, land & land development |
454 | 484 | 363 | 236 | 1,537 | 18 | ||||||||||||||||||
Other commerical real estate |
630 | 159 | 310 | 147 | 1,246 | 15 | ||||||||||||||||||
Total commercial real estate |
1,084 | 643 | 673 | 383 | 2,783 | 33 | ||||||||||||||||||
Residential mortgage |
564 | 148 | 196 | 127 | 1,035 | 12 | ||||||||||||||||||
Consumer |
294 | 25 | 69 | 42 | 430 | 5 | ||||||||||||||||||
Total |
$ | 4,791 | $ | 1,483 | $ | 1,238 | $ | 891 | $ | 8,403 | 100 | % | ||||||||||||
Percent of total |
57 | % | 18 | % | 15 | % | 10 | % | 100 | % | ||||||||||||||
The commercial real estate (CRE) portfolio includes loans for construction and land
development (C&D) and investment, both commercial and residential, and other real estate loans
secured by income-producing properties. The CRE portfolio decreased $358 million, or 11%, during
2009. Approximately half of the decrease came from charge-offs and foreclosures. Project
financing is an important component of the CRE portfolio sector, and sector growth is impacted by
the availability of new projects as well as the anticipated refinancing of seasoned income
properties in the secondary market and payments on residential development loans as inventory is
sold. Management expects that current economic conditions and uncertainty will limit the
availability of new creditworthy CRE projects throughout Whitneys market area over the near term.
Tables 3 and 4 show the composition of certain components of the CRE portfolio by property
type and the region from which the loans are serviced. Management also sets exposure guidelines
for the overall portfolio of CRE loans as well as for loans secured by various subcategories of
property.
TABLE 3. CONSTRUCTION, LAND & LAND DEVELOPMENT LOANS AT DECEMBER 31, 2009
Alabama/ | Percent | |||||||||||||||||||||||
(dollars in millions) | Louisiana | Texas | Florida | Mississippi | Total | of total | ||||||||||||||||||
Residential construction |
$ | 61 | $ | 56 | $ | 35 | $ | 18 | $ | 170 | 11 | % | ||||||||||||
Land & lots: |
||||||||||||||||||||||||
Residential |
161 | 45 | 129 | 79 | 414 | 27 | ||||||||||||||||||
Commercial |
107 | 84 | 85 | 57 | 333 | 22 | ||||||||||||||||||
Retail |
32 | 143 | 12 | 16 | 203 | 13 | ||||||||||||||||||
Multifamily |
20 | 81 | | 20 | 121 | 8 | ||||||||||||||||||
Office buildings |
12 | 35 | 23 | 1 | 71 | 5 | ||||||||||||||||||
Industrial/warehouse |
15 | 4 | 5 | 4 | 28 | 2 | ||||||||||||||||||
Hotel/motel |
| | 22 | | 22 | 1 | ||||||||||||||||||
Other (a) |
46 | 36 | 52 | 41 | 175 | 11 | ||||||||||||||||||
Total |
$ | 454 | $ | 484 | $ | 363 | $ | 236 | $ | 1,537 | 100 | % | ||||||||||||
Percent of total |
30 | % | 31 | % | 24 | % | 15 | % | 100 | % | ||||||||||||||
(a) | Includes agricultural land. |
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TABLE 4. OTHER COMMERCIAL REAL ESTATE LOANS AT DECEMBER 31, 2009
Alabama/ | Percent | |||||||||||||||||||||||
(dollars in millions) | Louisiana | Texas | Florida | Mississippi | Total | of total | ||||||||||||||||||
Retail |
$ | 159 | $ | 78 | $ | 80 | $ | 38 | $ | 355 | 28 | % | ||||||||||||
Office buildings |
112 | 25 | 61 | 30 | 228 | 18 | ||||||||||||||||||
Hotel/motel |
149 | 4 | 37 | 24 | 214 | 17 | ||||||||||||||||||
Multifamily |
72 | 32 | 47 | 30 | 181 | 15 | ||||||||||||||||||
Industrial/warehouse |
57 | 15 | 48 | 17 | 137 | 11 | ||||||||||||||||||
Other |
81 | 5 | 37 | 8 | 131 | 11 | ||||||||||||||||||
Total |
$ | 630 | $ | 159 | $ | 310 | $ | 147 | $ | 1,246 | 100 | % | ||||||||||||
Percent of total |
50 | % | 13 | % | 25 | % | 12 | % | 100 | % | ||||||||||||||
The residential mortgage loan portfolio declined $44 million during 2009, reflecting in
part the impact of attractive refinancing opportunities in the low interest rate environment, as
well as some charge-offs and foreclosures. The Bank continues to sell most conventional residential
mortgage loan production in the secondary market.
Table 5 reflects contractual loan maturities, unadjusted for scheduled principal reductions,
prepayments or repricing opportunities. Approximately 60% of the value of loans with a maturity
greater than one year carries a fixed rate of interest.
TABLE 5. LOAN MATURITIES BY TYPE
December 31, 2009 | ||||||||||||||||
One year | One through | More than | ||||||||||||||
(in thousands) | or less | five years | five years | Total | ||||||||||||
Commercial & industrial |
$ | 2,109,276 | $ | 845,356 | $ | 120,708 | $ | 3,075,340 | ||||||||
Owner-occupied real estate |
144,394 | 772,692 | 162,401 | 1,079,487 | ||||||||||||
Total commercial & industrial |
2,253,670 | 1,618,048 | 283,109 | 4,154,827 | ||||||||||||
Construction, land & land development |
907,780 | 532,065 | 97,310 | 1,537,155 | ||||||||||||
Other commercial real estate |
317,005 | 758,408 | 170,940 | 1,246,353 | ||||||||||||
Total commercial real estate |
1,224,785 | 1,290,473 | 268,250 | 2,783,508 | ||||||||||||
Residential mortgage |
186,449 | 560,822 | 287,839 | 1,035,110 | ||||||||||||
Consumer |
199,988 | 196,395 | 33,615 | 429,998 | ||||||||||||
Total |
$ | 3,864,892 | $ | 3,665,738 | $ | 872,813 | $ | 8,403,443 | ||||||||
Credit Risk Management and Allowance and Reserve for Credit Losses
General Discussion of Credit Risk Management and Determination of Credit Loss Allowance
and Reserve
Whitney manages credit risk mainly through adherence to underwriting and loan administration
standards established by the Banks Credit Policy Committee and through the efforts of the credit
administration function to ensure consistent application and monitoring of standards throughout the
Company. Written credit policies define underwriting criteria, concentration guidelines, and
lending approval processes that cover individual authority and the appropriate involvement of
regional loan committees and a senior loan committee. The senior loan committee includes the
Banks senior lenders, senior officers in Credit Administration, the Chief Risk Officer, the
President and the Chief Executive Officer.
C&I credits and CRE loans are underwritten principally based upon cash flow coverage, but
additional support is regularly obtained through collateralization and guarantees. C&I loans are
typically relationship-based
32
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rather than transaction-driven. Loan concentrations are monitored
monthly by management and the Board of Directors. Consumer loans are centrally underwritten with
reference to the customers debt capacity and with the support of automated credit scoring tools,
including appropriate secondary review procedures.
Lending officers are primarily responsible for ongoing monitoring and the assignment of risk
ratings to individual loans based on established guidelines. An independent credit review
function, which reports to the Audit Committee of the Board of Directors, assesses the accuracy of
officer ratings and the timeliness of rating changes and performs concurrent reviews of the
underwriting processes. Once a problem relationship over a certain size threshold is identified, a
monthly watch committee process is initiated. The watch committee, composed of senior lending and
credit administration management as well as the Chief Executive Officer and Chief Risk Officer,
must approve any substantive changes to identified problem credits and will assign relationships to
a special credits department when appropriate.
Managements evaluation of credit risk in the loan portfolio is reflected in its estimate of
probable losses inherent in the portfolio that is reported in the Companys financial statements as
the allowance for loan losses. Changes in this evaluation over time are reflected in the provision
for credit losses charged to expense. The methodology for determining the allowance involves
significant judgment, and important factors that influence this judgment are re-evaluated quarterly
to respond to changing conditions. This methodology is described in Note 2 to the consolidated
financial statements located in Item 8 of the annual report on Form 10-K.
The process for determining the recorded allowance involves three key elements: (1)
establishing specific allowances as needed for loans evaluated for impairment; (2) developing loss
factors based on historical loss experience for nonimpaired commercial loans grouped by geography,
loan product type and internal risk rating and for homogeneous groups of residential and consumer
loans; and (3) determining appropriate adjustments to historical loss factors based on managements
assessment of current economic conditions and other qualitative risk factors both internal and
external to the Company. During the third quarter of 2009, management enhanced the allowance
methodology by expanding the qualitative and environmental factors that are considered and by
evaluating and applying loss factors to the loan portfolio at a more granular level to better
capture regional distinctions and distinctions among the loan types.
The monitoring of credit risk also extends to unfunded credit commitments, such as unused
commercial credit lines and letters of credit, and management establishes reserves as needed for
its estimate of probable losses on such commitments.
Credit Quality Statistics and Components of Credit Loss Allowance and Reserve
The total of loans criticized through the Companys credit risk-rating process was $1.06
billion at December 31, 2009. This represented 13% of total loans and a net increase of $288
million from December 31, 2008, although the criticized total at year-end 2009 was down $124
million, or 11%, from its peak at September 30, 2009. The range of criticized ratings covers loans
with well-defined weaknesses that would likely lead to a default if not corrected as well as loans
with a high probability of loss but not yet charged off due to specific pending events. Criticized
ratings also identify loans that deserve close attention because of potential weaknesses as
evidenced by, for example, the borrowers recent operating trends or adverse market conditions.
Table 6 shows the composition of criticized loans at December 31, 2009, distributed by the
geographic region from which the loans are serviced.
Criticized C&I relationships, including associated real estate loans, totaled $336 million at
December 31, 2009, which was an increase of $122 million from year-end 2008. Criticized C&I loans
outstanding to O&G industry customers increased approximately $100 million during 2009 and totaled
approximately $122 million at December 31, 2009. This represented 14% of the O&G industry
portfolio outstanding, although less than 1% of this portfolio was considered to be nonperforming
at December 31, 2009. Until the outlook on commodity prices translates into increased exploration
and drilling activity, management expects continued stress on the O&G industry portfolio and
elevated levels of criticized relationships. There were no other significant industry
concentrations within the total for criticized C&I relationships.
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TABLE 6.CRITICIZED LOANS AT DECEMBER 31, 2009
Percent of | ||||||||||||||||||||||||
Alabama/ | loan category | |||||||||||||||||||||||
(dollars in millions) | Louisiana | Texas | Florida | Mississippi | Total | total | ||||||||||||||||||
Commercial & industrial |
$ | 71 | $ | 107 | $ | 8 | $ | 30 | $ | 216 | 7 | % | ||||||||||||
Owner-user real estate |
41 | 17 | 46 | 16 | 120 | 11 | % | |||||||||||||||||
Total commercial & industrial |
112 | 124 | 54 | 46 | 336 | 8 | % | |||||||||||||||||
Construction land & land
development |
25 | 135 | 173 | 44 | 377 | 25 | % | |||||||||||||||||
Other commercial real estate |
37 | 38 | 93 | 28 | 196 | 16 | % | |||||||||||||||||
Total commercial real estate |
62 | 173 | 266 | 72 | 573 | 21 | % | |||||||||||||||||
Residential mortgage |
45 | 6 | 63 | 19 | 133 | 13 | % | |||||||||||||||||
Consumer |
5 | | 8 | 3 | 16 | 4 | % | |||||||||||||||||
Total |
$ | 224 | $ | 303 | $ | 391 | $ | 140 | $ | 1,058 | 13 | % | ||||||||||||
Percent of regional loan total |
5 | % | 20 | % | 32 | % | 16 | % | 13 | % | ||||||||||||||
Tables 7 and 8 show the composition of certain components of the criticized CRE portfolio
by property type and the region from which the loans are serviced.
TABLE 7. | CRITICIZED CONSTRUCTION, LAND & LAND DEVELOPMENT LOANS AT DECEMBER 31, 2009 |
Alabama/ | Percent | |||||||||||||||||||||||
(dollars in millions) | Louisiana | Texas | Florida | Mississippi | Total | of total | ||||||||||||||||||
Residential construction |
$ | 5 | $ | 15 | $ | 21 | $ | | $ | 41 | 11 | % | ||||||||||||
Land & lots: |
||||||||||||||||||||||||
Residential |
9 | 9 | 60 | 25 | 103 | 27 | ||||||||||||||||||
Commercial |
8 | 43 | 52 | 3 | 106 | 28 | ||||||||||||||||||
Retail |
| 37 | 8 | | 45 | 12 | ||||||||||||||||||
Multifamily |
| 23 | | | 23 | 6 | ||||||||||||||||||
Office buildings |
| 8 | 7 | | 15 | 4 | ||||||||||||||||||
Other (a) |
3 | | 25 | 16 | 44 | 12 | ||||||||||||||||||
Total |
$ | 25 | $ | 135 | $ | 173 | $ | 44 | $ | 377 | 100 | % | ||||||||||||
Percent of total |
7 | % | 36 | % | 46 | % | 11 | % | 100 | % | ||||||||||||||
(a) | Includes agricultural land. |
The total for criticized C&D loans of $377 million at December 31, 2009 was up $37
million from December 31, 2008, but recently declined $39 million from September 30, 2009.
Whitneys Florida markets saw a decrease of $43 million in criticized C&D loans during 2009,
reflecting charge-offs, foreclosures and other problem loan resolutions, particularly with respect
to loans for residential development. Criticized C&D loans serviced from Whitneys Texas market
increased $104 million during 2009 and represented 28% of total C&D loans in the Texas market at
December 31, 2009. General economic and credit market conditions continue to delay the successful
completion of various retail and other income-producing CRE projects and stretch the financial
capacity of the developers. Whitney has worked proactively with its borrowers to develop
strategies to deal with these difficult conditions and only $11 million of C&D loans from the Texas
market were considered nonperforming at December 31, 2009; nevertheless, management expects the
elevated level of criticized credits to continue for the near term.
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TABLE 8. CRITICIZED OTHER COMMERCIAL REAL ESTATE LOANS AT DECEMBER 31, 2009
Alabama/ | Percent | |||||||||||||||||||||||
(dollars in millions) | Louisiana | Texas | Florida | Mississippi | Total | of total | ||||||||||||||||||
Retail |
$ | 5 | $ | 25 | $ | 14 | $ | 18 | $ | 62 | 32 | % | ||||||||||||
Office buildings |
3 | 3 | 10 | 4 | 20 | 10 | ||||||||||||||||||
Hotel/motel |
18 | | 17 | | 35 | 18 | ||||||||||||||||||
Multifamily |
5 | 10 | 27 | 5 | 47 | 24 | ||||||||||||||||||
Industrial/warehouse |
5 | | 19 | | 24 | 12 | ||||||||||||||||||
Other |
1 | | 6 | 1 | 8 | 4 | ||||||||||||||||||
Total |
$ | 37 | $ | 38 | $ | 93 | $ | 28 | $ | 196 | 100 | % | ||||||||||||
Percent of total |
19 | % | 19 | % | 48 | % | 14 | % | 100 | % | ||||||||||||||
Criticized other CRE loans on income-producing properties increased $77 million during
2009, although the total at December 31, 2009 was down $40 million from September 30, 2009. Net
additions to the criticized total during 2009 consisted mainly of loans secured by leased retail
and warehouse facilities and apartment buildings and were concentrated mainly in the Texas and
Florida markets. Nonperforming loans on income-producing CRE totaled approximately $79 million at
December 31, 2009, with $48 million from the Florida markets, but only $5 million from Texas. As
the weak conditions in the overall economy continue, management is closely monitoring the impact on
CRE loan customers with hotel operations and others in the hospitality industry and on the
performance of the CRE loan portfolio secured by retail and other income-producing properties in
all markets.
Included in the total of criticized loans at December 31, 2009 was $414 million of
nonperforming loans, which is up a net $113 million from year-end 2008. Residential-related real
estate credits that are heavily concentrated in Whitneys Florida and coastal Alabama markets
comprised approximately half of total nonperforming loans at December 31, 2009. In total, the
Florida market accounted for 59% of nonperforming loans at the year-end 2009, with another 18% from
Alabama, 17% from Louisiana, and 6% from Texas. The earlier discussion of criticized loans
includes some additional details on nonperforming assets at December 31, 2009. Table 9 provides
information on nonperforming loans and other nonperforming assets at the end of each of the five
years in the period ended December 31, 2009. Nonperforming loans encompass all loans that are
evaluated separately for impairment.
TABLE 9.NONPERFORMING ASSETS
December 31 | ||||||||||||||||||||
(dollars in thousands) | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||
Loans accounted for on a nonaccrual basis
|
$ | 414,075 | $ | 301,095 | $ | 120,096 | $ | 55,992 | $ | 65,565 | ||||||||||
Restructured loans accruing
|
| | | | 30 | |||||||||||||||
Total nonperforming loans
|
414,075 | 301,095 | 120,096 | 55,992 | 65,595 | |||||||||||||||
Foreclosed assets and surplus banking property
|
52,630 | 28,067 | 4,624 | 800 | 1,708 | |||||||||||||||
Total nonperforming assets
|
$ | 466,705 | $ | 329,162 | $ | 124,720 | $ | 56,792 | $ | 67,303 | ||||||||||
Loans 90 days past due still accruing
|
$ | 23,386 | $ | 16,101 | $ | 8,711 | $ | 7,574 | $ | 13,728 | ||||||||||
Ratios: |
||||||||||||||||||||
Nonperforming assets to loans plus foreclosed
assets and surplus property
|
5.52 | % | 3.61 | % | 1.64 | % | .81 | % | 1.03 | % | ||||||||||
Allowance for loan losses to
nonperforming loans
|
54.02 | 53.51 | 73.20 | 135.60 | 137.25 | |||||||||||||||
Loans 90 days past due still accruing to loans
|
.28 | .18 | .11 | .11 | .21 | |||||||||||||||
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Whitney will continue to evaluate all opportunities to dispose of nonperforming assets as
quickly as possible, including consideration of the trade-offs between current disposal prices and
the carrying costs and management challenges of longer-term resolution. Whitney may recognize
losses on future asset disposition decisions and actions.
A comparison of contractual interest income on nonperforming loans with the cash-basis and
cost-recovery interest actually recognized on these loans for 2009, 2008 and 2007 is presented in
Note 8 to the consolidated financial statements located in Item 8 of this annual report on Form
10-K. Whitneys policy for placing loans on nonaccrual status is presented in Note 2 to the
consolidated financial statements.
Table 10 recaps activity in the allowance for loan losses and in the reserve for losses on
unfunded credit commitments over the past five years. The allocation of the allowance to loan
categories is included in Table 11, together with the percentage of total loans in each category.
Approximately half of the total $258 million provision for loans losses in 2009 was related to
nonperforming loans evaluated for impairment losses. More than $100 million of the impaired loan
provisions came from Whitneys Florida and Alabama markets and reflected in large part the
continued decline in the value of underlying real estate collateral. The remainder of the provision
for loan losses for 2009 was related mainly to the increase in total criticized loans, the impact
of elevated charge-off levels on historical loss factors, smaller consumer charge-offs and
qualitative adjustments.
Gross charge-offs in 2009 totaled $204 million, with the majority from Whitneys Florida
markets. The gross charge-offs were heavily concentrated in residential C&D loans and other
residential-related credits, which totaled approximately $122 million for 2009. Other C&D loans
and loans on income-producing CRE accounted for approximately $42 million of charge-offs in 2009,
with the majority again from Florida. In total, Whitneys Florida markets generated approximately
$140 million of gross charge-offs for 2009, with $110 million from the Tampa market. The $32
million of C&I relationships charged off in 2009 came mainly from Whitneys Louisiana markets.
The provision for loan losses exceeded net charge-offs by $62.6 million during 2009, which
increased the allowance for loan losses to 2.66% of total loans at December 31, 2009 from 1.77% at
December 31, 2008.
It is uncertain when sufficient demand will return to depressed real estate markets to
establish a solid floor on prices and stimulate renewed development. This, when coupled with the
uncertainties arising from weak national and global economic conditions, makes it difficult for
management to predict when the level of criticized loans will stabilize or retreat. In this
current economic environment, the periodic estimate of inherent losses in Whitneys loan portfolio
may be volatile.
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TABLE 10. SUMMARY OF ACTIVITY IN THE ALLOWANCE FOR LOAN LOSSES AND RESERVE FOR LOSSES ON UNFUNDED CREDIT COMMITMENTS
(dollars in thousands) | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||
ALLOWANCE FOR LOAN LOSSES |
||||||||||||||||||||
Allowance at beginning of year |
$ | 161,109 | $ | 87,909 | $ | 75,927 | $ | 90,028 | $ | 54,345 | ||||||||||
Allowance of acquired banks |
| 9,971 | 2,791 | 2,908 | 3,648 | |||||||||||||||
Provision for credit losses |
257,600 | 134,500 | 17,600 | 2,400 | 37,000 | |||||||||||||||
Loans charged off: |
||||||||||||||||||||
Commercial & industrial |
(21,784 | ) | (31,481 | ) | (9,452 | ) | (15,841 | ) | (7,047 | ) | ||||||||||
Owner-user real estate |
(10,387 | ) | (1,891 | ) | (65 | ) | (100 | ) | (212 | ) | ||||||||||
Total commercial & industrial |
(32,171 | ) | (33,372 | ) | (9,517 | ) | (15,941 | ) | (7,259 | ) | ||||||||||
Construction, land & land development |
(116,846 | ) | (30,141 | ) | (3,671 | ) | (5,254 | ) | (220 | ) | ||||||||||
Other commercial real estate |
(21,367 | ) | (6,209 | ) | (634 | ) | (1,181 | ) | (6 | ) | ||||||||||
Total commercial real estate |
(138,213 | ) | (36,350 | ) | (4,305 | ) | (6,435 | ) | (226 | ) | ||||||||||
Residential mortgage |
(25,959 | ) | (7,885 | ) | (1,726 | ) | (555 | ) | (295 | ) | ||||||||||
Consumer |
(7,259 | ) | (4,619 | ) | (2,408 | ) | (2,297 | ) | (2,876 | ) | ||||||||||
Total charge-offs |
(203,602 | ) | (82,226 | ) | (17,956 | ) | (25,228 | ) | (10,656 | ) | ||||||||||
Recoveries on loans previously charged off: |
||||||||||||||||||||
Commercial & industrial |
4,431 | 7,417 | 7,703 | 3,409 | 2,707 | |||||||||||||||
Owner-user real estate |
55 | 32 | 62 | 31 | 370 | |||||||||||||||
Total commercial & industrial |
4,486 | 7,449 | 7,765 | 3,440 | 3,077 | |||||||||||||||
Construction, land & land development |
1,657 | 1,653 | 24 | 157 | 6 | |||||||||||||||
Other commercial real estate |
87 | 58 | 93 | 46 | 556 | |||||||||||||||
Total commercial real estate |
1,744 | 1,711 | 117 | 203 | 562 | |||||||||||||||
Residential mortgage |
1,058 | 638 | 407 | 270 | 571 | |||||||||||||||
Consumer |
1,276 | 1,157 | 1,258 | 1,906 | 1,481 | |||||||||||||||
Total recoveries |
8,564 | 10,955 | 9,547 | 5,819 | 5,691 | |||||||||||||||
Net loans charged off |
(195,038 | ) | (71,271 | ) | (8,409 | ) | (19,409 | ) | (4,965 | ) | ||||||||||
Allowance at end of year |
$ | 223,671 | $ | 161,109 | $ | 87,909 | $ | 75,927 | $ | 90,028 | ||||||||||
Ratios |
||||||||||||||||||||
Allowance for loan losses to loans at end of year |
2.66 | % | 1.77 | % | 1.16 | % | 1.08 | % | 1.37 | % | ||||||||||
Net charge-offs to average loans |
2.22 | .88 | .11 | .29 | .08 | |||||||||||||||
Gross charge-offs to average loans |
2.32 | 1.02 | .24 | .37 | .17 | |||||||||||||||
Recoveries to gross charge-offs |
4.21 | 13.32 | 53.17 | 23.07 | 53.41 | |||||||||||||||
RESERVE FOR LOSSES ON UNFUNDED CREDIT COMMITMENTS |
||||||||||||||||||||
Reserve at beginning of year |
$ | 800 | $ | 1,300 | $ | 1,900 | $ | 580 | $ | | ||||||||||
Provision for credit losses |
1,400 | (500 | ) | (600 | ) | 1,320 | 580 | |||||||||||||
Reserve at end of year |
$ | 2,200 | $ | 800 | $ | 1,300 | $ | 1,900 | $ | 580 | ||||||||||
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TABLE 11. ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||||||||||||||||||||
% | % | % | % | % | ||||||||||||||||||||||||||||||||||||
(dollars in millions) | Balance | Loans | Balance | Loans | Balance | Loans | Balance | Loans | Balance | Loans | ||||||||||||||||||||||||||||||
Commercial & industrial |
$ | 53 | 37 | % | $ | 36 | 38 | % | (a | ) | (a | ) | (a | ) | ||||||||||||||||||||||||||
Owner-occupied real estate |
19 | 13 | 20 | 11 | (a | ) | (a | ) | (a | ) | ||||||||||||||||||||||||||||||
Total commercial & industrial |
72 | 50 | 56 | 49 | $ | 55 | 47 | % | $ | 47 | 47 | % | $ | 57 | 50 | % | ||||||||||||||||||||||||
Construction, land & land development |
80 | 18 | 60 | 21 | (a | ) | (a | ) | (a | ) | ||||||||||||||||||||||||||||||
Other commercial real estate |
34 | 15 | 22 | 14 | (a | ) | (a | ) | (a | ) | ||||||||||||||||||||||||||||||
Total commercial real estate |
114 | 33 | 82 | 35 | 25 | 36 | 21 | 35 | 17 | 33 | ||||||||||||||||||||||||||||||
Residential mortgage |
28 | 12 | 19 | 12 | 6 | 12 | 4 | 13 | 8 | 12 | ||||||||||||||||||||||||||||||
Consumer |
10 | 5 | 4 | 4 | 2 | 5 | 4 | 5 | 8 | 5 | ||||||||||||||||||||||||||||||
Total |
$ | 224 | 100 | % | $ | 161 | 100 | % | $ | 88 | 100 | % | $ | 76 | 100 | % | $ | 90 | 100 | % | ||||||||||||||||||||
(a) | Allocation of allowance by subcategory for 2007 and prior years not available. |
INVESTMENT SECURITIES
Whitneys investment securities portfolio balance of $2.05 billion at December 31, 2009 was up
$111 million, or 6%, compared to December 31, 2008. Securities with carrying values of $1.39
billion at December 31, 2009 were sold under repurchase agreements, pledged to secure public
deposits or pledged for other purposes. Average investment securities decreased 1% between 2008
and 2009. The composition of the average portfolio in investment securities and effective yields
are shown in Table 19.
Information about the contractual maturity structure of investment securities at December 31,
2009, including the weighted-average yield on such securities, is shown in Table 12. The carrying
value of securities with explicit call options totaled $126 million at year-end 2009. These call
options and the scheduled principal reductions and projected prepayments on mortgage-backed
securities are not reflected in Table 12. Including expected principal reductions on
mortgage-backed securities, the weighted-average maturity of the overall securities portfolio was
approximately 42 months at December 31, 2009, compared to 31 months at year-end 2008.
Mortgage-backed securities issued or guaranteed by U.S. government agencies continued to be
the main component of the portfolio, comprising 83% of the total at December 31, 2009. The
duration of the overall investment portfolio was 2.6 years at December 31, 2009 and would extend to
3.8 years assuming an immediate 300 basis point increase in market rates, according to the
Companys asset/liability management model. Duration provides a measure of the sensitivity of the
portfolios fair value to changes in interest rates. At December 31, 2008, the portfolios
estimated duration was 1.6 years.
The weighted-average taxable-equivalent portfolio yield was approximately 4.35% at December
31, 2009, compared to 4.84% at December 31, 2008. A substantial majority of the securities in the
investment portfolio bear fixed interest rates. The investment in mortgage-backed securities with
final contractual maturities beyond ten years shown in Table 12 included approximately $105 million
of adjustable-rate issues with a weighted-average yield of 4.18%. The initial reset dates on these
securities are predominantly within one year from year-end 2009.
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TABLE 12. DISTRIBUTION OF INVESTMENT MATURITIES
December 31, 2009 | ||||||||||||||||||||||||||||||||||||||||
Over one through | Over five through | |||||||||||||||||||||||||||||||||||||||
One year and less | five years | ten years | Over ten years | Total | ||||||||||||||||||||||||||||||||||||
(dollars in thousands) | Amount | Yield | Amount | Yield | Amount | Yield | Amount | Yield | Amount | Yield | ||||||||||||||||||||||||||||||
Securities Available for Sale |
||||||||||||||||||||||||||||||||||||||||
Mortgage-backed
securities(a) |
$ | 33,059 | 3.67 | % | $ | 77,001 | 4.58 | % | $ | 293,642 | 4.38 | % | $ | 1,305,063 | 4.13 | % | $ | 1,708,765 | 4.18 | % | ||||||||||||||||||||
U. S. agency securities |
102,391 | 4.38 | | | | | | | 102,391 | 4.38 | ||||||||||||||||||||||||||||||
Obligations of states and political subdivisions (b) |
1,352 | 5.91 | 4,198 | 5.78 | 1,116 | 5.94 | | | 6,666 | 5.83 | ||||||||||||||||||||||||||||||
Other debt securities |
750 | 4.48 | 3,750 | 4.36 | | | | | 4,500 | 4.38 | ||||||||||||||||||||||||||||||
Equity securities(c) |
| | | | | | 53,173 | 4.21 | 53,173 | 4.21 | ||||||||||||||||||||||||||||||
Total |
$ | 137,552 | 4.22 | % | $ | 84,949 | 4.63 | % | $ | 294,758 | 4.39 | % | $ | 1,358,236 | 4.13 | % | $ | 1,875,495 | 4.20 | % | ||||||||||||||||||||
Securities Held to Maturity |
||||||||||||||||||||||||||||||||||||||||
Obligations of states and political subdivisions (b) |
$ | 17,964 | 5.34 | % | $ | 70,831 | 5.64 | % | $ | 60,267 | 6.03 | % | $ | 25,883 | 6.68 | % | $ | 174,945 | 5.90 | % | ||||||||||||||||||||
Total |
$ | 17,964 | 5.34 | % | $ | 70,831 | 5.64 | % | $ | 60,267 | 6.03 | % | $ | 25,883 | 6.68 | % | $ | 174,945 | 5.90 | % | ||||||||||||||||||||
(a) | Distributed by contractual maturity without regard to repayment schedules or projected prepayments. | |
(b) | Tax exempt yields are expressed on a fully taxable-equivalent basis. | |
(c) | These securities have no stated maturities or guaranteed dividends. Yield estimated based on expected near-term returns. |
Securities available for sale made up the bulk of the total investment portfolio at
December 31, 2009. Available-for-sale securities are carried at fair value, and the balance
reported at December 31, 2009 reflected gross unrealized gains of $41.0 million and gross
unrealized losses of $2.8 million. The unrealized losses were related mainly to mortgage-backed
securities and represented less than 1% of the total amortized cost of the underlying securities.
