DBRS Confirms Whitney Holding Corporation at BBB (high); Trend Stable

DBRS has today confirmed the ratings of Whitney Holding Corporation (Whitney or the Company) and its principal operating bank subsidiary, Whitney National Bank, including Whitney’s Issuer and Senior Debt rating at BBB (high) and Short-Term Instruments at R-2 (high). The Ratings trend remains Stable.

Whitney’s ratings evidence the Company’s historically strong and deep-rooted commercial banking franchise in New Orleans and other significant metropolitan statistical areas in Louisiana, Mississippi, Texas, Alabama and Florida. Further, ratings reflect the Company’s strong core deposit base, which provides ample liquidity and contributes to sustainable earnings, good capital position and currently stressed, yet still sound asset quality.

Whitney’s earnings capacity continues to be tempered by net interest margin (NIM) compression and increased credit costs. The lower NIM evidences the Company’s asset-sensitive balance sheet coupled with decreasing interest rates. Furthermore, DBRS notes that Whitney maintains a heavy reliance on more volatile spread income, and fee income generation remains below that of its peers.

Whitney’s loan portfolio contains risk concentrations in commercial real estate (CRE) and the energy sector. The CRE portfolio, excluding owner-occupied loans, represents roughly 316% of the Company’s tangible common equity. DBRS notes that roughly 10% of Whitney’s loan portfolio is energy-related, the bulk of which represents exposure to companies involved in transportation and other services, which support the energy sector and, to a lesser degree, exploration and production exposure.

Although sound and within expectations for its ratings, Whitney’s asset quality has been pressured by the downturn in the housing markets, and its Florida portfolio remains stressed and represents an outsized proportion of criticized assets. DBRS views Whitney’s levels of loan loss reserves to be sufficient to cover current losses; however, DBRS would expect Whitney to increase reserve levels in unison with net charge-offs (NCOs) and increasing non-accruals.

DBRS believes that further erosion in Whitney’s asset quality is likely given the continuing turmoil in the housing sector, coupled with a national economy leaning towards a recession. DBRS comments that Whitney’s earnings and profitability are likely to be constrained by these economic factors for the intermediate term. However, DBRS believes that Whitney can absorb the likely incremental loan losses from earnings without impairing its capital and franchise strengths. That said, DBRS will continue to monitor Whitney’s sizeable commercial real estate exposure, which could exacerbate potential future losses in a weakening environment.

Whitney’s liquidity and capital positions remain sound and in line with those banks in its rating group. Core deposits accounting for approximately 88% of net loans (as of March 31, 2008), combined with a good-quality securities portfolio and access to the Federal Home Loan Bank, underpin Whitney’s liquidity profile. The Company’s capital remains solid, as evidenced by its above-peer median tangible common equity ratio of 8.3%.

DBRS notes that Whitney’s geographic diversification has improved over the past few years, due to solid growth within Texas, Florida and the Louisiana markets just outside New Orleans. However, the Company remains somewhat vulnerable to the economic well-being of greater New Orleans, where approximately 40% of its loans are located.

Stronger and more defensible market shares in Whitney’s newer markets and improvement in revenue diversification could lead to positive rating consideration. Weakening asset quality, core profitability and a material increase in exposure to commercial real estate could result in negative rating action.

Whitney Holding Corporation, a bank holding company with headquarters in New Orleans, Louisiana, reported $10.8 billion in assets at March 31, 2008.

Notes:
All figures are in U.S. dollars unless otherwise noted.