March 22, 1995
Securities and Exchange Commission
450 Fifth St., N.W.
Judiciary Plaza
Washington, D.C. 20549-1004
Via Edgar Electronic Filing System
Re: File Number 0-1026
Gentlemen:
Pursuant to regulations of the Securities and Exchange Commission,
submitted herewith for filing on behalf of Whitney Holding Corporation (the
"Company"), is the Company's Report on Form 10-K for the year ended December 31,
1994.
This filing is being effected by direct transmission to the
Commission's EDGAR System.
Sincerely,
/s/ Edward B. Grimball
Edward B. Grimball
Executive Vice President&
Chief Financial Officer
(504) 586-7570
EBG/drm
<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, 1994
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
(Exact name of registrant as specified in its charter)
Incorporated in Louisiana I.R.S. Employer Identification
No. 72-6017893
228 St. Charles Avenue, New Orleans, Louisiana 70130
(Address of principal executive offices)
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. [ ]
State the aggregate market value of the voting stock held by
nonaffiliates of the Registrant as of March 1, 1995
Approximately $302,646,000*
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, 14,740,686 shares outstanding as of
March 1, 1995.
Documents Incorporated by Reference
Definitive Proxy Statement dated March 10, 1995, Part III.
* 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>
Page
----
PART I
Item 1: Business 3
Item 2: Properties 4
Item 3: Legal Proceedings 4
Item 4: Submission of Matters to a Vote of Security Holders 4
Item 4a: Executive Officers of the Registrant 4
-------------------------------------------------------------------------------
PART II
Item 5: Market for the Registrant's Common Stock and Related
Shareholder Matters 5
Item 6: Selected Financial Data 6
Item 7: Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Item 8: Financial Statements and Supplementary Data 23
Item 9: Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 45
-------------------------------------------------------------------------------
PART III
Item 10: Directors and Executive Officers of the Registrant 46
Item 11: Executive Compensation 46
Item 12: Security Ownership of Certain Beneficial Owners and
Management 46
Item 13: Certain Relationships and Related Transactions 46
-------------------------------------------------------------------------------
PART IV
Item 14: Exhibits, Financial Statement Schedules and Reports on
Form 8-K 47
-------------------------------------------------------------------------------
Signatures 49
Page 2 of 56
<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 "Louisiana
Bank") as its only significant subsidiary. In December, 1994, the Company
established the Whitney Bank of Alabama (the "Alabama Bank") and, through this
new banking subsidiary, acquired the Mobile area operations of The Peoples Bank,
Elba, Alabama on February 17, 1995. The Louisiana Bank, which has its
headquarters in Orleans Parish, has been engaged in general banking business in
Louisiana and the City of New Orleans since 1883.
The Company, through its banking subsidiaries, engages in commercial
and retail banking and in trust business, including the taking of deposits, the
making of secured and unsecured loans, the financing of commercial transactions,
the issuance of credit cards, the performance of corporate, pension and personal
trust services, investment services and safe deposit rentals. The Louisiana
Bank is active as a correspondent for other banks. The Banks render specialized
services of different kinds in connection with all of the foregoing, and operate
forty-four offices in south Louisiana, five offices in the Mobile area, and a
foreign branch on Grand Cayman in the British West Indies.
There is significant competition within the financial services industry
in general as well as with respect to the particular financial services provided
by the Banks. Within its market areas, the Banks compete 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).
In recent years there has been a significant consolidation within the
financial services industry, particularly with respect to the banking and
savings and loan segments of this industry. This movement to consolidation has
been driven both by the large number of bank and S&L failures experienced during
the crisis of the late 1980's and early 1990's as well as by general competitive
pressures. All of the Banks' major direct banking competitors have been
relatively active in expansion through acquisition. In recent years, the Company
has entered into two acquisitions of banking operations involving approximately
$200 million of assets and liabilities. The trend toward industry consolidation
is expected to continue in the near term.
All material funds of the Company are invested in the Banks. The Banks
have a large number of customer relationships which have been acquired over a
period of many years and are 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 Banks or the Company. The Louisiana Bank
has customers in a number of foreign countries but the portion of revenue
derived from these foreign customers is not a material portion of its overall
revenues.
The Company and the Banks and their related operations are subject to
federal, state and local laws applicable to banks and bank holding companies and
to the regulations of the Board of Governors of the Federal Reserve System, the
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.
Page 3 of 56
<PAGE>
Item 2: PROPERTIES
The Company owns no real estate in its own name. The Louisiana Bank
owns the fourteen-story Whitney National Bank Building at 228 St. Charles Avenue
in New Orleans. The Louisiana Bank occupies approximately 68.0% of the 364,863
square feet in this building, and the balance is either leased to third parties
or available to be leased. The Banks also own the premises for twelve branches
in Orleans Parish, six branches in Jefferson Parish, four branches in Mobile
County, four branches in Lafayette Parish, six branches 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 Banks hold a variety of property interest 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 as to such property
interest as of December 31, 1994.
Item 3: LEGAL PROCEEDINGS
There are no material pending legal proceedings, other than routine
litigation incidental to the business, to which the Company or its subsidiaries
is a party or to which any of their property is subject.
Item 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
Item 4a: EXECUTIVE OFFICERS OF THE REGISTRANT
William L. Marks, 51, Chairman of the Board and Chief Executive Officer
of the Louisiana Bank 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, 54, since 1979, Director, and since December, 1984,
Director and President, of the Louisiana Bank and the Company.
G. Blair Ferguson, 51, since July, 1993, Executive Vice President, of
the Louisiana Bank and the Company. Former Executive Vice President and
Regional Director of First City, Dallas, Texas.
Edward B. Grimball, 50, from September, 1990 to October, 1991, Vice
President and Chief Financial Officer, and since October, 1991, Executive Vice
President and Chief Financial Officer of the Louisiana 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., 53, since December, 1991, Executive Vice
President of the Louisiana Bank and the Company. Former Senior Vice President,
Wachovia Bank NA., a $17-billion bank headquartered in Winston-Salem, North
Carolina.
Joseph W. May, 49, since December, 1993, Executive Vice President of
the Louisiana Bank and the Company. Former Executive Vice President and Chief
Credit Policy Officer, Comerica, Inc., a $27-billion bank holding company
headquartered in Detroit, Michigan.
John C. Hope, III, 46, since October, 1994, Chairman of the Board and
Chief Executive Officer of Whitney Bank of Alabama, and Executive Vice President
of the Company. Former Executive Vice President and Manager, Southern Area of
AmSouth Bank of Alabama.
Page 4 of 56
<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 1994 and 1993 as reported on the NASDAQ
National Market System.
1994 1993
---------------- ----------------
1st Quarter 21 1/2 - 24 15 3/4 - 23 1/2
2nd Quarter 21 3/4 - 27 1/4 19 - 23 1/2
3rd Quarter 25 3/4 - 28 1/2 19 1/2 - 25 5/8
4th Quarter 21 - 27 21 3/4 - 26
b) The approximate number of shareholders of record of the
Company, as of March 1, 1995, is as follows:
Title of Class Shareholders of Record
-------------------------- ----------------------
Common Stock, no par value 2,854
c) During 1994 and 1993, the Company declared dividends as
follows:
1994 1993
------------- -------------
1st Quarter $ 0.15 $ 0.07
2nd Quarter 0.15 0.10
3rd Quarter 0.17 0.13
4th Quarter 0.17 0.13
The Company declared an increase in its quarterly on January 25, 1995
to $0.20 per share payable April 3, 1995.
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 5 of 56
<PAGE>
Item 6: SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1994 1993 1992 1991 1990
------------------------------------------------------------
BALANCE SHEET DATA (dollars in thousands, except per-share data)
AT YEAR-END:
<S> <C> <C> <C> <C> <C>
Total assets............................................. $2,912,657 $3,002,540 $2,953,032 $2,858,204 $2,872,287
Total investment in securities........................... 1,532,978 1,633,746 1,474,746 1,139,275 810,532
Total loans.............................................. 1,060,167 975,728 1,046,723 1,266,992 1,480,373
Total earning assets..................................... 2,610,745 2,719,474 2,649,914 2,543,392 2,521,326
Total deposits........................................... 2,411,063 2,505,303 2,541,136 2,440,913 2,397,900
AVERAGE BALANCE:
Total assets............................................. $2,956,032 $2,888,335 $2,843,833 $2,854,924 $2,701,872
Total investment in securities........................... 1,622,971 1,547,701 1,281,713 1,040,451 783,131
Total loans.............................................. 979,254 952,238 1,124,993 1,356,995 1,439,047
Total earning assets..................................... 2,667,051 2,604,901 2,550,935 2,553,172 2,374,271
Total deposits........................................... 2,452,208 2,415,590 2,399,412 2,383,941 2,176,161
INCOME DATA
Net interest income........................................... $123,894 $120,514 $112,430 $99,200 $96,688
Provision for possible loan losses:
Expense of providing loss reserves......................... - - (3,350) (45,387) (62,266)
Loss reserve reduction..................................... 26,139 60,000 - - -
Gains on sale of securities................................... 46 - 5,429 18,376 -
Non-interest income........................................... 32,307 30,991 27,215 26,923 18,218
Non-interest expense.......................................... (104,258) (100,093) (112,623) (105,803) (88,720)
------------------------------------------------------------
Income (Loss) before income tax and effect $78,128 $111,412 $29,101 ($6,691) ($36,080)
of accounting changes....................................
Income tax expense (benefit).................................. 25,290 35,645 8,899 (2,007) (18,641)
------------------------------------------------------------
Income (Loss) before effect of accounting $52,838 $75,767 $20,202 ($4,684) ($17,439)
changes......................................
Cumulative effect of accounting changes, net.................. - 634 - - -
------------------------------------------------------------
Net income (loss)............................................. $52,838 $76,401 $20,202 ($4,684) ($17,439)
COMMON STOCK DATA
Earnings (Loss) per share..................................... $3.63 $5.30 $1.41 ($0.33) ($1.21)
Dividends per share........................................... $0.64 $0.43 $0.07 - $0.85
Book value per share, end of period........................... $20.36 $17.93 $12.88 $11.57 $11.89
Weighted average number of shares 14,557,008 14,425,007 14,368,052 14,347,071 14,347,071
outstanding................................
SELECTED RATIOS
Return on average assets ..................................... 1.79% 2.65% 0.71% (0.16)% (0.65)%
Return on average shareholders' equity ....................... 19.13% 34.78% 11.52% (2.79)% (8.78)%
Net interest margin, taxable-equivalent....................... 4.79% 4.75% 4.52% 3.99% 4.03%
Tier 1 risk-based capital ratio............................... 20.70% 18.92% 13.59% 10.48% 9.30%
Total risk-based capital ratio................................ 21.97% 20.19% 14.91% 11.82% 10.62%
Tier 1 leverage capital ratio................................. 9.84% 8.23% 6.02% 5.29% 5.26%
Shareholders' equity to total assets.......................... 10.22% 8.63% 6.28% 5.81% 5.94%
Note: All share and per-share figures give effect to the three-for-two stock splits effective February 22,
1993 and November 29, 1993.
</TABLE>
Page 6 of 56
<PAGE>
Item 7: MANAGEMENTS'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SUMMARY
Whitney Holding Corporation earned $52.8 million in 1994 or $3.63 per
share. These results include the effects of a $6.1 million recovery of a
charged-off loan which the Company was able to transfer to income and of an
additional $20 million reduction in the level of the reserve for possible loan
losses. The transfer of the recovery and the reserve reduction together
contributed $17.0 million or $1.17 per share to 1994 earnings on an after-tax
basis. For 1993, the Company reported earnings of $76.4 million or $5.30 per
share, including an after-tax contribution to earnings of $39.5 million or $2.74
per share resulting from a total of $60.0 million in loan loss reserve
reductions during that year.
Net interest income and non-interest income both increased in 1994 as
compared to 1993, as did non-interest expense. Net interest income increased
$3.4 million or 2.8% while the taxable-equivalent net interest margin was
essentially unchanged at 4.79% in 1994 compared to 4.75% in 1993. The $1.3
million or 4.3% overall increase in non-interest income reflected improvement in
virtually all income categories. Non-interest expense was $4.2 million or 4.2%
higher in 1994 compared to 1993, largely as a result of increased personnel
expenses from acquisitions, merit pay increases, and various employee and
management incentives and benefits as well as from essential staff additions and
changes.
Non-performing assets continued their steady decrease of the past
several years in 1994. At December 31, 1994, non-performing assets were $22.1
million, down 56% from $49.9 million at December 31, 1993. The reserve for
possible loan losses was $34.4 million on December 31, 1994, an amount which
represented 224% of non-performing loans and 3.2% of total loans. At year end
1993, the reserve coverage was 132% of non-performing loans and 4.6% of total
loans on that date.
