<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
[ X ] Annual report pursuant to Section 13 or 15 (d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 1993
OR
[ ] Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission file number 0-1026
WHITNEY HOLDING CORPORATION
Incorporated in Louisiana I.R.S. Employer Identification
No. 72-6017893
228 St. Charles Avenue, New Orleans, Louisiana 70130
Registrant's telephone number, including area code (504) 586-7272
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of the Form 10-K or any amendment to this
Form 10-K. [ X ]
State the aggregate market value of the voting stock held by nonaffiliates
of the Registrant as of March 11, 1994
Approximately $279,370,000*
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date.
Common Stock, no par value, 14,458,227 shares outstanding as of March 11,
1994.
Documents Incorporated by Reference
Definitive Proxy Statement dated March 24, 1994, Part III.
An Exhibit Index appears on page 40.
* For the purposes of this computation, shares owned by directors and executive
officers of the Registrant, even though all such persons may not be affiliates
as defined in SEC Rule 405, have been excluded.
<PAGE>
<TABLE>
<CAPTION>
Page
- --------------------------------------------------------------------------
<S> <C>
PART I
Item 1: Business 3
Item 2: Properties 3
Item 3: Legal Proceedings 3
Item 4: Not Applicable
- --------------------------------------------------------------------------
PART II
Item 5: Market for the Registrant's Common Stock and 4
Related Shareholder Matters
Item 6: Selected Financial Data 5
Item 7: Management's Discussion and Analysis of 6
Financial Condition and Results of Operations
Item 8: Financial Statements and Supplementary Data 19
Item 9: Not Applicable
- --------------------------------------------------------------------------
PART III
Item 10: Directors and Executive Officers of the Registrant 39
Item 11: Executive Compensation 39
Item 12: Security Ownership of Certain Beneficial 39
Owners and Management
Item 13: Certain Relationships and Related Transactions 39
- --------------------------------------------------------------------------
PART IV
Item 14: Exhibits, Financial Statement Schedules and 40
Reports on Form 8-K
- --------------------------------------------------------------------------
Signatures 42
</TABLE>
Page 2 of 50
<PAGE>
PART I
ITEM 1: BUSINESS
Whitney Holding Corporation (the "Company") is a Louisiana bank holding
company registered pursuant to the Bank Holding Company Act of 1956. The
Company became an operating entity in 1962 with Whitney National Bank (the
"Bank") as its only significant subsidiary. The Bank, which has its
headquarters in Orleans parish, has been engaged in general banking business in
the City of New Orleans since 1883.
The Bank engages in commercial and retail banking and in trust business,
including the taking of deposits, the making of secured and unsecured loans, the
financing of commercial transactions, the issuance of credit cards, the
performance of corporate, pension and personal trust services, and safe deposit
rentals. The Bank is also active as a correspondent for other banks. The Bank
renders specialized services of different kinds in connection with all of the
foregoing, and has thirty-eight domestic offices and one foreign office.
There is significant competition within the financial services industry in
general as well as with respect to the particular financial services provided by
the Bank. Within its market area, the Bank competes directly with several major
banking institutions of comparable or larger size and resources as well as with
various other smaller banking organizations and local and national "non-bank"
competitors, including savings and loans, credit unions, mortgage companies,
personal and commercial finance companies, investment brokerage firms, and
registered investment companies (mutual funds).
All material funds of the Company are invested in the Bank. The Bank has a
large number of customer relationships which have been acquired over a period of
many years and is not dependent upon any single customer or upon a few
customers, so 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 but the portion of revenue derived from these
foreign customers is not a material portion of its overall revenues.
The Company and the Bank and their related operations are subject to
federal, state and local laws applicable to banks and bank holding companies and
to the regulations of the Board of Governors of the Federal Reserve System, the
Comptroller of Currency and the Federal Deposit Insurance Corporation.
The Company does not believe that compliance with existing federal, state
or local environmental laws and regulations will impose any material financial
obligation on the Company or materially affect the realizable value of its
assets.
ITEM 2: PROPERTIES
The Company owns no real estate in its own name. The Bank owns the
fourteen-story Whitney National Bank Building at 228 St. Charles Avenue in New
Orleans. The Bank occupies approximately one half of the 306,000 square feet in
this building, and the balance is either leased to third parties or available to
be leased. The Bank also owns the premises for twelve branches in Orleans
parish, six branches in Jefferson parish, four branches in Lafayette parish, one
branch in East Baton Rouge parish and three branches in St. Tammany parish, one
of which is located on leased ground. None of these properties is subject to
any significant encumbrances.
The Bank holds a variety of property interests acquired throughout the
years in settlement of loans. Reference is made to Note 7 to the financial
statements included in Item 8 for further information.
ITEM 3: LEGAL PROCEEDINGS
There are no material pending legal proceedings, other than routine
litigation incidental to the business, to which the Company or its subsidiaries
is a party or to which any of their property is a subject.
Page 3 of 50
<PAGE>
PART II
ITEM 5: MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER
MATTERS
a) The Company's stock price is reported on the National Association of
Securities Dealers Automated Quotation (NASDAQ) system under the
symbol WTNY. The following table shows the range of closing prices of
the Company's stock for each calendar quarter of 1993 and 1992 as
reported on the NASDAQ National Market System.
<TABLE>
<CAPTION>
1993 1992
--------------- ---------------
<S> <C> <C>
1st Quarter 15 3/4 - 23 1/2 8 3/8 - 12
2nd Quarter 19 1/8 - 23 1/2 11 1/4 - 14 5/8
3rd Quarter 19 1/2 - 25 5/8 14 1/4 - 17 1/4
4th Quarter 21 3/4 - 26 14 1/4 - 16 7/8
</TABLE>
b) The approximate number of shareholders of record of the Company, as of
March 1, 1994, is as follows:
<TABLE>
<CAPTION>
Title of Class Shareholders of Record
------------------ ----------------------
<S> <C>
Common Stock, no par value 2,878
</TABLE>
c) During 1993 and 1992, the Company declared dividends as follows:
<TABLE>
<CAPTION>
1993 1992
----- ----
<S> <C> <C>
1st Quarter $0.07 $ -
2nd Quarter 0.10 -
3rd Quarter 0.13 -
4th Quarter 0.13 0.07
</TABLE>
Per-share stock price and dividend information shown above has been
adjusted where appropriate to give retroactive effect to the three-for-two stock
splits that were effective February 22, 1993 and November 29, 1993.
Page 4 of 50
<PAGE>
ITEM 6: SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1993 1992 1991 1990 1989
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (dollars in thousands, except per-share data)
AT YEAR-END:
Total assets.................... $3,002,540 $2,953,032 $2,858,204 $2,872,287 $2,766,432
Total investment in securities.. 1,633,746 1,474,746 1,139,275 810,532 801,217
Total loans..................... 975,728 1,046,723 1,266,992 1,480,373 1,464,620
Total earning assets............ 2,719,474 2,649,914 2,534,392 2,521,326 2,431,821
Total deposits.................. 2,505,303 2,541,136 2,440,913 2,397,900 2,279,660
AVERAGE BALANCE:
Total assets.................... $2,888,335 $2,843,833 $2,854,924 $2,701,872 $2,596,603
Total investment in securities.. 1,547,701 1,281,713 1,040,451 783,131 720,489
Total loans..................... 952,238 1,124,993 1,356,995 1,439,047 1,477,608
Total earning assets............ 2,604,901 2,541,249 2,526,608 2,365,773 2,291,424
Total deposits.................. 2,415,590 2,399,412 2,383,941 2,176,161 2,087,569
INCOME DATA
Net interest income.................. $120,514 $112,430 $99,200 $96,688 $104,313
Provision for possible loan losses:
Expense of providing loss
reserves......................... - (3,350) (45,387) (62,266) (142,160)
Loss reserve reduction............ 60,000 - - - -
Gains on sale of securities.......... - 5,429 18,376 - -
Non-interest income.................. 30,991 27,215 26,923 18,218 14,882
Non-interest expense................. (100,093) (112,623) (105,803) (88,720) (78,270)
----------------------------------------------------------
Income (Loss) before income tax
and effect of accounting changes.... $111,412 $29,101 ($6,691) ($36,080) ($101,235)
Income tax expense (benefit)......... 35,645 8,899 (2,007) (18,641) (41,268)
----------------------------------------------------------
Income (Loss) before effect of
accounting changes.................. $75,767 $20,202 ($4,684) ($17,439) ($59,967)
Cumulative effect of accounting
changes, net........................ 634 - - - -
----------------------------------------------------------
Net income (loss).................... $76,401 $20,202 ($4,684) ($17,439) ($59,967)
==========================================================
Net income for 1993, before effect
of reserve reduction (net of tax)... $36,901
=========
COMMON STOCK DATA
Earnings (Loss) per share............ $5.30 $1.41 ($0.33) ($1.21) ($4.18)
Earnings per share for 1993, before
reserve reduction................... $2.56
Dividends per share.................. $0.43 $0.07 - $0.85 $1.14
Book value per share, end of period.. $17.93 $12.88 $11.57 $11.89 $13.96
Weighted average number of shares
outstanding......................... 14,425,007 14,368,052 14,347,071 14,347,071 14,347,071
SELECTED RATIOS
Return on average assets............. 2.65% 0.71% (0.16)% (0.65)% (2.31)%
Return on average assets for 1993
before reserve reduction............ 1.28%
Return on average shareholders'
equity.............................. 34.78% 11.52% (2.79)% (8.78)% (23.31)%
Return on average shareholders'
equity for 1993 before reserve
reduction........................... 16.80%
Net interest margin, taxable-
equivalent.......................... 4.75% 4.52% 3.99% 4.03% 4.55%
Tier 1 risk-based capital ratio...... 18.92% 13.59% 10.48% 9.30% -
Total risk-based capital ratio....... 20.19% 14.91% 11.82% 10.62% -
Tier 1 leverage capital ratio........ 8.23% 6.02% 5.29% 5.26% -
Shareholders' equity to total assets. 8.63% 6.28% 5.81% 5.94% 7.24%
</TABLE>
Note: All share and per-share figures give effect to the three-for-two stock
splits effective February 22, 1993 and November 29, 1993.
Page 5 of 50
<PAGE>
ITEM 7: MANAGEMENTS'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SUMMARY
For 1993, the Company earned $76.4 million or $5.30 per share. These
results include the effect of a $60.0 million reduction in the level of the
reserve for possible loan losses, which on an after-tax basis contributed $39.5
million or $2.74 per share to net income for the year. Excluding the impact of
the reserve reduction, the Company had after-tax earnings in 1993 of $36.9
million or $2.56 per share. This represents an increase of $16.7 million from
the $20.2 million, or $1.41 per share, earned in 1992.
The increase in earnings in 1993 before the effect of the reduction in the
reserve for possible loan losses was attributable both to higher net interest
income and other non-interest income as well as to an overall reduction in non-
interest expense. The impact of these factors was partly offset, however, by
the absence in 1993 of any gains on sales of investment securities.
Non-performing assets decreased throughout 1993 to $49.9 million at
December 31, 1993, down 55% from $111.2 million at December 31, 1992. The
reserve for possible loan losses, after the $60 million reduction, was $44.5
million on December 31, 1993, an amount which represented 132% of non-performing
loans and 4.6% of total loans. At year end 1992, the loan loss reserve was
$98.6 million, or 140% of non-performing loans and 9.4% of total loans on that
date.
In 1993, the Company continued to experience soft loan demand in the market
area serviced by the Bank. Average gross loans outstanding totalled $952
million during 1993 compared with $1.125 billion in the previous year, a
decrease of $173 million or 15%. Average total deposits, however, showed modest
growth between 1993 and 1992, increasing $16 million to $2.415 billion. Deposit
funds not needed for loans were redirected to the investment portfolio, which
rose on average by $265 million or 21% from $1.282 billion in 1992 to $1.547
billion in 1993. Adding the significant reduction in non-performing assets,
these year-to-year changes translated into a $103 million or 4.2% increase in
average earning assets, excluding nonaccruing loans, to $2.556 billion in 1993
from $2.453 billion in 1992.
After reinstating its dividend in the fourth quarter of 1992, the Company
declared dividends in each quarter of 1993, totalling $0.43 per share for the
year. During 1993, the Company's Board of Directors twice approved three-for-
two stock splits which were effective in February and November. All share and
per-share data in this report on Form 10-K reflect the effect of these stock
splits.
Page 6 of 50
<PAGE>
AVERAGE BALANCE SHEETS
- ----------------------
(in thousands)
<TABLE>
<CAPTION>
AVERAGE ASSETS 1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
Cash and due from depository institutions $ 186,358 $ 187,331 $ 194,616
Interest bearing deposits in other
financial institutions 849 9,686 26,564
U.S. Treasury and agency securities 1,223,466 996,467 810,228
Mortgage-backed securities 188,424 175,555 126,598
State and municipal securities 98,728 82,406 69,455
Corporate bonds and other securities 36,234 27,285 34,170
Federal funds sold 104,962 134,543 129,162
Loans, net of reserve for possible loan
losses of $72,866 in 1993, $103,926 in
1992 and $102,967 in 1991 879,372 1,021,067 1,254,028
Bank premises and equipment, net 61,868 63,631 64,218
All other assets 108,074 145,862 145,885
---------- ---------- ----------
Total assets $2,888,335 $2,843,833 $2,854,924
========== ========== ==========
AVERAGE LIABILITIES
Deposits:
Non-interest-bearing demand $ 732,734 $ 696,077 $ 661,403
Savings deposits, NOW accounts
and money market deposit accounts 1,157,859 1,101,488 820,297
Time deposits 524,997 601,847 902,241
--------- ---------- ---------
Total deposits 2,415,590 2,399,412 2,383,941
Federal funds purchased and
repurchase agreements 226,878 247,948 282,634
All other liabilities 26,205 21,060 20,259
--------- ---------- ---------
Total liabilities 2,668,673 2,668,420 2,686,834
AVERAGE SHAREHOLDERS' EQUITY
Total capital accounts 219,662 175,413 168,090
--------- ---------- ---------
Total liabilities and shareholders' equity $2,888,335 $2,843,833 $2,854,924
========== ========== ==========
</TABLE>
FINANCIAL CONDITION
LOANS
Economic conditions in the Company's market area, which is primarily
southern Louisiana and Mississippi, have in recent years slowed the overall
demand for loans and have prompted efforts by many commercial loan customers to
reduce their existing debt levels. Over this period, the Bank also consciously
reduced its exposure to credits whose performance had been adversely affected by
these economic conditions. The $173 million decrease in average loans
outstanding during 1993 as compared to 1992 is largely a reflection of the
prevailing economic conditions. The smaller $71 million decrease in gross loans
outstanding at December 31, 1993 as compared to the prior year end is influenced
by seasonal fluctuations in the short-term credit needs of certain industries
serviced by the Bank.
During 1993, the Bank has been expanding its lending resources and products
and plans to continue to intensify its efforts to compete for and place high
quality credits in the communities served by the Bank. Unfunded loan
commitments outstanding at December 31, 1993, have increased to nearly $400
million, some $43 million above the level at December 31, 1992.
Page 7 of 50
<PAGE>
LOAN PORTFOLIO BALANCES AT DECEMBER 31
- --------------------------------------
(in thousands)
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
-------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C>
Commercial, financial,
and agricultural
loans $569,812 $ 574,721 $ 745,159 $ 867,350 $ 813,265
Real estate loans -
commercial and
other 260,307 292,752 282,403 314,488 364,794
Real estate loans -
retail mortgage 71,363 88,590 118,878 131,381 131,201
Loans to individuals 74,246 90,660 120,552 167,154 155,332
Leases - - - - 28
-------- ---------- ---------- ---------- ----------
Total loans $975,728 $1,046,723 $1,266,992 $1,480,373 $1,464,620
======== ========== ========== ========== ==========
</TABLE>
DEPOSITS AND SHORT-TERM BORROWINGS
The Company's average deposit base was essentially stable during 1993,
increasing $16 million or 0.7% to $2.415 billion in 1993 from $2.399 billion in
1992. Underlying this modest overall increase is a shift in the deposit mix
away from time deposits, both core and those in amounts of $100,000 and over, in
favor of demand and savings deposits.
