<PAGE>
August 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 June 30,
1998.
This filing is being effected by direct transmission to the
Commission's EDGAR System.
Sincerely,
/s/ Edward B. Grimball
-------------------------------------
Edward B. Grimball
Executive Vice President &
Chief Financial Officer
(504) 586-7570
EBG/drm
<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------------------- ---------------------------
Commission file number 0-1026
WHITNEY HOLDING CORPORATION
(Exact name of registrant as specified in its charter)
Louisiana 72-6017893
--------------------------------------------------------------
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
228 St. Charles Avenue, New Orleans, Louisiana 70130
----------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(504) 586-7272
----------------------------------------------------
(Registrant's telephone number, including area code)
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 twelve 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
----- -----
The Company has only one class of common stock, of which 22,611,133 shares were
outstanding on July 31, 1998
An exhibit index appears on page 20.
<PAGE>
<TABLE>
<CAPTION>
WHITNEY HOLDING CORPORATION
TABLE OF CONTENTS
Page
- ----------------------------------------------------------------------------------------------------------------------
PART I. Financial Information
Item 1: Financial Statements:
<S> <C>
Consolidated Balance Sheets...............................................................3
Consolidated Statements of Operations.....................................................4
Consolidated Statements of Cash Flows.....................................................5
Notes to Financial Statements.............................................................6
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations..........................................................................9
- ----------------------------------------------------------------------------------------------------------------------
PART II. Other Information
Item 4: Submission of Matters to a Vote of Security Holders...............................................20
Item 6: Exhibits and Reports on Form 8-K..................................................................20
- ----------------------------------------------------------------------------------------------------------------------
Signatures.................................................................................................22
</TABLE>
Page 2 of 22 Pages
<PAGE>
<TABLE>
<CAPTION>
ITEM 1. Financial Statements
WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands) June 30, December 31,
ASSETS 1998 1997
-----------------------------
<S> <C> <C>
Cash and due from financial institutions........................................................ $ 244,670 $ 234,625
Investment in securities:
Securities available for sale ............................................................. 106,615 145,057
Securities held to maturity (fair value of $1,153,471 in 1998 and $1,277,387 in 1997)...... 1,138,067 1,262,395
Federal funds sold and short-term investments................................................... 72,562 21,551
Loans........................................................................................... 2,872,166 2,823,530
Less reserve for possible loan losses........................................................... 43,087 44,279
--------------------------
Loans, net................................................................................... 2,829,079 2,779,251
Bank premises and equipment, net................................................................ 151,548 144,900
Other real estate owned, net.................................................................... 2,208 2,995
Accrued income receivable....................................................................... 33,410 35,390
Other assets.................................................................................... 46,791 44,168
--------------------------
TOTAL ASSETS.......................................................................... $4,624,950 $4,670,332
==========================
LIABILITIES
Deposits:
Non-interest-bearing demand deposits....................................................... $1,043,504 $1,086,107
Interest-bearing deposits.................................................................. 2,699,780 2,747,544
--------------------------
Total deposits......................................................................... 3,743,284 3,833,651
Federal funds purchased and securities sold under repurchase agreements......................... 309,466 289,603
Dividends payable............................................................................... 6,767 5,820
Other liabilities............................................................................... 31,466 29,491
--------------------------
TOTAL LIABILITIES..................................................................... $4,090,983 $4,158,565
--------------------------
SHAREHOLDERS' EQUITY
Common stock.................................................................................... $ 2,800 $ 2,800
Capital surplus................................................................................. 134,901 126,426
Retained earnings............................................................................... 407,938 391,604
Accumulated other comprehensive income (loss)................................................... 198 182
Total................................................................................. 545,837 521,012
Treasury stock at cost, 318,776 shares in 1998 and 346,344
shares in 1997, and unearned restricted stock compensation................................... 11,870 9,245
--------------------------
TOTAL SHAREHOLDERS' EQUITY............................................................ $ 533,967 $ 511,767
--------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY............................................................ $4,624,950 $4,670,332
==========================
The accompanying notes are an intergral part of these financial statements.
</TABLE>
Page 3 of 22 Pages
<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 SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
1998 1997 1998 1997
------------------------ ------------------------
INTEREST INCOME
<S> <C> <C> <C> <C>
Interest and fees on loans................................................. $58,882 $53,898 $116,859 $105,331
Interest and dividends on investments:
U.S. Treasury and agency securities.................................. 11,131 16,640 23,685 33,149
Mortgage-backed securities........................................... 7,235 5,173 14,072 10,199
Obligations of states and political subdivisions..................... 1,728 1,939 3,534 3,967
Federal Reserve stock and other corporate securities................. 123 134 258 233
Interest on federal funds sold and short-term investments.................. 2,272 560 3,611 1,552
------------------------ ------------------------
TOTAL.......................................................... $81,371 $78,344 $162,019 $154,431
------------------------ ------------------------
INTEREST EXPENSE
Interest on deposits....................................................... $25,857 $24,383 $51,517 $47,959
Interest on federal funds purchased and securities
sold under repurchase agreements..................................... 3,903 5,463 7,510 10,908
------------------------ ------------------------
TOTAL.......................................................... $29,760 $29,846 $59,027 $58,867
------------------------ ------------------------
Net interest income........................................................ $51,611 $48,498 $102,992 $95,564
Provision for possible loan losses......................................... - 121 74 429
------------------------ ------------------------
Net interest income after provision for possible loan losses............... $51,611 $48,377 $102,918 $95,135
------------------------ ------------------------
NON-INTEREST INCOME
Gain on sale of securities................................................. $ - $ - $ - $ -
Other non-interest income.................................................. 17,374 15,099 30,592 26,497
------------------------ ------------------------
TOTAL.......................................................... $17,374 $15,099 $30,592 $26,497
------------------------ ------------------------
NON-INTEREST EXPENSE
Salaries and employee benefits............................................. $23,905 $21,457 $45,810 $42,093
Occupancy of bank premises, net............................................ 3,462 3,302 6,815 6,514
Other non-interest expenses................................................ 19,813 16,444 36,402 33,289
------------------------ ------------------------
TOTAL.......................................................... $47,180 $41,203 $89,027 $81,896
------------------------ ------------------------
Income before income taxes................................................. $21,805 $22,273 $44,483 $39,736
Income tax expense......................................................... 7,291 7,134 14,646 12,886
------------------------ ------------------------
Net income................................................................. $14,514 $15,139 $29,837 $26,850
======================== ========================
Earnings per share......................................................... $ 0.65 $ 0.68 $ 1.33 $ 1.21
Earnings per share, assuming dilution...................................... $ 0.64 $ 0.67 $ 1.31 $ 1.20
Weighted average shares outstanding ....................................... 22,501,270 22,309,890 22,462,919 22,240,570
Weighted average shares, assuming dilution................................. 22,770,599 22,485,193 22,745,607 22,415,895
The accompanying notes are an intergral part of these financial statements.