For 1994, average earning assets were $2.67 billion, an increase of $62
million or 2.4% from $2.61 billion in 1993. Average accruing loans outstanding
were $956 million in 1994 compared to $904 million in the previous year, an
increase of $52 million or 5.8%. This loan growth is attributable to both the
Baton Rouge acquisition, as discussed below, which was completed in the first
quarter of 1994 and to a strengthening of demand for both commercial and
consumer credit in the Company's market areas. At December 31, 1994, total loans
outstanding were $1.06 billion, an increase of $84 million or 8.6% over the $976
million of total loans outstanding on December 31, 1993.
Average total deposits showed modest growth between 1994 and 1993,
increasing $37 million to $2.45 billion. The impact of the deposits assumed in
the Baton Rouge acquisition was partially offset by the movement of some deposit
funds to higher yielding alternative investment instruments with the rise in
market rates in 1994.
The Company's average investment in securities increased by $75 million
or 4.9% to $1.62 billion in 1994 as compared to $1.55 billion in 1993.
Throughout 1994, however, the level of the increase over 1993 has been
declining. The funding of recent loan demand and deposit outflows is evident in
this trend. From December 31, 1993, the Company's total investment in securities
has decreased approximately $101 million or 6.2% to 1994's year end.
On March 31, 1994, the Company and the Louisiana Bank completed a
purchase and assumption transaction with Baton Rouge Bank and Trust Company.
Included in the acquired assets, which totalled approximately $118 million, were
$59 million in commercial, real estate mortgage and personal loans, and six
banking offices in the Baton Rouge area. The deposits assumed included
approximately $24 million in non-interest-bearing demand deposits and $94
million in interest-bearing transaction, savings and time deposit accounts. All
six branch locations have been integrated into the Louisiana Bank.
Subsequent to year end 1994, the Company, through the Alabama Bank, its
newly formed banking subsidiary, acquired the Mobile area operations of The
Peoples Bank, Elba, Alabama, for a purchase price of approximately $12 million.
The assets and deposit liabilities associated with the five banking locations
acquired in this transaction totalled approximately $90 million, including $47
million in loans. This impact of this acquisition will be reflected in the
Company's consolidated financial statements beginning in 1995.
The Company declared quarterly dividends in 1994 totalling $0.64 per
share compared with $0.43 per share in 1993, an increase of $0.21 per share or
49%. During 1993, the Company's Board of Directors twice approved three-for-two
stock splits which were effective in February and November of that year. All
share and per-share data in this report on Form 10-K reflect the effect of these
stock splits.
Page 7 of 56
<PAGE>
<TABLE>
<CAPTION>
AVERAGE BALANCE SHEETS
(in thousands)
AVERAGE ASSETS 1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Cash and due from financial institutions $ 186,362 $ 186,358 $ 187,331
Interest bearing deposits in other
financial institutions - 849 9,686
U.S. Treasury and agency securities 1,306,461 1,223,466 996,467
Mortgage-backed securities 157,442 188,424 175,555
State and municipal securities 121,481 98,728 82,406
Corporate bonds and other securities 37,587 36,234 27,285
Federal funds sold 64,826 104,962 134,543
Loans 979,254 952,238 1,124,993
Reserve for possible loan losses (43,046) (72,866) (103,926)
Bank premises and equipment, net 62,400 61,868 63,631
All other assets 83,265 108,074 145,862
---------- ---------- ----------
Total assets $2,956,032 $2,888,335 $2,843,833
========== ========== ==========
AVERAGE LIABILITIES
Deposits:
Non-interest-bearing demand deposits $ 759,549 $ 732,734 $ 696,077
Savings deposits, NOW account
and money market account deposits 1,122,636 1,157,859 1,101,488
Time deposits 570,023 524,997 601,847
--------- ---------- ----------
Total deposits 2,452,208 2,415,590 2,399,412
Federal funds purchased and
repurchase agreements 200,063 226,878 247,948
All other liabilities 27,542 26,205 21,060
--------- ---------- ----------
Total liabilities 2,679,813 2,668,673 2,668,420
--------- ---------- ----------
AVERAGE SHAREHOLDERS' EQUITY
Total capital accounts 276,219 219,662 175,413
--------- ---------- ----------
Total liabilities and shareholders'
equity $2,956,032 $2,888,335 $2,843,833
========== ========== ==========
</TABLE>
FINANCIAL CONDITION
Loans
For 1994, the Company's average loans outstanding increased $27 million
or 2.8% as compared to 1993. Average loans outstanding of $1.02 billion for the
fourth quarter of 1994, however, are $29 million above the level in 1994's third
quarter and $79 million or 8.4% above the fourth quarter of 1993. The Baton
Rouge acquisition in the first quarter of 1994, an improving regional economy
and a more aggressive effort to market both retail and commercial loan products
all contributed to the growth in the loan portfolio throughout 1994.
The improvement in economic conditions in the Company's market area,
which is primarily southern Louisiana and Mississippi and, most recently,
southern Alabama, has come after several years of a weaker economy which had
been reflected in limited loan demand and in efforts by many commercial loan
customers to reduce their existing debt levels. During that period the Louisiana
Bank also consciously reduced its exposure to credits whose performance had been
adversely affected by these adverse economic conditions. The significant
reduction in non-performing loans over the past several years is shown in below
in table of non-performing assets.
During 1994, the Company continued to expand its lending resources,
market areas and loan products, and management expects to continue and intensify
these efforts in 1995 as the Banks compete to place high quality credits in the
communities they serve. Unfunded loan commitments outstanding at December 31,
1994 have increased to approximately $582 million, some $183 million above the
level at December 31, 1993.
Page 8 of 56
<PAGE>
<TABLE>
<CAPTION>
LOAN PORTFOLIO BALANCES AT DECEMBER 31
(in thousands)
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Commercial, financial,
and agricultural
loans $ 575,794 $ 569,812 $ 574,721 $ 745,159 $ 867,350
Real estate loans -
commercial and other 292,018 260,307 292,752 282,403 314,488
Real estate loans -
retail mortgage 98,079 71,363 88,590 118,878 131,381
Loans to individuals 94,276 74,246 90,660 120,552 167,154
---------- ---------- ---------- ---------- ----------
Total loans $1,060,167 $ 975,728 $1,046,723 $1,266,992 $1,480,373
========== ========== ========== ========== =========
</TABLE>
Deposits and Short-term Borrowings
The Company's average deposit base increased $37 million or 1.5% to
$2.45 billion in 1994 from $2.42 billion in 1993. Underlying this modest overall
increase is the effect of the acquisition of Baton Rouge Bank & Trust Company,
offset in part by some net deposit outflow of interest-bearing deposits other
than time certificates of deposit.
As is shown in the table of average balance sheets,
non-interest-bearing demand deposits increased on average by $27 million or 3.7%
in 1994 as compared to 1993. This table also shows that average time deposits,
which includes both core deposits and certificates of deposit of $100,000 and
over, increased $45 million or 8.6% between 1993 and 1994. Virtually all of the
growth within the time deposit category came from core certificates of deposit
of under $100,000. The growth in the non-interest demand and time deposit
categories in 1994 exceeded the amount attributable to the Baton Rouge
acquisition for each category.
Average savings, interest-bearing demand, and money market account
deposits decreased $35 million or 3.0% in 1994 compared with 1993. These changes
have resulted in part from the increasing attractiveness of alternative
investment opportunities in 1994 as market rates have risen.
The Company's short-term borrowings consist of purchases of federal
funds and sales of securities under repurchase agreements. Such borrowings are
used both as a source of funding for certain short-term lending facilities and
as part of the Banks' services to correspondent banks and certain other
customers. The Company's average short-term borrowing position, net of federal
funds sold, was approximately $135 million in 1994 and $122 million in 1993.
Page 9 of 56
<PAGE>
Investment in Securities
The Company's annual average investment in securities increased by $76
million or 4.9% to $1.62 billion in 1994 from $1.55 billion in 1993. Between the
fourth quarters of 1993 and 1994, however, the average investment in securities
decreased $84 million or 5.2%, reflecting in part the recent strengthening of
loan demand. From December 31, 1993, the Company's total investment in
securities has decreased approximately $101 million or 6.2% to $1.53 billion at
1994's year end.
Both the period-end and average investment in securities constituted
approximately 54% of total assets and 59% of earning assets in both 1994 and
1993. The mix of period-end and average investment in securities also remained
relatively stable between these periods, with U.S. Treasury and government
agency issues, excluding mortgage-backed issues, representing approximately 80%
of total investments. The weighted average maturity of the overall portfolio of
securities was 28 months at year end 1994 as compared with 34 months at year end
1993. The weighted average taxable-equivalent portfolio yield increased 10 basis
points to 5.81% at December 31, 1994 from 5.71% at December 31, 1993.
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 has considered the Company's existing investment portfolio
and underlying asset/liability management policies and strategies in light of
SFAS No. 115 and determined that its investments in mortgage-backed securities
meet the criteria for classification as securities available for sale. These
securities were reported at their estimated fair values at December 31, 1994 and
1993. Any unrealized gain or loss associated with these securities at year end
1994 and 1993 was reported, net of tax, as a separate component of shareholders'
equity. The tax-effected unrealized loss at December 31, 1994 was approximately
$5.1 million. The remaining portfolio of securities was classified as held to
maturity and continues to be reported at amortized cost. The Company maintained
no trading portfolio in 1994 or 1993.
In accordance with SFAS No. 115, reported information on investment
securities from before the date of adoption has not been restated. On an ongoing
basis, investment securities are classified as they are acquired and the
continued propriety of classifications is periodically evaluated by management.
The Company does not maintain any investment or participation in
financial instruments or agreements whose value is linked to, or derived from,
changes in the value of some underlying asset or index. Such instruments or
agreements include futures, forward contracts, option contracts, interest-rate
swap agreements, and other financial arrangements with similar characteristics,
and are commonly referred to as derivatives.
Page 10 of 56
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT IN SECURITIES
(dollars in thousands)
Book Value at December 31 1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
U.S. Treasury securities $ 994,230 $ 934,134 $ 785,269
Securities of U.S. government agencies 246,027 366,938 385,664
Mortgage-backed securities (available
for sale at December 31, 1994 and 1993) 137,335 182,030 184,137
State and municipal securities 126,537 112,324 86,832
Corporate bonds 25,160 34,534 28,896
Equity securities 3,689 3,786 3,948
---------- ---------- ----------
Total $1,532,978 $1,633,746 $1,474,746
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Distribution
of Remaining
Maturity Over One Over Five
and Yield One Year Through Through Over
by Range and Less Five Years Ten Years Ten Years Total
at December--------------------------------------------------------------------
31, 1994 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 $174,202 5.3% $820,028 5.5% $ - -% $ - -% $994,230 5.4%
Securities
of U.S.
government
agencies 75,212 5.5 170,815 5.9 - - - - 246,027 5.8
State and
municipal
securities
(1) 8,577 7.2 49,029 7.7 58,532 8.3 10,399 9.7 126,537 8.1
Corporate
bonds 25,160 5.4 - - - - - - 25,160 5.4
Equity
securities
(3) - - - - - - 3,689 - 3,689 -
Securities
available
for sale:(4)
Mortgage-
backed
securities
(2) - - 133,495 6.5 3,840 5.5 - - 137,335 6.5
<FN>
(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.
</FN>
</TABLE>
Page 11 of 56
<PAGE>
<TABLE>
<CAPTION>
NON-PERFORMING ASSETS AT DECEMBER 31
(in thousands) 1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Loans accounted for
on a nonaccrual
basis $ 15,396 $ 33,631 $ 70,640 $103,763 $128,927
Restructured loans - - - 3,017 2,534
-------- -------- -------- -------- --------
Total non-performing
loans $ 15,396 $ 33,631 $ 70,640 $106,780 $131,461
Other real estate
owned 6,685 16,126 40,142 68,444 54,878
Other foreclosed
assets 3 174 420 364 -
-------- -------- -------- -------- --------
Total non-performing
assets $ 22,084 $ 49,931 $111,202 $175,588 $186,339
======== ======== ======== ======== ========
Loans 90 days past
due still
accruing $ 201 $ 876 $ 1,441 $ 1,004 $ 496
======== ======== ======== ======== ========
Non-performing assets
as a percentage of:
Total assets 0.8% 1.7% 3.8% 6.1% 6.5%
Total loans and
foreclosed assets 2.1% 5.0% 10.2% 13.1% 12.1%
</TABLE>
Asset Quality
Over the past four years, overall asset quality has improved steadily.
As is shown in the non-performing assets table, during this period, the Company
has been very successful in its efforts to reduce its non-performing assets
through the full rehabilitation of nonaccruing loans, the workout of troubled
credits, and the sale of repossessed loan collateral. Non-performing assets
totalled $22.1 million at December 31, 1994, a decrease of $27.8 million or 56%
from $49.9 million at year end 1993.