As is shown in the table of average balance sheets, non-interest-bearing
demand deposits increased on average by $37 million in 1993 as compared to 1992.
The increase in average deposits in interest-bearing demand and other
transaction accounts and non-time savings products was approximately $56 million
over this same period. Average total time deposits in 1993 declined $77 million
from the 1992 level, including a decrease of $46 million of deposits of $100,000
and over. The Company has emphasized and will continue to emphasize offering
core deposit products that respond to current market conditions while still
yielding customers a meaningful rate of return.
The Company's short-term borrowings arise from the purchase of federal
funds and the sale of securities under repurchase agreements, mainly as part the
Bank's services to correspondent banks and certain other customers. The
Company's average short-term borrowing position, net of federal funds sold, was
approximately $122 million in 1993 and $113 million in 1992.
INVESTMENT IN SECURITIES
At December 31, 1993, the Company's total investment in securities was
$1.634 billion or 54% of total assets and 60% of earning assets on that date.
The balance at year-end 1993 represents an increase of approximately $159
million or 10.8% over the December 31, 1992 investment total of $1.475 billion.
The average total investment portfolio outstanding increased $265 million or 21%
between 1992 and 1993 as funds not needed for loans were invested in securities.
The major portion of the increased investment activity was directed to
U.S. Treasury securities and securities of U. S. government agencies, excluding
mortgage-backed issues. The mix of period-end and average investments, however,
remained relatively stable, with U. S. Treasury and government agency securities
representing approximately 77% to 80% of the total investment in securities.
The weighted average maturity of the overall portfolio of securities was 34
months at year end 1993, virtually unchanged from year end 1992. The weighted
average taxable-equivalent portfolio yield decreased 57 basis points to 5.71% at
December 31, 1993 from 6.28% at December 31, 1992.
Page 8 of 50
<PAGE>
INVESTMENT IN SECURITIES
- ------------------------
(dollars in thousands)
<TABLE>
<CAPTION>
Book Value at December 31 1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
U.S. Treasury securities $ 934,134 $ 785,269 $ 688,614
Securities of U.S.
government agencies 366,938 385,664 194,062
Mortgage-backed securities
(available for sale at
December 31, 1993) 182,030 184,137 156,418
State and municipal
securities 112,324 86,832 82,235
Corporate bonds 34,534 28,896 13,584
Equity securities 3,786 3,948 4,362
---------- ---------- ----------
Total $1,633,746 $1,474,746 $1,139,275
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Distribution of Remaining Over One Over Five
Maturity and Yield by One Year Through Through Over Ten
Range and Less Five Years Ten Years Years Total
at December 31, 1993 --------------- -------------- ------------- ------------- -------------
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Securities held to
maturity:
U.S. Treasury securities $ 176,609 6.4 % $ 757,525 5.3% $ - - % $ - - % $934,134 5.5%
Securities of U.S.
government
agencies 137,943 4.0 202,281 5.7 26,714 7.2 - - 366,938 5.1
State and municipal
securities(1) 5,942 7.9 38,430 7.7 50,786 8.5 17,166 9.5 112,324 8.4
Corporate bonds 9,207 8.6 25,327 5.4 - - - - 34,534 6.2
Equity securities(3) - - - - - - 3,786 - 3,786 -
Securities available for
sale:(4)
Mortgage-backed
securities(2) 2 10.5 182,028 6.6 - - - - 182,030 6.6
</TABLE>
(1) Tax exempt yields are expressed on a fully taxable equivalent basis.
(2) Distributed by contractual maturity without regard to repayment schedules or
projected prepayments.
(3) These securities have no stated maturities or guaranteed dividends.
(4) These securities are classified as available for sale before maturity. The
actual timing of any such sales, however, is not determinable at year end.
Effective December 31, 1993, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities." The statement specifies
criteria for classifying investments as either trading securities, securities
held to maturity, or securities available for sale, and establishes reporting
standards for each classification.
Management considered the Company's existing investment portfolio and
underlying asset/liability management policies and strategies in light of the
new standard and determined that its investments in mortgage-backed securities
met the criteria for classification as securities available for sale. These
securities were reported at their estimated fair values at December 31, 1993,
and a tax-effected net unrealized gain of approximately $3.1 million was
recognized as a component of shareholders' equity. The remaining portfolio of
securities was classified as held to maturity and continues to be reported at
amortized cost. The Company currently maintains no trading portfolio.
In accordance with SFAS No. 115, prior period investment information has
not been restated to reflect the new standard. On an ongoing basis, investment
securities will be classified as they are acquired and the continued propriety
of classifications will be periodically evaluated by management.
Page 9 of 50
<PAGE>
ASSET QUALITY
Overall asset quality has exhibited a trend of steady improvement over the
past three years. During 1993, the Company continued to be successful in its
efforts to reduce all categories of its non-performing assets through the full
rehabilitation of nonaccruing loans, the workout of troubled credits, or the
sale of repossessed loan collateral. Non-performing assets totalled $49.9
million at December 31, 1993, a decrease of $61.3 million or 55% from $111.2
million at year end 1992.
Of the $33.6 million in nonaccruing loans at December 31, 1993, $15.6
million or 46% represented loans that are performing as contractually agreed but
are being carried in nonaccrual status because there is some doubt as to the
ultimate collectibility of all principal and interest. Nonaccruing loans
totalling approximately $18.6 million at year end 1993 were secured by real
property collateral. Another $14.2 million consisted of various commercial
credits.
NON-PERFORMING ASSETS AT DECEMBER 31
- ---------------------------------------
(in thousands)
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Loans accounted for on a
nonaccrual basis $33,631 $ 70,640 $103,763 $128,927 $ 70,851
Restructured loans - - 3,017 2,534 256
------- -------- -------- -------- --------
Total non-performing loans 33,631 70,640 106,780 131,461 71,107
Other real estate owned 16,126 40,142 68,444 54,878 44,517
Other foreclosed assets 174 420 364 - -
------- -------- -------- -------- --------
Total non-performing assets $49,931 $111,202 $175,588 $186,339 $115,624
======= ======== ======== ======== ========
Loans 90 days past due still accruing $ 876 $ 1,441 $ 1,004 $ 496 $ 1,598
======= ======== ======== ======== ========
Non-performing assets as a
percentage of:
Total assets 1.66% 3.76% 6.14% 6.49% 4.18%
Total loans and foreclosed assets 5.03% 10.23% 13.14% 12.14% 7.66%
</TABLE>
In 1993, the Company identified $6.4 million of loans to be charged off as
uncollectible against the reserve for possible loan losses, a decrease of 70%
from the $21.4 million of charge-offs in 1992. At the same time, the Company
was successful in increasing its loan recoveries to $12.4 million in 1993 from
$9.4 million in 1992.
The reserve for possible loan losses is maintained at a level believed by
management to be adequate to absorb potential losses in the portfolio. The $60
million reduction in the reserve during 1993 reflects management's determination
that the steps taken in recent years to deal with the Bank's asset quality
issues have yielded lasting positive results, evidenced in part by the positive
trends noted above. In management's judgment, some of the reserve levels that
had been established in the past in recognition of these asset quality issues
were no longer needed. After the reduction, the reserve for possible loan
losses was $44.5 million at December 31, 1993, or a 132% coverage of total non-
performing loans and 4.6% of total loans.
Page 10 of 50
<PAGE>
SUMMARY OF LOAN LOSS EXPERIENCE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(dollars in thousands)
1993 1992 1991 1990 1989
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Reserve for possible loan
losses at beginning of period $ 98,558 $107,246 $ 90,845 $ 96,023 $ 15,007
Reserves provided upon
acquisitions - - - - 7,834
Loans charged off during period:
Commercial, financial, and
agricultural loans $ 4,560 $ 12,651 $ 18,263 $ 33,221 $ 33,548
Real estate loans 620 4,742 8,819 29,993 31,133
Loans to individuals 1,252 3,996 7,909 9,053 5,870
-------- -------- -------- -------- --------
Total $ 6,432 $ 21,389 $ 34,991 $ 72,267 $ 70,551
-------- -------- -------- -------- --------
Recoveries of loans previously
charged off:
Commercial, financial, and
agricultural loans $ 7,156 $ 4,281 $ 2,265 $ 1,960 $ 687
Real estate loans 3,754 2,156 1,026 509 100
Loans to individuals 1,449 2,914 2,714 2,354 786
-------- -------- -------- -------- --------
Total $ 12,359 $ 9,351 $ 6,005 $ 4,823 $ 1,573
-------- -------- -------- -------- --------
Net loans (charged off) recovered
during period $ 5,927 $(12,038) $(28,986) $(67,444) $(68,978)
Additions to (reduction of)
reserve for possible loan
losses included in
operations (60,000) 3,350 45,387 62,266 142,160
-------- -------- -------- -------- --------
Reserve for possible loan
losses at end of period $ 44,485 $ 98,558 $107,246 $ 90,845 $ 96,023
======== ======== ======== ======== ========
Reserve as a percentage of:
Total non-performing loans 132% 140% 100% 69% 135%
Total loans 4.56% 9.42% 8.46% 6.14% 6.56%
Ratio of net charge-offs (recoveries)
to average loans outstanding (0.62%) 1.07% 2.14% 4.60% 4.67%
</TABLE>
ALLOCATION OF THE RESERVE FOR POSSIBLE LOAN LOSSES
- ----------------------------------------------------
(dollars in thousands)
<TABLE>
<CAPTION>
DECEMBER 31, 1993
-----------------------
AMOUNT PERCENTAGE
-------- -----------
<S> <C> <C>
Balance at year end applicable to -
Commercial, financial and agricultural loans $ 20,447 46.0%
Real estate loans - commercial and other 9,341 21.0
Real estate loans - retail mortgage 2,561 5.7
Loans to individuals 2,664 6.0
Unallocated 9,472 21.3
-------- --------
$44,485 100.0%
======== ========
</TABLE>
Page 11 of 50
<PAGE>
During 1993, the Company disposed of other real estate owned ("OREO")
properties with a carrying value at the time of sale totalling approximately $24
million. The value of OREO properties acquired in settlement of loans during
the year was $3.7 million. The balance of other real estate owned at December
31, 1993, which includes $8.2 million of loans deemed to have been foreclosed in
substance, consisted mainly of commercial land and buildings.
The Company has several property interests which were acquired through
routine banking transactions generally prior to 1933 and which are recorded in
its financial records at a nominal value. Management continually investigates
ways to maximize the return on these assets. There were no significant
dispositions of these property interests in 1993. Future dispositions may
result in the recognition of substantial gains.
The Company has not extended any credit in connection with what would be
defined under regulatory guidelines as highly leveraged transactions, nor has it
acquired any investment securities arising from such transactions. The
Company's foreign lending and investing activities are currently insignificant.
Note 3 to the consolidated financial statements discusses credit concentrations
in the loan portfolio.
CAPITAL ADEQUACY
The strong earnings reported for 1993, including the effect of the
reduction in the reserve for loan losses, are reflected in the increase in the
Company's and the Bank's regulatory capital ratios between December 31, 1993 and
1992. Also contributing to this increase was the shift in the asset mix toward
investments in securities which are assigned a risk-weighting lower than for
loans in the capital ratio calculations. For the purposes of these
calculations, capital does not currently include the net unrealized gain or loss
on securities held for sale which is reported as a separate component of
shareholders' equity under SFAS No. 115.
The Company's regulatory capital ratios, which are essentially the same as
those calculated for the Bank, are shown here compared to the minimums currently
required for regulatory classification as a "well capitalized" institution:
<TABLE>
<CAPTION>
Required for
December 31, well-capitalized
1993 1992 institution
---------------------------------
<S> <C> <C> <C>
Tier 1 risk-based
capital ratio 18.92% 13.59% 6.00%
Total risk-based
capital ratio 20.19% 14.91% 10.00%
Tier 1 leverage
capital ratio 8.23% 6.02% 5.00%
</TABLE>
The Company is committed to maintaining a strong capital base to support
its philosophy of soundness, profitability and growth.
The Bank's regulators have proposed rules which will incorporate a measure
of the Bank's interest rate risk into the level of regulatory capital it is
required to maintain. These rules are expected to be finalized and become
effective in 1994. Considering the Bank's current level of regulatory capital
and its interest rate risk position, management believes that adoption of the
proposed rule will not have a significant impact on the Bank's ability to
satisfy its regulatory capital requirements.
Page 12 of 50
<PAGE>
RESULTS OF OPERATIONS
The following table of comparative analytical income statements offers an
overview of the Company's results of operations.
<TABLE>
<CAPTION>
COMPARATIVE ANALYTICAL INCOME STATEMENTS
- ----------------------------------------
(in millions)
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Interest income (tax equivalent) $172.8 $180.6 $209.6
Interest expense 49.0 65.3 107.6
------ ------ ------
Net interest income (tax equivalent) $123.8 $115.3 $102.0
Service charges and fees on deposits $ 15.6 $ 14.8 $ 11.6
Trust income 2.7 2.8 2.7
Other operating income 9.1 8.3 8.3
------ ------ ------
Total non-interest operating income $ 27.4 $ 25.9 $ 22.6
Personnel expense $(48.3) $(46.3) $(43.4)
Net occupancy expense (6.5) (6.6) (6.6)
Other operating expense (43.4) (43.9) (41.8)
------ ------ ------
Total non-interest operating expense $(98.2) $(96.8) $(91.8)
Net operating profit $ 53.0 $ 44.4 $ 32.8
Gains on sales of securities $ - $ 5.4 $ 18.4
Net gains on sales of OREO 3.6 1.3 4.3
------ ------ ------
Total non-operating income $ 3.6 $ 6.7 $ 22.7
Provision for possible loan losses $ 60.0 $ (3.3) $(45.4)
Provision for losses on OREO and
other problem assets (1.9) (15.9) (14.0)
------ ------ ------
Total non-operating expense $ 58.1 $(19.2) $(59.4)
Income (loss) before tax (tax equivalent) $114.7 $ 31.9 $ (3.9)
Income tax (35.6) (8.9) 2.0
Tax equivalent adjustment (3.3) (2.8) (2.8)
Cumulative effect of accounting changes, net 0.6 - -
------ ------ ------
Net income (loss) $ 76.4 $ 20.2 $ (4.7)
====== ====== ======
</TABLE>
NET INTEREST INCOME
Taxable-equivalent net interest income increased $8.5 million or 7.4% in
1993 as compared to 1992, as the net interest margin rose to 4.75% from 4.52%.
A combination of factors contributed to this increase, the components of which
are detailed in the following tables analyzing changes in interest income and
expense.
Interest expense decreased $16.3 million in 1993, despite a modest rise in
average deposits, because of both the lower rate environment that prevailed in
1993 as compared to 1992 as well as the shift in the mix of deposits to non-
interest-bearing and lower-cost deposits between these periods. Average total
time deposits in 1993 were down $77 million from 1992's level, including a
decrease in deposits of $100,000 or more of $46 million.
Interest income also decreased in 1993 as compared to 1992, by $7.8
million, but not to the same degree as interest expense. Overall asset yields
declined in 1993 as a result of the lower rate environment and as the mix of
earning assets shifted from loans to lower-yielding investment securities.
Asset yields were favorably impacted, however, by an overall increase in average
earning assets, excluding nonaccruing loans, of $103 million from 1992 to 1993,
reflecting in part the continued positive trend in asset quality.