Note 5 to the consolidated financial statements located in Item 8 of this annual report on Form
10-K provides information on the process followed by management to evaluate whether unrealized
losses on securities, both those available for sale and those held to maturity, represent
impairment that is other than temporary and that should be recognized with a charge to operations.
No value impairment was evaluated as other than temporary at December 31, 2009.
The Company does not normally maintain a trading portfolio, other than holding trading account
securities for short periods while buying and selling securities for customers. Such securities,
if any, are included in other assets in the consolidated balance sheets.
Apart from securities issued or guaranteed by the U. S. government or its agencies, at
December 31, 2009, Whitney held no investment in the securities of a single issuer that exceeded
10% of its shareholders equity.
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Table of Contents
DEPOSITS AND BORROWINGS
Total deposits at December 31, 2009 decreased approximately 1%, or $112 million, from December
31, 2008. Deposits associated with Parish accounted for approximately $635 million of the
Companys total deposit growth of $678 million, or 8%, from December 31, 2007 to year-end 2008.
Table 13 shows the composition of deposits at December 31, 2009 and at the end of the two
previous years. Table 19 presents the composition of average deposits and borrowings and the
effective rates on interest-bearing funding sources for each of these years.
TABLE 13. DEPOSIT COMPOSITION
(dollars in thousands) | 2009 | 2008 | 2007 | |||||||||||||||||||||
Noninterest-bearing demand deposits |
$ | 3,301,354 | 36 | % | $ | 3,233,550 | 35 | % | $ | 2,740,019 | 32 | % | ||||||||||||
Interest-bearing deposits: |
||||||||||||||||||||||||
NOW account deposits |
1,299,274 | 14 | 1,281,137 | 14 | 1,151,988 | 13 | ||||||||||||||||||
Money market deposits |
1,823,548 | 20 | 1,306,937 | 14 | 1,229,715 | 14 | ||||||||||||||||||
Savings deposits |
840,135 | 9 | 909,197 | 10 | 879,609 | 10 | ||||||||||||||||||
Other time deposits |
799,142 | 9 | 875,999 | 9 | 823,884 | 10 | ||||||||||||||||||
Time deposits $100,000 and over |
1,086,441 | 12 | 1,654,774 | 18 | 1,758,574 | 21 | ||||||||||||||||||
Total interest-bearing |
5,848,540 | 64 | 6,028,044 | 65 | 5,843,770 | 68 | ||||||||||||||||||
Total |
$ | 9,149,894 | 100 | % | $ | 9,261,594 | 100 | % | $ | 8,583,789 | 100 | % | ||||||||||||
Noninterest-bearing demand deposits grew 2%, or $68 million, from year-end 2008, and
comprised 36% of total deposits at December 31, 2009. During the first half of 2009, the Bank
executed a campaign around a special money market deposit product to attract new personal and
business accounts. Balances held in money market accounts at year-end 2009 were up $517 million
from the end of 2008. Deposits at year-end 2009 and 2008 included some seasonal inflows that were
concentrated in NOW accounts.
Time deposits at December 31, 2009 were down 25%, or $645 million, compared to year-end 2008.
The sustained period of low market interest rates has tended to reduce the attractiveness of time
deposits compared to alternative deposit products and investments. Customers held $151 million of
funds in treasury-management time deposit products at December 31, 2009, down $246 million from the
total held at December 31, 2008. These products are used mainly by commercial customers with
excess liquidity pending redeployment for corporate or investment purposes, and, while they provide
a recurring source of funds, the amounts available over time can be volatile. Competitively bid
public funds time deposits totaled approximately $81 million at year-end 2009, which was down $179
million from year-end 2008. Treasury-management deposits and public funds deposits serve partly as
an alternative to Whitneys other short-term borrowings.
TABLE 14. MATURITIES OF TIME DEPOSITS
Deposits of | Deposits of | |||||||||||
$100,000 | less than | |||||||||||
(in thousands) | or more | $100,000 | Total | |||||||||
Three months or less |
$ | 547,229 | $ | 297,997 | $ | 845,226 | ||||||
Over three months through six months |
231,677 | 192,436 | 424,113 | |||||||||
Over six months through twelve months |
161,248 | 165,850 | 327,098 | |||||||||
Over twelve months |
146,287 | 142,859 | 289,146 | |||||||||
Total |
$ | 1,086,441 | $ | 799,142 | $ | 1,885,583 | ||||||
The balance of short-term borrowings at December 31, 2009 was down 42%, or $542 million,
from year-end 2008. The main source of short-term borrowing continued to be the sale of securities
under repurchase agreements to customers using Whitneys treasury-management sweep product.
Borrowings from customers under
40
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securities repurchase agreements totaled $712 million at December
31, 2009, which was down $68 million from December 31, 2008. Similar to Whitneys
treasury-management deposit products, this source of funds can be volatile. Other short-term
borrowings, which have included purchased federal funds, short-term Federal Home Loan Bank (FHLB)
advances and borrowing through the Federal Reserves Term Auction Facility, decreased $474 million
from year-end 2008, reflecting the overall reduced level of earning assets and the funds available
from the Companys recent common stock offering. Additional information on short-term borrowings,
including yields and maximum amounts borrowed, is presented in Note 12 to the consolidated
financial statements located in Item 8 of this annual report on Form 10-K.
In 2007, the Bank issued $150 million of ten-year subordinated notes as described in Note 13
to the consolidated financial statements located in Item 8. Whitney has no other significant
long-term borrowings.
SHAREHOLDERS EQUITY AND CAPITAL ADEQUACY
Shareholders equity totaled $1.68 billion at December 31, 2009, which represented an increase
of $156 million from the end of 2008. As noted earlier, Whitney raised $218 million in the fourth
quarter of 2009 in an underwritten public offering of 28.75 million of the Companys common shares.
Shareholders equity was reduced by the $62.1 million net loss for 2009 and by common dividends
declared of $3.0 million and preferred dividends of $13.0 million. These reductions were offset
partly by a $14.4 million increase in other comprehensive income.
Regulatory Capital
Tables 15 and 16 present information on regulatory capital ratios for the Company and the
Bank. The capital raised in the recent common stock offering is reflected in the Companys Tier 1
capital for 2009. Treasurys investment in preferred stock and common stock warrants is included
in Tier 1 capital for the Company beginning in 2008. The Tier 2 regulatory capital for both the
Company and the Bank includes $150 million beginning in 2007 in subordinated notes payable issued
by the Bank. The decrease in risk-weighted assets from the end of 2008 mainly reflected a
reduction in both outstanding loans and in certain credit-related commitments that are converted to
assets for risk-based capital calculations.
TABLE 15. REGULATORY CAPITAL AND CAPITAL RATIOS COMPANY
(dollars in thousands) | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||
Tier 1 regulatory capital |
$ | 1,242,268 | $ | 1,118,842 | $ | 911,141 | $ | 853,774 | $ | 765,881 | ||||||||||
Tier 2 regulatory capital |
270,532 | 280,103 | 238,967 | 77,827 | 90,608 | |||||||||||||||
Total regulatory capital |
$ | 1,512,800 | $ | 1,398,945 | $ | 1,150,108 | $ | 931,601 | $ | 856,489 | ||||||||||
Risk-weighted assets |
$ | 9,552,632 | $ | 10,393,894 | $ | 9,023,862 | $ | 8,340,926 | $ | 7,746,046 | ||||||||||
Ratios |
||||||||||||||||||||
Leverage ratio (Tier 1 capital to average assets) |
11.05 | % | 9.87 | % | 8.79 | % | 8.76 | % | 8.21 | % | ||||||||||
Tier 1 capital to risk-weighted assets |
13.00 | 10.76 | 10.10 | 10.24 | 9.89 | |||||||||||||||
Total capital to risk-weighted assets |
15.84 | 13.46 | 12.75 | 11.17 | 11.06 | |||||||||||||||
The minimum capital ratios are generally 4% leverage, 4% Tier 1 capital and 8% total
capital. Regulators may, however, set higher capital requirements for an individual institution
when particular circumstances warrant. Bank holding companies must also have at least a 6% Tier 1
capital ratio and a 10% total capital ratio to be considered well-capitalized for various
regulatory purposes. As of December 31, 2009, the Company had the requisite capital levels to
qualify as well-capitalized by its regulators.
41
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TABLE 16. REGULATORY CAPITAL AND CAPITAL RATIOS BANK
(dollars in thousands) | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||
Tier 1 regulatory capital |
$ | 999,176 | $ | 1,077,856 | $ | 792,175 | $ | 775,536 | $ | 687,047 | ||||||||||
Tier 2 regulatory capital |
270,336 | 279,895 | 238,836 | 77,756 | 90,608 | |||||||||||||||
Total regulatory capital |
$ | 1,269,512 | $ | 1,357,751 | $ | 1,031,011 | $ | 853,292 | $ | 777,655 | ||||||||||
Risk-weighted assets |
$ | 9,536,894 | $ | 10,377,245 | $ | 9,000,408 | $ | 8,321,419 | $ | 7,730,465 | ||||||||||
Ratios |
||||||||||||||||||||
Leverage ratio (Tier 1 capital to average assets) |
8.90 | % | 9.53 | % | 7.66 | % | 7.98 | % | 7.38 | % | ||||||||||
Tier 1 capital to risk-weighted assets |
10.48 | 10.39 | 8.80 | 9.32 | 8.89 | |||||||||||||||
Total capital to risk-weighted assets |
13.31 | 13.08 | 11.46 | 10.25 | 10.06 | |||||||||||||||
For a bank to qualify as well-capitalized under the current regulatory framework for
prompt corrective supervisory action, its leverage, Tier 1 and total capital ratios must be at
least 5%, 6% and 10%, respectively. As a result of the current difficult operating environment and
recent operating losses, the Bank has committed to its primary regulator that it will implement a
plan to maintain higher capital ratios with a leverage ratio of at least 8%, a Tier 1 regulatory
capital ratio of at least 9%, and a total risk-based capital ratio of at least 12%. As of December
31, 2009, the Bank exceeded the requisite capital levels to both satisfy these target minimums and
to qualify as well-capitalized by its regulators. The capital raised by the Company in its recent
common stock offering strengthens its capacity to serve as a source of financial support to the
Bank.
Voluntary Stress Test
Most economic indicators point toward the overall U.S. economy either remaining in a
potentially prolonged recessionary period or transitioning to a gradual recovery period. As a
result, during the third quarter of 2009, Whitney elected to perform a stress test of the loan
portfolio using a similar methodology employed in the Supervisory Capital Assessment Program
(SCAP), which was designed by banking regulators to stress a financial institutions loan
portfolios under different economic scenarios.
The Company engaged outside consultants to assist with the details of the SCAP methodology and
to advise the Company how to effectively build a model to estimate the Banks potential losses in
its loan portfolio. As a result, Whitneys management built a sophisticated model and used it to
calculate potential losses at a granular level based upon recent charge-off history and adjusted
for certain qualitative factors. Whitney segregated each portfolio by geography, loan product type
and risk rating and then computed a base loss percentage for each segment based upon a weighted
average of charge-offs over the past two years. Whitney then adjusted the calculation for
qualitative and macroeconomic factors. Finally, it applied the resulting two-year charge-off
percentages to the December 31, 2008 loan portfolio by segment.
Actual net charge-offs for 2009 were 15% less than the most likely base case for the first
year of the stress test period and 51% below the most adverse case. The results of the internal
stress test using the original loss projections indicate that the current level of Tier 1 common
capital is adequate to absorb losses under either the most likely or the most adverse case
scenarios.
Dividends
The Company declared a nominal quarterly dividend of $.01 per share to common shareholders
throughout 2009. The Company must currently obtain regulatory approval before increasing the
common dividend rate above this level. Regulatory policy statements provide that generally bank
holding companies should only pay dividends out of current operating earnings and that the level of
dividends, if any, must be consistent with current and expected capital requirements. Preferred
dividends totaled $13.0 million for 2009.
In addition to these regulatory requirements and restrictions, Whitneys ability to pay common
dividends is also limited by its participation in the Treasurys CPP. Prior to December 19, 2011,
unless the Company has redeemed the preferred stock issued to the Treasury in the CPP or the
Treasury has transferred the preferred stock to a third party, Whitney cannot pay a quarterly
common dividend above $.31 per share. Furthermore, if Whitney is
42
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not current in the payment of quarterly dividends on the preferred stock, it cannot pay
dividends on its common stock.
The common dividend rate will be reassessed quarterly in light of credit quality trends,
expected earnings performance and capital levels, limitations resulting from Treasurys CPP or
regulatory requirements, and the Banks capacity to declare and pay dividends to the Company.
Given the current operating environment, it is unlikely that Whitney will increase its common
dividend in the near term.
LIQUIDITY MANAGEMENT AND CONTRACTUAL OBLIGATIONS
Liquidity Management
The objective of liquidity management is to ensure that funds are available to meet the cash
flow requirements of depositors and borrowers, while at the same time meeting the operating,
capital and strategic cash flow needs of the Company and the Bank. Whitney develops its liquidity
management strategies and measures and monitors liquidity risk as part of its overall
asset/liability management process, making full use of quantitative modeling tools available to
project cash flows under a variety of possible scenarios, including credit-stressed conditions.
Liquidity management on the asset side primarily addresses the composition and maturity
structure of the loan portfolio and the portfolio of investment securities and their impact on the
Companys ability to generate cash flows from scheduled payments, contractual maturities, and
prepayments, through use as collateral for borrowings, and through possible sale or securitization.
Table 5 above presents the contractual maturity structure of the loan portfolio and Table 12
presents contractual investment maturities. At December 31, 2009, securities available for sale
with a carrying value of $1.22 billion, out of a total portfolio of $1.88 billion, were sold under
repurchase agreements, pledged to secure public deposits or pledged for other purposes.
On the liability side, liquidity management focuses on growing the base of core deposits at
competitive rates, including the use of treasury-management products for commercial customers,
while at the same time ensuring access to economical wholesale funding sources. The section above
entitled Deposits and Borrowings discusses changes in these liability-funding sources in 2009.
In October 2008, the FDIC temporarily increased deposit insurance coverage limits for all
deposit accounts from $100,000 to $250,000 per depositor through December 31, 2009 and also offered
to provide unlimited deposit insurance coverage for noninterest-bearing transaction accounts and
certain other specified deposits over the same period. Whitney elected to participate in the
unlimited coverage program, including a recent extension of this coverage through June 30, 2010.
In June 2009, the FDIC extended the period for the expanded $250,000 coverage through December 31,
2013. These steps were taken as part of the federal governments response to severe disruption in
the credit markets and were designed to support deposit retention and to enhance the liquidity of
the nations insured depository institutions and thereby assist in stabilizing the overall economy.
Wholesale funding currently available to the Bank includes FHLB advances, federal funds
purchased from correspondents and borrowings through the Federal Reserves Term Auction Facility.
The Banks unused borrowing capacity from the FHLB at December 31, 2009 totaled approximately $1.5
billion and is secured by a blanket lien on loans secured by real estate. The Banks unused
borrowing capacity from the Federal Reserve Discount Window totaled approximately $.9 billion at
December 31, 2009, based on the collateral pledged. In addition, both the Company and the Bank
have access to external funding sources in the financial markets, and the Bank has developed the
ability to gather deposits at a nationwide level, although it has not used this funding source to
date.
Cash generated from operations is another important source of funds to meet liquidity needs.
The consolidated statements of cash flows located in Item 8 of this annual report on Form 10-K
present operating cash flows and summarize all significant sources and uses of funds for each year
in the three-year period ended December 31, 2009.
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In the fourth quarter of 2009, Whitney raised $218 million in an underwritten public offering
of 28.75 million of the Companys common shares, as was discussed earlier. At December 31, 2009,
the Company had approximately $240 million in cash and demand notes from the Bank available to
provide liquidity for future dividend payments to its common and preferred shareholders and other
corporate purposes. Whitney reduced its quarterly common dividend to $.01 per share throughout
2009, and the Company must currently obtain regulatory approval before increasing the common
dividend rate above this rate.
Dividends received from the Bank have been the primary source of funds available to the
Company for the declaration and payment of dividends to Whitneys shareholders, both common and
preferred. There are various regulatory and statutory provisions that limit the amount of
dividends that the Bank can distribute to the Company. Because of recent losses, the Bank
currently has no capacity to declare dividends to the Company without prior regulatory approval.
Contractual Obligations
Table 17 summarizes payments due from the Company and the Bank under specified long-term and
certain other contractual obligations as of December 31, 2009. Obligations under deposit contracts
and short-term borrowings are not included. The maturities of time deposits are scheduled in Table
14 above in the section entitled Deposits and Borrowings. Purchase obligations represent legal
and binding contracts to purchase services or goods that cannot be settled or terminated without
paying substantially all of the contractual amounts. Not included are a number of contracts
entered into to support ongoing operations that either do not specify fixed or minimum amounts of
goods or services or are cancelable on short notice without cause and without significant penalty.
During 2009, Whitney announced an initiative to replace the Banks core data processing application
systems and invest in new customer service technology which will be implemented over a two-year
period. Obligations under contracts associated with this initiative are included with purchase
obligations in Table 17. The consolidated statements of cash flows provide a picture of Whitneys
ability to fund these and other more significant cash operating expenses, such as interest expense
and employee compensation and benefits, out of current operating cash flows.
TABLE 17. CONTRACTUAL OBLIGATIONS
Payments due by period from December 31, 2009 | ||||||||||||||||||||
Less than | 1 - 3 | 3 5 | More than | |||||||||||||||||
(in thousands) | Total | 1 year | years | years | 5 years | |||||||||||||||
Operating lease obligations |
$ | 79,683 | $ | 9,590 | $ | 14,522 | $ | 12,935 | $ | 42,636 | ||||||||||
Purchase obligations |
39,195 | 14,255 | 19,762 | 5,178 | | |||||||||||||||
Long-term debt service(a) |
232,590 | 19,123 | 23,811 | 17,625 | 172,031 | |||||||||||||||
Other long-term liabilities (b) (c) |
| | | | | |||||||||||||||
Total |
$ | 351,468 | $ | 42,968 | $ | 58,095 | $ | 35,738 | $ | 214,667 | ||||||||||
(a) | Principal payments on callable subordinated debentures are scheduled by expected call dates. | |
(b) | Obligations under the qualified defined benefit pension plan are not included. Whitney anticipates making a pension contribution of approximately $8.5 million during 2010. No material near-term payments are expected under the unfunded nonqualified pension plan. A $14.4 million nonqualified plan obligation was recorded at year-end 2009. | |
(c) | The recorded obligation for postretirement benefits other than pensions was $19.0 million at December 31, 2009. The funding to purchase benefits for current retirees, net of retiree contributions, has not been significant. |
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OFF-BALANCE SHEET ARRANGEMENTS
As a normal part of its business, the Company enters into arrangements that create financial
obligations that are not recognized, wholly or in part, in the consolidated financial statements.
Certain of these arrangements, such as noncancelable operating leases, are reflected in Table 17
above. The most significant off-balance sheet obligations are the Banks commitments under
traditional credit-related financial instruments. Table 18 schedules these commitments as of
December 31, 2009 by the periods in which they expire. Commitments under credit card and personal
credit lines generally have no stated maturity.
TABLE 18. CREDIT-RELATED COMMITMENTS
Commitments expiring by period from December 31, 2009 | ||||||||||||||||||||
Less than | 1 - 3 | 3 - 5 | More than | |||||||||||||||||
(in thousands) | Total | 1 year | years | years | 5 years | |||||||||||||||
Loan commitments revolving |
$ | 2,296,865 | $ | 1,594,594 | $ | 559,872 | $ | 138,882 | $ | 3,517 | ||||||||||
Loan commitments nonrevolving |
239,313 | 166,175 | 71,008 | 2,130 | | |||||||||||||||
Credit card and personal credit lines |
560,116 | 560,116 | | | | |||||||||||||||
Standby and other letters of credit |
364,294 | 204,729 | 63,730 | 95,835 | | |||||||||||||||
Total |
$ | 3,460,588 | $ | 2,525,614 | $ | 694,610 | $ | 236,847 | $ | 3,517 | ||||||||||
Revolving loan commitments are issued primarily to support commercial activities. The
availability of funds under revolving loan commitments generally depends on whether the borrower
continues to meet credit standards established in the underlying contract and has not violated
other contractual conditions. A number of such commitments are used only partially or, in some
cases, not at all before they expire. Credit card and personal credit lines are generally subject
to cancellation if the borrowers credit quality deteriorates, and many lines remain partly or
wholly unused. Unfunded balances on revolving loan commitments and credit lines should not be used
to project actual future liquidity requirements. Nonrevolving loan commitments are issued mainly
to provide financing for the acquisition and development or construction of real property, both
commercial and residential, although not all are expected to lead to permanent financing by the
Bank. Expectations about the level of draws under all credit-related commitments, including the
prospect of temporarily increased levels of draws on back-up commercial facilities during periods
of disruption in the credit markets, are incorporated into the Companys liquidity and
asset/liability management models.
Substantially all of the letters of credit are standby agreements that obligate the Bank to
fulfill a customers financial commitments to a third party if the customer is unable to perform.
The Bank issues standby letters of credit primarily to provide credit enhancement to its customers
other commercial or public financing arrangements and to help them demonstrate financial capacity
to vendors. Historically, the Bank has had minimal calls to perform under standby agreements.
Certain financing arrangements supported by letters of credit from the Bank are structured as
variable-rate demand notes that are periodically remarketed to reset the interest rate. When
disruption in the credit markets led to unsuccessful remarketing efforts for some of these
financings, the Bank assisted its customers by purchasing the underlying instruments until
credit market conditions improved sufficiently to restart remarketing efforts or the instruments
were refinanced under new arrangements. The Bank no longer held any of these instruments by the
end of 2009. Outstanding letters of credit supporting variable-rate demand notes totaled
approximately $119 million at December 31, 2009.
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ASSET/LIABILITY MANAGEMENT
The objective of the Companys asset/liability management is to implement strategies for the
funding and deployment of its financial resources to maximize soundness and profitability over time
at acceptable levels of risk.
Interest rate sensitivity is the potential impact of changing rate environments on both net
interest income and cash flows. The Company has developed a model to measure its interest rate
sensitivity over the near term primarily by running net interest income simulations. Management
also monitors longer-term interest rate risk by modeling the sensitivity of its economic value of
equity. The model can be used to test the Companys sensitivity in various economic environments.
The model incorporates managements assumptions and expectations regarding such factors as loan and
deposit growth, pricing, prepayment speeds and spreads between interest rates. Assumptions can
also be entered into the model to evaluate the impact of possible strategic responses to changes in
the competitive environment. Management, through the Companys Investment and Asset and Liability
Committee, monitors simulation results against rate sensitivity guidelines specified in Whitneys
asset/liability management policy.
Based on the simulation run at December 31, 2009, annual net interest income (TE) would be
expected to decrease approximately $8.1 million, or 1.8%, if interest rates instantaneously
increased from current rates by 100 basis points. The sensitivity is measured against the results
of a base simulation run that uses forecasts of earning assets and funding sources as of the
measurement date and that assumes a stable rate environment and structure. A comparable simulation
run as of December 31, 2008 produced results that indicated a positive impact on net interest
income (TE) of $10.3 million, or 2.1%, from a 100 basis point rate increase. Although Whitney has
historically tended to be moderately asset sensitive over the near term, the more recent
simulations indicate a somewhat liability-sensitive position in a rising market rate scenario.
This shift reflects to a large extent the increased use of rate floors on variable-rate loans and
the extent to which these floors exceed the indexed rate in the current low rate environment.
Additional information on variable-rate loans and loans with rate floors is included in the
following section on Net Interest Income (TE). The simulation assuming a 100 basis point
decrease from current rates was suspended at both December 31, 2009 and December 31, 2008 in light
of the historically low rate environment. The results of the December 31, 2008 simulation reflect
adjustments to the underlying model in light of the unusually low rate environment and they differ
from those previously disclosed.
The actual impact that changes in interest rates have on net interest income will depend on a
number of factors. These factors include Whitneys ability to achieve any expected growth in
earning assets and to maintain a desired mix of earning assets and interest-bearing liabilities,
the actual timing of the repricing of assets and liabilities, the magnitude of interest rate
changes and corresponding movement in interest rate spreads, and the level of success of
asset/liability management strategies that are implemented.
Changes in interest rates affect the fair values of financial instruments. The earlier
section entitled Investment Securities and Notes 5 and 19 to the consolidated financial
statements located in Item 8 of this annual report on Form 10-K contain information regarding fair
values.
The Company has made minimal use of derivative financial instruments as part of its
asset/liability and liquidity management processes, but management continues to evaluate whether to
make additional use of these instruments. During 2009, the Bank began offering interest rate swap
agreements to commercial banking customers seeking to manage their interest rate risk. For each
customer swap agreement, the Bank has entered into an offsetting agreement with an unrelated
financial institution.
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RESULTS OF OPERATIONS
NET INTEREST INCOME (TE)
Whitneys net interest income (TE) decreased $12.5 million, or 3%, in 2009 compared to 2008.
Average earning assets were 7%, or $745 million, higher in 2009, largely reflecting the Parish
acquisition in late 2008, while the net interest margin (TE) contracted 43 basis points to 4.12%. The net
interest margin is net interest income (TE) as a percent of average earning assets. Tables 19 and
20 provide details on the components of the Companys net interest income (TE) and net interest
margin (TE). The loan totals in Table 19 include loans held for sale.
The overall yield on earning assets decreased 92 basis points to 4.82% in 2009. This decline
resulted mainly from a steep reduction in benchmark rates for the large variable-rate segment of
Whitneys loan portfolio compared to 2008. There was a small favorable shift in the earning asset
mix between these periods. The yield (TE) on the largely fixed-rate investment portfolio declined
39 basis points between 2008 and 2009.
Loan yields (TE) for 2009 declined 103 basis points compared to 2008. The rates on
approximately 28%, or $2.4 billion, of the loan portfolio at year-end 2009 vary based on LIBOR
benchmarks, with another 28% tied to prime. These percentages are consistent with those at
year-end 2008. The Bank has increased the use of rate floors on its loan products which has helped
limit the impact of declining benchmark rates on loan yields. At the end of 2009, approximately
59% of the outstanding balance of its LIBOR/prime-based loans was subject to rate floors compared
to 36% at the end of 2008.
The disruption in credit markets in the latter part of 2008 was reflected in wider than normal
spreads for LIBOR rates, which benefited Whitneys net interest income and margin for the fourth
quarter of 2008 and parts of the third quarter. Management estimates that the wider than normal
LIBOR spreads added 30 basis points to the net interest margin for the fourth quarter of 2008 and
10 basis points to 2008s annual margin.
The higher level of nonaccruing loans in 2009 has also reduced net interest income and lowered
the effective asset yield. Nonaccruing loans reduced Whitneys net interest margin by
approximately 20 basis points for 2009, which was 10 basis points more than the estimated impact on
the margin for 2008.
The cost of funds decreased 49 basis points from 2008 to .70% in 2009. The decline reflected
mainly the impact of the sustained low rate environment on both deposit and short-term borrowing
rates. The overall cost of interest-bearing deposits was down 58 basis points between 2008 and
2009, with the cost of the more rate sensitive time deposits down 98 basis points. Short-term
borrowing costs decreased 132 basis points over this same period. Noninterest-bearing demand
deposits funded a favorable 29% of average earning assets in 2009 and 28% in 2008, although the
benefit to the net interest margin was somewhat muted by the lower rate environment in the current
period. The percentage of funding from all noninterest-bearing sources increased to 34% compared
to 31% in 2008.