</TABLE>
Page 4 of 22 Pages
<PAGE>
<TABLE>
<CAPTION>
WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the Six Months Ended
June 30,
1998 1997
--------------------------
Cash flows from operating activities:
<S> <C> <C>
Net income............................................................................. $ 29,837 $ 26,850
Adjustments to reconcile net income to cash provided by (used in)
operating activities:
Depreciation........................................................................ 7,564 6,622
Provision for possible loan losses.................................................. 74 429
Provision for losses on OREO and other problem assets............................... 62 75
Amortization of intangible assets and unearned restricted stock
compensation..................................................................... 2,680 2,019
Amortization of premiums and discounts on investment securities, net................ 536 1,698
Net gains on sales of OREO and other property....................................... (1,683) (2,138)
Deferred tax expense (benefit)...................................................... 2,314 (1,290)
Increase (Decrease) in accrued income taxes......................................... 1,890 1,926
(Increase) Decrease in accrued income receivable and other assets................... (786) 401
Increase (Decrease) in accrued expenses and other liabilities....................... (105) 1,288
--------------------------
Net cash provided by operating activities........................................... $ 42,383 $ 37,880
--------------------------
Cash flows from investing activities:
Proceeds from maturities of investment securities held to maturity..................... $ 293,617 $ 417,576
Proceeds from maturities of investment securities available for sale................... 43,211 71,184
Purchases of investment securities held to maturity.................................... (169,628) (375,292)
Purchases of investment securities available for sale.................................. (4,928) (20,942)
Net (increase) decrease in loans....................................................... (50,417) (123,355)
Net (increase) decrease in federal funds sold and short-term investments............... (51,011) 64,258
Proceeds from sales of OREO and other property......................................... 3,181 3,451
Capital expenditures................................................................... (15,203) (15,644)
Other.................................................................................. (2,219) (403)
--------------------------
Net cash provided by (used in) investing activities.................................... $ 46,603 $ 20,833
--------------------------
Cash flows from financing activities:
Net increase (decrease) in non-interest-bearing demand deposits........................ $ (42,603) $ 3,898
Net increase (decrease) in interest-bearing deposits other than
time deposits....................................................................... 3,217 (18,882)
Net increase (decrease) in time deposits............................................... (50,981) 28,839
Net increase (decrease) in federal funds purchased and securities sold
under repurchase agreements......................................................... 19,863 (59,174)
Repurchase of common stock for treasury............................................... (536) (497)
Sale of common stock under employee savings plan and dividend
reinvestment plan................................................................... 3,651 1,964
Exercise of stock options, including tax benefits on exercise.......................... 1,341 460
Options returned to fund employee tax liability on exercise............................ (620)
Tax benefit from lapse of stock restrictions........................................... 373
Dividends paid, including pooled entities.............................................. (12,646) (10,878)
--------------------------
Net cash provided by (used in) financing activities.................................... $ (78,941) $ (54,270)
--------------------------
Net increase (decrease) in cash and cash equivalents...................................... $ 10,045 $ 4,443
Cash and cash equivalents at the beginning of the period.................................. 234,625 262,299
--------------------------
Cash and cash equivalents at the end of the period........................................ $ 244,670 $ 266,742
==========================
Interest income received.................................................................. $ 163,998 $ 151,415
==========================
Interest expense paid..................................................................... $ 59,526 $ 58,750
==========================
Net federal income taxes paid............................................................. $ 12,139 $ 11,624
==========================
The accompanying notes are an integral part of these financial statements.
</TABLE>
Page 5 of 22 Pages
<PAGE>
WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO 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") and Whitney Community Development
Corporation. From 1994 through 1997, the Company operated as a multi-bank
holding company. In January 1998, the Company merged all of its separately
chartered banking operations into Whitney National Bank.
RESTATEMENT AND RECLASSIFICATION
Prior period information has been restated to give effect to the two
mergers completed during the second quarter of 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.
Page 6 of 22 Pages
<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 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 premitted 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.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits." While this statement amends
and expands the disclosure requirements of existing accounting standards, it
does not address accounting measurement or recognition and will not impact the
Company's financial position or results of operations. The expanded disclosures
will first be presented in the Company's annual report for the year ending
December 31, 1998.
In 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information." SFAS No. 131 establishes standards for
reporting information about a company's operating segments and requires that
reportable segments be identified based on how management organizes the
company's operations and related financial information for decision-making
purposes and performance assessment. The provisions of SFAS No. 131 are
effective for 1998, but the required disclosures need not be provided in interim
financial statements during the initial year.