Page 13 of 50
<PAGE>
ANALYSIS OF CHANGES IN INTEREST INCOME AND INTEREST EXPENSE
YIELDS ON AVERAGE EARNINGS ASSETS AND RATES ON AVERAGE
INTEREST-BEARING LIABILITIES
- -----------------------------------------------------------
(dollars in thousands)
<TABLE>
<CAPTION>
1993 1992 1991
----------------------------- --------------------------- ---------------------------
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate Balance Expense Rate
------- ------- ----- ------- ------- ----- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
INTEREST-EARNING ASSETS:
Loans (tax equivalent).. $ 903,835 $ 74,846 8.28% $1,027,357 $ 90,062 8.77% $1,219,947 $121,797 9.98%
Nonaccruing loans....... 48,403 - - 97,636 - - 137,048 - -
---------- -------- ---- ---------- -------- ---- ---------- -------- ----
Total loans......... $ 952,238 $ 74,846 7.86% $1,124,993 $ 90,062 8.01% $1,356,995 $121,797 8.98%
---------- -------- ---- ---------- -------- ---- ---------- -------- ----
U.S. Treasury
securities............. $ 884,417 $51,463 5.82% $ 739,556 $ 46,959 6.35% $ 710,027 $ 50,937 7.17%
U.S. government agency
securities............. 339,049 19,570 5.77% 256,911 15,547 6.05% 100,201 6,920 6.91%
Mortgage-backed
securities............. 188,424 12,635 6.71% 175,555 13,090 7.46% 126,598 10,859 8.58%
State and municipal
securities (tax
equivalent)............ 98,728 8,603 8.71% 82,406 7,750 9.40% 69,455 7,172 10.33%
Corporate bonds and
other securities....... 36,234 2,501 6.90% 27,285 2,099 7.69% 34,170 2,732 8.00%
---------- -------- ---- ---------- -------- ---- ---------- -------- ----
Total investment
securities.......... $1,546,852 $94,772 6.13% $1,281,713 $ 85,445 6.67% $1,040,451 $ 78,620 7.56%
---------- -------- ---- ---------- -------- ---- ---------- -------- ----
Federal funds sold...... 104,962 3,145 3.00% 134,543 4,702 3.49% 129,162 7,197 5.57%
Interest-bearing
deposits in financial
institutions........... 849 26 3.06% 9,686 400 4.13% 26,564 1,953 7.35%
---------- -------- ---- ---------- -------- ---- ---------- -------- ----
Total interest-
earning assets...... $2,604,901 $172,789 6.63% $2,550,935 $180,609 7.08% $2,553,172 $209,567 8.21%
---------- -------- ---- ---------- -------- ---- ---------- -------- ----
Cash and due from
financial
institutions........... 186,358 187,331 194,616
Bank premises and
equipment, net......... 61,868 63,631 64,218
Other real estate
owned, net............. 27,753 60,424 64,042
Other assets............ 80,321 85,438 81,843
Reserve for possible
loan losses............ (72,866) (103,926) (102,967)
---------- ---------- ----------
Total assets........ $2,888,335 $2,843,833 $2,854,924
========== ========== ==========
LIABILITIES AND
SHAREHOLDERS' EQUITY
INTEREST-BEARING
LIABILITIES:
Savings deposits........ $ 552,420 $ 15,194 2.75% $ 496,678 $ 17,294 3.48% $ 341,656 $ 17,569 5.14%
NOW and MMDA deposits... 605,439 12,010 1.98% 604,810 18,219 3.01% 478,641 21,179 4.42%
Time deposits........... 524,997 15,552 2.96% 601,847 21,693 3.60% 902,241 53,559 5.94%
---------- -------- ---- ---------- -------- ---- ---------- -------- ----
Total interest-
bearing deposits.. $1,682,856 $ 42,756 2.54% $1,703,335 $ 57,206 3.36% $1,722,538 $ 92,307 5.36%
---------- -------- ---- ---------- -------- ---- ---------- -------- ----
Federal funds
purchased and
repurchase agreements.. 226,878 6,260 2.76% 247,948 8,119 3.27% 282,634 15,271 5.40%
---------- -------- ---- ---------- -------- ---- ---------- -------- ----
Total interest-
bearing
liabilities..... $1,909,734 $ 49,016 2.57% $1,951,283 $ 65,325 3.35% $2,005,172 $107,578 5.37%
---------- -------- ---- ---------- -------- ---- ---------- -------- ----
Demand deposits,
non-interest-bearing.. 732,734 696,077 661,403
Other liabilities...... 26,205 21,060 20,259
Shareholders' equity... 219,662 175,413 168,090
---------- --------- ---------
Total liabilities
and shareholders
equity.......... $2,888,335 $2,843,833 $2,854,924
========== ========== ==========
Net interest income/
margin (tax
equivalent)........... $123,773 4.75% $115,284 4.52% $101,989 3.99%
======== ==== ======== ==== ======== ====
</TABLE>
Note: Tax equivalent amounts are calculated using a marginal federal income tax
rate of 35% for 1993 and 34% for 1992 and 1991.
Page 14 of 50
<PAGE>
VOLUME AND YIELD/RATE VARIANCE
ANALYSIS OF CHANGES IN INTEREST INCOME AND INTEREST EXPENSE
- -----------------------------------------------------------
(in thousands)
<TABLE>
<CAPTION>
1993 Compared to 1992 1992 Compared to 1991
---------------------------------- ---------------------------------
Increase (Decrease) Due to Increase (Decrease) Due to
Yield/ Yield/
Volume Rate Total Volume Rate Total
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
INTEREST EARNED ON
Loans (tax equivalent).......................... $(10,618) $ (4,598) $(15,216) $(18,281) $(13,454) $(31,735)
Nonaccruing loans............................... - - - - - -
-------- -------- -------- -------- -------- --------
Total loans................................... $(10,618) $ (4,598) $(15,216) $(18,281) $(13,454) $(31,735)
-------- -------- -------- -------- -------- --------
U.S. Treasury securities........................ $ 8,919 $ (4,415) $ 4,504 $ 1,925 $ (5,903) $ (3,978)
U.S. government agency securities............... 4,933 (910) 4,023 10,580 (1,953) 8,627
Mortgage-backed securities...................... 900 (1,355) (455) 4,006 (1,775) 2,231
State and municipal securities (tax equivalent). 1,498 (645) 853 1,295 (717) 578
Corporate bonds and other securities............ 666 (264) 402 (545) (88) (633)
-------- -------- -------- -------- -------- --------
Total investment securities................... $ 16,916 $ (7,589) $ 9,327 $ 17,261 $(10,436) $ 6,825
-------- -------- -------- -------- -------- --------
Federal funds sold.............................. (986) (571) (1,557) 195 (2,690) (2,495)
Interest-bearing deposits in financial
institutions................................... (362) (12) (374) (1,073) (480) (1,553)
-------- -------- -------- -------- -------- --------
Total interest-earnings assets................ $ 4,950 $(12,770) $ (7,820) $ (1,898) $(27,060) $(28,958)
-------- -------- -------- -------- -------- --------
INTEREST PAID ON
Savings deposits................................ $ 1,643 $ (3,743) $ (2,100) $ 6,413 $ (6,688) $ (275)
NOW and MMDA deposits........................... 12 (6,221) (6,209) 4,343 (7,303) (2,960)
Time deposits................................... (2,479) (3,662) (6,141) (13,841) (18,025) (31,866)
-------- -------- -------- -------- -------- --------
Total interest-bearing deposits............... $ (824) $(13,626) $(14,450) $ (3,085) $(32,016) $(35,101)
-------- -------- -------- -------- -------- --------
Federal funds purchased and repurchase
agreements..................................... (622) (1,237) (1,859) (1,264) (5,888) (7,152)
-------- -------- -------- -------- -------- --------
Total interest-bearing liabilities............ $ (1,446) $(14,863) $(16,309) $ (4,349) $(37,904) $(42,253)
-------- -------- -------- -------- -------- --------
Net interest income
(tax equivalent)............................... $ 6,396 $ 2,093 $ 8,489 $ 2,451 $ 10,844 $ 13,295
======== ======== ======== ======== ======== ========
</TABLE>
Note: Tax equivalent amounts are calculated using a marginal federal income
tax rate of 35% for 1993 and 34% for 1992 and 1991.
Page 15 of 50
<PAGE>
OTHER INCOME AND EXPENSE
Non-interest operating income, excluding securities gains and net gains
from OREO sales, increased $1.5 million, or 5.8%, to $27.4 million in 1993 from
$25.9 million in 1992. The overall increase was primarily attributable to an
$800 thousand, or 5.4% increase in income from service charges on deposit
accounts and an additional $700 thousand in income related to international
banking services.
There were no securities sales during 1993. In 1992, the Company
recognized a $5.4 million gain on the sale of a block of mortgage-backed
securities that was experiencing excessive prepayments as market interest rates
declined. This block of securities was replaced with another offering a more
stable return. Gains of $18.4 million were recognized on securities sales in
1991 in connection with an overall repositioning of the portfolio begun in 1990
to implement a revised asset/liability management strategy.
Non-interest operating expenses, excluding provisions for possible losses
on loans, OREO and other problem assets, were $98.2 million in 1993, an increase
of $1.4 million, or 1.4%, over 1992's total of $96.8 million. Personnel expense
increased $2.0 million in 1993 as compared to 1992. Both compensation expense
and the expense of providing insurance benefits contributed to this 4.3%
increase.
Other non-interest operating expenses showed a net decrease of
approximately $500 thousand from 1992 to 1993. The positive effects of
improving asset quality were evident in the 1993 reductions of $1.2 million in
legal expense and $287 thousand in the expense of maintaining and operating OREO
net of revenues generated by the properties prior to sale.
In addition to the $60 million reduction in the reserve for possible loan
losses discussed earlier, there was a decrease of $14 million from 1992 to 1993
in provisions for losses on OREO and other problem assets. This decrease is
directly related to the Company's success in reducing its exposure to non-
performing assets.
INCOME TAXES
The Company provided for income taxes at an overall effective rate of 32.0%
in 1993, up from the 30.6% rate in 1992. The effective rates in each period
differ from the statutory rates of 35% in 1993 and 34% in 1992 primarily because
of the tax exempt income earned on investments in state and municipal
obligations. The higher effective rate in 1993 is largely the result of a lower
proportion of tax-exempt to pre-tax income for 1993 compared to 1992.
ASSET/LIABILITY MANAGEMENT
The asset/liability management process has as its focus the development and
implementation of strategies in the funding and deployment of the Company's
financial resources which is expected to maximize soundness and profitability
over time. Such strategies reflect the goals set by the Company for capital
adequacy, liquidity, and growth and the tolerance for risk established in
Company policies.
INTEREST RATE RISK/INTEREST RATE SENSITIVITY
The Company's financial assets and liabilities are subject to scheduled and
unscheduled repricing opportunities over time. The Company's potential for
generating net interest income, as well as the current market values of
financial assets and liabilities, are sensitive to the levels of market interest
rates available as these repricing opportunities arise. Interest rate risk is a
measure of this potential volatility in net interest income and market values.
As part of the asset/liability management process, the Company uses a
variety of tools, including an earnings simulation model, to measure interest
rate risk and to evaluate the impact of proposed changes in its internal
strategies and potential changes in its economic environment. The interest rate
sensitivity gap analysis, which compares the volume of repricing assets against
repricing liabilities over time, is a relatively simple tool which is useful in
highlighting significant short-term repricing volume mismatches but is limited
in measuring the potential impact on earnings and net asset values.
The following table presents the rate sensitivity gap analysis at December
31, 1993. The interest rates on most of the Bank's commercial loans vary with
changes in its prime rate or the prime rates of certain money-center banks.
These loans are assigned to the earliest repricing period in the rate
sensitivity analysis. A substantial portion of loans shown in the analysis as
repricing after one year is made up of fixed-rate real estate loans, both retail
and commercial. These loans generally mature within five years. In preparing
this analysis, deposit funding sources with no scheduled maturity or contractual
repricing date are assigned to a particular repricing period after consideration
of past and expected customer behavior in response to general market rate
changes. Surveying
Page 16 of 50
<PAGE>
the twelve-month period from December 31, 1993, the analysis indicates that the
Company is in a balanced rate sensitivity position on a cumulative basis.
INTEREST RATE SENSITIVITY
- -------------------------
December 31, 1993
(dollars in millions)
<TABLE>
<CAPTION>
TIME TO MATURITY OR NEXT REPRICING
-------------------------------------------------
0-30 31-90 91-180 181-365 OVER 1
DAYS DAYS DAYS DAYS YEAR TOTAL
----- ------ ------- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Securities held to maturity $ 113 $ 41 $ 68 $ 121 $1,109 $1,452
Securities available for sale 3 6 8 16 149 182
Loans 555 42 38 69 272 976
Federal funds sold 110 - - - - 110
----- ------ ------- -------- ------ ------
Total earning assets $ 781 $ 89 $ 114 $ 206 $1,530 $2,720
SOURCES OF FUNDS
Demand deposits $ - $ - $ - $ - $ 784 $ 784
Savings deposits - - - - 559 559
Money market account
deposits - - - 331 - 331
NOW account deposits - - 244 - - 244
Eurodollar deposits 61 - - - - 61
Trust deposits 21 - - - - 21
Certificates of deposit 118 143 172 40 32 505
Funds purchased and
repurchase agreements 215 - - - - 215
----- ------ ------- -------- ------ ------
Total funding liabilities $ 415 $ 143 $ 416 $ 371 $1,375 $2,720
INTEREST RATE
SENSITIVITY GAP $ 366 $ (54) $ (302) $ (165) $ 155 -
CUMULATIVE INTEREST
RATE SENSITIVITY
GAP $ 366 $ 312 $ 10 $ (155) -
CUMULATIVE INTEREST
RATE SENSITIVITY
GAP AS A PERCENT
OF TOTAL EARNING
ASSETS 13.5% 11.5% 0.37% (5.70)% -
</TABLE>
LIQUIDITY
The Company and the Bank manage liquidity to ensure their ability to
satisfy customer demand for credit, to fund deposit withdrawals, to meet
operating and other corporate obligations, and to take advantage of investment
opportunities, all in a timely and cost-effective manner. Traditionally, these
liquidity needs have been met by maintaining a strong base of core deposits
within the Bank and by carefully managing the maturity structure of the Bank's
investment portfolio. The funds provided by current operations and forecasts of
loan repayments are also considered in the liquidity management process.
The Bank enters into short-term borrowing arrangements by purchasing
federal funds and selling securities under repurchase agreements, mainly as part
of its services to correspondent banks and certain other customers. Neither the
Company nor the Bank has had to access short or long term debt markets as part
of liquidity management.
Page 17 of 50
<PAGE>
The following tables present information concerning deposits and short-term
borrowings for the years 1993, 1992 and 1991.
DEPOSITS
- --------
(in thousands)
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Average non-interest-bearing demand deposits in
domestic bank offices $732,734 $696,077 $661,043
Average NOW accounts in domestic offices 344,249 339,909 264,013
Average savings and money market deposits in
domestic bank offices 813,610 761,579 556,284
Average time deposits in domestic bank offices 520,721 597,555 894,110
Average time deposits in foreign banking offices 4,276 4,292 8,131
Remaining maturity of time certificates of deposit
of $100,000 or more issued by domestic offices as
of December 31, 1993:
3 months or less $145,578
Over 3 through 6 months 58,959
Over 6 through 12 months 20,639
Over 12 months 9,306
--------
Total certificates of deposit of
$100,000 or more $234,482
--------
Remaining maturity of time certificates of
deposit of less than $100,000 issued by domestic
offices as of December 31, 1993:
3 months or less $115,146
Over 3 through 6 months 112,991
Over 6 through 12 months 18,356
Over 12 months 23,951
--------
Total certificates of deposit of less than
$100,000 $270,444
--------
Total time certificates of deposit $504,926
========
</TABLE>
FEDERAL FUNDS PURCHASED AND BORROWINGS UNDER REPURCHASE AGREEMENTS
- ------------------------------------------------------------------
(in thousands)
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Amount outstanding at year end $215,168 $210,488 $235,531
Weighted average interest rate at year end 2.91% 2.72% 3.89%
Average outstanding during the year $226,878 $247,948 $282,634
Weighted average interest rate for the year 2.76% 3.27% 5.40%
Maximum amount outstanding at any month end $247,055 $268,540 $333,725
</TABLE>
Average core deposits, defined as all deposits other than time deposits of
$100,000 or more, increased approximately $63 million in 1993 over the prior
year. During 1993, core deposits comprised 90.2% of total average deposits,
compared to 88.2% during 1992.
