Hancock Whitney Corp (HWC) 2010 Q3 法說會逐字稿

Good morning and welcome to Whitney Holding Corporation third quarter 2010 earnings conference call. Participating on today's call are John Hope, Chairman and CEO, John Turner, President, Tom Callicutt, CFO, John Exnicios, Chief Risk Officer, Suzanne Thomas, Manager of Credit Administration and Steve Barker, Controller of the Bank. I would now like to turn the call over to Mr. Steve Barker. You may begin.

Good morning.

During today's call we may make forward-looking statements. Forward-looking statements provide projections of results of operations or financial condition or state other forward-looking information, such as expectations about future conditions and descriptions of plans and strategies for the future. Whitney's ability to accurately project results or predict the effects of futures or strategies in inherently limited. We believe the expectations reflected in the forward-looking statements are based on reasonable assumptions but actual results in performance could differ materially from those set forth in the forward-looking statements. Factors that could cause actual results different from those expressed in the Company's forward-looking statements include but are not limited to those outlined in the Whitney's SEC filings, including the Risk Factors section of the Company's Forms 10- K and 10-Q. Whitney does not intend and undertakes no obligation to update or revise any forward-looking statements and you are cautioned not to place undue reliance on such forward-looking statements.

I will now turn the call over to John Hope, Chairman and Chief Executive Officer.

Good morning. Thank you for joining us.

Today, as Whitney officially begins its 128th year, we are taking certain actions designed to ensure a bright future for our bank, our employees and our shareholders. In case you did not see it this morning we have taken aggressive actions to manage other credit issues by announcing the sale of over half of nonperforming loans. We have a signed contract to sell $180 million of our nonperforming loans, the majority of which are in Florida, and will reclassify up to an additional $100 million of nonperforming loans as held for sale.

Although the challenges of the most recent credit cycle continue to impact our results in the third quarter, we have gained greater clarity and an increased confidence about where we are today. The issues and concerns that tempered our optimism last quarter, specifically the Gulf oil spill, the third party risk rating review project, and the weak performance of the economy and threat of another severe downturn in economy, have all eased or been addressed. The oil leak has been capped. Those along the Gulf Coast are recovering and the remaining issues, we believe, are manageable. The risk rating project has been completed. It's fully reflected in our third quarter results. And I can say with great confidence that we have our arms around our credit situation. And finally, while not in a full recovery mode, the economy is showing more signs of stabilization and it doesn't appear there will be a double dip.

With a clearer picture of the current conditions, the primary objective of the sale of problem loans is to accelerated both the disposition of our problem assets and our exit from the effects of the credit cycle in order to reduce a faster recovery in earnings and an improved return for our shareholders. Our strong capital brace and our improved market for asset sales have allowed to us opportunistically dispose of these problem assets and place us in an excellent position to begin a return to consistent quarterly profitability beginning in the first quarter of 2011.

I recognize in light of these announcements there will be many questions this morning. With that in minute we will bypass a normal detail review of the quarter's financial results and instead I will quickly hit some items of note in our results. John Turner will then provide a quick update on extra strategic plan and after that we will open the call to questions.

We reported a net loss of $29 million or $0.34 for the third quarter. Loan demand remained weak across the footprint. Deposits were stable, linked quarter, and continued to be a core operating strength for Whitney. Non-interest-bearing deposits comprised 36% of total deposits for the third quarter. The net interest margin declined 10 basis points to 4.05%, reflecting a lower yield on earning assets and a shift in the mix of earning assets.

The provision for credit losses was $70 million in the third quarter. More than half of this quarter's provision was related to the increase in classified loans. Another $11 million was related to resolution of problem credits through note sales, foreclosures, and approximately $15 million was related to lower collateral values on previously impaired loans. We do expect these factors to be significantly reduced in light of the bulk sale announcement and the completion of the risk rating review project. As noted in the release, we expect material declines in our provision for loan losses and our problem asset collection events beginning in 2011.

The remainder of the third quarter's provision was mainly related to charge-offs of smaller commercial and consumer credits. Charge-offs of non-impaired loans was $18 million in the third quarter compared to $11 million in the second quarter of 2010.