Of the $15.4 million in nonaccruing loans at December 31, 1994,
approximately $4.0 million represented loans on which interest payments are
being recognized in income as collected. Nonaccruing loans totalling $6.6
million at year end 1994 were secured by real property collateral. Another $7.7
million consisted of various commercial credits.
In 1994, the Company was successful in recovering $19.7 million of
previously charged-off loans. For the same period, the Company identified
approximately $3.6 million of loans to be charged off, a decrease of 44% from
the $6.4 million of charge-offs in 1993. As is shown in the table summarizing
loan loss experience, the Company ended 1994 in a net recovery position of
approximately $16.1 million, an improvement of $10.1 million over 1993.
The reserve for possible loan losses is maintained at a level believed
by management to be adequate to absorb potential losses in the portfolio. With
the significant recoveries during 1994 and the continued improvement in overall
asset quality, the Company was able to return $26.1 million of the reserves for
possible loan losses to income. In 1993, the Company had reduced the reserve for
possible loan losses by a total of $60 million, reflecting the improvement in
asset quality and management's determination that the steps taken in recent
years to deal with asset quality issues at the Louisiana Bank had yielded
lasting positive results. In management's judgment, some of the reserve levels
that had been established in recognition of these asset quality issues were no
longer needed. The reserve for possible loan losses was $34.4 million at
December 31, 1994, which represented a 224% coverage of total non-performing
loans and 3.3% of total loans.
During 1994, the Company disposed of other real estate owned ("OREO")
properties with a carrying value at the time of sale totalling approximately
$11.2 million. The value of OREO properties acquired in settlement of loans
during the year was $1.6 million. The $6.7 million balance of OREO at December
31, 1994 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 1994. Future dispositions may result
in the recognition of substantial gains.
The Company has not extended any credit in connection with what would
be defined under regulatory guidelines as highly leveraged transactions, nor has
it acquired any investment securities arising from such transactions. The
Company's foreign lending and investing activities are currently insignificant.
Note 3 to the consolidated financial statements discusses credit concentrations
in the loan portfolio.
Page 12 of 56
<PAGE>
<TABLE>
<CAPTION>
SUMMARY OF LOAN LOSS EXPERIENCE
(dollars in thousands)
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Reserve for
possible loan losses
at beginning of
of period $ 44,485 $ 98,558 $107,246 $ 90,845 $ 96,023
Loans charged off
during period:
Commercial,
financial, and
agricultural loans $ 1,833 $ 4,560 $ 12,651 $ 18,263 $ 33,221
Real estate loans 358 620 4,742 8,819 29,993
Loans to individuals 1,383 1,252 3,996 7,909 9,053
-------- -------- -------- -------- --------
Total $ 3,574 $ 6,432 $ 21,389 $ 34,991 $ 72,267
-------- -------- -------- -------- --------
Recoveries of loans
previously
charged off:
Commercial,
financial, and
agricultural loans $ 4,706 $ 7,156 $ 4,281 $ 2,265 $ 1,960
Real estate loans 11,918 3,754 2,156 1,026 509
Loans to individuals 3,029 1,449 2,914 2,714 2,354
-------- -------- -------- -------- --------
Total $ 19,653 $ 12,359 $ 9,351 $ 6,005 $ 4,823
-------- -------- -------- -------- --------
Net loans (charged off)
recovered
during period $ 16,079 $ 5,927 $(12,038) $(28,986) $(67,444)
Additions to
(reduction of)
reserve for
possible loan
losses charged
(credited)
to operations (26,139) (60,000) 3,350 45,387 62,266
-------- -------- -------- -------- --------
Reserve for
possible loan
losses at end
of period $ 34,425 $ 44,485 $ 98,558 $107,246 $ 90,845
======== ======== ======== ======== ========
Reserve as a
percentage of:
Total non-performing
loans 224% 132% 140% 100% 69%
Total loans 3.3% 4.6% 9.4% 8.5% 6.1%
Ratio of net charge-offs
(recoveries) to average
loans outstanding (1.6%) (0.6%) 1.1% 2.1% 4.6%
</TABLE>
ALLOCATION OF THE RESERVE FOR POSSIBLE LOAN LOSSES
(dollars in thousands)
<TABLE>
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1993
---------------------- ---------------------
Balance at year end AMOUNT PERCENTAGE AMOUNT PERCENTAGE
applicable to - ---------------------- ---------------------
<S> <C> <C> <C> <C>
Commercial, financial and
agricultural loans $16,180 47.0% $20,447 46.0%
Real estate loans -
commercial and other 9,295 27.0 9,341 21.0
Real estate loans -
retail mortgage 3,201 9.3 2,561 5.7
Loans to individuals 3,064 8.9 2,664 6.0
Unallocated 2,685 7.8 9,472 21.3
------- ------ ------- ------
$34,425 100.0% $44,485 100.0%
</TABLE>
Page 13 of 56
<PAGE>
<TABLE>
<CAPTION>
REGULATORY CAPITAL RATIOS
-------------------------------------------------------------------------------
Required for
December 31, well-capitalized
1994 1993 institution
----------------------------------------------
<S> <C> <C> <C>
Tier 1 risk-based
capital ratio 20.70% 18.92% 6.00%
Total risk-based
capital ratio 21.97% 20.19% 10.00%
Tier 1 leverage
capital ratio 9.84% 8.23% 5.00%
</TABLE>
Capital Adequacy
The strong earnings reported for 1994, including the effect of the
reduction in the reserve for loan losses, are reflected in the increase in the
Company's regulatory capital ratios between December 31, 1994 and 1993.
The Company's regulatory capital ratios are shown above compared to the
minimums currently required for regulatory classification as a
"well-capitalized" institution. The regulatory capital ratios for the Banks were
also well in excess of minimum requirements at December 31, 1994. The Company is
committed to maintaining a strong capital base to support its philosophy of
soundness, profitability and growth.
Regulatory agencies have proposed rules through which a measure of
interest rate risk will be incorporated in the level of regulatory capital that
an institution is required to maintain. These rules are not yet finalized, but
they are likely to become effective in 1995. Management believes that
implementation of the proposed rules will not have a significant impact on the
Company's or the Banks' ability to satisfy regulatory capital requirements.
Page 14 of 56
<PAGE>
RESULTS OF OPERATIONS
Net Interest Income
Taxable-equivalent net interest income increased $3.9 million or 3.1%
in 1994 as compared to 1993, as the net interest margin rose to 4.79% from
4.75%. 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.
Loan interest income increased $8.9 million or 11.8% in 1994 as
compared to 1993. Approximately half of this increase was driven by the growth
in average loans outstanding during 1994 with the other half driven by the rise
in the effective yield on the Company's loan portfolio. Market interest rates
generally rose throughout 1994, and bank prime rates increased a full two
percentage points during the year. The effective yield on the Company's average
loan portfolio, approximately 40% of which reprices with changes in prime,
increased 69 basis points in 1994 as compared to 1993. The increase in the
effective yield was partly influenced by an adjustment recorded in 1994 to
recognize $2.6 million of previously collected but unrecognized interest on
loans that had at times in prior years been accounted for under the cost
recovery method.
Interest income on investment securities decreased approximately $1.5
million or 1.6% in 1994 as compared to 1993, despite an increase between these
years in the average investment in securities outstanding. The effective yield
on the investment securities portfolio is not as immediately responsive to
rising market rates as are loan yields. The effective yield was 5.75% in 1994
and 6.13% in 1993, a decrease which reflects the lingering impact of the falling
rate environment that had prevailed until earlier this year. During 1994, the
overall effective investment yield registered small but steady increases.
The net increase in total interest income between 1993 and 1994 was
$6.7 million or 3.9%. This overall net increase was driven by the $62.2 million
growth in total average earning assets outstanding in 1994 as compared to 1993.
The overall effective earning-asset yield in 1994 was 6.73%, an increase of 10
basis points from 6.63% in 1993.
Interest expense increased $2.9 million or 5.8% in 1994 as compared to
1993. This increase reflects the impact of the rising rate environment during
1994 and a shift in the deposit mix toward core time deposits from other lower
cost deposit categories, a shift which is partly attributable to the Baton Rouge
acquisition. The average maturity of certificates of deposit outstanding also
lengthened somewhat during 1994 as consumer deposit rates increased. The overall
cost of funds rate on interest-bearing liabilities was 2.74% in 1994 as compared
to 2.57% in 1993, an increase of 17 basis points.
Page 15 of 56
<PAGE>
<TABLE>
<CAPTION>
ANALYSIS OF CHANGES IN INTEREST INCOME AND INTEREST EXPENSE
YIELDS ON AVERAGE EARNING ASSETS AND RATES ON AVERAGE INTEREST-BEARING LIABILITIES
------------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
1994 1993 1992
--------------------------------------------------------------------------------------------
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
Loans (tax equivalent)(1)(2)......... $979,254 $83,711 8.55 % $952,238 $74,846 7.86 % $1,124,993 $90,062 8.01 %
--------------------------------------------------------------------------------------------
U.S. Treasury securities............. $1,007,913 $54,312 5.39 % $884,417 $51,463 5.82 % $739,556 $46,959 6.35 %
U.S. government agency securities.... 298,548 16,500 5.53 % 339,049 19,570 5.77 % 256,911 15,547 6.05 %
Mortgage-backed securities(3)........ 157,442 10,197 6.48 % 188,424 12,635 6.71 % 175,555 13,090 7.46 %
State and municipal securities
(tax equivalent)(1)............... 121,481 9,934 8.18 % 98,728 8,603 8.71 % 82,406 7,750 9.40 %
Corporate bonds and other
securities........................ 37,587 2,309 6.14 % 36,234 2,501 6.90 % 27,285 2,099 7.69 %
--------------------------------------------------------------------------------------------
Total investment in securities.... $1,622,971 $93,252 5.75 % $1,546,852 $94,772 6.13 % $1,281,713 $85,445 6.67 %
--------------------------------------------------------------------------------------------
Federal funds sold................... 64,826 2,550 3.93 % 104,962 3,145 3.00 % 134,543 4,702 3.49 %
Interest-bearing deposits............ - - - 849 26 3.06 % 9,686 400 4.13 %
--------------------------------------------------------------------------------------------
Total interest-earning assets..... $2,667,051 $179,513 6.73 % $2,604,901 $172,789 6.63 % $2,550,935 $180,609 7.08 %
--------------------------------------------------------------------------------------------
Cash and due from financial
institutions...................... 186,362 186,358 187,331
Bank premises and equipment, net..... 62,400 61,868 63,631
Other real estate owned, net......... 10,681 27,753 60,424
Other assets......................... 72,584 80,321 85,438
Reserve for possible loan losses..... (43,046) (72,866) (103,926)
------------ ------------ ------------
Total assets...................... $2,956,032 $2,888,335 $2,843,833
============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Savings account deposits............. $541,782 $14,611 2.70 % $552,420 $15,194 2.75 % $496,678 $17,294 3.48 %
NOW account and MMDA deposits........ 580,854 10,459 1.80 % 605,439 12,010 1.98 % 604,810 18,219 3.01 %
Time deposits........................ 570,023 19,965 3.50 % 524,997 15,552 2.96 % 601,847 21,693 3.60 %
--------------------------------------------------------------------------------------------
Total interest-bearing deposits... $1,692,659 $45,035 2.661 % $1,682,856 $42,756 2.541 % $1,703,335 $57,206 3.358 %
--------------------------------------------------------------------------------------------
Federal funds purchased and
repurchase agreements........... 200,063 6,832 3.41 % 226,878 6,260 2.76 % 247,948 8,119 3.27 %
--------------------------------------------------------------------------------------------
Total interest-bearing
liabilities..................... $1,892,722 $51,867 2.74 % $1,909,734 $49,016 2.57 % $1,951,283 $65,325 3.35 %
--------------------------------------------------------------------------------------------
Demand deposits,
non-interest-bearing.............. 759,549 732,734 696,077
Other liabilities.................... 27,542 26,205 21,060
Shareholders' equity................. 276,219 219,662 175,413
------------ ------------ ------------
Total liabilities and
shareholders' equity.............. $2,956,032 $2,888,335 $2,843,833
============ ============ ============
Net interest income/margin
(tax equivalent)(1)............... $127,646 4.79 % $123,773 4.75 % $115,284 4.52 %
=================== =================== ==================
<FN>
(1) Tax equivalent amounts are calculated using a marginal federal income tax rate of 35% for 1994 and 1993 and 34% for 1992.
(2) Average balance includes nonaccruing loans of $23,313, $48,403, and $97,636, respectively in 1994, 1993 and 1992.
(3) Average balance in 1994 includes unrealized loss on securities available for sale of $1,257, which is excluded in calculating
the yield.