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TABLE 19. SUMMARY OF AVERAGE BALANCE SHEETS, NET INTEREST INCOME(TE)(a) YIELDS AND RATES
Year Ended | Year Ended | Year Ended | ||||||||||||||||||||||||||||||||||
(dollars in thousands) | December 31, 2009 | December 31, 2008 | December 31, 2007 | |||||||||||||||||||||||||||||||||
Average | Yield/ | Average | Yield/ | Average | Yield/ | |||||||||||||||||||||||||||||||
Balance | Interest | Rate | Balance | Interest | Rate | Balance | Interest | Rate | ||||||||||||||||||||||||||||
ASSETS |
||||||||||||||||||||||||||||||||||||
EARNING ASSETS |
||||||||||||||||||||||||||||||||||||
Loans (TE)(b) (c) |
$ | 8,812,986 | $ | 436,158 | 4.95 | % | $ | 8,080,658 | $ | 483,372 | 5.98 | % | $ | 7,364,777 | $ | 556,170 | 7.55 | % | ||||||||||||||||||
Mortgage-backed securities |
1,583,532 | 68,571 | 4.33 | 1,477,998 | 70,798 | 4.79 | 1,236,977 | 58,625 | 4.74 | |||||||||||||||||||||||||||
U.S. agency securities |
104,010 | 4,487 | 4.31 | 171,455 | 7,063 | 4.12 | 312,950 | 12,936 | 4.13 | |||||||||||||||||||||||||||
U.S. Treasury securities |
| | | 507 | 18 | 3.65 | 22,744 | 1,111 | 4.88 | |||||||||||||||||||||||||||
Obligations of states and political
subdivisions (TE) |
198,319 | 11,823 | 5.96 | 268,596 | 15,843 | 5.90 | 285,388 | 16,964 | 5.94 | |||||||||||||||||||||||||||
Other securities |
60,380 | 2,332 | 3.86 | 48,819 | 2,036 | 4.18 | 35,807 | 2,133 | 5.96 | |||||||||||||||||||||||||||
Total investment securities |
1,946,241 | 87,213 | 4.48 | 1,967,375 | 95,758 | 4.87 | 1,893,866 | 91,769 | 4.85 | |||||||||||||||||||||||||||
Federal funds sold and
short-term investments |
108,234 | 610 | .56 | 74,587 | 1,753 | 2.35 | 377,943 | 19,243 | 5.09 | |||||||||||||||||||||||||||
Total earning assets |
10,867,461 | $ | 523,981 | 4.82 | % | 10,122,620 | $ | 580,883 | 5.74 | % | 9,636,586 | $ | 667,182 | 6.92 | % | |||||||||||||||||||||
NONEARNING ASSETS |
||||||||||||||||||||||||||||||||||||
Other assets |
1,304,145 | 1,067,233 | 954,840 | |||||||||||||||||||||||||||||||||
Allowance for loan losses |
(216,010 | ) | (109,511 | ) | (79,004 | ) | ||||||||||||||||||||||||||||||
Total assets |
$ | 11,955,596 | $ | 11,080,342 | $ | 10,512,422 | ||||||||||||||||||||||||||||||
LIABILITES AND
SHAREHOLDERS EQUITY |
||||||||||||||||||||||||||||||||||||
INTEREST-BEARING LIABILITIES |
||||||||||||||||||||||||||||||||||||
NOW account deposits |
$ | 1,163,820 | $ | 4,266 | .37 | % | $ | 1,068,468 | $ | 6,523 | .61 | % | $ | 1,034,811 | $ | 12,074 | 1.17 | % | ||||||||||||||||||
Money market deposits |
1,659,663 | 15,527 | .94 | 1,220,312 | 13,741 | 1.13 | 1,222,341 | 35,454 | 2.90 | |||||||||||||||||||||||||||
Savings deposits |
883,803 | 1,395 | .16 | 917,531 | 3,926 | .43 | 920,028 | 8,879 | .97 | |||||||||||||||||||||||||||
Other time deposits |
844,236 | 16,693 | 1.98 | 774,512 | 24,222 | 3.13 | 829,264 | 31,736 | 3.83 | |||||||||||||||||||||||||||
Time deposits $100,000 and over |
1,419,669 | 25,464 | 1.79 | 1,602,111 | 43,184 | 2.70 | 1,682,981 | 74,857 | 4.45 | |||||||||||||||||||||||||||
Total interest-bearing deposits |
5,971,191 | 63,345 | 1.06 | 5,582,934 | 91,596 | 1.64 | 5,689,425 | 163,000 | 2.86 | |||||||||||||||||||||||||||
Short-term and other borrowings |
991,958 | 2,531 | .26 | 1,197,869 | 18,974 | 1.58 | 641,758 | 25,055 | 3.90 | |||||||||||||||||||||||||||
Long-term debt |
195,571 | 9,990 | 5.11 | 160,880 | 9,651 | 6.00 | 136,459 | 8,259 | 6.05 | |||||||||||||||||||||||||||
Total interest-bearing liabilities |
7,158,720 | $ | 75,866 | 1.06 | % | 6,941,683 | $ | 120,221 | 1.73 | % | 6,467,642 | $ | 196,314 | 3.04 | % | |||||||||||||||||||||
NONINTEREST-BEARING
LIABILITIES AND
SHAREHOLDERS EQUITY |
||||||||||||||||||||||||||||||||||||
Demand deposits |
3,134,811 | 2,786,003 | 2,708,353 | |||||||||||||||||||||||||||||||||
Other liabilities |
119,772 | 127,479 | 126,504 | |||||||||||||||||||||||||||||||||
Shareholders equity |
1,542,293 | 1,225,177 | 1,209,923 | |||||||||||||||||||||||||||||||||
Total liabilities and
shareholders equity |
$ | 11,955,596 | $ | 11,080,342 | $ | 10,512,422 | ||||||||||||||||||||||||||||||
Net interest income and margin (TE) |
$ | 448,115 | 4.12 | % | $ | 460,662 | 4.55 | % | $ | 470,868 | 4.89 | % | ||||||||||||||||||||||||
Net earning assets and spread |
$ | 3,708,741 | 3.76 | % | $ | 3,180,937 | 4.01 | % | $ | 3,168,944 | 3.88 | % | ||||||||||||||||||||||||
Interest cost of funding
earning assets |
.70 | % | 1.19 | % | 2.03 | % | ||||||||||||||||||||||||||||||
(a) | Tax-equivalent (TE) amounts are calculated using a marginal federal income tax rate of 35%. | |
(b) | Includes loans held for sale. | |
(c) | Average balance includes nonaccruing loans of $383,555 in 2009, $173,741 in 2008 and $66,051 in 2007. |
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TABLE 20. SUMMARY OF CHANGES IN NET INTEREST INCOME(TE)(a) (b)
Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||
2009 Compared to 2008 | 2008 Compared to 2007 | |||||||||||||||||||||||
Due to | Total | Due to | Total | |||||||||||||||||||||
Change in | Increase | Change in | Increase | |||||||||||||||||||||
(dollars in thousands) | Volume | Yield/Rate | (Decrease) | Volume | Yield/Rate | (Decrease) | ||||||||||||||||||
INTEREST INCOME (TE) |
||||||||||||||||||||||||
Loans (TE) |
$ | 41,203 | $ | (88,417 | ) | $ | (47,214 | ) | $ | 50,481 | $ | (123,279 | ) | $ | (72,798 | ) | ||||||||
Mortgage-backed securities |
4,848 | (7,075 | ) | (2,227 | ) | 11,539 | 634 | 12,173 | ||||||||||||||||
U.S. agency securities |
(2,896 | ) | 320 | (2,576 | ) | (5,829 | ) | (44 | ) | (5,873 | ) | |||||||||||||
U.S. Treasury securities |
(9 | ) | (9 | ) | (18 | ) | (854 | ) | (239 | ) | (1,093 | ) | ||||||||||||
Obligations of states and politica
subdivisions (TE) |
(4,188 | ) | 168 | (4,020 | ) | (991 | ) | (130 | ) | (1,121 | ) | |||||||||||||
Other securities |
455 | (159 | ) | 296 | 648 | (745 | ) | (97 | ) | |||||||||||||||
Total investment securities |
(1,790 | ) | (6,755 | ) | (8,545 | ) | 4,513 | (524 | ) | 3,989 | ||||||||||||||
Federal funds sold and
short-term investments |
567 | (1,710 | ) | (1,143 | ) | (10,468 | ) | (7,022 | ) | (17,490 | ) | |||||||||||||
Total interest income (TE) |
39,980 | (96,882 | ) | (56,902 | ) | 44,526 | (130,825 | ) | (86,299 | ) | ||||||||||||||
INTEREST EXPENSE |
||||||||||||||||||||||||
NOW account deposits |
540 | (2,797 | ) | (2,257 | ) | 381 | (5,932 | ) | (5,551 | ) | ||||||||||||||
Money market deposits |
4,378 | (2,592 | ) | 1,786 | (59 | ) | (21,654 | ) | (21,713 | ) | ||||||||||||||
Savings deposits |
(139 | ) | (2,392 | ) | (2,531 | ) | (24 | ) | (4,929 | ) | (4,953 | ) | ||||||||||||
Other time deposits |
2,023 | (9,552 | ) | (7,529 | ) | (1,994 | ) | (5,520 | ) | (7,514 | ) | |||||||||||||
Time deposits $100,000 and over |
(4,500 | ) | (13,220 | ) | (17,720 | ) | (3,443 | ) | (28,230 | ) | (31,673 | ) | ||||||||||||
Total interest-bearing deposits |
2,302 | (30,553 | ) | (28,251 | ) | (5,139 | ) | (66,265 | ) | (71,404 | ) | |||||||||||||
Short-term borrowings |
(2,796 | ) | (13,647 | ) | (16,443 | ) | 14,058 | (20,139 | ) | (6,081 | ) | |||||||||||||
Long-term debt |
1,898 | (1,559 | ) | 339 | 1,466 | (74 | ) | 1,392 | ||||||||||||||||
Total interest expense |
1,404 | (45,759 | ) | (44,355 | ) | 10,385 | (86,478 | ) | (76,093 | ) | ||||||||||||||
Change in net interest income (TE) |
$ | 38,576 | $ | (51,123 | ) | $ | (12,547 | ) | $ | 34,141 | $ | (44,347 | ) | $ | (10,206 | ) | ||||||||
(a) | Tax-equivalent (TE) amounts are calculated using a marginal federal income tax rate of 35%. | |
(b) | The change in interest shown as due to changes in either volume or rate includes an allocation of the amount that reflects the interaction of volume and rate changes. This allocation is based on the absolute dollar amounts of change due solely to changes in volume or rate. |
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There are several factors that will challenge Whitneys ability to increase net interest
income and expand the net interest margin in the near future. Continued weak loan demand will make
it difficult to grow earning assets and maintain the proportion of loans in the earning asset mix.
The rates on many variable-rate loans with rate floors currently exceed the underlying indexed
market rates. This will limit the benefit to Whitneys loan yields from any rise in market rates
as the economy recovers. Whitney continues to manage its deposit rates and funding mix to maintain
a favorable net interest margin, but the ability to further reduce funding costs has become limited
after the sustained period of low market rates.
Net interest income (TE) decreased $10.2 million, or 2%, in 2008 compared to 2007. Average
earning assets were 5%, or $486 million, higher in 2008, while the net interest margin (TE)
contracted 34 basis points to 4.55%.
The overall yield on earning assets decreased 118 basis points to 5.74% in 2008, again mainly
from a steep reduction in benchmark rates for variable-rate loans. The higher level of nonaccruing
loans in 2008 lowered the effective yield by approximately 10 basis points, but this was offset by
the impact of the wider than normal LIBOR spreads discussed earlier. Loan yields (TE) for 2008
declined 157 basis points compared to 2007. There was a favorable shift in the earning asset mix
between these periods, with loans comprising 80% of average earning assets for 2008 compared to 76%
in 2007. The yield (TE) on the fixed-rate investment portfolio was stable between 2007 and 2008.
The overall cost of funds decreased 84 basis points from 2007 to 2008. Noninterest-bearing
demand deposits funded 28% of average earning assets in both 2008 and 2007, and the percentage of
funding from all noninterest-bearing sources was 31% in 2008 compared to 33% in 2007. Rates on
interest-bearing deposits and short-term borrowings during 2008 were down sharply from 2007,
consistent with general market rate movements that were driven by the slowing economy and the trend
toward liquidity and safety by investors and savers. The reduction in funding costs from declining
rates was partially offset by the impact of a shift between these years toward higher-cost sources,
which includes time deposits and borrowings. This shift mainly reflected the increased use of
short-term borrowings to support earning asset growth.
PROVISION FOR CREDIT LOSSES
Whitney increased its provision for credit losses to $259 million in 2009 compared to $134
million in 2008. Provisions related to impaired loans accounted for approximately half of the total
provision for credit losses in 2009. More than $100 million of the impaired loan provisions came
from Whitneys Florida and Alabama markets and reflected in large part the continued decline in the
value of underlying real estate collateral. The remainder of the provision for credit losses for
2009 was related to the increase in total criticized loans, the impact of elevated charge-off
levels on historical loss factors, smaller consumer charge-offs and qualitative adjustments.
Net loan charge-offs were $195 million, or 2.22%, of average loans in 2009, compared to $71.3
million, or .88% of average loans, in 2008. Florida loans generated approximately $140 million of
the $204 million of gross charge-offs for 2009. The gross charge-offs were heavily concentrated in
residential-related real estate loans.
The provision for loan losses exceeded net charge-offs by $62.6 million during 2009, which
increased the allowance for loan losses to 2.66% of total loans at December 31, 2009 from 1.77% at
December 31, 2008.
For a more detailed discussion of changes in the allowance for loan losses, the reserve for
losses on unfunded credit commitments, nonperforming assets and general credit quality, see the
earlier section entitled Loans, Credit Risk Management and Allowance and Reserve for Credit
Losses. The future level of the allowance and reserve and the provisions for credit losses will
reflect managements ongoing evaluation of credit risk, based on established internal policies and
practices.
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NONINTEREST INCOME
Table 21 shows the components of noninterest income for each year in the three-year period
ended December 31, 2009, along with the percent changes between years for each component. In 2008,
Whitney recognized a $2.3 million gain from the mandatory redemption of a portion of its Visa
shares in connection with Visas restructuring and initial public offering. The 2007 noninterest
income total included a $31.3 million gain recognized on the settlement of insurance claims arising
from hurricanes that struck portions of Whitneys market area in 2005. Excluding these unusual
gains and income associated with foreclosed assets and surplus property, noninterest income grew
15%, or $15.4 million, in 2009 and 11%, or $10.1 million, in 2008. Parishs operations contributed
approximately $8.0 million to the increase for 2009.
TABLE 21. NONINTEREST INCOME
(dollars in thousands) | 2009 | %change | 2008 | %change | 2007 | |||||||||||||||
Service charges on deposit accounts |
$ | 37,699 | 11 | % | $ | 34,050 | 11 | % | $ | 30,676 | ||||||||||
Bank card fees |
19,886 | 13 | 17,670 | 7 | 16,487 | |||||||||||||||
Trust service fees |
11,984 | (7 | ) | 12,948 | | 12,969 | ||||||||||||||
Secondary mortgage market operations |
9,406 | 92 | 4,899 | | 4,915 | |||||||||||||||
Investment services income |
6,129 | 2 | 6,035 | 3 | 5,836 | |||||||||||||||
Credit-related fees |
6,304 | 6 | 5,921 | 9 | 5,417 | |||||||||||||||
ATM fees |
5,657 | (1 | ) | 5,693 | 6 | 5,374 | ||||||||||||||
Other fees and charges |
5,543 | 20 | 4,628 | (4 | ) | 4,818 | ||||||||||||||
Earnings from bank-owned life insurance program |
7,207 | 84 | 3,908 | (a | ) | | ||||||||||||||
Other operating income |
5,754 | (18 | ) | 6,979 | (80 | ) | 35,181 | |||||||||||||
Net gain on sales and other |
||||||||||||||||||||
revenue from foreclosed assets |
2,036 | (a | ) | 4,302 | (a | ) | 5,109 | |||||||||||||
Net gain (loss) on disposals of surplus property |
2,011 | (a | ) | 72 | (a | ) | (100 | ) | ||||||||||||
Securities transactions |
334 | (a | ) | 67 | (a | ) | (1 | ) | ||||||||||||
Total noninterest income |
$ | 119,950 | 12 | % | $ | 107,172 | (15 | )% | $ | 126,681 | ||||||||||
(a) | Percentage change not meaningful. |
Reduced overall economic activity and conservative behavior by Whitneys customers in
response to economic uncertainty limited the opportunity for growth in certain income categories in
2009, including deposit service charges and bank card fees. The Company is monitoring recent
legislative proposals that would impose limits on certain deposit and other transaction fees and
potentially reduce the Banks fee income.
Income from service charges on deposit accounts increased 11%, or $3.6 million, in 2009 on
higher commercial account fees and the impact of Parish. This followed an 11%, or $3.4 million,
increase between 2008 and 2007 also on higher commercial account fees. Service charges include
periodic account maintenance fees for both commercial and personal customers, charges for specific
transactions or services such as processing return items or wire transfers, and other revenue
associated with deposit accounts such as commissions on check sales.
The fees charged on a large number of Whitneys commercial accounts are based on an analysis
of account activity, and these customers are allowed to offset accumulated charges with an earnings
credit based on balances maintained in the account. The growth in commercial fees in each period
was driven in large part by a reduction in the earnings credit allowance in the low market rate
environment, although the impact was muted by higher account balances maintained in 2009.
Personal account service charges have been relatively stable, with aggressive competition
holding down the pricing for fees charged to service these deposit accounts.
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Charges earned on specific transactions and services in 2009 increased 4%, or $.7 million,
compared to 2008. Charges had decreased 3%, or $.6 million, in 2008 compared to 2007. Without
Parishs contribution, there would have been a decrease of over $1.0 million in 2009 reflecting in
part the conservative customer behavior discussed above. Broad trends in how customers execute
transactions have also been reducing charging opportunities in recent years. The main component of
this income category is fees earned on items returned for insufficient funds and for overdrafts.
Fee income generated by Whitneys secondary mortgage market operations grew $4.5 million in
2009, nearly double the level in 2008. This fee income category was stable between 2008 and 2007.
The low interest rate environment prompted increased refinancing activity in 2009 and results for
the year also benefited from the addition of Parishs mortgage operations. Relatively broad
weakness in the overall housing market was apparent in the latter part of 2007 and continued
throughout 2008 and into 2009. The market improved as 2009 progressed, but it is unclear if
continued improvement will generate loan production sufficient to offset an anticipated decrease in
refinancing activity. Whitney has positioned resources in those parts of its market area with the
best potential for loan production.
The Parish acquisition also benefited bank card fees, although most of the increase in this
income category in 2009 reflected a change in the reporting of certain transactions by a new
processor, with the offset in the ATM fees category. Excluding the impact of this change in 2009,
bank card fees increased 4%, or $.8 million, in 2009 and 7%, or $1.1 million, in 2008. This income
category includes fees from activity on Bank-issued debit and credit cards as well as from merchant
processing services.
Trust service fees declined 7%, or $1.0 million, in 2009 and were essentially unchanged
between 2008 and 2007 under difficult financial market conditions. Whitney has positioned
relationship officers to attract and service trust and wealth management customers across its
market area.
Whitney implemented a bank-owned life insurance program in May 2008. Earnings on the $150
million used to purchase policies under this program increased $3.3 million in 2009 compared to
2008.
In the latter part of 2009, the Bank began offering interest rate swap agreements to
commercial banking customers seeking to manage their interest rate risk. Income related to this
service added $.5 million to other operating income in 2009. The Visa share redemption gain and
the insurance settlement gain mentioned above are included in the totals for other operating income
for 2008 and 2007, respectively.
The net gain on sales and other revenue from foreclosed assets includes income from
grandfathered assets carried at a nominal value. Such income totaled $1.9 million in 2009, $3.8
million in 2008 and $4.3 million in 2007, with the fluctuations mainly reflecting opportunities for
asset sales.
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NONINTEREST EXPENSE
Table 22 shows the components of noninterest expense for each year in the three-year period
ended December 31, 2009, along with the percent changes between years for each component.
Noninterest expense increased 19%, or $65.3 million, in 2009, following an increase of 1%, or $2.0
million, from 2007 to 2008. Incremental operating costs associated with acquired operations,
including the amortization of acquired intangibles, totaled approximately $23.8 million in 2009 and
$7.9 million in 2008. Loan collection costs, including legal services, and foreclosed asset
expenses and provisions for valuation losses totaled approximately $28 million for 2009, up
approximately $21 million from 2008. The expense for deposit insurance and other regulatory fees
was up approximately $19 million compared to 2008, reflecting mainly steps taken by the FDIC to
maintain the integrity of the deposit insurance fund as it absorbs recent bank failures.
TABLE 22. NONINTEREST EXPENSE
(dollars in thousands) | 2009 | %change | 2008 | %change | 2007 | |||||||||||||||
Employee compensation |
$ | 158,116 | 5 | % | $ | 150,614 | (6 | )% | $ | 159,850 | ||||||||||
Employee benefits |
43,223 | 32 | 32,808 | (3 | ) | 33,694 | ||||||||||||||
Total personnel |
201,339 | 10 | 183,422 | (5 | ) | 193,544 | ||||||||||||||
Net occupancy |
38,810 | 8 | 35,906 | 7 | 33,568 | |||||||||||||||
Equipment and data processing |
25,770 | 3 | 25,035 | 9 | 22,886 | |||||||||||||||
Legal and other professional services |
19,556 | 44 | 13,612 | 28 | 10,652 | |||||||||||||||
Deposit insurance and regulatory fees |
24,260 | 352 | 5,373 | 118 | 2,462 | |||||||||||||||
Telecommunication and postage |
12,288 | 11 | 11,118 | (10 | ) | 12,420 | ||||||||||||||
Corporate value and franchise taxes |
8,684 | (7 | ) | 9,312 | (3 | ) | 9,571 | |||||||||||||
Amortization of intangibles |
8,767 | 13 | 7,785 | (28 | ) | 10,879 | ||||||||||||||
Security and other outsourced services |
17,094 | 8 | 15,758 | | 15,735 | |||||||||||||||
Bank card processing services |
5,019 | 16 | 4,319 | 8 | 4,008 | |||||||||||||||
Advertising and promotion |
4,167 | (14 | ) | 4,824 | 2 | 4,740 | ||||||||||||||
Operating supplies |
4,136 | (2 | ) | 4,223 | 3 | 4,120 | ||||||||||||||
Provision for valuation losses on foreclosed assets |
11,660 | 825 | 1,260 | 916 | 124 | |||||||||||||||
Nonlegal loan collection and other foreclosed asset costs |
8,418 | 212 | 2,696 | 438 | 501 | |||||||||||||||
Miscellaneous operating losses |
3,116 | (41 | ) | 5,269 | 27 | 4,140 | ||||||||||||||
Other operating expense |
23,310 | 10 | 21,182 | 7 | 19,758 | |||||||||||||||
Total noninterest expense |
$ | 416,394 | 19 | % | $ | 351,094 | 1 | % | $ | 349,108 | ||||||||||
Employee compensation increased 5%, or $7.5 million, in 2009, after decreasing 6%, or
$9.2 million, in 2008. Employee compensation includes base pay and contract labor costs,
compensation earned under sales-based and other employee incentive programs, and compensation
expense under management incentive plans.
Compensation other than that earned under management incentive plans increased 9%, or $12.4
million, in 2009, with approximately $7.7 million of the total increase related to the staff of
acquired operations. This followed an increase of 3%, or $4.0 million, from 2007 to 2008, when
acquired operations contributed approximately $2.1 million to the total change. The increase in
2009 compensation unrelated to acquisitions of $4.7 million reflected normal salary adjustments and
higher sales-based incentive-program compensation related mainly to secondary mortgage operations.
The average full-time equivalent staff level was down slightly between 2009 and 2008, excluding the
impact of acquired staff. The compensation added for normal salary adjustments in 2008 was partly
offset by the favorable impact of a 2% reduction in the average full-time equivalent staff level
compared to 2007, excluding the acquired staff. Sales-based incentive-program compensation
increased only slightly in 2008, consistent with the level of growth in fee-based income categories
discussed earlier.
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Compensation expense associated with management incentive programs decreased by $4.9 million
in 2009 and $13.3 million in 2008, largely as a result of tightened performance criteria coupled
with the current difficult operating environment. No bonus was earned under the cash bonus
incentive program for 2009 or 2008. Reduced share-based compensation has reflected in part the
lower estimated cost of more recent awards relative to the cost of prior awards that vested in 2009
and 2008. Share-based incentives currently include restricted stock units, both performance-based
and tenure-based, and stock options. See Notes 2 and 16 to the consolidated financial statements
located in Item 8 of this annual report on Form 10-K for more information on share-based
compensation.
Employee benefits expense increased 32%, or $10.4 million, in 2009, following a decrease of
3%, or $.9 million, in 2008. The major components of employee benefits expense, in addition to
payroll taxes, are the cost of providing pension benefits through both the defined-benefit plans
and a 401(k) employee savings plan and the cost of providing health benefits for active and retired
employees.
The increase in employee benefits expense in 2009 was driven mainly by the cost of providing
pension benefits. The addition of the Parish staff added approximately $1.3 million to benefits
expense for 2009.
The performance of the pension trust fund for 2008 was substantially below the long-term
expected rate of return, reflecting conditions in the equity and corporate debt markets. This
level of fund performance contributed to an increase of $3.1 million in the actuarially determined
periodic expense for the defined-benefit pension plan in 2009. As described more fully in Note 15
to the consolidated financial statements, Whitney amended its qualified defined-benefit pension
plan in late 2008 to limit future eligibility and to freeze benefit accruals for certain current
participants. At the same time, the employee savings plan was amended to authorize the Company to
make discretionary profit sharing contributions, beginning in 2009, on behalf of participants in
the savings plan who are ineligible to participate in the qualified defined-benefit plan or subject
to the freeze in benefit accruals. The discretionary profit sharing contribution added $2.6
million to 2009 expense.
Net occupancy expense increased 8%, or $2.9 million, in 2009, following a 7%, or $2.3 million,
increase in 2008 compared to 2007. The incremental impact of acquired operations totaled
approximately $2.1 million in 2009 and $.6 million in 2008. Increased expenses related to de novo
branch expansion and higher energy costs drove most of the remaining increase for 2008.
Equipment and data processing expense increased 3%, or $.7 million, in 2009. The incremental
costs for acquired operations totaled approximately $1.2 million in 2009. Costs added in 2009
related to the initiative to replace the core data processing system, the opening of a new
operations center and various new and enhanced applications, were offset by savings achieved on
certain major contract renewals and the elimination of some costs associated with the Banks
response to operational difficulties encountered in the aftermath the major hurricanes in 2005.
Equipment and data processing expense in 2008 was up 9% over 2007, driven in large part by the cost
of new customer-oriented applications associated with strategic initiatives and by branch
expansion. Acquired operations contributed $.4 million to the 2008 increase.
The total expense for professional services, both legal and other services, increased $5.9
million in 2009 and $3.0 million in 2008. Legal expense increased $4.9 million to a total of $9.7
million in 2009 and was up $1.7 million in 2008. Each increase came mainly from higher costs
associated with problem loan collection efforts. The legal expense category also includes the cost
of services for general corporate matters. The expense for nonlegal professional services was up
$1.1 million in 2009, following a $1.3 million increase in 2008 compared to 2007. The 2009 expense
total included consulting costs related to the initiative to replace core data processing systems,
the set-up of the new operations center and an internal stress test of Whitneys capital adequacy
under various credit loss scenarios. Consultants have also been engaged over the past three years
to assist in strategic planning, the upgrade of major customer interface tools, the development and
implementation of product enhancements and process improvements, and regulatory compliance efforts.
Both 2008 and 2007 included approximately $1.0 million for assistance integrating the systems of
acquired operations.
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Other costs associated with problem loan collections and foreclosed assets increased $16.1
million in 2009, including a $10.4 million additional provision to increase the valuation allowance
on foreclosed property. These costs were up $3.3 million in 2008 compared to 2007. Expenses
associated with problem loan collections and foreclosed assets are expected to remain elevated in
the near term.
The $1.3 million reduction in telecommunications and postage expense in 2008 mainly reflected
the elimination of some redundant communication services used during an upgrade project in 2007.
This was part of the overall efforts to improve operational resiliency in the event of a natural
disaster.
Amortization of intangibles is associated mainly with the value of deposit relationships
acquired in bank and branch acquisitions. Amortization expense of $5.2 million is scheduled for
2010. Note 3 to the consolidated financial statements located in Item 8 of this annual report on
Form 10-K reviews recently completed acquisitions and Note 10 presents additional information on
intangible assets subject to amortization.
The expense for deposit insurance and other regulatory fees in 2009 was up $18.9 million
compared to 2008. Recent bank failures and economic conditions have put pressure on deposit
insurance reserve ratios and led the FDIC to introduce a higher rate structure in 2009. Whitney
also elected to participate in the FDICs Temporary Liquidity Guarantee Program that provides for
full deposit insurance coverage for specified deposit categories. This program began October 14,
2008 and is scheduled to end June 30, 2010, with increased premiums beginning in 2010. During
2009, the FDIC also imposed an industry-wide emergency special assessment at 5 basis points of the
insured institutions total assets less Tier 1 regulatory capital. Whitneys assessment totaled
$5.5 million. The FDIC will increase regular assessment rates in the future as needed to maintain
the integrity of the deposit insurance fund. The $2.9 million increase in deposit insurance and
other regulatory fees in 2008 reflected mainly the availability of a one-time credit to offset
deposit insurance assessments imposed under a rate structure that was adopted by the FDIC for 2007.
The one-time credit fully offset the Banks 2007 assessment as well as $1.6 million of the Banks
$4.4 million assessment for 2008.
Miscellaneous operating losses included uninsured casualty losses and certain expenses
associated with tropical storms that struck parts of the Companys market area totaling
approximately $2.1 million in 2008 and $1.0 million in 2007. Whitney also took charges of $.3
million in 2009 and $1.9 million in 2008 related to the planned closure of branch facilities. In
2007, the Company recorded a charge of $1.0 million to establish a liability with respect to an
indemnification agreement with Visa. As discussed in Note 20 to the consolidated financial
statements located in Item 8 of this annual report on Form 10-K, this liability was reversed in
2008.
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INCOME TAXES
The Company provided for income tax expense or benefit at an effective rate of 44.5% in 2009,
24.6% in 2008 and 33.0% in 2007. Whitneys effective tax rates have varied from the 35% federal
statutory rate primarily because of tax-exempt interest income and the availability of tax credits.
Interest income from the financing of state and local governments and earnings from the bank-owned
life insurance program are the major components of tax-exempt income. The main source of tax
credits has been investments in affordable housing projects and, beginning in 2008, in projects
that primarily benefit low-income communities or help the recovery and redevelopment of communities
in the Gulf Opportunity Zone. Tax-exempt income and tax credits tend to increase the effective tax
benefit rate from the statutory rate in loss periods and to reduce the tax expense rate in
profitable periods. The impact on the effective rate becomes more pronounced as the pre-tax income
or loss becomes smaller, leading to lower expense rates and higher tax benefit rates. Table 23
reconciles reported income tax expense to that computed at the statutory federal tax rate for each
year in the three-year period ended December 31, 2009.
TABLE 23. INCOME TAXES
(in thousands) | 2009 | 2008 | 2007 | |||||||||
Income tax expense (benefit) at 35% of pre-tax income |
$ | (39,204 | ) | $ | 27,203 | $ | 78,877 | |||||
Increase (decrease) resulting from |
||||||||||||
Tax exempt income |
(5,399 | ) | (4,411 | ) | (3,432 | ) | ||||||
Tax credits |
(4,868 | ) | (4,358 | ) | (2,785 | ) | ||||||
State income tax and miscellaneous items |
(395 | ) | 704 | 1,650 | ||||||||
Income tax expense (benefit) reported |
$ | (49,866 | ) | $ | 19,138 | $ | 74,310 | |||||
Louisiana-sourced income of commercial banks is not subject to state income taxes.