The independent analysis of our risk ratings was a necessary step to gain increased clarity and confidence regarding the potential losses in our portfolio and the current economic environment. The third party consultant we hired was Alvarez and Marsal, a firm with a highly regarded banking practice made up a number of former OCC personnel.

Classified loans was $236 million net during the third quarter and totaled $1.1 billion at September 30th, 2010. We believe that most of the newly classified credits have lower loss potential compared to those losses incurred on credits impacted by the real estate market's problems in Florida. Texas did not see the run-up in real estate values seen in Florida, as well as Louisiana did not, and there was no real stake bubble in those two states. These credits are suffering from the effects of the local and national economies, and we believe most are still good projects. We expect these credits to act as they would in a post-recessionary environment, and to date, we have not seen and do not expect to see the same level of charge-offs that we saw in Florida.

We have seen very little movement of classified credits in Texas and Louisiana moving into the impaired portfolio. Impaired loans in Texas reduced in the third quarter from $68 million at the end of the second quarter to $44 million at the end of the third quarter. In-flow in Texas to impaired loans was only $2.8 million for the third quarter. No significant additional credits were identified as having potential direct or indirect exposure to the oil spill, or downgraded as a result of the oil spill. The oil spill appears to have minimal impact on the loan portfolio.

Nonperforming loans, a subset classified loans, totaled $428 million at September 30, 2010. Once completed, these transactions will significantly reduce nonperforming loans from $428 million at September 30 to a pro forma balance of approximately $150 million. This reduction in nonperforming loans includes an over 80% reduction in our nonperforming portfolio in our most difficult market, Florida.

Net loan charge-offs in the third quarter were approximately $76.6 million. Approximately $40 million, or over half of the charge office in the third quarter, were related to losses and identified previously on those impaired loans.

Our tangible common equity ratio and leverage ratio at the third quarter were 8.1 and 10.09 respectively. As noted in our release, we expect Whitney's pro forma tangible common equity ratio to decrease approximately 55 basis points from September 30, 2010. And its pro forma leverage, tier 1, and total capital ratios are expected to decrease each between 80 to 90 basis points from September 30, 2010, as a result of the bulk sale transactions.

The company did not record a good will impairment or DTA valuation allowance in the third quarter, and we do not expect either actions addressing nonperforming loans will require a good will impairment or a deferred tax asset valuation allowance in the fourth quarter. Regulatory capital ratios are and will continue to remain above those required for the Company and Whitney National Bank to be considered well-capitalized institutions.

Thanks, John.

As we discussed with investors previously, despite the distractions of the environments and challenges we face, management has remained focused on improving our core businesses and executing the bank's strategic plan. Over the past year, the results of our efforts have positively impacted our future earnings potential. As you would expect, our plan is designed to emphasize the segments within our business lines that provide us with the greatest opportunities. We have made a number of strategic hires and have successfully introduced updated products for our customers. We have embarked on several company-wide campaigns over the last year, and have met or exceeded our initial goals for each and as the largest bank headquartered in New Orleans, Whitney has a greater opportunity to gain share of wallet in the greater New Orleans metropolitan area.

I would like to take a minute to highlight our successes. Our most recent campaign, the Saints debit card campaign, has been a tremendous success. As the official bank of the World Champion New Orleans Saints, we have issued over 17,000 debit cards to first-time Whitney card holders in just the past few weeks and based upon projected card activity have added over $1.5 million in annualized revenue in the past month alone. Our bankers continue to produce excellent results in opening new checking accounts and sales are up almost 35% as of 2009. As importantly, and as a result of our service quality initiatives, retention of existing customer relationships has improved by more than 10%. As a result of two very successful credit card campaigns, credit card sales are up 216% and total outstandings in the card portfolio are up 23.5% over last year.

In late 2009, the bank began offering interest rate swaps, acting only as an intermediary, but having significant fee income opportunities. Through the third quarter we earned approximately $1 million in swap fees.

