Annual Report (Form 10-K), fiscal year 1993

ITEM 1: BUSINESS
Whitney Holding Corporation (the "Company") is a Louisiana bank holding company registered pursuant to the Bank Holding Company Act of 1956. The Company became an operating entity in 1962 with Whitney National Bank (the "Bank") as its only significant subsidiary. The Bank, which has its headquarters in Orleans parish, has been engaged in general banking business in the City of New Orleans since 1883.
The Bank engages in commercial and retail banking and in trust business, including the taking of deposits, the making of secured and unsecured loans, the financing of commercial transactions, the issuance of credit cards, the performance of corporate, pension and personal trust services, and safe deposit rentals. The Bank is also active as a correspondent for other banks. The Bank renders specialized services of different kinds in connection with all of the foregoing, and has thirty-eight domestic offices and one foreign office.
There is significant competition within the financial services industry in general as well as with respect to the particular financial services provided by the Bank. Within its market area, the Bank competes directly with several major banking institutions of comparable or larger size and resources as well as with various other smaller banking organizations and local and national "non-bank" competitors, including savings and loans, credit unions, mortgage companies, personal and commercial finance companies, investment brokerage firms, and registered investment companies (mutual funds).
All material funds of the Company are invested in the Bank. The Bank has a large number of customer relationships which have been acquired over a period of many years and is not dependent upon any single customer or upon a few customers, so the loss of any single customer or a few customers would not have a material adverse effect on the Bank or the Company. The Bank has customers in a number of foreign countries but the portion of revenue derived from these foreign customers is not a material portion of its overall revenues.
The Company and the Bank and their related operations are subject to federal, state and local laws applicable to banks and bank holding companies and to the regulations of the Board of Governors of the Federal Reserve System, the Comptroller of Currency and the Federal Deposit Insurance Corporation.
The Company does not believe that compliance with existing federal, state or local environmental laws and regulations will impose any material financial obligation on the Company or materially affect the realizable value of its assets.
ITEM 2:



ITEM 2: PROPERTIES
The Company owns no real estate in its own name. The Bank owns the fourteen-story Whitney National Bank Building at 228 St. Charles Avenue in New Orleans. The Bank occupies approximately one half of the 306,000 square feet in this building, and the balance is either leased to third parties or available to be leased. The Bank also owns the premises for twelve branches in Orleans parish, six branches in Jefferson parish, four branches in Lafayette parish, one branch in East Baton Rouge parish and three branches in St. Tammany parish, one of which is located on leased ground. None of these properties is subject to any significant encumbrances.
The Bank holds a variety of property interests acquired throughout the years in settlement of loans. Reference is made to Note 7 to the financial statements included in Item 8 for further information.
ITEM 3:

ITEM 3: LEGAL PROCEEDINGS
There are no material pending legal proceedings, other than routine litigation incidental to the business, to which the Company or its subsidiaries is a party or to which any of their property is a subject.
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PART II
ITEM 5:


ITEM 5: MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
a) The Company's stock price is reported on the National Association of Securities Dealers Automated Quotation (NASDAQ) system under the symbol WTNY. The following table shows the range of closing prices of the Company's stock for each calendar quarter of 1993 and 1992 as reported on the NASDAQ National Market System.
b) The approximate number of shareholders of record of the Company, as of March 1, 1994, is as follows:
c) During 1993 and 1992, the Company declared dividends as follows:
Per-share stock price and dividend information shown above has been adjusted where appropriate to give retroactive effect to the three-for-two stock splits that were effective February 22, 1993 and November 29, 1993.
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ITEM 6:

ITEM 6: SELECTED FINANCIAL DATA
Note: All share and per-share figures give effect to the three-for-two stock splits effective February 22, 1993 and November 29, 1993.
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ITEM 7:

ITEM 7: MANAGEMENTS'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SUMMARY
For 1993, the Company earned $76.4 million or $5.30 per share. These results include the effect of a $60.0 million reduction in the level of the reserve for possible loan losses, which on an after-tax basis contributed $39.5 million or $2.74 per share to net income for the year. Excluding the impact of the reserve reduction, the Company had after-tax earnings in 1993 of $36.9 million or $2.56 per share. This represents an increase of $16.7 million from the $20.2 million, or $1.41 per share, earned in 1992.
The increase in earnings in 1993 before the effect of the reduction in the reserve for possible loan losses was attributable both to higher net interest income and other non-interest income as well as to an overall reduction in non- interest expense. The impact of these factors was partly offset, however, by the absence in 1993 of any gains on sales of investment securities.
Non-performing assets decreased throughout 1993 to $49.9 million at December 31, 1993, down 55% from $111.2 million at December 31, 1992. The reserve for possible loan losses, after the $60 million reduction, was $44.5 million on December 31, 1993, an amount which represented 132% of non-performing loans and 4.6% of total loans. At year end 1992, the loan loss reserve was $98.6 million, or 140% of non-performing loans and 9.4% of total loans on that date.
In 1993, the Company continued to experience soft loan demand in the market area serviced by the Bank. Average gross loans outstanding totalled $952 million during 1993 compared with $1.125 billion in the previous year, a decrease of $173 million or 15%. Average total deposits, however, showed modest growth between 1993 and 1992, increasing $16 million to $2.415 billion. Deposit funds not needed for loans were redirected to the investment portfolio, which rose on average by $265 million or 21% from $1.282 billion in 1992 to $1.547 billion in 1993. Adding the significant reduction in non-performing assets, these year-to-year changes translated into a $103 million or 4.2% increase in average earning assets, excluding nonaccruing loans, to $2.556 billion in 1993 from $2.453 billion in 1992.
After reinstating its dividend in the fourth quarter of 1992, the Company declared dividends in each quarter of 1993, totalling $0.43 per share for the year. During 1993, the Company's Board of Directors twice approved three-for- two stock splits which were effective in February and November. All share and per-share data in this report on Form 10-K reflect the effect of these stock splits.
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AVERAGE BALANCE SHEETS - ---------------------- (in thousands)
FINANCIAL CONDITION
LOANS
Economic conditions in the Company's market area, which is primarily southern Louisiana and Mississippi, have in recent years slowed the overall demand for loans and have prompted efforts by many commercial loan customers to reduce their existing debt levels. Over this period, the Bank also consciously reduced its exposure to credits whose performance had been adversely affected by these economic conditions. The $173 million decrease in average loans outstanding during 1993 as compared to 1992 is largely a reflection of the prevailing economic conditions. The smaller $71 million decrease in gross loans outstanding at December 31, 1993 as compared to the prior year end is influenced by seasonal fluctuations in the short-term credit needs of certain industries serviced by the Bank.
During 1993, the Bank has been expanding its lending resources and products and plans to continue to intensify its efforts to compete for and place high quality credits in the communities served by the Bank. Unfunded loan commitments outstanding at December 31, 1993, have increased to nearly $400 million, some $43 million above the level at December 31, 1992.