</FN>
</TABLE>
Page 16 of 56
<PAGE>
<TABLE>
<CAPTION>
ANALYSIS OF CHANGES IN INTEREST INCOME AND INTEREST EXPENSE
VOLUME AND YIELD/RATE VARIANCE
-----------------------------------------------------------------------------------------------------
(in thousands)
1994 Compared to 1993 1993 Compared to 1992
------------------------------------------------------------
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)(1)(2).......... $4,420 $4,445 $8,865 ($10,618) ($4,598) ($15,216)
------------------------------------------------------------
U.S. Treasury securities.............. $6,975 ($4,126) $2,849 $8,919 ($4,415) $4,504
U.S. government agency securities..... (2,326) (744) (3,070) 4,933 (910) 4,023
Mortgage-backed securities............ (2,066) (372) (2,438) 900 (1,355) (455)
State and municipal securities
(tax equivalent)(1)................ 1,946 (615) 1,331 1,498 (645) 853
Corporate bonds and other securities.. 85 (277) (192) 666 (264) 402
------------------------------------------------------------
Total investment securities........ $4,614 ($6,134) ($1,520) $16,916 ($7,589) $9,327
------------------------------------------------------------
Federal funds sold.................... (1,303) 708 (595) (986) (571) (1,557)
Interest-bearing deposits in
financial institutions............. (26) - (26) (362) (12) (374)
------------------------------------------------------------
Total interest-earning assets...... $7,705 ($981) $6,724 $4,950 ($12,770) ($7,820)
------------------------------------------------------------
INTEREST ACCRUED ON
Savings account deposits.............. ($300) ($283) ($583) $1,643 ($3,743) ($2,100)
NOW account and MMDA deposits......... (461) (1,090) (1,551) 12 (6,221) (6,209)
Time deposits......................... 1,494 2,919 4,413 (2,479) (3,662) (6,141)
------------------------------------------------------------
Total interest-bearing deposits.... $733 $1,546 $2,279 ($824) ($13,626) ($14,450)
------------------------------------------------------------
Federal funds purchased and
repurchase agreements.............. (837) 1,409 572 (622) (1,237) (1,859)
------------------------------------------------------------
Total interest-bearing liabilities. ($104) $2,955 $2,851 ($1,446) ($14,863) ($16,309)
------------------------------------------------------------
Net interest income
(tax equivalent)(1)................ $7,809 ($3,936) $3,873 $6,396 $2,093 $8,489
============================================================
<FN>
(1) Tax equivalent amounts are calculated using a marginal federal income tax rate of 35% for 1994 and
1993 and 34% for 1992.
(2) Interest recognized on nonaccruing loans was $4,191, $3,830 and $3,676 in 1994, 1993 and 1992,
respectively. In 1994, the Company recorded an adjustment to recognize $2,612 of interest
collections previously accounted for under the cost recovery method.
</FN>
</TABLE>
Page 17 of 56
<PAGE>
Other Income and Expense
Non-interest income, adjusted to exclude gains on securities sales and
the net gain from sales of OREO, increased $1.7 million, or 6.1%, to $29.0
million in 1994 from $27.3 million in 1993. This followed an increase of $1.5
million or 5.8% from 1992 to 1993.
Income from service charges on deposit accounts, which accounted for
approximately 57% of adjusted non-interest income in each of these three years,
increased 4.5% between 1993 and 1994, largely reflecting the impact of the Baton
Rouge acquisition. Improvement in the economy of the Company's service area in
1994 was evident in higher credit transaction volume which supported a 14.5%
increase over 1993 in income from credit card related operations. Improved
economic conditions and enhanced products and delivery systems helped generate a
23.5% increase in 1994 income from services which support the international
activities of the Company's customers.
The rise in market interest rates throughout 1994 stimulated demand for
the services of the Company's investment department, leading to a 27.5% increase
over 1993 in investment service fee income. Higher interest rates in 1994,
however, also had the effect of reducing the volume of activity in, and the
income from, the Company's secondary mortgage loan operations as compared to
1993. Secondary market income, which is included with other fees and charges in
the accompanying table of non-interest income, decreased 43.7% or approximately
$300 thousand. The Company expanded its ATM facilities in 1994 and fees
generated from ATM operations, which are also included with other fees and
charges, increased 180% or approximately $450 thousand over 1993.
In 1994, the Company sold certain held-to-maturity securities shortly
before they were scheduled to mature and recognized a small gain of $46
thousand. There were no sales from the investment securities portfolios in 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.
Non-interest operating expenses, adjusted to exclude provisions for or
recoveries of losses on OREO and other problem assets, were $105.3 million in
1994, an increase of $7.1 million or 7.2%, over 1993's total of $98.2 million.
Between 1992 and 1993, the increase in adjusted non-interest operating expenses
was $1.4 million or 1.4%.
As is shown in the accompanying table of non-interest expense, salaries
and benefits expense in 1994 increased $5.5 million or 11.3% as compared to
1993. Approximately 25% of this increase can be attributed to the new banking
operations in Baton Rouge acquired in the first quarter of 1994. The
implementation of a 401(k) employee savings plan in the fourth quarter of 1993
contributed another 12% to the overall increase in personnel expense in 1994.
The remainder of the 1994 increase resulted from merit pay increases and various
employee and management incentives as well as from essential staff additions and
changes.
Excluding personnel-related expenses, the Baton Rouge acquisition
increased 1994 non-interest expense by a total of approximately $1.4 million as
compared to 1993, with the increase concentrated primarily in occupancy expense
and the amortization of intangible assets. Enhancements to the Company's data
processing systems and automation capabilities in 1994 as well as the expansion
of the ATM network contributed to an 18.7% increase over 1993 in the expense for
furnishings and equipment. The increase in credit card operating expense for
1994 is consistent with the increase in income from these operations as
discussed above.
The 59.0% increase in 1994's expense for taxes and insurance is almost
entirely a consequence of the improved earnings and equity of the Louisiana Bank
which are used to compute the assessment base for certain state ad valorem
taxes. The continued improvement in asset quality was an important factor in the
25.0% reduction in 1994's expense for legal and other professional services and
the 14.5% reduction in the expense of maintaining and operating OREO properties
prior to sale. During 1994, the Company also recovered approximately $1.1
million previously identified valuation losses on OREO.
Page 18 of 56
<PAGE>
<TABLE>
<CAPTION>
NON-INTEREST INCOME
(in thousands) % %
1994 Change 1993 Change 1992
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Service charges
on deposits $ 16,322 4.5% $ 15,613 5.3% $ 14,827
Trust service
fees 2,775 1.3 2,740 (2.9) 2,821
Credit card
income 4,598 14.5 4,014 (1.5) 4,074
International
services income 1,783 23.5 1,443 95.5 738
Investment
services income 1,113 27.5 873 (2.5) 895
Other fees and
charges 1,990 11.7 1,782 2.5 1,738
Net gain on sales
of OREO 3,260 (9.9) 3,618 175.6 1,313
Other operating
income 466 (48.7) 908 12.2 809
-------------------------------------------------------------
Total other
non-interest
income 32,307 4.2 30,991 13.9 27,215
Gain on sale of
securities 46 - - - 5,429
-------------------------------------------------------------
Total non-interest
income $ 32,353 4.4% $ 30,991 (5.1%) $ 32,644
=============================================================
</TABLE>
<TABLE>
<CAPTION>
NON-INTEREST EXPENSE
(in thousands) % %
1994 Change 1993 Change 1992
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Salaries and
benefits $ 53,725 11.3% $ 48,264 4.3% $ 46,297
Occupancy of bank
premises, net 6,903 6.2 6,502 (0.8) 6,557
Furnishings and
equipment,
including data
processing 7,180 18.7 6,050 (12.4) 6,904
Deposit insurance
and regulatory
fees 5,898 (14.3) 6,885 22.4 5,627
Security and other
outside services 4,142 14.4 3,621 10.2 3,285
Taxes and
insurance, other
than real estate 2,991 59.0 1,881 (14.3) 2,194
Credit card
processing 2,793 15.1 2,427 7.9 2,249
Postage and
communications 2,574 3.5 2,488 5.4 2,360
Legal and other
professional
services 2,549 (25.0) 3,398 (34.1) 5,160
Stationery and
supplies 2,237 5.8 2,115 3.5 2,044
Advertising 1,559 23.1 1,267 (4.1) 1,321
Amortization of
intangible assets 4,161 13.6 3,664 1.6 3,608
OREO maintenance
and operations,
net 958 (14.5) 1,120 (20.4) 1,407
Provision for
(recovery of)
losses on OREO
and other problem
assets, net (1,056) (155.6) 1,900 (88.0) 15,862
Other operating
expenses 7,644 (10.2) 8,511 9.8 7,748
-------------------------------------------------------------
Total non-interest
expense $104,258 4.2% $ 100,093 (11.1%) $ 112,623
=============================================================
</TABLE>
Income Taxes
The Company provided for income taxes at an overall effective rate of
32.4% in 1994, up from the 32.0% rate in 1993. The effective rates in each
period differ from the statutory rate of 35% primarily because of the tax-
exempt income earned on investments in state and municipal obligations.
Page 19 of 56
<PAGE>
ASSET/LIABILITY MANAGEMENT
The asset/liability management process has as its focus the development
and implementation of strategies in the funding and deployment of the Company's
financial resources which are expected to maximize soundness and profitability
over time. Such strategies reflect the goals set by the Company for capital
adequacy and liquidity, and the tolerance for risk established in Company
policies.
Interest Rate Risk/Interest Rate Sensitivity
The Company's and the Banks' financial assets and liabilities are
subject to scheduled and unscheduled repricing opportunities over time. The
potential for generating net interest income, as well as the current market
values of financial assets and liabilities, are related 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 and the
Banks use 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 of dynamic change on
earnings and net asset values.
The interest rate sensitivity table presents the rate sensitivity gap
analysis at December 31, 1994. The interest rates on most of the outstanding
commercial loans vary with changes in the Banks' prime rates or the prime rates
of certain money-center banks. These loans are assigned to the earliest
repricing period in the rate sensitivity analysis. A 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 the twelve-month period from
December 31, 1994, the analysis indicates that the Company is in a slightly
liability-sensitive position on a cumulative basis.
<TABLE>
<CAPTION>
INTEREST RATE SENSITIVITY
December 31, 1994
(dollars in millions)
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 $ 22 $ 43 $ 76 $ 142 $1,113 $1,396
Securities available
for sale 1 3 4 8 121 137
Loans 553 24 43 59 381 1,060
Federal funds sold 18 - - - - 18
---------------------------------------------------
Total earning assets $ 594 $ 70 $ 123 $ 209 $1,615 $2,611
SOURCES OF FUNDS
Demand deposits $ - $ - $ - $ - $ 769 $ 769
Savings deposits - - - - 497 497
Money market account
deposits - - - 237 - 237
NOW account deposits - - 318 - - 318
Eurodollar deposits 7 - - - - 7
Trust deposits 18 - - - - 18
Certificates of deposit 128 132 140 54 111 565
Funds purchased and
repurchase agreements 180 - - - - 180
---------------------------------------------------
Total funding liabilities $ 333 $ 132 $ 458 $ 291 $1,377 $2,591
INTEREST RATE SENSITIVITY
GAP $ 261 $ (62) $ (335) $ (82) $ 238 $ 20
CUMULATIVE INTEREST
RATE SENSITIVITY GAP $ 261 $ 199 $ (136) $ (218) $ 20
CUMULATIVE INTEREST RATE
SENSITIVITY GAP AS A
PERCENT OF TOTAL
EARNING ASSETS 10.0% 7.6% (5.2)% (8.3)% 0.8%
</TABLE>
Page 20 of 56
<PAGE>
Liquidity
The Company and the Banks 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 and
by carefully managing the maturity structure of the investment portfolio. The
funds provided by current operations and forecasts of loan repayments are also
considered in the liquidity management process.
The Banks may enter into short-term borrowing arrangements by
purchasing federal funds and selling securities under repurchase agreements,
both as a source of funding for certain short-term lending facilities and as
part of services to correspondent banks and certain other customers. Neither the
Company nor the Banks have accessed long-term debt markets as part of liquidity
management.
Page 21 of 56
<PAGE>
The following tables present information concerning deposits and
short-term borrowings for the years 1994, 1993 and 1992.