Enrollment in the bank's commercial banking internet banking platform continues to increase. Customers and prospects alike are impressed with the functionality of our new product, and over the past six months a number of businesses across our footprint have committed to move their banking relationships to Whitney because of this platform. We continue to make significant improvements in the brokerage business, with the addition of seasoned brokers with well-established books of business, we have produced revenue of $5.5 million year to date, a 15% increase versus last year.

Adding new products to our target lines of business we believe the additional fee income will complement our already strong margin Withcontinued focus by our bankers, the positive results will accumulate, and the compounding effect of these annuity businesses will produce ever increasing earnings momentum.

Finally our technology upgrade project, Project Genesis is on track and we are excited about the upcoming conversion and new offerings to our customers. This long-term project continues to move forward and we expect to have state-of-the-art systems and products when completed. We spent almost the past two years investigating and working on this initiative and our customers and share holds will be the beneficiaries. We expect to have a largest phase completed in the next six months.

And I would like to turn the program back over to John.

As you can see, our potential for significant growth opportunities is improving. Coupled with a better economic environment, our brand and core funding strength, along with the resolution of a significant portion of our nonperforming loans, we expect 2011 to be a much better year for Whitney. We are excited about 2011 and we expect to return to profitability in the first quarter of 2011.

The bulk sale is a transaction that puts a material portion of our Florida problems behind us and affects our balance sheet significantly. We wanted to be as transparent as possible to help the Street and our investors understand our new strategy. Given the significant disparity between our expectations versus the Street's expectations for our performance next year, we have elected to provide guidance in today's bulk sale announcement. We are not under any obligation to provide this guidance but may elect to update it periodically as the market begins to better understand our new strategy.

Management expects earnings in the range of $0.30 to $0.50 per diluted common share for the full year 2011. This range assume no change in interest rates and no significant balance sheet growth. However, once the economy is in full recovery and interest rates begin to rise, we believe we can return to a more normalized level of earnings.

We will now open it for questions.

(Operator Instructions). Our first question comes from Steven Alexopoulos of JPMorgan. Your line is open.

Good morning, everyone.

Good morning.

Regarding the large increase in the classified loans with this risk rating project -- could you give more color on what change that drove such a large increase in the balances and then maybe what the regulatory response has been from such a big increase?

Steve, this is Joe Exnicios.

We had a third party consultant, as we mentioned, Alvarez and Marsal, come in and we went through some extensive training of our lending staff. We rely on the lending staff primarily to provide the appropriate risk ratings. And we were such a dynamic environment with respect to credit quality, we felt it was necessary to make sure there was clarity with respect to being able to specifically identify issues in our credits and understanding a potential weakness versus a well-defined weakness. And the result of that is we reviewed every credit in our portfolio, 500,000 and over and we did a very thorough analysis of each credit. We just tried to be as honest as we could and as conservative as we could so that we could know exactly where we stand. And the result is what you see into the third quarter.

And we are pleased with where we are. We think we have great clarity now with respect to our portfolio.

The improvement is now to identify potential weakness?

That's a regulatory definition. But what we have to make sure is that the folks in our bank that have assigned a responsibility for classifying credits, they have to understand a potential weakness versus a well-defined weakness.

Joe, I appreciate the guidance on the provision for 2011, but begin it's so early, you can help us think about how you arrived at that $40 million to $70 million range for 2011?

What we have done looked at the non-provision portion -- non-impaired portion of each quarter, $11 million last quarter, $18 million this quarter, and we think with the bulk of the impaired portfolio being dealt with and our analysis of what's left there, we think that the range that we have provided is achievable.

Maybe a final question. Could you give us a sense -- I know you're giving us a provision expectation, but what level of reserve release are you embedding in this 2011 guidance?Thanks.

I think it's very limited, Steven. Particularly through the first half of 2011, we have specifically maintained it pretty high -- I'd say it's less than $10 million, it's kind of rounding almost.

Perfect, thanks, guys.

Steven, you can be assured we won't use that to get to these earnings numbers. We get there because of the lower provision required because of the resolution of the problem assets.

Thank you, our next question comes from Adam Barkstrom of Sterne, Agee. Your line is open.