As of December 31, 1993, $329 million or 22.7% of the portfolio of
securities held to maturity was scheduled to mature within one year. An
additional $182 million of investment securities are classified as available for
sale at year end 1993, although management's determination of this
classification does not derive primarily from liquidity considerations.
The Bank had $399 million in unfunded loan commitments outstanding at
December 31, 1993, an increase of $43 million from the level at December 31,
1992. Contingent obligations under letters of credit and financial guarantees
of $58 million and available credit card lines of $26 million at year end 1993
were both down slightly from year end 1992. Draws under these financial
commitments should not place any unusual strain on the Bank's or the Company's
liquidity positions.
Page 18 of 50
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(dollars in thousands) DECEMBER 31,
1993 1992
----------- -------------
<S> <C> <C>
ASSETS
Cash and due from financial institutions.......... $ 187,447 $ 218,226
Investment in securities:
Securities available for sale................... 182,030 -
Securities held to maturity (fair value of
$1,483,044 in 1993 and $1,502,785 in 1992)..... 1,451,716 1,474,746
Federal funds sold................................ 110,000 128,445
Loans............................................. 975,728 1,046,723
Less reserve for possible loan losses............. 44,485 98,558
----------- -----------
Loans, net...................................... 931,243 948,165
Bank premises and equipment, net.................. 60,175 62,610
Other real estate owned, net...................... 16,126 40,142
Accrued income receivable......................... 29,142 27,565
Other assets...................................... 34,661 53,133
----------- -----------
TOTAL ASSETS.................................. $ 3,002,540 $ 2,953,032
=========== ===========
LIABILITIES
Deposits:
Non-interest-bearing demand deposits............ $ 784,410 $ 812,471
Interest-bearing deposits....................... 1,720,893 1,728,665
----------- -----------
Total deposits................................ 2,505,303 2,541,136
Federal funds purchased and securities sold under
repurchase agreements............................ 215,168 210,488
Dividends payable................................. 1,925 960
Other liabilities................................. 21,106 14,917
----------- -----------
TOTAL LIABILITIES............................. $ 2,743,502 $ 2,767,501
----------- -----------
SHAREHOLDERS' EQUITY
Common stock, no par value: 40,000,000 shares
authorized, 15,123,535 shares issued and
14,446,957 shares outstanding in 1993,
15,120,000 shares issued and 14,405,121 shares
outstanding in 1992, after deduction of treasury
stock............................................ $ 2,800 $ 2,800
Capital surplus................................... 47,897 47,448
Retained earnings................................. 212,533 142,383
Net unrealized gain on securities available for
sale, net of tax effect of $1,660................ 3,083 -
----------- -----------
Total......................................... 266,313 192,631
Treasury stock at cost, 676,578 shares in 1993
and 714,879 shares in 1992, and unearned
restricted stock compensation.................... 7,275 7,100
----------- -----------
TOTAL SHAREHOLDERS' EQUITY.................... $ 259,038 $ 185,531
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.... $ 3,002,540 $ 2,953,032
=========== ===========
</TABLE>
Note: All share and per-share figures in the consolidated financial statements
give effect to the three-for-two stock splits effective February 22, 1993 and
November 29, 1993.
The accompanying notes are an intergral part of these financial statements.
Page 19 of 50
<PAGE>
WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(in thousands, except per-share amounts) YEAR ENDED DECEMBER 31,
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans.................. $ 74,598 $ 89,843 $ 121,452
Interest and dividends on investments-
U.S. Treasury and agency securities....... 83,668 75,596 68,716
Obligations of states and political
subdivisions............................. 5,592 5,115 4,728
Federal Reserve and corporate securities.. 2,501 2,099 2,732
Interest on federal funds sold.............. 3,145 4,702 7,197
Interest on deposits in other financial
institutions............................... 26 400 1,953
--------- --------- ---------
TOTAL................................... $ 169,530 $ 177,755 $ 206,778
--------- --------- ---------
INTEREST EXPENSE
Interest on deposits........................ $ 42,756 $ 57,206 $ 92,307
Interest on federal funds purchased and
securities sold under repurchase agreement. 6,260 8,119 15,271
--------- --------- ---------
TOTAL................................... $ 49,016 $ 65,325 $ 107,578
--------- --------- ---------
Net interest income......................... $ 120,514 $ 112,430 $ 99,200
Provision for possible loan losses:
Expense of providing loss reserves........ - 3,350 45,387
Loss reserve reduction.................... (60,000) _ -
--------- --------- ---------
Net interest income after provision for
possible loan losses....................... $ 180,514 $ 109,080 $ 53,813
--------- --------- ---------
NON-INTEREST INCOME
Gain on sale of securities.................. $ - $ 5,429 $ 18,376
Other non-interest income................... 30,991 27,215 26,923
--------- --------- ---------
TOTAL................................... $ 30,991 $ 32,644 $ 45,299
--------- --------- ---------
NON-INTEREST EXPENSE
Salaries and employee benefits.............. $ 48,264 $ 46,297 $ 43,383
Occupancy of bank premises, net............. 6,502 6,557 6,633
Other non-interest expenses................. 45,327 59,769 55,787
--------- --------- ---------
TOTAL................................... $ 100,093 $ 112,623 $ 105,803
--------- --------- ---------
Income (Loss) before income taxes and effect
of accounting changes...................... $ 111,412 $ 29,101 $ (6,691)
Income tax expense (benefit)................ 35,645 8,899 (2,007)
--------- --------- ---------
Income (loss) before effect of accounting
changes.................................... $ 75,767 $ 20,202 $ (4,684)
Cumulative effect of accounting changes,
net........................................ 634 - -
--------- --------- ---------
Net income (loss)........................... $ 76,401 $ 20,202 $ (4,684)
========= ========= =========
EARNINGS (LOSS) PER SHARE:
Income (Loss) before cumulative effect of
accounting changes....................... $ 5.25 $ 1.41 $ (0.33)
Cumulative effect of accounting changes,
net...................................... 0.05 - -
--------- --------- ---------
Net income (loss)....................... $ 5.30 $ 1.41 $ (0.33)
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 20 of 50
<PAGE>
WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
(in thousands, except share and per-share amounts)
NET
UNREALIZED UNEARNED
GAIN ON RESTRICTED
SECURITIES STOCK
COMMON CAPITAL RETAINED AVAILABLE TREASURY COMPEN-
STOCK SURPLUS EARNINGS FOR SALE STOCK SATION TOTAL
------ ------- --------- ------------ ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1990................... $2,800 $47,200 $127,825 $ - ($7,199) $ - $170,626
Net loss for 1991......................... (4,684) (4,684)
------ ------- -------- ------ ------- ----- --------
Balance at December 31, 1991................... $2,800 $47,200 $123,141 $ - ($7,199) $ - $165,942
------ ------- -------- ------ ------- ----- --------
Net income for 1992....................... 20,202 20,202
Cash dividends declared, $0.07 per share.. (960) (960)
Restricted stock issued, 37,125 shares.... 145 346 (491) -
Common stock issued in connection with
stock options exercised, 20,925 shares... 103 195 298
Amortization of unearned restricted stock
compensation............................. 49 49
------ ------- -------- ------ ------- ----- --------
Balance at December 31, 1992................... $2,800 $47,448 $142,383 $ - ($6,658) ($442) $185,531
------ ------- -------- ------ ------- ----- --------
Net income for 1993....................... 76,401 76,401
Cash dividends declared, $0.43 per share.. (6,251) (6,251)
Restricted stock issued, 36,000 shares.... 364 335 (699) -
Common stock issued:
Employee savings plan purchases,
3,266 shares........................... 76 76
Stock options exercised, 2,302 shares.. 9 21 30
Amortization of unearned restricted
stock compensation................... 168 168
Change in net unrealized gain on
securities available for sale............ 3,083 3,083
------ ------- -------- ------ ------- ----- --------
Balance at December 31, 1993 $2,800 $47,897 $212,533 $3,083 ($6,302) ($973) $259,038
====== ======= ======== ====== ======= ===== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 21 of 50
<PAGE>
WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(in thousands) YEAR ENDED DECEMBER 31,
1993 1992 1991
------------ ----------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)...................................................... $ 76,401 $ 20,202 $ (4,684)
Adjustments to reconcile net income (loss) to cash provided by
(used in) operating activities:
Cumulative effects of accounting changes.............................. (634) -- --
Depreciation.......................................................... 5,971 5,141 4,392
Provision for (Reduction of) reserves for possible loan losses........ (60,000) 3,350 45,387
Provision for losses on OREO and other problem assets................. 1,900 15,862 14,005
Amortization of intangible assets and unearned restricted stock
compensation......................................................... 3,833 3,657 3,562
Accretion of discounts on investments in securities................... (1,659) (3,066) (9,214)
(Gains) Losses on sales of OREO and other property.................... (3,612) (1,224) (4,341)
(Gains) Losses on sales of securities................................. -- (5,429) (18,376)
Deferred tax expense (benefit)....................................... 19,803 (1,605) (10,479)
Increase (Decrease) in accrued income taxes.......................... 912 (2,985) 14,924
(Increase) Decrease in accrued income receivable and other assets.... (1,351) (1,402) 2,028
Increase (Decrease) in accrued expenses and other liabilities........ 500 (2,297) (2,443)
----------- ----------- ------------
Net cash provided by (used in) operating activities.................. $ 42,064 $ 30,204 $ 34,761
----------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of investments in securities.................. $ 1,186,998 $ 1,102,244 $ 704,376
Proceeds from sales of investments in securities....................... -- 150,120 582,376
Purchases of investments in securities................................. (1,339,591) (1,579,340) (1,587,905)
Net (increase) decrease in loans....................................... 75,322 192,494 152,004
Net (increase) decrease in federal funds sold.......................... 18,445 (1,320) 42,875
Net (increase) decrease in interest-bearing deposits held in other
financial institutions................................................ -- 10,000 50,421
Proceeds from sales of OREO and other property......................... 27,711 35,308 12,147
Capital expenditures................................................... (3,868) (3,431) (6,850)
Other.................................................................. (1,526) 2,488 923
----------- ----------- ------------
Net cash provided by (used in) investing activities.................... $ (36,509) $ (91,437) $ (49,633)
----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in non-interest-bearing demand deposits........ $ (28,061) $ 96,648 $ (37,931)
Net increase (decrease) in interest-bearing deposits other than
certificates of deposit............................................... 6,725 213,348 332,322
Net increase (decrease) in certificates of deposit..................... (14,497) (209,773) (251,378)
Net increase (decrease) in federal funds purchased and securities sold
under repurchase agreements........................................... 4,680 (25,043) (55,267)
Exercise of stock options.............................................. 30 271 --
Sale of common stock and settlement of fractional shares............... 76 -- --
Dividends paid......................................................... (5,287) -- --
----------- ----------- ------------
Net cash provided by (used in) financing activities.................... $ (36,334) $ 75,451 $ (12,254)
----------- ----------- ------------
Net increase (decrease) in cash and cash equivalents.................... $ (30,779) $ 14,218 $ (27,126)
Cash and cash equivalents at the beginning of the year.................. 218,226 204,008 231,134
----------- ----------- ------------
Cash and cash equivalents at the end of the year........................ $ 187,447 218,226 204,008
=========== =========== ============
Interest income received................................................ $ 167,355 $ 176,353 $ 208,806
========== =========== ============
Interest expense paid................................................... $ 48,873 $ 68,295 $ 111,871
=========== =========== ============
Net federal income taxes paid (refunded)................................ $ 14,920 $ 12,000 $ (10,033)
=========== =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 22 of 50
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Whitney Holding Corporation and
its subsidiaries (the "Company") follow generally accepted accounting principles
and policies within the banking industry. The following is a summary of the
more significant policies.
CONSOLIDATION
The consolidated financial statements of the Company include the accounts
of Whitney Holding Corporation and its wholly-owned subsidiary, Whitney National
Bank (the "Bank"). Intercompany accounts and transactions have been eliminated
in consolidation.
Certain balances in prior years have been reclassified to conform with this
year's presentation.
CASH AND DUE FROM FINANCIAL INSTITUTIONS
The Company considers cash and cash due from financial institutions as cash
and cash equivalents for purposes of the consolidated statement of cash flows.
INVESTMENT IN SECURITIES
In May, 1993, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." Under SFAS No. 115, debt
securities which the Company both positively intends and has the ability to hold
to maturity are carried at amortized cost. These criteria are not considered
satisfied when a security is available to be sold in response to changes in
interest rates, prepayment rates, liquidity needs or other reasons as part of an
overall asset/liability management strategy.
Debt securities and equity securities with readily determinable fair values
that are acquired with the intention of being resold in the near term are
classified under SFAS No. 115 as trading securities and are carried at fair
value, with unrealized holding gains and losses recognized in current earnings.
The Company does not currently hold any securities for trading purposes.
Securities not meeting the criteria of either trading securities or
securities held to maturity are classified as available for sale and are carried
at fair value. Unrealized holding gains and losses for these securities are
recognized, net of related tax effects, as a separate component of shareholders'
equity.
The Company adopted this new standard effective December 31, 1993. As a
result, investments in mortgage-backed securities were reclassified as of that
date as securities available for sale and are being reported at fair value.
Shareholders' equity was increased at year-end 1993 to reflect the tax-effected
net unrealized holding gain on these securities which previously had been
carried at the lower of either aggregate amortized cost or market. In
accordance with SFAS No. 115, prior period financial statements have not been
restated to reflect this change in accounting principle.
Interest and dividend income earned on securities either held to maturity
or available for sale is included in current earnings, including the
amortization of premiums and the accretion of discounts using the interest
method. The gain or loss realized on the sale of a security held to maturity or
available for sale is computed with reference to its amortized cost and is also
included in current earnings.
LOANS
Loans are generally carried at the principal amounts outstanding, less
unearned income and the reserve for possible loan losses.
Interest on loans is accrued and credited to income based on the
outstanding loan principal amounts. The accrual of interest on loans is
discontinued when, in management's judgement, there is an indication that a
borrower will be unable to meet contractual payments as they become due. For
commercial and real estate loans, this generally occurs when a loan falls 90-
days past due as to principal or interest, and the loan is not otherwise both
well secured and in the process of collection. Upon discontinuance, accrued but
uncollected interest is reversed against current income. Interest payments
received on nonaccrual loans are used to reduce the
Page 23 of 50
<PAGE>
reported loan principal until the collectibility of the remaining principal is
reasonably assured.
A nonaccrual loan may be reinstated to accrual status when full payment of
contractual principal and interest is expected and this expectation is supported
by current performance.
RESERVE FOR POSSIBLE LOAN LOSSES
The reserve for possible loan losses is maintained at a level which, in
management's judgment, is considered adequate to absorb potential losses
inherent in the loan portfolio. The adequacy of the reserve is evaluated by
management on an ongoing basis. As adjustments to the level of reserves become
necessary, they are reported in current earnings. The factors considered in
this evaluation include estimated potential losses from specific lending
relationships, including unused loan commitments and credit guarantees; general
economic conditions; economic conditions affecting specific classes of borrowers
or types of loan collateral; historical loss experience; and various trends in
loan portfolio characteristics, such as volume, maturity, customer mix,
delinquencies and nonaccruals.