<TABLE>
<CAPTION>
DEPOSITS
-------------------------------------------------------------------------------
(in thousands)
1994 1993 1992
--------------------------------------------
<S> <C> <C> <C>
Average non-interest-bearing
demand deposits in domestic
offices $ 749,549 $ 732,734 $ 696,077
Average NOW account deposits
in domestic offices 330,090 344,249 339,909
Average savings and money
market deposits in domestic
offices 792,546 813,610 761,579
Average time deposits in
domestic offices 565,923 520,721 597,555
Average time deposits in
foreign banking offices 4,100 4,276 4,292
Remaining maturity of time
certificates of deposit of
$100,000 or moreissued by
domestic offices as of
December 31, 1994:
3 months or less $ 151,548
Over 3 through 6 months 41,575
Over 6 through 12 months 18,942
Over 12 months 25,031
---------
Total certificates of
deposit of $100,000 or
more $ 237,096
---------
Remaining maturity of time
certificates of deposit of
less than $100,000 issued by
domestic offices as of
December 31, 1994:
3 months or less $ 107,890
Over 3 through 6 months 98,792
Over 6 through 12 months 35,006
Over 12 months 85,754
---------
Total certificates of
deposit of less than
$100,000 $ 327,442
---------
Total time certificates
of deposit $ 564,538
=========
</TABLE>
<TABLE>
<CAPTION>
FEDERAL FUNDS PURCHASED AND BORROWINGS UNDER REPURCHASE AGREEMENTS
(in thousands)
1994 1993 1992
------------------------------------------------
<S> <C> <C> <C>
Amount outstanding at year
end $ 179,806 $ 215,168 $ 210,488
Weighted average interest
rate at year end 4.27% 2.91% 2.72%
Average outstanding during
the year $ 200,063 $ 226,878 $ 247,948
Weighted average interest
rate for the year 3.41% 2.76% 3.27%
Maximum amount outstanding
at any month end $ 262,970 $ 247,055 $ 268,540
</TABLE>
Average core deposits, defined as all deposits other than time deposits
of $100,000 or more, increased approximately $32 million in 1994 over the prior
year. During both 1994 and 1993, core deposits comprised approximately 90% of
total average deposits.
As of December 31, 1994, $283 million or approximately 20% of the
portfolio of investment securities held to maturity was scheduled to mature
within one year. An additional $137 million of investment securities are
classified as available for sale at year end 1994, although management's
determination of this classification does not derive primarily from liquidity
considerations.
The Louisiana Bank had $582 million in unfunded loan commitments
outstanding at December 31, 1994, an increase of $183 million from the level at
December 31, 1993. Contingent obligations under letters of credit and financial
guarantees of $72 million and available credit card lines of $29 million at year
end 1994 were up approximately $15 million and $3 million, respectively, from
the amounts outstanding at year end 1993. Customer draws under these financial
commitments are not expected to place any unusual strain on the Louisiana Bank's
or the Company's liquidity positions.
Page 22 of 56
<PAGE>
<TABLE>
<CAPTION>
Item 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
W H I T N E Y H O L D I N G C O R P O R A T I O N A N D S U B S I D I A R I E S
C O N S O L I D A T E D B A L A N C E S H E E T
(dollars in thousands) DECEMBER 31,
1994 1993
-------------------------
<S> <C> <C>
ASSETS
Cash and due from financial institutions............................................. $ 196,850 $ 187,447
Investment in securities:
Securities available for sale..................................................... 137,335 182,030
Securities held to maturity (fair value of $1,350,581 in 1994 and $1,483,044
in 1993........................................................................... 1,395,643 1,451,716
Federal funds sold................................................................... 17,600 110,000
Loans................................................................................ 1,060,167 975,728
Less reserve for possible loan losses................................................ 34,425 44,485
-------------------------
Loans, net ..................................................................... 1,025,742 931,243
Bank premises and equipment, net..................................................... 63,209 60,175
Other real estate owned, net......................................................... 6,685 16,126
Accrued income receivable............................................................ 31,580 29,142
Other assets......................................................................... 38,013 34,661
-------------------------
TOTAL ASSETS............................................................... $ 2,912,657 $ 3,002,540
-------------------------
LIABILITIES
Deposits:
Non-interest-bearing demand deposits............................................... $ 768,811 $ 784,410
Interest-bearing deposits.......................................................... 1,642,252 1,720,893
-------------------------
Total deposits............................................................. 2,411,063 2,505,303
Federal funds purchased and securities sold under repurchase agreements.............. 179,806 215,168
Dividends payable.................................................................... 2,488 1,925
Other liabilities.................................................................... 21,621 21,106
-------------------------
TOTAL LIABILITIES.......................................................... $ 2,614,978 $ 2,743,502
-------------------------
SHAREHOLDERS' EQUITY
Common stock, no par value: 40,000,000 shares authorized, 15,242,505 shares issued
and 14,634,701 shares outstanding in 1994, 15,123,535 shares issued and 14,446,957
shares outstanding in 1993, after deduction of treasury stock.................... $ 2,800 $ 2,800
Capital surplus...................................................................... 51,608 47,897
Retained earnings.................................................................... 256,041 212,533
Net unrealized gain (loss) on securities available for sale, net
of tax effect of $2,755 in 1994 and ($1,660) in 1993............................ (5,118) 3,083
-------------------------
Total...................................................................... 305,331 266,313
Treasury stock at cost, 607,804 shares in 1994 and 676,578 shares in 1993,
and unearned restricted stock compensation....................................... 7,652 7,275
-------------------------
TOTAL SHAREHOLDERS' EQUITY................................................. $ 297,679 $ 259,038
-------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY................................................. $ 2,912,657 $ 3,002,540
=========================
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.
</TABLE>
Page 23 of 56
<PAGE>
<TABLE>
<CAPTION>
W H I T N E Y H O L D I N G C O R P O R A T I O N A N D S U B S I D I A R I E S
C O N S O L I D A T E D S T A T E M E N T S O F O P E R A T I O N S
(in thousands, except per-share amounts) YEAR ENDED DECEMBER 31,
1994 1993 1992
----------------------------------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans................................... $ 83,436 $ 74,598 $ 89,843
Interest and dividends on investments-
U.S. Treasury and agency securities.................... 70,812 71,033 62,507
Mortgage-backed securities............................. 10,197 12,635 13,089
Obligations of states and political subdivisions....... 6,457 5,592 5,115
Federal Reserve and corporate securities............... 2,309 2,501 2,099
Interest on federal funds sold............................... 2,550 3,145 4,702
Interest on deposits in other financial institutions......... - 26 400
----------------------------------
TOTAL............................................ $ 175,761 $ 169,530 $ 177,755
----------------------------------
INTEREST EXPENSE
Interest on deposits......................................... $ 45,035 $ 42,756 $ 57,206
Interest on federal funds purchased and securities
sold under repurchase agreement ....................... 6,832 6,260 8,119
----------------------------------
TOTAL............................................ $ 51,867 $ 49,016 $ 65,325
----------------------------------
Net interest income.......................................... $ 123,894 $ 120,514 $ 112,430
Provision for possible loan losses:
Expense of providing loss reserves...................... - - 3,350
Loss reserve reduction.................................. (26,139) (60,000) -
----------------------------------
Net interest income after provision for possible
loan losses............................................ $ 150,033 $ 180,514 $ 109,080
----------------------------------
NON-INTEREST INCOME
Gain on sale of securities................................... $ 46 $ - $ 5,429
Other non-interest income.................................... 32,307 30,991 27,215
----------------------------------
TOTAL............................................ $ 32,353 $ 30,991 $ 32,644
----------------------------------
NON-INTEREST EXPENSE
Salaries and employee benefits............................... $ 53,725 $ 48,264 $ 46,297
Occupancy of bank premises, net.............................. 6,903 6,502 6,557
Other non-interest expenses.................................. 43,630 45,327 59,769
----------------------------------
TOTAL............................................ $ 104,258 $ 100,093 $ 112,623
----------------------------------
Income before income taxes and effect of accounting changes.. $ 78,128 $ 111,412 $ 29,101
Income tax expense........................................... 25,290 35,645 8,899
----------------------------------
Income before effect of accounting changes................... $ 52,838 $ 75,767 $ 20,202
Cumulative effect of accounting changes, net................. - 634 -
----------------------------------
Net income .................................................. $ 52,838 $ 76,401 $ 20,202
==================================
EARNINGS PER SHARE:
Income before cumulative effect of accounting changes.. $ 3.63 $ 5.25 $ 1.41
Cumulative effect of accounting changes, net............ - 0.05 -
----------------------------------
Net income ........................................ $ 3.63 $ 5.30 $ 1.41
==================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
Page 24 of 56
<PAGE>
<TABLE>
<CAPTION>
W H I T N E Y H O L D I N G C O R P O R A T I O N A N D S U B S I D I A R I E S
C O N S O L I D A T E D S T A T E M E N T S O F C H A N G E S I N
S H A R E H O L D E R S ' E Q U I T Y
(in thousands, except share and per-share amounts)
NET
UNREALIZED
GAIN (LOSS) UNEARNED
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> <C> <C>
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 grants, 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 grants, 36,000 shares.... 364 335 (699) -
Common stock issued:
Employee savings plan grants,
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 (loss)
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
---------------------------------------------------------------------------
Net income for 1994....................... 52,838 52,838
Cash dividends declared, $0.64 per share.. (9,330) (9,330)
Restricted stock grants, 50,100 shares.... 891 466 (1,357) -
Director stock grants, 1,200 shares....... 63 63
Common stock issued:
Acquisition of Baton Rouge Bank and
Trust Company, 90,909 shares......... 2,000 2,000
Employee savings plan grants,
16,768 shares........................ 406 406
Dividend reinvestment, 10,093 shares... 269 269
Stock options exercised, 18,674 shares. 82 174 256
Amortization of unearned restricted
stock compensation................... 340 340
Change in net unrealized gain (loss)
on securities available for sale..... ( 8,201) (8,201)
---------------------------------------------------------------------------
Balance at December 31, 1994 $2,800 $51,608 $256,041 ($ 5,118) ($5,662) ($1,990) $297,679
===========================================================================
The accompanying notes are an integral part of these financial statements.
Page 25 of 56
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
W H I T N E Y H O L D I N G C O R P O R A T I O N A N D S U B S I D I A R I E S
C O N S O L I D A T E D S T A T E M E N T S O F C A S H F L O W S
(in thousands) YEAR ENDED DECEMBER 31,
1994 1993 1992
----------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................................................ $ 52,838 $ 76,401 $ 20,202
Adjustments to reconcile net income to cash provided by
operating activities:
Cumulative effects of accounting changes........................... - (634) -
Depreciation....................................................... 6,389 5,971 5,141
Provision for (Reduction of) reserves for possible loan losses..... (26,139) (60,000) 3,350
Provision for (Reduction of) losses on OREO and other problem
assets.......................................................... (1,073) 1,900 15,862
Amortization of intangible assets and unearned restricted stock
compensation.................................................... 4,500 3,833 3,657
Amortization of premiums and discounts on investment securities,
net............................................................. 14,464 13,576 6,815
(Gains) Losses on sales of OREO and other property................. (3,262) (3,612) (1,224)
(Gains) Losses on sales of securities.............................. (46) - (5,429)
Deferred tax expense (benefit)..................................... 6,281 19,803 (1,605)
Increase (Decrease) in accrued income taxes........................ (859) 912 (2,985)
(Increase) Decrease in accrued income receivable and other assets.. (2,660) (1,351) (1,402)
Increase (Decrease) in accrued expenses and other liabilities...... 257 500 (2,297)
--------------------------------------
Net cash provided by operating activities.......................... $ 50,690 $ 57,299 $ 40,085
--------------------------------------
Cash flows from investing activities:
Proceeds from maturities of investment securities held to maturity.... $ 798,551 $ 1,171,763 $ 1,092,363
Proceeds from maturities of investment securities available for sale.. 42,184 - -
Proceeds from sales of investment securities held to maturity......... 25,066 - 150,120
Purchases of investment securities held to maturity................... (771,013) (1,339,591) (1,579,340)
Purchases of investment securities available for sale................. (10,100) - -
Net (increase) decrease in loans...................................... (5,771) 75,322 192,494
Net (increase) decrease in federal funds sold......................... 94,700 18,445 (1,320)
Net (increase) decrease in interest-bearing deposits held in other
financial institutions............................................. - - 10,000
Proceeds from sales of OREO and other property........................ 12,358 27,711 35,308
Capital expenditures.................................................. (6,330) (3,868) (3,431)
Net cash (paid) received in business acquistion....................... 35,659 - -
Other................................................................. (1,312) (1,526) 2,488
--------------------------------------
Net cash provided by (used in) investing activities................... $ 213,992 $ (51,744)$ (101,318)
--------------------------------------
Cash flows from financing activities:
Net increase (decrease) in non-interest-bearing demand deposits....... $ (39,109)$ (28,061)$ 96,648
Net increase (decrease) in interest-bearing deposits other than
certificates of deposit............................................ (179,740) 6,725 213,348
Net increase (decrease) in certificates of deposit.................... 6,818 (14,497) (209,773)
Net increase (decrease) in federal funds purchased and securities sold
under repurchase agreements........................................ (35,412) 4,680 (25,043)
Exercise of stock options............................................. 256 30 271
Sale of common stock under employee savings plan and dividend
reinvestment plan.................................................. 675 76 -
Dividends paid........................................................ (8,767) (5,287) -
--------------------------------------
Net cash provided by (used in) financing activities................... $ (255,279)$ (36,334)$ 75,451
--------------------------------------
Net increase (decrease) in cash and cash equivalents..................... $ 9,403 $ (30,779)$ 14,218
Cash and cash equivalents at the beginning of the period................. 187,447 218,226 204,008
--------------------------------------
Cash and cash equivalents at the end of the period....................... $ 196,850 $ 187,447 $ 218,226
======================================
Interest income received................................................. $ 173,323 $ 167,355 $ 176,353
======================================
Interest expense paid.................................................... $ 50,119 $ 48,873 $ 68,295
======================================
Net federal income taxes paid............................................ $ 19,823 $ 14,920 $ 12,000
======================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
Page 26 of 56
<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 subsidiaries,
Whitney National Bank (the "Louisiana Bank") and, in 1994, Whitney Bank of
Alabama (the "Alabama Bank"). Whitney Bank of Alabama had not commenced
significant operations as of December 31, 1994. 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 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 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. 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 judgment, 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 reported loan principal
under the cost recovery method when the collectibility of the remaining
principal is not reasonably assured; otherwise, these payments are recognized as
interest income.