Hey, guys, good morning.

Good morning.

I was wondering if you can maybe walk us through. This is -- it not to beat a dead horse but the DTA, walk us through that issue, how you're thinking about that. What is the argument to your auditors at this point?

I think there's a lot of misconception about DTA and allowances out there.

We did reach a point this quarter where we have 12 consecutive quarters of loss, and that is a trigger for a lot more documentation and conversation and discussion. But what you've got to do for GAAP purposes is you've got to look forward and see when you think your projections are reasonable and can be supported, and everyone and believe that they are going to happen so that you can actually use that deferred tax asset. And if you can use it within the next 3 to 5 years, generally speaking, there's usually not a reason for deferred tax asset allowance.

Now, remember, we are already limited to almost the whole amount of the DTA as far as regulatory capital is concerned. So GAAP and regulatory capital are different.

Right. I'm just curious, the DTA. Did this DTA issue come into play with the -- you know this proposed asset sale? Because it seems to me that the proposed asset sale which is pulling in losses to the next couple of quarters makes your argument stronger for profitability in 2011. Are those two at all related or completely unrelated?

They are all wound up together but we have to look at the DTA every financial statement date, and analyze it based on what is there that day. So we did it then, and then we did it as the losses would be taken in the fourth quarter. So while they are intermingled, I'm not sure they are totally dependant on each other at all.

One last follow-up. You were thinking about the problem asset sale. You gave some color on the assets being sold, but maybe if you can give a little additional color or credit tied to geography on those, and also the same thing for the loans that have been moved and held for sale.

Well, the majority of the assets that are being sold are located in the flat -- Florida market and safe to say they are our real estate portfolio, basically.

And then of the loans that are potentially moved to sale are fairly evenly split between Louisiana, Alabama, Mississippi and Texas. Very little of that would be in the Florida portfolio because most of those would have been dealt with in the sale.

Most of what is left in Florida after the sale is our accounts of what we believe are fully collectible or relationships that we tend to want to stay with through the cycle.

One last thing, real quick. You talk about the classified assets? I think last quarter, did you guys -- I gave us the criticize as well, the special mention bucket? Just curious what that number is.

I can get it for you. Just a second. Total criticized at the end of September 30 was $1.45 billion versus $1.15 billion at 6-30.

Great. Thank you very much.

The increase in special mention was only about $70 million every quarter.

That's correct.

The increase in problem assets primarily was in the sub-standard rating and that goes back to our bankers better understanding the regulatory definition of potential weakness versus well-defined weakness.

Thank you.

Thank you.

Thank you. Our next question is from Ebrahim Poonawala of Morgan Keegan. Your line is open.

Hey guys. This question is probably for Joe. Given your guidance in provision, is it safe to say in your view, classified loans have peaked in all the markets? I'm trying to tie the provisional guidance with the fact that classified loans in the non-Florida market went up quite a bit in quarter?

I'm going to go out on a limb and say yes. You can conclude we have peaked with respect to classified credits.

Now you've had increases in classified credits in Louisiana and Texas, for instance, and Abraham, when we look at the nature of those credits and we try to determine the potential for loss, we see much different characteristic than what we saw in the Florida and south Alabama market. These are, for the most part, projects that have been recently completed in Texas, for the most part, that the overall economy has created a slower absorption and a lot of these product -- we are convinced, will be successful, it's just a matter of timing. And that would be the reason for the increase in the classification. So we are highly confident that we will be able to work through these as we would normally work through these types of credits in a post-recessionary recovery period.

Got you. Did you guy disclose the number of the gross MPL inflow? I believe it was $155 million last quarter.

Let's see. The gross MPL ... $134 million.

$134 million. Okay.

I guess the last question is solely for John. He mentioned about seeing some improvement in the economy. And I was wondering if there are some real signs that you are seeing in your market that make you believe we will avoid the double dip and what improvement are you specifically seeing in some of these markets?

I think it's more stabilization. The improvement from the second quarter was at the end of the second quarter we had too much of pretty dismal economic signs. Over the course of the last three months I wouldn't go so far as to say the economy is improving but it has certainly stabilized.