Rather, a bank in Louisiana pays a tax based on the value of its capital stock in lieu of income
and franchise taxes, and this tax is allocated to parishes in which the bank maintains branches.
Whitneys corporate value tax is included in noninterest expense. This expense will fluctuate in
part based on the growth in the Banks equity and earnings and in part based on market valuation
trends for the banking industry.
FOURTH QUARTER RESULTS
Whitney reported net income of $318,000 for the fourth quarter of 2009 compared to a net loss
of $30.0 million for the third quarter of 2009. Including dividends on preferred stock, the loss
to common shareholders was $3.75 million, or $.04 per diluted common share, for the fourth quarter
of 2009 compared to a loss of $34.1 million, or $.50 per diluted share, for the third quarter of
2009. The Company earned $8.2 million, or $.12 per diluted common share, for the fourth quarter of
2008.
The following discussion highlights factors impacting recent trends in Whitneys operating
results:
| Net interest income (TE) for the fourth quarter of 2009 increased 1.3%, or $1.4 million, compared to the third quarter of 2009. Although average earning assets were down slightly between these periods, the net interest margin (TE) improved 9 basis points to 4.20%, reflecting mainly a further reduction in the cost of funds. Funding costs benefited from the maturity or renewal in the current low interest rate environment of higher-cost certificates of deposit from a 2008 campaign as well as rate reductions on deposits from a special money market campaign earlier in 2009. | ||
| Whitney provided $39.5 million for credit losses in the fourth quarter of 2009, down 51%, or $41 million, from the $80.5 million provision in the third quarter of 2009. Provisions related to impaired loans accounted for 75%, or almost $30 million, of the quarters total provision for credit losses, with almost $26 million from the Florida and Alabama markets. These provisions reflect in part the continued decline in the value of real estate collateral. The remainder of the quarters provision for credit losses was related mainly to residential mortgage and consumer charge-offs. Total criticized loans declined $124 million during the fourth quarter from its peak of $1.18 billion in the third quarter of 2009. Criticized loans in Louisiana, Florida and Texas declined $52 million, $39 million and $33 |
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million, respectively. Net loan charge-offs in the fourth quarter of 2009 were $54.5 million, or 2.59%, of average loans on an annualized basis compared to $61.9 million, or 2.86%, of average loans in the third quarter of 2009. Approximately 70% of gross charge-offs came from credits in the Florida market, mainly the Tampa Bay region. | |||
| Noninterest income for 2009s fourth quarter decreased less than 1%, or $.2 million, from the third quarter of 2009. Deposit service charge income in the fourth quarter of 2009 was down 3%, or $.3 million, reflecting mainly the impact of higher balances maintained in commercial accounts subject to analysis charges and earnings credits. | ||
| Total noninterest expense for the fourth quarter of 2009 increased less than 1%, or $.5 million, from the third quarter of 2009. Employee compensation was down $2.1 million mainly from reductions in both sales-based incentive plan compensation and share-based compensation on updated performance estimates. The cost of employee benefits increased $.9 million for the fourth quarter of 2009 related mainly to various retirement plan expense adjustments. Loan collection costs, including legal services, and foreclosed asset expenses and provisions for valuation losses totaled $8.6 million in the fourth quarter of 2009, up $1.8 million from the third quarter of 2009. |
The Summary of Quarterly Financial Information appearing in Item 8 of this annual report on
Form 10-K provides selected comparative financial information for each of the four quarters in 2009
and 2008.
Item 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required for this item is included in the section entitled Asset/Liability
Management in Managements Discussion and Analysis of Financial Condition and Results of
Operations that appears in Item 7 of this annual report on Form 10-K and is incorporated here by
reference.
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Item 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
SUMMARY OF QUARTERLY FINANCIAL INFORMATION (Unaudited)
2009 Quarters | ||||||||||||||||
(dollars in thousands, except per share data) | 4th | 3rd | 2nd | 1st | ||||||||||||
Net interest income |
$ | 111,391 | $ | 109,854 | $ | 110,572 | $ | 111,615 | ||||||||
Net interest income (TE) |
112,396 | 110,975 | 111,820 | 112,924 | ||||||||||||
Provision for credit losses |
39,500 | 80,500 | 74,000 | 65,000 | ||||||||||||
Noninterest income |
29,026 | 29,227 | 32,431 | 29,266 | ||||||||||||
Net securities gains in noninterest income |
139 | 195 | | | ||||||||||||
Noninterest expense |
104,143 | 103,596 | 111,807 | 96,848 | ||||||||||||
Income tax benefit |
(3,544 | ) | (14,991 | ) | (21,503 | ) | (9,828 | ) | ||||||||
Net income (loss) |
$ | 318 | $ | (30,024 | ) | $ | (21,301 | ) | $ | (11,139 | ) | |||||
Net loss to common shareholders |
$ | (3,749 | ) | $ | (34,091 | ) | $ | (25,368 | ) | $ | (15,164 | ) | ||||
Average balances |
||||||||||||||||
Total assets |
$ | 11,733,149 | $ | 11,796,108 | $ | 12,140,311 | $ | 12,159,252 | ||||||||
Earning assets |
10,635,573 | 10,723,215 | 11,062,643 | 11,054,605 | ||||||||||||
Loans |
8,434,397 | 8,661,806 | 8,945,911 | 9,068,755 | ||||||||||||
Deposits |
9,017,220 | 9,076,350 | 9,212,882 | 9,119,000 | ||||||||||||
Shareholders equity |
1,629,312 | 1,485,525 | 1,520,609 | 1,533,293 | ||||||||||||
Ratios |
||||||||||||||||
Return on average assets |
.01 | % | (1.01 | )% | (.70 | )% | (.37 | )% | ||||||||
Return on average common equity |
(1.11 | ) | (11.36 | ) | (8.30 | ) | (4.96 | ) | ||||||||
Net interest margin |
4.20 | 4.11 | 4.05 | 4.13 | ||||||||||||
Earnings (loss) per common share |
||||||||||||||||
Basic |
$ | (.04 | ) | $ | (.50 | ) | $ | (.38 | ) | $ | (.22 | ) | ||||
Diluted |
(.04 | ) | (.50 | ) | (.38 | ) | (.22 | ) | ||||||||
Cash dividends per common share |
.01 | .01 | .01 | .01 | ||||||||||||
Common stock trading data |
||||||||||||||||
High price |
$ | 9.69 | $ | 11.27 | $ | 15.33 | $ | 16.16 | ||||||||
Low price |
7.78 | 7.94 | 8.33 | 8.17 | ||||||||||||
End-of-period closing price |
9.11 | 9.54 | 9.16 | 11.45 | ||||||||||||
Trading volume |
79,863,609 | 49,059,850 | 62,308,611 | 48,896,275 | ||||||||||||
All prices as reported on The Nasdaq Global Select Market.
58
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SUMMARY OF QUARTERLY FINANCIAL INFORMATION (Unaudited) (continued)
2008 Quarters | ||||||||||||||||
(dollars in thousands, except per share data) | 4th | 3rd | 2nd | 1st | ||||||||||||
Net interest income |
$ | 119,540 | $ | 111,435 | $ | 111,125 | $ | 113,545 | ||||||||
Net interest income (TE) |
120,902 | 112,601 | 112,344 | 114,815 | ||||||||||||
Provision for credit losses |
45,000 | 40,000 | 35,000 | 14,000 | ||||||||||||
Noninterest income |
27,050 | 25,472 | 26,174 | 28,476 | ||||||||||||
Net securities gains in noninterest income |
| 67 | | | ||||||||||||
Noninterest expense |
92,026 | 89,549 | 85,590 | 83,929 | ||||||||||||
Income tax expense |
756 | 310 | 3,835 | 14,237 | ||||||||||||
Net income |
$ | 8,808 | $ | 7,048 | $ | 12,874 | $ | 29,855 | ||||||||
Net income to common shareholders |
$ | 8,220 | $ | 7,048 | $ | 12,874 | $ | 29,855 | ||||||||
Average balances |
||||||||||||||||
Total assets |
$ | 11,777,922 | $ | 10,902,329 | $ | 10,838,912 | $ | 10,796,496 | ||||||||
Earning assets |
10,719,892 | 9,892,165 | 9,929,683 | 9,944,709 | ||||||||||||
Loans |
8,700,317 | 8,007,507 | 7,866,942 | 7,685,478 | ||||||||||||
Deposits |
8,646,612 | 8,230,249 | 8,220,223 | 8,377,141 | ||||||||||||
Shareholders equity |
1,264,714 | 1,192,535 | 1,213,461 | 1,229,921 | ||||||||||||
Ratios |
||||||||||||||||
Return on average assets |
.30 | % | .26 | % | .48 | % | 1.11 | % | ||||||||
Return on average common equity |
2.67 | 2.35 | 4.27 | 9.76 | ||||||||||||
Net interest margin |
4.49 | 4.53 | 4.54 | 4.64 | ||||||||||||
Earnings per common share |
||||||||||||||||
Basic |
$ | .12 | $ | .11 | $ | .20 | $ | .45 | ||||||||
Diluted |
.12 | .11 | .20 | .45 | ||||||||||||
Cash dividends per common share |
.20 | .31 | .31 | .31 | ||||||||||||
Common stock trading data |
||||||||||||||||
High price |
$ | 26.37 | $ | 33.02 | $ | 26.32 | $ | 27.49 | ||||||||
Low price |
14.14 | 13.96 | 17.85 | 21.12 | ||||||||||||
End-of-period closing price |
15.99 | 24.25 | 18.30 | 24.79 | ||||||||||||
Trading volume |
42,771,277 | 72,540,716 | 53,522,061 | 45,483,491 | ||||||||||||
All prices as reported on The Nasdaq Global Select Market.
59
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MANAGEMENTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of Whitney Holding Corporation is responsible for establishing and
maintaining adequate internal control over financial reporting for the Company. Internal control
over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. Internal control over
financial reporting includes those policies and procedures that (i) pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with generally accepted
accounting principles and that receipts and expenditures of the Company are being made only in
accordance with authorizations of management and directors of the Company; and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the Companys assets that could have a material effect on the financial statements.
Management used the framework of criteria established in Internal Control Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission to conduct
an evaluation of the effectiveness of internal control over financial reporting. Based on that
evaluation, management concluded that internal control over financial reporting for the Company as
of December 31, 2009 was effective.
Because of its inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Also, projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
The effectiveness of the Companys internal control over financial reporting as of December
31, 2009 has been audited by PricewaterhouseCoopers LLP, an independent registered public
accounting firm, as stated in their report, which follows.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To Shareholders and Board of Directors
of Whitney Holding Corporation:
of Whitney Holding Corporation:
In our opinion, the accompanying consolidated balance sheets and the related consolidated
statements of income, changes in shareholders equity and cash flows present fairly, in all
material respects, the financial position of Whitney Holding Corporation and its subsidiaries (the
Company) at December 31, 2009 and 2008, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 2009 in conformity with accounting
principles generally accepted in the United States of America. Also in our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2009, based on criteria established in Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Companys
management is responsible for these financial statements, for maintaining effective internal
control over financial reporting and for its assessment of the effectiveness of internal control
over financial reporting, included in the accompanying Managements Report on Internal Control
Over Financial Reporting. Our responsibility is to express opinions on these financial statements
and on the Companys internal control over financial reporting based on our integrated audits. We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material misstatement and
whether effective internal control over financial reporting was maintained in all material
respects. Our audits of the financial statements included examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating the overall financial
statement presentation. Our audit of internal control over financial reporting included obtaining
an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk. Our audits also included performing such other procedures as
we considered necessary in the circumstances. We believe that our audits provide a reasonable basis
for our opinions.
A companys internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting
principles. A companys internal control over financial reporting includes those policies and
procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (iii) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the companys assets that could have
a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Also, projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
/s/PricewaterhouseCoopers LLP
March 1, 2010
March 1, 2010
61
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WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31 | ||||||||
(dollars in thousands) | 2009 | 2008 | ||||||
ASSETS |
||||||||
Cash and due from financial institutions |
$ | 216,347 | $ | 299,619 | ||||
Federal funds sold and short-term investments |
212,219 | 167,268 | ||||||
Loans held for sale |
33,745 | 20,773 | ||||||
Investment securities |
||||||||
Securities available for sale |
1,875,495 | 1,728,962 | ||||||
Securities held to maturity, fair values of $180,384 and $213,920, respectively |
174,945 | 210,393 | ||||||
Total investment securities |
2,050,440 | 1,939,355 | ||||||
Loans, net of unearned income |
8,403,443 | 9,081,850 | ||||||
Allowance for loan losses |
(223,671 | ) | (161,109 | ) | ||||
Net loans |
8,179,772 | 8,920,741 | ||||||
Bank premises and equipment |
223,142 | 212,501 | ||||||
Goodwill |
435,678 | 435,678 | ||||||
Other intangible assets |
14,116 | 22,883 | ||||||
Accrued interest receivable |
32,841 | 39,799 | ||||||
Other assets |
493,841 | 321,884 | ||||||
Total assets |
$ | 11,892,141 | $ | 12,380,501 | ||||
LIABILITIES |
||||||||
Noninterest-bearing demand deposits |
$ | 3,301,354 | $ | 3,233,550 | ||||
Interest-bearing deposits |
5,848,540 | 6,028,044 | ||||||
Total deposits |
9,149,894 | 9,261,594 | ||||||
Short-term borrowings |
734,606 | 1,276,636 | ||||||
Long-term debt |
199,707 | 179,236 | ||||||
Accrued interest payable |
11,908 | 19,789 | ||||||
Accrued expenses and other liabilities |
114,962 | 117,768 | ||||||
Total liabilities |
10,211,077 | 10,855,023 | ||||||
SHAREHOLDERS EQUITY |
||||||||
Preferred stock, no par value |
||||||||
Authorized, 20,000,000 shares; issued and outstanding, 300,000 shares |
294,974 | 293,706 | ||||||
Common stock, no par value |
||||||||
Authorized - 200,000,000 shares Issued - 96,947,377 and 67,845,159 shares, respectively |
2,800 | 2,800 | ||||||
Capital surplus |
617,038 | 397,703 | ||||||
Retained earnings |
790,481 | 869,918 | ||||||
Accumulated other comprehensive loss |
(11,532 | ) | (25,952 | ) | ||||
Treasury stock at cost - 500,000 shares |
(12,697 | ) | (12,697 | ) | ||||
Total shareholders equity |
1,681,064 | 1,525,478 | ||||||
Total liabilities and shareholders equity |
$ | 11,892,141 | $ | 12,380,501 | ||||
The accompanying notes are an integral part of these financial statements.
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WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31 | ||||||||||||
(dollars in thousands, except per share data) | 2009 | 2008 | 2007 | |||||||||
INTEREST INCOME |
||||||||||||
Interest and fees on loans |
$ | 435,613 | $ | 483,009 | $ | 554,991 | ||||||
Interest and dividends on investment securities |
||||||||||||
Taxable securities |
75,390 | 82,461 | 77,774 | |||||||||
Tax-exempt securities |
7,685 | 8,643 | 9,097 | |||||||||
Interest on federal funds sold and short-term investments |
610 | 1,753 | 19,243 | |||||||||
Total interest income |
519,298 | 575,866 | 661,105 | |||||||||
INTEREST EXPENSE |
||||||||||||
Interest on deposits |
63,345 | 91,596 | 163,000 | |||||||||
Interest on short-term borrowings |
2,531 | 18,974 | 25,055 | |||||||||
Interest on long-term debt |
9,990 | 9,651 | 8,259 | |||||||||
Total interest expense |
75,866 | 120,221 | 196,314 | |||||||||
NET INTEREST INCOME |
443,432 | 455,645 | 464,791 | |||||||||
PROVISION FOR CREDIT LOSSES |
259,000 | 134,000 | 17,000 | |||||||||
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES |
184,432 | 321,645 | 447,791 | |||||||||
NONINTEREST INCOME |
||||||||||||
Service charges on deposit accounts |
37,699 | 34,050 | 30,676 | |||||||||
Bank card fees |
19,886 | 17,670 | 16,487 | |||||||||
Trust service fees |
11,984 | 12,948 | 12,969 | |||||||||
Secondary mortgage market operations |
9,406 | 4,899 | 4,915 | |||||||||
Other noninterest income |
40,641 | 37,538 | 61,635 | |||||||||
Securities transactions |
334 | 67 | (1 | ) | ||||||||
Total noninterest income |
119,950 | 107,172 | 126,681 | |||||||||
NONINTEREST EXPENSE |
||||||||||||
Employee compensation |
158,116 | 150,614 | 159,850 | |||||||||
Employee benefits |
43,223 | 32,808 | 33,694 | |||||||||
Total personnel |
201,339 | 183,422 | 193,544 | |||||||||
Net occupancy |
38,810 | 35,906 | 33,568 | |||||||||
Equipment and data processing |
25,770 | 25,035 | 22,886 | |||||||||
Legal and other professional services |
19,556 | 13,612 | 10,652 | |||||||||
Deposit insurance and regulatory fees |
24,260 | 5,373 | 2,462 | |||||||||
Telecommunication and postage |
12,288 | 11,118 | 12,420 | |||||||||
Corporate value and franchise taxes |
8,684 | 9,312 | 9,571 | |||||||||
Amortization of intangibles |
8,767 | 7,785 | 10,879 | |||||||||
Other noninterest expense |
76,920 | 59,531 | 53,126 | |||||||||
Total noninterest expense |
416,394 | 351,094 | 349,108 | |||||||||
INCOME (LOSS) BEFORE INCOME TAXES |
(112,012 | ) | 77,723 | 225,364 | ||||||||
INCOME TAX EXPENSE (BENEFIT) |
(49,866 | ) | 19,138 | 74,310 | ||||||||
NET INCOME (LOSS) |
$ | (62,146 | ) | $ | 58,585 | $ | 151,054 | |||||
Preferred stock dividends |
16,226 | 588 | | |||||||||
- | ||||||||||||
NET INCOME (LOSS) TO COMMON SHAREHOLDERS |
$ | (78,372 | ) | $ | 57,997 | $ | 151,054 | |||||
EARNINGS (LOSS) PER COMMON SHARE |
||||||||||||
Basic |
$ | (1.08 | ) | $ | .89 | $ | 2.23 | |||||
Diluted |
(1.08 | ) | .88 | 2.21 | ||||||||
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING |
||||||||||||
Basic |
72,824,964 | 64,767,708 | 66,953,343 | |||||||||
Diluted |
72,824,964 | 65,087,861 | 67,476,756 | |||||||||
CASH DIVIDENDS PER COMMON SHARE |
$ | .04 | $ | 1.13 | $ | 1.16 | ||||||
The accompanying notes are an integral part of these financial statements.
63
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WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
Common | Accumulated | |||||||||||||||||||||||||||
Stock and | Other | |||||||||||||||||||||||||||
Preferred | Common | Capital | Retained | Comprehensive | Treasury | |||||||||||||||||||||||
(dollars and shares in thousands, except per share data) | Stock | Shares | Surplus | Earnings | Income (Loss) | Stock | Total | |||||||||||||||||||||
Balance at December 31, 2006 |
$ | | 65,930 | $ | 346,497 | $ | 812,644 | $ | (41,015 | ) | $ | (5,164 | ) | $ | 1,112,962 | |||||||||||||
Adjustment on adoption of FIN 48 (Note 23) |
| | | 721 | | | 721 | |||||||||||||||||||||
Adjusted balance at beginning of period |
| 65,930 | 346,497 | 813,365 | (41,015 | ) | (5,164 | ) | 1,113,683 | |||||||||||||||||||
Comprehensive income: |
||||||||||||||||||||||||||||
Net income |
| | | 151,054 | | | 151,054 | |||||||||||||||||||||
Other comprehensive income: |
||||||||||||||||||||||||||||
Unrealized net holding gain on securities,
net of reclassifications and tax |
| | | | 17,641 | | 17,641 | |||||||||||||||||||||
Net change in prior service cost or credit and net
actuarial loss on retirement plans, net of tax |
| | | | 4,571 | | 4,571 | |||||||||||||||||||||
Total comprehensive income |
| | | 151,054 | 22,212 | | 173,266 | |||||||||||||||||||||
Common stock dividends, $1.16 per share |
| | | (78,627 | ) | | | (78,627 | ) | |||||||||||||||||||
Common stock issued in business combination |
| 1,492 | 48,298 | | | | 48,298 | |||||||||||||||||||||
Common stock issued to dividend reinvestment plan |
| 105 | 1,676 | | | 1,443 | 3,119 | |||||||||||||||||||||
Employee incentive plan common stock activity |
| 132 | 11,937 | | | 2,497 | 14,434 | |||||||||||||||||||||
Director compensation plan common stock activity |
| 62 | 2,658 | | | 1,415 | 4,073 | |||||||||||||||||||||
Common stock acquired under repurchase program |
| (1,895 | ) | | | | (49,510 | ) | (49,510 | ) | ||||||||||||||||||
Balance at December 31, 2007 |
$ | | 65,826 | $ | 411,066 | $ | 885,792 | $ | (18,803 | ) | $ | (49,319 | ) | $ | 1,228,736 | |||||||||||||
Comprehensive income: |
||||||||||||||||||||||||||||
Net income |
| | | 58,585 | | | 58,585 | |||||||||||||||||||||
Other comprehensive income (loss): |
||||||||||||||||||||||||||||
Unrealized net holding gain on securities,
net of reclassifications and tax |
| | | | 20,386 | | 20,386 | |||||||||||||||||||||
Net change in prior service cost or credit and
net actuarial loss on retirement plans, net of tax |
| | | | (27,535 | ) | | (27,535 | ) | |||||||||||||||||||
Total comprehensive income (loss) |
| | | 58,585 | (7,149 | ) | | 51,436 | ||||||||||||||||||||
Common stock dividends, $1.13 per share |
| | | (73,871 | ) | | | (73,871 | ) | |||||||||||||||||||
Preferred stock dividend and discount accretion |
46 | | | (588 | ) | | | (542 | ) | |||||||||||||||||||
Common stock issued in business combination |
| 3,331 | (20,277 | ) | | | 81,229 | 60,952 | ||||||||||||||||||||
Common stock issued to dividend reinvestment plan |
| 146 | (358 | ) | | | 3,753 | 3,395 | ||||||||||||||||||||
Employee incentive plan common stock activity |
| 47 | 3,935 | | | 1,213 | 5,148 | |||||||||||||||||||||
Director compensation plan common stock activity |
| 35 | (203 | ) | | | 911 | 708 | ||||||||||||||||||||
Common stock acquired under repurchase program |
| (2,040 | ) | | | | (50,484 | ) | (50,484 | ) | ||||||||||||||||||
Preferred stock issued, with common stock warrants |
293,660 | | 6,340 | | | | 300,000 | |||||||||||||||||||||
Balance at December 31, 2008 |
$ | 293,706 | 67,345 | $ | 400,503 | $ | 869,918 | $ | (25,952 | ) | $ | (12,697 | ) | $ | 1,525,478 | |||||||||||||
Comprehensive income (loss): |
||||||||||||||||||||||||||||
Net loss |
| | | (62,146 | ) | | | (62,146 | ) | |||||||||||||||||||
Other comprehensive income: |
||||||||||||||||||||||||||||
Unrealized net holding gain on securities,
net of reclassifications and tax |
| | | | 4,880 | | 4,880 | |||||||||||||||||||||
Net change in prior service cost or credit and
net actuarial loss on retirement plans, net of tax |
| | | | 9,540 | | 9,540 | |||||||||||||||||||||
Total comprehensive income (loss) |
| | | (62,146 | ) | 14,420 | | (47,726 | ) | |||||||||||||||||||
Common stock dividends, $.04 per share |
| | | (2,981 | ) | | | (2,981 | ) | |||||||||||||||||||
Preferred stock dividend and discount accretion |
1,268 | | | (14,310 | ) | | | (13,042 | ) | |||||||||||||||||||
Common stock offering |
| 28,750 | 217,917 | | | | 217,917 | |||||||||||||||||||||
Common stock issued to dividend reinvestment plan |
| 50 | 717 | | | | 717 | |||||||||||||||||||||
Employee incentive plan common stock activity |
| 258 | 349 | | | | 349 | |||||||||||||||||||||
Director compensation plan common stock activity |
| 44 | 352 | | | | 352 | |||||||||||||||||||||
Balance at December 31, 2009 |
$ | 294,974 | 96,447 | $ | 619,838 | $ | 790,481 | $ | (11,532 | ) | $ | (12,697 | ) | $ | 1,681,064 | |||||||||||||
The accompanying notes are an integral part of these financial statements.
64
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WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31 | ||||||||||||
(dollars in thousands) | 2009 | 2008 | 2007 | |||||||||
OPERATING ACTIVITIES |
||||||||||||
Net income (loss) |
$ | (62,146 | ) | $ | 58,585 | $ | 151,054 | |||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
||||||||||||
Depreciation and amortization of bank premises and equipment |
20,356 | 19,033 | 17,437 | |||||||||
Amortization of purchased intangibles |
8,767 | 7,785 | 10,879 | |||||||||
Share-based compensation earned |
5,132 | 8,118 | 14,638 | |||||||||
Premium amortization (discount accretion) on securities, net |
2,546 | 1,127 | 910 | |||||||||
Provision for credit losses and losses on foreclosed assets |
270,660 | 135,260 | 17,124 | |||||||||
Net gains on asset dispositions, including gain on insurance settlement in 2007 |
(2,903 | ) | (2,263 | ) | (33,804 | ) | ||||||
Deferred tax expense (benefit) |
(23,176 | ) | (14,122 | ) | 3,321 | |||||||
Net (increase) decrease in loans originated and held for sale |
(12,972 | ) | 5,125 | 10,391 | ||||||||
Net (increase) decrease in interest and other income receivable and prepaid expenses |
(89,104 | ) | 748 | 1,936 | ||||||||
Net increase (decrease) in interest payable and accrued income taxes and expenses |
(28,547 | ) | (50,131 | ) | 20,113 | |||||||
Other, net |
(506 | ) | (12,619 | ) | (2,194 | ) | ||||||
Net cash provided by operating activities |
88,107 | 156,646 | 211,805 | |||||||||
INVESTING ACTIVITIES |
||||||||||||
Proceeds from sales of investment securities available for sale |
22,640 | 91,711 | 38,964 | |||||||||
Proceeds from maturities of investment securities available for sale |
594,666 | 571,303 | 405,472 | |||||||||
Purchases of investment securities available for sale |
(732,804 | ) | (576,436 | ) | (469,438 | ) | ||||||
Proceeds from maturities of investment securities held to maturity |
35,331 | 80,829 | 10,241 | |||||||||
Purchases of investment securities held to maturity |
| (5,050 | ) | (23,309 | ) | |||||||
Net (increase) decrease in loans |
428,579 | (980,660 | ) | (318,711 | ) | |||||||
Net (increase) decrease in federal funds sold and short-term investments |
(44,951 | ) | 383,334 | (221,628 | ) | |||||||
Purchases under bank-owned life insurance program |
| (150,000 | ) | | ||||||||
Proceeds from sales of foreclosed assets and surplus property |
28,083 | 10,634 | 6,368 | |||||||||
Proceeds from insurance settlement |
| | 30,801 | |||||||||
Purchases of bank premises and equipment |
(34,979 | ) | (14,308 | ) | (24,788 | ) | ||||||
Net cash paid in acquisition |
| (80,287 | ) | (7,503 | ) | |||||||
Other, net |
(22,801 | ) | (2,936 | ) | (2,401 | ) | ||||||
Net cash provided by (used in) investing activities |
273,764 | (671,866 | ) | (575,932 | ) | |||||||
FINANCING ACTIVITIES |
||||||||||||
Net increase (decrease) in transaction account and savings account deposits |
533,490 | 253,654 | (319,470 | ) | ||||||||
Net increase (decrease) in time deposits |
(644,626 | ) | (221,304 | ) | 250,766 | |||||||
Net increase (decrease) in short-term borrowings |
(542,030 | ) | 316,852 | 384,723 | ||||||||
Proceeds from issuance of long-term debt |
20,773 | 11,883 | 149,738 | |||||||||
Repayment of long-term debt |
(98 | ) | (8,439 | ) | (7,366 | ) | ||||||
Proceeds from issuance of common stock |
218,634 | 4,279 | 6,932 | |||||||||
Purchases of common stock |
(1,087 | ) | (52,588 | ) | (52,782 | ) | ||||||
Proceeds from issuance of preferred stock, with common stock warrants |
| 300,000 | | |||||||||
Cash dividends on common stock |
(13,250 | ) | (78,590 | ) | (77,340 | ) | ||||||
Cash dividends on preferred stock |
(13,584 | ) | | | ||||||||
Other, net |
(3,365 | ) | (1,107 | ) | 960 | |||||||
Net cash provided by (used in) financing activities |
(445,143 | ) | 524,640 | 336,161 | ||||||||
Increase (decrease) in cash and cash equivalents |
(83,272 | ) | 9,420 | (27,966 | ) | |||||||
Cash and cash equivalents at beginning of period |
299,619 | 290,199 | 318,165 | |||||||||
Cash and cash equivalents at end of period |
$ | 216,347 | $ | 299,619 | $ | 290,199 | ||||||
Cash received during the period for: |
||||||||||||
Interest income |
$ | 522,203 | $ | 572,207 | $ | 655,073 | ||||||
Cash paid during the period for: |
||||||||||||
Interest expense |
$ | 84,381 | $ | 129,518 | $ | 188,419 | ||||||
Income taxes |
1,675 | 38,500 | 60,000 | |||||||||
Noncash investing activities: |
||||||||||||
Foreclosed assets received in settlement of loans |
$ | 59,176 | $ | 29,636 | $ | 4,776 | ||||||
The accompanying notes are an integral part of these financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1
NATURE OF BUSINESS
Whitney Holding Corporation is a Louisiana bank holding company headquartered in New
Orleans, Louisiana. Its principal subsidiary is Whitney National Bank (the Bank), which represents
virtually all its operations and net income.
The Bank, which has been in continuous operation since 1883, engages in community banking in
its market area stretching across the five-state Gulf Coast region, including the Houston, Texas
metropolitan area, southern Louisiana, the coastal region of Mississippi, central and south
Alabama, the panhandle of Florida, and the Tampa Bay metropolitan area of Florida. The Bank offers
commercial and retail banking products and services, including trust products and investment
services, to the customers in the communities it serves. Southern Coastal Insurance Agency, Inc.,
a wholly owned Bank subsidiary, offers personal and business insurance products to customers
primarily in northwest Florida and the New Orleans metropolitan area.