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LOAN PORTFOLIO BALANCES AT DECEMBER 31 - -------------------------------------- (in thousands)
DEPOSITS AND SHORT-TERM BORROWINGS
The Company's average deposit base was essentially stable during 1993, increasing $16 million or 0.7% to $2.415 billion in 1993 from $2.399 billion in 1992. Underlying this modest overall increase is a shift in the deposit mix away from time deposits, both core and those in amounts of $100,000 and over, in favor of demand and savings deposits.
As is shown in the table of average balance sheets, non-interest-bearing demand deposits increased on average by $37 million in 1993 as compared to 1992. The increase in average deposits in interest-bearing demand and other transaction accounts and non-time savings products was approximately $56 million over this same period. Average total time deposits in 1993 declined $77 million from the 1992 level, including a decrease of $46 million of deposits of $100,000 and over. The Company has emphasized and will continue to emphasize offering core deposit products that respond to current market conditions while still yielding customers a meaningful rate of return.
The Company's short-term borrowings arise from the purchase of federal funds and the sale of securities under repurchase agreements, mainly as part the Bank's services to correspondent banks and certain other customers. The Company's average short-term borrowing position, net of federal funds sold, was approximately $122 million in 1993 and $113 million in 1992.
INVESTMENT IN SECURITIES
At December 31, 1993, the Company's total investment in securities was $1.634 billion or 54% of total assets and 60% of earning assets on that date. The balance at year-end 1993 represents an increase of approximately $159 million or 10.8% over the December 31, 1992 investment total of $1.475 billion. The average total investment portfolio outstanding increased $265 million or 21% between 1992 and 1993 as funds not needed for loans were invested in securities.
The major portion of the increased investment activity was directed to U.S. Treasury securities and securities of U. S. government agencies, excluding mortgage-backed issues. The mix of period-end and average investments, however, remained relatively stable, with U. S. Treasury and government agency securities representing approximately 77% to 80% of the total investment in securities. The weighted average maturity of the overall portfolio of securities was 34 months at year end 1993, virtually unchanged from year end 1992. The weighted average taxable-equivalent portfolio yield decreased 57 basis points to 5.71% at December 31, 1993 from 6.28% at December 31, 1992.
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INVESTMENT IN SECURITIES - ------------------------ (dollars in thousands)
(1) Tax exempt yields are expressed on a fully taxable equivalent basis. (2) Distributed by contractual maturity without regard to repayment schedules or projected prepayments. (3) These securities have no stated maturities or guaranteed dividends. (4) These securities are classified as available for sale before maturity. The actual timing of any such sales, however, is not determinable at year end.
Effective December 31, 1993, the Company adopted SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities." The statement specifies criteria for classifying investments as either trading securities, securities held to maturity, or securities available for sale, and establishes reporting standards for each classification.
Management considered the Company's existing investment portfolio and underlying asset/liability management policies and strategies in light of the new standard and determined that its investments in mortgage-backed securities met the criteria for classification as securities available for sale. These securities were reported at their estimated fair values at December 31, 1993, and a tax-effected net unrealized gain of approximately $3.1 million was recognized as a component of shareholders' equity. The remaining portfolio of securities was classified as held to maturity and continues to be reported at amortized cost. The Company currently maintains no trading portfolio.
In accordance with SFAS No. 115, prior period investment information has not been restated to reflect the new standard. On an ongoing basis, investment securities will be classified as they are acquired and the continued propriety of classifications will be periodically evaluated by management.
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ASSET QUALITY
Overall asset quality has exhibited a trend of steady improvement over the past three years. During 1993, the Company continued to be successful in its efforts to reduce all categories of its non-performing assets through the full rehabilitation of nonaccruing loans, the workout of troubled credits, or the sale of repossessed loan collateral. Non-performing assets totalled $49.9 million at December 31, 1993, a decrease of $61.3 million or 55% from $111.2 million at year end 1992.
Of the $33.6 million in nonaccruing loans at December 31, 1993, $15.6 million or 46% represented loans that are performing as contractually agreed but are being carried in nonaccrual status because there is some doubt as to the ultimate collectibility of all principal and interest. Nonaccruing loans totalling approximately $18.6 million at year end 1993 were secured by real property collateral. Another $14.2 million consisted of various commercial credits.
NON-PERFORMING ASSETS AT DECEMBER 31 - --------------------------------------- (in thousands)
In 1993, the Company identified $6.4 million of loans to be charged off as uncollectible against the reserve for possible loan losses, a decrease of 70% from the $21.4 million of charge-offs in 1992. At the same time, the Company was successful in increasing its loan recoveries to $12.4 million in 1993 from $9.4 million in 1992.
The reserve for possible loan losses is maintained at a level believed by management to be adequate to absorb potential losses in the portfolio. The $60 million reduction in the reserve during 1993 reflects management's determination that the steps taken in recent years to deal with the Bank's asset quality issues have yielded lasting positive results, evidenced in part by the positive trends noted above. In management's judgment, some of the reserve levels that had been established in the past in recognition of these asset quality issues were no longer needed. After the reduction, the reserve for possible loan losses was $44.5 million at December 31, 1993, or a 132% coverage of total non- performing loans and 4.6% of total loans.
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SUMMARY OF LOAN LOSS EXPERIENCE - --------------------------------------------------------------------------------
ALLOCATION OF THE RESERVE FOR POSSIBLE LOAN LOSSES - ---------------------------------------------------- (dollars in thousands)
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During 1993, the Company disposed of other real estate owned ("OREO") properties with a carrying value at the time of sale totalling approximately $24 million. The value of OREO properties acquired in settlement of loans during the year was $3.7 million. The balance of other real estate owned at December 31, 1993, which includes $8.2 million of loans deemed to have been foreclosed in substance, consisted mainly of commercial land and buildings.
The Company has several property interests which were acquired through routine banking transactions generally prior to 1933 and which are recorded in its financial records at a nominal value. Management continually investigates ways to maximize the return on these assets. There were no significant dispositions of these property interests in 1993. Future dispositions may result in the recognition of substantial gains.
The Company has not extended any credit in connection with what would be defined under regulatory guidelines as highly leveraged transactions, nor has it acquired any investment securities arising from such transactions. The Company's foreign lending and investing activities are currently insignificant. Note 3 to the consolidated financial statements discusses credit concentrations in the loan portfolio.
CAPITAL ADEQUACY
The strong earnings reported for 1993, including the effect of the reduction in the reserve for loan losses, are reflected in the increase in the Company's and the Bank's regulatory capital ratios between December 31, 1993 and 1992. Also contributing to this increase was the shift in the asset mix toward investments in securities which are assigned a risk-weighting lower than for loans in the capital ratio calculations. For the purposes of these calculations, capital does not currently include the net unrealized gain or loss on securities held for sale which is reported as a separate component of shareholders' equity under SFAS No. 115.
The Company's regulatory capital ratios, which are essentially the same as those calculated for the Bank, are shown here compared to the minimums currently required for regulatory classification as a "well capitalized" institution:
The Company is committed to maintaining a strong capital base to support its philosophy of soundness, profitability and growth.
