Hancock Whitney Corp (HWC) 2011 Q2 法說會逐字稿

Good morning, and welcome to Hancock Holding Company's second quarter 2011 earnings conference call. Participating in today's call are Carl Chaney, President and CEO, Mike Achary, CFO, Sam Kendricks, Chief Credit Officer, Steve Barker, Chief Accounting Officer, and Trisha Carlson, Investor Relations Manager.

At this time, all lines are in a listen only mode. Later, we will conduct a question and answer session, and instructions will follow at that time.

(Operator Instructions)

I would now like to turn the call over to Trisha Carlson. You may begin.

Thank you, and good morning. During today's call we may make forward-looking statements. We would like to remind everyone to review the Safe Harbour language that was published with yesterday's earnings press release. Hancock's ability to accurately project results, or predict the effects of future plans or strategy, is inherently limited.

We believe that the expectations requested in the forward-looking statements are based on reasonable assumptions, but actual results and performance could differ materially from those set forth in the forward-looking statements. Hancock 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'll now turn the call over to Carl.

Thank you for joining us, this morning. Welcome to Hancock's earnings conference call. We appreciate your interest in our company. A new chapter in the history of Hancock began this quarter with the closing of the Whitney acquisition.

After almost 6 months since the deal was announced, on June 4th, 2 long time neighbors and friends joined forces, solidifying Hancock as the premiere Gulf South financial services franchise. With the closing of the merger, the new Hancock is now a 2-bank holding company, Hancock Bank and Whitney Bank, with $20 billion in assets, $11 billion in loans, and almost $16 billion in deposits.

We have over 300 locations, and almost 400 ATM's located along the Gulf Coast from Houston, Texas to Tampa, Florida. Operating income, which is net income excluding tax effective merger costs and security transactions, totaled almost $27 million, or $0.48 per diluted common share for the second quarter.

Since the transaction closed on June 4th, the profit for the quarter in overall operating results reflect only 26 days of what Whitney truly brings to the combined company. In a few minutes, Mike Achary, our CFO, will walk through the specifics of the balance sheet and income statement and the details of the purchased accounting adjustments.

There are a few items I would like to note before I turn the call over to Mike and Sam. First, the loan mark of $463 million was in line with our initial estimate of $447 million.

Whitney's loan portfolio was valued with the help of a professional accounting firm, and when coupled with the actions Whitney had taken over the past couple of years, including the bulk sale and the write down of held for sale loans, the resulting loan mark makes us feel very comfortable with the portfolio we acquired. We also remain committed to maintaining the credit culture that has benefited Hancock throughout this most recent credit cycle.

As you have heard me say many times, Hancock has a conservative approach to banking and having strong capital is an important hallmark of this company. With total equity of $2.4 billion at June 30th, Hancock continues to remain very well capitalized. At the end of the second quarter, the TCE ratio was a solid 8.1%. The $308 million in preferred stock and warrants, issued by Whitney under the TARP program, was immediately repaid by Hancock.

So, we are proud to continue to say thanks but no thanks to government bailout funds. You can be assured that Hancock will always maintain a strong capital position and use it to the benefit of our shareholders.

With the integration on track, call savings beginning to be realized, opportunities to cross sale market leading products and services, such as treasury management and commercial insurance, and the dynamics of a region poised for future growth, the outlook for Hancock Bank and Whitney Bank is very positive and exciting.

The integration of Whitney into Hancock continues to progress as scheduled. Professional consulting groups have been assisting Hancock with the integration and accounting matters related to the transaction. We have a group of bankers from both Whitney and Hancock dedicated to this process.

The main systems conversion is currently scheduled for the first quarter of 2012, with smaller systems converting later this year. We currently expect a divestiture of Whitney's 7 branches in coastal Mississippi and 1 branch in Louisiana, that was required by the Department of Justice to be completed in the third quarter of this year.

To date merger costs have totaled approximately $24 million. We expect a total of approximately $125 million in pre-tax merger costs. These calls will be included in quarterly results through the remainder of 2011 and early 2012. The Company realized approximately $4 million in call synergies from acquisition date through the end of the second quarter, related mainly to a reduction in headcount and other call synergies.

The time line for realization of these expected call synergies remains on track, and management remains very confident it will meet its total projected annual call saves of $134 million. Customer employee retention is a priority for both organizations. To date, the Company has not lost any major customer relationship as a result of the transaction, and we have been able to retain key employees throughout the organization.

We are continuing to place as many Whitney employees as we can, to fill the needs of the expanded Hancock organization, and many of Whitney's employees have signed multi-year retention agreements with Hancock to ensure a smooth transition, and retention of the customer base. At this time, I'll turn the call over to our CFO, Mike Achary.