As actual loan losses are incurred, they are charged against the reserve.
Recoveries on loans previously charged off are added back to the reserve.
FORECLOSED ASSETS
Collateral acquired through foreclosure or in settlement of loans is
classified as either other real estate owned ("OREO") or other assets and is
carried at its fair value, net of estimated costs to sell, or the remaining
investment in the loan, whichever is lower. At acquisition, any excess of the
recorded loan value over the estimated fair value of the collateral is charged
against the allowance for possible loan losses. After acquisition, valuation
allowances are established with a charge to current earnings to adjust the
reported value of foreclosed assets to reflect changes in the estimate of a
property's fair value or selling costs. Revenues and expenses associated with
the management of foreclosed assets prior to sale are included in current
earnings.
BANK PREMISES AND EQUIPMENT
Bank premises and equipment are carried at cost, net of accumulated
depreciation, as follows (in thousands):
<TABLE>
<CAPTION>
1993 1992
------- -------
<S> <C> <C>
Land $15,580 $16,133
Buildings and improvements 32,200 33,240
Furnishings and equipment 12,395 13,237
------- -------
$60,175 $62,610
======= =======
</TABLE>
Accumulated depreciation was $57,408,000 in 1993 and $51,437,000 in 1992.
Provisions for depreciation included in non-interest expenses were computed
primarily on the straight-line method over the estimated useful lives of the
assets. Estimated useful lives range mainly from 15 to 45 years for buildings
and improvements and from 5 to 7 years for furnishings and equipment.
INCOME TAXES
Effective January 1, 1993, the Company adopted SFAS No. 109, "Accounting
for Income Taxes." In general, under this new accounting standard, the tax
consequences of all temporary differences that arise between the tax bases of
assets or liabilities and their reported amounts in the financial statements
represent either tax liabilities to be settled in the future or tax assets that
will be realized as a reduction of future taxes. The change in net deferred
assets or liabilities between periods is recognized as a deferred tax expense or
benefit in the consolidated statement of operations.
In prior years, a deferred tax expense or benefit was provided on those
items of income and expense which were recognized in different time periods for
financial statement and income tax purposes. See Note 4 for a more detailed
discussion of the accounting for income taxes and of the impact of the adoption
of SFAS No. 109 in 1993.
EARNINGS (LOSS) PER SHARE
Earnings (loss) per share is calculated using the weighted average number
of shares outstanding during each period presented. Potentially dilutive common
stock equivalents consist of stock options which have been granted to certain
officers. Incorporating these common stock equivalents into the calculation of
earnings (loss) per share using the treasury method does not materially affect
the
Page 24 of 50
<PAGE>
reported results whether on a primary or fully-diluted basis.
All share and per-share data in this report on Form 10-K reflect the three-
for-two stock splits that were effective February 22, 1993 and November 29,
1993.
(2) INVESTMENT IN SECURITIES
Summary information regarding securities available for sale and securities
held to maturity follows.
<TABLE>
<CAPTION>
Securities Available for Sale
----------------------------------------------------------
WEIGHTED GROSS GROSS ESTIMATED
(dollars in thousands) AVERAGE AMORTIZED UNREALIZED UNREALIZED FAIR
December 31, 1993 MATURITY COST GAIN LOSS VALUE
--------- ------------ ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Mortgage-backed
securities 54.5 mos. $177,287 $4,819 $76 $182,030
--------- -------- ------ --- --------
TOTAL 54.5 mos. $177,287 $4,819 $76 $182,030
========= ======== ====== === ========
</TABLE>
As discussed in Note 1, the Company adopted SFAS No. 115 effective December
31, 1993. As a result, investments in mortgage-backed securities were
reclassified as of that date as securities available for sale and are being
reported at fair value. The tax-effected net unrealized holding gain on these
securities at date of adoption of $3,083,000 is reported as a separate component
of shareholders' equity.
<TABLE>
<CAPTION>
Securities Held to Maturity
----------------------------------------------------------
WEIGHTED GROSS GROSS ESTIMATED
(dollars in thousands) AVERAGE AMORTIZED UNREALIZED UNREALIZED FAIR
December 31, 1993 MATURITY COST GAIN LOSS VALUE
--------- ------------ ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
U.S. Treasury securities 27.0 mos. $ 934,134 $16,207 $ 666 $ 949,675
Securities of U.S.
government agencies 20.1 mos. 366,938 6,700 432 373,206
State and municipal
securities 74.4 mos. 112,324 7,335 291 119,368
Corporate bonds 17.1 mos. 34,534 767 30 35,271
Equity securities - 3,786 1,738 - 5,524
--------- ---------- ------- ------ ----------
TOTAL 31.5 mos. $1,451,716 $32,747 $1,419 $1,483,044
========= ========== ======= ====== ==========
December 31, 1992
U.S. Treasury securities 26.1 mos. $ 785,269 $13,673 $ 888 $ 798,054
Securities of U.S.
government agencies 29.8 mos. 385,664 5,079 362 390,381
Mortgage-backed
securities 63.7 mos. 184,137 3,296 - 187,433
State and municipal
securities 78.5 mos. 86,832 4,460 93 91,199
Corporate bonds 23.7 mos. 28,896 1,006 5 29,897
Equity securities - 3,948 1,873 - 5,821
--------- ---------- ------- ------ ----------
TOTAL 33.6 mos. $1,474,746 $29,387 $1,348 $1,502,785
========= ========== ======= ====== ==========
</TABLE>
At December 31, 1993 and 1992, U.S. Treasury and agency securities with a
carrying value of $477,904,000 and $432,751,000, respectively, were pledged to
secure public and trust deposits or sold under repurchase agreements.
There were no sales from the securities portfolios during 1993. Proceeds
from sales of investment securities during 1992 were $150,120,000. In 1992, the
Company sold a block of mortgage-backed securities that was experiencing
excessive early payoffs because of declining mortgage rates and replaced it with
a block of mortgage-backed securities that offered a more stable return. The
Company realized a $5.4 million gain as a result of this transaction. In 1990,
the Company developed and began to implement a strategy to balance maturities
and liquidity needs and to diversify and increase yields in the investment
securities portfolio.
Page 25 of 50
<PAGE>
Repositioning the portfolio in line with this strategy resulted in the
realization of $18,376,000 in gains in 1991 on sales of $582,377,000.
The amortized cost and estimated fair value of investment securities held
to maturity at December 31, 1993, by contractual maturity, are shown below.
Actual maturities may differ from contractual maturities because certain issuers
have the right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
(in thousands) ESTIMATED
MATURITY DISTRIBUTION AMORTIZED FAIR
DECEMBER 31, 1993 COST VALUE
----------- ----------
<S> <C> <C>
1 year or less $ 329,701 $ 332,183
1 - 5 years 1,023,563 1,043,385
5 - 10 years 77,500 83,067
Over 10 years 20,952 24,409
---------- ----------
$1,451,716 $1,483,044
========== ==========
</TABLE>
(3) LOANS AND RESERVE FOR POSSIBLE LOAN LOSSES
The composition of the Company's loan portfolio at December 31, was as
follows (in thousands):
<TABLE>
<CAPTION>
1993 1992
--------- -----------
<S> <C> <C>
Commercial, financial and agricultural loans $569,812 $ 574,721
Real estate loans - commercial and other 260,307 292,752
Real estate loans - retail mortgage 71,363 88,590
Loans to individuals 74,246 90,660
-------- ----------
$975,728 $1,046,723
======== ==========
</TABLE>
The Company's lending activity, both commercial and retail, is conducted
primarily among customers in Louisiana and Mississippi. In its market area, the
Company serves a broad base of commercial customers in diverse industries.
Within the portfolio, the Company maintains a relatively significant
concentration of outstanding credits and loan commitments to customers involved
in the oil and gas industry. At December 31, 1993, outstanding loans to this
industry totalled $78,488,000, and unused loan commitments and letters of credit
and guarantees were $99,727,000 and $15,959,000, respectively. The operations of
this industry have been stabilizing in recent years, following a period of
severe decline and major restructuring which had adversely impacted the overall
economy of the Company's market area. Management continues to closely monitor
its lending relationships in this industry.
The total of commercial and other real estate loans shown above includes
both those for which the primary source of repayment is the operation or sale of
the underlying project, as well as those secured by real estate employed in
other operations of the customer. Unfunded commitments for loans secured by
commercial or other real estate were $9,140,000 at December 31, 1993. Real
estate values had declined steeply during the period of economic contraction in
the Company's market area, but have in recent periods been stabilizing. The
Company's portfolio of commercial and other real estate loans is diversified as
to both the types of collateral property and the industries in which the
properties are employed.
Loans on which the accrual of interest had been discontinued totalled
$33,631,000 and $70,640,000 at December 31, 1993 and 1992, respectively. If
interest on nonaccrual loans had been recognized in accordance with contractual
terms, reported interest income would have been increased by approximately
$1,458,000 in 1993, $6,256,000 in 1992, and $13,328,000 in 1991.
The Bank has made loans, in the normal course of business, to certain
directors and executive officers of the Company and to their associates (related
parties). The aggregate amount of these loans was $31,341,000 and $27,907,000
at December 31, 1993 and 1992, respectively. During 1993, $78,061,000 of new
loan advances were made, and repayments totalled $74,627,000. Outstanding
commitments and letters of credit to related parties totalled $39,517,000 and
$9,092,000 at December 31, 1993 and 1992, respectively. Related party loans are
made on substantially the same terms, including interest rates and collateral,
as those prevailing at the time for comparable transactions with unrelated
persons, and do not involve more than the normal risk of collectibility.
The FASB has issued SFAS No. 114, "Accounting by Creditors for Impairment
of a Loan," which is effective January 1,
Page 26 of 50
<PAGE>
1995. This statement establishes standards, including the use of discounted
cash flow techniques, for measuring the impairment of a loan when it is probable
that the contractual terms will not be met. Adoption of this new accounting
standard is not expected to have a significant impact on the Company's financial
condition and results of operations based on the current loan portfolio.
Changes in the reserve for possible loan losses for the three years ended
December 31, 1993 were as follows (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
-------- --------- ---------
<S> <C> <C> <C>
Balance at beginning of year $ 98,558 $107,246 $ 90,845
Addition to (reduction of) reserve (60,000) 3,350 45,387
Recoveries 12,359 9,351 6,005
Loans charged off (6,432) (21,389) (34,991)
-------- -------- --------
Balance at end of year $ 44,485 $ 98,558 $107,246
======== ======== ========
</TABLE>
(4) INCOME TAXES
Income tax expense (benefit) consists of the following components for the
three years ended December 31, 1993 (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Included in income before cumulative
effect of accounting changes:
Current tax expense $15,842 $10,504 $ 8,472
Deferred tax expense (benefit) 19,803 (1,605) (10,479)
------- ------- --------
$35,645 $ 8,899 $ (2,007)
======= ======= ========
Included in cumulative effect of accounting
changes:
Deferred tax benefit related to adoption of
SFAS No. 106 (Note 5) $(2,023) $ - $ -
======= ======= ========
Included in shareholders' equity:
Deferred tax expense related to
net unrealized gain on
securities available for sale (Note 2) $ 1,660 $ - $ -
======= ======= ========
</TABLE>
Effective January 1, 1993, the Company adopted SFAS No. 109, "Accounting
for Income Taxes." Under this new accounting standard, the tax consequences of
all temporary differences between the tax bases of assets or liabilities and
their reported amounts in the financial statements represent either tax
liabilities to be settled in the future or tax assets that will be realized as a
reduction of future taxes. Among other provisions, SFAS No. 109 requires the
use of currently enacted tax rates to measure these deferred tax assets and
liabilities. The impact of any change in the enacted tax rates is included in
the deferred tax expense or benefit recognized in the period in which the change
occurs. The change in the net deferred tax asset or liability between periods
represents the deferred tax expense or benefit recognized in the financial
statements. With the adoption of SFAS No. 109, the Company recognized an
additional net deferred tax asset of $4,574,000, which is reported in the
consolidated statements of operations as a cumulative effect of an accounting
change (Note 6).
Page 27 of 50
<PAGE>
Net deferred income tax assets, which are included in other assets on the
consolidated balance sheets, were approximately $19,046,000 and $34,113,000 at
December 31, 1993 and 1992, respectively. The components of the net deferred
tax asset as of December 31, 1993 were as follows (in thousands):
<TABLE>
<S> <C>
Deferred tax assets:
Reserves for losses on loans, OREO, and
other problem assets $18,646
Unrecognized interest income 4,688
Employee benefit plan liabilities 2,659
Other 725
-------
Total deferred tax assets $26,718
=======
Deferred tax liabilities:
Accumulated depreciation and
amortization $(5,887)
Net unrealized gain on securities
available for sale (1,660)
Other (125)
--------
Total deferred tax liabilities $(7,672)
========
Net deferred tax asset $19,046
========
</TABLE>
For years ending before January 1, 1993, deferred tax expense (benefit)
resulted from timing differences in the recognition of revenue and expense for
income tax and financial statement purposes. For the year ended December 31,
1992, the most significant timing difference was the excess of interest income
recognized for tax purposes over the amount recognized for financial statement
purposes. The most significant timing difference in the year ended December 31,
1991 was in the excess of the provision for possible loan losses over losses
recognized for income tax purposes. The sources of timing differences and the
tax effects for the years ended December 31, 1992 and 1991 are summarized as
follows (in thousands):
<TABLE>
<CAPTION>
1992 1991
-------- ---------
<S> <C> <C>
Interest income recognition $(1,791) $ (2,887)
Accelerated depreciation and
amortization (659) (261)
Provisions for losses on loan,
OREO, and other problem assets 655 (8,981)
Employee benefit plan expense (202) (1)
Utilization of net operating loss - 512
Unrecognized tax benefit 675 1,924
Other (283) (785)
------- --------
Deferred tax expense (benefit) $(1,605) $(10,479)
======= ========
</TABLE>
Page 28 of 50
<PAGE>
The effective tax rate is less than the statutory federal income tax rate
in each of the three years in the period ended December 31, 1993 because of the
following:
<TABLE>
<CAPTION>
Percent of Income (Loss) Before Income Tax
1993 1992 1991
---- ---- -----
<S> <C> <C> <C>
Statutory tax rate 35.0% 34.0% (34.0%)
Adjustments in rate resulting from -
Tax exempt income (1.9) (5.9) (25.1)
Unrecognized tax benefit - 2.4 28.7
Impact of change in enacted tax rate (1.0) - -
Miscellaneous items (0.1) 0.1 0.4
---- ---- -----
Effective tax rate 32.0% 30.6% (30.0%)
==== ==== =====
</TABLE>
Under SFAS No. 109, the Company is required to establish a valuation
allowance against the deferred tax assets if, based on all available evidence,
it is more likely than not that some or all of the asset will not be realized.
Management has weighed the evidence, including current earnings performance,
taxable income generated during available carryback periods, and the nature of
significant deductible temporary differences, and believes that no valuation
reserve is required as of December 31, 1993. Rules issued by regulatory
agencies impose additional limitations on the amount of deferred tax assets that
may be recognized when calculating regulatory capital ratios. The Company's
ratio calculations were not affected by these rules at December 31, 1993.
(5) EMPLOYEE BENEFIT PLANS
The Company has a noncontributory qualified defined benefit pension plan
covering substantially all of its employees. The benefits are based on an
employee's total years of service and his or her highest five-year level of
compensation during the final ten years of employment. Contributions are made in
amounts sufficient to meet funding requirements set forth in federal employee
benefit and tax laws plus such additional amounts as the Company may determine
to be appropriate from time to time.
In October, 1992, the Company authorized certain amendments to the defined
benefit plan which were effective on January 1, 1993. The amendments included
provisions to accelerate early retirement availability and to discontinue life
insurance and disability benefits now provided by other Company-sponsored
benefit programs. The amounts disclosed below as of December 31, 1993 and 1992,
include consideration of these amendments.