The Bank's regulators have proposed rules which will incorporate a measure of the Bank's interest rate risk into the level of regulatory capital it is required to maintain. These rules are expected to be finalized and become effective in 1994. Considering the Bank's current level of regulatory capital and its interest rate risk position, management believes that adoption of the proposed rule will not have a significant impact on the Bank's ability to satisfy its regulatory capital requirements.
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RESULTS OF OPERATIONS
The following table of comparative analytical income statements offers an overview of the Company's results of operations.
NET INTEREST INCOME
Taxable-equivalent net interest income increased $8.5 million or 7.4% in 1993 as compared to 1992, as the net interest margin rose to 4.75% from 4.52%. A combination of factors contributed to this increase, the components of which are detailed in the following tables analyzing changes in interest income and expense.
Interest expense decreased $16.3 million in 1993, despite a modest rise in average deposits, because of both the lower rate environment that prevailed in 1993 as compared to 1992 as well as the shift in the mix of deposits to non- interest-bearing and lower-cost deposits between these periods. Average total time deposits in 1993 were down $77 million from 1992's level, including a decrease in deposits of $100,000 or more of $46 million.
Interest income also decreased in 1993 as compared to 1992, by $7.8 million, but not to the same degree as interest expense. Overall asset yields declined in 1993 as a result of the lower rate environment and as the mix of earning assets shifted from loans to lower-yielding investment securities. Asset yields were favorably impacted, however, by an overall increase in average earning assets, excluding nonaccruing loans, of $103 million from 1992 to 1993, reflecting in part the continued positive trend in asset quality.
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ANALYSIS OF CHANGES IN INTEREST INCOME AND INTEREST EXPENSE YIELDS ON AVERAGE EARNINGS ASSETS AND RATES ON AVERAGE INTEREST-BEARING LIABILITIES - ----------------------------------------------------------- (dollars in thousands)
Note: Tax equivalent amounts are calculated using a marginal federal income tax rate of 35% for 1993 and 34% for 1992 and 1991.
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VOLUME AND YIELD/RATE VARIANCE ANALYSIS OF CHANGES IN INTEREST INCOME AND INTEREST EXPENSE - ----------------------------------------------------------- (in thousands)
Note: Tax equivalent amounts are calculated using a marginal federal income tax rate of 35% for 1993 and 34% for 1992 and 1991.
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OTHER INCOME AND EXPENSE
Non-interest operating income, excluding securities gains and net gains from OREO sales, increased $1.5 million, or 5.8%, to $27.4 million in 1993 from $25.9 million in 1992. The overall increase was primarily attributable to an $800 thousand, or 5.4% increase in income from service charges on deposit accounts and an additional $700 thousand in income related to international banking services.
There were no securities sales during 1993. In 1992, the Company recognized a $5.4 million gain on the sale of a block of mortgage-backed securities that was experiencing excessive prepayments as market interest rates declined. This block of securities was replaced with another offering a more stable return. Gains of $18.4 million were recognized on securities sales in 1991 in connection with an overall repositioning of the portfolio begun in 1990 to implement a revised asset/liability management strategy.
Non-interest operating expenses, excluding provisions for possible losses on loans, OREO and other problem assets, were $98.2 million in 1993, an increase of $1.4 million, or 1.4%, over 1992's total of $96.8 million. Personnel expense increased $2.0 million in 1993 as compared to 1992. Both compensation expense and the expense of providing insurance benefits contributed to this 4.3% increase.
Other non-interest operating expenses showed a net decrease of approximately $500 thousand from 1992 to 1993. The positive effects of improving asset quality were evident in the 1993 reductions of $1.2 million in legal expense and $287 thousand in the expense of maintaining and operating OREO net of revenues generated by the properties prior to sale.
In addition to the $60 million reduction in the reserve for possible loan losses discussed earlier, there was a decrease of $14 million from 1992 to 1993 in provisions for losses on OREO and other problem assets. This decrease is directly related to the Company's success in reducing its exposure to non- performing assets.
INCOME TAXES
The Company provided for income taxes at an overall effective rate of 32.0% in 1993, up from the 30.6% rate in 1992. The effective rates in each period differ from the statutory rates of 35% in 1993 and 34% in 1992 primarily because of the tax exempt income earned on investments in state and municipal obligations. The higher effective rate in 1993 is largely the result of a lower proportion of tax-exempt to pre-tax income for 1993 compared to 1992.
ASSET/LIABILITY MANAGEMENT
The asset/liability management process has as its focus the development and implementation of strategies in the funding and deployment of the Company's financial resources which is expected to maximize soundness and profitability over time. Such strategies reflect the goals set by the Company for capital adequacy, liquidity, and growth and the tolerance for risk established in Company policies.
INTEREST RATE RISK/INTEREST RATE SENSITIVITY
The Company's financial assets and liabilities are subject to scheduled and unscheduled repricing opportunities over time. The Company's potential for generating net interest income, as well as the current market values of financial assets and liabilities, are sensitive to the levels of market interest rates available as these repricing opportunities arise. Interest rate risk is a measure of this potential volatility in net interest income and market values.
As part of the asset/liability management process, the Company uses a variety of tools, including an earnings simulation model, to measure interest rate risk and to evaluate the impact of proposed changes in its internal strategies and potential changes in its economic environment. The interest rate sensitivity gap analysis, which compares the volume of repricing assets against repricing liabilities over time, is a relatively simple tool which is useful in highlighting significant short-term repricing volume mismatches but is limited in measuring the potential impact on earnings and net asset values.
The following table presents the rate sensitivity gap analysis at December 31, 1993. The interest rates on most of the Bank's commercial loans vary with changes in its prime rate or the prime rates of certain money-center banks. These loans are assigned to the earliest repricing period in the rate sensitivity analysis. A substantial portion of loans shown in the analysis as repricing after one year is made up of fixed-rate real estate loans, both retail and commercial. These loans generally mature within five years. In preparing this analysis, deposit funding sources with no scheduled maturity or contractual repricing date are assigned to a particular repricing period after consideration of past and expected customer behavior in response to general market rate changes. Surveying
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the twelve-month period from December 31, 1993, the analysis indicates that the Company is in a balanced rate sensitivity position on a cumulative basis.
INTEREST RATE SENSITIVITY - ------------------------- December 31, 1993 (dollars in millions)
LIQUIDITY
The Company and the Bank manage liquidity to ensure their ability to satisfy customer demand for credit, to fund deposit withdrawals, to meet operating and other corporate obligations, and to take advantage of investment opportunities, all in a timely and cost-effective manner. Traditionally, these liquidity needs have been met by maintaining a strong base of core deposits within the Bank and by carefully managing the maturity structure of the Bank's investment portfolio. The funds provided by current operations and forecasts of loan repayments are also considered in the liquidity management process.
The Bank enters into short-term borrowing arrangements by purchasing federal funds and selling securities under repurchase agreements, mainly as part of its services to correspondent banks and certain other customers. Neither the Company nor the Bank has had to access short or long term debt markets as part of liquidity management.
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The following tables present information concerning deposits and short-term borrowings for the years 1993, 1992 and 1991.