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 quarterly and year to
date periods ended June 30, 1998 and 1997, comprehensive income was comprised of
the following:
<TABLE>
<CAPTION>
Second Quarter Year to Date
1998 1997 1998 1997
--------------------------- ----------------------------
<S> <C> <C> <C> <C>
Net income for the period $ 14,514 $ 15,139 $ 29,837 $ 26,850
Other comprehensive income:
Unrealized holding gain (loss)
on securities available for sale,
net of tax (154) 637 (52) (99)
Amortization of unrealized holding (gain)
loss at transfer of securities from
available for sale to held to maturity,
net of tax 33 37 67 65
Reclassification adjustment, net of tax, for
held to maturity securities amortization
included in net income (33) (37) (67) (65)
--------- --------- -------- ---------
Total comprehensive income for the period $ 14,360 $ 15,776 $ 29,785 $ 26,751
========= ========= ======== =========
</TABLE>
Page 7 of 22 Pages
<PAGE>
3) MERGERS AND ACQUISITIONS
In June 1998, the Bank entered into an agreement to purchase
substantially all of the operations of eight branches of The First National Bank
of Lake Charles, a former subsidiary of First Commerce Corporation, which
recently merged with Banc One Corporation. These eight branches, all of which
are located in or near Lake Charles in southwest Louisiana, have approximately
$43 million of customer loans and $159 million of deposits The Bank's
acquisition cost will include an amount calculated at 15.25% of the deposits
assumed or approximately $24 million based on recent deposit information.
Intangible assets recognized in this purchase transaction will be amortized
over the underlying useful lives, currently estimated at an average of
approximately fifteen years. This transaction is scheduled for September
1998 and is subject to regulatory approvals and other customary conditions to
closing.
In March 1998, the Company announced that it had entered into a
definitive agreement to merge with The First National Bancorp of Greenville,
Inc., the holding company for The First National Bank of Greenville, Alabama,
which has three branches and approximately $117 million in assets. The merger is
subject to approval by First National Bancorp shareholders and other customary
conditions to closing. The Company anticipates closing this transaction in
August 1998. This transaction will be accounted for as a pooling of interests.
During the second quarter of 1998, the Company completed two merger
transactions, one with Louisiana National Security Bank ("LNSB") of
Donaldsonville, Louisiana in May and one with Meritrust Federal Savings Bank
("Meritrust") of Thibodaux, Louisiana in April. LNSB operated three banking
offices in Ascension Parish, Louisiana and had total assets of approximately
$105 million, $52 million in loans, total deposits of $93 million and
shareholders' equity of $12 million. This transaction was priced at
approximately $32 million and LNSB shareholders received approximately 0.5
million shares of Company common stock at the closing. Meritrust operated eight
banking offices in southeast Louisiana and had total assets of approximately
$234 million, $121 million in loans, total deposits of $210 million and
shareholders' equity of $20 million. The price of this transaction was
approximately $60.5 million and Meritrust shareholders received approximately
1.1 million Company shares at the closing. Each of these mergers has been
accounted for as a pooling of interests.
In April 1997, the Company merged with Merchants Bancshares, Inc., the
parent of Merchants Bank & Trust Company ("MB&T") of Gulfport, Mississippi.
MB&T, with operations along the Mississippi Gulf Coast, had total assets of
approximately $208 million, deposits of $188 million and shareholders' equity of
$17 million. The transaction was priced at approximately $52 million and
Merchants Bancshares shareholders received approximately 1.45 million shares of
Company common stock at the closing. The merger was accounted for as a pooling
of interests.
In February 1997, the Company completed a merger with First National
Bankshares, Inc. ("FNB"), the parent of First National Bank of Houma ("FNBH").
FNBH, with operations in Terrebonne Parish, Louisiana, had total assets of
approximately $235 million, $126 million in loans, total deposits of $210
million and shareholders' equity of $18 million. The price of this transaction
was $41 million. FNB shareholders received approximately 1.13 million shares of
Whitney Holding Corporation common stock at the closing. This merger was also
accounted for as a pooling of interests.
Page 8 of 22 Pages
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SUMMARY
Whitney Holding Corporation earned $14.5 million for the second quarter
of 1998 or $0.65 per share. For the second quarter of 1997, the Company earned
$15.1 million or $0.68 per share. Excluding the effect of merger-related
administrative and conversion expenses of $2.7 million after tax, earnings for
the second quarter were $17.2 million or $0.76 per share in 1998 and $15.4
million or $0.69 per share in 1997. Year to date through June 30, 1998, the
Company earned $29.8 million or $1.33 per share compared with $26.9 million or
$1.21 per share for the same period in 1997. Excluding the effect of
merger-related expenses, earnings for the six month periods in 1998 and 1997
were $32.6 million or $1.45 per share and $27.9 million or $1.26 per share,
respectively.
Taxable-equivalent net interest income increased $3.0 million or 6.1%
between the second quarters of 1997 and 1998, and the taxable-equivalent net
interest margin increased to 4.95% from 4.85% between these periods. Noninterest
income improved by $2.3 million or 15.1% in the second quarter of 1998 from the
same period in 1997, while non-interest expense, including all merger-related
expenses, increased $6.0 million or 14.5% between these periods.
For the first six months of 1998, taxable-equivalent net interest
income increased $7.3 million or 7.4% from the comparable prior-year period. The
year to date taxable-equivalent net interest margin also increased, from 4.82%
in 1997 to 5.00% in 1998. Non-interest income for the six months ended June 30,
1998 increased $4.1 million or 15.5% over the same period in 1997. Year to date
non-interest expense for 1998, including all merger-related expenses, increased
$7.1 million or 8.7% over 1997.
The following compares the Company's annualized return on average total
assets and its return on average shareholders' equity for the three month and
six month periods ended June 30, 1998 and 1997.
