<PAGE>
November 13, 1998
Securities and Exchange Commission
450 Fifth St., N.W.
Judiciary Plaza
Washington, D.C. 20549-1004
Via Edgar Electronic Filing System
In Re: File Number 0-1026
------------------
Gentlemen:
Pursuant to regulations of the Securities and Exchange Commission,
submitted herewith for filing on behalf of Whitney Holding Corporation (the
"Company") is the Company's Report on Form 10-Q for the period ended September
30, 1998.
This filing is being effected by direct transmission to the
Commission's EDGAR System.
Sincerely,
/s/ William L. Marks
-----------------------------
William L. Marks
Chief Executive Officer and
Chief Financial Officer
(504) 586-7209
WLM/drm
<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
Commission file number 0-1026
WHITNEY HOLDING CORPORATION
(Exact name of registrant as specified in its charter)
Louisiana 72-6017893
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
228 St. Charles Avenue
New Orleans, Louisiana 70130
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (504) 586-7272
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 the number of shares outstanding of the Registrant's classes of common
stock as of the last practicable date.
Class Outstanding as of October 31, 1998
----- ----------------------------------
Common Stock, no par value 23,373,090
An exhibit index appears on page 20.
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WHITNEY HOLDING CORPORATION
TABLE OF CONTENTS
Page
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PART I. Financial Information
Item 1: Financial Statements:
Consolidated Balance Sheets....................................1
Consolidated Statements of Operations..........................2
Consolidated Statements of Cash Flows..........................3
Notes to Consolidated Financial Statements.....................4
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations.........................................7
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PART II. Other Information
Item 1: Legal Proceedings................................................20
Item 2: Changes in Securities............................................20
Item 3: Defaults Upon Senior Securities..................................20
Item 4: Submission of Matters to a Vote of Security Holders..............20
Item 5: Other Information................................................20
Item 6: Exhibits and Reports on Form 8-K.................................20
<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands) September 30 December 31
ASSETS 1998 1997
--------------------------------
<S> <C> <C>
Cash and due from financial institutions.................................................... $237,398 $238,058
Investment in securities:
Securities available for sale ......................................................... 126,644 208,195
Securities held to maturity (fair value of $1,080,760 in 1998 and $1,277,764 in 1997).. 1,056,973 1,262,772
Federal funds sold and short-term investments............................................... 85,327 23,801
Loans....................................................................................... 3,171,422 2,864,664
Less reserve for possible loan losses....................................................... 41,692 44,543
------------- -------------
Loans, net............................................................................... 3,129,730 2,820,121
Bank premises and equipment, net............................................................ 164,234 146,066
Other real estate owned, net................................................................ 2,076 2,995
Accrued income receivable................................................................... 34,585 36,498
Other assets................................................................................ 70,753 48,941
------------- -------------
TOTAL ASSETS...................................................................... $4,907,720 $4,787,447
============= =============
LIABILITIES
Deposits:
Non-interest-bearing demand deposits................................................... $1,086,149 $1,104,784
Interest-bearing deposits.............................................................. 2,902,617 2,831,087
------------- -------------
Total deposits..................................................................... 3,988,766 3,935,871
Federal funds purchased and securities sold under repurchase agreements..................... 322,135 289,686
Dividends payable........................................................................... 7,004 5,987
Other liabilities........................................................................... 35,251 30,767
------------- -------------
TOTAL LIABILITIES................................................................. 4,353,156 4,262,311
------------- -------------
SHAREHOLDERS' EQUITY
Common stock, no par value: 100,000,000 shares authorized,
23,641,672 and 23,460,618 shares issued, respectively.................................... 2,800 2,800
Capital surplus............................................................................. 137,834 127,316
Retained earnings........................................................................... 424,451 403,892
Accumulated other comprehensive income ..................................................... 205 373
Less:
Treasury stock at cost, 295,056 and 346,344 shares, respectively........................... 4,265 3,685
Unearned restricted stock compensation...................................................... 6,461 5,560
------------- -------------
TOTAL SHAREHOLDERS' EQUITY........................................................ 554,564 525,136
------------- -------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY........................................................ $4,907,720 $4,787,447
============= =============
The accompanying notes are an integral part of these financial statements.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per-share amounts) FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
1998 1997 1998 1997
----------------------------- ----------------------------------
INTEREST INCOME
<S> <C> <C> <C> <C>
Interest and fees on loans...................................$ 62,824 $ 58,203 $ 181,508 $ 165,295
Interest and dividends on investments:
U.S. Treasury and agency securities.................... 10,251 16,632 35,754 51,549
Mortgage-backed securities............................. 7,204 5,104 21,277 15,304
Obligations of states and political subdivisions....... 1,844 1,950 5,428 6,005
Federal Reserve stock and other corporate securities... 132 188 440 477
Interest on federal funds sold and short-term investments.... 1,847 566 5,813 2,214
----------------------------- ----------------------------------
TOTAL............................................ 84,102 82,643 250,220 240,844
----------------------------- ----------------------------------
INTEREST EXPENSE
Interest on deposits......................................... 27,201 25,646 80,367 75,217
Interest on federal funds purchased and securities
sold under repurchase agreements....................... 3,963 5,336 11,728 16,269
----------------------------- ----------------------------------
TOTAL............................................ 31,164 30,982 92,095 91,486
----------------------------- ----------------------------------
Net interest income.......................................... 52,938 51,661 158,125 149,358
Provision for possible loan losses.......................... - (2,808) 73 (2,356)
----------------------------- ----------------------------------
Net interest income after provision for possible loan losses. 52,938 54,469 158,052 151,714
----------------------------- ----------------------------------
NON-INTEREST INCOME
Gain (Loss) on sale of securities............................ 833 3 841 (8)
Other non-interest income.................................... 13,767 13,314 44,719 40,188
----------------------------- ----------------------------------
TOTAL............................................ 14,600 13,317 45,560 40,180
----------------------------- ----------------------------------
NON-INTEREST EXPENSE
Salaries and employee benefits............................... 26,097 22,160 72,671 65,053
Occupancy of bank premises, net.............................. 3,894 3,340 10,801 9,948
Other non-interest expenses.................................. 21,675 18,706 58,708 52,558
----------------------------- ----------------------------------
TOTAL............................................ 51,666 44,206 142,180 127,559
----------------------------- ----------------------------------
Income before income taxes................................... 15,872 23,580 61,432 64,335
Income tax expense........................................... 5,216 8,695 20,196 21,892
----------------------------- ----------------------------------
Net income...................................................$ 10,656 $ 14,885 $ 41,236 $ 42,443
============================= ==================================
Earnings per share...........................................$ .46 $ .65 $ 1.77 $ 1.85
Earnings per share, assuming dilution........................$ .45 $ .64 $ 1.76 $ 1.83
Weighted average shares outstanding ........................23,333,486 23,057,380 23,234,282 22,993,816
Weighted average shares, assuming dilution..................23,507,628 23,269,095 23,480,390 23,181,404
The accompanying notes are an integral part of these financial statements.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the Nine Months Ended
September 30
1998 1997
------------------------------
Cash flows from operating activities:
<S> <C> <C>
Net income................................................................. $ 41,236 $ 42,443
Adjustments to reconcile net income to cash provided by (used in)
operating activities:
Depreciation............................................................ 11,577 10,291
Provision for possible loan losses...................................... 73 (2,356)
Provision for losses on OREO and other problem assets................... 77 101
Amortization of intangible assets and unearned restricted stock
compensation......................................................... 4,129 3,299
Amortization of premiums and discounts on investment securities, net.... 633 1,773
Net gains on sales of OREO and other property........................... (2,169) (3,186)
Net (gains) losses on sales of investment securities.................... (841) 8
Deferred tax expense ................................................... 630 1,224
Increase (decrease) in accrued income taxes... (726) 1,613
(Increase) decrease in accrued income receivable and other assets....... 250 (974)
Increase in accrued expenses and other liabilities...................... 2,701 6,622
------------------------------
Net cash provided by operating activities... 57,570 60,858
------------------------------
Cash flows from investing activities:
Proceeds from maturities of investment securities held to maturity......... 441,121 358,337
Proceeds from maturities of investment securities available for sale....... 85,107 89,309
Proceeds from sales of investment securities available for sale............ 858 -
Purchases of investment securities held to maturity........................ (235,879) (239,237)
Purchases of investment securities available for sale...................... (4,516) (22,975)
Net decrease in loans...................................................... (271,780) (227,044)
Net (increase) decrease in federal funds sold and short-term investments... (61,526) 33,093
Proceeds from sales of OREO and other property............................. 5,184 5,213
Capital expenditures....................................................... (25,934) (24,110)
Net cash received in branch acquisition.................................... 84,059 -
Other...................................................................... 1,496 (45)
------------------------------
Net cash provided by (used in) investing activities........................ 18,190 (27,459)
------------------------------
Cash flows from financing activities:
Net (decrease) in non-interest-bearing demand deposits..................... (40,202) (20,316)
Net increase in interest-bearing deposits other than
time deposits........................................................... 14,486 8,256
Net increase (decrease) in time deposits................................... (70,308) 68,263
Net increase (decrease) in federal funds purchased and securities sold
under repurchase agreements............................................. 32,449 (107,297)
Repurchase of common stock for treasury.................................... (536) (497)
Sale of common stock under employee savings plan and dividend
reinvestment plan....................................................... 4,970 2,913
Exercise of stock options, including tax benefit on exercise............... 2,407 669
Options returned to fund employee tax liability on exercise................ (620) -
Tax benefit on lapse of stock restrictions................................. 373 -
Dividends paid, including pooled entities.................................. (19,439) (17,360)
------------------------------
Net cash (used in) financing activities.................................... (76,420) (65,369)
------------------------------
Net increase (decrease) in cash and cash equivalents.......................... (660) (31,970)
Cash and cash equivalents at the beginning of the period...................... 238,058 262,037
------------------------------
Cash and cash equivalents at the end of the period............................ $ 237,398 $ 230,067
==============================
Interest income received...................................................... $ 252,133 $ 238,142
==============================
Interest expense paid......................................................... $ 91,217 $ 91,467
==============================
Net federal income taxes paid................................................. $ 19,755 $ 17,178
==============================
The accompanying notes are an integral part of these financial statements.