Thanks, Carl, and welcome everyone to this morning's call. As Carl mention, on June the 4th, Hancock completed its acquisition of Whitney Holding Corporation. Under purchase accounting rules the Whitney balance sheet was marked a fair value at the acquisition date. The acquired fair value balances are included in a table within the release.

I would first like to take a minute to go over some of the most notable purchase accounting items that have impacted our results. First, the impact of the acquisition is reflected in our financial information from the acquisition date are only 26 days.

So, for the quarter, we have two months of Hancock only, and a bit less than a full month worth of results for the combined Company. Please keep that fact in mind when looking at average balances, income and ratios that include averages.

Secondly, Whitney's allowance for loan losses at acquisition date of $208 million was not carried forward, and the loan portfolio was reduced, or marked, $463 million to fair value. Approximately 40%, or $181 million, of the loan mark will be accreted into interest income over the weighted average life of the loan portfolio, or about 57 months.

Thirdly, reported levels of nonaccrual loans and past due accruing loans do not include any purchase credit impaired loans, which were written down to fair value upon acquisition. So, moving onto the results of the quarter, we first note that operating income for the second quarter was $26.6 million, or $0.48 cents per diluted common share. And, of course, that compares to the $16.4 million, or $0.44 cents in the first quarter of 2011.

As noted by Carl, operating income for the second quarter did not include $22.2 million of pre-tax merger related costs. Pre-tax merger related costs for the first quarter of 2011, and also related to the Whitney transaction, totaled $1.6 million. Return on average assets, excluding merger related costs and securities transactions, were 92 basis points for the second quarter. That was up 11 basis points from the 81 basis points that we reported in the first quarter of this year.

Pre-tax pre-provision profit for the second quarter was $49.5 million, compared to $32.4 million in the first quarter. Period end loans for the combined company totaled $11.2 billion at June 30th. That compared to $4.8 billion at March 31st.

The increase in period end loans does, of course, reflect the impact of the Whitney acquisition. However, excluding the impact of Whitney at acquisition date, period end loan balances were down approximately $48 million, or about 1%, compared to March 31st.

Period end deposits were $15.6 billion, compared to $6.7 billion at March 31st. As with our loan portfolio, the increase in period end deposits reflects the Whitney acquisition. Again, excluding the impact of Whitney at acquisition date, period end deposits were down about $291 million, or about 4%, compared to March 3st. About one-third of that decrease was related to expected run off and the People's First CD portfolio.

The remainder of that decline from the end of the first quarter was due in part to seasonality of our commercial and also public fund deposit books. Non-interest-bearing demand deposits for the combined Company totaled $4.9 billion at June 30th, that compares to $1.2 billion at March 31st. Non-interest-bearing demand deposits comprise 31% of our total period end deposits at June 30th.

That compares to about 18% at March 31st. The increase is, of course, related to the Whitney acquisition and the very favorable deposit mix that was, and continues to be, a Hallmark of that franchise. Net interest income for the second quarter was $102 million. That compared to $69.6 million for the first quarter.

The Company's net interest margin was 4.11% for the second quarter. That compared to 3.97% for the first quarter. The increase in the margin of about 14 basis points reflected a favorable shift in our funding sources and also a decline in our funding costs. That was only partially offset by a less than favorable shift in the mix of earning assets.

In addition, approximately 6 basis points of the quarter's net interest margin, or about $1.5 million in net interest income, was related to net accretion of various purchase accounting adjustments. Toward the end of the second quarter, the Company deployed into our bond portfolio approximately $400 million of our approximately $1 billion of excess liquidity.

We purchased a combination of mortgage-backed securities and CMO's with a yield of 2.54%. This resulted in an improved yield of 229 basis points, compared to the current short-term rate of just 25 basis points. This action could lift our annual pre-tax earnings by as much as $9.2 million.

Non-interest income for the Company totaled $46.7 million for the second quarter, compared to just over $34 million for the first quarter. Approximately $8.2 million, or about 65% of the increase, was related to the impact of the Whitney acquisition. The remainder of the increase in the first quarter was primarily related to higher other income of about $3.5 million, and an increase of $1.4 million in insurance fee income.

The increase in other income was mainly related to interest accretion of our FDIC receivable related to the People's First acquisition. While the increase in insurance fees was related to seasonal renewals in the second quarter.

We also noted in the release that we expect the new interchange rates related to the Durbin Amendment could lower our non-interest income by approximately $2 million to $3 million in the remainder of this year 2011, and approximately $15 million to $18 million in 2012.