NOTE 2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENT PRONOUNCEMENTS
Whitney Holding Corporation and its subsidiaries (the Company or Whitney) follow
accounting and reporting policies that conform with accounting principles generally accepted in the
United States of America and those generally practiced within the banking industry. The following
is a summary of the more significant accounting policies.
Basis of Presentation
The consolidated financial statements include the accounts of Whitney Holding Corporation and
its subsidiaries. All significant intercompany balances and transactions have been eliminated.
Whitney reports the balances and results of operations from business combinations accounted for as
purchases from the respective dates of acquisition (see Note 3).
Use of Estimates
In preparing the consolidated financial statements, the Company is required to make estimates,
judgments and assumptions that affect the amounts reported in the consolidated financial statements
and accompanying notes. Actual results could differ from those estimates.
Investment Securities
Securities are classified as trading, held to maturity or available for sale. Management
determines the classification of securities when they are purchased and reevaluates this
classification periodically as conditions change that could require reclassification.
Trading account securities are bought and held principally for resale in the near term. They
are carried at fair value with realized and unrealized gains or losses reflected in noninterest
income. Trading account securities are immaterial in each period presented and have been included
in other assets on the consolidated balance sheets.
Securities that the Company both positively intends and has the ability to hold to maturity
are classified as securities held to maturity and are carried at amortized cost. The intent and
ability to hold 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.
Securities not meeting the criteria to be classified as either trading securities or
securities held to maturity are classified as available for sale and are carried at fair value.
Unrealized holding losses, other than those determined to be other than temporary, and unrealized
holding gains are excluded from net income and are recognized, net of tax, in other comprehensive
income and in accumulated other comprehensive income, a separate component of shareholders equity.
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Premiums and discounts on securities, both those held to maturity and those available for
sale, are amortized and accreted to income as an adjustment to the securities yields using the
interest method. Realized gains and losses on securities, including declines in value judged to be
other than temporary, are reported net as a component of noninterest income. The cost of
securities sold is specifically identified for use in calculating realized gains and losses.
Loans Held for Sale
Loans originated for sale are carried at the lower of either cost or market value. At times,
management may decide to sell loans that were not originated for that purpose. These loans are
reclassified as held for sale when that decision is made and are also carried at the lower of cost
or market.
Loans
Loans are carried at the principal amounts outstanding net of unearned income. Interest on
loans and accretion of unearned income, including deferred loan fees, are computed in a manner that
approximates a level rate of return on recorded principal.
The Company stops accruing interest on a loan when the borrowers ability to meet contractual
payments is in doubt. For commercial and real estate loans, a loan is placed on nonaccrual status
generally when it is ninety days past due as to principal or interest, and the loan is not
otherwise both well secured and in the process of collection. When a loan is moved to nonaccrual
status, any accrued but uncollected interest is reversed against interest income. Interest payments
on nonaccrual loans are used to reduce the reported loan principal under the cost recovery method
if the collectibility of the remaining principal is not reasonably assured; otherwise, such
payments are recognized as interest income when received. A loan on nonaccrual status may be
reinstated to accrual status when full payment of contractual principal and interest is expected
and this expectation is supported by current sustained performance.
A loan is considered impaired when it is probable that all amounts will not be collected as
they become due according to the contractual terms of the loan agreement. Generally, impaired
loans are accounted for on a nonaccrual basis. The extent of impairment is measured as discussed
below in the section entitled Allowance for Loan Losses.
Allowance for Loan Losses
Managements evaluation of credit risk in the loan portfolio is reflected in the estimate of
probable losses inherent in the portfolio that is reported in the Companys financial statements as
the allowance for loan losses. Changes in this evaluation over time are reflected in the provision
for credit losses charged to expense. As actual loan losses are incurred, they are charged against
the allowance. Subsequent recoveries are added back to the allowance when collected. The
methodology for determining the allowance involves significant judgment, and important factors that
influence this judgment are re-evaluated quarterly to respond to changing conditions.
The process for determining the recorded allowance involves three key elements: (1)
establishing specific allowances as needed for loans evaluated for impairment; (2) developing loss
factors based on historical loss experience for nonimpaired commercial loans grouped by geography,
loan product type and internal risk rating and for homogeneous groups of residential and consumer
loans; and (3) determining appropriate adjustments to historical loss factors based on managements
assessment of current economic conditions and other qualitative risk factors both internal and
external to the Company.
A loan is considered impaired when it is probable that all contractual amounts will not be
collected as they come due. Specific allowances are determined for impaired loans based on the
present value of expected future cash flows discounted at the loans contractual interest rate, the
fair value of the collateral if the loan is collateral dependent, or, when available, the loans
observable market price.
The historical loss factors for commercial loans are determined with reference to the results
of migration analysis, which analyzes the charge-off experience over time for loans within each
grouping. The historical loss factors for homogeneous loan groups are based on average historical
charge-off information. Management adjusts historical loss factors based on its assessment of
whether current conditions, both internal and external, would be
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adequately reflected in these
factors. Internally, management must consider such matters as whether trends have
been identified in the quality of underwriting and loan administration as well as in the
timely identification of credit quality issues. Management also monitors shifts in portfolio
concentrations and other changes in portfolio characteristics that indicate levels of risk not
fully captured in the loss factors. External factors include local and national economic trends,
as well as changes in the economic fundamentals of specific industries which are well-represented
in Whitneys customer base. Applying the adjusted loss factors to the corresponding loan groups
yields an allowance that represents managements best estimate of probable losses. Management has
established policies and procedures to help ensure a consistent approach to this inherently
judgmental process.
The monitoring of credit risk also extends to unfunded credit commitments, such as unused
commercial credit lines and letters of credit, and management establishes reserves as needed for
its estimate of probable losses on such commitments.
Bank Premises and Equipment
Bank premises and equipment are carried at cost, less accumulated depreciation. Depreciation
is computed primarily using the straight-line method over the estimated useful lives of the assets
and over the shorter of the lease terms or the estimated lives of leasehold improvements. Useful
lives range principally from fifteen to thirty years for buildings and improvements and from three
to ten years for furnishings and equipment, including data processing equipment and software.
Additions to bank premises and equipment and major replacements or improvements are capitalized.
Foreclosed Assets
Collateral acquired through foreclosure or in settlement of loans is reported with other
assets in the consolidated balance sheets. With the exception of grandfathered property interests,
which are assigned a nominal book value, these assets are recorded at estimated fair value less
estimated selling costs. Any initial reduction in the carrying amount of a loan to the fair value
of the collateral received is charged to the allowance for loan losses. Subsequent valuation
adjustments for foreclosed assets are also included in current earnings, as are the revenues and
expenses associated with managing these assets before they are sold.
Goodwill and Other Intangible Assets
Whitney has recognized intangible assets in connection with its purchase business
combinations. Identifiable intangible assets acquired by the Company have represented mainly the
value of the deposit relationships purchased in these transactions. Goodwill represents the
purchase price premium over the fair value of the net assets of an acquired business, including
identifiable intangible assets.
Goodwill must be assessed for impairment annually unless interim events or circumstances make
it more likely than not that an impairment loss has occurred. Impairment is defined as the amount
by which the implied fair value of the goodwill contained in any reporting unit within a company is
less than the goodwills carrying value. The Company has assigned all goodwill to one reporting
unit that represents Whitneys overall banking operations. This reporting unit is the same as the
operating segment identified below, and its operations constitute substantially all of the
Companys consolidated operations. Impairment losses would be charged to operating expense.
Identifiable intangible assets with finite lives are amortized over the periods benefited and
are evaluated for impairment similar to other long-lived assets. If the useful life of an
identifiable intangible asset is indefinite, the recorded asset is not amortized but is tested for
impairment annually by comparison to its estimated fair value.
Share-Based Compensation
The grant-date fair value of equity instruments awarded to employees establishes the cost of
the services received in exchange, and the cost associated with awards that are expected to vest is
recognized over the required service period.
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Income Taxes
The Company and its subsidiaries file a consolidated federal income tax return. Income taxes
are accounted for using the asset and liability method. Under this method, the expected tax
consequences of temporary differences hat arise between the tax bases of assets or liabilities and
their reported amounts in the financial statements represent either deferred tax liabilities to be
settled in the future or deferred tax assets that will be realized as a reduction of future taxes
payable. Currently enacted tax rates and laws are used to calculate the expected tax consequences.
Valuation allowances are established against deferred tax assets if, based on all available
evidence, it is more likely than not that some or all of the assets will not be realized.
Under accounting standards adopted by the Company on January 1, 2007, the benefit of a
position taken or expected to be taken in a tax return is recognized in a companys financial
statements when it is more likely than not that the position will be sustained based on its
technical merits.
Earnings per Common Share
The Financial Accounting Standards Board (FASB) has concluded that unvested share-based
payment awards that contain nonforfeitable rights to dividends or dividend equivalents are
participating securities and must be included in the computation of earnings per common share using
the two-class method. Whitney has awarded share-based payments that are considered participating
securities under this guidance. The two-class method allocates net income applicable to common
shareholders to each class of common stock and participating security according to common dividends
declared and participation rights in undistributed earnings. Net losses are not allocated to
participating securities because the securities bear no contractual obligation to fund or otherwise
share in losses. This guidance is effective for 2009 and has been applied retrospectively to
earnings per share data presented for prior periods with no material impact.
Basic earnings per common share is computed by dividing income applicable to and allocated to
common shareholders by the weighted-average number of common shares outstanding for the period.
Shares outstanding are adjusted for unvested restricted shares issued to employees under the
long-term incentive compensation plan and for certain shares that will be issued under the
directors compensation plan.
Diluted earnings per common share is computed using the weighted-average number of common
shares outstanding increased by dilutive potential common shares. Potential common shares consist
of employee and director stock options, unvested restricted stock units awarded to employees
without dividend rights, and stock warrants issued to Treasury in December 2008. Performance-based
restricted stock units reflect expected performance factors. The number of potential common shares
included in the diluted earnings per share calculation is determined using the treasury stock
method. Potential common shares do not enter into the calculation of diluted earnings per share if
the impact would be anti-dilutive, i.e., increase earnings per share or reduce a loss per share.
Statements of Cash Flows
The Company considers only cash on hand, cash items in process of collection and balances due
from financial institutions as cash and cash equivalents for purposes of the consolidated
statements of cash flows.
Operating Segment Disclosures
Accounting standards have been established for reporting information about a companys
operating segments using a management approach. Reportable segments are identified in these
standards as those revenue-producing components for which separate financial information is
produced internally and which are subject to evaluation by the chief operating decision maker in
deciding how to allocate resources to segments. Consistent with its stated strategy that is
focused on providing a consistent package of community banking products and services throughout a
coherent market area, Whitney has identified its overall banking operations as its only reportable
segment. Because the overall banking operations comprise substantially all of the consolidated
operations, no separate segment disclosures are presented.
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Other
Assets held by the Bank in a fiduciary capacity are not assets of the Bank and are not
included in the consolidated balance sheets. Generally, certain minor sources of income are
recorded on a cash basis, which does not differ materially from the accrual basis.
Accounting Standard Developments
In August 2009, the FASB updated its guidance on fair value measurements and disclosure. The
updated guidance clarifies how to measure the fair value of a liability when a quoted price in an
active market for the identical liability is not available, but does not introduce new fair value
measurement principles. The new guidance did not have a material impact on the Companys fair
value disclosures.
In June 2009, the FASB amended its guidance on accounting for transfers of financial assets.
The amended guidance eliminates the concept of qualifying special-purpose entities and requires
that these entities be evaluated for consolidation under applicable accounting guidance, and it
also removes the exception that permitted sale accounting for certain mortgage securitizations when
control over the transferred assets had not been surrendered. Based on this new standard, many
types of transferred financial assets that would previously have been derecognized will now remain
on the transferors financial statements. The guidance also requires enhanced disclosures about
transfers of financial assets and the transferors continuing involvement with those assets and
related risk exposure. The new guidance is effective for Whitney beginning in 2010. Adoption of
this new guidance is not expected to have a significant impact on the Companys financial condition
or results of operations, given Whitneys current involvement in financial asset transfer
activities.
Also in June 2009, the FASB issued amended guidance on accounting for variable interest
entities (VIEs). This guidance replaces the quantitative-based risks and rewards calculation for
determining which enterprise might have a controlling financial interest in a VIE. The new, more
qualitative evaluation focuses on who has the power to direct the significant economic activities
of the VIE and also has the obligation to absorb losses or rights to receive benefits from the VIE.
It also requires an ongoing reassessment of whether an enterprise is the primary beneficiary of a
VIE and calls for certain expanded disclosures about an enterprises involvement with variable
interest entities. The new guidance is effective for Whitneys 2010 fiscal year. The adoption of
this new guidance is not expected to materially impact the Companys financial condition or results
of operations.
In April 2009, the FASB established a new method of recognizing and reporting
other-than-temporary impairments of debt securities and expanded and increased the frequency of
related disclosures. Given the current composition of Whitneys portfolio of debt securities,
application of this new guidance did not materially impact the Companys financial condition or
results of operations.
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NOTE 3
MERGERS AND ACQUISITIONS
In November 2008, Whitney completed its acquisition of Parish National Corporation
(Parish), the parent of Parish National Bank. Parish National Bank operated 16 banking centers,
primarily on the north shore of Lake Pontchartrain and other parts of the metropolitan New Orleans
area, and had $771 million in total assets, including a loan portfolio of $606 million, and $636
million in deposits at the acquisition date. The transaction was valued at approximately $158
million, with approximately $97 million paid to Parishs shareholders in cash and the remainder in
Whitney stock totaling approximately 3.33 million shares. Applying purchase accounting to this
transaction, the Company recorded goodwill of $104 million and a $13 million intangible asset for
the estimated value of deposit relationships with a weighted-average life of approximately three
years.
In March 2007, Whitney acquired Signature Financial Holdings, Inc. (Signature), headquartered
in St. Petersburg, Florida, the parent of Signature Bank. Signature Bank operated seven banking
centers in the Tampa Bay metropolitan area and had approximately $270 million in total assets,
including $220 million of loans, and $210 million in deposits at acquisition. Signatures
shareholders received 1.49 million shares of Whitney common stock and cash totaling $13 million,
for a total transaction value of approximately $61 million. Intangible assets acquired in this
transaction included $39 million of goodwill and $4 million assigned to the value of deposit
relationships with a weighted-average life of 2.4 years.
The acquired banking operations have been merged into the Bank. Whitneys financial
statements include the results from acquired operations since the acquisition dates.
NOTE 4
FEDERAL FUNDS SOLD AND SHORT-TERM INVESTMENTS
The balance of federal funds sold and short-term investments included the following.
December 31 | ||||||||
(in thousands) | 2009 | 2008 | ||||||
Federal funds sold |
$ | 11,150 | $ | 43,430 | ||||
Securities purchased under resale agreements |
| 100,000 | ||||||
Other short-term interest-bearing investments and deposits |
201,069 | 23,838 | ||||||
Total |
$ | 212,219 | $ | 167,268 | ||||
Federal funds at December 31, 2009 were sold on an overnight basis. Interest-bearing
deposits at December 31, 2009 include $195 million with the regional Federal Reserve Bank.
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NOTE 5
INVESTMENT SECURITIES
Summary information about securities available for sale and securities held to maturity
follows. Substantially all mortgage-backed securities are backed by residential mortgage loans.
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
(in thousands) | Cost | Gains | Losses | Value | ||||||||||||
Securities Available for Sale |
||||||||||||||||
December 31, 2009 |
||||||||||||||||
Mortgage-backed securities |
$ | 1,673,136 | $ | 38,435 | $ | 2,806 | $ | 1,708,765 | ||||||||
U. S. agency securities |
100,131 | 2,260 | | 102,391 | ||||||||||||
Obligations of states and political subdivisions |
6,376 | 293 | 3 | 6,666 | ||||||||||||
Other securities |
57,673 | | | 57,673 | ||||||||||||
Total |
$ | 1,837,316 | $ | 40,988 | $ | 2,809 | $ | 1,875,495 | ||||||||
December 31, 2008 |
||||||||||||||||
Mortgage-backed securities |
$ | 1,527,632 | $ | 26,342 | $ | 1,189 | $ | 1,552,785 | ||||||||
U. S. agency securities |
100,269 | 5,309 | | 105,578 | ||||||||||||
Obligations of states and political subdivisions |
7,635 | 223 | 10 | 7,848 | ||||||||||||
Other securities |
62,751 | | | 62,751 | ||||||||||||
Total |
$ | 1,698,287 | $ | 31,874 | $ | 1,199 | $ | 1,728,962 | ||||||||
Securities Held to Maturity |
||||||||||||||||
December 31, 2009 |
||||||||||||||||
Obligations of states and political subdivisions |
$ | 174,945 | $ | 5,464 | $ | 25 | $ | 180,384 | ||||||||
Total |
$ | 174,945 | $ | 5,464 | $ | 25 | $ | 180,384 | ||||||||
December 31, 2008 |
||||||||||||||||
Obligations of states and political subdivisions |
$ | 210,393 | $ | 4,316 | $ | 789 | $ | 213,920 | ||||||||
Total |
$ | 210,393 | $ | 4,316 | $ | 789 | $ | 213,920 | ||||||||
The following summarizes securities with unrealized losses at December 31, 2009 and 2008
by the period over which the securitys fair value had been continuously less than its amortized
cost as of each year end.
December 31, 2009 | Less than 12 Months | 12 Months or Longer | ||||||||||||||
Fair | Unrealized | Fair | Unrealized | |||||||||||||
(in thousands) | Value | Losses | Value | Losses | ||||||||||||
Securities Available for Sale |
||||||||||||||||
Mortgage-backed securities |
$ | 504,315 | $ | 2,806 | $ | | $ | | ||||||||
Obligations of states and political subdivisions |
235 | 1 | 406 | 2 | ||||||||||||
Total |
$ | 504,550 | $ | 2,807 | $ | 406 | $ | 2 | ||||||||
Securities Held to Maturity |
||||||||||||||||
Obligations of states and political subdivisions |
$ | 4,279 | $ | 25 | $ | | $ | | ||||||||
Total |
$ | 4,279 | $ | 25 | $ | | $ | | ||||||||
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December 31, 2008 | Less than 12 Months | 12 Months or Longer | ||||||||||||||
Fair | Unrealized | Fair | Unrealized | |||||||||||||
(in thousands) | Value | Losses | Value | Losses | ||||||||||||
Securities Available for Sale |
||||||||||||||||
Mortgage-backed securities |
$ | 245,088 | $ | 1,170 | $ | 7,396 | $ | 19 | ||||||||
Obligations of states and political subdivisions |
1,145 | 9 | 150 | 1 | ||||||||||||
Total |
$ | 246,233 | $ | 1,179 | $ | 7,546 | $ | 20 | ||||||||
Securities Held to Maturity |
||||||||||||||||
Obligations of states and political subdivisions |
$ | 13,618 | $ | 461 | $ | 10,459 | $ | 328 | ||||||||
Total |
$ | 13,618 | $ | 461 | $ | 10,459 | $ | 328 | ||||||||
Management evaluates whether unrealized losses on securities represent impairment that is
other than temporary. If such impairment is identified, the carrying amount of the security is
reduced with a charge to operations. In making this evaluation, management first considers the
reasons for the indicated impairment. These could include changes in market rates relative to
those available when the security was acquired, changes in market expectations about the timing of
cash flows from securities that can be prepaid, and changes in the markets perception of the
issuers financial health and the securitys credit quality. Management then considers the
likelihood of a recovery in fair value sufficient to eliminate the indicated impairment and the
length of time over which an anticipated recovery would occur, which could extend to the securitys
maturity. Finally, management determines whether there is both the ability and the intent to hold
the impaired security until an anticipated recovery, in which case the impairment would be
considered temporary. In making this assessment, management considers whether the security
continues to be a suitable holding from the perspective of the Companys overall portfolio and
asset/liability management strategies and whether there are other circumstances that would more
likely than not require the sale of the security.
There were minimal unrealized losses at December 31, 2009, all of which were unrelated to
credit quality. In all cases, the indicated impairment would be recovered by the securitys
maturity or repricing date or possibly earlier if the market price for the security increases with
a reduction in the yield required by the market. All impaired securities were originally purchased
for continuing investment purposes, and management believes that they remain suitable for this
purpose in light of current market conditions and Company strategies. At December 31, 2009,
management had both the intent and ability to hold these securities until the market-based
impairment is recovered. No losses for other-than-temporary impairment were recognized in any of
the three years ended December 31, 2009.
The following table shows the amortized cost and estimated fair value of securities available
for sale and held to maturity grouped by contractual maturity as of December 31, 2009. Debt
securities with scheduled repayments, such as mortgage-backed securities, and equity securities are
presented in separate totals. The expected maturity of a security, in particular certain U.S.
agency securities and obligations of states and political subdivisions, may differ from its
contractual maturity because of the exercise of call options.
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Amortized | Fair | |||||||
(in thousands) | Cost | Value | ||||||
Securities Available for Sale |
||||||||
Within one year |
$ | 102,231 | $ | 104,493 | ||||
One to five years |
7,726 | 7,948 | ||||||
Five to ten years |
1,050 | 1,116 | ||||||
After ten years |
| | ||||||
Debt securities with single maturities |
111,007 | 113,557 | ||||||
Mortgage-backed securities |
1,673,136 | 1,708,765 | ||||||
Equity securities |
53,173 | 53,173 | ||||||
Total |
$ | 1,837,316 | $ | 1,875,495 | ||||
Securities Held to Maturity |
||||||||
Within one year |
$ | 17,964 | $ | 18,157 | ||||
One to five years |
70,831 | 73,612 | ||||||
Five to ten years |
60,267 | 61,882 | ||||||
After ten years |
25,883 | 26,733 | ||||||
Total |
$ | 174,945 | $ | 180,384 | ||||
Proceeds from sales of securities available for sale were $23 million in 2009, $92
million in 2008 and $39 million in 2007. Substantially all of the proceeds in 2008 and 2007 came
from the sale of portfolios acquired in business combinations. Realized gross gains and losses
were insignificant.
Securities with carrying values of $1.39 billion at December 31, 2009 and $1.69 billion at
December 31, 2008 were sold under repurchase agreements, pledged to secure public deposits or
pledged for other purposes.
NOTE 6
LOANS
The composition of the Companys loan portfolio follows.
December 31 | ||||||||||||||||
(in thousands) | 2009 | 2008 | ||||||||||||||
Commercial & industrial |
$ | 3,075,340 | 37 | % | $ | 3,436,461 | 38 | % | ||||||||
Owner-occupied real estate |
1,079,487 | 13 | 1,013,919 | 11 | ||||||||||||
Total commercial & industrial |
4,154,827 | 50 | 4,450,380 | 49 | ||||||||||||
Residential construction |
170,415 | 2 | 275,012 | 3 | ||||||||||||
Commercial construction, land & land development |
1,366,740 | 16 | 1,612,468 | 18 | ||||||||||||
Other commercial real estate |
1,246,353 | 15 | 1,254,329 | 14 | ||||||||||||
Total commercial real estate |
2,783,508 | 33 | 3,141,809 | 35 | ||||||||||||
Residential mortgage |
1,035,110 | 12 | 1,079,270 | 12 | ||||||||||||
Consumer |
429,998 | 5 | 410,391 | 4 | ||||||||||||
Total |
$ | 8,403,443 | 100 | % | $ | 9,081,850 | 100 | % | ||||||||
The Bank makes loans in the normal course of business to directors and executive officers
of the Company and the Bank and to their associates. Loans to such related parties carry
substantially the same terms, including interest rates and collateral requirements, as those
prevailing at the time for comparable transactions with unrelated parties and do not involve more
than normal risks of collectibility when originated. An analysis of the changes in loans to
related parties during 2009 follows.
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(in thousands) | 2009 | |||
Beginning balance |
$ | 31,782 | ||
Additions |
46,025 | |||
Repayments |
(41,298 | ) | ||
Net decrease from changes in related parties |
(700 | ) | ||
Ending balance |
$ | 35,809 | ||
Outstanding unfunded commitments and letters of credit to related parties totaled $121
million and $125 million at December 31, 2009 and 2008, respectively.
NOTE 7
ALLOWANCE FOR LOAN LOSSES AND RESERVE FOR LOSSES ON UNFUNDED CREDIT COMMITMENTS
A summary analysis of changes in the allowance for loan losses follows.
Years Ended December 31 | ||||||||||||
(in thousands) | 2009 | 2008 | 2007 | |||||||||
Allowance at beginning of year |
$ | 161,109 | $ | 87,909 | $ | 75,927 | ||||||
Allowance of acquired banks |
| 9,971 | 2,791 | |||||||||
Provision for credit losses |
257,600 | 134,500 | 17,600 | |||||||||
Loans charged off |
(203,602 | ) | (82,226 | ) | (17,956 | ) | ||||||
Recoveries |
8,564 | 10,955 | 9,547 | |||||||||
Net charge-offs |
(195,038 | ) | (71,271 | ) | (8,409 | ) | ||||||
Allowance at end of year |
$ | 223,671 | $ | 161,109 | $ | 87,909 | ||||||
A summary analysis of changes in the reserve for losses on unfunded credit commitments
follows. The reserve is reported with accrued expenses and other liabilities in the consolidated
balance sheets.
Years Ended December 31 | ||||||||||||
(in thousands) | 2009 | 2008 | 2007 | |||||||||
Reserve at beginning of year |
$ | 800 | $ | 1,300 | $ | 1,900 | ||||||
Provision for credit losses |
1,400 | (500 | ) | (600 | ) | |||||||
Reserve at end of year |
$ | 2,200 | $ | 800 | $ | 1,300 | ||||||
NOTE 8
IMPAIRED LOANS, NONPERFORMING LOANS, FORECLOSED ASSETS AND SURPLUS PROPERTY
Information on loans evaluated for possible impairment loss follows.
December 31 | |||||||||||
(in thousands) | 2009 | 2008 | |||||||||
Impaired loans at year end: |
|||||||||||
Requiring a loss allowance |
$ | 277,421 | $ | 218,376 | |||||||
Not requiring a loss allowance |
67,572 | 54,492 | |||||||||
Total recorded investment in impaired loans |
$ | 344,993 | $ | 272,868 | |||||||
Impairment loss allowance required at year end |
$ | 51,462 | $ | 39,288 | |||||||
Average recorded investment in impaired loans during the year |
$ | 321,094 | $ | 169,308 | |||||||
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The following is a summary of nonperforming loans and foreclosed assets and surplus
property. All of the impaired loans summarized above are included in the nonperforming loan
totals.
December 31 | ||||||||
(in thousands) | 2009 | 2008 | ||||||
Loans accounted for on a nonaccrual basis |
$ | 414,075 | $ | 301,095 | ||||
Restructured loans accruing |
| | ||||||
Total nonperforming loans |
$ | 414,075 | $ | 301,095 | ||||
Foreclosed assets and surplus property |
$ | 52,630 | $ | 28,067 | ||||
Interest income is recognized on certain nonaccrual loans as payments are received.
Interest payments on other nonaccrual loans are accounted for under the cost recovery method, but
this interest may later be recognized in income when loan collections exceed expectations or when
workout efforts result in fully rehabilitated credits. The following compares estimated
contractual interest income on nonaccrual loans and restructured loans with the cash-basis and
cost-recovery interest actually recognized on these loans.
Years Ended December 31 | ||||||||||||
(in thousands) | 2009 | 2008 | 2007 | |||||||||
Contractual interest |
$ | 27,078 | $ | 15,773 | $ | 7,967 | ||||||
Interest recognized |
1,194 | 903 | 1,345 | |||||||||
Decrease in reported interest income |
$ | 25,884 | $ | 14,870 | $ | 6,622 | ||||||
The Bank and one of its subsidiaries own various property interests that were acquired in
routine banking transactions generally before 1933. There was no ready market for these assets
when they were initially acquired, and, as was general banking practice at the time, they were
written down to a nominal value. The assets include direct and indirect ownership interests in
scattered undeveloped acreage, various mineral interests, and a few commercial and residential
sites primarily in southeast Louisiana.
The revenues and direct expenses related to these grandfathered property interests that are
included in the statements of income follow.
Years Ended December 31 | ||||||||||||
(in thousands) | 2009 | 2008 | 2007 | |||||||||
Revenues |
$ | 1,940 | $ | 3,898 | $ | 4,375 | ||||||
Direct expenses |
193 | 230 | 236 | |||||||||
NOTE 9
BANK PREMISES AND EQUIPMENT
A summary of bank premises and equipment by asset classification follows.
December 31 | ||||||||
(in thousands) | 2009 | 2008 | ||||||
Land |
$ | 59,412 | $ | 60,861 | ||||
Buildings and improvements |
227,054 | 220,784 | ||||||
Equipment and furnishings |
154,955 | 135,455 | ||||||
441,421 | 417,100 | |||||||
Accumulated depreciation |
(218,279 | ) | (204,599 | ) | ||||
Total bank premises and equipment |
$ | 223,142 | $ | 212,501 | ||||
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Provisions for depreciation and amortization included in noninterest expense were as
follows.
Years Ended December 31 | ||||||||||||
(in thousands) | 2009 | 2008 | 2007 | |||||||||
Buildings and improvements |
$ | 9,626 | $ | 8,599 | $ | 8,062 | ||||||
Equipment and furnishings |
10,730 | 10,434 | 9,375 | |||||||||
Total depreciation and amortization expense |
$ | 20,356 | $ | 19,033 | $ | 17,437 | ||||||
At December 31, 2009, the Bank was obligated under a number of noncancelable operating
leases, substantially all related to premises. Certain of these leases have escalation clauses and
renewal options. Total rental expense was $11.2 million in 2009, $11.0 million in 2008 and $9.8
million in 2007.
As of December 31, 2009, the future minimum rentals under noncancelable operating leases
having an initial lease term in excess of one year were as follows.
(in thousands) | ||||
2010 |
$ | 9,590 | ||
2011 |
7,704 | |||
2012 |
6,818 | |||
2013 |
6,585 | |||
2014 |
6,350 | |||
Later years |
42,636 | |||
Total |
$ | 79,683 | ||
NOTE 10
GOODWILL AND OTHER INTANGIBLE ASSETS
Intangible assets consist mainly of identifiable intangibles, such as the value of
deposit relationships, and goodwill acquired in business combinations accounted for as purchases.