</TABLE>
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<PAGE>
WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Whitney Holding Corporation and its subsidiaries (the "Company") follow
accounting and reporting policies generally accepted within the banking
industry. In preparing this quarterly report, all adjustments have been made
which, in the opinion of management, are necessary to fairly state the financial
results for the interim periods presented. Pursuant to rules and regulations of
the Securities and Exchange Commission, certain financial information and
disclosures have been condensed or omitted in preparing the consolidated
financial statements presented in this quarterly report on Form 10-Q. The
Company recommends that these financial statements be read in conjunction with
the Company's annual report on Form 10-K for the year ended December 31, 1997.
CONSOLIDATION
The consolidated financial statements of the Company include the
accounts of Whitney Holding Corporation and its wholly owned subsidiaries,
Whitney National Bank (the "Bank"), The First National Bank of Greenville,
Alabama and Whitney Community Development Corporation. From 1994 through 1997,
the Company operated as a multi-bank holding company. In January 1998, the
Company merged each of its then separately chartered banking operations into the
Bank. The First National Bank of Greenville, Alabama is expected to be merged
into the Bank during the fourth quarter of 1998.
RESTATEMENT AND RECLASSIFICATION
Prior period information has been restated to give effect to the three
mergers completed during 1998 which have been accounted for as poolings of
interests. Certain balances in prior periods have been reclassified to conform
with this period's financial presentation.
USE OF ESTIMATES
To prepare financial statements in conformity with generally accepted
accounting principles, management is required to develop estimates that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the amounts
of revenues and expenses to be reported for the periods presented in the
financial statements. Actual results could differ from those estimates.
EARNINGS PER SHARE
During 1997 the Financial Accounting Standards Board issued a statement
that revised and simplified the standards for the calculation of earnings per
share ("EPS"). Under these standards, which became effective for the period
ended December 31, 1997, the Company reports two measures of EPS. The basic EPS
measure is calculated by dividing income available to common shareholders by the
weighted-average number of common shares outstanding for the applicable period,
without adjustment for potential common shares outstanding in the form of
options, warrants, convertible securities or contingent stock agreements. The
second measure of EPS incorporates the dilutive effect of potential common
shares by increasing the number of common shares outstanding used in the basic
calculation by the number of additional shares that would have been outstanding
if the dilutive potential common shares had been issued, all as determined using
the treasury stock method where appropriate. The new standards have been applied
to the calculation of EPS for all periods presented.
In calculating both measures of EPS, the Company's reported net income
equals income available to common shareholders. The potential common shares that
are factored into the calculation of the weighted-average shares outstanding for
the diluted EPS measurement consist only of unexercised stock options that the
Company has granted to employees and directors.
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<PAGE>
RECENT PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." Among other provisions, this
statement redefines derivative instruments and requires that every derivative
instrument, including certain derivatives embedded in other instruments, be
recorded in the balance sheet as either an asset or liability measured at its
fair value. The change in a derivative's fair value is required to be recognized
currently in earnings unless the instrument qualifies for the special accounting
afforded certain highly effective hedge transactions. Ineffectiveness in
qualifying hedge transactions may also be reflected in current earnings. SFAS
No. 133 is effective for fiscal years beginning after June 15, 1999 with earlier
adoption permitted beginning as early as July 1, 1998. The Company's use of
derivatives has been minimal, and management anticipates no material impact on
its financial position or results of operations from the adoption of this new
statement.
2) COMPREHENSIVE INCOME
SFAS No. 130, "Reporting Comprehensive Income," which is effective for
1998, establishes standards for the reporting and display of comprehensive
income as part of a full set of financial statements. Comprehensive income for a
period encompasses net income and all other changes in a company's equity other
than from transactions with the company's owners. For the three-month and
nine-month periods ended September 30, 1998 and 1997, comprehensive income was
comprised of the following:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1998 1997 1998 1997
----------------------------- -----------------------------
<S> <C> <C> <C> <C>
Net income for the period $ 10,656 $ 14,885 $ 41,236 $ 42,443
Other comprehensive income:
Unrealized holding gain
on securities available for sale,
net of tax 361 685 270 536
Amortization of unrealized holding
loss at transfer of securities from
available for sale to held to maturity,
net of tax 35 37 103 109
Reclassification adjustment, net of tax, for
realized gain on sale of securities available
for sale included in net income (541) - (541) -
Reclassification adjustment, net of tax, for
held to maturity securities amortization
included in net income (35) (37) (103) (109)
----------------------------- -----------------------------
Total comprehensive income for the period $ 10,476 $ 15,570 $ 40,965 $ 42,979
============================= =============================
</TABLE>
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<PAGE>
3) MERGERS AND ACQUISITIONS
On September 11, 1998, the Bank purchased substantially all of the
assets and deposits of eight of the branches of The First National Bank of Lake
Charles, Louisiana. These eight branches, all of which are located in or near
Lake Charles in southwest Louisiana, had approximately $39 million of loans and
$149 million of deposits at the time of purchase. The Bank's acquisition cost
included an amount calculated at 15.25% of the estimated deposits assumed, or
approximately $23 million, which has been allocated to assets purchased, deposit
intangibles and goodwill. The deposit intangibles are being amortized over the
estimated lives of the deposits, approximately eight years, and the goodwill is
being amortized over 25 years. The results of operations of the Lake Charles
branches have been included in the financial statements from the acquisition
date. The pro forma impact of the Lake Charles acquisition would not be material
to the Company's results of operations.
During 1998, the Company and/or Bank have merged with three financial
institutions, which were accounted for as poolings of interests. Those three
institutions were Meritrust Federal Savings Bank ("Meritrust") of Thibodaux,
Louisiana, Louisiana National Security Bank ("LNSB") of Donaldsonville,
Louisiana, and The First National Bancorp of Greenville, Inc. ("Greenville"),
Greenville, Alabama. The Company's financial statements for all periods
presented have been restated to reflect each of these pooled institutions. The
following table shows the merger date, assets acquired and number of Company
common shares issued for each of the pooled institutions:
Assets
Acquired
Institution Date (millions) Shares
- --------------- ---- ---------- ------
Meritrust April 24, 1998 $234 1,046,686
LNSB May 16, 1998 $105 542,475
Greenville August 21, 1998 $115 720,938
4) CONTINGENCIES
The Company and its subsidiaries have been named as defendants in
various legal actions arising from normal business activities in which damages
in various amounts are claimed. The amount, if any, of ultimate liability with
respect to such claims cannot be determined. However, after consulting with
legal counsel, management believes any such liability will not have a material
adverse effect on the Company's consolidated financial condition or results of
operations.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SUMMARY
Whitney Holding Corporation (the "Company") earned $10.7 million for
the third quarter of 1998, or $.46 per common share. For the third quarter of
1997, the Company earned $14.9 million, or $.65 per share. Excluding the effect
of merger-related administrative and conversion expenses of $1 million after tax
in 1998 and $.8 million in 1997, earnings for the third quarter were $11.6
million, or $.50 per share, in 1998 and $15.6 million, or $.68 per share, in
1997. Through September 30, 1998, the Company earned $41.2 million, or $1.77 per
share, compared with $42.4 million, or $1.85 per share, for the same period in
1997. Excluding the effect of merger-related expenses, earnings for the
nine-month periods in 1998 and 1997 were $45.0 million, or $1.93 per share, and
$44.3 million, or $1.93 per share, respectively.
Taxable-equivalent net interest income increased $1.3 million, or 2.5%,
between the third quarters of 1997 and 1998, while the taxable-equivalent net
interest margin decreased to 4.89% from 4.95% between these periods.
Non-interest income improved by $1.3 million, or 9.6%, in the third quarter of
1998 from the same period in 1997, while non-interest expense increased $7.5
million, or 16.9%, between these periods, including a net increase in
merger-related expenses of $.3 million.
For the first nine months of 1998, taxable-equivalent net interest
income increased $8.7 million, or 5.7%, from the comparable prior-year period.
The year to date taxable-equivalent net interest margin also increased from
4.85% in 1997 to 4.95% in 1998. Non-interest income for the nine months ended
September 30, 1998 increased $5.4 million, or 13.4%, over the same period in
1997. Year to date non-interest expense for 1998 increased $14.6 million, or
11.5%, over 1997, including a net increase in merger-related expenses of $2.4
million.
The following compares the Company's annualized return on average total
assets and its return on average shareholders' equity for the three-month and
nine-month periods ended September 30, 1998 and 1997.