1998 1997
------ ------
Return on average assets:
Second quarter -
Total return 1.25% 1.35%
Return before merger expenses 1.47% 1.37%
Year to date -
Total return 1.29% 1.21%
Return before merger expenses 1.41% 1.25%
Return on average shareholders' equity:
Second quarter -
Total return 10.93% 12.53%
Return before merger expenses 12.92% 12.73%
Year to date -
Total return 11.44% 11.28%
Return before merger expenses 12.49% 11.73%
For the second quarter of 1998, average earning assets were $4.27
billion, a net increase of $164 million or 4.0% from $4.10 billion in the second
quarter of 1997. For the six-month period ended June 30, 1998, average earning
assets grew to $4.24 billion from $4.09 billion for the same period in 1997, a
net increase of $150 million or 3.7%. Average loans outstanding grew $311
million or 12% between the second quarters of 1997 and 1998 and $320 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 total average
investment in securities in 1998 decreased $278 million for the second quarter
and $250
Page 9 of 22 Pages
<PAGE>
million for the year to date period as compared to 1997. At June 30, 1998,
earning assets totalled $4.19 billion compared to $4.25 billion at December 31,
1997.
Average total deposits increased $227 million or 6.4% to $3.78 billion
in the second quarter of 1998 compared to $3.55 billion in the second quarter of
1997. For the year to date period, average deposits grew $232 million or 6.6% in
1998 compared to the same period in 1997. Total deposits at June 30, 1998 were
$3.74 billion, a small decrease from the $3.83 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
$235 million or 59% for the second quarter of 1998 and $201 million or 52% for
the year to date period when compared to 1997.
Non-performing assets increased $1.6 million in the first six months of
1998 from year end 1997 to $15.9 million at June 30, 1998. The quarter-end total
was $1.6 million or 9% below the level of non-performing assets at June 30,
1997. The reserve for possible loan losses was $43.1 million on June 30, 1998,
an amount which represented 378% of total nonaccruing loans and 1.50% of total
loans. At year end 1997, the reserve coverage was 482% of nonaccruing loans and
1.57% of total loans.
On May 27, 1998 the Company declared a second quarter dividend of $0.30
per share of common stock, payable July 1, 1998. Year to date the Company has
declared dividends of $0.60 per share of common stock. This is a 7.1% increase
over the $0.56 dividend declared by the Company in the first six months of 1997.
FINANCIAL CONDITION
Loans
The Company continued to increase its loans outstanding in the second
quarter of 1998, although the overall rate of growth has decelerated in
comparison to the prior year's performance. Average loans grew to $2.82 billion
in 1998 or an increase of $311 million or 12% over the $2.51 billion outstanding
in the same period of 1997. Year to date, average loans increased $320 million
or 13% in 1998 compared to the average for the first six months of 1997. Total
loans outstanding of $2.87 billion at June 30, 1998 were $48 million above the
total at year end 1997. The loan growth between these periods reflects both the
Company's expansion into Gulf Coast markets and the continued 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 experienced growth from the end of the second
quarter of 1997 to the end of the second quarter of 1998. Loans secured by
commercial and other non-retail residential mortgage loans increased
approximately $152 million or 22%. 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 $105 million or
21% 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 $47 million or 4.4% 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, increased $6 million or approximately 2.2%.
Deposits and Short-Term Borrowings
The Company's average total deposits increased $227 million or 6.4% in
the second quarter of 1998 and $232 million or 6.6% for the first six 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 $91 million or 9.5%
for the second quarter and $85
Page 10 of 22 Pages
<PAGE>
million or 8.8% 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.
Table 1 also shows that average interest-bearing deposits have
increased $136 million or 5.2% between the second quarter of 1997 and 1998 and
$147 million or 5.7% between the year to date periods. Second quarter average
savings, NOW and money market account deposits increased a net $123 million or
9.3% between 1997 and 1998. For the first six months of 1998, the net increase
in these deposit categories from their 1997 levels was $113 million or 8.3%. 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 $201 million or 56% in 1998's
second quarter and $178 million or 51% year to date as compared to 1997. Between
1997 and 1998, average regular savings deposits decreased $39 million for both
the quarter and year to date periods, a decrease of approximately 7.3%. Average
NOW account deposits were also lower in 1998 as compared to 1997, decreasing
approximately $36 million or 7.6% for the second quarter and $26 million or 5.6%
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 increase on
average of approximately $9.0 million or 0.7% for the second quarter of 1998 and
$34 million or 2.8% year to date compared to the prior year periods. Within this
category, core deposits decreased $38 million for the quarter and $40 million or
5.5% year to date while other time deposits had a quarterly increase of $47
million and a year to date increase of $75 million or 16%. The increase in other
time deposits in 1998 resulted primarily from the solicitation of collateralized
public fund deposits as an alternative to broker 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 as well as 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 $105 million or 24% for the second quarter of
1998 and $121 million or 28% 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 $130 million for the second quarter and $79 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 $235 million or 59% for the
second quarter and $201 million or 52% year to date in 1998 compared to the same
periods in 1997.
Investment in Securities
The Company's total investment in securities decreased $163 million to
$1.24 billion at June 30, 1998 compared to $1.41 billion at December 31, 1997.
The average total investment securities portfolio decreased $278 million or 18%
between the second quarter of 1997 and the second quarter of 1998 and $250
million or 16% between the year to date periods. Funds provided by maturing
investment securities, in particular U. S. Treasury securities, have been used
to partially satisfy increased loan demand in recent years. Also in recent
years, the Company has gradually used its reinvestment opportunities to 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.
Page 11 of 22 Pages
<PAGE>
The weighted-average expected maturity of the overall portfolio of
securities was 41 months at June 30, 1998 as compared to 38 months at June 30,
1997. As is shown in Table 1, the weighted-average taxable-equivalent portfolio
yield increased 20 basis points to 6.57% for the second quarter of 1998 and 24
basis points to 6.56% 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 8.6% of the total
investment portfolio at June 30, 1998 compared to 10% at year end 1997. The net
unrealized gains or losses on these securities are reported, net of tax, as a
separate component of shareholders' equity. The net unrealized gain was
approximately $1.0 million at June 30, 1998 and $1.1 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 included net of tax as a component
of shareholders' equity, were insignificant.