DEPOSITS - -------- (in thousands)
FEDERAL FUNDS PURCHASED AND BORROWINGS UNDER REPURCHASE AGREEMENTS - ------------------------------------------------------------------ (in thousands)
Average core deposits, defined as all deposits other than time deposits of $100,000 or more, increased approximately $63 million in 1993 over the prior year. During 1993, core deposits comprised 90.2% of total average deposits, compared to 88.2% during 1992.
As of December 31, 1993, $329 million or 22.7% of the portfolio of securities held to maturity was scheduled to mature within one year. An additional $182 million of investment securities are classified as available for sale at year end 1993, although management's determination of this classification does not derive primarily from liquidity considerations.
The Bank had $399 million in unfunded loan commitments outstanding at December 31, 1993, an increase of $43 million from the level at December 31, 1992. Contingent obligations under letters of credit and financial guarantees of $58 million and available credit card lines of $26 million at year end 1993 were both down slightly from year end 1992. Draws under these financial commitments should not place any unusual strain on the Bank's or the Company's liquidity positions.
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ITEM 8.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Note: All share and per-share figures in the consolidated financial statements give effect to the three-for-two stock splits effective February 22, 1993 and November 29, 1993.
The accompanying notes are an intergral part of these financial statements.
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WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
The accompanying notes are an integral part of these financial statements.
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WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY
The accompanying notes are an integral part of these financial statements.
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WHITNEY HOLDING CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
The accompanying notes are an integral part of these financial statements. Page 22 of 50
NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Whitney Holding Corporation and its subsidiaries (the "Company") follow generally accepted accounting principles and policies within the banking industry. The following is a summary of the more significant policies.
CONSOLIDATION
The consolidated financial statements of the Company include the accounts of Whitney Holding Corporation and its wholly-owned subsidiary, Whitney National Bank (the "Bank"). Intercompany accounts and transactions have been eliminated in consolidation.
Certain balances in prior years have been reclassified to conform with this year's presentation.
CASH AND DUE FROM FINANCIAL INSTITUTIONS
The Company considers cash and cash due from financial institutions as cash and cash equivalents for purposes of the consolidated statement of cash flows.
INVESTMENT IN SECURITIES
In May, 1993, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities." Under SFAS No. 115, debt securities which the Company both positively intends and has the ability to hold to maturity are carried at amortized cost. These criteria are not considered satisfied when a security is available to be sold in response to changes in interest rates, prepayment rates, liquidity needs or other reasons as part of an overall asset/liability management strategy.
Debt securities and equity securities with readily determinable fair values that are acquired with the intention of being resold in the near term are classified under SFAS No. 115 as trading securities and are carried at fair value, with unrealized holding gains and losses recognized in current earnings. The Company does not currently hold any securities for trading purposes.
Securities not meeting the criteria of either trading securities or securities held to maturity are classified as available for sale and are carried at fair value. Unrealized holding gains and losses for these securities are recognized, net of related tax effects, as a separate component of shareholders' equity.
The Company adopted this new standard effective December 31, 1993. As a result, investments in mortgage-backed securities were reclassified as of that date as securities available for sale and are being reported at fair value. Shareholders' equity was increased at year-end 1993 to reflect the tax-effected net unrealized holding gain on these securities which previously had been carried at the lower of either aggregate amortized cost or market. In accordance with SFAS No. 115, prior period financial statements have not been restated to reflect this change in accounting principle.
Interest and dividend income earned on securities either held to maturity or available for sale is included in current earnings, including the amortization of premiums and the accretion of discounts using the interest method. The gain or loss realized on the sale of a security held to maturity or available for sale is computed with reference to its amortized cost and is also included in current earnings.
LOANS
Loans are generally carried at the principal amounts outstanding, less unearned income and the reserve for possible loan losses.
Interest on loans is accrued and credited to income based on the outstanding loan principal amounts. The accrual of interest on loans is discontinued when, in management's judgement, there is an indication that a borrower will be unable to meet contractual payments as they become due. For commercial and real estate loans, this generally occurs when a loan falls 90- days past due as to principal or interest, and the loan is not otherwise both well secured and in the process of collection. Upon discontinuance, accrued but uncollected interest is reversed against current income. Interest payments received on nonaccrual loans are used to reduce the
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reported loan principal until the collectibility of the remaining principal is reasonably assured.
A nonaccrual loan may be reinstated to accrual status when full payment of contractual principal and interest is expected and this expectation is supported by current performance.
RESERVE FOR POSSIBLE LOAN LOSSES
The reserve for possible loan losses is maintained at a level which, in management's judgment, is considered adequate to absorb potential losses inherent in the loan portfolio. The adequacy of the reserve is evaluated by management on an ongoing basis. As adjustments to the level of reserves become necessary, they are reported in current earnings. The factors considered in this evaluation include estimated potential losses from specific lending relationships, including unused loan commitments and credit guarantees; general economic conditions; economic conditions affecting specific classes of borrowers or types of loan collateral; historical loss experience; and various trends in loan portfolio characteristics, such as volume, maturity, customer mix, delinquencies and nonaccruals.
As actual loan losses are incurred, they are charged against the reserve. Recoveries on loans previously charged off are added back to the reserve.
FORECLOSED ASSETS
Collateral acquired through foreclosure or in settlement of loans is classified as either other real estate owned ("OREO") or other assets and is carried at its fair value, net of estimated costs to sell, or the remaining investment in the loan, whichever is lower. At acquisition, any excess of the recorded loan value over the estimated fair value of the collateral is charged against the allowance for possible loan losses. After acquisition, valuation allowances are established with a charge to current earnings to adjust the reported value of foreclosed assets to reflect changes in the estimate of a property's fair value or selling costs. Revenues and expenses associated with the management of foreclosed assets prior to sale are included in current earnings.
BANK PREMISES AND EQUIPMENT
Bank premises and equipment are carried at cost, net of accumulated depreciation, as follows (in thousands):
Accumulated depreciation was $57,408,000 in 1993 and $51,437,000 in 1992. Provisions for depreciation included in non-interest expenses were computed primarily on the straight-line method over the estimated useful lives of the assets. Estimated useful lives range mainly from 15 to 45 years for buildings and improvements and from 5 to 7 years for furnishings and equipment.
INCOME TAXES
Effective January 1, 1993, the Company adopted SFAS No. 109, "Accounting for Income Taxes." In general, under this new accounting standard, the tax consequences of all temporary differences that arise between the tax bases of assets or liabilities and their reported amounts in the financial statements represent either tax liabilities to be settled in the future or tax assets that will be realized as a reduction of future taxes. The change in net deferred assets or liabilities between periods is recognized as a deferred tax expense or benefit in the consolidated statement of operations.
In prior years, a deferred tax expense or benefit was provided on those items of income and expense which were recognized in different time periods for financial statement and income tax purposes. See Note 4 for a more detailed discussion of the accounting for income taxes and of the impact of the adoption of SFAS No. 109 in 1993.