True. Any signs or any area we are seeing pickup in loan demand?

This is John Turner.

We are seeing good opportunities from time to time in the Tampa market but I think that's more a function of our marking effort in trying to take away business. Periodically the same is true across south Louisiana but I would not characterize any of our markets as reflecting any sort of pickup in loan demand right now.

Got you. Thank you for taking my questions, guys.

Thank you. Our next question is from Jennifer Demba of Robinson Humphrey. Your line is open.

Thank you, good morning.

I hope that my question doesn't seem redundant following all your commentary. But I can't think of any bank that I'm aware of that has really given specific guidance in terms of earnings and credit provision next year and no one has really gone with guidance beyond really the fourth quarter. So I'm wondering why you feel compelled to make what looks like a pretty bold prediction given you could be incorrect if conditions change on the economic front.

Jennifer, there's a tremendous amount of disparity between where the Street is for next year and where our expectations are for next year. And we are trying to manage those expectations a little.

I will tell you that while we are really encouraged about next year and -- it's not just the asset sale. It's our expectation, as Joe Exnicios expressed with the risk rating project, with the conclusion of the spill and stabilization in the economy, we are not going to continue to see any deterioration in the portfolio. We feel good about the outlook for the future, and in terms of why we did it, we are just trying to communicate with you and be transparent.

One follow-up for Tom, if I can.

Yes?

Tom, it looks like following the asset sales, you'll have a TCE ratio of around 750, 760.

755, I believe.

755, what is your minimum comfort level in terms of that percentage going forward?

I don't know that we necessarily have established for ourselves a minimum comfort level. We obviously would like for it to go up and earnings growth will make that go up. So I think that a -- if you look at it, it's kind of a similar reduction in your ratios that we had the parish transaction and, frankly, you know some regulatory ratios are going to go up when we get the DTA back too, so pretty markedly. So there are a lot of thing that can make that go up. Not TCE necessarily, but the regulatory issues but the TCE, from earnings will go up.

Okay. Thanks.

Thank you the next question is Kevin Fitzsimmons of Sandler O'Neill. Your line is open.

Good morning, everyone.

I just have two quick questions. Number one, did you all finance the buyer in the transaction of the MPLs? And then secondly, just throwing in your guidance in my model for the REO cost and the provision, the only way I can really get close is by meaningfully ramping up the margin. And I wanted to run that by you, if that seems consistent. Because unless I'm missing something, that seems to be the way it needs to get up to that range.

Let me give you a quick answer on the first one.

No, we did not finance the transaction. And I will ask Tom and Steve Barker to give you some information on the second question.

Right. We are not looking at the model to significantly ramp up margin. Because we think margin is still under pressure.

Remember, my comments, Kevin, that our projections are in no way based upon an increase in the interest rates or growth in the balance sheet. The way you get, there really is by preproduction of provision and reduction of non-provision credit costs.

I guess I'm missing something because I've done both of those and I don't know if it's asset growth or fee revenues or other expenses. I'm not able to get there without finding a third criteria. But maybe we can talk about it offline.

Well, we certainly can. I think we will try to resolve it with you. The numbers do work. They're there. And Trisha can help you walk through it.

Okay. Thanks.

Thank you. Our next question is from Bain Slack of Keefe Bruyette Woods. Your line is open.

Good morning.

Hey, Bain.

With regard to the pro forma numbers where we stand and capital, from the regulatory standpoint, you're required to have a leverage of around 8%. I think pro forma this would take to us 9.2%, if I have my numbers right. So it looks like you have a slim cushion there. What is your thinking with regard to TARP and 2012 given this forecast you put out there? Well, I think this is a first step towards the thing we need to do to evenly repay TARP. But as far as timing, that's another question for another day. So, obviously it's not in these numbers. And I guess --

It's not in the projection of numbers we gave you guidance on.

So the dividend would still be there. When the plan comes to pay it back, given the regulatory requirements, are we still thinking you can do this without a capital raise? Or at some point do we needed to go back to the market to raise some common equity to pay TARP back?