Bank Premises and Equipment
The net investment in bank premises and equipment at June 30, 1998 of
$152 million represents a $7 million increase from the level at year end 1997
and a $17 million or 13% increase from June 30, 1997. In recent years and
continuing into 1998, the Company 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 June 30, 1997 and June 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 June 30, 1998, an
additional ten 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 $15.9 million at June 30, 1998 from $14.3 million on December 31,
1997. The 1998 quarter end total is $1.6 million or 9.1% below the level of
non-performing assets at June 30, 1997. The Company recovered $2.2 million of
previously charged-off loans in the second quarter of 1998 and $3.8 million year
to date through June 30, 1998. As is shown in Table 3 on page 19, over the same
periods the Company identified $2.0 million and $5.0 million, respectively, of
loans to be charged off as uncollectible against the reserve for possible loan
losses, resulting in a net recovery for the second quarter of $0.2 million and a
net charge-off for the first six months of $1.2 million. In 1997, the Company
had a net recovery in the second quarter of $0.7 million. Charge-offs and
recoveries in 1997 were equal over the six 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 378% of nonaccruing loans and 326% of total
non-performing loans at June 30, 1998. At year end 1997 this reserve coverage
was 482% of nonaccruing loans and 395% of non-performing loans. The reserve for
possible loan losses represented 1.50% of total loans at June 30, 1998 and 1.57%
at December 31, 1997. 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 market conditions, additional loss
provisions may be recorded in future periods.
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 $1.5 million for the first six months of 1998
compared to $0.4 million for the first six months of 1997. The majority of the
1998 income is the result of gains on sales of
Page 12 of 22 Pages
<PAGE>
acreage near Berwick, Louisiana and in Livingston Parish, Louisiana. Future
dispositions of these assets may result in the recognition of substantial 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 increased between
December 31, 1997 and June 30, 1998 and all ratios continued well in excess of
the minimum requirements. The increases between these dates are the result of
growth in regulatory capital through retained earnings coupled with a relatively
small increase in total risk-weighted assets.
<TABLE>
<CAPTION>
Minimum Minimum for
June 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 15.56% 15.12% 4.00% n/a
Whitney National Bank 15.25% 14.93% 4.00% 6.00%
Total risk-based capital ratio:
Company 16.81% 16.39% 8.00% n/a
Whitney National Bank 16.50% 16.18% 8.00% 10.00%
Tier 1 leverage capital ratio:
Company 11.20% 10.66% 4.00% n/a
Whitney National Bank 10.97% 10.49% 4.00% 5.00%
Total risk-weighted assets:
Company $3,314,000 $3,263,000
Whitney National Bank $3,312,000 $3,258,000
</TABLE>
Page 13 of 22 Pages
<PAGE>
RESULTS OF OPERATIONS
Net Interest Income
Taxable-equivalent net interest income in 1998 increased $3.0 million
or 6.1% for the second quarter and $7.3 million or 7.4% year to date when
compared to the same periods in 1997. The net interest margin increased to 4.95%
for the second quarter and 5.00% for the first six months in 1998 compared to
4.85% for the second quarter and 4.82% year to date 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 $5.0 million or 9.3%
for the second quarter and $11.6 million or 11.0% for the first six 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, growth which totalled
$311 million or 12% for the second quarter and $320 million or 13% year to date.
The increase in interest income from loan growth was partially offset by the
impact of a decrease in the effective loan yields in 1998 as compared to 1997.
For the second quarter, the effective yield decreased 24 basis points to 8.40%
in 1998 from 8.64% in 1997. For the year to date period, the effective yield
decreased 15 basis points to 8.47% in 1998 from 8.62% in 1997. The decrease in
the effective loan yield, which resulted partly from the portfolio performance
of recently merged entities, is also consistent with a relatively stable market
interest rate environment that continues to afford borrowers favorable repricing
opportunities and with active competition among lenders to satisfy the loan
demand of a healthy market area economy.
Taxable-equivalent interest income on investments securities for 1998's
second quarter decreased $3.8 million or 15.2% from the second quarter of 1997.
For the first six months of 1998, the decrease in investment income was $6.2
million or 12.6%. These decreases are consistent with the reduction in the
average investment in securities between 1997 and 1998, which totalled $278
million or 17.8% for the second quarter and $250 million or 15.9% for the year
to date period. The effective investment portfolio average yield increased 20
basis points to 6.57% for the second quarter of 1998 and 24 basis points to
6.56% for the first six 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 will likely experience some compression if current market conditions
persist.
The net increase in total taxable-equivalent interest income between
1997 and 1998 was $3.0 million or 3.7% for the second quarter and $7.4 million
or 4.7% for the first six months. The overall effective earning-asset yield in
the second quarter of 1998 was 7.74% or 2 basis points below the 7.76% yield in
1997, and the year to date effective yield in 1998 was 7.79%, up 7 basis points
from 1997's yield of 7.72%.
Interest expense was little changed between 1997 and 1998, decreasing
$0.1 million or 0.3% for the second quarter and increasing $0.2 million or 0.3%
year to date. Total interest-bearing liabilities increased on average a net $31
million or 1.0% in the second quarter of 1998 and $26 million or 0.9% year to
date compared to 1997. The increase of $136 million in average interest-bearing
deposits for the second quarter of 1998 and $147 million year to date were
largely offset by decreases in average short-term borrowings of $105 million for
the second quarter of 1998 and $122 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 moderate increase in the overall cost
of funds for interest-bearing deposits, which rose 3 basis points to 3.81% for
the second quarter of 1998 and 6 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 28 basis points to 4.82% in the second quarter of 1998 and 24 basis
points to 4.76% year to date from the comparable 1997 periods. The overall cost
of funds rate on interest-bearing liabilities in 1998 was 3.92% for both the
second quarter and year to date periods, little changed from 3.97% in the second
quarter of 1997 and 3.94% year to date in 1997.