Page 27 of 56
<PAGE>
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.
In 1995, the Company will adopt SFAS No. 114, as amended by SFAS No.
118, which addresses the accounting by creditors for impairment of certain
loans. The Company's reserve for possible loan losses will include a measure of
impairment related to those loans identified for evaluation under the new
standard. This measurement will be based on a comparison of the recorded
investment in the loan with either the expected cash flows discounted using the
loan's original effective interest rate or, in the case of certain
collateral-dependent loans, the fair value of the underlying collateral.
Adoption of this standard will not have a material impact on the Company's
financial position or results of operations.
FORECLOSED ASSETS
Collateral acquired through foreclosure or in settlement of loans is
classified as either other real estate owned ("OREO") or other assets and is
carried at its fair value, net of estimated costs to sell, or the remaining
investment in the loan, whichever is lower. At acquisition, any excess of the
recorded loan value over the estimated fair value of the collateral is charged
against the 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>
1994 1993
-------------------------
<S> <C> <C>
Land $ 16,974 $ 15,580
Buildings and improvements 33,607 32,200
Furnishings and equipment 12,628 12,395
-------------------------
$ 63,209 $ 60,175
=========================
</TABLE>
Accumulated depreciation was $63,528,000 in 1994 and $57,408,000 in
1993. 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 from 3 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 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 statements of operations.
Prior to 1993, 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.
Page 28 of 56
<PAGE>
EARNINGS PER SHARE
Earnings 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 and directors. Incorporating these common stock equivalents into the
calculation of earnings per share using the treasury method does not materially
affect the reported results whether on a primary or fully-diluted basis.
All share and per-share data in this annual report 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
-----------------------------------------------------------
(dollars in
thousands) WEIGHTED GROSS GROSS ESTIMATED
December 31, AVERAGE AMORTIZED UNREALIZED UNREALIZED FAIR
1994 MATURITY COST GAIN LOSS VALUE
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Mortgage-backed
securities 45.0 mos. $ 145,208 $ - $ 7,873 $ 137,335
-----------------------------------------------------------
TOTAL 45.0 mos. $ 145,208 $ - $ 7,873 $ 137,335
===========================================================
December 31,
1993
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>
<TABLE>
<CAPTION>
Securities Held to Maturity
-----------------------------------------------------------
WEIGHTED GROSS GROSS ESTIMATED
December 31, AVERAGE AMORTIZED UNREALIZED UNREALIZED FAIR
1994 MATURITY COST GAIN LOSS VALUE
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. Treasury
securities 25.4 mos. $ 994,230 $ 4 $ 38,323 $ 955,911
Securities of
U.S. government
agencies 20.1 mos. 246,027 - 6,429 239,598
State and
municipal
securities 65.5 mos. 126,537 1,762 3,517 124,782
Corporate
bonds 7.3 mos. 25,160 - 301 24,859
Equity
securities - 3,689 1,742 - 5,431
-----------------------------------------------------------
TOTAL 29.4 mos. $1,395,643 $ 3,508 $ 48,570 $1,350,581
===========================================================
December 31,
1993
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
===========================================================
</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.
Page 29 of 56
<PAGE>
At December 31, 1994 and 1993, U.S. Treasury and agency securities with
a carrying value of $508,725,000 and $477,904,000, respectively, were pledged to
secure public and trust deposits or were sold under repurchase agreements.
During 1994, the Company sold certain securities classified as held to
maturity and recognized a gain of $46,000. The proceeds from these sales
totalled $25,066,000. All of these sales occurred shortly before the securities
were to mature. 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 $5,400,000 gain as a result of this
transaction.
The amortized cost and estimated fair value of debt securities held to
maturity at December 31, 1994 are shown below by contractual maturity. 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, 1994 COST VALUE
------------------------------------
<S> <C> <C>
1 year or less $ 283,151 $ 280,762
1 - 5 years 1,039,872 996,965
5 - 10 years 58,532 57,016
Over 10 years 10,399 10,407
------------------------------------
$ 1,391,954 $ 1,345,150
====================================
</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>
1994 1993
-------------------------------
<S> <C> <C>
Commercial, financial and
agricultural loans $ 575,794 $ 569,812
Real estate loans - commercial and other 292,018 260,307
Real estate loans - retail mortgage 98,079 71,363
Loans to individuals 94,276 74,246
-------------------------------
$ 1,060,167 $ 975,728
===============================
</TABLE>
The Company's lending activity, both commercial and retail, is
conducted primarily among customers in Louisiana, Mississippi and southern
Alabama. In its market areas, 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, 1994, outstanding loans to this
industry totalled $86,141,000, and unused loan commitments and letters of credit
and guarantees were $59,395,000 and $14,641,000, respectively. The operations of
this industry have stabilized 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
otherwise employed in the operations of the customer. Unfunded commitments for
loans secured by commercial or other real estate were otherwise $6,204,000 at
December 31, 1994. Real estate values had declined steeply during the period of
economic contraction in the Company's market area, but have in recent periods
stabilized and registered increases. 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.
Page 30 of 56
<PAGE>
Loans on which the accrual of interest had been discontinued totalled
$15,396,000 and $33,631,000 at December 31, 1994 and 1993, respectively. With
respect to certain nonaccrual loans, interest income is recognized as cash
interest payments are received. Interest payments on nonaccrual loans that had
been accounted for under the cost recovery method may also subsequently be
recognized as interest income as loan collections exceed previous expectations
or as workout efforts result in fully rehabilitated credits. The following
compares contractual interest income on nonaccrual loans with the interest
income reported with respect to such loans (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
--------------------------------------------
<S> <C> <C> <C>
Contractual interest $ 2,611 $ 5,288 $ 9,932
Interest recognized 4,191 3,830 3,676
--------------------------------------------
Impact on reported interest income,
increase (decrease) $ 1,580 $ (1,458) $ (6,256)
============================================
</TABLE>
During 1994, the Company recorded an adjustment to recognize $2,612,000
of previously collected but unrecognized interest on loans that had at times in
prior years been accounted for under the cost recovery method. Through
management's continuing review of the Louisiana Bank's loan portfolios to ensure
compliance with internal policies, it was determined that the cost recovery
method had not been warranted for these loans. No portion of the total
adjustment related to a particular prior period was material.
The Louisiana 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 $31,591,000 and
$31,341,000 at December 31, 1994 and 1993, respectively. During 1994,
$147,353,000 of new loan advances were made, and repayments totalled
$147,603,000. Outstanding commitments and letters of credit to related parties
totaled $37,734,000 and $39,517,000 at December 31, 1994 and 1993, 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.
Changes in the reserve for possible loan losses for the three years in
the period ended December 31, 1994 were as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
-----------------------------------
<S> <C> <C> <C>
Balance at beginning of year $ 44,485 $ 98,558 $107,246
Addition to (reduction of) reserve (26,139) (60,000) 3,350
Recoveries 19,653 12,359 9,351
Loans charged off (3,574) (6,432) (21,389)
-----------------------------------
Balance at end of year $ 34,425 $ 44,485 $ 98,558
===================================
</TABLE>
During 1994, the Company recovered approximately $6,139,000 on a loan
previously charged off and, with the continued improvement in credit quality in
recent years, was able to transfer this recovery to income. Total reductions in
the reserve for possible loan losses, including the transfer of this large
recovery, were $26,139,000 in 1994 and $60,000,000 in 1993, reflecting the
improvement in overall asset quality and management's determination that efforts
to deal with asset quality issues have yielded lasting positive results. In
management's judgement, some of the reserve levels established previously in
recognition of these asset quality issues were no longer needed.
Page 31 of 56
<PAGE>
(4) INCOME TAXES
Income tax expense (benefit) consisted of the following components for
the three years in the period ended December 31, 1994 (in thousands):
<TABLE>
<CAPTION>
Included in income before
cumulative effect of 1994 1993 1992
accounting changes: -------------------------------------
<S> <C> <C> <C>
Current tax expense $ 19,009 $ 15,842 $ 10,504
Deferred tax expense
(benefit) 6,281 19,803 (1,605)
-------------------------------------
$ 25,290 $ 35,645 $ 8,899
=====================================
Included in cumulative effects
of accounting changes:
Deferred tax benefit related
to adoption of
SFAS No. 106 (Note 5) $ - $ (2,023) $ -
=====================================
Included in shareholders'
equity:
Deferred tax expense
(benefit)related to the
change in the net
unrealized gain (loss)
on securities available
for sale (Note 2) $ (4,415) $ 1,660 $ -
=====================================
</TABLE>
Effective January 1, 1993, the Company adopted SFAS No. 109,
"Accounting for Income Taxes." Under this 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 to be recognized in the financial statements.
With the adoption of SFAS No. 109, the Company recognized an additional net
deferred asset of $4,574,000, which is reported in the consolidated statement of
operations for 1993 as a cumulative effect of an accounting change (Note 6).
Net deferred income tax assets, which are included in other assets on
the consolidated balance sheets, were approximately $17,181,000 and $19,046,000
at December 31, 1994 and 1993, respectively. The components of the net deferred
tax assets were as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Deferred tax assets:
Reserves for losses on loans,
OREO, and other problem assets $ 14,129 $ 18,646
Unrecognized interest income 2,088 4,688
Employee benefit plan liabilities 2,952 2,659
Net unrealized loss on securities
available for sale 2,755 -
Other 284 725
------- --------
Total deferred tax assets $ 22,208 $ 26,718
======== ========
Deferred tax liabilities:
Accumulated depreciation and
amortization $ (4,645) $ (5,887)
Net unrealized gain on securities
available for sale - (1,660)
Other (382) (125)
---------- ---------
Total deferred tax
liabilities $ (5,027) $ (7,672)
========== =========
Net deferred tax asset $ 17,181 $ 19,046
========== =========
</TABLE>
Page 32 of 56
<PAGE>
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, 1994. 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, 1994.
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 sources of timing differences and the tax effects for the year
ended December 31, 1992 is summarized as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Interest income recognition $ (1,791)
Accelerated depreciation and
amortization (659)
Provisions for losses on loans,
OREO, and other problem assets 655
Employee benefit plan expense (202)
Unrecognized tax benefit 675
Other (283)
------------------
Deferred tax benefit $ (1,605)
==================
</TABLE>
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, 1994 because of
the following:
<TABLE>
<CAPTION>
PERCENT OF INCOME BEFORE INCOME TAX
1994 1993 1992
----------------------------------------
<S> <C> <C> <C>
Tax at statutory rate 35.0% 35.0% 34.0%
Adjustments in rate resulting from -
Tax exempt income (3.0) (1.9) (5.9)
Unrecognized tax benefit - - 2.4
Impact of change in enacted tax rate - (1.0) -
Miscellaneous items 0.4 (0.1) 0.1
----------------------------------------
Effective tax rate 32.4% 32.0% 30.6%
========================================
</TABLE>
Page 33 of 56
<PAGE>
(5) EMPLOYEE BENEFIT PLANS
Retirement Plans
The Company has a noncontributory qualified defined benefit pension
plan covering substantially all of its employees. The benefits are based on an
employee's total years of service and his or her highest five-year level of
compensation during the final ten years of employment. Contributions are made in
amounts sufficient to meet funding requirements set forth in federal employee
benefit and tax laws plus such additional amounts as the Company may determine
to be appropriate from time to time.
The actuarial present value of vested and of total accumulated benefit
obligations (both excluding projected future increases in compensation levels)
were $32,361,000 and $35,306,000, respectively, as of December 31, 1994, and
$34,012,000 and $37,375,000, respectively, as of December 31, 1993.
