Correction: DBRS Confirms Whitney Holding Corporation -- Senior at BBB (high); Changes Trend to Neg

In the rating table in today's press release on Whitney Holding Corporation, DBRS inadvertently stated that the rating action for the Company's Short-Term Instruments was a technical change and not a trend change.

DBRS has corrected the rating table and the full press release is as follows.

DBRS has today confirmed all ratings for Whitney Holding Corporation (Whitney or the Company) and its related entities, including its Issuer & Senior Debt rating of BBB (high). At the same time, DBRS has changed the trend on all ratings to Negative from Stable.

The rating action follows the Company’s announcement of its Q1 2009 loss to common shareholders of $15.2 million. Driving the quarterly loss was a significant increase in credit costs and a 36 basis points (bps) narrowing of net interest margin (NIM) to 4.13%.

The Negative trend reflects DBRS’s concern over Whitney’s deteriorating asset quality, particularly within its sizeable commercial real estate and commercial and industrial loan portfolios. With the economy showing little sign of stabilization, DBRS perceives that additional amounts of potential losses remain embedded in these portfolios. The Negative ratings trend indicates the potential for future negative rating actions, which could be triggered by continued elevated asset quality erosion and lack of sustainable revenue generation. Conversely, sustained solid profitability and the absence of elevated credit costs may result in the restoration of the trend to Stable.

The confirmation of Whitney’s ratings reflects its solid capital position, adequate liquidity and deep rooted community bank franchise. Ratings also take into account the Company’s less granular loan portfolio and concentration of commercial real estate (CRE) exposure.

Given the rapid deterioration in the economy, Whitney’s asset quality erosion steepened. The Company’s criticized loans increased $113 million during the quarter to $883 million, driven by growing levels of Louisiana and Texas based commercial and industrial (C&I) loans. DBRS comments that Whitney’s commercial construction, land and land development loans, which represent the largest component of criticized assets, reflected modest growth during the quarter. At March 31, 2009, Whitney’s non-performing assets (NPA) increased to a relatively high 4.50% of loans, from 3.61% at December 31, 2008. Meanwhile Q1 2009 net charge-offs (NCO) represented 1.41% of average loans, up from 0.91% for the prior quarter. For Q1 2009, loan loss provisions totaled $65 million, of which 51% was for reserve build. DBRS comments that Whitney’s allowance for loan loss reserves to nonaccrual loans was somewhat low at 53%.

Whitney’s Q1 2009 NIM narrowed 36 bps to 4.13%, as LIBOR spreads continued to compress and levels of nonaccruals expanded. That said, the Company’s still solid NIM continues to benefit from a high level of non-interest bearing sources, which fund 33% of earnings assets. DBRS notes that Whitney’s cost of funds of 1.24% (at December 31, 2008) falls well below the average of 2.42% for similarly sized institutions (greater than $10 billion to less than $20 billion in assets).

Liquidity remains adequate as core deposits account for approximately 85% of net loans (at December 31, 2008). Moreover, Whitney’s securities portfolio, which represents 16% of total assets, and access to the Federal Home Loan Bank round out its liquidity profile.

Positively, the Company issued $300 million of preferred stock to the U.S. Treasury as part of the Treasury’s Capital Purchase Program, which helped augment regulatory capital ratios and provide more of a cushion to absorb credit losses. At March 31, 2009, Whitney’s regulatory leverage and tangible common equity ratios were solid at 9.47% and 6.68%, respectively.

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

The applicable methodologies are Rating Banks and Bank Holding Companies Operating in the United States, and Enhanced Methodology for Bank Ratings – Intrinsic and Support Assessments which can be found on our website under Methodologies.

This is a Corporate (Financial Institutions) rating.