Page 14 of 22 Pages
<PAGE>
Other Income and Expense
Non-interest income increased $2.3 million or 15.1% for the second
quarter and $4.1 million or 15.5% 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 $4.5 million in the second quarter
of 1998 compared to $3.8 million in 1997. Year to date, this income totalled
approximately $4.8 million in 1998 and $4.4 million in 1997. Excluding this
income, second quarter non-interest income was $12.9 million in 1998 and $11.3
million in 1997, an increase of $1.6 million or 13.9%. Year to date non-interest
income, excluding nonrecurring items, was $25.8 million in 1998 compared to
$22.1 million for the same period in 1997, an increase of $3.7 million or 16.6%.
Income from service charges on deposit accounts, which accounted for
approximately half of recurring non-interest income, increased in each of these
periods, by $0.1 million or 2.3% in the second quarter of 1998 as compared to
1997 and $0.6 million or 5.2% for the year to date period.
Between 1997 and 1998, fee income from credit card transaction
operations increased approximately $0.7 million or 37% for the second quarter
and $1.3 million or 38% year to date, reflecting both economic conditions as
well as successful marketing efforts. Successful marketing throughout an
expanding market area is also reflected in the increase in trust services income
in 1998 of $0.4 million or 38% for the quarter and $1.0 million or 45% 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 $0.3 million or 84% for the second quarter of 1998 and
$0.5 million or 75% 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.
Most other categories of non-interest income registered solid increases
in the second quarter of 1998 compared with 1997. These include a 49% increase
in fees for investment services provided to correspondent banks and other
customers and an 8.1% increase in fee income from the Company's expanding ATM
network. Year to date in 1998, investment service fee income has increased 44%
over 1997 and ATM fee income has increased 10%.
Non-interest operating expenses, excluding merger-related expenses,
were $43.8 million for the second quarter of 1998 and $85.6 million for the year
to date period. These totals represent increases over 1997 of $2.9 million or
7.1% for the quarter and $4.9 million or 6.1% 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 $22.8 million for the second quarter of 1998 and $44.7
million for the year to date period. These amounts represent increases of $1.4
million or 6.7% for the quarter and $2.9 million or 7.1% year to date when
compared to the same periods in 1997. Executive incentive compensation increased
approximately $0.6 million for the second quarter in 1998 and $1.3 million year
to date compared to the same periods in 1997. Excluding executive incentive
compensation, salaries and benefits expense increased $0.8 million for the
second quarter of 1998 and $1.6 million year to date compared to 1997, or 4.1%
for each period. 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 employee benefit and incentive
programs.
Non-interest expenses other than personnel-related expenses, again
excluding merger-related expenses, increased $1.5 million or 7.6% for the second
quarter of 1998 and $2.0 million or 5.1% year to date when compared to the same
periods in 1997.
Occupancy expense increased $0.2 million or 4.6% for the second quarter
of 1998 and $0.3 million or 4.5% year to date as compared to the same periods in
1997. These increases are mainly attributable to 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 $1.3 million or 8.1% for the
second quarter of 1998 and $1.7 million or 5.3% year to date when compared to
the same periods in 1997. Credit card transaction processing expenses increased
$0.4 million for the second quarter and $0.8 million year to date in 1998. These
increases of approximately 40% between these periods 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, to establish and maintain voice and data communication links
throughout
Page 15 of 22 Pages
<PAGE>
the Company's expanded service area, to replace and upgrade the branch delivery
system, including providing necessary training, and to install a standardized
office automation network. 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.
Non-interest expense in 1998 includes 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. These costs have not been
material and are not expected to be material in the future. 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. The Company has initiated
certain year 2000 compliance testing and expects to complete its test procedures
this year. The task force's objective is to have year 2000 issues satisfactorily
addressed and substantially completed by the end of 1998. In addition, the
Company is addressing year 2000 issues and their potential impact on business
operations with third-party suppliers and customers to reduce the risk that such
matters could have on the Company's future operations.
The Company and its merger candidates 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 $3.4 million in merger-related expenses for the second
quarter as compared to $0.4 million in the prior year. Year to date
merger-related expenses were $3.5 million in 1998 and $1.3 million in 1997.
Income Taxes
The Company provided for income taxes at an overall effective rate of
33.4% for the second quarter in 1998 and 32.9% year to date compared to 32.0%
and 32.4%, respectively, for the same periods in 1997. The effective rates in
each period differ from the statutory rate of 35% primarily because of the tax
exempt income earned on investments in state and municipal obligations. The
higher effective rates in 1998 reflect in large part the impact of
non-deductible merger-related expenses.
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 June 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 show 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
Page 16 of 22 Pages
<PAGE>
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 5 provide a
summarized view of the Company's uses and sources of liquidity for the six-month
periods ended June 30, 1998 and 1997. The Company generated $42 million in
liquid funds from operations for the first six months of 1998 and paid total
dividends of $13 million. A major source of liquid funds during the first six
months of 1998 was unreinvested maturities of investment securities totalling
$162 million. Much of the funds provided from investment maturities served to
fund loan growth of $50 million and to increase short-term liquidity as shown by
the $51 million increase in federal funds sold and short-term investments. This
increase in liquidity is expected to support near-term loan growth.
Total deposits, which are discussed in more detail below, decreased
slightly during the first six months of 1998, using $90 million of funds during
this period. At the same time, short-term borrowings of federal funds and sales
of securities under repurchase agreements increased $20 million.
Average core deposits, defined as all deposits other than time deposits
of $100,000 or more, increased by $158 million between the first six months of
1997 and 1998. Growth in average non-interest-bearing demand deposits of $85
million in 1998 and net growth of $113 million in average interest-bearing
checking, savings and money market account deposits for the same period was
offset by a $40 million decrease in core time deposits. Other time deposits
increased on average by $74 million for the first six months in 1998 as compared
to 1997, primarily as an alternative source of funds to short-term repurchase
agreement borrowings.