1998 1997
-------- --------
Return on average assets:
Third quarter -
Total return .88% 1.28%
Return before merger expenses .96% 1.34%
Year to date -
Total return 1.15% 1.23%
Return before merger expenses 1.26% 1.28%
Return on average shareholders' equity:
Third quarter -
Total return 7.61% 11.62%
Return before merger expenses 8.32% 12.21%
Year to date -
Total return 10.12% 11.40%
Return before merger expenses 11.03% 11.90%
For the third quarter of 1998, average earning assets were $4.39
billion, a net increase of $160 million, or 3.8%, from $4.23 billion in the
third quarter of 1997. For the nine-month period ended September 30, 1998,
average earning assets grew to $4.36 billion from $4.21 billion for the same
period in 1997, a net increase of $154 million, or 3.7%. Average loans
outstanding grew $361 million, or 14%, between the third quarters of 1997 and
1998 and
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<PAGE>
$335 million, or 13%, between the year to date periods. The growth in the loan
portfolio was partly funded by maturities of investment securities, and the
average total investment in securities in 1998 decreased $293 million for the
third quarter and $265 million for the year to date period as compared to 1997.
At September 30, 1998, earning assets totalled $4.44 billion compared to $4.36
billion at December 31, 1997.
Average total deposits increased $224 million, or 6.1%, to $3.89
billion in the third quarter of 1998 compared to $3.66 billion in the third
quarter of 1997. For the year to date period, average deposits grew $230
million, or 6.3%, in 1998 compared to the same period in 1997. Total deposits at
September 30, 1998 were $3.99 billion, an increase of $53 million from the $3.94
billion balance at year-end 1997. Short-term funds obtained through purchases of
federal funds and sales of securities under repurchase agreements, net of funds
used in sales of federal funds and short-term liquidity management investments,
decreased on average by $181 million, or 47%, for the third quarter of 1998 and
$196 million, or 51%, for the year to date period when compared to 1997.
Non-performing assets increased $2.0 million in the first nine months
of 1998 from year-end 1997 to $16.5 million at September 30, 1998. The
quarter-end total was $2.8 million, or 20%, above the level of non-performing
assets at September 30, 1997. The reserve for possible loan losses was $41.7
million on September 30, 1998, an amount which represented 357% of total
nonaccruing loans and 1.31% of total loans. At year-end 1997, the reserve
coverage was 477% of nonaccruing loans and 1.58% of total loans.
On August 26, 1998 the Company declared a third quarter dividend of
$.30 per share of common stock, payable October 1, 1998. Year to date the
Company has declared dividends of $.90 per share of common stock. This
represents a 7.1% increase over the $.84 in dividends declared by the Company in
the first nine months of 1997.
FINANCIAL CONDITION
Loans
The Company continued to increase its loans outstanding in the third
quarter of 1998, although the overall rate of growth has decelerated in
comparison to the prior year. Average loans grew to $3.02 billion in 1998, or an
increase of $361 million (14%) over the $2.66 billion outstanding in the same
period of 1997. Year to date, average loans increased $335 million, or 13%, in
1998 compared to the average for the first nine months of 1997. Total loans
outstanding of $3.17 billion at September 30, 1998 were $307 million above the
total at year end 1997. The loan growth between these periods reflects both the
Company's expansion into Gulf Coast markets, including the Lake Charles
purchase, and favorable economic conditions in the Company's overall market
area, which primarily includes the southern portions of Louisiana, Mississippi
and Alabama and the western Florida panhandle, as well as the impact of a
focused effort to market the Company's retail and commercial loan products.
All categories of loans, except loans to individuals, experienced
growth from the end of the third quarter of 1997 to the end of the third quarter
of 1998. Loans secured by commercial and other non-retail residential mortgage
loans increased approximately $194 million, or 25%. This growth came both from
loans on income producing properties as well as from loans secured by other real
estate used in commercial operations. Retail mortgages grew by approximately
$116 million, or 22%, between these dates, largely as a result of the continued
successful marketing of retail loan products that have been introduced in recent
years as an alternative to the conventional mortgage loan products that the
Company originates for sale in the secondary market. Commercial loans, other
than those secured by real estate, increased approximately $155 million, or 14%,
between these dates. The portfolio of commercial loans continues to be well
distributed over a number of different industries, including loans to entities
involved in manufacturing, wholesaling, retailing, and natural resource
exploration and development. Loans to individuals, which include various
consumer installment and credit line loan products, decreased $2 million, or
approximately 1%.
- 8 -
<PAGE>
Deposits and Short-Term Borrowings
The Company's average total deposits increased $224 million, or 6.1%, in
the third quarter of 1998 and $230 million, or 6.3%, for the first nine months
of 1998 when compared to the same periods in 1997. As is shown in Table 1 on
page 18, average non-interest-bearing demand deposits increased $75 million, or
7.6%, for the third quarter and $82 million, or 8.4%, year to date in 1998 over
the comparable 1997 periods. Factors that contributed to these increases include
the successful promotion of newer small business and personal checking account
products throughout the Company's expanding market area, as well as the
attraction of deposits to new branch locations opened during 1998 and recent
years. The deposits assumed with the Lake Charles branch acquisition in
September 1998 also had small impact on the growth in average deposits.
Table 1 also shows that average interest-bearing deposits have
increased $149 million, or 5.6%, between the third quarter of 1997 and 1998 and
$148 million, or 5.6%, between the year to date periods. Third quarter average
savings, NOW and money market account deposits increased a net $154 million, or
11.0%, between 1997 and 1998. For the first nine months of 1998, the net
increase in these deposit categories from their 1997 levels was $128 million, or
9.1%. The success of continuing periodic campaigns to promote a premium money
market product first introduced in 1996 was primarily responsible for this
deposit growth. Total money market account deposits grew $199 million, or 50%,
in 1998's third quarter and $185 million, or 50%, year to date as compared to
1997. Between 1997 and 1998, average regular savings deposits decreased $34
million, or 6.3%, for the quarter and $38 million, or 6.8%, for the year.
Average NOW account deposits were also lower in 1998 as compared to 1997,
decreasing approximately $10 million, or 2.2%, for the third quarter and $20
million, or 4.1%, for the year to date period. A portion of the year-to-year
decreases in regular savings and NOW account deposits is attributable to funds
moving to the premium money market product.
The time deposit category, which includes both core time deposits of
under $100,000 and time deposits of $100,000 and over, showed a net decrease on
average of approximately $5.4 million, or .4%, for the third quarter of 1998 and
a net increase of $21 million, or 1.6%, year to date compared to the prior year
periods. Within this category, core deposits decreased $19 million, or 2.5%, for
the quarter and $34 million, or 4.4%, year to date, while other time deposits
had a quarterly increase of $14 million, or 2.6%, and a year to date increase of
$54 million, or 11%. The increase in other time deposits in 1998 resulted
primarily from the solicitation of collateralized public fund deposits as an
alternative to brokered repurchase agreement borrowings.
The Company's short-term borrowings consist of purchases of federal
funds and sales of securities under repurchase agreements. Such borrowings are
both a source of funding for certain short-term lending activity and a part of
the Company's services to correspondent banks and certain other customers. With
the growth in average deposits and, as discussed below, the reduction in the
average investment in securities providing more than adequate funding for the
growth in average loans between 1997 and 1998, the Company reduced its average
short-term borrowings by $89 million, or 21%, for the third quarter of 1998 and
$111 million, or 26%, year to date when compared to the same periods in 1997.
Over these same periods, the Company increased its federal funds sold and
short-term investments by $92 million for the third quarter and $85 million year
to date in 1998. The year-to-year increase in short-term liquidity management
investments reflects mainly the continued funds availability from customer
demand for repurchase agreements and a lack of security investment opportunities
with maturity/yield characteristics appropriate for the Company's portfolio. The
Company's overall average short-term borrowing position, net of short-term fund
sales and investments, decreased $181 million, or 47%, for the third quarter and
$196 million, or 51%, year to date in 1998 compared to the same periods in 1997.
Investment in Securities
The Company's total investment in securities decreased $287 million to
$1.18 billion at September 30, 1998, compared to $1.47 billion at December 31,
1997. The average total investment securities portfolio decreased $293 million,
or 19%, between the third quarter of 1997 and the third quarter of 1998 and $265
million, or 17%, between the year to date periods. Funds provided by maturing
investment securities, in particular U. S. Treasury securities,
- 9 -
<PAGE>
have been used to partially satisfy increased loan demand in recent years. Also
in recent years, the Company has used its reinvestment opportunities to
gradually increase the percentage of the overall portfolio invested in higher
yielding mortgage-backed issues, obligations of states and municipalities, and
U. S. government agency securities and to reduce its emphasis on U. S. Treasury
securities.
The weighted-average expected maturity of the overall portfolio of
securities was 42 months at September 30, 1998 as compared to 37 months at
September 30, 1997. As is shown in Table 1, the weighted-average
taxable-equivalent portfolio yield increased 11 basis points to 6.58% for the
third quarter of 1998 and 21 basis points to 6.58% for the year to date period
when compared to the same periods in 1997.
Securities classified as available for sale, which are reported at
their estimated fair values, represented approximately 10.7% of the total
investment portfolio at September 30, 1998, compared to 14% at year-end 1997.