There were no acquisitions or dispositions of intangible assets during 2009. The balance of
goodwill that will not generate future tax deductions was $427 million at December 31, 2009.
Goodwill is tested for impairment at least annually. The impairment test compares the
estimated fair value of a reporting unit with its net book value. Whitney has assigned all
goodwill to one reporting unit that represents the overall banking operations. The fair value of
the reporting unit is based on valuation techniques that market participants would use in the
acquisition of the whole unit, such as estimated discounted cash flows, the quoted market price of
Whitneys common stock including an estimated control premium, and observable average
price-to-earnings and price-to-book multiples of our competitors. No indication of goodwill
impairment was identified in the annual assessments as of September 30, 2009 and 2008. Given the
current economic environment and potential for volatility in the fair value estimate, management
has been updating the impairment test for goodwill quarterly throughout 2009. No indication of
goodwill impairment was identified in these interim tests. For the most recent impairment test as
of December 31, 2009, the discounted cash flow analysis resulted in a fair value estimate
approximately 7% higher than book value. Either a 10 basis point reduction in the expected net
interest margin, a .50% lower projected growth rate or a .50% higher discount rate would reduce the
estimated fair value by approximately 7%.
Forecasting cash flows, credit losses and growth in addition to valuing the Companys assets
with any degree of assurance in the current economic environment is very difficult and subject to
change over very short time periods. Management will continue to update its impairment analysis as
circumstances change in this environment of volatile and unpredictable market conditions. As a
result, it is possible that a noncash goodwill impairment charge may be required in future periods.
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Identifiable intangible assets with finite lives are amortized over the periods benefited and
are evaluated for impairment similar to other long-lived assets. The Companys only
significant identifiable intangible assets reflect the value of deposit relationships, all of which
have finite lives. The weighted-average remaining life of identifiable intangible assets was
approximately 2.6 years at December 31, 2009.
The carrying value of intangible assets subject to amortization was as follows, including
changes during 2009.
Purchase | Accumulated | Carrying | ||||||||||
(in thousands) | Value | Amortization | Value | |||||||||
Balance at December 31, 2008 |
$ | 61,910 | (39,027 | ) | $ | 22,883 | ||||||
Amortization |
| (8,767 | ) | (8,767 | ) | |||||||
Fully-amortized assets |
(21,382 | ) | 21,382 | | ||||||||
Balance at December 31, 2009 |
$ | 40,528 | (26,412 | ) | $ | 14,116 | ||||||
Amortization of intangible assets included in noninterest expense was as follows.
Years Ended December 31 | ||||||||||||
(in thousands) | 2009 | 2008 | 2007 | |||||||||
Deposit relationships and other identifiable intangibles |
$ | 8,767 | $ | 7,785 | $ | 9,595 | ||||||
Unidentifiable intangibles |
| | 1,284 | |||||||||
Total amortization |
$ | 8,767 | $ | 7,785 | $ | 10,879 | ||||||
The following shows estimated amortization expense for the five succeeding years,
calculated based on current amortization schedules.
(in thousands) | ||||
2010 |
$ | 5,194 | ||
2011 |
3,389 | |||
2012 |
2,220 | |||
2013 |
1,377 | |||
2014 |
905 | |||
NOTE 11
DEPOSITS
The composition of deposits was as follows.
December 31 | ||||||||
(in thousands) | 2009 | 2008 | ||||||
Noninterest-bearing demand deposits |
$ | 3,301,354 | $ | 3,233,550 | ||||
Interest-bearing deposits: |
||||||||
NOW account deposits |
1,299,274 | 1,281,137 | ||||||
Money market deposits |
1,823,548 | 1,306,937 | ||||||
Savings deposits |
840,135 | 909,197 | ||||||
Other time deposits |
799,142 | 875,999 | ||||||
Time deposits $100,000 and over |
1,086,441 | 1,654,774 | ||||||
Total interest-bearing deposits |
5,848,540 | 6,028,044 | ||||||
Total deposits |
$ | 9,149,894 | $ | 9,261,594 | ||||
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Time deposits of $100,000 or more include balances in treasury-management deposit
products for commercial and certain other larger deposit customers. Balances maintained in such
products totaled $151 million and $397 million at December 31, 2009 and 2008, respectively. Most
of these deposits mature on a daily basis. Scheduled maturities of all time deposits at December
31, 2009 were as follows.
(in thousands) | ||||
2010 |
$ | 1,596,437 | ||
2011 |
247,642 | |||
2012 |
40,439 | |||
2013 |
692 | |||
2014 and thereafter |
373 | |||
Total |
$ | 1,885,583 | ||
NOTE 12
SHORT-TERM BORROWINGS
Short-term borrowings consisted of the following.
December 31 | ||||||||
(in thousands) | 2009 | 2008 | ||||||
Securities sold under agreements to repurchase |
$ | 711,896 | $ | 780,059 | ||||
Federal funds purchased |
15,810 | 479,837 | ||||||
Treasury Investment Program |
6,900 | 16,740 | ||||||
Total short-term borrowings |
$ | 734,606 | $ | 1,276,636 | ||||
The Bank borrows funds on a secured basis by selling securities under agreements to
repurchase, mainly in connection with treasury-management services offered to its deposit
customers. Repurchase agreements generally mature daily. The Bank has the ability to exercise
legal authority over the underlying securities.
Additional information about securities sold under repurchase agreements follows.
(dollars in thousands) | 2009 | 2008 | 2007 | |||||||||
At December 31 |
||||||||||||
Interest rate |
.16 | % | .15 | % | 3.15 | % | ||||||
Balance |
$ | 711,896 | $ | 780,059 | $ | 771,717 | ||||||
Average for the year |
||||||||||||
Effective interest rate |
.16 | % | 1.31 | % | 3.80 | % | ||||||
Balance |
$ | 648,106 | $ | 637,164 | $ | 583,754 | ||||||
Maximum month-end outstanding |
$ | 732,514 | $ | 780,059 | $ | 771,717 | ||||||
Federal funds purchased represent unsecured borrowings from other banks, generally on an
overnight basis. Additional information about federal funds purchased follows.
(dollars in thousands) | 2009 | 2008 | 2007 | |||||||||
At December 31 |
||||||||||||
Interest rate |
.15 | % | .27 | % | 3.76 | % | ||||||
Balance |
$ | 15,810 | $ | 479,837 | $ | 98,302 | ||||||
Average for the year |
||||||||||||
Effective interest rate |
.26 | % | 1.71 | % | 4.94 | % | ||||||
Balance |
$ | 72,385 | $ | 261,289 | $ | 48,128 | ||||||
Maximum month-end outstanding |
$ | 159,446 | $ | 661,076 | $ | 98,302 | ||||||
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From time to time, the Bank uses advances from the Federal Home Loan Bank (FHLB) as an
additional source of short-term funds, although no advances were outstanding at December 31, 2009
and 2008. FHLB advances are secured by a blanket lien on Bank loans secured by real estate.
Additional information about FHLB advances outstanding during 2009 and 2008 follows. The Bank made
no use of short-term FHLB advances during 2007.
(dollars in thousands) | 2009 | 2008 | ||||||
Average for the year |
||||||||
Effective interest rate |
.58 | % | 2.08 | % | ||||
Balance |
$ | 202,192 | $ | 286,001 | ||||
Maximum month-end outstanding |
$ | 500,000 | $ | 501,694 | ||||
During 2009, the Bank obtained borrowings through the Federal Reserves Term Auction
Facility (TAF). TAF borrowings averaged $61 million with an effective interest rate of .25%, and
the maximum outstanding during 2009 was $400 million. At December 31, 2009, the Bank has unused
borrowing capacity with the Federal Reserve that is secured by the pledge of selected loans and
investment securities.
Under the Treasury Investment Program, temporary excess U.S. Treasury receipts are loaned to
participating financial institutions at 25 basis points under the federal funds rate. Repayment of
these borrowed funds can be demanded at any time, and the Bank pledges securities as collateral.
The maximum month-end borrowings under this program during 2009 totaled $10 million.
NOTE 13
LONG-TERM DEBT
Long-term debt consisted of the following.
December 31 | ||||||||
(in thousands) | 2009 | 2008 | ||||||
Subordinated notes payable |
$ | 149,810 | $ | 149,784 | ||||
Subordinated debentures |
17,029 | 17,260 | ||||||
Other long-term debt |
32,868 | 12,192 | ||||||
Total long-term debt |
$ | 199,707 | $ | 179,236 | ||||
The Banks $150 million par value subordinated notes carry an interest rate of 5.875% and
mature April 1, 2017. These notes qualify as capital for the calculation of the regulatory ratio
of total capital to risk-weighted assets, subject to certain limitations as they approach maturity.
In connection with bank acquisitions, the Company assumed obligations under subordinated
debentures payable to unconsolidated trusts which issued trust preferred securities. The
weighted-average yield was approximately 4.45% at year-end 2009. The debentures have maturities
from 2031 through 2034, but they may be called with prior regulatory approval beginning at various
dates from 2010 through 2011. Subject to certain adjustments, these debentures currently qualify
as capital for the calculation of regulatory capital ratios.
Substantially all of the other long-term debt consists of borrowings associated with tax
credit fund activities. These borrowings mature in 2015 and 2016.
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NOTE 14
OTHER ASSETS AND ACCRUED EXPENSES AND OTHER LIABILITIES
The more significant components of other assets and accrued expenses and other
liabilities at December 31, 2009 and 2008 were as follows.
December 31 | ||||||||
(in thousands) | 2009 | 2008 | ||||||
Other Assets |
||||||||
Cash surrender value of life insurance |
$ | 174,296 | $ | 166,627 | ||||
Net deferred income tax asset |
85,825 | 73,023 | ||||||
Prepaid expenses |
77,594 | 8,049 | ||||||
Foreclosed assets and surplus property |
52,630 | 28,067 | ||||||
Recoverable income taxes |
32,942 | 3,765 | ||||||
Low-income housing tax credit fund investments |
9,503 | 12,182 | ||||||
Miscellaneous investments, receivables and other assets |
61,051 | 30,171 | ||||||
Total other assets |
$ | 493,841 | $ | 321,884 | ||||
Accrued Expenses and Other Liabilities |
||||||||
Trade date obligations |
$ | 30,060 | $ | | ||||
Accrued taxes and other expenses |
20,063 | 24,672 | ||||||
Dividend payable |
832 | 11,647 | ||||||
Liability for pension benefits |
23,170 | 38,747 | ||||||
Obligation for postretirement benefits other than pensions |
19,043 | 18,045 | ||||||
Reserve for losses on unfunded credit commitments |
2,200 | 800 | ||||||
Miscellaneous payables, deferred income and other liabilities |
19,594 | 23,857 | ||||||
Total accrued expenses and other liabilities |
$ | 114,962 | $ | 117,768 | ||||
Life insurance policies purchased under a bank-owned life insurance program are carried
at their cash surrender value, which represents the amount that could be realized as of the
reporting date. Earnings on these policies are reported in noninterest income and are not taxable.
Recent bank failures and economic conditions have put pressure on deposit insurance reserve
ratios and have led the FDIC to require that insured banks prepay an estimate of their deposit
insurance premiums for the years 2010 through 2012. These premiums are normally assessed and
collected on a quarterly basis. The Banks prepayment of approximately $68 million is included in
the total for prepaid expenses at December 31, 2009. This prepayment does not affect how the Bank
determines and reports FDIC deposit insurance expense.
The total for miscellaneous investments, receivables and other assets at December 31, 2009,
included approximately $25 million of investments in auction rate securities (ARS), which are
investment grade securities with underlying collateral of municipal securities. The ARS were
purchased at par from brokerage customers to provide a source of liquidity. Disruptions in the
broader credit markets led to failed auctions in the ARS market and a resulting period of
illiquidity. While management believes the ARS will be redeemed at par, the actual timing of
redemptions is uncertain. These investments are carried at their estimated fair values.
NOTE 15
EMPLOYEE BENEFIT PLANS
Retirement Plans
Whitney has a noncontributory qualified defined benefit pension plan. The benefits are based
on an employees total years of service and his or her highest consecutive 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. Based on currently
available information, the Company anticipates making a contribution of approximately $8.5 million
during 2010.
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Table of Contents
During the fourth quarter of 2008, Whitneys Board of Directors approved amendments to the
qualified plan (a) to limit eligibility to those employees who were employed on December 31, 2008
and (b) to freeze benefit accruals for all participants other than those who were fully vested and
whose age and years of benefit service combined equaled at least fifty as of December 31, 2008.
Whitney also has an unfunded nonqualified defined benefit pension plan that provides
retirement benefits to designated executive officers. These benefits are calculated using the
qualified plans formula, but without applying the restrictions imposed on qualified plans by
certain provisions of the Internal Revenue Code. Benefits that become payable under the
nonqualified plan supplement amounts paid from the qualified plan.
The following table details the changes in the actuarial present value of the qualified and
nonqualified pension benefit obligations and in the plans assets for the years ended December 31,
2009 and 2008. The table also shows the funded status of each plan at each year end and the
amounts recognized in the Companys consolidated balance sheets. Whitney uses a December 31
measurement date for all of its defined benefit retirement plans and other postretirement benefit
plans.
2009 | 2008 | |||||||||||||||
(in thousands) | Qualified | Nonqualified | Qualified | Nonqualified | ||||||||||||
Changes in benefit obligation |
||||||||||||||||
Benefit obligation, beginning of year |
$ | 166,909 | $ | 11,935 | $ | 158,966 | $ | 10,763 | ||||||||
Service cost for benefits |
5,721 | 336 | 8,128 | 251 | ||||||||||||
Interest cost on benefit obligation |
10,186 | 816 | 9,381 | 683 | ||||||||||||
Plan amendments |
| | (4,332 | ) | | |||||||||||
Net actuarial loss |
5,886 | 2,085 | 1,243 | 620 | ||||||||||||
Benefits paid |
(6,079 | ) | (808 | ) | (6,477 | ) | (382 | ) | ||||||||
Benefit obligation, end of year |
182,623 | 14,364 | 166,909 | 11,935 | ||||||||||||
Changes in plan assets |
||||||||||||||||
Plan assets at fair value, beginning of year |
140,097 | | 135,773 | | ||||||||||||
Actual return on plan assets |
27,606 | | (28,531 | ) | | |||||||||||
Employer contribution |
12,875 | 808 | 40,000 | 382 | ||||||||||||
Benefits paid |
(6,079 | ) | (808 | ) | (6,477 | ) | (382 | ) | ||||||||
Plan expenses |
(682 | ) | | (668 | ) | | ||||||||||
Plan assets at fair value, end of year |
173,817 | | 140,097 | | ||||||||||||
Funded status and pension liability recognized |
$ | (8,806 | ) | $ | (14,364 | ) | $ | (26,812 | ) | $ | (11,935 | ) | ||||
The weighted-average assumptions used to determine the benefit obligation for both the
qualified and nonqualified plans at December 31, 2009 and 2008 follow. The assumption regarding
the rate of future compensation increases applied only to participants who were not subject to the
benefit freeze.
2009 | 2008 | |||||||
Discount rate
|
6.00 | % | 6.00 | % | ||||
Rate of future compensation increases
|
3.58 | 3.58 | ||||||
The accumulated benefit obligation was $163 million and $148 million, respectively, for
the qualified plan at December 31, 2009 and 2008, and $13 million and $11 million, respectively,
for the nonqualified plan. The calculation of the accumulated benefit obligation ignores the
assumption about future compensation levels.
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Benefit payments under the qualified and nonqualified plans are expected to total $7.2
million in 2010, $7.8 million in 2011, $8.6 million in 2012, $9.3 million in 2013, $10.2 million in
2014, and $63.6 million for the next five years combined. These estimates were developed based on
the same assumptions used in measuring benefit obligations as of December 31, 2009.
The components of net periodic pension expense were as follows for the qualified and
nonqualified plans.
2009 | 2008 | 2007 | ||||||||||||||||||||||
(in thousands) | Qualified | Nonqualified | Qualified | Nonqualified | Qualified | Nonqualified | ||||||||||||||||||
Service cost for benefits in period |
$ | 5,721 | $ | 336 | $ | 8,128 | $ | 251 | $ | 7,862 | $ | 420 | ||||||||||||
Interest cost on benefit obligation |
10,186 | 816 | 9,381 | 683 | 8,669 | 577 | ||||||||||||||||||
Expected return on plan assets |
(11,199 | ) | | (10,877 | ) | | (10,695 | ) | | |||||||||||||||
Amortization of: |
||||||||||||||||||||||||
Net actuarial loss |
5,288 | 224 | 822 | 257 | 906 | 284 | ||||||||||||||||||
Prior service cost (credit) |
(14 | ) | 337 | (93 | ) | 7 | (108 | ) | (8 | ) | ||||||||||||||
Net periodic pension expense |
$ | 9,982 | $ | 1,713 | $ | 7,361 | $ | 1,198 | $ | 6,634 | $ | 1,273 | ||||||||||||
The Company used the following weighted-average assumptions to determine the net pension
expense for both the qualified and nonqualified plans for each of the three years in the period
ended December 31, 2009. For 2009, the assumption regarding the rate of future compensation
increases applied only to participants who were not subject to the benefit freeze.
2009 | 2008 | 2007 | ||||||||||
Discount rate |
6.00 | % | 6.00 | % | 5.75 | % | ||||||
Rate of future compensation increases |
3.58 | 3.58 | 3.58 | |||||||||
Expected long-term return on plan assets |
8.00 | 8.00 | 8.00 | |||||||||
The following table shows changes in the amounts recognized in accumulated other
comprehensive income or loss during 2009 and 2008 for both the qualified and nonqualified plans.
Net actuarial | Prior service | Total, | ||||||||||||||||||
(in thousands) | gain (loss) | (cost) credit | Total | Tax effect | net of tax | |||||||||||||||
Balance at December 31, 2007 |
$ | (27,044 | ) | $ | 36 | $ | (27,008 | ) | $ | 9,451 | $ | (17,557 | ) | |||||||
Changes arising during the period: |
||||||||||||||||||||
Plan amendment |
4,332 | | 4,332 | (1,516 | ) | 2,816 | ||||||||||||||
Other changes |
(44,097 | ) | | (44,097 | ) | 15,435 | (28,662 | ) | ||||||||||||
Adjustments for amounts recognized in
net periodic benefit cost |
1,079 | (85 | ) | 994 | (348 | ) | 646 | |||||||||||||
Recognized in comprehensive income (loss) |
(38,686 | ) | (85 | ) | (38,771 | ) | 13,571 | (25,200 | ) | |||||||||||
Balance at December 31, 2008 |
(65,730 | ) | (49 | ) | (65,779 | ) | 23,022 | (42,757 | ) | |||||||||||
Changes arising during the period: |
12,018 | (2,108 | ) | 9,910 | (3,468 | ) | 6,442 | |||||||||||||
Adjustments for amounts recognized in
net periodic benefit cost |
5,512 | 323 | 5,835 | (2,042 | ) | 3,793 | ||||||||||||||
Recognized in comprehensive income (loss) |
17,530 | (1,785 | ) | 15,745 | (5,510 | ) | 10,235 | |||||||||||||
Balance at December 31, 2009 |
$ | (48,200 | ) | $ | (1,834 | ) | $ | (50,034 | ) | $ | 17,512 | $ | (32,522 | ) | ||||||
The Company expects to recognize $3.3 million of the net actuarial loss and $.3 million
of the prior service cost included in accumulated other comprehensive loss at the end of 2009 as a
component of net pension expense in 2010.
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Table of Contents
The following table shows the percentage allocation of plan assets by investment category at
December 31, 2009 and 2008, as well as the long-range average target allocation currently set by
the investment manager and the target allocation ranges specified in the plans investment policy.
The allocation to cash investments at the end of 2008 reflects the pending investment of a $30
million employer contribution made in late December 2008.
Long-range | ||||||||||||||||
Actual Allocation | Average | Policy | ||||||||||||||
2009 | 2008 | Target | Range | |||||||||||||
Equity securities: |
||||||||||||||||
U. S. large cap |
23 | % | 27 | % | ||||||||||||
U. S. small cap |
23 | 7 | ||||||||||||||
International |
18 | 7 | ||||||||||||||
Total equity securities |
64 | 41 | 55 | % | 40-70 | % | ||||||||||
Corporate debt securities |
15 | 15 | ||||||||||||||
U. S. government and agency securities and other debt securities |
18 | 14 | ||||||||||||||
Total debt securities |
33 | 29 | 40 | 30-50 | ||||||||||||
Cash investments |
3 | 30 | 5 | 0-10 | ||||||||||||
Total |
100 | % | 100 | % | ||||||||||||
Whitney determines its assumption regarding the expected long-term return on plan assets
with reference to the plans investment policy and practices, including the tolerance for market
and credit risk, and historical returns for benchmark indices specified in the policy. The policy
communicates risk tolerance in terms of diversification criteria and constraints on investment
quality. The plan may not hold debt securities of any single issuer, except the U.S. Treasury and
U.S. government agencies, in excess of 10% of plan assets. In addition, all purchases for the debt
portfolio are limited to investment grade securities of less than 10 years of average life. The
policy also calls for diversification of equity holdings across business segments and states a
preference for holdings in companies that demonstrate consistent growth in earnings and dividends.
No companys equity securities shall comprise more than 5% of the plans total market value.
Limited use of derivatives is authorized by the policy, but the investment manager has not employed
these instruments.
Plan assets included 39,175 shares of Whitney common stock with a value of $.4 million (.2% of
plan assets) at December 31, 2009 and $.6 million (.5% of plan assets) at December 31, 2008.
The fair value measurements of the plans assets at December 31, 2009 are summarized below by
the level of inputs used in the fair value measurement process. The hierarchy of fair value
measurements is discussed in Note 19.
December 31, 2009 | ||||||||||||||||
Fair Value Measurement Using | ||||||||||||||||
(in thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity securities |
$ | 111,945 | $ | | $ | | $ | 111,945 | ||||||||
Corporate debt securities |
| 25,975 | | 25,975 | ||||||||||||
U. S. government and agency
securities and other debt
securities |
| 29,829 | | 29,829 | ||||||||||||
Cash investments |
6,068 | | | 6,068 | ||||||||||||
Total investments at fair value |
$ | 118,013 | $ | 55,804 | $ | | $ | 173,817 | ||||||||
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Whitney sponsors an employee savings plan under Section 401(k) of the Internal Revenue
Code that covers substantially all full-time employees. The Company annually matches the savings
of each participant up to 4% of his or her compensation. Tax law imposes limits on total annual
participant savings. Participants are fully vested in their savings and in the matching Company
contributions at all times. Concurrent with the defined-benefit plan amendments in late 2008, the
Board also approved amendments to the employee savings plan. These amendments authorized the
Company to make discretionary profit sharing contributions, beginning in 2009, on behalf of
participants in the savings plan who are either (a) ineligible to participate in the qualified
defined-benefit plan or (b) subject to the freeze in benefit accruals under the defined-benefit
plan. The discretionary profit sharing contribution for a plan year
is up to 4% of the participants
eligible compensation for such year and is allocated only to
participants who are employed on the first day of the plan year and at year
end. Participants must complete three years of service to become vested in the Companys
contributions, subject to earlier vesting in the case of retirement, death or disability. The
expense of the Companys matching contributions was approximately $4.1 million in 2009, $3.8
million in 2008 and $3.7 million in 2007. The discretionary contribution for 2009 was $2.6
million.
Health and Welfare Plans
Whitney has offered health care and life insurance benefit plans for retirees and their
eligible dependents. Participant contributions are required under the health plan. All health
care benefits are covered under contracts with health maintenance or preferred provider
organizations or insurance contracts. The Company funds its obligations under these plans as
contractual payments come due to health care organizations and insurance companies. In 2007,
Whitney amended these plans to restrict eligibility for postretirement health benefits to retirees
already receiving benefits and to those active participants who were eligible to receive benefits
as of December 31, 2007. The amendment also eliminated the life insurance benefit for employees
who retire after December 31, 2007.
The following table presents changes in the actuarial present value of the benefit obligation,
the funded status of the plan, and the related amounts recognized and not recognized in the
Companys consolidated balance sheets.
(in thousands) | 2009 | 2008 | ||||||
Changes in benefit obligation |
||||||||
Benefit obligation, beginning of year |
$ | 18,044 | $ | 15,196 | ||||
Interest cost on benefit obligation |
1,063 | 830 | ||||||
Participant contributions |
434 | 834 | ||||||
Net actuarial (gain) loss |
1,198 | 3,086 | ||||||
Benefits paid, net of Medicare subsidy received |
(1,696 | ) | (1,902 | ) | ||||
Benefit obligation, end of year |
19,043 | 18,044 | ||||||
Changes in plan assets |
||||||||
Plan assets, beginning of year |
| | ||||||
Employer contributions |
1,262 | 1,068 | ||||||
Participant contributions |
434 | 834 | ||||||
Benefits paid, net of Medicare subsidy received |
(1,696 | ) | (1,902 | ) | ||||
Plan assets, end of year |
| | ||||||
Funded status and postretirement benefit liability recognized |
$ | (19,043 | ) | $ | (18,044 | ) | ||
Annual benefit payments, net of Medicare subsidies, are expected to range from $1.3
million to $1.7 million over the next ten years. These estimates were developed based on the same
assumptions used in measuring benefit obligations as of December 31, 2009.
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The discount rates used to determine the present value of the postretirement benefit
obligation and the net periodic expense were the same as those shown above for the defined benefit
pension plan. The Company also assumed the following trends in health care costs for the actuarial
calculation of the benefit obligation at December 31, 2009 and 2008.
Pre- and Post- | ||||||||
Medicare Age Cost | ||||||||
2009 | 2008 | |||||||
Cost trend rate for next year |
9 | % | 9 | % | ||||
Ultimate rate to which the cost trend rate gradually declines |
5 | 5 | ||||||
Year in which the ultimate trend rate is reached |
2024 | 2024 | ||||||
The net periodic expense recognized for postretirement benefits was immaterial in 2009,
2008 and 2007.
The following shows changes in the amounts recognized in accumulated other comprehensive
income or loss during 2009 and 2008.
Net actuarial | Prior service | Total | ||||||||||||||||||
(in thousands) | gain (loss) | (cost) credit | Total | Tax effect | net of tax | |||||||||||||||
Balance at December 31, 2007 |
$ | (10,731 | ) | $ | 9,503 | $ | (1,228 | ) | $ | 430 | $ | (798 | ) | |||||||
Changes arising during the period |
(3,086 | ) | | (3,086 | ) | 1,081 | (2,005 | ) | ||||||||||||
Adjustments for amounts recognized in net |
||||||||||||||||||||
periodic benefit cost |
1,732 | (2,239 | ) | (507 | ) | 177 | (330 | ) | ||||||||||||
Recognized in comprehensive income (loss) |
(1,354 | ) | (2,239 | ) | (3,593 | ) | 1,258 | (2,335 | ) | |||||||||||
Balance at December 31, 2008 |
(12,085 | ) | 7,264 | (4,821 | ) | 1,688 | (3,133 | ) | ||||||||||||
Changes arising during the period |
(1,198 | ) | | (1,198 | ) | 419 | (779 | ) | ||||||||||||
Adjustments for amounts recognized in net |
||||||||||||||||||||
periodic benefit cost |
2,367 | (2,235 | ) | 132 | (46 | ) | 86 | |||||||||||||
Recognized in comprehensive income (loss) |
1,169 | (2,235 | ) | (1,066 | ) | 373 | (693 | ) | ||||||||||||
Balance at December 31, 2009 |
$ | (10,916 | ) | $ | 5,029 | $ | (5,887 | ) | $ | 2,061 | $ | (3,826 | ) | |||||||
NOTE 16
SHARE-BASED COMPENSATION
Whitney maintains incentive compensation plans that incorporate share-based compensation.
The plans for both employees and directors have been approved by the Companys shareholders. The
most recent long-term incentive plan for key employees was approved in 2007 (the 2007 plan).
The Compensation and Human Resources Committee (the Committee) of the Board of Directors
administers the employee plans, designates who will participate and authorizes the awarding of
grants. Under the 2007 plan, participants may be awarded stock options, restricted stock and stock
units, including those subject to the attainment of performance goals, and stock appreciation
rights, as well as other stock-based awards that the Committee deems consistent with the plans
purposes. These are substantially the same as the awards that were available under prior plans.
To date, the Committee has awarded both stock options as well as performance-based and tenure-based
restricted stock and restricted stock units under the 2007 plan or prior plans.
The 2007 plan authorizes awards with respect to a maximum of 3,200,000 Whitney common shares.
Shares subject to awards that have been settled in cash are not counted against the maximum
authorization. At December 31, 2009, the Committee could make future awards with respect to
1,822,500 shares. This remaining authorization reflects a reduction for the maximum number of
shares that could be issued with respect to performance-based awards under this plan until the
performance measurement periods have been completed and the final performance adjustments are
known. The stock issued for employee or director awards may come from unissued shares or shares
held in treasury.
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The directors plan as originally implemented provided for an annual award of common stock and
stock options to nonemployee directors. The Board of Directors subsequently amended the plan to
eliminate the annual award of stock options beginning in 2009 and to reduce the aggregate number of
common shares authorized to be issued to no more than 937,500. At December 31, 2009, 350,922
shares remain available for future award and issuance under the directors plan.
Employees forfeit their restricted stock units if they terminate employment within three years
of the award date, although they can retain a prorated number of units in the case of retirement,
death, disability and, in limited circumstances, involuntary termination. During the three-year
period, they cannot transfer or otherwise dispose of the units awarded. Additional restrictions
apply to the units awarded to certain highly-compensated award recipients as long as the preferred
stock issued to the U.S. Department of Treasury (Treasury), as discussed in Note 17, is
outstanding. The performance-based restricted stock units that ultimately vest will be determined
with reference to Whitneys financial performance over a three-year period in relation to that of a
designated peer group. All employee restricted stock units would vest and the restrictions on
their shares would lapse upon a change in control of the Company. The directors stock grants are
fully vested upon award.
The following table recaps changes during 2009 in the number of shares that are expected to
ultimately be issued with respect to employees performance-based and tenure-based restricted stock
units, taking into consideration expected performance factors but not expected forfeitures.