EARNINGS (LOSS) PER SHARE
Earnings (loss) per share is calculated using the weighted average number of shares outstanding during each period presented. Potentially dilutive common stock equivalents consist of stock options which have been granted to certain officers. Incorporating these common stock equivalents into the calculation of earnings (loss) per share using the treasury method does not materially affect the
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reported results whether on a primary or fully-diluted basis.
All share and per-share data in this report on Form 10-K reflect the three- for-two stock splits that were effective February 22, 1993 and November 29, 1993.
(2) INVESTMENT IN SECURITIES
Summary information regarding securities available for sale and securities held to maturity follows.
As discussed in Note 1, the Company adopted SFAS No. 115 effective December 31, 1993. As a result, investments in mortgage-backed securities were reclassified as of that date as securities available for sale and are being reported at fair value. The tax-effected net unrealized holding gain on these securities at date of adoption of $3,083,000 is reported as a separate component of shareholders' equity.
At December 31, 1993 and 1992, U.S. Treasury and agency securities with a carrying value of $477,904,000 and $432,751,000, respectively, were pledged to secure public and trust deposits or sold under repurchase agreements.
There were no sales from the securities portfolios during 1993. Proceeds from sales of investment securities during 1992 were $150,120,000. In 1992, the Company sold a block of mortgage-backed securities that was experiencing excessive early payoffs because of declining mortgage rates and replaced it with a block of mortgage-backed securities that offered a more stable return. The Company realized a $5.4 million gain as a result of this transaction. In 1990, the Company developed and began to implement a strategy to balance maturities and liquidity needs and to diversify and increase yields in the investment securities portfolio.
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Repositioning the portfolio in line with this strategy resulted in the realization of $18,376,000 in gains in 1991 on sales of $582,377,000.
The amortized cost and estimated fair value of investment securities held to maturity at December 31, 1993, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because certain issuers have the right to call or prepay obligations with or without call or prepayment penalties.
(3) LOANS AND RESERVE FOR POSSIBLE LOAN LOSSES
The composition of the Company's loan portfolio at December 31, was as follows (in thousands):
The Company's lending activity, both commercial and retail, is conducted primarily among customers in Louisiana and Mississippi. In its market area, the Company serves a broad base of commercial customers in diverse industries.
Within the portfolio, the Company maintains a relatively significant concentration of outstanding credits and loan commitments to customers involved in the oil and gas industry. At December 31, 1993, outstanding loans to this industry totalled $78,488,000, and unused loan commitments and letters of credit and guarantees were $99,727,000 and $15,959,000, respectively. The operations of this industry have been stabilizing in recent years, following a period of severe decline and major restructuring which had adversely impacted the overall economy of the Company's market area. Management continues to closely monitor its lending relationships in this industry.
The total of commercial and other real estate loans shown above includes both those for which the primary source of repayment is the operation or sale of the underlying project, as well as those secured by real estate employed in other operations of the customer. Unfunded commitments for loans secured by commercial or other real estate were $9,140,000 at December 31, 1993. Real estate values had declined steeply during the period of economic contraction in the Company's market area, but have in recent periods been stabilizing. The Company's portfolio of commercial and other real estate loans is diversified as to both the types of collateral property and the industries in which the properties are employed.
Loans on which the accrual of interest had been discontinued totalled $33,631,000 and $70,640,000 at December 31, 1993 and 1992, respectively. If interest on nonaccrual loans had been recognized in accordance with contractual terms, reported interest income would have been increased by approximately $1,458,000 in 1993, $6,256,000 in 1992, and $13,328,000 in 1991.
The Bank has made loans, in the normal course of business, to certain directors and executive officers of the Company and to their associates (related parties). The aggregate amount of these loans was $31,341,000 and $27,907,000 at December 31, 1993 and 1992, respectively. During 1993, $78,061,000 of new loan advances were made, and repayments totalled $74,627,000. Outstanding commitments and letters of credit to related parties totalled $39,517,000 and $9,092,000 at December 31, 1993 and 1992, respectively. Related party loans are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated persons, and do not involve more than the normal risk of collectibility.
The FASB has issued SFAS No. 114, "Accounting by Creditors for Impairment of a Loan," which is effective January 1,
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1995. This statement establishes standards, including the use of discounted cash flow techniques, for measuring the impairment of a loan when it is probable that the contractual terms will not be met. Adoption of this new accounting standard is not expected to have a significant impact on the Company's financial condition and results of operations based on the current loan portfolio.
Changes in the reserve for possible loan losses for the three years ended December 31, 1993 were as follows (in thousands):
(4) INCOME TAXES
Income tax expense (benefit) consists of the following components for the three years ended December 31, 1993 (in thousands):
Effective January 1, 1993, the Company adopted SFAS No. 109, "Accounting for Income Taxes." Under this new accounting standard, the tax consequences of all temporary differences between the tax bases of assets or liabilities and their reported amounts in the financial statements represent either tax liabilities to be settled in the future or tax assets that will be realized as a reduction of future taxes. Among other provisions, SFAS No. 109 requires the use of currently enacted tax rates to measure these deferred tax assets and liabilities. The impact of any change in the enacted tax rates is included in the deferred tax expense or benefit recognized in the period in which the change occurs. The change in the net deferred tax asset or liability between periods represents the deferred tax expense or benefit recognized in the financial statements. With the adoption of SFAS No. 109, the Company recognized an additional net deferred tax asset of $4,574,000, which is reported in the consolidated statements of operations as a cumulative effect of an accounting change (Note 6).
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Net deferred income tax assets, which are included in other assets on the consolidated balance sheets, were approximately $19,046,000 and $34,113,000 at December 31, 1993 and 1992, respectively. The components of the net deferred tax asset as of December 31, 1993 were as follows (in thousands):
For years ending before January 1, 1993, deferred tax expense (benefit) resulted from timing differences in the recognition of revenue and expense for income tax and financial statement purposes. For the year ended December 31, 1992, the most significant timing difference was the excess of interest income recognized for tax purposes over the amount recognized for financial statement purposes. The most significant timing difference in the year ended December 31, 1991 was in the excess of the provision for possible loan losses over losses recognized for income tax purposes. The sources of timing differences and the tax effects for the years ended December 31, 1992 and 1991 are summarized as follows (in thousands):
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The effective tax rate is less than the statutory federal income tax rate in each of the three years in the period ended December 31, 1993 because of the following:
Under SFAS No. 109, the Company is required to establish a valuation allowance against the deferred tax assets if, based on all available evidence, it is more likely than not that some or all of the asset will not be realized. Management has weighed the evidence, including current earnings performance, taxable income generated during available carryback periods, and the nature of significant deductible temporary differences, and believes that no valuation reserve is required as of December 31, 1993. Rules issued by regulatory agencies impose additional limitations on the amount of deferred tax assets that may be recognized when calculating regulatory capital ratios. The Company's ratio calculations were not affected by these rules at December 31, 1993.