The net unrealized gains or losses on these securities are reported, net of tax,
with accumulated other comprehensive income as a separate component of
shareholders equity. The net unrealized gain was approximately $1.1 million at
September 30, 1998 and $1.5 million at year-end 1997. The remaining portfolio
securities are classified as held to maturity and are reported at amortized
cost. During 1997, securities that had been classified by various pooled
entities as available for sale were transferred to the held to maturity category
in accordance with the investment policies and practices of the Company. These
transfers were recorded at fair value. The unrealized gains and losses at the
transfer dates, which are also reported net of tax with accumulated other
comprehensive income, were insignificant.
Bank Premises and Equipment
The net investment in bank premises and equipment at September 30, 1998
of $164 million represents an $18 million increase from the level at year end
1997 and a $25 million, or 18%, increase from September 30, 1997. In recent
years and continuing into 1998, the Company has accelerated the expansion of its
branch and automated teller machine networks, the renovation or replacement of
existing branch facilities, and the enhancement of its facilities for support
operations. Between September 30, 1997 and September 30, 1998, the Company
completed construction on ten new branch locations throughout its market area,
including a new administrative headquarters for the Alabama region. At September
30, 1998, an additional twelve new branch facilities are under construction or
in the planning phase. During 1997 the Company also substantially completed the
upgrade of its branch delivery system and its office automation system.
Asset Quality
As is shown in Table 2 on page 19, total non-performing assets
increased to $16.5 million at September 30, 1998 from $14.5 million on December
31, 1997. The 1998 quarter-end total $2.8 million, or 20%, above the level of
non-performing assets at September 30, 1997. The Company recovered $1.2 million
of previously charged-off loans in the third quarter of 1998 and $5.1 million
year to date through September 30, 1998. As is shown in Table 3 on page 19, over
the same periods the Company identified $2.9 million and $8.0 million,
respectively, of loans to be charged off as uncollectible against the reserve
for possible loan losses, resulting in net charge-offs for the third quarter of
$1.7 million and net charge-offs for the first nine months of $2.9 million. In
1997, the Company had net recoveries in the third quarter of $2.2 million and
$2.1 million for the nine-month period.
The reserve for possible loan losses is maintained at a level believed
by management to be adequate to absorb potential losses in the portfolio. The
small provisions during the first half of 1998 and 1997 shown in Table 3 were
made by pooled entities prior to their mergers with the Company. The reserve for
possible loan losses represented 357% of nonaccruing loans and 290% of total
non-performing loans at September 30, 1998. At year-end 1997, this reserve
coverage was 477% of nonaccruing loans and 391% of non-performing loans. The
reserve for possible loan losses represented 1.31% of total loans at September
30, 1998 and 1.58% at December 31, 1997.
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<PAGE>
Management continually monitors the adequacy of the Company's reserve for
possible loan losses based on defined internal credit policies and, if deemed
appropriate based on the Company's loan portfolio structure and potential
changes in economic conditions, additional loss provisions may be recorded in
future periods. Mainly due to the expected continued growth in the loan
portfolio and an expected continued decline in loan recoveries, management
expects to begin providing for possible loan losses either in the fourth quarter
of 1998 or in 1999, depending upon the results of reserve adequacy analysis to
be conducted during those periods. A portion of the Company's loan portfolio
includes loans to customers whose major lines of business include oil and gas
and export activity. The financial performance of these business lines may be
adversely impacted by currently depressed oil and gas prices and recent economic
turmoil in Asian markets.
Whitney National Bank has several property interests which were
acquired through routine banking transactions generally prior to 1933 and which
are carried in its financial records at a nominal value. Management continually
investigates ways to maximize the return on these assets. Operating income from
these property interests, primarily from oil and gas royalties and real estate
operations, was approximately $2.2 million for the first nine months of 1998,
compared to $1.5 million for the first nine months of 1997. The majority of the
1998 income is the result of gains on sales of acreage near Berwick, Louisiana
and in Livingston Parish, Louisiana. Future dispositions of these assets may
result in the recognition of additional gains.
Capital Adequacy
The regulatory capital ratios for the Company and Whitney National Bank
are compared in the accompanying table to the minimums that are currently
required under capital adequacy standards imposed by their regulators and those
that banks must maintain to be eligible for a "well capitalized" classification
under the prompt corrective action regulatory framework. Note that the December
31, 1997 information for the Bank was calculated as if the January 1998 merger
of the Company's multi-state banking subsidiaries had already been effective.
The Company's and the Bank's risk-based capital ratios decreased between
December 31, 1997 and September 30, 1998, although all ratios continued well in
excess of the minimum requirements. The decreases between these dates reflect in
part the growth in risk-weighted assets, including the impact of the Lake
Charles branch purchase in September. The intangible assets recorded in this
purchase transaction also serve to reduce the amount of capital allowed to be
used in the regulatory capital ratio calculations.
<TABLE>
<CAPTION>
Minimum Minimum for
September 30 December 31 Capital Adequacy "Well Capitalized"
1998 1997 Standard Classification
----------------------------------------------------------------------------------
(dollars in thousands)
Tier 1 risk-based capital ratio:
<S> <C> <C> <C> <C>
Company 14.33% 15.30% 4.00% n/a
Whitney National Bank 13.78% 14.93% 4.00% 6.00%
Total risk-based capital ratio:
Company 15.49% 16.56% 8.00% n/a
Whitney National Bank 14.94% 16.18% 8.00% 10.00%
Tier 1 leverage capital ratio:
Company 10.59% 10.68% 4.00% n/a
Whitney National Bank 10.24% 10.49% 4.00% 5.00%
Total risk-weighted assets:
Company $3,595,000 $3,311,000
Whitney National Bank $3,545,000 $3,258,000
</TABLE>
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<PAGE>
RESULTS OF OPERATIONS
Net Interest Income
Taxable-equivalent net interest income in 1998 increased $1.3 million
or 2.5% in the third quarter and $8.7 million or 5.7% year to date when compared
to the same periods in 1997. The net interest margin decreased to 4.89% for the
third quarter of 1998 compared to 4.95% in the same period in 1997. Year to date
the net interest margin increased to 4.95% compared to 4.85% for the first nine
months in 1997. A combination of factors contributed to these changes, the
components of which are detailed in Table 1 on page 18.
Taxable-equivalent loan interest income increased $4.7 million, or
8.0%, for the third quarter and $16.3 million, or 9.9%, for the first nine
months when compared to the same periods in 1997. These increases were the
result of the growth in average loans outstanding between 1997 and 1998, which
totalled $361 million, or 14%, for the third quarter and $335 million, or 13%,
year to date. The increase in interest income from loan growth was partially
offset by the impact of a decrease in effective loan yields in 1998 as compared
to 1997. For the third quarter, the effective yield decreased 43 basis points to
8.27% from 8.70% in 1997. For the year to date period, the effective yield
decreased 25 basis points to 8.40% in 1998 from 8.65% in 1997. The decrease in
the effective loan yield, which resulted partly from the portfolio performance
of recently merged entities, also reflects a lower level of recoveries of
prior-period interest recognized as income in 1998 as compared to 1997 and is
consistent with a market interest rate environment that continues to afford
borrowers favorable repricing opportunities with active competition among
lenders to satisfy the loan demand of a healthy market area economy.
Taxable-equivalent interest income on investment securities for 1998's
third quarter decreased $4.4 million, or 18%, from the third quarter of 1997.
For the first nine months of 1998, the decrease in investment income was $10.6
million, or 14%. These decreases are consistent with the reduction in the
average investment in securities between 1997 and 1998, which totalled $293
million, or 19%, for the third quarter and $265 million, or 17%, for the year
to date period. The effective investment portfolio average yield increased 11
basis points to 6.58% for the third quarter of 1998 and 21 basis points to 6.58%
for the first nine months, when compared to the same periods in 1997. These
increases are primarily the result of higher yields obtained on reinvestment.
Market interest rates were relatively stable during 1997, moderating somewhat
into 1998. Although the Company has structured the maturities of its investment
portfolio in a way that reduces the sensitivity of its effective yield to
current market conditions, the year-to-year increase in the effective portfolio
yields has experienced will likely continue to experience some compression if
current market conditions persist.
The net increase in total taxable-equivalent interest income between
1997 and 1998 was $1.5 million, or 1.8%, for the third quarter and $9.3 million,
or 3.8%, for the first nine months. The overall effective earning-asset yield in
the third quarter of 1998 was 7.70%, or 15 basis points below the 7.85% yield in
1997, and the year to date effective yield in 1998 was 7.77%, up 1 basis point
from 1997's yield of 7.76%.
Interest expense was little changed between 1997 and 1998, increasing
$.2 million, or .6%, for the third quarter and $.6 million, or .7%, year to
date. Total interest-bearing liabilities increased on average a net $60 million,
or 1.9%, in the third quarter of 1998 and $37 million, or 1.2%, year to date
compared to 1997. The increase of $149 million in average interest-bearing
deposits for the third quarter of 1998 and $148 million year to date were
partially offset by decreases in average short-term borrowings of $89 million
for the third quarter of 1998 and $111 million year to date compared to 1997. As
discussed earlier, the overall growth in interest-bearing deposits was primarily
a function of the success of a premium money market product. The growth in this
deposit product is also reflected in the small increase in the overall cost of
funds for interest-bearing deposits, which rose 2 basis points to 3.82% for the
third quarter of 1998 and 4 basis points to 3.82% year to date compared to the
same periods in 1997. As shown in Table 1, the cost of short-term borrowings
decreased 29 basis points to 4.77% in the third quarter of 1998 and 16 basis
points to 4.86% year to date from the comparable 1997 periods. The overall cost
of funds rate on interest-bearing liabilities in 1998 was 3.92% for the third
quarter and 3.93% for the year to date period, little changed from 3.97% in the
third quarter of 1997 and 3.95% year to date in 1997.