As of December 31, 1993, the actuarial present values of vested and total
accumulated benefit obligations (excluding projected future increases in
compensation levels) were $34,012,000 and $37,375,000, respectively, and as of
December 31, 1992, $31,799,000 and $34,458,000, respectively.
The following table sets forth the plan's funded status and amounts
recognized in the Company's consolidated financial statements (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
1993 1992
--------- ---------
<S> <C> <C>
Actuarial present value of projected benefit obligation for services rendered to date $(50,087) $(42,965)
Plan assets at fair value, primarily U.S. Treasury securities and listed stocks 60,703 57,768
-------- --------
Plan assets in excess of projected benefit obligations $ 10,616 $ 14,803
Unrecognized net actuarial gains (3,691) (6,435)
Unrecognized net implementation asset (3,929) (4,335)
Unrecognized prior service cost resulting from plan amendments (2,766) (3,788)
-------- --------
Prepaid pension cost $ 230 $ 245
======== ========
</TABLE>
Page 29 of 50
<PAGE>
The net pension expense (benefit) recognized for 1993, 1992, and 1991 is
comprised of the following components (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Service cost for benefits during the period $ 1,688 $ 1,498 $ 1,251
Interest cost on projected benefit obligation 3,437 3,400 3,171
Actual return on plan assets (5,739) (5,318) (4,874)
Net amortization and deferral 629 632 423
-------- -------- --------
Net pension expense (benefit) $ 15 $ 212 $ (29)
======== ======== ========
</TABLE>
The weighted-average discount rate used in determining the actuarial
present value of the projected benefit obligation was 7.5% in 1993 and 8.0% in
prior periods. For all periods presented, the Company assumed an 8.0% expected
long-term rate of return on plan assets and an annual rate of increase in future
compensation levels of 5.0%.
For participants in the qualified defined benefit plan whose calculated
benefits are reduced as a result of limitations under federal tax laws, the
Company sponsors an unfunded non-qualified plan that provides benefits equal to
those reductions. At December 31, 1993, the accrued pension cost and accumulated
benefit obligation, substantially all of which is vested, related to this plan
were $1,358,000 and $962,000, respectively. The net pension expense under the
plan was $11,000, $55,000 and $163,000 in 1993, 1992, and 1991, respectively.
Effective October 1, 1993, the Company converted its noncontributory
employee thrift plan into an employee savings plan under Section 401(k) of the
Internal Revenue Code. Under the new plan, which covers substantially all full-
time employees, the Company will match the savings of each participant up to 3%
of his or her compensation. Annual participant savings are limited by tax law.
Participants are fully vested in their savings and in the matching Company
contributions at all times. For 1993, the expense of the Company's matching
contributions was approximately $245,000. There had been no Company
contributions to the noncontributory thrift plan in 1993, 1992 or 1991. At
current participation levels, the Company's annual matching contributions under
the savings plan are expected to total approximately $1 million.
The Company also maintains certain health care and life insurance benefit
plans for retirees and their eligible dependents. Participant contributions are
required under the health plan, and the Company has established annual and
lifetime maximum health care benefit limits. Effective January 1, 1993, the
Company adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other than Pensions." This statement requires that the expected cost of
providing these postretirement benefits be recognized during the period
employees are actively working. Prior to 1993, the Company recognized the cost
only as benefit payments were made to or on behalf of retirees. The Company
continues to fund its obligations under the postretirement benefit plans as the
benefit payments are made.
Upon adoption of SFAS No. 106, the Company elected to immediately recognize
the accumulated postretirement benefit obligation of $5,963,000. The expense
related to the recognition of this transition obligation is reported, net of
income tax effects of $2,023,000, as a cumulative effect of a accounting change
in the consolidated statements of operations (Note 6).
At December 31, 1993, the net postretirement benefit liability reported
with other liabilities in the consolidated balance sheets was approximately
$6,306,000. The net periodic postretirement benefit expense recognized under
SFAS No. 106 for 1993 was $450,000, including components for both the portion of
the expected benefit obligation attributed to current service as well as
interest on the accumulated benefit obligation. The expense recognized is not
materially different from that which would have been reported under the previous
accounting method.
For the actuarial calculation of its postretirement benefit obligations at
December 31, 1993, the Company assumed annual health care cost increases
beginning at 12% and decreasing 0.6% per year to a 5.5% rate, and used a
discount rate of 7.5% in determining the present value of projected benefits. A
1% rise in the assumed health care cost trend rates would not materially impact
the accumulated benefit obligation or the periodic net benefit expense.
The FASB has issued SFAS No. 112, "Employers' Accounting for Postemployment
Benefits," which is effective January 1, 1994. Postemployment benefits are
those provided to former or inactive employees after active employment but
before retirement. Given the current structure of such benefit programs offered
by the Company, this accounting standard will not have a significant impact on
the Company's financial position or results of operations when adopted.
The Company has a long-term incentive program for which all employees are
eligible. As of December 31, 1993, 494,625
Page 30 of 50
<PAGE>
shares of treasury stock are reserved for the purposes of this program, which
include the granting of stock options and restricted, performance and phantom
stock. The Company granted 36,000 shares of restricted stock to certain
employees during 1993 for no cash consideration. During 1992, restricted stock
grants totalled 37,125 shares. Employees receiving the grants are restricted
from transferring or otherwise disposing of the stock until June, 1998, for the
grants in 1993, and until May, 1997, for the 1992 grants. The market values of
the restricted shares, determined as of the grant dates, were $699,000 and
$491,000, respectively, for 1993 and 1992. These amounts are being amortized as
compensation expense over the five year restriction periods. Compensation
expense recognized during 1993 and 1992 related to these stock grants was
$168,000 and $49,000, respectively.
The following table summarizes stock option activity under the long-term
incentive program for 1993 and 1992:
<TABLE>
<CAPTION>
INCENTIVE OPTIONS NON-QUALIFIED OPTIONS
--------------------------------- ------------------------------------
AVERAGE AVERAGE
EXERCISE MARKET EXERCISE MARKET
SHARES PRICE PRICE SHARES PRICE PRICE
------ ------------ ------ ------- -------------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1991 - - - - - -
Options granted 43,650 $ 13.22 $13.22 32,850 $ 13.22 $13.22
Options exercised - - - (20,925) $ 13.22 $16.24
------ ------------ ------ ------- -------------- ------
Balance, December 31, 1992 43,650 $ 13.22 $16.00 11,925 $ 13.22 $16.00
Options granted 50,497 $ 19.42 $19.42 25,253 $ 19.42 $19.42
Options exercised (2,302) $ 13.22 $22.35 - $ - $ -
------ ------------ ------ ------- -------------- ------
Balance, December 31, 1993 91,845 $13.22-19.42 $22.75 37,178 $13.22 - 19.42 $22.75
====== ============ ====== ======= ============== ======
</TABLE>
The incentive and non-qualified options are exercisable at the market price
on the grant dates. All outstanding options were exercisable at December 31,
1993.
On February 28, 1990, an executive officer was granted options to purchase
33,750 shares of common stock of the Company at the then market price of $18.11
per share through February 28, 2000. At December 31, 1993, none of those
options had been exercised. If this officer terminates his employment with the
Company, the options will be exercisable for six months after his date of
termination. The options will also be exercisable up to one year past the date
of his death, but in no event beyond February 28, 2000.
(6) NET CUMULATIVE EFFECT OF ACCOUNTING CHANGES
The net cumulative effect of accounting changes reported in the
consolidated statement of operation for 1993 consists of the following (in
thousands):
<TABLE>
<S> <C>
Postretirement benefits expense (net of tax effect
of $2,023) (Note 5) $ (3,940)
Income taxes (Note 4) 4,574
------
Net cumulative effect of accounting changes $ 634
========
</TABLE>
(7) OTHER REAL ESTATE OWNED
Other real estate owned ("OREO") is comprised of real property collateral
acquired through foreclosure or in settlement of loans and surplus banking
property. With the exception of the pre-1933 properties discussed below, these
properties are reported at their fair value, less expected disposition costs, or
the recorded investment in the related loan, whichever is lower. Activity in
the OREO valuation reserve for the three years ended December 31, 1993 was as
follows (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Balance at January 1 $ 2,272 $ - $ -
Provisions 2,956 3,777 6,940
Charge-offs (1,438) (1,505) (6,940)
------- ------- -------
Balance at December 31 $ 3,790 $ 2,272 $ -
======= ======= =======
</TABLE>
Page 31 of 50
<PAGE>
OREO includes a variety of property interests which were acquired though
routine banking transactions generally prior to 1933 and for which there existed
no ready market. These were subsequently written down to a nominal holding
value in accordance with general banking practice at that time. These property
interests include a few commercial and residential site locations principally in
the New Orleans area, ownership interests in scattered undeveloped acreage, and
various mineral interests.
Not included in OREO are real estate interests evidenced by stock
ownership. Such stock is carried as an investment in securities and dividends
are recognized as investment income.
In 1991, the Company recorded a gain of approximately $4 million on the
sale of one of the pre-1933 property interests. Other revenues derived from
these direct and indirect property interests and related expenses have not been
significant over the three-year period ended December 31, 1993.
(8) NON-INTEREST INCOME
The components of non-interest income were as follows for the three years
ended December 31, 1993 (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Service charges on deposits $15,613 $14,827 $11,581
Trust service fees 2,740 2,821 2,749
Credit card income 4,014 4,074 4,019
International services income 1,443 738 593
Investment services income 873 895 1,030
Other fees and charges 1,782 1,738 2,045
Net gains on sales of OREO 3,618 1,313 4,340
Other operating income 908 809 566
------ ------ -------
Total other non-interest income 30,991 27,215 26,923
Gain on sale of securities - 5,429 18,376
------ ------ -------
Total non-interest income $30,991 $32,644 $45,299
======= ====== =======
</TABLE>
(9) NON-INTEREST EXPENSE
The components of non-interest expense were as follows for the three years
ended December 31, 1993 (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Salaries and benefits $ 48,264 $ 46,297 $ 43,383
Occupancy of bank premises,net 6,502 6,557 6,633
Furnishings and equipment,including
data processing 6,050 6,904 6,061
Deposit insurance and regulatory fees 6,885 5,627 5,510
Legal and other professional services 3,398 5,160 4,781
Security and other outside services 3,621 3,285 2,988
Postage and communications 2,488 2,360 2,497
Credit card processing 2,427 2,249 2,256
Stationery and supplies 2,115 2,044 2,440
Taxes and insurance, other than real estate 1,881 2,194 2,101
Advertising 1,267 1,321 1,227
Amortization of intangible assets 3,664 3,608 3,562
OREO maintenance and operations, net 1,120 1,407 1,618
Provision for losses on OREO and
other problem assets 1,900 15,862 14,005
Other operating expense 8,511 7,748 6,741
------- ------- -------
Total non-interest expense $100,093 $112,623 $105,803
======== ======== ========
</TABLE>
Page 32 of 50
<PAGE>
(10) OTHER ASSETS AND LIABILITIES
The significant components of other assets and other liabilities at
December 31, 1993 and 1992, were as follows (in thousands):
<TABLE>
<CAPTION>
Other Assets
-------------------
1993 1992
-------- --------
<S> <C> <C>
Net deferred tax asset $19,046 $34,113
Costs in excess of net
tangible assets acquired 8,258 11,922
Other 7,357 7,098
------- -------
Total other assets $34,661 $53,133
======= =======
</TABLE>
Costs in excess of the net tangible assets acquired in prior years'
business combinations are being amortized over remaining lives ranging from one
to twelve years as of December 31, 1993.
<TABLE>
<CAPTION>
Other Liabilities
-----------------
1993 1992
------- -------
<S> <C> <C>
Accrued interest payable $ 2,718 $ 2,576
Obligation for postretirement
benefits other than pensions 6,306 -
Accrued taxes and expenses 8,402 10,639
Other 3,680 1,702
------- -------
Total other liabilities $21,106 $14,917
======= =======
</TABLE>
(11) ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure is made in accordance with the requirements of
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments." In cases where quoted market prices are not
available, fair values have been estimated using present value or other
valuation techniques. The results of these techniques are highly sensitive to
the assumptions used, such as those concerning appropriate discount rates and
estimates of future cash flows, which require considerable judgment.
Accordingly, estimates presented herein are not necessarily indicative of the
amounts the Company could realize in a current settlement of the underlying
financial instruments. SFAS No. 107 excludes certain financial instruments and
all nonfinancial instruments from its disclosure requirements. These
disclosures should not be interpreted as representing an aggregate measure of
the underlying value of the Company.
<TABLE>
<CAPTION>
DECEMBER 31, 1993 DECEMBER 31, 1992
(in thousands)
----------------------------------------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS:
Cash and due from financial
institutions $ 187,447 $ 187,447 $ 218,226 $ 218,226
Federal funds sold 110,000 110,000 128,445 128,445
Investment in securities 1,633,746 1,665,074 1,474,746 1,502,785
Loans, net 931,243 935,641 948,165 998,660
Interest receivable and
other assets 31,338 31,338 27,656 27,656
LIABILITIES:
Deposits $2,505,303 $2,505,784 $2,541,136 $2,541,438
Federal funds purchased and
other short-term borrowings 215,168 215,168 210,488 210,488
Interest payable and
other liabilities 7,752 7,752 6,131 6,131
</TABLE>
Page 33 of 50
<PAGE>
The following significant methods and assumptions were used by the Company
in estimating the fair value of financial instruments.
CASH AND SHORT-TERM INVESTMENTS
The carrying value of highly liquid instruments, such as cash on hand,
interest-and non-interest bearing deposits in financial institutions, and
federal funds sold, provides a reasonable estimate of their fair value.
INVESTMENT SECURITIES
Substantially all of the Company's investment securities are traded in
active markets. Fair value estimates for these securities are based on quoted
market prices obtained from independent pricing services. The carrying amount
of accrued interest on securities approximates its fair value.
LOANS, NET
For loans with rates that are repriced in coordination with movements in
market rates and with no significant change in credit risk, fair value estimates
are based on carrying values. The fair values for other loans are estimated
through discounted cash flow analysis, using current rates at which loans with
similar terms would be made to borrowers of similar credit quality. Appropriate
adjustments are made to reflect probable credit losses. The carrying amount of
accrued interest on loans approximates its fair value.
DEPOSITS
SFAS No. 107 specifies that the fair value of deposit liabilities with no
defined maturity is to be disclosed as the amount payable on demand at the
reporting date, i.e., at their carrying or book value. These deposits, which
include interest and non-interest checking, passbook savings, and money market
accounts, represented approximately 80% of total deposits at December 31, 1993
and 1992. The fair value of fixed maturity deposits is estimated using a
discounted cash flow calculation that applies rates currently offered for time
deposits of similar remaining maturities. The carrying amount of accrued
interest payable on deposits approximates its fair value.
The economic value attributable to the relationship with depositors who
provide low-cost funds to the Company is viewed as a separate intangible asset
and is excluded in SFAS No. 107 from the definition of a financial instrument.
SHORT-TERM BORROWINGS
The carrying amounts of federal funds purchased, borrowings under
repurchase agreements, and other short-term borrowings, approximate their fair
values.
OFF-BALANCE-SHEET INSTRUMENTS
Off-balance-sheet financial instruments include commitments to extend
credit, letters of credit, and other financial guarantees. The fair value of
such instruments is estimated using fees currently charged for similar
arrangements in the marketplace, adjusted for changes in terms and credit risk
as appropriate. The estimated fair value for these instruments was
insignificant at December 31, 1993 and 1992.
(12) FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
In order to meet the financing needs of its customers, the Company deals in
financial instruments that expose it to off-balance-sheet risk. These financial
instruments include commitments to extend credit, letters of credit, and other
financial guarantees. Such instruments involve, to varying degrees, elements of
credit and interest rate risk in excess of the amount recognized in the
statements of financial position.