Tenure-based | Performance-based | |||||||||||||||
Weighted- | Weighted- | |||||||||||||||
Average | Average | |||||||||||||||
Grant Date | Grant Date | |||||||||||||||
Shares | Fair Value | Shares | Fair Value | |||||||||||||
Nonvested at December 31, 2008 |
231,626 | $ | 22.87 | 798,121 | $ | 28.58 | ||||||||||
Granted |
492,653 | 8.80 | | | ||||||||||||
Net change on updated performance estimates |
| | (165,143 | ) | 23.54 | |||||||||||
Vested |
(1,986 | ) | 23.46 | (372,647 | ) | 34.29 | ||||||||||
Actual forfeitures |
(19,835 | ) | 15.34 | (26,643 | ) | 26.52 | ||||||||||
Nonvested at December 31, 2009 (a) |
702,458 | $ | 13.21 | 233,688 | $ | 23.27 | ||||||||||
(a) | Performance-based total includes 128,359 shares that could be issued with respect to awards whose performance measurement periods were not completed by December 31, 2009. The maximum shares that potentially could be issued with respect to these awards total approximately 210,587. Under certain levels of performance, no shares would be issued. |
The Company recognized compensation expense with respect to employee restricted stock units of
$4.1 million in 2009, $6.9 million in 2008 and $13.3 million in 2007. The income tax benefits
associated with this compensation were approximately $1.4 million, $2.4 million and $4.7 million,
respectively, in 2009, 2008 and 2007. Unrecognized compensation related to restricted stock units
expected to vest totaled $6.6 million at December 31, 2009. This compensation will be recognized
over an expected weighted-average period of 1.9 years. The total fair value of the restricted
stock units that vested during 2009 was $3.5 million, based on the closing market price of
Whitneys common stock on the vesting dates. The fair value of vested restricted stock and stock
units totaled $6.6 million in 2008 and $10.4 million in 2007.
Directors stock grants totaled 39,312 in 2009, 6,750 shares in 2008 and 8,100 shares in 2007.
The aggregate grant date fair value of these awards was $360,000 in 2009, $124,000 in 2008 and
$244,000 in 2007.
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The following table summarizes combined stock option activity under the employee and director
plans.
Weighted- | ||||||||
Average | ||||||||
Number | Exercise Price | |||||||
Outstanding at December 31, 2006 |
2,817,230 | $ | 25.95 | |||||
Grants |
239,450 | 29.06 | ||||||
Exercises |
(191,027 | ) | 21.08 | |||||
Vested expirations and unvested forfeitures |
(52,675 | ) | 31.40 | |||||
Outstanding at December 31, 2007 |
2,812,978 | 26.44 | ||||||
Grants |
262,437 | 18.69 | ||||||
Exercises |
(55,814 | ) | 20.18 | |||||
Vested expirations and unvested forfeitures |
(452,313 | ) | 27.76 | |||||
Outstanding at December 31, 2008 |
2,567,288 | 25.55 | ||||||
Grants |
| | ||||||
Exercises |
| | ||||||
Vested expirations and unvested forfeitures |
(360,700 | ) | 24.28 | |||||
Outstanding at December 31, 2009 |
2,206,588 | $ | 25.76 | |||||
Exercisable at December 31, 2009 |
1,853,394 | $ | 26.24 | |||||
For awards during or after 2006, employees can first exercise their stock options
beginning three years from the grant date, provided they are still employed. A prorated number of
options can vest and become immediately exercisable upon an employees retirement, death or
disability within this three-year period, and all options would vest upon a change in control of
the Company. All employee options expire after ten years, although an earlier expiration applies
in the case of retirement, death or disability. The exercise price for employee options is set at
an amount not lower than the opening market price for Whitneys stock on the grant date. Before
2006, employee stock options were awarded without the three-year service requirement, but otherwise
had substantially the same terms as the options awarded during or after 2006. Directors stock
options are immediately exercisable and expire no later than ten years from the grant date. The
exercise price for directors options was set at the closing market price for the Companys stock
on the grant date.
The following table presents certain additional information about stock options as of December
31, 2009. The intrinsic value of an option is the excess of the closing market price of Whitneys
common stock over its exercise price.
(dollars in thousands, | Weighted- | Weighted- | Aggregate | |||||||||||||
except per share data) | Average Years | Average | Intrinsic | |||||||||||||
Range of Exercise Prices | Number | to Expiration | Exercise Price | Value | ||||||||||||
Options Exercisable |
||||||||||||||||
$15.31-$18.77 |
300,072 | 2.2 | $ | 17.75 | ||||||||||||
$20.52-$22.58 |
572,383 | 2.7 | 22.33 | |||||||||||||
$28.86-$29.83 |
426,489 | 4.5 | 28.95 | |||||||||||||
$30.10-$35.41 |
554,450 | 5.6 | 32.79 | |||||||||||||
$15.31-$35.41 |
1,853,394 | 3.8 | $ | 26.24 | $ | | ||||||||||
Options Outstanding |
||||||||||||||||
$15.31-$35.41 |
2,206,599 | 4.5 | $ | 25.76 | $ | | ||||||||||
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The following table provides information on total cash proceeds received on option
exercises, the intrinsic value of options exercised by employees and directors based on the
Companys closing stock price as of the exercise dates, and related tax benefits realized by
Whitney. The tax benefit in each year was credited to capital surplus. The impact of the tax
benefit was reported as a cash flow from financing activities in the consolidated statement of cash
flows. The Company recognized compensation expense with respect to employee and director stock
options of $.7 million in 2009, $.9 million in 2008 and $.7 million in 2007.
Years Ended December 31 | |||||||||||||
(in thousands) | 2009 | 2008 | 2007 | ||||||||||
Proceeds from option exercises |
$ | | $ | 884 | $ | 3,813 | |||||||
Intrinsic value of option exercised |
| 228 | 1,703 | ||||||||||
Tax benefit realized |
| 77 | 475 | ||||||||||
The fair values of the stock options were estimated as of the grant dates using the
Black-Scholes option-pricing model. The significant assumptions made in applying the
option-pricing model are shown in following table. Both the volatility assumption and the
weighted-average life assumption were based primarily on historical experience. No stock options
were awarded in 2009.
2008 | 2007 | |||||||
Weighted-average expected annualized volatility |
24.38 | % | 21.17 | % | ||||
Weighted-average option life (in years) |
6.59 | 6.61 | ||||||
Expected annual dividend yield |
4.00 | % | 3.50 | % | ||||
Weighted-average risk-free interest rate |
3.85 | % | 4.96 | % | ||||
Weighted-average grant date fair value of options awarded |
$ | 3.47 | $ | 5.83 | ||||
NOTE 17
SHAREHOLDERS EQUITY, CAPITAL REQUIREMENTS AND OTHER REGULATORY MATTERS
Common Stock Offering
During the fourth quarter of 2009, Whitney announced and completed an underwritten public
offering of the Companys common stock. The underwriters purchased 28.75 million shares at a
public offering price of $8.00 per share. The net proceeds to the Company after deducting offering
expenses and underwriting discounts and commissions totaled $218 million.
Senior Preferred Stock
In December 2008, Whitney issued 300,000 shares of senior preferred stock to the Treasury
under the Capital Purchase Program (CPP) established under the Troubled Asset Relief Program (TARP)
that was created as part of the Emergency Economic Stabilization Act of 2008 (EESA). The preferred
shares were issued with no par value and have a liquidation amount of $1,000 per share. Treasury
also received a ten-year warrant to purchase 2,631,579 shares of Whitney common stock at an
exercise price of $17.10 per share. The aggregate proceeds were $300 million, and approximately
$294 million was allocated to the initial carrying value of the preferred stock and $6 million to
the warrant based on their relative estimated fair values on the issue date. The total capital
raised through this issue qualifies as Tier 1 regulatory capital and can be used in calculating all
regulatory capital ratios.
Cumulative preferred stock dividends are payable quarterly at a 5% annual rate on the per
share liquidation amount for the first five years and 9% thereafter. Whitney may redeem the
preferred stock from the Treasury at any time without penalty, subject to the Treasurys
consultation with the Companys primary regulatory agency.
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Whitney may not declare or pay dividends on its common stock or, with certain exceptions,
repurchase common stock without first having paid all accrued cumulative preferred dividends that
are due to Treasury. For three years from the preferred stock issue date, the Company also may not
increase its common stock dividend rate above a quarterly rate of $.31 per share or repurchase its
common shares without Treasurys consent, unless Treasury has transferred all the preferred shares
to third parties or the preferred stock has been redeemed.
Regulatory Capital Requirements
Measures of regulatory capital are an important tool used by regulators to monitor the
financial health of financial institutions. The primary quantitative measures used by regulators
to gauge capital adequacy are the ratio of Tier 1 regulatory capital to average total assets, also
known as the leverage ratio, and the ratios of Tier 1 and total regulatory capital to risk-weighted
assets. The regulators define the components and computation of each of these ratios. The minimum
capital ratios for both the Company and the Bank are generally 4% leverage, 4% Tier 1 capital and
8% total capital. Regulators may, however, set higher capital requirements for an individual
institution when particular circumstances warrant.
To evaluate capital adequacy, regulators compare an institutions 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 classification under
the uniform framework, regulators must also consider other subjective and quantitative assessments
of risk associated with the institution. Regulators will take certain mandatory as well as
possible additional discretionary actions against institutions that they judge to be inadequately
capitalized. These actions could materially impact the institutions financial position and
results of operations.
Under the regulatory framework for prompt corrective action, the capital levels of banks are
categorized into one of five classifications ranging from well-capitalized to critically
under-capitalized. For an institution to qualify as well-capitalized, its leverage, Tier 1 and
total capital ratios must be at least 5%, 6% and 10%, respectively. As of December 31, 2009, the
Banks ratios exceeded these minimums. If an institution fails to maintain a well-capitalized
classification, it will be subject to a series of operating restrictions that increase as the
capital condition worsens.
As a result of the current difficult operating environment and recent operating losses, the
Bank has committed to its primary regulator that it will implement a plan to maintain higher
capital ratios with a leverage of at least 8%, a Tier 1 regulatory capital ratio of at least 9%,
and a total capital ratio of at least 12%. As of December 31, 2009, the Banks regulatory capital
ratios exceeded all three of these target minimums.
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The actual capital amounts and ratios for the Company and the Bank are presented in the
following tables, together with the corresponding capital amounts determined using regulatory
guidelines. Bank holding companies must also have at least a 6% Tier 1 capital ratio and a 10%
total capital ratio to be considered well-capitalized for various regulatory purposes, and the
Company satisfied these criteria at December 31, 2009.
(dollars in thousands) | Actual | Well- | ||||||||||||||
December 31, 2009 | Amount | Ratio | Minimum(a) | Capitalized(b) | ||||||||||||
Leverage (Tier 1 Capital to Average Assets): |
||||||||||||||||
Company |
$ | 1,242,268 | 11.05 | % | $ | 449,830 | (c | ) | ||||||||
Bank |
999,176 | 8.90 | 449,259 | $ | 561,574 | |||||||||||
Tier 1 Capital (to Risk-Weighted Assets): |
||||||||||||||||
Company |
1,242,268 | 13.00 | 382,105 | 573,158 | ||||||||||||
Bank |
999,176 | 10.48 | 381,476 | 572,214 | ||||||||||||
Total Capital (to Risk-Weighted Assets): |
||||||||||||||||
Company |
1,512,800 | 15.84 | 764,211 | 955,263 | ||||||||||||
Bank |
1,269,512 | 13.31 | 762,952 | 953,689 | ||||||||||||
December 31, 2008 |
||||||||||||||||
Leverage (Tier 1 Capital to Average Assets): |
||||||||||||||||
Company |
$ | 1,118,842 | 9.87 | % | $ | 453,301 | (c | ) | ||||||||
Bank |
1,077,856 | 9.53 | 452,598 | $ | 565,747 | |||||||||||
Tier 1 Capital (to Risk-Weighted Assets): |
||||||||||||||||
Company |
1,118,842 | 10.76 | 415,756 | 623,634 | ||||||||||||
Bank |
1,077,856 | 10.39 | 415,090 | 622,635 | ||||||||||||
Total Capital (to Risk-Weighted Assets): |
||||||||||||||||
Company |
1,398,945 | 13.46 | 831,512 | 1,039,389 | ||||||||||||
Bank |
1,357,751 | 13.08 | 830,180 | 1,037,725 | ||||||||||||
(a) | Minimum capital required for capital adequacy purposes. | |
(b) | Capital required for well-capitalized status under regulatory framework for prompt corrective action. | |
(c) | Not applicable. |
Regulatory Restrictions on Dividends
At December 31, 2009, the Company had approximately $240 million in cash and demand notes from
the Bank available to provide liquidity for future dividend payments to its common and preferred
shareholders and other corporate purposes. The Company must currently obtain regulatory approval
before increasing the common dividend rate above the current quarterly level of $.01 per share.
Regulatory policy statements provide that generally bank holding companies should only pay
dividends out of current operating earnings and that the level of dividends, if any, must be
consistent with current and expected capital requirements.
Dividends received from the Bank have been the primary source of funds available to the
Company for the declaration and payment of dividends to Whitneys shareholders, both common and
preferred. There are various regulatory and statutory provisions that limit the amount of
dividends that the Bank can distribute to the Company. Because of recent losses, the Bank
currently has no capacity to declare dividends to the Company without prior regulatory approval.
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Other Regulatory Matters
Under current Federal Reserve regulations, the Bank is limited in the amounts it may lend to
the Company to a maximum of 10% of its capital and surplus, as defined in the regulations. Any
such loans must be collateralized from 100% to 130% of the loan amount, depending upon the nature
of the underlying collateral. The Bank made no loans to the Company during 2009 and 2008.
Banks are required to maintain currency and coin or a balance with the Federal Reserve Bank to
meet reserve requirements based on a percentage of deposits. During 2009 and 2008, the Bank
covered substantially all its reserve maintenance requirement with balances of coin and currency.
NOTE 18
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS AND DERIVATIVES
Off-Balance Sheet Financial Instruments
To meet the financing needs of its customers, the Bank issues financial instruments which
represent conditional obligations that are not recognized, wholly or in part, in the consolidated
balance sheets. These financial instruments include commitments to extend credit under loan
facilities and guarantees under standby and other letters of credit. Such instruments expose the
Bank to varying degrees of credit and interest rate risk in much the same way as funded loans.
Revolving loan commitments are issued primarily to support commercial activities. The
availability of funds under revolving loan commitments generally depends on whether the borrower
continues to meet credit standards established in the underlying contract and has not violated
other contractual conditions. A number of such commitments are used only partially or, in some
cases, not at all before they expire. Nonrevolving loan commitments are issued mainly to provide
financing for the acquisition and development or construction of real property, both commercial and
residential, although not all are expected to lead to permanent financing by the Bank. Loan
commitments generally have fixed expiration dates and may require payment of a fee. Credit card
and personal credit lines are generally subject to cancellation if the borrowers credit quality
deteriorates, and many lines remain partly or wholly unused.
Substantially all of the letters of credit are standby agreements that obligate the Bank to
fulfill a customers financial commitments to a third party if the customer is unable to perform.
The Bank issues standby letters of credit primarily to provide credit enhancement to its customers
other commercial or public financing arrangements and to help them demonstrate financial capacity
to vendors of essential goods and services. Approximately 96% of the letters of credit outstanding
at December 31, 2009 were rated as having average or better credit risk under the Banks credit
risk rating guidelines. A substantial majority of standby letters of credit outstanding at
year-end 2009 have a term of one year or less.
The Banks exposure to credit losses from these financial instruments is represented by their
contractual amounts. The Bank follows its standard credit policies in approving loan facilities
and financial guarantees and requires collateral support if warranted. The required collateral
could include cash instruments, marketable securities, accounts receivable, inventory, property,
plant and equipment, and income-producing commercial property. See Note 7 for a summary analysis
of changes in the reserve for losses on unfunded credit commitments.
A summary of off-balance sheet financial instruments follows.
December 31 | ||||||||
(in thousands) | 2009 | 2008 | ||||||
Loan commitments revolving |
$ | 2,296,865 | $ | 2,474,000 | ||||
Loan commitments nonrevolving |
239,313 | 519,695 | ||||||
Credit card and personal credit lines |
560,116 | 564,385 | ||||||
Standby and other letters of credit |
364,294 | 417,053 | ||||||
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Derivative Financial Instruments
During 2009, the Bank began offering interest rate swap agreements to commercial banking
customers seeking to manage their interest rate risk. For each customer swap agreement, the Bank
has entered into an offsetting agreement with an unrelated financial institution. These derivative
financial instruments are carried at fair value, with changes in fair value recorded in current
period earnings. At December 31, 2009, the aggregate notional amounts of both customer interest
rate swap agreements and the offsetting agreements were each $30.4 million. The fair value of
these derivatives and the credit risk exposure to the Bank was insignificant at December 31, 2009.
NOTE 19
FAIR VALUE DISCLOSURES
The FASB defines fair value as the exchange price that would be received to sell an asset
or paid to transfer a liability in the principal or most advantageous market for the asset or
liability in an orderly transaction between market participants on the measurement date.
This accounting guidance also emphasizes that fair value is a market-based measurement and not
an entity-specific measurement and established a hierarchy to prioritize the inputs that can be
used in the fair value measurement process. The inputs in the three levels of this hierarchy are
described as follows:
Level 1 Quoted prices in active markets for identical assets or
liabilities. An active market is one in which transactions occur
with sufficient frequency and volume to provide pricing
information on an ongoing basis.
Level 2 Observable inputs other than Level 1 prices. This would include
quoted prices for similar assets or liabilities, quoted prices in
markets that are not active, or other inputs that are observable
or can be corroborated by observable market data.
Level 3 Unobservable inputs, to the extent that observable inputs are
unavailable. This allows for situations in which there is little
or no market activity for the asset or liability at the
measurement date.
The material assets or liabilities measured at fair value by Whitney on a recurring basis are
summarized below. Securities available for sale primarily consist of U.S. government agency and
agency mortgage-backed debt securities. The balances exclude nonmarketable equity securities
(Federal Reserve Bank and Federal Home Loan Bank stock) that are carried at cost, which totaled $53
million at December 31, 2009 and $59 million at December 31, 2008. The Level 2 fair value
measurement shown below was obtained from a third-party pricing service that uses industry-standard
pricing models. Substantially all of the model inputs are observable in the marketplace or can be
supported by observable data.
The fair value of interest rate swaps is obtained from a third-party pricing service that uses
an industry-standard discounted cash flow model that relies on inputs, such as interest rate
futures, observable in the marketplace. To comply with the accounting guidance, credit valuation
adjustments are incorporated in the fair values to appropriately reflect nonperformance risk for
both the Company and counterparties. Although the Company has determined that the majority of the
inputs used to value derivative instruments fall within Level 2 of the fair value hierarchy, the
credit valuation adjustments utilize Level 3 inputs, such as estimates of current credit spreads.
The Company has determined that the impact of the credit valuation adjustments is not significant
to the overall valuation of these derivatives. As a result, the Company has classified its
derivative valuations in their entirety in Level 2 of the fair value hierarchy. At December 31,
2009, the derivative fair values were insignificant. There were no derivative instruments
outstanding at December 31, 2008.
Fair Value Measurement Using | ||||||||||||
(in millions) | Level 1 | Level 2 | Level 3 | |||||||||
December 31, 2009 |
||||||||||||
Investment securities available for sale |
$ | | $ | 1,822 | $ | | ||||||
Derivative financial instruments |
| | | |||||||||
December 31, 2008 |
||||||||||||
Investment securities available for sale |
$ | | $ | 1,670 | $ | | ||||||
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Certain assets and liabilities may be measured at fair value on a nonrecurring basis; that is,
the instruments are not measured and reported at fair value on an ongoing basis, but are subject to
fair value adjustments in certain circumstances. To measure the extent to which a loan is
impaired, the relevant accounting principles permit or require the Company to compare the recorded
investment in the impaired loans to the fair value of the underlying collateral in certain
circumstances. The fair value measurement process uses independent appraisals and other
market-based information, but in many cases it also requires significant input based on
managements knowledge of and judgment about current market conditions, specific issues relating to
the collateral, and other matters. As a result, substantially all of these fair value measurements
fall within Level 3 of the hierarchy discussed above. The net carrying value of impaired loans
which reflected a nonrecurring fair value measurement totaled $214 million at December 31, 2009 and
$163 million at December 31, 2008. The portion of the allowance for loan losses allocated to these
loans totaled $36 million at December 31, 2009 and $34 million at year-end 2008. The recorded
investment in such loans was written down by $116 million during 2009 with a charge against the
allowance for loan losses. The valuation allowance on impaired loans and charge-offs factor into
the determination of the provision for credit losses.
Accounting guidance from the FASB requires the disclosure of estimated fair value information
about certain on- and off-balance sheet financial instruments, including those financial
instruments that are not measured and reported at fair value on a recurring basis or nonrecurring
basis. The significant methods and assumptions used by the Company to estimate the fair value of
financial instruments are discussed below. The aggregate fair value amounts presented do not, and
are not intended to, represent an aggregate measure of the underlying fair value of the Company.
Cash, federal funds sold and short-term investments and short-term borrowings The carrying
amounts of these highly liquid or short maturity financial instruments were considered a reasonable
estimate of fair value.
Investment in securities available for sale and held to maturity The fair value measurement
for securities available for sale was discussed earlier. The same measurement approach was used
for securities held to maturity, which consist of obligations of states and political subdivisions.
Loans The fair value measurement for certain impaired loans was discussed earlier. For the
remaining portfolio, fair values were generally determined by discounting scheduled cash flows by
discount rates determined with reference to current market rates at which loans with similar terms
would be made to borrowers of similar credit quality, including adjustments that management
believes market participants would consider in setting required yields on loans from certain
portfolio sectors and geographic regions. An overall valuation adjustment was made for specific
credit risks as well as general portfolio credit risk.
Deposits The FASBs guidance requires that deposits without a stated maturity, such as
noninterest-bearing demand deposits, NOW account deposits, money market deposits and savings
deposits, be assigned fair values equal to the amounts payable upon demand (carrying amounts).
Deposits with a stated maturity were valued by discounting contractual cash flows using a discount
rate approximating current market rates for deposits of similar remaining maturity.
Long-term debt The fair value of long-term debt was estimated by discounting contractual
payments at current market interest rates for similar instruments.
Derivative financial instruments The fair value measurement for interest rate swaps was
discussed earlier.
Off-balance sheet financial instruments Off-balance sheet financial instruments include
commitments to extend credit and guarantees under standby and other letters of credit. The fair
values of such instruments were estimated using fees currently charged for similar arrangements in
the market, adjusted for changes in terms and credit risk as appropriate. The estimated fair
values of these instruments were not material.
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The estimated fair values of the Companys financial instruments follow.
December 31, 2009 | December 31, 2008 | |||||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||||
(in millions) | Amount | Value | Amount | Value | ||||||||||||
ASSETS: |
||||||||||||||||
Cash and short-term investments |
$ | 429 | $ | 429 | $ | 467 | $ | 467 | ||||||||
Investment securities available for sale (a) |
1,822 | 1,822 | 1,670 | 1,670 | ||||||||||||
Investment securities held to maturity |
175 | 180 | 210 | 214 | ||||||||||||
Loans held for sale |
34 | 34 | 21 | 21 | ||||||||||||
Loans, net |
8,180 | 8,085 | 8,921 | 8,947 | ||||||||||||
Derivative financial instruments |
| | | | ||||||||||||
LIABILITIES: |
||||||||||||||||
Deposits |
9,150 | 9,159 | 9,262 | 9,270 | ||||||||||||
Short-term borrowings |
735 | 735 | 1,277 | 1,277 | ||||||||||||
Long-term debt |
200 | 178 | 179 | 138 | ||||||||||||
Derivative financial instruments |
| | | | ||||||||||||
(a) | Excludes nonmarketable equity securities carried at cost. |
NOTE 20
CONTINGENCIES
Legal Proceedings
The Company and its subsidiaries are parties to various legal proceedings arising in the
ordinary course of business. After reviewing all pending and threatened actions with legal
counsel, management believes that the ultimate resolution of these actions will not have a material
effect on the Companys financial condition, results of operations or cash flows.
Indemnification Obligation
In October 2007, Visa completed restructuring transactions that modified the obligation of
members of Visa USA, including Whitney, to indemnify Visa against pending and possible settlements
of certain litigation matters. Whitney recorded a $1.0 million liability in the fourth quarter of
2007 for the estimated value of its obligations under the indemnification agreement. In the first
quarter of 2008, Visa completed an initial public offering of its shares and used the proceeds to
redeem a portion of Visa USA members equity interests and to establish an escrow account that will
fund any settlement of the members obligations under the indemnification agreement. Whitney
recognized a $2.3 million gain from the redemption proceeds and reversed the $1.0 million liability
for its indemnification obligations. Visa had made additional cash contributions to the escrow
account subsequent to the initial funding. Although the Company remains obligated to indemnify
Visa for losses in connection with certain litigation matters whose claims exceed amounts set aside
in the escrow account, Whitneys interest in the escrow balance approximates managements current
estimate of the value of the Companys indemnification obligation. The amount of offering proceeds
and other cash contributions to the escrow account for litigation settlements will reduce the
number of shares of Visa stock to which Whitney will ultimately be entitled as a result of the
restructuring.
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NOTE 21
OTHER NONINTEREST INCOME
The components of other noninterest income were as follows.
Years Ended December 31 | ||||||||||||
(in thousands) | 2009 | 2008 | 2007 | |||||||||
Investment services income
|
$ | 6,129 | $ | 6,035 | $ | 5,836 | ||||||
Credit-related fees
|
6,304 | 5,921 | 5,417 | |||||||||
ATM fees
|
5,657 | 5,693 | 5,374 | |||||||||
Other fees and charges
|
5,543 | 4,628 | 4,818 | |||||||||
Earnings from bank-owned life insurance program
|
7,207 | 3,908 | | |||||||||
Other operating income
|
5,754 | 6,979 | 35,181 | |||||||||
Net gains on sales and other revenue from foreclosed assets
|
2,036 | 4,302 | 5,109 | |||||||||
Net gains (losses) on disposals of surplus property
|
2,011 | 72 | (100 | ) | ||||||||
Total
|
$ | 40,641 | $ | 37,538 | $ | 61,635 | ||||||
During the third quarter of 2007, Whitney reached a final settlement on insurance claims
primarily arising from the hurricanes that struck portions of its market area in 2005. With this
settlement, the Company recognized a gain of $31.3 million that is included in other operating
income in 2007.
NOTE 22
OTHER NONINTEREST EXPENSE
The components of other noninterest expense were as follows.
Years Ended December 31 | ||||||||||||
(in thousands) | 2009 | 2008 | 2007 | |||||||||
Security and other outsourced services
|
$ | 17,094 | $ | 15,758 | $ | 15,735 | ||||||
Bank card processing services
|
5,019 | 4,319 | 4,008 | |||||||||
Advertising and promotion
|
4,167 | 4,824 | 4,740 | |||||||||
Operating supplies
|
4,136 | 4,223 | 4,120 | |||||||||
Provision for valuation losses on foreclosed assets
|
11,660 | 1,260 | 124 | |||||||||
Nonlegal loan collection and other foreclosed asset costs
|
8,418 | 2,696 | 501 | |||||||||
Miscellaneous operating losses
|
3,116 | 5,269 | 4,140 | |||||||||
Other operating expense
|
23,310 | 21,182 | 19,758 | |||||||||
Total
|
$ | 76,920 | $ | 59,531 | $ | 53,126 | ||||||
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NOTE 23
INCOME TAXES
The components of income tax expense (benefit) follow.
Years Ended December 31 | ||||||||||||
(in thousands) | 2009 | 2008 | 2007 | |||||||||
Included in net income |
||||||||||||
Current |
||||||||||||
Federal
|
$ | (26,677 | ) | $ | 31,314 | $ | 67,692 | |||||
State
|
(13 | ) | 1,946 | 3,297 | ||||||||
Total current
|
(26,690 | ) | 33,260 | 70,989 | ||||||||
Deferred |
||||||||||||
Federal
|
(22,400 | ) | (13,639 | ) | 3,445 | |||||||
State
|
(776 | ) | (483 | ) | (124 | ) | ||||||
Total deferred
|
(23,176 | ) | (14,122 | ) | 3,321 | |||||||
Total included in net income
|
$ | (49,866 | ) | $ | 19,138 | $ | 74,310 | |||||
Included in shareholders equity |
||||||||||||
Deferred tax related to the change in the
net unrealized gain on securities
|
$ | 2,627 | $ | 10,978 | $ | 9,497 | ||||||
Deferred tax related to the change in the pension
and other post-retirement benefits liabilities
|
5,138 | (14,827 | ) | 2,463 | ||||||||
Current tax related to stock options
and restricted stock and units
|
3,364 | 1,144 | (998 | ) | ||||||||
Total included in shareholders equity
|
$ | 11,129 | $ | (2,705 | ) | $ | 10,962 | |||||
The effective rate of the tax benefit included in the net loss for 2009 and of the tax
expense included in net income for 2008 and 2007 differed from the statutory federal income tax
rate because of the following factors.
Years Ended December 31 | ||||||||||||
(in percentages) | 2009 | 2008 | 2007 | |||||||||
Federal income tax rate
|
35.00 | % | 35.00 | % | 35.00 | % | ||||||
Increase (decrease) resulting from |
||||||||||||
Tax-exempt income
|
4.82 | (5.68 | ) | (1.52 | ) | |||||||
Tax credits
|
4.35 | (5.61 | ) | (1.23 | ) | |||||||
State income tax and miscellaneous items
|
.35 | .91 | .72 | |||||||||
Effective tax rate
|
44.52 | % | 24.62 | % | 32.97 | % | ||||||
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Interest income from the financing of state and local governments and earnings from the
bank-owned life insurance program are the major components of tax-exempt income. The main source
of tax credits has been investments in affordable housing projects and, beginning in 2008, in
projects that primarily benefit low-income communities or help the recovery and redevelopment of
communities in the Gulf Opportunity Zone. Tax-exempt income and tax credits tend to increase the
effective tax benefit rate from the statutory rate in loss periods and to reduce the tax expense
rate in profitable periods.
Temporary differences arise between the tax bases of assets or liabilities and their reported
amounts in the financial statements. The expected tax effects when these differences are resolved
are recorded currently as deferred tax assets or liabilities. The components of the net deferred
income tax asset, which is included in other assets on the consolidated balance sheets, follow.