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<PAGE>
Other Income and Expense
Non-interest income increased $1.3 million, or 9.6%, for the third
quarter and $5.4 million, or 13.4%, year to date in 1998 when compared to the
same periods in 1997. Gains on sales of foreclosed assets, including those
acquired prior to 1933, and other such income totalled $.7 million in the third
quarter of 1998 compared to $1.2 million in 1997. Year to date, this income
totalled approximately $5.5 million in 1998 and $5.4 million in 1997. Gains on
sales of securities totaled $.8 million in the third quarter and year to date
periods in 1998 compared to insignificant activity in 1997. Excluding these
securities gains or losses and other gains, third quarter non-interest income
was $13.1 million in 1998 and $12.1 million in 1997, an increase of $1 million,
or 8%. Year to date non-interest income, excluding these same items, was $39.2
million in 1998 compared to $34.7 million for the same period in 1997, an
increase of $4.5 million, or 13%.
Income from service charges on deposit accounts, which accounted for
approximately half of regular sources of non-interest income, was relatively
stable between 1997 and 1998, decreasing by $.1 million, or 2.1%, in the third
quarter and increasing by $.4 million, or 2.5%, for the year to date period.
Between 1997 and 1998, fee income from credit card transaction
operations increased approximately $.6 million, or 34%, for the third quarter
and $1.9 million, or 37%, year to date, reflecting both economic conditions and
successful marketing efforts. Successful marketing throughout an expanding
market area is also reflected in the increase in trust services income in 1998
of $.3 million, or 26%, for the quarter and $1.3 million, or 38%, year to date
when compared to 1997. Income from trust investment management services has also
benefited from the strong performance of the financial markets in recent years.
The Company's secondary market mortgage lending operations generated increases
in income of $.2 million, or 38%, for the third quarter of 1998 and $.7 million,
or 60%, year to date compared to the same periods in 1997. A healthy economy,
market interest rates that favor home sales and present refinancing
opportunities, and the Company's allocation of additional resources to its
mortgage banking operations all contributed to the strong performance in this
income category.
Several other categories of non-interest income registered solid
increases in the third quarter of 1998 compared with 1997. These include a 39%
increase in fees for investment services provided to correspondent banks and
other customers and an 8.8% increase in fee income from the Company's expanding
ATM network. Year to date in 1998, investment service fee income has increased
43% over 1997, and ATM fee income has increased 9.5%.
Non-interest operating expenses, excluding merger-related expenses,
were $50.3 million for the third quarter of 1998 and $137 million for the year
to date period. These totals represent increases over 1997 of $7.2 million, or
17%, for the quarter and $12.2 million, or 9.7%, for the year to date period.
Salaries and employee benefits expense, excluding merger-related
expenses which consist primarily of contractual and other severance
arrangements, totalled $25.9 million for the third quarter of 1998 and $71.3
million for the year to date period. These amounts represent increases of $3.8
million, or 17%, for the quarter and $6.7 million, or 10%, year to date when
compared to the same periods in 1997. Executive incentive compensation increased
approximately $.6 million for the third quarter in 1998 and $1.9 million year to
date compared to the same periods in 1997. Other incentive compensation,
including signing bonuses and productivity-based compensation, increased $.6
million for the quarter and $1.0 million year to date compared to the same
periods in 1997.
The expense of providing employee health and group insurance benefits
increased $1.2 million in 1998's third quarter and $.8 million year to date over
1997. Unusually high claims experience from employees participating in the
self-insured health benefit program was the primary factor contributing to the
year to date increase. The quarterly increase resulted mainly from delays in
claims processes associated with the transition to a new claims administrator
in the second quarter of 1998, the impact of which was compounded by the
unfavorable overall claims experience.
Excluding executive and employee incentive compensation and health and
group insurance benefits, salaries and benefits expense increased $1.3 million,
or 6.7%, for the third quarter of 1998 and $3.0 million, or 5.3%, year to date
compared to the same periods in 1997. These increases are attributable to
regular merit increases, the cost of staffing the expanding branch network and
other staff additions, and to the net change in the cost of various other
employee incentive programs.
Occupancy expense increased $.6 million, or 17%, for the third quarter
of 1998 and $.9 million, or 8.5%, year to date as compared to the same periods
in 1997. These increases are mainly attributable to unscheduled
- 13 -
<PAGE>
mechanical system and other building repair and maintenance expenses at several
major facilities, as well as to the cost of servicing additional branches and
other new facilities opened during 1997 and 1998.
Excluding merger expenses, the remaining net increase in
non-personnel-related expenses was approximately $2.9 million, or 16%, for the
third quarter of 1998 and $4.6 million, or 9.1%, year to date when compared to
the same periods in 1997. Credit card transaction processing expenses increased
$.4 million, or 32%, for the third quarter and $1.4 million, or 37%, year to
date in 1998. These increases are consistent with the growth in related fee
income discussed above. Also contributing to the overall increase were
additional costs incurred to furnish, equip and service the new banking
facilities, replace and upgrade the branch delivery system, install a
standardized office automation network, and upgrade the mainframe central
processing unit. The total expense for furnishings and equipment, including data
processing systems, increased over the comparable 1997 periods by $1.1 million,
or 28%, in 1998's third quarter and $1.8 million, or 15%, year to date.
The increased cost of establishing and maintaining voice and data
communication links throughout the Company's expanded service area is reflected
in the expense for postage and communications in 1998. This expense category
increased approximately 24% over 1997 for both the quarterly and year to date
periods.
Other factors contributing to the overall increase non-interest
expenses for 1998 included $.5 million in consulting fees during the third
quarter associated with the preliminary phase of a project to establish a
state-of-the- art customer call center. This is reflected in the increased
expense for legal and other professional fees. Training expense, which is
included in the other non-interest expense category, increased approximately
$.6 million in 1998's third quarter and $.9 million year to date in 1998
compared to 1997. The Company is conducting a system- wide retail sales
automation and sales culture training program as part of the overall branch
delivery system upgrade mentioned earlier. This program should be substantially
completed by year-end 1998.
Partially offsetting these increased expenses were savings realized in
connection with the periodic negotiation of certain service contracts and a net
reduction in Federal Reserve Bank processing charges.
The Company and its merger partners incur various nonrecurring costs to
complete merger transactions and to consolidate operations subsequent to a
merger. These include change in control payments and other employment related
costs, investment banker fees, fees for various professional services, and
losses related to obsolescence and contract cancellations. In 1998, the Company
reported approximately $1.4 million in merger-related expenses for the third
quarter as compared to $1.2 million in the prior year. Year to date
merger-related expenses were $4.9 million in 1998 and $2.4 million in 1997.
Year 2000 Issue
Inherent risks to the Company with respect to the Year 2000 situation
include potential losses related to data processing and other systems that may
not operate as expected, disruption of Company operations resulting from
technological malfunctions from within the Company's internal communications and
other processing systems, business problems associated with key third party
vendors and other external service providers that may not be Year 2000 system
compliant, credit quality issues that may arise with respect to significant
customers that may not be Year 2000 system compliant, as well as other business
and economic risks that may result from the pervasive impact that the Year 2000
situation could have on overall social and economic conditions.
In response to Year 2000 issues, a company-wide task force has
developed a plan to review and test the Company's systems and other business
operations in relation to Year 2000 compliance. To date, the task force has
identified appropriate remediation action steps, and system revisions and/or
upgrades are being made, where appropriate. These remediation action steps also
include non-information technology systems that employ embedded technology, such
as facilities control systems.
The Company plans to have its internal mission-critical systems
substantially remediated and tested for Year 2000 compliance by the end of 1998.
All mission-critical systems are planned to be placed back into production by
March 1999. Remediation and testing of other systems and business operations are
underway and are anticipated to be fully compliant and in production by June
1999. Approximately 50% of mission-critical systems were compliant as of
September 30, 1998. Processes and procedures are in place to ensure that all
projects undertaken in the interim deliver Year 2000 compliant solutions, all
future third party hardware and software acquisitions are Year 2000
- 14 -
<PAGE>
compliant, and all commercial third-party service providers are queried
regarding their Year 2000 compliance plans.
Non-interest expense in 1998 includes direct costs incurred in
connection with the Company's efforts to ensure that its operations will not be
significantly affected by the use of the year 2000 in its computer systems or
other systems or in the systems of its suppliers and customers. The majority of
systems remediation costs have been borne by third party vendors who supply the
software under annual maintenance fees. The Company's costs for installation of
vendor remediated software fall within the "business as usual" budget.
Expenditures for vendor maintenance and specific software costs related to the
Year 2000 items have been less than $1 million. Internal costs associated with
Year 2000 compliance were approximately $1.5 million for the year to date
period in 1998. The Company's remaining cost of system remediation is estimated
to be an additional $2 million. This estimate includes an additional $1
million of internal costs.