As you would expect we are working hard to identify opportunities to mitigate this lost revenue. Non-interest expense, excluding merger costs, for the second quarter totaled just over $99 million. That compares to $71.4 million in the first quarter.

The majority of that nearly $48 million increase was Whitney-related expenses inclusive of about $4 million in realized cost synergies. Finally, the company's efficiency ratio, excluding merger costs, was 65.6% for the second quarter, compared to just over 68% for the first quarter. Now, at this point, I'll turn the call over to Sam Kendricks, our Chief Credit Officer.

Thank you, Mike. As Mike mentioned earlier, when you review Hancock's credit measures, keep in mind the accounting for the transaction eliminates Whitney's problem loan portfolio because the fair value adjustments of the loan mark. I would also like to note when you are reviewing the additional asset quality information in the financial tables, originated loans include the Legacy Hancock portfolio, plus any newly originated Hancock Bank or Whitney Bank loans.

The acquired loans information includes the Whitney portfolio that was marked at the acquisition.

The covered loans are People's First. The acquired and covered portfolios will run off overtime as those loans mature. All newly originated loans will be included in the originated loan total. The provision for loan losses for second quarter was $9.1 million, and that compares to $8.8 million for the first quarter.

During the second quarter, we reversed the remaining $2.7 million of allowance that was established to cover estimated losses from the BP oil spill, and we increased the unallocated portions of the reserve for loan losses by $1.2 million. We recorded an $18 million increase in the allowance for losses in the second quarter related to certain pools of covered loans from the People's First acquisition, due to a change in expected cash flows on that portfolio.

Because of the 95% loss share coverage for the FDIC the net provision on covered loans increased by only $900,000 for the second quarter. Net charge offs for the second quarter were $8.2 million, or 49 basis points of average loans on analyzed basis. That compares to $6.8 million, or 57 basis points of average loans for the first quarter.

The company's allowance for loan losses was $112.4 million at June 30th, compared to $94.4 million at March 31st. Excluding the acquired and covered portfolios, the ratio of the allowance for loan losses to period end loans was 1.99% at June 30th, compared to 2.05% at March 31st.

As noted earlier, Whitney's allowance was not carried forward at acquisition. Non-performing assets totaled $258.2 million at June 30th, and that compared to $161.9 million at March 31st. The increase from the previous period is mainly related to the addition of $81.2 million of foreclosed assets from the Whitney portfolio.

Whitney's credit impaired loan portfolio was recorded at fair value at acquisition and, as noted earlier, is not included in the non-performing as assets. And, while you can't see it in the financials, Whitney's classified portfolio declined approximately 7% from March 31st, excluding the mark and held for sale portfolio. Loans 90 days past due are greater and still accruing as a percent of period end loans was 4 basis points at June 30th, that compares to 1 basis point at March 31st.

I would like to make one general comment about the credit cultures of Hancock and Whitney and the integration of those cultures. As Carl mentioned earlier, Hancock's conservative credit culture was key to its good asset quality performance over this most recent credit cycle. And that conservative culture will survive in the integration of Hancock and Whitney.

It's going to be easier than some may think. Despite the problems that Whitney experienced during the recent credit cycle, a culture and loan review process similar to Hancock's had already been established and implemented at Whitney during 2010. The lenders and credit analysts were trained in the new processes and policies, and the credit administration area took a leading role in the transition.

Additionally, all of the work that the Whitney organization had already done in classifying the credit quality of its portfolio and completing the bulk sale, along with the outside consultant's review of the portfolio in 2010 were key in helping determining the loan mark for this transaction. What we determined to be the status of the loan portfolio during our due diligence was confirmed, and to date, we have not been surprised during this process. Carl, I'll turn it back over to you.

Thanks, Sam. As I'm sure you all could hear from the train whistle, commerce is moving rapidly throughout the Gulf Coast. Before I open the call up for questions, I would like to echo Sam's final comment. There is absolutely no buyer's remorse in this transaction.

In fact, I am more excited about this merger today than I was on the day we announced the transaction. Hancock bank and Whitney bank are moving forward together very well. So, at this time we'll now open the call up for questions.

(Operator Instructions)

Kevin Fitzsimmons, Sandler O'Neill.

I guess the credit situation you would best -- you would advise to look at this supplemental table you have toward the end, which shows non-performers excluding the Whitney mark loans and the covered loans. But, it has Whitney's oreo lumped in there.

When I pull Whitney's oreo out of there, it still looks like, am I right to -- that it looks like Hancock's non-performers increased about $15.5 million, or 16% in the quarter. Just wondering if that's right, and if you can kind of comment on that whether there is any take-aways from that?