You know, as we said before, we think we have enough capital to do it and make it work. But we never know what the regulators are going to require us to do when we finally ask to do it and think we are in a position to do it. So again it's a moving target and a question for another day.

Okay. Great. Thank you.

I was going to say the preference is to not go to the market or go in a small amount as we possibly have to go. So we will probably defer the repayment of TARP for a little longer. At the cost we have now, it's pretty inexpensive capital.

I guess just another question.

With regard to the capital or the cash, maybe, at the holding company versus the bank, do you all have any near-term maturities or cash at the holding company that would prevent downstreaming?

Not at the holding company, no. The only thing that a comes out of the holding company is an almost immaterial amount of dividends on trust preferred and our common dividend. The biggest thing is the preferred dividend for the government.

Great. Thank you.

Thank you. Our next question is from Kevin Reynolds of Wunderlich Securities. Your line is open.

Good morning, everyone.

Good morning.

Going back to a couple of questions on the bulk sale MPLs, how much do you think that once that is removed your margin might benefit from not having the drag -- or alternatively, how much of elevated MPLs have hurt your margin over the last couple of quarters? And the second question is once you get the proceeds back from these sales when they are completed, how do you expect to use those proceeds on your balance sheet? Or will they just sit in cash at 25 bps?

First the margin has been hurt by 25 basis point on the quarter on average from MPL. So if you get rid of about two-thirds of those, then you can kind of gauge that a little bit, because those non-earning assets won't be there.

As far as what we will do with the proceeds, you know, that is an issue for all bank these days with a lot of liquidity. And we may modestly increase our investment portfolio. Obviously we don't want to lock in anything long-term at all because we think loan demand will come back eventually.

Okay. Thanks a lot that's all I have.

Before we go into the next question, if I might interrupt. I think we need to go back and clarify the question on the pro forma for everyone and not just Kevin. I will ask Steve Barker if he will give you color on how he got that pro forma and our comfort factor with it.

I will just give some into our thoughts on the major drivers or the income statement. For the first item and income we expect earning assets to increase modestly next year, driven by the liability side as deposits are growing right now. We did not expect growth in loans until sometime late in the year. So overall loans will be down from this year average to average.

The margin percentage we expect to increase very slightly, mainly as a result of taking the nonperforming assets out of the earning asset side. We are projecting, along with the economic forecast, a slight increase in rates in the latter part of next year that will help the margin very slightly.

Noninterest income, we expect a very modest growth there, and then expenses are held very well with the reduction in loan collection ORE, as well as some other decreases and thing like consulting costs and a couple of other items we had one time this year. So total expenses would see a fairly significant decrease year over year.

We did give guidance on the reduction of non-provision credit costs. That's in the guidance numbers. And then, finally, the projection on the provision expenses is the last remaining ingredient on the income statement. I hope that gets you there, Kevin.

Thank you. Our next question is from Dave Bishop of Stifel Nicolaus.

Good morning, gentlemen.

Good morning.

Circulating to the regulatory capital question. Looking at the numbers. I didn't see a number disclosed this quarter for the bank level, tier 1 ratio, there's that 8% hurdle there. How should we think of that number sort of going forward, taking in some losses?

I think that number we will keep above 8%. You know, in September we put 25 million down from the holding company into the bank to make sure that was above 8%. And we will continue to do that as necessary.

You put 25 million?

We put 25 million, yes.

And then secondly, the remarks about Texas and Louisiana in terms of the new impairment for the impaired portfolio there. You can give us a sense of what the cumulative marks have been on that portfolio relative to the rest of the portfolio, specifically to Florida, Alabama?

We have that. Hold on a second.

In Texas, they charge-off today on contractual balance is about 17%. Louisiana about 20%. It's one of the slides in the package that accompanies the earnings release. It has the detail for every geography.

There had not been much change in terms of the impact from the Gulf oil spill but as you go to talk to your borrowers and your customers down there, can you give us an update in terms what have they are seeing as that progresses through resolution?