During the second quarter of 1998, the Company began assessing the Year
2000 readiness of its larger borrowing customers by sending screening
questionnaires to those customers. To date, 98% of those questionnaires have
been received and analyzed, representing 90% of the loan dollar exposure
surveyed. Based upon the responses, the Company has graded each customer as
being at low, moderate or high risk of sustaining Year 2000-related business
disruptions. During the third quarter, the Company sent additional, more
detailed questionnaires to those customers who either did not respond or were
graded as being at moderate or high risk of Year 2000 disruptions. The Company
intends to use its Watchlist Committee process to monitor the Year 2000
remediation progress of non responding or high risk customers with initial
Watchlist Committee review of all such customers prior to January 1, 1999. The
Company's contingency plan for high risk customers includes additional
collateral, additional guarantees, alternative sources of repayment or, in
certain cases declining to renew existing loans or extend new advances. The
formal risk assessment of customers is also incorporated into the underwriting,
credit review and reserve adequacy analysis processes.
The Company is also dependent upon customers and others for deposits
and other funding sources to fund its earning assets. In a process similar to
that used for borrowing customers, the Company sent assessment questionnaires to
major depositors and investment counter parties. These responses have been used
to assess the possible impact from Year 2000 problems on the Company's ability
to secure sufficient funding to support its operations and have been included in
its asset/liability and liquidity modeling and planning.
The Company has also initiated formal communications with its
significant suppliers to determine the extent to which it is vulnerable to those
third parties' failures to remediate their own Year 2000 issues. However, there
can be no assurance that the systems of other organizations upon which the
Company's operations rely, including essential utilities and telecommunications
providers, will be timely converted, or that a failure to convert by another
company, or a conversion that is incompatible with the Company's systems, would
not have a materially adverse effect on the Company.
Because there is no generally accepted definition of "Year 2000
Compliant" and the ability of any organization's systems to operate reliably
after midnight on December 31, 1999 is dependent upon factors that may be
outside the control of, or unknown to, that organization, no "certification" of
compliance is possible by any business. For example, in Securities and Exchange
Commission ("SEC") Staff Legal Bulletin No. 5, the SEC opined that "it is not,
and will not, be possible for any single entity or collective enterprise to
represent that it has achieved complete Year 2000 compliance and thus to
guarantee its remediation efforts. The problem is simply too complex for such a
claim to have legitimacy. Efforts to solve Year 2000 problems are best described
as 'risk mitigation'." Consequently, the Company cannot so "certify" either.
Although the Company believes the likelihood of any or all of the above risks
occurring to be low, specific contingency plans are currently being developed in
the event that efforts to remediate the Company's systems are not fully
successful or are not completed in accordance with current expectations. The
contingency plans represent an expansion of the Company's existing business
resumption plans to safeguard the Company under various Year 2000 scenarios.
While there can be no assurance that the Company will not be materially
adversely effected by Year 2000 problems, it is committed to ensuring that it is
fully Year 2000 compliant and believes its plans adequately address the
above-mentioned risks.
Income Taxes
The Company provided for income taxes at an overall effective rate of
32.9% for the third quarter and year to date in 1998 compared to 36.9% and
34.0%, respectively, for the same periods in 1997. The effective rates in each
period differ from the statutory rate of 35% generally because of the tax exempt
income earned on investments in state and municipal obligations and state income
taxes. The high effective rate in 1997 reflects in large part the impact of
non-deductible merger-related expenses.
- 15 -
<PAGE>
ASSET/LIABILITY MANAGEMENT
The Company maintains an asset/liability management process which has
as its focus the development and implementation of strategies in the funding and
deployment of the Company's resources that are expected to maximize soundness
and profitability over time. These strategies reflect the goals set by the
Company for capital adequacy, liquidity, and the acceptable levels of risk
established in Company policies. As part of this process, the Company uses an
earnings simulation model to analyze how its net interest income and net income
would change in response to changes in market interest rates. The simulation
model incorporates management's expectations regarding loan demand, deposit
product preferences, pricing and funds availability, prepayment rates, and the
spread of rates between different financial instruments, among other factors.
Interest rate change scenarios of plus and minus 100, 200 and 300 basis points
are run in the model against the Company's balance sheet and the results of
these simulations show the impact on the Company's future earnings and on the
discounted cash value of its balance sheet. Management has established policy
limits which are used to monitor the results of these tests. Should these
simulations yield changes that are not within limits, management would evaluate
the desirability of altering the loan and deposit portfolios of the Company or
of taking other steps to return the Company to policy limits. The simulations
run at September 30, 1998 yielded results that were all within policy limits and
showed no material impact on earnings or net asset values. These simulated
results also showed no significant negative impact on the Company's liquidity
position.
LIQUIDITY AND OTHER MATTERS
The Company and the Bank manage liquidity to ensure their ability to
satisfy customer demand for credit, to fund deposit withdrawals, to meet
operating and other corporate obligations, and to take advantage of investment
opportunities, all in a timely and cost-effective manner. Traditionally, these
liquidity needs have been met by maintaining a strong base of core deposits and
by carefully managing the maturity structure of the investment portfolio. The
funds provided by current operations and expected from future loan repayments
are also considered in the liquidity management process.
The Bank enters into short-term borrowing arrangements by purchasing
federal funds and selling securities under repurchase agreements, both as a
source of funding for certain short-term lending facilities and as part of its
services to correspondent banks and certain other customers. Neither the Company
nor the Bank have accessed long-term debt markets as part of liquidity
management.
The consolidated statements of cash flows on page 3 provide a
summarized view of the Company's uses and sources of liquidity for the
nine-month periods ended September 30, 1998 and 1997. The Company generated $58
million in liquid funds from operations for the first nine months of 1998 and
paid total dividends of $19 million. A major source of liquid funds during the
first nine months of 1998 was unreinvested maturities of investment securities
totalling $287 million. Much of the funds provided from investment maturities
served to fund loan growth of $272 million, excluding loans acquired in the Lake
Charles branch purchase transaction of $39 million, and to increase short-term
liquidity as shown by the $62 million increase in federal funds sold and
short-term investments. This increase in liquidity is expected to support
near-term loan growth. In connection with the Lake Charles branch purchase
completed in September 1998, the Company also received net cash of approximately
$84 million.
Total deposits, which are discussed in more detail below, increased
during the first nine months of 1998 by $53 million. Excluding the $149 million
of deposits assumed in connection with the Lake Charles branch purchase
transaction, total deposits would have decreased by approximately $96 million
through September 30,1998 from year end 1997, primarily in the time deposit
category. At the same time, short-term borrowings of federal funds and sales of
securities under repurchase agreements increased $32 million over this period.
Average core deposits, defined as all deposits other than time deposits
of $100,000 or more, increased by $176 million between the first nine months of
1997 and 1998. Growth in average non-interest-bearing demand deposits of $82
million in 1998 and net growth of $128 million in average interest-bearing
checking, savings and money market account deposits for the same period was
offset by a $34 million decrease in core time deposits. Other time deposits
increased on average by $54 million for the first nine months in 1998 as
compared to 1997, primarily as an alternative source of funds to short-term
repurchase agreement borrowings.
As of September 30, 1998, the portfolio of investment securities held
to maturity was expected to generate approximately $322 million of principal
cash flow within one year. An additional $127 million of investment securities
- 16 -
<PAGE>
was classified as available for sale at the end of 1998's third quarter,
although management's determination of this classification does not derive
primarily from liquidity considerations.
The Bank had approximately $1.3 billion in unfunded loan commitments
and lines of credit outstanding at September 30, 1998, up from the $1.2 billion
level at December 31, 1997. Because commitments and unused credit lines may, and
many times do, expire without being drawn upon, unfunded balances do not
necessarily represent actual future liquidity requirements. Draws by customers
against these commitments are not expected to place any unusual strain on the
Company's liquidity position.
FORWARD LOOKING STATEMENTS
The Company may from time to time make written or oral forward-looking
statements, including statements contained in this report or other filings with
the Securities and Exchange Commission, in its reports to shareholders and in
other communications by the Company, which are made in good faith by the Company
pursuant to the "Safe Harbor" provisions of the Private Securities Litigation
Reform Act of 1995.
These forward-looking statements are based on a number of assumptions
about future events and are subject to various risks and uncertainties, which
may cause actual results to differ materially from those in such statements.
These risks and uncertainties include, but are not limited to (i) the strength
of the U.S. economy in general and the strength of the local economies in which
the Company conducts operations, (ii) changes in trade, monetary and fiscal
policies, laws and regulations of government agencies and similar organizations,
including interest rate policies of the Board of Governors of the Federal
Reserve System, (iii) inflation, interest rate, market and monetary
fluctuations, (iv) the Company's ability to improve sales and service quality
and to develop profitable new products, (v) the willingness of users to
substitute competitors' products and services for the Company's products and
services, (vi) the success of the Company in gaining regulatory approval of its
products and services, when required, (vii) changes in consumer spending,
borrowing and saving habits, (viii) the effect of changes in accounting policies
and practices, as may be adopted by the regulatory agencies as well as the
Financial Accounting Standards Board, (ix) the amount and rate of growth in the
Company's expenses and its ability to achieve targeted or projected cost
controls, (x) the costs and effects of litigation and of unexpected or adverse
outcomes in such litigation, (xi) technological changes, including the
possibility that the Company's Year 2000 remediation project may not be
completed as projected resulting in losses related to data processing and other
systems that may not operate as expected, (xii) acquisitions and the integration
of acquired businesses, (xiii) the impact on the Company's financial statements
of nonrecurring accounting charges that may result from its ongoing evaluation
of its business strategies, asset valuations and organizational structures,
(xiv) charge-off and delinquency trends, (xv) the effects of easing of
restrictions on the financial services industry, and the effects of competition
from institutions that can take better advantage of eased restrictions and from
new entries into the markets served by the Company, and (xvi) the success of the
Company at managing the risks involved in the foregoing.