December 31 | ||||||||
(in thousands) | 2009 | 2008 | ||||||
Deferred tax assets: |
||||||||
Allowance for credit losses and losses on foreclosed assets
|
$ | 81,860 | $ | 56,917 | ||||
Employee compensation and benefits
|
22,831 | 36,045 | ||||||
Unrecognized interest income
|
7,082 | 6,413 | ||||||
Other
|
9,390 | 8,685 | ||||||
Total deferred tax assets
|
121,163 | 108,060 | ||||||
Deferred tax liabilities: |
||||||||
Depreciable and amortizable assets
|
19,754 | 19,883 | ||||||
Net unrealized gain on securities available for sale
|
13,363 | 10,736 | ||||||
Gain recognized on casualty insurance settlement
|
| 2,273 | ||||||
Other
|
2,221 | 2,145 | ||||||
Total deferred tax liabilities
|
35,338 | 35,037 | ||||||
Net deferred tax asset
|
$ | 85,825 | $ | 73,023 | ||||
Under accounting standards adopted by the Company on January 1, 2007, the benefit of a
position taken or expected to be taken in a tax return should be recognized when it is more likely
than not that the position will be sustained based on its technical merit. At adoption, Whitney
reduced its liability for unrecognized tax benefits from uncertain tax positions by $.7 million
with a corresponding increase to beginning retained earnings for 2007. The liability for
unrecognized tax benefits was immaterial at December 31, 2009 and December 31, 2008, and changes in
the liability were insignificant during 2009, 2008 and 2007. The Company does not expect the
liability for unrecognized tax benefits to change significantly during 2010. Whitney recognizes
interest and penalties, if any, related to income tax matters in income tax expense, and the
amounts recognized during 2009, 2008 and 2007 were insignificant.
The Company and its subsidiaries file a consolidated federal income tax return and various
separate company state returns. With few exceptions, the returns for years before 2005 are not
open for examination by federal or state taxing authorities.
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NOTE 24
EARNINGS (LOSS) PER COMMON SHARE
As discussed in Note 2, the Financial Accounting Standards Board (FASB) has concluded
that unvested share-based payment awards that contain nonforfeitable rights to dividends or
dividend equivalents are participating securities and must be included in the computation of
earnings per share using the two-class method. Whitney has awarded share-based payments that are
considered participating securities under this guidance. The two-class method allocates earnings
to each class of common stock and participating security according to dividends declared and
participation rights in undistributed earnings. This guidance is effective for 2009 and has been
applied retrospectively to earnings per share data presented for prior periods with no material
impact.
The components used to calculate basic and diluted earnings (loss) per common share under the
two-class method were as follows. The net loss was not allocated to participating securities
because the securities bear no contractual obligation to fund or otherwise share in losses.
Potential common shares consist of employee and director stock options, unvested restricted stock
units awarded to employees without dividend rights, and stock warrants issued to Treasury in
December 2008. These potential common shares do not enter into the calculation of diluted earnings
per share if the impact would be anti-dilutive, i.e., increase earnings per share or reduce a loss
per share.
Years Ended December 31 | ||||||||||||||||
(dollars in thousands, except per share data) | 2009 | 2008 | 2007 | |||||||||||||
Numerator: |
||||||||||||||||
Net income (loss) |
$ | (62,146 | ) | $ | 58,585 | $ | 151,054 | |||||||||
Preferred stock dividends |
16,226 | 588 | | |||||||||||||
Net income (loss) to common shareholders |
(78,372 | ) | 57,997 | 151,054 | ||||||||||||
Net income (loss) allocated to participating
securities basic and diluted |
| 640 | 1,729 | |||||||||||||
Net income (loss) allocated to common
shareholders basic and diluted |
A | $ | (78,372 | ) | $ | 57,357 | $ | 149,325 | ||||||||
Denominator: |
||||||||||||||||
Weighted-average common shares basic |
B | 72,824,964 | 64,767,708 | 66,953,343 | ||||||||||||
Dilutive potential common shares |
| 320,153 | 523,413 | |||||||||||||
Weighted-average common shares diluted |
C | 72,824,964 | 65,087,861 | 67,476,756 | ||||||||||||
Earnings (loss) per common share: |
||||||||||||||||
Basic |
A/B | $ | (1.08 | ) | $ | .89 | $ | 2.23 | ||||||||
Diluted |
A/C | (1.08 | ) | .88 | 2.21 | |||||||||||
Weighted-average anti-dilutive potential common shares: | ||||||||||||||||
Stock options and restricted stock units |
2,334,579 | 2,261,558 | 1,060,741 | |||||||||||||
Warrants |
2,631,579 | 93,471 | | |||||||||||||
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NOTE 25
PARENT COMPANY FINANCIAL STATEMENTS
The following financial statements are for the parent company only. Cash and cash
equivalents include noninterest-bearing deposits in the Bank and the demand note receivable from
the Bank.
BALANCE SHEETS
December 31 | ||||||||
(in thousands) | 2009 | 2008 | ||||||
ASSETS |
||||||||
Cash and cash equivalents
|
$ | 239,516 | $ | 45,339 | ||||
Investment in bank subsidiary
|
1,452,783 | 1,500,493 | ||||||
Investments in nonbank subsidiaries
|
2,788 | 2,865 | ||||||
Notes receivable nonbank subsidiaries
|
1,484 | 2,634 | ||||||
Other assets
|
13,392 | 12,335 | ||||||
Total assets
|
$ | 1,709,963 | $ | 1,563,666 | ||||
LIABILITIES |
||||||||
Dividends payable
|
$ | 832 | $ | 11,647 | ||||
Subordinated debentures
|
17,029 | 17,260 | ||||||
Other liabilities
|
11,038 | 9,281 | ||||||
Total liabilities
|
28,899 | 38,188 | ||||||
SHAREHOLDERS EQUITY
|
1,681,064 | 1,525,478 | ||||||
Total liabilities and shareholders equity
|
$ | 1,709,963 | $ | 1,563,666 | ||||
STATEMENTS OF INCOME
Years Ended December 31 | ||||||||||||
(in thousands) | 2009 | 2008 | 2007 | |||||||||
Dividend income from bank subsidiary
|
$ | | $ | 113,500 | $ | 80,000 | ||||||
Equity in undistributed earnings of subsidiaries |
||||||||||||
Bank
|
(59,427 | ) | (55,240 | ) | 66,683 | |||||||
Nonbanks
|
(77 | ) | (189 | ) | 21 | |||||||
Other income, net of expenses
|
(2,642 | ) | 514 | 4,350 | ||||||||
Net income (loss)
|
$ | (62,146 | ) | $ | 58,585 | $ | 151,054 | |||||
Preferred stock dividends
|
16,226 | 588 | | |||||||||
Net income (loss) to common shareholders
|
$ | (78,372 | ) | $ | 57,997 | $ | 151,054 | |||||
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STATEMENTS OF CASH FLOWS
Years Ended December 31 | ||||||||||||
(in thousands) | 2009 | 2008 | 2007 | |||||||||
OPERATING ACTIVITIES |
||||||||||||
Net income (loss) |
$ | (62,146 | ) | $ | 58,585 | $ | 151,054 | |||||
Adjustments to reconcile net income (loss) to net cash provided
by operating activities: |
||||||||||||
Equity in undistributed earnings of subsidiaries |
59,504 | 55,429 | (66,704 | ) | ||||||||
Other, net |
846 | 794 | 1,593 | |||||||||
Net cash provided by (used in) operating activities |
(1,796 | ) | 114,808 | 85,943 | ||||||||
INVESTING ACTIVITIES |
||||||||||||
Investments in subsidiaries, net |
| (370,466 | ) | (13,291 | ) | |||||||
Loans to nonbank subsidiaries, net of repayments |
1,150 | 1,550 | 78,750 | |||||||||
Net cash provided by (used in) investing activities |
1,150 | (368,916 | ) | 65,459 | ||||||||
FINANCING ACTIVITIES |
||||||||||||
Cash dividends on common stock |
(13,250 | ) | (78,590 | ) | (77,340 | ) | ||||||
Cash dividends on preferred stock |
(13,584 | ) | | | ||||||||
Proceeds from issuance of common stock |
218,634 | 4,279 | 6,932 | |||||||||
Purchases of common stock |
(1,087 | ) | (52,588 | ) | (52,782 | ) | ||||||
Proceeds from issuance of preferred stock, with common stock
warrant |
| 300,000 | | |||||||||
Share-based compensation reimbursed by bank subsidiary |
4,110 | 6,929 | 13,329 | |||||||||
Repayment of long-term debt |
| (6,186 | ) | (3,093 | ) | |||||||
Other, net |
| 63 | 124 | |||||||||
Net cash provided by (used in) financing activities |
194,823 | 173,907 | (112,830 | ) | ||||||||
Increase (decrease) in cash and cash equivalents |
194,177 | (80,201 | ) | 38,572 | ||||||||
Cash and cash equivalents at beginning of year |
45,339 | 125,540 | 86,968 | |||||||||
Cash and cash equivalents at end of year |
$ | 239,516 | $ | 45,339 | $ | 125,540 | ||||||
The total for cash used to invest in subsidiaries in 2008 included a $275 million capital
contribution to the Bank following the preferred stock issue under the Treasurys Capital Purchase
Program. Cash for subsidiary investments also included the net cash paid to acquire Parish in 2008
and Signature in 2007. The bank subsidiaries acquired with these holding companies were merged
into the Bank.
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Item 9: | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
None.
Item 9A: | CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and Procedures. The Companys management, with the
participation of the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), has evaluated
the effectiveness of the Companys disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the
period covered by this annual report on Form 10-K. Based on that evaluation, the CEO and CFO have
concluded that the disclosure controls and procedures as of the end of the period covered by this
annual report were effective.
Managements Report on Internal Control over Financial Reporting and Report of Independent
Registered Public Accounting Firm. Managements Report on Internal Control over Financial
Reporting, which appears in Item 8 on page 60 of this annual report on Form 10-K, and Report of
Independent Registered Public Accounting Firm, which appears in Item 8 on page 61of this annual
report on Form 10-K are incorporated here by reference.
Changes in Internal Control over Financial Reporting. There were no changes in the Companys
internal control over financial reporting during the last fiscal quarter in the period covered by
this annual report on Form 10-K that have materially affected, or are reasonably likely to
materially affect, the Companys internal control over financial reporting.
Item 9B: | OTHER INFORMATION |
None.
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PART III
Item 10: | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
Whitney has adopted a Code of Ethics and Conduct for Senior Financial Officers and Executive
Officers that applies to its chief executive officer, chief financial officer, controller or
principal accounting officer, as well as such other persons, including officers of its
subsidiaries, identified by resolution of the Board of Directors from time to time as performing
similar functions for the Company and any other persons the Board of Directors designates as
executive officers. A copy of the code is available on the Companys website at
www.whitneybank.com. Whitney will also post on its website at the same address any
amendments to the code and any waivers from the code required to be disclosed by the rules of the
SEC or the Nasdaq Global Select Market.
In further response to this Item 10, Whitney incorporates by reference the section entitled
Executive Officers of the Company appearing in Item 1 of this Form 10-K and the following
sections of its Proxy Statement for the 2010 Annual Meeting of Shareholders to be filed with the
SEC:
| The subsections entitled Board of Directors, Board Qualifications, Audit Committee, Nominating and Corporate Governance Committee, and Corporate Governance of the section entitled Board of Directors and Its Committees. | ||
| The section entitled Section 16(a) Beneficial Ownership Reporting Compliance. | ||
| The section entitled Transactions with Related Persons. |
Item 11: | EXECUTIVE COMPENSATION |
In response to this item, Whitney incorporates by reference the following sections of its
Proxy Statement for the 2010 Annual Meeting of Shareholders to be to be filed with the SEC:
| The section entitled Executive Compensation. | ||
| The subsections entitled Board Committees and Compensation and Human Resources Committee of the section entitled Board of Directors and Its Committees. | ||
| The section entitled Compensation and Human Resources Committee Interlocks and Insider Participation. | ||
| The section entitled Compensation Discussion and Analysis. | ||
| The section entitled Compensation and Human Resources Committee Report. |
Item 12: | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
In partial response to this item, Whitney incorporates by reference the section entitled
Security Ownership of Certain Beneficial Owners and Management of its Proxy Statement for the
2010 Annual Meeting of Shareholders to be filed with the SEC.
The following table summarizes certain information regarding the Companys equity compensation
plans as of December 31, 2009. The underlying compensation plans, which are more fully described
in Note 16 to the consolidated financial statements included in Item 8 of this annual report on
Form 10-K, have been previously approved by a vote of the shareholders.
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Equity Compensation Plan Information
(a) | (b) | (c) | ||||||||||
Number of securities | ||||||||||||
remaining available for | ||||||||||||
future issuance under | ||||||||||||
Number of securities to | Weighted-average | equity compensation | ||||||||||
be issued upon exercise | exercise price of | plans (excluding | ||||||||||
of outstanding options, | outstanding options, | securities reflected in | ||||||||||
Plan category | warrants and rights | warrants and rights | column (a)) | |||||||||
Equity compensation plans
approved by shareholders |
2,287,788 | (1) | $ | 25.76 | (2) | 2,173,422 | (3) | |||||
Equity compensation plans
not approved by shareholders |
| | | |||||||||
Total |
2,287,788 | $ | 25.76 | 2,173,422 |
(1) | The total includes an aggregate of 1,911,838 shares that can be issued on the exercise of options held by employees. 355,340 shares are subject to options granted under the 2007 Long-Term Compensation Plan (2007 LTCP), 808,295 shares are subject to options granted under the 2004 Long-Term Incentive Plan (2004 LTIP), and 748,203 shares are subject to options granted under the 1997 Long-Term Incentive Plan (1997 LTIP). The total also includes an aggregate of 294,750 shares that can be issued on the exercise of options held by nonemployee directors of the Company. These options were granted under the Directors Compensation Plan, as amended and restated. | |
Also included in the total are 81,200 common stock equivalent units held in deferred compensation accounts maintained for certain of the Companys directors, which must eventually be distributed as common shares of the Company. As allowed under the Directors Compensation Plan, certain nonemployee directors have deferred receipt of annual stock awards and fees, and the value of these deferrals has been credited to a bookkeeping account maintained for each director. The value of an account is indexed to the performance of one or more investment options specified in the plans. One of the investment options is equivalent units of the Companys common stock. This option is mandatory for deferred stock awards and was extended by the Directors Compensation Plan to deferred compensation account balances maintained under a prior deferred compensation plan. The number of common stock equivalent units allocated to a directors account for each deferral is based on the fair market value of the Companys common stock on the deferral date. The common stock equivalent units are deemed to earn any dividends declared on the Companys common stock, and additional units are allocated on the dividend payment date based on the stocks fair market value. | ||
(2) | Represents the weighted-average exercise price of options granted under the 2007 LTCP, the 2004 LTIP, the 1997 LTIP, and the Directors Compensation Plan. It does not include the per share price of common stock equivalent units held in deferred compensation accounts for the benefit of nonemployee directors. These units are allocated to accounts based on the fair market value of the Companys common stock on the date of each account transaction. | |
(3) | Under the 2007 LTCP, the Company is authorized to make awards with respect to a maximum of 3,200,000 of its common shares. The 2007 LTCP provides for the award of options, stock appreciation rights, restricted stock and restricted stock units that represent common shares, as well as other stock-based awards that the Compensation and Human Resources Committee of the Companys Board of Directors deems consistent with the plans purposes. Of the total shares authorized, the Company can make awards with respect to a maximum of 2,400,000 shares in a form of full-value awards, i.e., awards other than in the form of stock options or stock appreciations rights and which are settled in stock. A maximum of 1,000,000 shares may be issued upon exercise of incentive stock options awarded under the 2007 LTCP. At December 31, 2009, the Company could make future awards under the 2007 LTCP with respect to 1,822,500 shares of its common stock, of which 1,377,840 can be under full-value awards. No incentive stock options had been awarded under the 2007 LTCP as of December 31, 2009. The total shares available for award has been reduced by the maximum number of shares that could be issued with respect to performance-based awards under the 2007 LTCP for which the performance measurement period was not |
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completed by December 31, 2009. | ||
The Directors Compensation Plan as originally implemented provided for awards of stock options or common stock and allocations of common stock equivalent units. The Board of Directors subsequently amended the plan to eliminate the annual award of stock options beginning in 2009 and to reduce the aggregate number of common shares authorized to be issued to no more than 937,500. At December 31, 2009, the Company could make future awards or allocations of common stock equivalent units under the plan with respect to 350,922 shares of its common stock. |
Item 13: | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
In response to this item, the Company incorporates by reference the following sections of its
Proxy Statement for the 2010 Annual Meeting of Shareholders to be filed with the SEC:
| The section entitled Transactions with Related Persons. | ||
| The first paragraph of the subsection entitled Board of Directors in the section entitled Board of Directors and Its Committees. | ||
| The first paragraph of the subsection entitled Nominating and Corporate Governance Committee in the section entitled Board of Directors and Its Committees. | ||
| The first paragraph of the subsection entitled Audit Committee in the section entitled Board of Directors and Its Committees. | ||
| The first paragraph of the subsection entitled Role of the Compensation and Human Resources Committee in the section entitled Compensation Discussion and Analysis. |
Item 14: | PRINCIPAL ACCOUNTING FEES AND SERVICES |
In response to this item, the Company incorporates by reference the section entitled
Auditors of its Proxy Statement for the 2010 Annual Meeting of Shareholders to be filed with the
SEC.
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PART IV
Item 15: | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
(a)(1) The following consolidated financial statements and supplementary data of the Company and its subsidiaries are included in Part II Item 8 of this Form 10-K: |
Page Number | ||||
61 | ||||
62 | ||||
63 | ||||
64 | ||||
65 | ||||
66 |
(a)(2) All schedules have been omitted because they are either not applicable or the required information has been included in the consolidated financial statements or notes to the consolidated financial statements. | ||
(a)(3) Exhibits: |
Exhibit 3.1 Copy of the Companys Composite Charter (filed as Exhibit 3.1 to the Companys current report on Form 8-K filed on December 23, 2008 (Commission file number 0-1026) and incorporated by reference). | |||
Exhibit 3.2 Copy of the Companys Bylaws (filed as Exhibit 3.2 to the Companys current report on Form 8-K filed on December 23, 2008 (Commission file number 0-1026) and incorporated by reference). | |||
Exhibit 4.1 Form of Certificate of Series A Preferred Stock (filed as Exhibit 4.1 to the Companys current report on Form 8-K filed on December 23, 2008 (Commission file number 0-1026) and incorporated by reference). | |||
Exhibit 4.2 Form of Warrant to Purchase Shares of Common Stock (filed as Exhibit 4.2 to the Companys current report on Form 8-K filed on December 23, 2008 (Commission file number 0-1026) and incorporated by reference). |
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Exhibit 10.1 *- Form of Amended and Restated Executive Agreement between the Company, the Bank and certain executive officers (filed as Exhibit 10.1 to the Companys annual report on Form 10-K for the year ended December 31, 2007 (Commission file number 0-1026) and incorporated by reference). | |||
Exhibit 10.2 *- Form of Amended and Restated Officer Agreement between the Company, the Bank and an executive officer (filed as Exhibit 10.2 to the Companys annual report on Form 10-K for the year ended December 31, 2007 (Commission file number 0-1026) and incorporated by reference). | |||
Exhibit 10.3 *- Senior Executive Letter Agreement by and between the Company and Robert C. Baird, Jr. (filed as Exhibit 10.22 to the Companys annual report on Form 10-K for the year ended December 31, 2007 (Commission file number 0-1026) and incorporated by reference). | |||
Exhibit 10.4 *- Senior Executive Letter Agreement by and between the Company and Thomas L. Callicutt, Jr. (filed as Exhibit 10.23 to the Companys annual report on Form 10-K for the year ended December 31, 2007 (Commission file number 0-1026) and incorporated by reference). | |||
Exhibit 10.5 *- Senior Executive Letter Agreement by and between the Company and Joseph S. Exnicios (filed as Exhibit 10.24 to the Companys annual report on Form 10-K for the year ended December 31, 2007 (Commission file number 0-1026) and incorporated by reference). | |||
Exhibit 10.6 *- Senior Executive Letter Agreement by and between the Company and John C. Hope, III (filed as Exhibit 10.25 to the Companys annual report on Form 10-K for the year ended December 31, 2007 (Commission file number 0-1026) and incorporated by reference). | |||
Exhibit 10.7 *- Senior Executive Letter Agreement by and between the Company and R. King Milling (filed as Exhibit 10.26 to the Companys annual report on Form 10-K for the year ended December 31, 2007 (Commission file number 0-1026) and incorporated by reference). | |||
Exhibit 10.8 *- Senior Executive Letter Agreement by and between the Company and John M. Turner, Jr. (filed as Exhibit 10.27 to the Companys annual report on Form 10-K for the year ended December 31, 2007 (Commission file number 0-1026) and incorporated by reference). | |||
Exhibit 10.9 *- Whitney Holding Corporation 1997 Long-Term Incentive Plan (filed as Exhibit A to the Companys Proxy Statement dated March 18, 1997 (Commission file number 0-1026) and incorporated by reference). | |||
Exhibit 10.10 *- Whitney Holding Corporation 2004 Long-Term Incentive Plan (filed as Exhibit B to the Companys Proxy Statement for the Annual Meeting of Shareholders dated March 19, 2004 (Commission file number 0-1026) and incorporated by reference). | |||
Exhibit 10.11 *- Whitney Holding Corporation 2007 Long-Term Compensation Plan (filed as Exhibit A of the Definitive Additional Materials to the Companys Definitive Proxy Statement on Schedule 14A dated March 29, 2007 (Commission file number 0-1026) and incorporated by reference). | |||
Exhibit 10.12 *- Amendment to the Companys 2007 Long-Term Compensation Plan effective as of December 1, 2007 (filed as Exhibit 10.6 to the Companys annual report on Form 10-K for the year ended December 31, 2007 (Commission file number 0-1026) and incorporated by reference). | |||
Exhibit 10.13 *- Form of performance-based restricted stock unit agreement for executive officers under the Companys 2007 Long-Term Compensation Plan (filed as Exhibit 10.10 to the Companys annual report on Form 10-K for the year ended December 31, 2007 (Commission file number 0-1026) and incorporated by reference). |
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Exhibit 10.14 *- Form of performance-based restricted stock unit agreement for executive officers under the Companys 2007 Long-Term Compensation Plan (filed as Exhibit 10.1 to the Companys quarterly report on Form 10-Q for the quarter ended June 30, 2008 (Commission file number 0-1026) and incorporated by reference.) | |||
Exhibit 10.15 *- Form of tenure-based restricted stock unit agreement for executive officers under the Companys 2007 Long-Term Compensation Plan (filed as Exhibit 10.1 to the Companys quarterly report on Form 10-Q for the quarter ended June 30, 2009 (Commission file number 0-1026) and incorporated by reference). | |||
Exhibit 10.16 *- Form of stock option agreement between the Company and certain of its officers (filed as Exhibit 10.9b to the Companys annual report on Form 10-K for the year ended December 31, 2001 (Commission file number 0-1026) and incorporated by reference). | |||
Exhibit 10.17 *- Form of notice and acceptance of stock option grant to certain of the Companys officers under the Companys 2004 Long-Term Incentive Plan (filed on June 17, 2005 as Exhibit 99.3 to the Companys current report on Form 8-K (Commission file number 0-1026) and incorporated by reference). | |||
Exhibit 10.18 *- Form of notice and acceptance of stock option grant under the Companys 2004 Long-Term Incentive Plan (filed on July 6, 2006 as Exhibit 99.2 to the Companys current report on Form 8-K (Commission file number 0-1026) and incorporated by reference). | |||
Exhibit 10.19 *- Form of notice and acceptance of stock option grant under the Companys 2007 Long-Term Compensation Plan (filed as Exhibit 10.14 to the Companys annual report on Form 10-K for the year ended December 31, 2007 (Commission file number 0-1026) and incorporated by reference). | |||
Exhibit 10.20 *- Amendment to stock options granted under the Companys 2007 Long-term Compensation Plan (filed as Exhibit 10.1 to the Companys quarterly report on Form 10-Q for the quarter ended March 31, 2009 (Commission file number 0-1026) and incorporated by reference). | |||
Exhibit 10.21 *- Whitney Holding Corporation Directors Compensation Plan (filed as Exhibit A to the Companys Proxy Statement dated March 24, 1994 (Commission file number 0-1026) and incorporated by reference). | |||
Exhibit 10.22 *- Amendment No. 1 to the Companys Directors Compensation Plan (filed as Exhibit A to the Companys Proxy Statement dated March 15, 1996 (Commission file number 0-1026) and incorporated by reference). | |||
Exhibit 10.23 *- Whitney Holding Corporation 2001 Directors Compensation Plan as amended and restated effective as of January 1, 2008 (filed as Exhibit 10.17 to the Companys annual report on Form 10-K for the year ended December 31, 2007 (Commission file number 0-1026) and incorporated by reference). | |||
Exhibit 10.24 *- Amendment to the Companys Amended and Restated 2001 Directors Compensation Plan effective as of July 23, 2008 (filed as Exhibit 10.1 of the Companys quarterly report on Form 10-Q for the quarter ended September 30, 2008 (Commission file number 0-1026) and incorporated by reference). | |||
Exhibit 10.25 *- Whitney Holding Corporation Retirement Restoration Plan as amended and restated effective January 1, 2008 (filed as Exhibit 10.18 to the Companys annual report on Form 10-K for the year ended December 31, 2007 (Commission file number 0-1026) and incorporated by reference). | |||
Exhibit 10.26 *- Amendment to the Companys Retirement Restoration Plan (filed as Exhibit 10.2 to the Companys quarterly report on Form 10-Q for the quarter ended June 30, 2009 (Commission file number 0-1026) and incorporated by reference). |
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Exhibit 10.27 *- Whitney Holding Corporation Executive Incentive Compensation Plan as amended and restated effective as of January 1, 2008 (filed as Exhibit 10.19 to the Companys annual report on Form 10-K for the year ended December 31, 2007 (Commission file number 0-1026) and incorporated by reference). | |||
Exhibit 10.28 *- Whitney Holding Corporation Deferred Compensation Plan as amended and restated effective as of January 1, 2008 (filed as Exhibit 10.20 to the Companys annual report on Form 10-K for the year ended December 31, 2007 (Commission file number 0-1026) and incorporated by reference). | |||
Exhibit 10.29 Letter Agreement, dated December 19, 2008, including the Securities Purchase Agreement, by and between the Company and the United States Department of the Treasury (filed as Exhibit 10.1 to the Companys current report on Form 8-K filed on December 23, 2008 (Commission file number 0-1026) and incorporated by reference). | |||
Exhibit 12 Statement regarding computation of earnings to fixed charges | |||
Exhibit 21 Subsidiaries |
Whitney Holding Corporation owns 100% of Whitney National Bank, a national banking
association organized under the laws of the United States of America. All other
subsidiaries considered in the aggregate would not constitute a significant subsidiary.
Exhibit 23 Consent of PricewaterhouseCoopers LLP dated March 1, 2010. | |||
Exhibit 31.1 Certification of the Companys Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||
Exhibit 31.2 Certification of the Companys Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||
Exhibit 32 Certification by the Companys Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |||
Exhibit 99.1 Certification of Principal Executive Officer pursuant to 31 C.F.R. Section 30.15. | |||
Exhibit 99.2 Certification of Principal Financial Officer pursuant to 31 C.F.R. Section 30.15. |
* | Management contract or compensatory plan or arrangement. | |
** | Pursuant to Item 601(b)(4)(iii) of Regulation S-K, copies of instruments defining the rights of certain holders of long-term debt are not filed. The Company will furnish copies thereof to the SEC upon request. |
To obtain a copy of any listed exhibit send your request to the address below. The copy will
be furnished upon payment of a fee.
Mrs. Shirley Fremin, Manager
Investor Relations
Whitney Holding Corporation
P. O. Box 61260
New Orleans, LA 70161-1260
(504) 586-3627 or toll free (800) 347-7272, ext. 3627
E-mail: investor.relations@whitneybank.com
Investor Relations
Whitney Holding Corporation
P. O. Box 61260
New Orleans, LA 70161-1260
(504) 586-3627 or toll free (800) 347-7272, ext. 3627
E-mail: investor.relations@whitneybank.com
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SIGNATURES
Pursuant to the requirements of 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/ John C. Hope, III | |||
John C. Hope, III | ||||
Chairman of the Board and Chief Executive Officer |
||||
March 1, 2010
Date
Date
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.
Signature | Title | Date | ||
/s/ John C. Hope, III
|
Chairman of the Board, | March 1, 2010 | ||
John C. Hope, III
|
Chief Executive Officer and Director | |||
/s/ John M. Turner, Jr.
|
President and Director | March 1, 2010 | ||
John M. Turner, Jr. |
||||
/s/ Thomas L. Callicutt, Jr.
|
Senior Executive Vice President and | March 1, 2010 | ||
Thomas L. Callicutt, Jr.
|
Chief Financial Officer (Principal Accounting Officer) |
|||
/s/ A. R. Blossman, Jr.
|
Director | March 1, 2010 | ||
A. R. Blossman, Jr. |
||||
/s/ Angus R. Cooper II
|
Director | March 1, 2010 | ||
Angus R. Cooper II |
||||
/s/ Richard B. Crowell
|
Director | March 1, 2010 | ||
Richard B. Crowell |
||||
/s/ Hardy B. Fowler
|
Director | March 1, 2010 | ||
Hardy B. Fowler |
||||
/s/ Terence E. Hall
|
Director | March 1, 2010 | ||
Terence E. Hall |
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Signature | Title | Date | ||
/s/ William A. Hines
|
Director | March 1, 2010 | ||
William A. Hines |
||||
/s/ Alfred S. Lippman
|
Director | March 1, 2010 | ||
Alfred S. Lippman |
||||
/s/ Michael L. Lomax
|
Director | March 1, 2010 | ||
Michael L. Lomax |
||||
/s/ R. King Milling
|
Director | March 1, 2010 | ||
R. King Milling |
||||
/s/ Eric J. Nickelsen
|
Director | March 1, 2010 | ||
Eric J. Nickelsen |
||||
/s/ Kathryn M. Sullivan
|
Director | March 1, 2010 | ||
Kathryn M. Sullivan |
||||
/s/ Dean E. Taylor
|
Director | March 1, 2010 | ||
Dean E. Taylor |
||||
/s/ Thomas D. Westfeldt
|
Director | March 1, 2010 | ||
Thomas D. Westfeldt |
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