The Company's exposure to credit loss in the event of nonperformance by
other parties for commitments to extend credit and letters of credit and other
financial guarantees written is represented by the contractual amount of those
instruments. The Company follows the same credit policies in making commitments
and conditional obligations as it does for on-balance-sheet instruments.
Page 34 of 50
<PAGE>
<TABLE>
<CAPTION>
Contractual
Amount
December 31, 1993
-----------------
(in thousands)
<S> <C>
Financial instruments whose contract
amounts represent credit risk:
Commitments to extend credit $398,587
Letters of credit and
financial guarantees written 57,684
Credit card lines 25,682
</TABLE>
Commitments to extend credit and credit card lines are agreements to make a
loan to a customer as long as there is no violation of any condition established
in the commitment or credit card contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payments of a fee.
Since many of the commitments are expected to expire without being drawn upon,
the total commitment amount outstanding does not necessarily represent total
future cash outlay requirements.
The amount of collateral, if any, required by the Company upon issuance of
a commitment is based on management's credit evaluation of the borrower.
Collateral varies, but may include accounts receivable, inventory, property,
plant and equipment, and income-producing commercial properties.
Letters of credit and financial guarantees written are conditional
agreements issued by the Company to guarantee the performance of a customer to a
third party. These agreements are primarily issued to support commercial trade.
Agreements totalling $10.5 million at December 31, 1993 have original maturities
greater than one year. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to customers.
The Company holds marketable securities as collateral to support those letters
of credit and guarantees for which collateral is deemed necessary. Letters of
credit and financial guarantees outstanding at December 31, 1993, ranged from
unsecured to fully secured.
(13) REGULATORY MATTERS
The Bank is required to maintain non-interest-bearing reserve balances with
the Federal Reserve Bank to fulfill its reserve requirements. The average
balance maintained was approximately $63,243,000 in 1993 and $61,182,000 in
1992.
In 1990, the Company and the Bank entered into an agreement with federal
bank regulators designed to ensure the continued strength of the institution and
to improve its internal policies in certain respects. The terms of the
agreement have been satisfied and the agreement was dissolved during 1993.
(14) COMMITMENTS AND CONTINGENCIES
On December 21, 1993, the Company and the Bank entered into an agreement
for the Bank to purchase substantially all of the assets and assume the deposit
and certain other liabilities of Baton Rouge Bank and Trust. This transaction,
which is expected to be completed in the first half of 1994, is subject to
regulatory approvals and certain other conditions. The assets to be acquired
total approximately $120,000,000. The final purchase price has not yet been
determined.
The Company and its subsidiaries are parties to various legal proceedings
arising in the ordinary course of business. After reviewing with outside legal
counsel pending and threatened actions, management is of the opinion that the
ultimate resolution of these actions will not have a material effect on the
Company's financial condition and results of operations.
Management also does not believe that compliance with existing federal,
state or local environmental laws and regulations will impose any material
financial obligation on the Company or materially affect the realizable value of
its assets.
The Company owns its own main office building as well as most of its branch
banking facilities and has not entered into material commitments under non-
cancellable leases for facilities or equipment. The defined benefit retirement
plan is sufficiently funded on an actuarial basis so as not to have required an
additional contribution by the Company during 1993. Current projections do not
indicate that a contribution will be required for 1994.
Page 35 of 50
<PAGE>
(15) PARENT COMPANY FINANCIAL STATEMENTS
Summarized parent-company-only financial statements of Whitney Holding
Corporation follow (in thousands):
<TABLE>
<CAPTION>
December 31,
1993 1992
-------- --------
<S> <C> <C> <C>
BALANCE SHEETS
Investment in Bank $258,066 $184,660
Dividends receivable 1,925 1,000
Other assets 972 831
-------- --------
Total assets $260,963 $186,491
======== ========
Dividends payable and
other liabilities $ 1,925 $ 960
Shareholders' equity, net of treasury
shares, and unearned restricted stock
compensation 259,038 185,531
-------- --------
Total liabilities and
shareholders' equity $260,963 $186,491
======== ========
STATEMENTS OF OPERATIONS 1993 1992 1991
-------- -------- -------
Dividend income from Bank $ 6,252 $ 1,000 $ -
Equity in undistributed earnings (loss)
of the Bank 70,155 19,135 (4,661)
Other income and (expenses), net (6) 67 (23)
-------- -------- -------
Net income (loss) $ 76,401 $ 20,202 $(4,684)
======== ======== =======
STATEMENTS OF CASH FLOWS 1993 1992 1991
-------- -------- -------
Cash flows from operating activities:
Net income (loss) $ 76,401 $ 20,202 $(4,684)
Adjustments to reconcile net
income (loss) to net cash provided
by (used in ) operating activities:
Equity in undistributed
(earnings) loss of the Bank (70,155) (19,135) 4,661
(Increase) Decrease in dividend
receivable (925) (1,000) -
Increase (Decrease) in other
assets 2 5 (11)
-------- -------- -------
Net cash provided by
(used in) operating
activities $ 5,323 $ 72 $ (34)
-------- -------- -------
Cash flows from investing activities:
(Increase) Decrease in investment
securities $ (130) $ (375) $ -
-------- -------- -------
Net cash provided by
(used in) investing activities $ (130) $ (375) $ -
-------- -------- -------
Cash flows from financing activities:
Dividends paid $ (5,287) $ - $ -
Sale of common stock and settlement
of fractional shares 76 - -
Exercise of stock options 30 271 -
-------- -------- -------
Net cash provided by
(used in) financing activities $ (5,181) $ 271 $ 0
-------- -------- -------
Net increase (decrease) in cash $ 12 $ (32) $ (34)
Cash at the beginning of the year 24 56 90
-------- -------- -------
Cash at the end of the year $ 36 $ 24 $ 56
======== ======== =======
</TABLE>
Page 36 of 50
<PAGE>
MANAGEMENT REPORT ON RESPONSIBILITY FOR FINANCIAL REPORTING
The management of Whitney Holding Corporation is responsible for the
preparation of the financial statements, related financial data and other
information in this report on Form 10-K. The financial statements are prepared
in accordance with generally accepted accounting principles and include amounts
based on management's estimates and judgement where appropriate. Financial
information appearing throughout this report on Form 10-K is consistent with the
financial statements.
The Company's financial statements have been audited by Arthur Andersen &
Co., independent public accountants. Management has made available to Arthur
Andersen & Co. all of the Company's financial records and related data, as well
as the minutes of shareholders' and directors' meetings. Furthermore,
management believes that all representations made to Arthur Andersen & Co.
during its audit were valid and appropriate.
Management of the Company has established and maintains a system of
internal control that provides reasonable assurance as to the integrity and
reliability of the financial statements, the protection of assets from
unauthorized use or disposition, and the prevention and detection of fraudulent
financial reporting. The system of internal control provides for appropriate
division of responsibility and is documented by written policies and procedures
that are communicated to employees with significant roles in the financial
reporting process and updated as necessary. Management continually monitors the
system of internal control for compliance. The Company maintains a strong
internal control auditing program that independently assesses the effectiveness
of the internal controls and recommends possible improvements thereto. As part
of their audit of the Company's 1993 financial statements, Arthur Andersen & Co.
considered the Company's system of internal control to the extent they deemed
necessary to determine the nature, timing and extent of their audit tests.
Management has considered the internal auditor's and Arthur Andersen & Co.'s
recommendations concerning the Company's system of internal control and has
taken actions that it believes are cost-effective in the circumstances to
respond appropriately to these recommendations. Management believes that, as of
December 31, 1993, the Company's system of internal control is adequate to
accomplish the objectives discussed herein.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF WHITNEY HOLDING CORPORATION:
We have audited the accompanying consolidated balance sheets of Whitney
Holding Corporation (a Louisiana corporation) and subsidiaries as of December
31, 1993 and 1992, and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1993. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Whitney Holding
Corporation and subsidiaries as of December 31, 1993 and 1992, and results of
its operations and cash flows for each of the three years in the period ended
December 31, 1993, in conformity with generally accepted accounting principles.
As discussed in Notes 4 and 5 to the consolidated financial statements,
effective January 1, 1993, the Company changed its methods of accounting for
income taxes and for postretirement benefits other than pensions. As discussed
in Notes 1 and 2 to the consolidated financial statements, effective December
31, 1993, the Company changed its method of accounting for certain investments
in debt and equity securities.
(SIGNATURE OF ARTHUR ANDERSEN & CO.
APPEARS HERE)
Arthur Andersen & Co.
New Orleans, Louisiana
January 13, 1994
Page 37 of 50
<PAGE>
SUMMARY OF QUARTERLY FINANCIAL INFORMATION
- ------------------------------------------
The following quarterly financial information is unaudited. In the opinion
of management all normal recurring adjustments necessary to present fairly the
results of operations for such periods are reflected.
<TABLE>
<CAPTION>
1993 - UNAUDITED
(in thousands, except per-share amounts)
-------------------------------------------------------------
4TH 3RD 2ND 1ST
QUARTER QUARTER QUARTER QUARTER
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest income $ 42,237 $ 42,581 $ 42,523 $ 42,189
Net interest income 30,245 30,468 30,327 29,474
Reduction in reserve for possible loan losses - 10,000 50,000 -
Income before taxes and accounting changes 12,706 23,248 65,289 10,169
Net income 9,010 15,935 43,704 7,752
Earnings per share for the three-month periods
(based on weighted average number of shares
outstanding) $ 0.62 $ 1.11 $ 3.03 $ 0.54
Dividend declared, per share $ 0.13 $ 0.13 $ 0.10 $ 0.07
Range of closing stock prices 21 3/4-26 19 1/2-25 5/8 19 1/8-23 1/2 $15 3/4-23 1/2
</TABLE>
<TABLE>
<CAPTION>
1992 - UNAUDITED
(in thousands, except per-share amounts)
-------------------------------------------------------------
4TH 3RD 2ND 1ST
QUARTER QUARTER QUARTER QUARTER
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest income $ 43,500 $ 44,156 $ 44,051 $ 46,048
Net interest income 29,379 29,004 27,274 26,773
Provision for possible loan losses - (750) (2,600) -
Income before taxes 8,677 7,454 6,852 6,118
Net income 6,004 5,249 4,728 4,221
Earnings per share for the three-month periods
(based on weighted average number of shares
outstanding) $ 0.42 $ 0.37 $ 0.33 $ 0.29
Dividend declared, per share $ 0.07 $ - $ - $ -
Range of closing stock prices 14 1/4-16 7/8 14 1/4-17 1/4 11 1/4-14 5/8 8 3/8-12
</TABLE>
Page 38 of 50
<PAGE>
ITEM 9: DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
In response to this item, registrant incorporates by reference the section
entitled "Election of Directors" of the Proxy Statement dated March 24, 1994.
EXECUTIVE OFFICERS OF THE REGISTRANT
WILLIAM L. MARKS, 50, Chairman of the Board and Chief Executive Officer of
WNB and the Company since February 28, 1990. Former Senior Executive Vice
President and Regional Executive of AmSouth Bank NA, headquartered in
Birmingham, Alabama, responsible for a division with $1 billion in assets and
702 employees.
R. KING MILLING, 53, since 1978, Director, since December, 1984, Director
and President, of the Bank and the Company.
G. BLAIR FERGUSON, 50, since July, 1993, Executive Vice President, of the
Bank. Former Executive Vice President and Regional Director of First City,
Texas - Dallas.
EDWARD B. GRIMBALL, 49, from September, 1990 to October, 1991, Vice
President and Chief Financial Officer, since October, 1991, Executive Vice
President and Chief Financial Officer, of the Bank and the Company. Former
Senior Vice President, Comptroller and Secretary of Bank South Corp., a $5-
billion multi-bank holding company headquartered in Atlanta, Georgia.
KENNETH A. LAWDER, JR., 52, since December, 1991, Executive Vice President,
of the Bank and the Company. Former Senior Vice President, Wachovia Bank NA., a
$17-billion bank headquartered in Winston-Salem, North Carolina.
JOSEPH W. MAY, 48, since December, 1993, Executive Vice President, of the
Bank and the Company. Former Executive Vice President and Chief Credit Policy
Officer, Comerica, Inc., a $27-billion bank headquartered in Detroit, Michigan.
ITEM 11: EXECUTIVE COMPENSATION
In response to this item, registrant incorporates by reference the section
entitled "Executive Compensation" of the Proxy Statement dated March 24, 1994.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
In response to this item, registrant incorporates by reference the sections
entitled "Voting Securities and Principal Holders Thereof" and "Election of
Directors" of the Proxy Statement dated March 24, 1994.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In response to this item, registrant incorporates by reference the section
entitled "Certain Transactions" of the Proxy Statement dated March 24, 1994.
Page 39 of 50
<PAGE>
PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) and (2) Financial Statements and Schedules
The following consolidated financial statements of the Company and its
subsidiaries are included in Part II Item 8:
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
Consolidated Balance Sheets --
December 31, 1993 and 1992 19
Consolidated Statements of Operations --
Years Ended December 31, 1993, 1992, and 1991 20
Consolidated Statements of Shareholders' Equity --
Years Ended December 31, 1993, 1992, and 1991 21
Consolidated Statements of Cash Flows --
Years Ended December 31, 1993, 1992, and 1991 22
Notes to Financial Statements 23
Report of Independent Public Accountants 37
Summary of Quarterly Financial Information 38
</TABLE>
All schedules have been omitted because they are either not applicable or
the required information has been included in the financial statements or notes
to the financial statements.
(a) (3) Exhibits:
Exhibit 3.1 - Copy of Composite Charter, incorporated by reference to
the Company's March 31, 1993 Form 10-Q
Exhibit 3.2 - Copy of Bylaws, as amended, incorporated by reference to
the Company's March 31, 1993 Form 10-Q
Exhibit 10.1 - Stock Option Agreement between Whitney Holding
Corporation and William L. Marks, incorporated by reference to the
Company's 1990 Form 10-K
Exhibit 10.2 - Executive agreement between Whitney Holding
Corporation, Whitney National Bank and William L. Marks, incorporated
by reference to the Company's June 30, 1993 Form 10-Q
Exhibit 10.3 - Executive agreement between Whitney Holding
Corporation, Whitney National Bank and R. King Milling, incorporated
by reference to the Company's June 30, 1993 Form 10-Q
Exhibit 10.4 - Executive agreement between Whitney Holding
Corporation, Whitney National Bank and Edward B. Grimball,
incorporated by reference to the Company's June 30, 1993 Form 10-Q
Exhibit 10.5 - Executive agreement between Whitney Holding
Corporation, Whitney National Bank and Kenneth A. Lawder, Jr.,
incorporated by reference to the Company's June 30, 1993 Form 10-Q
Exhibit 10.6 - Executive agreement between Whitney Holding
Corporation, Whitney National Bank and G. Blair Ferguson, incorporated
by reference to the Company's September 30, 1993 From 10-Q
Page 40 of 50
<PAGE>
Exhibit 10.7 - Executive agreement between Whitney Holding
Corporation, Whitney National Bank and Joseph W. May, effective
December 13, 1993
Exhibit 10.8 - Long-term incentive program, incorporated by reference
to the Company's 1991 Form 10-K
Exhibit 10.9 - Executive compensation plan, incorporated by reference
to the Company's 1991 Form 10-K
Exhibit 10.10 - Form of restricted stock agreement between Whitney
Holding Corporation and certain of its officers, incorporated by
reference to the Company's June 30, 1992 Form 10-Q
Exhibit 10.11 - Form of stock option agreement between Whitney Holding
Corporation and certain of its officers, incorporated by reference to
the Company's June 30, 1992 Form 10-Q
Exhibit 10.12 - Directors' Compensation Plan, incorporated by
reference to the Company's Proxy Statement dated March 24, 1994
Exhibit 21 - Subsidiaries
Whitney Holding Corporation owns 100% of the capital stock of Whitney
National Bank.