Readers are cautioned not to place undue reliance on forward-looking
statements made by or on behalf of the Company. Any such statement speaks only
as of the date it was made. The Company undertakes no obligation to update or
revise any forward-looking statements.
- 17 -
<PAGE>
<TABLE>
<CAPTION>
TABLE 1.
WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
ANALYSIS OF INTEREST INCOME AND INTEREST EXPENSE
(dollars in thousands)
THREE MONTHS ENDED SEPTEMBER 30 NINE MONTHS ENDED SEPTEMBER 30
1998 1997 1998 1997
------------------------------------------------------- -------------------------------------------------------------
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate Balance Expense Rate Balance Expense Rate
------------------------------------------------------- -------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Loans (tax
equivalent)
(1),(2).....$3,023,046 $63,017 8.27% $2,661,662 $58,355 8.70% $2,896,997 $182,092 8.40% $2,562,110 $165,748 8.65%
------------------------------------------------------- -------------------------------------------------------------
U. S.
Treasury
securities.. 248,618 4,041 6.45 500,598 7,546 5.98 280,336 13,579 6.48 557,784 24,637 5.91
U.S.
government
agency
securities.. 382,362 6,210 6.50 563,251 9,086 6.45 456,854 22,175 6.47 564,444 26,912 6.36
Mortgage-
backed
securities.. 458,667 7,204 6.28 311,703 5,104 6.55 450,744 21,277 6.29 317,715 15,304 6.42
State and
municipal
securities
(tax
equivalent)
(1)......... 140,566 2,831 8.06 145,335 2,941 8.09 136,181 8,329 8.15 149,246 9,068 8.10
Federal Reserve
stock and
other
corporate
securities.. 9,733 132 5.42 11,943 188 6.30 10,672 440 5.50 11,039 477 5.76
------------------------------------------------------- -------------------------------------------------------------
Total
investments
in
securities
(1),(3).... 1,239,946 20,418 6.58 1,532,830 24,865 6.47 1,334,787 65,800 6.58 1,600,228 76,398 6.37
------------------------------------------------------- -------------------------------------------------------------
Federal funds
sold and
short-term
investments. 129,207 1,847 5.67 37,288 566 6.02 132,779 5,813 5.85 47,841 2,214 6.19
------------------------------------------------------- -------------------------------------------------------------
Total
interest-
earning
assets..... 4,392,199 $85,282 7.70% 4,231,780 $83,786 7.85% 4,364,563 $253,705 7.77% 4,210,179 $244,360 7.76%
------------------------------------------------------- -------------------------------------------------------------
Cash and due
from
financial
institutions 212,684 208,168 219,070 217,213
Bank premises
and equipment,
net......... 155,962 137,309 150,958 133,117
Other real
estate owned,
net......... 2,042 4,462 2,281 4,549
Other assets. 92,222 91,119 88,950 92,148
Reserve for
possible
loan losses. (42,788) (45,517) (43,681) (44,598)
----------- ----------- ----------- -----------
Total
assets.....$4,812,321 $4,627,321 $4,782,141 $4,612,608
=========== =========== =========== ===========
LIABILITIES
Savings
deposits....$ 507,742 $ 3,121 2.44% $ 541,950 $ 3,535 2.59% $ 511,163 $ 9,382 2.45% $ 548,703 $ 10,881 2.65%
NOW and MMDA
deposits.... 1,046,368 7,753 2.94 857,792 5,580 2.58 1,014,642 21,821 2.88 849,569 15,941 2.51
Time
deposits.... 1,272,384 16,327 5.09 1,277,811 16,531 5.13 1,285,037 49,164 5.12 1,264,460 48,395 5.12
------------------------------------------------------- -------------------------------------------------------------
Total
interest-
bearing
deposits 2,826,494 27,201 3.82 2,677,553 25,646 3.80 2,810,842 $ 80,367 3.82 2,662,732 75,217 3.78
------------------------------------------------------- -------------------------------------------------------------
Federal funds
purchased and
repurchase
agreements.. 329,457 3,963 4.77 418,557 5,336 5.06 322,316 11,728 4.86 433,322 16,269 5.02
------------------------------------------------------- -------------------------------------------------------------
Total
interest-
bearing
liabilities 3,155,951 $31,164 3.92% 3,096,110 $30,982 3.97% 3,133,158 $ 92,095 3.93% 3,096,054 $ 91,486 3.95%
------------------------------------------------------- -------------------------------------------------------------
Demand
deposits,
non-
interest-
bearing..... 1,059,235 984,181 1,064,327 982,019
Other
liabilities. 41,673 38,653 39,766 36,663
Shareholders'
equity...... 555,462 508,377 544,890 497,872
----------- ----------- ----------- -----------
Total
liabilities
and
shareholders'
equity.....$4,812,321 $4,627,321 $4,782,141 $4,612,608
=========== =========== =========== ===========
Net interest
income/margin
(tax
equivalent)
(1)........ $54,118 4.89% $52,804 4.95% $161,610 4.95% $152,874 4.85%
======= ===== ======= ===== ======== ===== ======== =====
(1) Tax equivalent amounts are calculated using a marginal federal income tax rate of 35%.
(2) Average balance includes nonaccruing loans of $11,721 and $8,344 for the quarterly periods in 1998 and 1997, respectively ,and
$10,507 and $9,315 for the year-to-date periods in 1998 and 1997, respectively.
(3) Average balance excludes unrealized gain or loss on securities available for sale.
</TABLE>
- 18 -
<PAGE>
<TABLE>
<CAPTION>
TABLE 2.
WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
NON-PERFORMING ASSETS AND OTHER SELECTED DATA
(end of quarter, dollars in millions)
1998 1997
--------------------------- --------------------------------------
3rd 2nd 1st 4th 3rd 2nd 1st
--------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Loans accounted for on a nonaccrual basis................ $11.7 $11.6 $8.3 $9.4 $7.4 $9.7 $10.3
Restructured loans....................................... 2.7 1.8 1.8 2.0 2.7 3.3 2.8
--------------------------- --------------------------------------
Total non-performing loans............................... 14.4 13.4 10.1 11.4 10.1 13.0 13.1
--------------------------- --------------------------------------
Other real estate owned, net............................. 2.1 2.2 2.0 3.0 3.5 4.5 4.9
Other foreclosed assets.................................. .1 .5 .1 .1 .1 .1 -
--------------------------- --------------------------------------
Total non-performing assets.............................. $16.5 $16.2 $12.2 $14.5 $13.7 $17.6 $18.0
=========================== ======================================
Reserve for possible loan losses as a percent of:
Total nonaccruing loans............................... 357% 374% 521% 477% 589% 455% 422%
Total non-performing loans............................ 290% 323% 426% 391% 432% 341% 334%
Total loans........................................... 1.31% 1.51% 1.56% 1.58% 1.63% 1.73% 1.78%
Non-performing loans as a percent of
total loans........................................... .46% .47% .37% .40% .38% .51% .53%
Non-performing assets as a percent of
total assets.......................................... .34% .35% .26% .31% .30% .39% .40%
</TABLE>
<TABLE>
<CAPTION>
TABLE 3.
WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
RESERVE FOR POSSIBLE LOAN LOSSES
(by quarter, in millions)
1998 1997
--------------------------- --------------------------------------
3rd 2nd 1st 4th 3rd 2nd 1st
--------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Reserve balance, beginning of quarter................ $43.4 $43.3 $44.5 $43.7 $44.3 $43.6 $44.0
Provision for possible loan losses:
Expense of providing loss reserves............... - - .1 .2 - .1 .3
Reduction of loss reserves....................... - - - - (2.8) - -
Loans charged off.................................... (2.9) (2.1) (3.0) (2.5) (1.7) (2.0) (3.1)
Recoveries........................................... 1.2 2.2 1.7 3.1 3.9 2.6 2.4
--------------------------- --------------------------------------
Reserve balance, end of quarter...................... $41.7 $43.4 $43.3 $44.5 $43.7 $44.3 $43.6
=========================== ======================================
</TABLE>
- 19 -
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K (a)(3) Exhibits:
Exhibit 3.1 - Copy of Composite Charter (filed as Exhibit 3(i) to the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1993 (Commission file number 0-1026) and incorporated herein by
reference)
Exhibit 3.2 - Copy of Bylaws (filed as Exhibit 3.2 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1997
(Commission file number 0-1026) and incorporated by reference herein)
Exhibit 3.3 - Copy of Bylaws, as amended July 1998
Exhibit 10.1 - Stock Option Agreement between Whitney Holding
Corporation and William L. Marks (filed as Exhibit 10.2 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1990 (Commission file number 0-1026) and incorporated by reference)
Exhibit 10.2 - Executive agreement between Whitney Holding Corporation,
Whitney National Bank and William L. Marks (filed as Exhibit 10.3 to
the Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1993 (Commission file number 0-1026) and incorporated by reference)
Exhibit 10.3 - Executive agreement between Whitney Holding Corporation,
Whitney National Bank and R. King Milling (filed as Exhibit 10.4 to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1993 (Commission file number 0-1026) and incorporated by reference)
Exhibit 10.4 - Executive agreement between Whitney Holding Corporation,
Whitney National Bank and Edward B. Grimball (filed as Exhibit 10.5 to
the Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1993 (Commission file number 0-1026) and incorporated by reference)
Exhibit 10.5 - Executive agreement between Whitney Holding Corporation,
Whitney National Bank and Kenneth A. Lawder, Jr. (filed as Exhibit 10.6
to the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1993 (Commission file number 0-1026) and incorporated by
reference)
Exhibit 10.6 - Executive agreement between Whitney Holding Corporation,
Whitney National Bank and G. Blair Ferguson (filed as Exhibit 10.7 to
the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1993 (Commission file number 0-1026) and incorporated by
reference)
- 20 -
<PAGE>
Exhibit 10.7 - Executive agreement between Whitney Holding Corporation,
Whitney National Bank and Joseph W. May (filed as Exhibit 10.7 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1993 (Commission file number 0-1026) and incorporated by reference)
Exhibit 10.8 - Executive agreement between Whitney Holding Corporation,
Whitney Bank of Alabama and John C. Hope, III (filed as Exhibit 10.8 to
the Company's Annual Report on Form 10-K for the year ended December
31, 1994 (Commission file number 0-1026) and incorporated by reference)
Exhibit 10.9 - Executive agreement between Whitney Holding Corporation,
Whitney National Bank and Robert C. Baird, Jr. (filed as Exhibit 10.9
to the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1995 (Commission file number 0-1026) and incorporated by
reference)
Exhibit 10.10a - Long-term incentive program (filed as Exhibit 10.7 to
the Company's Annual Report on Form 10-K for the year ended December
31, 1991 (Commission file number 0-1026) and incorporated by reference)
Exhibit 10.10b - Long-term incentive plan (filed as a Proposal in the
Company's Proxy Statement dated March 18, 1997 (Commission file number
0-1026) and incorporated by reference)
Exhibit 10.11 - Executive compensation plan (filed as Exhibit 10.8 to
the Company's Annual Report on Form 10-K for the year ended December
31, 1991 (Commission file number 0-1026) and incorporated by reference)
Exhibit 10.12 - Form of restricted stock agreement between Whitney
Holding Corporation and certain of its officers (filed as Exhibit 19.1
to the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1992 (Commission file number 0-1026) and incorporated by
reference)
Exhibit 10.13 - Form of stock option agreement between Whitney Holding
Corporation and certain of its officers (filed as Exhibit 19.2 to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1992 (Commission file number 0-1026) and incorporated by reference)
Exhibit 10.14 - Directors' Compensation Plan (filed as Exhibit A to the
Company's Proxy Statement dated March 24, 1994 (Commission file number
0-1026) and incorporated by reference)
Exhibit 10.14a - Amendment No. 1 to the Whitney Holding Corporation
Directors' Compensation Plan (filed as Exhibit A to the Company's Proxy
Statement dated March 15, 1996 (Commission file number 0-1026) and
incorporated by reference)
Exhibit 10.15 - Retirement Restoration Plan effective January 1, 1995
(filed as Exhibit 10.16 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995 (Commission file number 0-1026) and
incorporated by reference)
Exhibit 10.16 - Executive agreement between Whitney Holding
Corporation, Whitney National Bank and Rodney D. Chard (filed as
Exhibit 10.17 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996 (Commission file number 0-1026) and
incorporated by reference)
Exhibit 10.17 - Form of Amendment to Section 2.1e of the Executive
agreements (set forth as Exhibits 10.2 through 10.9 herein (filed as
Exhibit 10.18 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1996 (Commission file number 0-1026) and
incorporated by reference)
Exhibit 10.18 - Executive agreement between Whitney National Bank of
Mississippi and Guy C. Billups, Jr. dated April 18, 1997 (filed as
Exhibit 10.19 to the Company's Quarterly Report on form 10-Q for the
quarter ended June 30, 1997 (Commission file number 0-1026) and
incorporated by reference)
Exhibit 10.19 - Form of Amendment adding subsection 2.1g to the
Executive agreements set forth as Exhibits 10.2 through 10.9, Exhibit
10.16 and Exhibit 10.18 herein (filed as Exhibit 10.19 to the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1998
(Commission file number 0-0126) and incorporated by reference)
- 21 -
<PAGE>
Exhibit 21 - Subsidiaries
Whitney Holding Corporation owns 100% of the capital stock of Whitney
National Bank.
All other subsidiaries considered in the aggregate would not constitute
a significant subsidiary.
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
None
- 22 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WHITNEY HOLDING CORPORATION
(Registrant)
By: /s/ William L. Marks
-------------------------------
William L. Marks
Chief Executive Officer and
Chief Financial Officer
November 13, 1998
-------------------------------
Date
- 23 -
<PAGE>
EXHIBIT 3.3
BY-LAWS
OF
WHITNEY HOLDING CORPORATION
Section 1. Meetings of the Board of Directors of this corporation may be held by
means of conference telephone or similar communications equipment.
Section 2. A. Without limiting in any way the indemnification by the corporation
of persons as provided in its charter and the existing applicable law, the
corporation shall have authority to indemnify persons in accordance with
Louisiana Revised Statutes 12:83 as it may from time to time become amended,
supplemented or replaced.
B. The corporation shall have authority to procure or maintain
insurance or other similar arrangement in accordance with Louisiana Revised
Statutes 12:83(F) and (G) as they may from time to time become amended,
supplemented or replaced.
Section 3. The Company may issue stock certificates signed by the Chief
Executive Officer and Secretary of the Company. In addition to the Chief
Executive Officer and Secretary of the Company, the President, any Vice
President and any Assistant Secretary, respectively, of the Company may sign the
Company's stock certificates. All stock certificates representing shares of the
Company's stock, whether currently outstanding or that may be issued in the
future, may bear facsimile signatures of the Company's Chief Executive Officer
and Secretary, or other authorized officers, provided such certificates are or
have been countersigned by a transfer agent or registrar other than the Company
itself or an employee of the Company.
Section 4. There shall be a standing committee of this Corporation, appointed by
the Board, to be known as the Executive Committee, consisting of the Chairman of
the Board, the President, and such other Directors as may be appointed from time
to time, each to serve a 12 months' term, four (4) members of which shall
constitute a quorum for the transaction of business. This committee shall have
power to direct and transact all business of the Corporation, which properly
might come before the Board of Directors, except such as the Board only, by law,
is authorized to perform. The Executive Committee shall report its actions in
writing at each regular meeting of the Board of Directors, which shall approve
or disapprove the report and record such action in the minutes of the meeting.
Section 5.
A. Directors shall retire from the Board of this corporation upon the earlier
occurrence of either of the following events:
1. Upon attainment of the Director's 70th birthday. A Director
shall retire effective the date of the annual meeting of
shareholders following his or her 70th birthday.
- 24 -
<PAGE>
2. Upon the Director's resignation or retirement from the
principal business enterprise by which he or she was employed
when he or she became a Director ("principal business
enterprise"). A Director shall retire from the Board effective
the date of the annual meeting of shareholders following the
expiration of a one year period beginning with his or her
resignation or retirement from his or her principal business
enterprise, unless the Director meets both of the following
requirements:
a. He or she has assumed a prominent role in a business or
community organization during the one year period; and
b. Both the Director's role and the organization's status in a
significant Whitney market satisfy this corporation's
customary requirements for the nomination of a new Director.
B. Neither event set forth in Section 5A shall require (i) the retirement at any
time of any Director who, on October 26, 1994, had already achieved the age of
70 or had already resigned or retired from his or her principal business
enterprise or (ii) the retirement prior to the end of his or her term of any
Director who, on July 22, 1998, had already achieved the age of 70 or had
already resigned or retired from his or her principal business enterprise.
- 25 -
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 237,398
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 85,327
<TRADING-ASSETS> 16
<INVESTMENTS-HELD-FOR-SALE> 126,644
<INVESTMENTS-CARRYING> 1,056,973
<INVESTMENTS-MARKET> 1,080,364
<LOANS> 3,171,421
<ALLOWANCE> 41,692
<TOTAL-ASSETS> 4,907,720
<DEPOSITS> 3,988,766
<SHORT-TERM> 322,135
<LIABILITIES-OTHER> 42,255
<LONG-TERM> 0
<COMMON> 2,800
0
0
<OTHER-SE> 551,764
<TOTAL-LIABILITIES-AND-EQUITY> 4,907,720
<INTEREST-LOAN> 181,508
<INTEREST-INVEST> 62,899
<INTEREST-OTHER> 5,813
<INTEREST-TOTAL> 250,220
<INTEREST-DEPOSIT> 80,367
<INTEREST-EXPENSE> 92,095
<INTEREST-INCOME-NET> 158,125
<LOAN-LOSSES> 73
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 142,180
<INCOME-PRETAX> 61,432
<INCOME-PRE-EXTRAORDINARY> 41,236
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 41,236
<EPS-PRIMARY> 1.77
<EPS-DILUTED> 1.76
<YIELD-ACTUAL> 7.73
<LOANS-NON> 11,691
<LOANS-PAST> 5,767
<LOANS-TROUBLED> 2,686
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 44,543
<CHARGE-OFFS> 7,981
<RECOVERIES> 5,056
<ALLOWANCE-CLOSE> 41,692
<ALLOWANCE-DOMESTIC> 41,692
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