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,
1994 1993
--------------------------
<S> <C> <C>
Actuarial present value of projected benefit
obligation for services rendered to date $(44,434) $(50,087)
Plan assets at fair value, primarily U.S. Treasury
securities and listed stocks 56,532 60,703
--------------------------
Plan assets in excess of projected benefit
obligations $ 12,098 $ 10,616
Unrecognized net actuarial gains (5,061) (3,691)
Unrecognized net implementation asset (3,524) (3,929)
Unrecognized prior service cost resulting
from plan amendments (3,058) (2,766)
--------------------------
Prepaid pension cost $ 455 $ 230
==========================
</TABLE>
Page 34 of 56
<PAGE>
The net pension expense (benefit) recognized for 1994, 1993, and 1992
is comprised of the following components (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
-------------------------------
<S> <C> <C> <C>
Service costs for benefits
during the period $ 1,900 $ 1,688 $ 1,498
Interest cost on projected
benefit obligation 3,428 3,437 3,400
Actual (return) loss on plan assets 1,430 (5,739) (5,318)
Net amortization and deferral (6,983) 629 632
-------------------------------
Net pension expense (benefit) $ (225) $ 15 $ 212
===============================
</TABLE>
The weighted average discount rate used in determining the actuarial
present value of the projected benefit obligation was 8.25% in 1994, 7.5% in
1993 and 8.0% in 1992. 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%. The decrease in the benefit obligations
between year end 1993 and 1994 reflects both actuarial gains related mainly to
the composition of the employee base and the impact of the increase in the
discount rate used to determine actuarial values.
For certain participants in the qualified defined benefit plan whose
calculated benefits are reduced as a result of limitations under federal tax
laws, the Company sponsored an unfunded non-qualified plan that provides
benefits equal to those reductions. The non-qualified plan has been terminated,
effective as of January 1, 1993, with accrued benefits preserved for
participants. The Company intends to replace the non-qualified plan with another
form of supplemental executive retirement plan.
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 3.0% of his or her compensation. Annual participant savings are limited by
tax law. Participants are fully vested in their savings and in the matching
Company contributions at all times. The expense of the Company's matching
contributions was approximately $922,000 in 1994 and $245,000 in 1993. There had
been no Company contributions to the noncontributory thrift plan in 1993 or
1992.
Health and Welfare Plans
The Company also maintains certain health care and life insurance
benefit plans for retirees and their eligible dependents. Participant
contributions are required under the health plan, and the Company has
established annual and lifetime maximum health care benefit limits. 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 was reported,
net of income tax effects of $2,023,000, as the cumulative effect of a
accounting change in 1993 in the consolidated statements of operations (Note 6).
At December 31, 1994, the net postretirement benefit liability reported
with other liabilities in the consolidated balance sheets was approximately
$6,702,000. The net periodic postretirement benefit expense recognized under
SFAS No. 106 for 1994 and 1993 was $300,000 and $450,000, respectively. The
benefit expense includes components for the portion of the expected benefit
obligation attributed to current service, for interest on the accumulated
benefit obligation, and for amortization of unrecognized actuarial gains or
losses. 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, 1994 and 1993, the Company assumed annual health care cost
increases beginning at 12% and decreasing 0.6% per year to a 5.5% rate. Discount
rates of 8.25% in 1994 and 7.5% in 1993 were used in determining the present
value of projected benefits. A 1.0% rise in the assumed health care cost trend
rates would not materially impact the accumulated benefit obligation or the
periodic net benefit expense.
Page 35 of 56
<PAGE>
The FASB has issued SFAS No. 112, "Employers' Accounting for
Postemployment Benefits," which was 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, application of this accounting standard does
not have a significant impact on the Company's financial position or results of
operations.
Incentive and Other Plans
The Company has a long-term incentive program for which all employees
are eligible. As of December 31, 1994, 384,125 shares of treasury stock are
reserved for the purposes of this program, which include the granting of stock
options, restricted stock, and performance and phantom stock. The Company
granted 50,100 shares of restricted stock to certain employees during 1994 for
no cash consideration. During 1993 and 1992, restricted stock grants totalled
36,000 and 37,125 shares, respectively. Employees receiving the grants are
restricted from transferring or otherwise disposing of the stock for five years
from the date of grant. The market values of the restricted shares, determined
as of the grant dates, were $1,357,000, $699,000 and $491,000, respectively, for
1994, 1993 and 1992. These amounts are being amortized as compensation expense
over the five year restriction periods. Compensation expense recognized during
1994, 1993 and 1992 related to these stock grants was $340,000, $168,000 and
$49,000, respectively.
The following table summarizes stock option activity under the
long-term incentive program for employees for the three years ended December 31,
1994. The incentive and non-qualified options are fully exercisable six months
after the date of grant.
<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
Options granted 48,926 $ 28.00 $28.00 23,574 $ 28.00 $28.00
Options exercised (17,174) $ 13.22 $22.84 - - -
Options exercised (1,500) $ 19.42 $22.00 - - -
------------------------------- -----------------------------
Balance,
December 31, 1994 122,097 $13.22-28.00 $21.75 60,752 $13.22-28.00 $21.75
=============================== =============================
</TABLE>
On February 28, 1990, an executive officer was granted options to
purchase 33,750 shares of common stock of the Company at a price of $18.11 per
share through February 28, 2000. At December 31, 1994, none of these 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.
During 1994, the Company adopted a revised Directors' Compensation Plan
which provides for, among other matters, the annual award of 150 shares of
common stock and the annual grant of nonqualified options to purchase 1,000
shares of common stock to each director who is not an employee of the Company or
its subsidiaries. As of December 31, 1994, options to purchase 12,000 shares of
common stock at an exercise price of $26.25, the market price or the grant date,
were outstanding. No options were exercised in 1994. An expense of $47,000 was
recognized in 1994 in connection with the award of stock under this plan.
Page 36 of 56
<PAGE>
(6) NET CUMULATIVE EFFECT OF ACCOUNTING CHANGES
The net cumulative effect of accounting changes reported in the
consolidated statement of operations for 1993 consisted of the following (in
thousands):
<TABLE>
<CAPTION>
<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 OREO 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 in the period
ended December 31, 1994 was as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
-------------------------------------
<S> <C> <C> <C>
Balance at January 1 $ 3,790 $ 2,272 $ -
Provisions for valuation
adjustments charged (credited)
to expense (1,073) 2,956 3,777
Charge-offs (1,774) (1,438) (1,505)
-------------------------------------
Balance at December 31 $ 943 $ 3,790 $ 2,272
=====================================
</TABLE>
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. Revenues derived from these
interests and related expenses have not been significant over the three-year
period ended December 31, 1994.
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.
Page 37 of 56
<PAGE>
(8) NON-INTEREST INCOME
The components of non-interest income were as follows for the three
years in the period ended December 31, 1994 (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
--------------------------------
<S> <C> <C> <C>
Service charges on deposits $ 16,322 $ 15,613 $ 14,827
Trust service fees 2,775 2,740 2,821
Credit card income 4,598 4,014 4,074
International services income 1,783 1,443 738
Investment services income 1,113 873 895
Other fees and charges 1,990 1,782 1,738
Net gains on sales of OREO 3,260 3,618 1,313
Other operating income 466 908 809
--------------------------------
Total other non-interest income 32,307 30,991 27,215
Gain on sale of securities 46 - 5,429
--------------------------------
Total non-interest income $ 32,353 $ 30,991 $ 32,644
================================
</TABLE>
(9) NON-INTEREST EXPENSE
The components of non-interest expense were as follows for the three
years in the period ended December 31, 1994 (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
--------------------------------
<S> <C> <C> <C>
Salaries and benefits $ 53,725 $ 48,264 $ 46,297
Occupancy of bank premises,net 6,903 6,502 6,557
Furnishings and equipment,including
data processing 7,180 6,050 6,904
Deposit insurance and regulatory fees 5,898 6,885 5,627
Security and other outside services 4,142 3,621 3,285
Taxes and insurance, other than real
estate 2,991 1,881 2,194
Credit card processing 2,793 2,427 2,249
Postage and communications 2,574 2,488 2,360
Legal and other professional services 2,549 3,398 5,160
Stationery and supplies 2,237 2,115 2,044
Advertising 1,559 1,267 1,321
Amortization of intangible assets 4,161 3,664 3,608
OREO maintenance and operations, net 958 1,120 1,407
Provision for (recovery of) losses on
OREO and other problem assets (1,056) 1,900 15,862
Other operating expense 7,644 8,511 7,748
--------------------------------
Total non-interest expense $104,258 $100,093 $112,623
================================
</TABLE>
Page 38 of 56
<PAGE>
(10) OTHER ASSETS AND LIABILITIES
The significant components of other assets and other liabilities at
December 31, 1994 and 1993, were as follows (in thousands):
<TABLE>
<CAPTION>
Other Assets
--------------------------------------------------
1994 1993
--------------------------------------------------
<S> <C> <C>
Net deferred tax asset $ 17,181 $ 19,046
Costs in excess of net
tangible assets acquired 14,034 8,258
Other 6,798 7,357
--------------------------------------------------
Total other assets $ 38,013 $ 34,661
==================================================
</TABLE>
Costs in excess of the net tangible assets acquired in current and
prior years' business combinations are being amortized over remaining lives
ranging from one to fourteen years as of December 31, 1994.
<TABLE>
<CAPTION>
Other Liailities
--------------------------------------------------
1994 1993
--------------------------------------------------
<S> <C> <C>
Accrued interest payable $ 4,467 $ 2,718
Obligation for postretirement
benefits other than pensions 6,702 6,306
Accrued taxes and expenses 8,012 8,402
Other 2,440 3,680
--------------------------------------------------
Total other liabilities $ 21,621 $ 21,106
==================================================
</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 judgement.
Accordingly, estimates presented herein are not necessarily indicative of the
amounts the Company could realize in a current settlement of the underlying
financial instruments. SFAS No. 107 excludes certain financial instruments and
all nonfinancial instruments from its disclosure requirements. These disclosures
should not be interpreted as representing an aggregate measure of the underlying
value of the Company.
The Company does not maintain any investment or participation in
financial instruments or agreements whose value is linked to, or derived from,
changes in the value of some underlying asset or index. Such instruments or
agreements include futures, forward contracts, option contracts, interest-rate
swap agreements, and other financial arrangements with similar characteristics,
and are commonly referred to as derivatives.
Page 39 of 56
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1993
(in thousands)
------------------------------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Cash and due from financial
institutions $ 196,850 $ 196,850 $ 187,447 $ 187,447
Federal funds sold 17,600 17,600 110,000 110,000
Investment in securities 1,532,978 1,487,916 1,633,746 1,665,074
Loans, net 1,025,742 1,037,462 931,243 935,641
Interest receivable and
other assets 32,054 32,054 31,338 31,338
LIABILITIES:
Deposits $2,411,063 $2,409,259 $2,505,303 $2,505,784
Federal funds purchased and
other short-term borrowings 179,806 179,806 215,168 215,168
Interest payable and
other liabilities 10,107 10,107 7,752 7,752
</TABLE>
The following significant methods and assumptions were used by the
Company in estimating the fair value of financial instruments.
Cash and short-term investments
The carrying value of highly liquid instruments, such as cash on hand,
interest- and non-interest-bearing deposits in financial institutions, and
federal funds sold, provides a reasonable estimate of their fair value.
Investment securities
Substantially all of the Company's investment securities are traded in
active markets. Fair value estimates for these securities are based on quoted
market prices obtained from independent pricing services. The carrying amount of
accrued interest on securities approximates its fair value.
Loans, net
For loans with rates that are repriced in coordination with movements
in market rates and with no significant change in credit risk, fair value
estimates are based on carrying values. The fair values for other loans are
estimated through discounted cash flow analysis, using current rates at which
loans with similar terms would be made to borrowers of similar credit quality.
Appropriate adjustments are made to reflect probable credit losses. The carrying
amount of accrued interest on loans approximates it fair value.
Deposits
SFAS No. 107 specifies that the fair value of deposit liabilities with
no defined maturity is to be disclosed as the amount payable on demand at the
reporting date, i.e., at their carrying or book value. These deposits, which
include interest and non-interest checking, passbook savings, and money market
accounts, represented approximately 77% of total deposits at December 31, 1994
and 1993. The fair value of fixed maturity deposits is estimated using a
discounted cash flow calculation that applies rates currently offered for time
deposits of similar remaining maturities. The carrying amount of accrued
interest payable on deposits approximates its fair value.
The economic value attributable to the relationship with depositors who
provide low-cost funds to the Company is viewed as a separate intangible asset
and is excluded in SFAS No. 107 from the definition of a financial instrument.
Short-term borrowings
The carrying amounts of federal funds purchased, borrowings under
repurchase agreements, and other short-term borrowings, approximate their fair
values.
Page 40 of 56
<PAGE>
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, 1994 and 1993.
(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.
<TABLE>
<CAPTION>
CONTRACTUAL AMOUNT
December 31,
1994 1993
--------------------------------
(in thousands)
<S> <C> <C>
Financial instruments whose contract
amounts represent credit risk:
Commitments to extend credit $ 582,385 $ 398,587
Letters of credit and
financial guarantees written 72,488 57,684
Credit card lines 28,716 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 payment
of a fee. Since many of the commitments are expected to expire without being
drawn upon, the total commitment amount outstanding does not necessarily
represent total future cash outlay requirements.