(5) EMPLOYEE BENEFIT PLANS
The Company has a noncontributory qualified defined benefit pension plan covering substantially all of its employees. The benefits are based on an employee's total years of service and his or her highest five-year level of compensation during the final ten years of employment. Contributions are made in amounts sufficient to meet funding requirements set forth in federal employee benefit and tax laws plus such additional amounts as the Company may determine to be appropriate from time to time.
In October, 1992, the Company authorized certain amendments to the defined benefit plan which were effective on January 1, 1993. The amendments included provisions to accelerate early retirement availability and to discontinue life insurance and disability benefits now provided by other Company-sponsored benefit programs. The amounts disclosed below as of December 31, 1993 and 1992, include consideration of these amendments.
As of December 31, 1993, the actuarial present values of vested and total accumulated benefit obligations (excluding projected future increases in compensation levels) were $34,012,000 and $37,375,000, respectively, and as of December 31, 1992, $31,799,000 and $34,458,000, respectively.
The following table sets forth the plan's funded status and amounts recognized in the Company's consolidated financial statements (in thousands):
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The net pension expense (benefit) recognized for 1993, 1992, and 1991 is comprised of the following components (in thousands):
The weighted-average discount rate used in determining the actuarial present value of the projected benefit obligation was 7.5% in 1993 and 8.0% in prior periods. For all periods presented, the Company assumed an 8.0% expected long-term rate of return on plan assets and an annual rate of increase in future compensation levels of 5.0%.
For participants in the qualified defined benefit plan whose calculated benefits are reduced as a result of limitations under federal tax laws, the Company sponsors an unfunded non-qualified plan that provides benefits equal to those reductions. At December 31, 1993, the accrued pension cost and accumulated benefit obligation, substantially all of which is vested, related to this plan were $1,358,000 and $962,000, respectively. The net pension expense under the plan was $11,000, $55,000 and $163,000 in 1993, 1992, and 1991, respectively.
Effective October 1, 1993, the Company converted its noncontributory employee thrift plan into an employee savings plan under Section 401(k) of the Internal Revenue Code. Under the new plan, which covers substantially all full- time employees, the Company will match the savings of each participant up to 3% of his or her compensation. Annual participant savings are limited by tax law. Participants are fully vested in their savings and in the matching Company contributions at all times. For 1993, the expense of the Company's matching contributions was approximately $245,000. There had been no Company contributions to the noncontributory thrift plan in 1993, 1992 or 1991. At current participation levels, the Company's annual matching contributions under the savings plan are expected to total approximately $1 million.
The Company also maintains certain health care and life insurance benefit plans for retirees and their eligible dependents. Participant contributions are required under the health plan, and the Company has established annual and lifetime maximum health care benefit limits. Effective January 1, 1993, the Company adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other than Pensions." This statement requires that the expected cost of providing these postretirement benefits be recognized during the period employees are actively working. Prior to 1993, the Company recognized the cost only as benefit payments were made to or on behalf of retirees. The Company continues to fund its obligations under the postretirement benefit plans as the benefit payments are made.
Upon adoption of SFAS No. 106, the Company elected to immediately recognize the accumulated postretirement benefit obligation of $5,963,000. The expense related to the recognition of this transition obligation is reported, net of income tax effects of $2,023,000, as a cumulative effect of a accounting change in the consolidated statements of operations (Note 6).
At December 31, 1993, the net postretirement benefit liability reported with other liabilities in the consolidated balance sheets was approximately $6,306,000. The net periodic postretirement benefit expense recognized under SFAS No. 106 for 1993 was $450,000, including components for both the portion of the expected benefit obligation attributed to current service as well as interest on the accumulated benefit obligation. The expense recognized is not materially different from that which would have been reported under the previous accounting method.
For the actuarial calculation of its postretirement benefit obligations at December 31, 1993, the Company assumed annual health care cost increases beginning at 12% and decreasing 0.6% per year to a 5.5% rate, and used a discount rate of 7.5% in determining the present value of projected benefits. A 1% rise in the assumed health care cost trend rates would not materially impact the accumulated benefit obligation or the periodic net benefit expense.
The FASB has issued SFAS No. 112, "Employers' Accounting for Postemployment Benefits," which is effective January 1, 1994. Postemployment benefits are those provided to former or inactive employees after active employment but before retirement. Given the current structure of such benefit programs offered by the Company, this accounting standard will not have a significant impact on the Company's financial position or results of operations when adopted.
The Company has a long-term incentive program for which all employees are eligible. As of December 31, 1993, 494,625
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shares of treasury stock are reserved for the purposes of this program, which include the granting of stock options and restricted, performance and phantom stock. The Company granted 36,000 shares of restricted stock to certain employees during 1993 for no cash consideration. During 1992, restricted stock grants totalled 37,125 shares. Employees receiving the grants are restricted from transferring or otherwise disposing of the stock until June, 1998, for the grants in 1993, and until May, 1997, for the 1992 grants. The market values of the restricted shares, determined as of the grant dates, were $699,000 and $491,000, respectively, for 1993 and 1992. These amounts are being amortized as compensation expense over the five year restriction periods. Compensation expense recognized during 1993 and 1992 related to these stock grants was $168,000 and $49,000, respectively.
The following table summarizes stock option activity under the long-term incentive program for 1993 and 1992:
The incentive and non-qualified options are exercisable at the market price on the grant dates. All outstanding options were exercisable at December 31, 1993.
On February 28, 1990, an executive officer was granted options to purchase 33,750 shares of common stock of the Company at the then market price of $18.11 per share through February 28, 2000. At December 31, 1993, none of those options had been exercised. If this officer terminates his employment with the Company, the options will be exercisable for six months after his date of termination. The options will also be exercisable up to one year past the date of his death, but in no event beyond February 28, 2000.
(6) NET CUMULATIVE EFFECT OF ACCOUNTING CHANGES
The net cumulative effect of accounting changes reported in the consolidated statement of operation for 1993 consists of the following (in thousands):
(7) OTHER REAL ESTATE OWNED
Other real estate owned ("OREO") is comprised of real property collateral acquired through foreclosure or in settlement of loans and surplus banking property. With the exception of the pre-1933 properties discussed below, these properties are reported at their fair value, less expected disposition costs, or the recorded investment in the related loan, whichever is lower. Activity in the OREO valuation reserve for the three years ended December 31, 1993 was as follows (in thousands):
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OREO includes a variety of property interests which were acquired though routine banking transactions generally prior to 1933 and for which there existed no ready market. These were subsequently written down to a nominal holding value in accordance with general banking practice at that time. These property interests include a few commercial and residential site locations principally in the New Orleans area, ownership interests in scattered undeveloped acreage, and various mineral interests.
Not included in OREO are real estate interests evidenced by stock ownership. Such stock is carried as an investment in securities and dividends are recognized as investment income.
In 1991, the Company recorded a gain of approximately $4 million on the sale of one of the pre-1933 property interests. Other revenues derived from these direct and indirect property interests and related expenses have not been significant over the three-year period ended December 31, 1993.