As of June 30, 1998, the portfolio of investment securities held to
maturity was expected to generate approximately $434 million of principal cash
flow within one year. An additional $107 million of investment securities was
classified as available for sale at the end of 1998's second quarter, although
management's determination of this classification does not derive primarily from
liquidity considerations.
The Bank had approximately $1.2 billion in unfunded loan commitments
and lines of credit outstanding at June 30, 1998, unchanged from the 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
Certain statements in this form 10-Q regarding future expectations may
be regarded as "forward-looking statements" within the meaning of the Securities
Litigation Reform Act. Although the Company believes that its expectations are
based on reasonable assumptions, it can give no assurance that its goals will be
achieved. Important factors that could cause actual results to differ materially
from those forward-looking statements include the timing and extent of changes
in interest rates, actions of government regulators and other economic factors.
Page 17 of 22 Pages
<PAGE>
<TABLE>
<CAPTION>
TABLE 1
WHITNEY HOLDING CORPORATION
ANALYSIS OF CHANGES IN INTEREST INCOME AND INTEREST EXPENSE
(dollars in thousands, unaudited)
SECOND QUARTER ENDED JUNE 30, YEAR-TO-DATE PERIOD ENDED JUNE 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
--------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans (tax
equivalent
(1),(2).......$2,819,342 $59,066 8.40 % $2,507,781 $54,038 8.64 % $2,790,576 $117,236 8.47 % $2,470,732 $105,628 8.62 %
--------------------------------------------------------------------------------------------------------------------
U. S. Treasury
securities.... $253,265 $4,143 6.56 % $545,850 $8,048 5.91 % $276,327 $8,918 6.51 % $561,947 $16,344 5.87 %
U.S. government
agency
securities.... 429,123 6,988 6.51 541,444 8,592 6.35 458,442 14,767 6.44 532,874 16,805 6.31
Mortgage-backed
securities.... 464,420 7,235 6.23 321,864 5,173 6.43 446,405 14,072 6.30 320,258 10,199 6.37
State and
municipal
securities
(tax
equivalent)
(1)........... 129,607 2,609 8.05 145,109 2,938 8.10 132,530 5,336 8.05 148,421 6,004 8.09
Federal Reserve
stock and other
corporate
securities.... 9,167 123 5.37 9,440 134 5.68 9,348 258 5.52 9,068 233 5.14
--------------------------------------------------------------------------------------------------------------------
Total
investment in
securities
(1,3)........ $1,285,582 $21,098 6.57 % $1,563,707 $24,885 6.37 % $1,323,052 $43,351 6.56 % $1,572,568 $49,585 6.32 %
--------------------------------------------------------------------------------------------------------------------
Federal funds
sold and
short term
investments... 163,854 2,272 5.56 % 33,245 560 6.76 % 130,738 3,611 5.57 % 50,991 1,552 6.14 %
--------------------------------------------------------------------------------------------------------------------
Total
interest-
earning
assets......$4,268,778 $82,436 7.74 % $4,104,733 $79,483 7.76 % $4,244,366 $164,198 7.79 % $4,094,291 $156,765 7.72 %
--------------------------------------------------------------------------------------------------------------------
Cash and due
from financial
institutions.. 215,694 216,262 218,539 218,517
Bank premises
and equipment,
net........... 149,162 131,962 147,239 129,898
Other real
estate owned,
net........... 2,096 4,451 2,399 4,589
Other assets.... 80,401 86,717 81,149 87,009
Reserve for
possible
loan losses... (43,442) (43,738) (43,845) (43,946)
---------- ---------- ---------- ----------
Total assets..$4,672,689 $4,500,387 $4,649,847 $4,490,358
========== ========== ========== ==========
LIABILITIES
Savings
deposits...... $495,193 $3,017 2.44 % $534,304 $3,576 2.68 % $492,975 $5,975 2.44 % $531,476 $7,049 2.67 %
NOW and MMDA
deposits...... 992,537 7,131 2.88 826,797 5,193 2.52 976,233 13,753 2.84 824,570 10,069 2.46
Time deposits... 1,232,040 15,709 5.11 1,223,030 15,614 5.12 1,250,512 31,789 5.13 1,216,251 30,841 5.11
--------------------------------------------------------------------------------------------------------------------
Total
interest-
bearing
deposits....$2,719,770 $25,857 3.81 % $2,584,131 $24,383 3.78 % $2,719,720 $51,517 3.82 % $2,572,297 $47,959 3.76 %
--------------------------------------------------------------------------------------------------------------------
Federal funds
purchased and
repurchase
agreements.... 324,875 3,903 4.82 % 429,555 5,463 5.10 % 318,368 7,510 4.76 % 439,919 10,908 5.00 %
--------------------------------------------------------------------------------------------------------------------
Total
interest-
bearing
liabilities.$3,044,645 $29,760 3.92 % $3,013,686 $29,846 3.97 % $3,038,088 $59,027 3.92 % $3,012,216 $58,867 3.94 %
--------------------------------------------------------------------------------------------------------------------
Demand deposits,
non-interest
bearing....... 1,057,798 966,359 1,048,380 963,562
Other
liabilities... 37,740 35,595 37,476 34,419
Shareholders'
equity........ 532,506 484,747 525,903 480,161
---------- ---------- ---------- ----------
Total
liabilities
and
shareholders'
equity......$4,672,689 $4,500,387 $4,649,847 $4,490,358
========== ========== ========== ==========
Net interest
income/margin
(tax
equivalent)
(1)......... $52,676 4.95 % $49,637 4.85 % $105,171 5.00 % $97,898 4.82 %
======= ====== ======= ====== ======== ====== ======= ======
<FN>
(1) Tax equivalent amounts are calculated using a marginal federal income tax rate of 35%.
(2) Average balance includes nonaccruing loans of $10,427 and $9,793 for the quarterly periods in 1998 and 1997, respectively
and $9,685 and $9,678 for the year-to-date periods in 1998 and 1997, respectively.