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 $10,051,000 at December 31, 1994 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, 1994 range from
unsecured to fully secured.
Page 41 of 56
<PAGE>
(13) REGULATORY MATTERS
The Banks are required to maintain non-interest-bearing reserve
balances with the Federal Reserve Bank to fulfill their reserve requirements.
The average reserve balances maintained were approximately $42,731,000 in 1994
and $63,243,000 in 1993.
Minimum regulatory capital requirements have been established with
respect to banks and bank holding companies, expressed in terms of regulatory
capital ratios. At December 31, 1994, the Company's and the Banks' ratios
satisfied all of the minimum capital requirements.
(14) MERGERS AND ACQUISITIONS
On March 31, 1994, the Company and the Louisiana Bank purchased
substantially all of the assets and assumed the deposit and certain other
liabilities of Baton Rouge Bank and Trust Company. Included in the tangible
assets acquired, whose fair value totalled approximately $118,000,000, were cash
and cash items of $41,000,000, investment securities and federal funds sold of
$13,000,000, and $59,000,000 in commercial, real estate mortgage and personal
loans, as well as six banking offices in the Baton Rouge area. The deposits
assumed included approximately $24,000,000 in non-interest-bearing demand
deposits and $94,000,000 in interest-bearing transaction, savings and time
deposit accounts. The operating results from this acquisition are reflected in
the consolidated income statements beginning April 1, 1994.
As part of the acquisition price, which totalled approximately
$9,000,000, Whitney Holding Corporation issued 90,909 shares of its common stock
with a value of $2,000,000.
On February 17, 1995, the Company, through its newly formed
state-chartered banking subsidiary, Whitney Bank of Alabama, purchased the
assets and assumed the deposit liabilities of the five Mobile branch offices of
The Peoples Bank, Elba, Alabama. The assets acquired and deposits assumed
totalled approximately $90,000,000, including $47,000,000 in loans. The purchase
price was approximately $12,000,000.
(15) COMMITMENTS AND CONTINGENCIES
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-cancelable 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 1994. Current
projections do not indicate that a contribution will be required for 1995.
Page 42 of 56
<PAGE>
(16) PARENT COMPANY FINANCIAL STATEMENTS
Summarized parent-company-only financial statements of Whitney Holding
Corporation follow (in thousands):
<TABLE>
<CAPTION>
December 31,
1994 1993
----------------------
<S> <C> <C>
BALANCE SHEETS
Investment in and advances
to the Banks $ 295,739 $ 258,066
Dividends receivable 2,488 1,925
Other assets 2,143 972
----------------------
Total assets $ 300,370 $ 260,963
======================
Dividends payable and
other liabilities $ 2,691 $ 1,925
Shareholders' equity, net of
treasury shares, and
unearned restricted stock
compensation 297,679 259,038
----------------------
Total liabilities and
shareholders' equity $ 300,370 $ 260,963
======================
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
STATEMENTS OF OPERATIONS 1994 1993 1992
-----------------------------------
<S> <C> <C> <C>
Dividend income from the Banks $ 31,430 $ 6,252 $ 1,000
Equity in undistributed earnings
of the Banks 21,427 70,155 19,135
Other income (expense), net (19) (6) 67
-----------------------------------
Net income $ 52,838 $ 76,401 $ 20,202
===================================
STATEMENTS OF CASH FLOWS
Cash flows from operating
activities:
Net income $ 52,838 $ 76,401 $ 20,202
Adjustment to reconcile net
income to net cash provided
by operating activities:
Equity in undistributed
earnings of the Banks (21,427) (70,155) (19,135)
(Increase) Decrease in dividend
receivable (563) (925) (1,000)
(Increase) Decrease in other
assets (119) 2 5
Increase (Decrease) in other
liabilities 207 - -
------------------------------------
Net cash provided by
operating activities $ 30,936 $ 5,323 $ 72
------------------------------------
Cash flows from investing
activities:
Investment and advances to
Whitney Bank of Alabama $ (22,162) $ - $ -
(Increase) Decrease in
investment securities (740) (130) (375)
------------------------------------
Net cash provided by
(used in) investing
activities $ (22,902) $ (130) $ (375)
------------------------------------
Cash flows from financing
activities:
Dividends paid $ (8,767) $ (5,287) $ -
Sale of common stock under
employee savings plan and
dividend reinvestment plan 675 76 -
Exercise of stock options 256 30 271
------------------------------------
Net cash provided by
(used in) financing
activities $ (7,836) $ (5,181) $ 271
------------------------------------
Net increase (decrease) in cash $ 198 $ 12 $ (32)
Cash at the beginning of the year 36 24 56
------------------------------------
Cash at the end of the year $ 234 $ 36 $ 24
====================================
</TABLE>
Page 43 of 56
<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 annual report. The financial statements are prepared in
accordance with generally accepted accounting principles and include amounts
based on management's estimates and judgement where appropriate. Financial
information appearing throughout this annual report is consistent with the
financial statements.
The Company's financial statements have been audited by Arthur Andersen
LLP, independent public accountants. Management has made available to Arthur
Andersen LLP all of the Company's financial records and related data, as well as
the minutes of shareholders' and directors' meetings. Furthermore, management
believes that all representations made to Arthur Andersen LLP during its audit
were valid and appropriate.
Management of the Company has established and maintains a system of
internal control that provides reasonable assurance as to the integrity and
reliability of the financial statements, the protection of assets from
unauthorized use or disposition, and the prevention and detection of fraudulent
financial reporting. The system of internal control provides for appropriate
division of responsibility and is documented by written policies and procedures
that are communicated to employees with significant roles in the financial
reporting process and updated as necessary. Management continually monitors the
system of internal control for compliance. The Company maintains a strong
internal control auditing program that independently assesses the effectiveness
of the internal controls and recommends possible improvements thereto. As part
of their audit of the Company's 1994 financial statements, Arthur Andersen LLP
considered the Company's system of internal control to the extent they deemed
necessary to determine the nature, timing and extent of their audit tests.
Management has considered the recommendations of the internal auditors and
Arthur Andersen LLP concerning the Company's system of internal control and has
taken actions that it believes are cost-effective in the circumstances to
respond appropriately to these recommendations. Management believes that, as of
December 31, 1994, 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, 1994 and 1993, and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1994. 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, 1994 and 1993, and the
results of its operations and cash flows for each of the three years in the
period ended December 31, 1994, 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 post retirement 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.
New Orleans, Louisiana Arthur Andersen LLP
January 13, 1995 (except with respect to the last paragraph of Note 14 as to
which the date is February 17, 1995)
Page 44 of 56
<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>
1994 - UNAUDITED
(in thousands, except per-share amounts)
------------------------------------------------------
4TH 3RD 2ND 1ST
QUARTER QUARTER QUARTER QUARTER
------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income $ 44,367 $ 46,010 $ 43,842 $ 41,542
Net interest income 30,812 32,872 30,889 29,321
Reduction in reserve for
possible loan losses 10,000 6,139 - 10,000
Income before income tax 20,846 20,005 13,798 23,479
Net income 14,135 13,512 9,474 15,717
Earnings per share for the
three-month period
(based on weighted average
of number of shares
outstanding) $ 0.96 $ 0.93 $ 0.65 $ 1.09
Dividend declared, per
share $ 0.17 $ 0.17 $ 0.15 $ 0.15
Range of closing stock
prices 21-27 25 3/4-28 1/2 21 3/4-27 1/4 21 1/2-24
</TABLE>
<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 income tax
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 period
(based on weighted average
of 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>
Item 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
Page 45 of 56
<PAGE>
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 its Proxy Statement dated March 10,
1995.
Item 11: EXECUTIVE COMPENSATION
In response to this item, registrant incorporates by reference the
section entitled "Executive Compensation" of its Proxy Statement dated March 10,
1995.
Item 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
In response to this item, registrant incorporates by reference the
sections entitled "Voting Securities and Principal Holders Thereof" and
"Election of Directors" of its Proxy Statement dated March 10, 1995.
Item 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In response to this item, registrant incorporates by reference the
section entitled "Certain Transactions" of its Proxy Statement dated March 10,
1995.
Page 46 of 56
<PAGE>
PART IV
Item 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) The following consolidated financial statements of the Company and its
subsidiaries are included in Part II Item 8:
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
Consolidated Balance Sheets --
December 31, 1994 and 1993 23
Consolidated Statements of Operations --
Years Ended December 31, 1994, 1993, and 1992 24
Consolidated Statements of Changes in Shareholders' Equity --
Years Ended December 31, 1994, 1993, and 1992 25
Consolidated Statements of Cash Flows --
Years Ended December 31, 1994, 1993, and 1992 26
Notes to Financial Statements 27
Report of Independent Public Accountants 44
Summary of Quarterly Financial Information 45
</TABLE>
(a) (2) All schedules have been omitted because they are either not applicable
or the required information has been included in the financial statements or
notes to the financial statements.
(a) (3) Exhibits:
Exhibit 3.1 - Copy of Composite Charter, incorporated by reference to
the Company's March 31, 1993 Form 10-Q
Exhibit 3.2 - Copy of Bylaws, as amended, 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 47 of 56
<PAGE>
Exhibit 10.7 - Executive agreement between Whitney Holding Corporation,
Whitney National Bank and Joseph W. May, effective December 13, 1993,
incorporated by reference to the Company's 1993 Form 10-K
Exhibit 10.8 - Executive agreement between Whitney Holding Corporation,
Whitney National Bank and John C. Hope, III, effective October 28, 1994
Exhibit 10.9 - Long-term incentive program, incorporated by reference
to the Company's 1991 Form 10-K
Exhibit 10.10 - Executive compensation plan, incorporated by reference
to the Company's 1991 Form 10-K
Exhibit 10.11 - 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 10.12 - 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 10.13 - 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 and Whitney Bank of Alabama. 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 1994.
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 22, 1995
---------------
Date
Page 48 of 56
<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.
/s/ William L. Marks , Chairman of the Board and
----------------------------------- Chief Executive Officer and
William L. Marks Director March 22, 1995
--------------------------------
/s/ R. King Milling , President and Director March 22, 1995
----------------------------------- -------------------
R. King Milling
/s/ Edward B. Grimball , Executive Vice President & C.F.O.
----------------------------------- (Principal Accounting Officer)
Edward B. Grimball March 22, 1995
-------------------------------
/s/ John G. Phillips , Director March 22, 1995
----------------------------------- -------------------------------
John G. Phillips
/s/ W.P. Snyder III , Director March 22, 1995
----------------------------------- -------------------------------
W.P. Snyder III
/s/ Robert H. Crosby, Jr. , Director March 22, 1995
----------------------------------- -------------------------------
Robert H. Crosby, Jr.
/s/ Richard B. Crowell , Director March 22, 1995
----------------------------------- -------------------------------
Richard B. Crowell
/s/ James M. Cain , Director March 22, 1995
----------------------------------- -------------------------------
James M. Cain
/s/ Harry J. Blumenthal, Jr., Director March 22, 1995
----------------------------------- -------------------------------
Harry J. Blumenthal, Jr.
/s/ Robert E. Howson , Director March 22, 1995
----------------------------------- -------------------------------
Robert E. Howson
/s/ Warren K. Watters , Director March 22, 1995
----------------------------------- -------------------------------
Warren K. Watters
/s/ John K. Roberts, Jr. , Director March 22, 1995
----------------------------------- -------------------------------
John K. Roberts, Jr.
/s/ William A. Hines , Director March 22, 1995
----------------------------------- -------------------------------
William A. Hines
/s/ E. James Kock, Jr. , Director March 22, 1995
----------------------------------- -------------------------------
E. James Kock, Jr.
, Director
----------------------------------- -------------------------------
John J. Kelly
/s/ Angus R. Cooper, III , Director March 22, 1995
----------------------------------- -------------------------------
Angus R. Cooper, III
/s/ Joel B. Bullard, Jr. , Director March 22, 1995
----------------------------------- -------------------------------
Joel B. Bullard, Jr.
Page 49 of 56
<PAGE>
Exhibit 10.8
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 JOHN C. HOPE, III (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 October 28, 1994, 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.
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;
Page 50 of 56
<PAGE>
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.
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.
-2-
Page 51 of 56
<PAGE>
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;
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.
-3-
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<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.
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.
-4-
Page 53 of 56
<PAGE>
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.
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.
-5-
Page 54 of 56
<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/ John C. Hope, III
John C. Hope, III
Date: November 11, 1994 By: /s/ Robert E. Howson
----------------- ----------------------------
Title: Director & Chairman
Compensation Committee of
Board of Directors
Date: January ______, 1994
-6-
Page 55 of 56
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