I will break that answer down really into two parts. Those customers in the oil and gas -- operating oil and gas sector are experiencing a slowdown, as you would expect. There is a fair amount of activity planning for the latter part of 2011. To date there have been no deep water permits issued since lifting the moratorium. There is indications that Chevron is going to apply for one in about two weeks as a test case.

The shallow water activity is much slower. Typically you can get a permit in three to four weeks. Now it's taking three to six months. So activity has just slowed down but it has not stopped and there is good capital budgeting and planning occurring for the latter part of 2011. So I think we are still optimistic.

On the tourism and real estate side. Payments from BP continue to flow pretty well to that segment and the feedback we are getting is that it seems as if that market is going to work through the winter without too many problems. So generally pretty optimistic.

Great. Thanks.

Thank you. Our next question comes from Bill Young of Macquarie. Your line is open.

Good morning, guys.

Good morning.

Could you give more color on the asset sales -- first, did they already occur? If not, is there a binding agreement for the sales? And for the 100 million held for sale, have there been any preliminary discussions about sale activity there or what is your plan to market those? Thanks.

First of all, on the $180 million we have a contract. Business due diligence has already occurred. We are in the process of document due diligence, once document due diligence or legal due diligence is complete, then the transaction will be closed there. There is some earnest money and some additional triggers for non-refundable earnest money that is fairly substantial.

We have done transactions with this particular buyer before. We have been able to -- in previous quarters we have closed up to $50 million in asset sales in aggregate with this buyer. They are known to us and we have a working relationship with them for asset sales.

As far as the $100 million that will go in the held for sale account, we have not specifically had a bulk sale conversation, but we have had a number of one-off conversations on some of those assets in the held for sale account. The buyer, by the way, on the bulk sale is a company called Trax Capital Management, and they are confident enough of their desire to close this sale that they actually asked us to announce their name as part of the information.

I think we should say the $100 million is up to an additional $100 million. We haven't committed to an exact amount at this point.

We really are down in the impaired portfolio, the larger amount accrual portfolio to where we are getting down to basically working through those credits with customers we want to condition to work with, as opposed to those we would like to off-load.

Great. That's helpful.

Can you remind us how much cash is at the hold till?

After the projections that you have seen for the bulk sales, we will have slightly more than $90 million left at the holding company level, after the transactions are completed.

Great. Thanks, guys.

On thank you. Our next question is from John Arfstrom of RBC Capital Markets. Your line is open.

Thanks. Good morning.

Good morning.

One quick follow-up on the last question. Is the goal to get more of these sales done in Q4 or really is that inconsequential? It doesn't matter to you?

No, John, the goal is to do it as quickly as possible.

I think we will end up doing some of it in Q4. How much, I can't say. But realistically some of it will go into next year, and we will be trying to do as much of it in the first quarter as we can. But once we have paid for it effectively by taking the mark, then it's a matter of liquidation of that remaining portfolio.

Butt goal is to get all these expenses in Q4?

Well, the expenses will be in Q4. Some sales may not occur into early part of 2011.

Okay. Then, Tom, maybe a question for you.

How quickly can the problem asset collection expenses come down?

I think they can come down relatively quickly because we can -- you know we try to do a good job of accruing legal fees and things like that. So they should stop pretty drastically.

The largest single component in the non-provision credit cost is REO writedowns. And we are effectively moving the single biggest piece of future foreclosed properties off the books. That's where the primary reduction in noncredit cost goes down.

The number you talked about in the press release --

The number we talked about in the press release includes all of those kind of charges, legal fees, property taxes, REO write-downs, all of the above. We are basically off-loading the balance of the Florida real estate, for the most part.

And you obviously stop your property taxes from accruing against you when you sell the property.

Okay. So it's essentially front loaded in 2011, is what you're saying?

A lot of it. But it still continues, I think, into 2012, if you looked at how it would play out without it.

Okay. And maybe one bigger picture question, maybe for you, John Hope.

You can give us -- there's obviously a lot of media coverage on the oil leak and it caused a lot of concern but you can maybe give us your view on the long-term impact? Is it a speed bump? Is it something more serious? Obviously I think we all had moments of being very, very concern when it was occurring. But give us your...