(3) Average balance excludes unrealized gain or loss on securities available for sale.
</FN>
</TABLE>
Page 18 of 22 Pages
<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
---------------- --------------------------------------
2nd 1st 4th 3rd 2nd 1st
---------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Loans accounted for on a nonaccrual basis...................... $11.4 $ 8.1 $ 9.2 $ 7.3 $ 9.6 $10.2
Restructured loans............................................. 1.8 1.8 2.0 2.7 3.3 2.8
---------------- --------------------------------------
Total non-performing loans..................................... $13.2 $ 9.9 $11.2 $10.0 $12.9 $13.0
---------------- --------------------------------------
Other real estate owned, net................................... 2.2 2.0 3.0 3.5 4.5 4.9
Other foreclosed assets........................................ 0.4 0.1 0.1 0.1 0.1 0.0
---------------- --------------------------------------
Total non-performing assets.................................... $15.9 $12.0 $14.3 $13.6 $17.5 $17.9
================ ======================================
Net gain on sales of OREO...................................... $ 0.0 $ 0.2 $ 0.0 $ 0.0 $ 0.0 $ 0.0
================ ======================================
Reserve for possible loan losses as a percent of:
Total nonaccruing loans..................................... 378% 533% 482% 594% 459% 426%
Total non-performing loans.................................. 326% 434% 395% 434% 343% 333%
Total loans................................................. 1.50% 1.55% 1.57% 1.63% 1.72% 1.77%
Non-performing loans as a percent of
total loans................................................. 0.46% 0.36% 0.40% 0.38% 0.50% 0.53%
Non-performing assets as a percent of
total assets................................................ 0.34% 0.26% 0.31% 0.30% 0.38% 0.40%
</TABLE>
<TABLE>
<CAPTION>
TABLE 3.
WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
RESERVE FOR POSSIBLE LOAN LOSSES
(by quarter, in millions)
1998 1997
---------------- --------------------------------------
2nd 1st 4th 3rd 2nd 1st
---------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Reserve balance, beginning of quarter.......................... $43.0 $44.3 $43.6 $44.2 $43.4 $43.8
Provision for possible loan losses:
Expense of providing loss reserves..................... - 0.1 0.1 - 0.1 0.3
Reduction of loss reserves............................. - - (2.8) -
Loans charged off.............................................. (2.0) (3.0) (2.4) (1.6) (1.9) (3.0)
Recoveries..................................................... 2.2 1.6 3.0 3.8 2.6 2.3
---------------- --------------------------------------
Reserve balance, end of quarter................................ $43.1 $43.0 $44.3 $43.6 $44.2 $43.4
================ ======================================
</TABLE>
Page 19 of 22 Pages
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders of Whitney Holding Corporation was
held on April 22, 1998, for the purpose of electing a board of directors, a
proposed amendment to increase the authorized number of shares of Common Stock
and approving the appointment of auditors. Proxies for the meeting were
solicited pursuant to Section 14(a) of the Securities and Exchange Act of 1934
and there was no solicitation in opposition to management's solicitations.
All of management's nominees for directors as listed in the proxy
statement were elected. The votes for each nominee are set forth below:
Shares
Voted Shares
FOR Withheld
--------------------------------------------
E. James Kock, Jr. 15,618,837 640,938
R. King Milling 15,643,342 616,433
John G. Phillips 15,615,961 643,814
The appointment of Arthur Andersen LLP as independent auditor was
approved by the following vote:
Shares Shares
Voted Voted Shares
FOR AGAINST ABSTAINING
-------------------------------------------------------------
16,110,647 32,943 116,185
The amendment to increase the authorized number of shares of Common
Stock was approved by the following vote:
Shares Shares
Voted Voted Shares Shares
FOR AGAINST ABSTAINING NOT Voted
-----------------------------------------------------------------------------
14,002,276 2,109,916 147,583 4,571,738
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 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)
Page 20 of 22 Pages
<PAGE>
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)
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)
Page 21 of 22 Pages
<PAGE>
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)
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
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/ Edward B. Grimball
--------------------------------------
Edward B. Grimball
Executive Vice President and
Chief Financial Officer
August 13, 1998
-------------------------------------
Date
Page 22 of 22 Pages
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 244,670
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 72,562
<TRADING-ASSETS> 547
<INVESTMENTS-HELD-FOR-SALE> 106,615
<INVESTMENTS-CARRYING> 1,138,067
<INVESTMENTS-MARKET> 1,153,471
<LOANS> 2,872,166
<ALLOWANCE> 43,087
<TOTAL-ASSETS> 4,624,950
<DEPOSITS> 3,743,284
<SHORT-TERM> 309,466
<LIABILITIES-OTHER> 38,233
<LONG-TERM> 0
<COMMON> 2,800
0
0
<OTHER-SE> 531,167
<TOTAL-LIABILITIES-AND-EQUITY> 4,624,950
<INTEREST-LOAN> 116,859
<INTEREST-INVEST> 41,549
<INTEREST-OTHER> 3,611
<INTEREST-TOTAL> 162,019
<INTEREST-DEPOSIT> 51,517
<INTEREST-EXPENSE> 59,027
<INTEREST-INCOME-NET> 102,992
<LOAN-LOSSES> 74
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 89,027
<INCOME-PRETAX> 44,483
<INCOME-PRE-EXTRAORDINARY> 29,837
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,837
<EPS-PRIMARY> 1.33
<EPS-DILUTED> 1.31
<YIELD-ACTUAL> 7.79
<LOANS-NON> 11,398
<LOANS-PAST> 4,414
<LOANS-TROUBLED> 1,826
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 44,279
<CHARGE-OFFS> 5,064
<RECOVERIES> 3,798
<ALLOWANCE-CLOSE> 43,087
<ALLOWANCE-DOMESTIC> 43,087
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