(8) NON-INTEREST INCOME
The components of non-interest income were as follows for the three years ended December 31, 1993 (in thousands):
(9) NON-INTEREST EXPENSE
The components of non-interest expense were as follows for the three years ended December 31, 1993 (in thousands):
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(10) OTHER ASSETS AND LIABILITIES
The significant components of other assets and other liabilities at December 31, 1993 and 1992, were as follows (in thousands):
Costs in excess of the net tangible assets acquired in prior years' business combinations are being amortized over remaining lives ranging from one to twelve years as of December 31, 1993.
(11) ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure is made in accordance with the requirements of Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments." In cases where quoted market prices are not available, fair values have been estimated using present value or other valuation techniques. The results of these techniques are highly sensitive to the assumptions used, such as those concerning appropriate discount rates and estimates of future cash flows, which require considerable judgment. Accordingly, estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current settlement of the underlying financial instruments. SFAS No. 107 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. These disclosures should not be interpreted as representing an aggregate measure of the underlying value of the Company.
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The following significant methods and assumptions were used by the Company in estimating the fair value of financial instruments.
CASH AND SHORT-TERM INVESTMENTS
The carrying value of highly liquid instruments, such as cash on hand, interest-and non-interest bearing deposits in financial institutions, and federal funds sold, provides a reasonable estimate of their fair value.
INVESTMENT SECURITIES
Substantially all of the Company's investment securities are traded in active markets. Fair value estimates for these securities are based on quoted market prices obtained from independent pricing services. The carrying amount of accrued interest on securities approximates its fair value.
LOANS, NET
For loans with rates that are repriced in coordination with movements in market rates and with no significant change in credit risk, fair value estimates are based on carrying values. The fair values for other loans are estimated through discounted cash flow analysis, using current rates at which loans with similar terms would be made to borrowers of similar credit quality. Appropriate adjustments are made to reflect probable credit losses. The carrying amount of accrued interest on loans approximates its fair value.
DEPOSITS
SFAS No. 107 specifies that the fair value of deposit liabilities with no defined maturity is to be disclosed as the amount payable on demand at the reporting date, i.e., at their carrying or book value. These deposits, which include interest and non-interest checking, passbook savings, and money market accounts, represented approximately 80% of total deposits at December 31, 1993 and 1992. The fair value of fixed maturity deposits is estimated using a discounted cash flow calculation that applies rates currently offered for time deposits of similar remaining maturities. The carrying amount of accrued interest payable on deposits approximates its fair value.
The economic value attributable to the relationship with depositors who provide low-cost funds to the Company is viewed as a separate intangible asset and is excluded in SFAS No. 107 from the definition of a financial instrument.
SHORT-TERM BORROWINGS
The carrying amounts of federal funds purchased, borrowings under repurchase agreements, and other short-term borrowings, approximate their fair values.
OFF-BALANCE-SHEET INSTRUMENTS
Off-balance-sheet financial instruments include commitments to extend credit, letters of credit, and other financial guarantees. The fair value of such instruments is estimated using fees currently charged for similar arrangements in the marketplace, adjusted for changes in terms and credit risk as appropriate. The estimated fair value for these instruments was insignificant at December 31, 1993 and 1992.
(12) FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
In order to meet the financing needs of its customers, the Company deals in financial instruments that expose it to off-balance-sheet risk. These financial instruments include commitments to extend credit, letters of credit, and other financial guarantees. Such instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the statements of financial position.
The Company's exposure to credit loss in the event of nonperformance by other parties for commitments to extend credit and letters of credit and other financial guarantees written is represented by the contractual amount of those instruments. The Company follows the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.
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Commitments to extend credit and credit card lines are agreements to make a loan to a customer as long as there is no violation of any condition established in the commitment or credit card contract. Commitments generally have fixed expiration dates or other termination clauses and may require payments of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amount outstanding does not necessarily represent total future cash outlay requirements.
The amount of collateral, if any, required by the Company upon issuance of a commitment is based on management's credit evaluation of the borrower. Collateral varies, but may include accounts receivable, inventory, property, plant and equipment, and income-producing commercial properties.
Letters of credit and financial guarantees written are conditional agreements issued by the Company to guarantee the performance of a customer to a third party. These agreements are primarily issued to support commercial trade. Agreements totalling $10.5 million at December 31, 1993 have original maturities greater than one year. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Company holds marketable securities as collateral to support those letters of credit and guarantees for which collateral is deemed necessary. Letters of credit and financial guarantees outstanding at December 31, 1993, ranged from unsecured to fully secured.
(13) REGULATORY MATTERS
The Bank is required to maintain non-interest-bearing reserve balances with the Federal Reserve Bank to fulfill its reserve requirements. The average balance maintained was approximately $63,243,000 in 1993 and $61,182,000 in 1992.
In 1990, the Company and the Bank entered into an agreement with federal bank regulators designed to ensure the continued strength of the institution and to improve its internal policies in certain respects. The terms of the agreement have been satisfied and the agreement was dissolved during 1993.
(14) COMMITMENTS AND CONTINGENCIES
On December 21, 1993, the Company and the Bank entered into an agreement for the Bank to purchase substantially all of the assets and assume the deposit and certain other liabilities of Baton Rouge Bank and Trust. This transaction, which is expected to be completed in the first half of 1994, is subject to regulatory approvals and certain other conditions. The assets to be acquired total approximately $120,000,000. The final purchase price has not yet been determined.
The Company and its subsidiaries are parties to various legal proceedings arising in the ordinary course of business. After reviewing with outside legal counsel pending and threatened actions, management is of the opinion that the ultimate resolution of these actions will not have a material effect on the Company's financial condition and results of operations.
Management also does not believe that compliance with existing federal, state or local environmental laws and regulations will impose any material financial obligation on the Company or materially affect the realizable value of its assets.
The Company owns its own main office building as well as most of its branch banking facilities and has not entered into material commitments under non- cancellable leases for facilities or equipment. The defined benefit retirement plan is sufficiently funded on an actuarial basis so as not to have required an additional contribution by the Company during 1993. Current projections do not indicate that a contribution will be required for 1994.
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(15) PARENT COMPANY FINANCIAL STATEMENTS
Summarized parent-company-only financial statements of Whitney Holding Corporation follow (in thousands):
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MANAGEMENT REPORT ON RESPONSIBILITY FOR FINANCIAL REPORTING
The management of Whitney Holding Corporation is responsible for the preparation of the financial statements, related financial data and other information in this report on Form 10-K. The financial statements are prepared in accordance with generally accepted accounting principles and include amounts based on management's estimates and judgement where appropriate. Financial information appearing throughout this report on Form 10-K is consistent with the financial statements.
The Company's financial statements have been audited by Arthur Andersen & Co., independent public accountants. Management has made available to Arthur Andersen & Co. all of the Company's financial records and related data, as well as the minutes of shareholders' and directors' meetings. Furthermore, management believes that all representations made to Arthur Andersen & Co. during its audit were valid and appropriate.