All other subsidiaries considered in the aggregate would not
constitute a significant subsidiary.
(b) No report on Form 8-K was required to be filed by the Registrant
during the last quarter of 1993.
Pursuant to the requirements of the Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
WHITNEY HOLDING CORPORATION
(Registrant)
By: /s/ William L. Marks
-----------------------------
William L. Marks
Chairman of the Board and
Chief Executive Officer March 23, 1994
Page 41 of 50
<PAGE>
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.
<TABLE>
<S> <C> <C>
/s/ William L. Marks Chairman of the Board and
- ------------------------------------, Chief Executive Officer and
William L. Marks Director March 23, 1994
/s/ R. King Milling President and Director March 23, 1994
- ------------------------------------,
R. King Milling
/s/ Edward B. Grimball Executive Vice President & C.F.O.
- ------------------------------------, (Principal Accounting Officer) March 23, 1994
Edward B. Grimball
/s/ John G. Phillips Director March 23, 1994
- ------------------------------------,
John G. Phillips
/s/ W.P. Snyder III Director March 23, 1994
- ------------------------------------,
W.P. Snyder III
/s/ Robert H. Crosby, Jr. Director March 23, 1994
- ------------------------------------,
Robert H. Crosby, Jr.
/s/ Richard B. Crowell Director March 23, 1994
- ------------------------------------,
Richard B. Crowell
/s/ James M. Cain Director March 23, 1994
- ------------------------------------,
James M. Cain
/s/ Harry J. Blumenthal, Jr. Director March 23, 1994
- ------------------------------------,
Harry J. Blumenthal, Jr.
/s/ Robert E. Howson Director March 23, 1994
- ------------------------------------,
Robert E. Howson
/s/ Warren K. Watters Director March 23, 1994
- ------------------------------------,
Warren K. Watters
/s/ John K. Roberts, Jr. Director March 23, 1994
- ------------------------------------,
John K. Roberts, Jr.
Director
- ------------------------------------,
William A. Hines
/s/ E. James Kock, Jr. Director March 23, 1994
- ------------------------------------,
E. James Kock, Jr.
Director
- ------------------------------------,
John J. Kelly
</TABLE>
Page 42 of 50
<PAGE>
Exhibit 10.7
WHITNEY HOLDING CORPORATION
AND
WHITNEY NATIONAL BANK
EXECUTIVE AGREEMENT
-------------------
THIS AGREEMENT (the "Agreement") is made by and between WHITNEY HOLDING
CORPORATION, a corporation organized and existing under the laws of the State of
Louisiana (the "Holding Corporation"), WHITNEY NATIONAL BANK, a financial
institution organized and existing under the laws of the United States (the
"Bank"), and JOSEPH W. MAY (the "Executive").
WHEREAS, the Executive is presently employed by each of the Holding
Corporation and the Bank as a EXECUTIVE VICE PRESIDENT.
NOW, THEREFORE, effective December 13, 1993, the Holding Corporation, the
Bank and the Executive agree as follows:
SECTION I
---------
DEFINITIONS
-----------
1.1 "Change in Duties" means the occurrence of one of the following events
in connection with a Change in Control:
a. A diminution in the nature or scope of the Executive's authorities or
duties, a change in his reporting responsibilities or titles or the
assignment of the Executive to any duties or responsibilities that are
inconsistent with his position, duties, responsibilities or status
immediately preceding such assignment;
b. A reduction in the Executive's compensation during the Covered Period.
For this purpose, "compensation" means the fair market value of all
remuneration paid to the Executive by the Employer during the
immediately preceding calendar year, including, without limitation,
deferred compensation, stock options and other forms of incentive
compensation awards, coverage under any employee benefit plan (such as
a pension, thrift, medical, dental, life insurance or long-term
disability plan) and other perquisites;
c. The transfer of the Executive to a location requiring a change in his
residence or a material increase in the amount of travel ordinarily
required of the Executive in the performance of his duties; or
d. A good faith determination by the Executive that his position, duties,
responsibilities or status has been affected, whether directly or
indirectly, in any manner which prohibits the effective discharge of
any such duties or responsibilities.
Page 43 of 50
<PAGE>
1.2 "Change in Control" means and shall be deemed to have occurred if:
a. Any "person," including any "group," determined in accordance with
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended,
becomes the beneficial owner, directly or indirectly, of securities of
the Holding Corporation representing 20% or more of the combined voting
power of the Holding Corporation's then outstanding securities, without
the approval, recommendation, or support of the Board of Directors of
the Holding Corporation as constituted immediately prior to such
acquisition;
b. The Federal Deposit Insurance Corporation or any other regulatory
agency negotiates and implements a plan for the merger, transfer of
assets and liabilities, reorganization, and/or liquidation of the Bank;
c. Either of the Holding Corporation or the Bank is merged into another
corporate entity or consolidated with one or more corporations, other
than a wholly- owned subsidiary of the Holding Corporation;
d. A change in the members of the Board of Directors of the Holding
Corporation which results in the exclusion of a majority of the
"continuing board." For this purpose, the term "continuing board"
means the members of the Board of Directors of the Holding Corporation,
determined as of the date on which this Agreement is executed and
subsequent members of such board who are elected by or on the
recommendation of a majority of such "continuing board"; or
e. The sale or other disposition of all or substantially all of the stock
or the assets of the Bank or the Holding Corporation (or any successor
corporation thereto).
1.3 "Company" means the Holding Corporation and the Bank.
1.4 "Covered Period" means the one-year period immediately preceding and
the three-year period immediately following the occurrence of a Change in
Control.
1.5 "Employer" means the Holding Corporation or the Bank or both, as the
case may be.
-2-
Page 44 of 50
<PAGE>
1.6 "Severance Amount" means 300% of the Executive's "annual salary." For
this purpose, "annual salary" means the average of all compensation paid to the
Executive by the Company which is includable in the Executive's gross income for
the highest 3 of the 5 calendar years immediately preceding the calendar year in
which a Change in Control occurs, including the amount of any compensation which
the Executive elected to defer under any plan or arrangement of the Company with
respect to such years. If the Executive has been employed less than 5 years
prior to the calendar year in which a Change in Control occurs, "annual salary"
shall be determined by averaging the compensation (as defined in the preceding
sentence) for the Executive's actual period of employment. Further, if the
Executive has been employed less than 12 months prior to the occurrence of a
Change in Control, the actual compensation of the Executive shall be annualized
for purposes of this Section 1.6. In the event of dispute between the Executive
and the Company, the determination of the "annual salary" shall be made by an
independent public accounting firm agreed upon by the Executive and the Company.
1.7 "Termination" or "Terminated" means (a) termination of the employment
of the Executive with the Employer for any reason, other than cause, or (b) the
resignation of the Executive following a Change in Duties. In no event,
however, shall the Executive's voluntary separation from service with the
Employer on account of death, disability, or resignation on or after the
attainment of the normal retirement age specified in any qualified employee
benefit plan maintained by the Employer constitute a Termination. For purposes
of determining whether a Termination has occurred, "cause" means fraud,
misappropriation of or intentional material damage to the property or business
of the Employer or the commission of a felony by the Executive.
SECTION II
----------
TERMINATION RIGHTS AND OBLIGATIONS
----------------------------------
2.1 Severance Awards. If the Executive's employment is Terminated during
----------------
the Covered Period, then no later than 30 days after the later of (a) the date
of such Termination, or (b) the occurrence of a Change in Control, the Company
shall:
a. Pay to the Executive the Severance Amount;
b. Transfer to the Executive the ownership of all club memberships,
automobiles and other perquisites which were assigned to the Executive
as of the day immediately preceding such Termination;
-3-
Page 45 of 50
<PAGE>
c. In accordance with Section 2.2 hereof, provide for the benefit of the
Executive, his spouse, and his dependents, if any, coverage under the
plans, policies or programs (as the same may be amended from time to
time) maintained by the Company for the purpose of providing medical
benefits and life insurance to other executives of the Company with
comparable duties; provided, however, that in no event shall the
coverage provided under this paragraph be substantially less than the
coverage provided to the Executive as of the date immediately preceding
a Termination;
d. Pay to the Executive an amount equal to the contributions by the
Company to the Whitney National Bank of New Orleans Thrift Incentive
Plan, or a successor arrangement, that would have been made for the
lesser of (i) 3 years following the date of Termination, or (ii) the
number of years until the Executive's normal retirement age under such
plan;
e. Pay to the Executive an amount equal to the present value of the
additional retirement benefit which would have accrued under the
Whitney National Bank of New Orleans Retirement Plan, or a successor
arrangement, that would have been made for the lesser of (i) 3 years
following the date of Termination, or (ii) the number of years until
the Executive's normal retirement age under such plan; and
f. Pay to the Executive the amount to which the Executive would be
entitled under the 1991 Executive Compensation Plan, or a successor
thereto, for the calendar year in which a Change in Control occurs,
determined as if all performance goals applicable to the Company and
the Executive were achieved.
2.2 Special Rules Governing Group Benefits. Coverage under Section 2.1c,
--------------------------------------
hereof, shall (a) commence as of the later of the date of Termination or the
occurrence of a Change in Control, and (b) end as of the earlier of the
Executive's coverage under Medicare Part B or the date on which the Executive is
covered under group plans providing substantially similar benefits maintained by
another employer. For this purpose, the Company shall provide coverage during
any period in which the payment of benefits is limited by any form of pre-
existing condition clause.
Coverage under Section 2.1c, hereof, may be provided under a group policy or
program maintained by the Company or the Company, in its sole discretion, may
acquire or adopt an individual plan, policy or program providing coverage solely
for the benefit of the Executive, his spouse, and his dependents, if any.
-4-
Page 46 of 50
<PAGE>
If coverage commences as of a Change in Control, the Company shall (a)
retroactively reinstate the Executive, his spouse, and dependents, if any, as of
the date of Termination, and (b) reimburse to the Executive his cost of
obtaining similar coverage for the period commencing on the date of Termination
and ending on the occurrence of a Change in Control. As to medical claims
incurred during such period, any coverage actually obtained by the Executive
shall be designated as the Executive's primary coverage, and the reinstated
coverage shall operate as secondary coverage.
2.3 Other Plans and Agreements. To the maximum extent permitted by law and
--------------------------
not withstanding any provision to the contrary contained in any plan, grant,
program, contract or other arrangement under which the Executive and the
Employer are parties, if the Executive's employment is Terminated during the
Covered Period, then any vesting schedule or other restriction on the ownership
of any benefits payable to the Executive under the terms of any such plan,
grant, contract, or arrangement shall be accelerated or lapse, as the case may
be.
Notwithstanding any provision to the contrary contained in any plan, grant,
program, contract, or arrangement under which the Executive and the Employer are
parties, in the event the Executive has elected to defer the payment of any
benefit under any such plan, grant, contract, or arrangement, the payment of
such benefit shall be accelerated and paid to the Executive in the form of a
single-sum no later than 30 days after the Executive's Termination during the
Covered Period.
2.4 Taxes. The Executive shall be responsible for applicable income tax
-----
and the Company shall have the right to withhold from any payment made under
this Agreement, or to collect as a condition of any payment, any income taxes
required by law to be withheld.
Notwithstanding the preceding paragraph, the Company shall pay any excise
tax or similar penalty imposed by Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code") or any comparable successor provision, on the
Executive as a consequence of any "excess parachute payment" within the meaning
of Section 280(g) of the Code (or a comparable successor provision) payable
under this Agreement or any plan, grant, program, contract or other arrangement
under which the Executive and the Employer are parties.
The Executive shall submit to the Company the amount to be paid under this
Section 2.4, together with supporting documentation. If the Executive and the
Company disagree as to such amount, an independent public accounting firm agreed
upon by the Executive and the Company shall make such determination.
-5-
Page 47 of 50
<PAGE>
SECTION III
-----------
MISCELLANEOUS
-------------
3.1 Notices. Notices and other communication required under this Agreement
-------
shall be made to the Company at 228 St. Charles Avenue, New Orleans, Louisiana
70130 and to the Executive at 228 St. Charles Avenue, New Orleans, Louisiana
70130 or, as to each party, at such other address as may be designated by
written notice to the other. All such notices and communications shall be
effective when deposited in the United States mail, postage prepaid, or
delivered to the affected party.
3.2 Employment Rights. The terms of this Agreement shall not be deemed to
-----------------
confer on the Executive any right to continue in the employ of the Employer for
any period or any right to continue his present or any other rate of
compensation.
3.3 Assignment. The Executive shall not sell, assign, pledge, transfer or
----------
otherwise convey the right to receive any form of payment or benefit provided
under the Agreement, except by will or the laws of intestacy.
3.4 Inurement. This Agreement shall be binding upon and inure to the
---------
benefit of the Holding Corporation, the Bank and the Executive and their
respective heirs, executors, administrators, successors and assigns.
3.5 Payment of Expenses. In the event that it is necessary or desirable
-------------------
for the Executive to retain legal counsel and/or incur other costs and expenses
in connection with the enforcement of the terms of the Agreement, the Company
shall pay (or the Executive shall be entitled to reimbursement of) reasonable
attorneys' fees, costs, and expenses actually incurred, without regard to the
final outcome, unless there is no reasonable basis for the Executive's action.
3.6 Amendment and Termination. The Agreement shall not be amended or
-------------------------
terminated by any act of the Company, except as may be expressly agreed upon, in
writing, by the Company and the Executive.
3.7 Nature of Obligation. The Company intends that its obligations
--------------------
hereunder be construed in the nature of severance pay. The Company's
obligations under Section 2 are absolute and unconditional and shall not be
affected by any circumstance, including, without limitation, any right of
offset, counterclaim, recoupment, defense, or other right which the Company may
have against the Executive or others. All amounts payable by the Company
hereunder shall be paid without notice or demand.
-6-
Page 48 of 50
<PAGE>
3.8 Choice of Law. The Agreement shall be governed and construed in
-------------
accordance with the laws of the State of Louisiana.
3.9 No Effect on Other Benefits. Any other compensation paid or benefits
---------------------------
provided to the Executive shall be in addition to and not in lieu of the
benefits provided to such Executive under this Agreement. Except as may be
expressly provided herein, nothing in this Agreement shall be construed as
limiting, varying or reducing the provision of any benefit available to the
Executive (or to such Executive's estate or other beneficiary) pursuant to any
employment agreement, group plan, including any qualified pension or profit-
sharing plan, health, disability or life insurance plan, or any other form of
agreement or arrangement between the Company and the Executive.
3.10 Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the Executive and the Holding Corporation and the Bank and is intended
to supersede all prior written or oral understandings with respect to the
subject matter of this Agreement.
3.11 Invalidity. In the event that any one or more provisions of this
----------
Agreement shall, for any reason, be held invalid, illegal or unenforceable in
any manner, such invalidity, illegality or unenforceability shall not affect any
other provision of such Agreement.
3.12 Mitigation. Notwithstanding any provision of this Agreement to the
----------
contrary and to the maximum extent permitted by law, the Executive shall not be
subject to any duty to mitigate the severance awards received hereunder by
seeking other employment. No severance award received under this Agreement
shall be offset by any compensation the Executive receives from future
employment, and the Executive shall not be required to perform any service as a
condition of this Agreement.
-7-
Page 49 of 50
<PAGE>
EXECUTED in multiple counterparts as of the dates set forth below, each of
which shall be deemed an original, and effective as of the date first set forth
above.
EXECUTIVE WHITNEY NATIONAL BANK AND
WHITNEY HOLDING CORPORATION
/s/ Joseph W. May /s/ R. E. Howson
- ----------------- ----------------
Date: January 21, 1994 By: Robert E. Howson
Title: Director & Chairman
Compensation Committee of
Board of Directors
Date: January 21, 1994
-8-
Page 50 of 50