I will. And I will ask John Turner to contribute because he has been our point person on this.

You have to look at it by sector. And we, from the very beginning said there were three broad categories of impact.

The first category is the local community, principal reply in Louisiana and some of Alabama and Mississippi coast. These were the fishermen and marinas, the people who were directly impacted because their livelihood was effectively cut off for some period of time. Those people are going to be able to return to normal fairly quickly. This shrimping season is open. Crabs are being caught but primarily you need to know we don't bank that sector. Those are not our customers so there's really little or no impact on Whitney from that sector.

The second sector I would call coastal tourism. This summer was difficult, at best. It was traumatic for our customers along the coastal zone, whether in the condominium rental business, restaurant business, whatever. But it's not unlike a hurricane experience. In a year of a major hurricane, the same kind of things happens. The economy comes to a halt and ultimately there's lots of insurance collections. Well, the insurance company this time is BP. And a lot of our customers are actually collecting money through the process that was set up to make claims against BP. We believe -- with one or two expectations, our customers are going to do fine as things return to normal. That's going to be okay.

The third area is the oil and gas business in the Gulf of Mexico, both shallow water and deep water. We expect there to be a slowdown -- a continued slowdown in activity. But ultimately we think the market is going to recover. The country has a got to have the oil and gas reserves located in the Gulf of Mexico and they are going to have to come together and find a way to gather those products from the Gulf. There -- again, there may be some burden. There may be some slowdown but we think that will effectively recover.

Now that's a cyclical industry, as you know, and our customer base, that we deal with in that a industry, has been through downturns in the energy business before. And this is sort of like a downturn. They will weather it, and they will come back. And the market will recover.

I wouldn't add anything to that. I think that's exactly true.

Okay. Thank you.

Thank you. (Operator Instructions). The next question is from Jeff Davis of Guggenheim.

Thank you, but my question was covered.

Thanks, Jeff.

If there are no further questions, we would like to provide clarity on another question we were asked, Tom.

Right. The question that was asked by email, actually, was to remind you why we are limited in our regulatory capital for using the deferred tax asset. The reason for that is because the regulatory rules are much more restricted than as the GAAP rules, and only lets you carry forward a loss for one year. And so, therefore, we became limited during this past year significantly on that measure already. But we're not limited for GAAP I hope that clears that up.

Any further questions?

I'm showing a question from Sidney Balk, Investor. Your line is open.

Good morning.

I believe you referred to the TARP deferred dividend which is $4.1 million quarter that is paid to the U.S. treasury under TARP as inexpensive capital. Why is that a referred to given the current interest rates as inexpensive, because it exceeds 5%?

The reason it's inexpensive because the alternative to that is either some preferred stock, which probably today would be going for around 10% or plus dividend, or common stock, which is even more expensive than that. So that's why we would refer to it as relatively inexpensive capital.

Well. Thank you.

I would also ask that given the anticipated $100 million -- or net $90 million from the sale of these loans, if Whitney adds that to its capitalization, would it currently have sufficient capitalization, say, in early 2011 to repay the $300 million TARP loan?

Again, earlier in the call we received some questions on TARP about that. And we said we really need to make the TARP decision after we have gotten past and completed the bulk sale and returned to profitability. We will make a decision to repay TARP. We are not now prepared to tell you exactly when that can be.

Obviously that affects the dividend which has been reduced to $0.01 and it's really hurting investors and I've written to you this effect. And to just say it's postponed indefinitely, I do not think is very reassuring to the investors.

The reassurance I would give you is that the first step in being able to return the dividend is that we have to return the profitability. And I would take great reassurance in the fact that management is willing to put itself on the line, that we will return to profitability in the first quarter of next year. That's the first step and the most important step.

Thank you for your questions. And I will refer any of you to the various material that was associated with the press releases. Or if you have speck questions please call Trisha Carlson. Thank you, everyone.

Thank you.

Ladies and gentlemen this concludes the conference for today. You may all disconnect and have a wonderful day.