Management of the Company has established and maintains a system of internal control that provides reasonable assurance as to the integrity and reliability of the financial statements, the protection of assets from unauthorized use or disposition, and the prevention and detection of fraudulent financial reporting. The system of internal control provides for appropriate division of responsibility and is documented by written policies and procedures that are communicated to employees with significant roles in the financial reporting process and updated as necessary. Management continually monitors the system of internal control for compliance. The Company maintains a strong internal control auditing program that independently assesses the effectiveness of the internal controls and recommends possible improvements thereto. As part of their audit of the Company's 1993 financial statements, Arthur Andersen & Co. considered the Company's system of internal control to the extent they deemed necessary to determine the nature, timing and extent of their audit tests. Management has considered the internal auditor's and Arthur Andersen & Co.'s recommendations concerning the Company's system of internal control and has taken actions that it believes are cost-effective in the circumstances to respond appropriately to these recommendations. Management believes that, as of December 31, 1993, the Company's system of internal control is adequate to accomplish the objectives discussed herein.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF WHITNEY HOLDING CORPORATION:
We have audited the accompanying consolidated balance sheets of Whitney Holding Corporation (a Louisiana corporation) and subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of operations, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1993. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Whitney Holding Corporation and subsidiaries as of December 31, 1993 and 1992, and results of its operations and cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles.
As discussed in Notes 4 and 5 to the consolidated financial statements, effective January 1, 1993, the Company changed its methods of accounting for income taxes and for postretirement benefits other than pensions. As discussed in Notes 1 and 2 to the consolidated financial statements, effective December 31, 1993, the Company changed its method of accounting for certain investments in debt and equity securities.
(SIGNATURE OF ARTHUR ANDERSEN & CO. APPEARS HERE)
Arthur Andersen & Co.
New Orleans, Louisiana January 13, 1994
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SUMMARY OF QUARTERLY FINANCIAL INFORMATION - ------------------------------------------
The following quarterly financial information is unaudited. In the opinion of management all normal recurring adjustments necessary to present fairly the results of operations for such periods are reflected.
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ITEM 9:

ITEM 9: DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable
PART III
ITEM 10:



ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
In response to this item, registrant incorporates by reference the section entitled "Election of Directors" of the Proxy Statement dated March 24, 1994.
EXECUTIVE OFFICERS OF THE REGISTRANT
WILLIAM L. MARKS, 50, Chairman of the Board and Chief Executive Officer of WNB and the Company since February 28, 1990. Former Senior Executive Vice President and Regional Executive of AmSouth Bank NA, headquartered in Birmingham, Alabama, responsible for a division with $1 billion in assets and 702 employees.
R. KING MILLING, 53, since 1978, Director, since December, 1984, Director and President, of the Bank and the Company.
G. BLAIR FERGUSON, 50, since July, 1993, Executive Vice President, of the Bank. Former Executive Vice President and Regional Director of First City, Texas - Dallas.
EDWARD B. GRIMBALL, 49, from September, 1990 to October, 1991, Vice President and Chief Financial Officer, since October, 1991, Executive Vice President and Chief Financial Officer, of the Bank and the Company. Former Senior Vice President, Comptroller and Secretary of Bank South Corp., a $5- billion multi-bank holding company headquartered in Atlanta, Georgia.
KENNETH A. LAWDER, JR., 52, since December, 1991, Executive Vice President, of the Bank and the Company. Former Senior Vice President, Wachovia Bank NA., a $17-billion bank headquartered in Winston-Salem, North Carolina.
JOSEPH W. MAY, 48, since December, 1993, Executive Vice President, of the Bank and the Company. Former Executive Vice President and Chief Credit Policy Officer, Comerica, Inc., a $27-billion bank headquartered in Detroit, Michigan.
ITEM 11:

ITEM 11: EXECUTIVE COMPENSATION
In response to this item, registrant incorporates by reference the section entitled "Executive Compensation" of the Proxy Statement dated March 24, 1994.
ITEM 12:

ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
In response to this item, registrant incorporates by reference the sections entitled "Voting Securities and Principal Holders Thereof" and "Election of Directors" of the Proxy Statement dated March 24, 1994.
ITEM 13:

ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In response to this item, registrant incorporates by reference the section entitled "Certain Transactions" of the Proxy Statement dated March 24, 1994.
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PART IV
ITEM 14:

ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) and (2) Financial Statements and Schedules
The following consolidated financial statements of the Company and its subsidiaries are included in Part II Item 8:
All schedules have been omitted because they are either not applicable or the required information has been included in the financial statements or notes to the financial statements.
(a) (3) Exhibits:
Exhibit 3.1 - Copy of Composite Charter, incorporated by reference to the Company's March 31, 1993 Form 10-Q
Exhibit 3.2 - Copy of Bylaws, as amended, incorporated by reference to the Company's March 31, 1993 Form 10-Q
Exhibit 10.1 - Stock Option Agreement between Whitney Holding Corporation and William L. Marks, incorporated by reference to the Company's 1990 Form 10-K
Exhibit 10.2 - Executive agreement between Whitney Holding Corporation, Whitney National Bank and William L. Marks, incorporated by reference to the Company's June 30, 1993 Form 10-Q
Exhibit 10.3 - Executive agreement between Whitney Holding Corporation, Whitney National Bank and R. King Milling, incorporated by reference to the Company's June 30, 1993 Form 10-Q
Exhibit 10.4 - Executive agreement between Whitney Holding Corporation, Whitney National Bank and Edward B. Grimball, incorporated by reference to the Company's June 30, 1993 Form 10-Q
Exhibit 10.5 - Executive agreement between Whitney Holding Corporation, Whitney National Bank and Kenneth A. Lawder, Jr., incorporated by reference to the Company's June 30, 1993 Form 10-Q
Exhibit 10.6 - Executive agreement between Whitney Holding Corporation, Whitney National Bank and G. Blair Ferguson, incorporated by reference to the Company's September 30, 1993 From 10-Q
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Exhibit 10.7 - Executive agreement between Whitney Holding Corporation, Whitney National Bank and Joseph W. May, effective December 13, 1993
Exhibit 10.8 - Long-term incentive program, incorporated by reference to the Company's 1991 Form 10-K
Exhibit 10.9 - Executive compensation plan, incorporated by reference to the Company's 1991 Form 10-K
Exhibit 10.10 - Form of restricted stock agreement between Whitney Holding Corporation and certain of its officers, incorporated by reference to the Company's June 30, 1992 Form 10-Q
Exhibit 10.11 - Form of stock option agreement between Whitney Holding Corporation and certain of its officers, incorporated by reference to the Company's June 30, 1992 Form 10-Q
Exhibit 10.12 - Directors' Compensation Plan, incorporated by reference to the Company's Proxy Statement dated March 24, 1994
Exhibit 21 - Subsidiaries
Whitney Holding Corporation owns 100% of the capital stock of Whitney National Bank. All other subsidiaries considered in the aggregate would not constitute a significant subsidiary.
(b) No report on Form 8-K was required to be filed by the Registrant during the last quarter of 1993.
Pursuant to the requirements of the Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
WHITNEY HOLDING CORPORATION (Registrant)
By: /s/ William L. Marks ----------------------------- William L. Marks Chairman of the Board and Chief Executive Officer March 23, 1994
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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
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