Yes, we did have a slight uptick in the NPAs and the core bank. We follow those very diligently and continue to monitor the portfolio, and have not had any significant surprises in terms of any large credit migration onto the problem loan list. We continue to work through those identified problems very methodically.

I guess I'm just trying to get a sense where is this just kind of a taste you all think may continue? Or is it, I would assume, getting -- closing the deal you were probably going through more of a concerted look at the whole portfolio?

I would classify it as nothing systemic. As we said earlier, part of the assessment that continues with the acquired P-1 portfolio. As we recognize any deterioration of that portfolio, we will include those in the analysis of those non-performers as well.

We see nothing that would indicate any trends whatsoever. So, there is no concern on our part on that slight increase. In fact, you are correct. As part of the quarter in which we consummate the acquisition, clearly we look at everything even a little harder. There is no systemic issues at all.

Can you all -- the amortization of intangibles line item within expenses, what kind of run rate, on a full-quarter basis, can we expect there? That came in a little lighter than what I was expecting this quarter.

The CDI amortization for the quarter was right at about $1 million. Again, that was an estimate on our part for the quarter. I think on a run rate basis you can expect to see about $4.5 million per quarter.

$4.5 million?

Yes

Jefferson Harralson.

I was going to ask you about the merger costs. If I'm reading the release right, it seems like the merger cost, the estimation there has come down by a lot. What's the driver to that decrease, if I'm reading that correctly.

As you know, our original estimate was about $210 million. The current estimate is $125 million. So, obviously, we are down pretty significantly. The $210 million, as you would expect from us, was a very conservative estimate.

In that number we assumed really 100% payout on all of Whitney's change and control contracts. And, where we stand right now, is a lot of those change and control contracts, fully half, will either not trigger or we've replaced with the retention contracts. So, that was a big driver of the overall decrease in the merger costs.

Jefferson, that is actually a two-fold policy. One we don't have -- we are not going to have the initial estimated merger costs. And, secondly, we have been very, very successful in maintaining the key team together, which, of course, flows through our successful ability to keep the customer base intact as well.

On the March balance sheet that you are buying. When I look at that on page 2, the net assets acquired, the $1.6 billion, is that the estimation of the purchase price? I think I would have, if that is the purchase price, I would have guessed that would have been down to like $1.3 billion.

The difference there basically is the TARP re-purchase. From an accounting point of view, that is actually included as part of the purchase price of the transaction.

Michael Rose, Raymond James.

Just a question on the outlook on loan growth. I know you mentioned in the press release that at Legacy Hancock the outlook still remains somewhat challenged.

With Whitney's higher concentration of C & I loans and the growth we have seen at several banks in and around your region this quarter, can we start to look for loan growth as we get through some of these merger issues and into 2012?

I think you absolutely can. We -- in fact if you look at the very end of our quarter, we truly started to see some growth in the C & I book, specifically the C & I book. I think you could expect that trend.

One of the primary drivers for that is if you just consider the fact that over half of the combined company is represented by Whitney. And the Whitney franchise is now making that transition from a defensive mode to a very aggressive offensive mode, hence the ability to really focus on growing loans. I think what we saw at the very end of the quarter is likely to continue, with respect to loan growth.

As it relates to potentially hiring additional lenders, what is your outlook there?

Well, we are blessed to be in some very attractive markets throughout our 5-state footprint. When you combine the fact that we have an excellent story to tell with our balance sheet, our capital, we are having some great success in going out and actually recruiting the best bankers that we can identify in the various markets in which we operate.

Attracting those bankers over, many of those are coming from institutions, larger institutions, that may be some what distracted. Those individual bankers, producers, are very frustrated, as well as some of their customers. We are able to attract those excellent bankers over and, of course, they would, over time, bring that book of business with them as well.

We consider the markets, particularly like in Houston, really the 2 extremes of our footprint, the Houston market, as well as Jacksonville, Orlando and Tampa. We have had some real success in being able to identify potential candidates and bring them over.

Conversely on that point, I think you had mentioned that you hadn't lost anybody that maybe you didn't want to lose. Is that still the case today?

Yes. We haven't lost any real significant key executive leadership. As a result, we haven't lost any, what I will call, significant relationships. Any time you have a $20 billion company, we are going to be picking up new business every day and losing some. But, net-net we were very, very pleased with the associate team in retention as well as the customer retention.

Emlen Harmon, Jeffries & Co.

Was hoping you could address a little bit what the expense run rate is of the expenses you brought over from Whitney. You addressed the amortization already, but could you talk a little bit about what the expense base was you brought over on a quarterly basis, how much of the $4 million in cost saves is actually in the run rate? I guess, those would be the key points to talk about within there.

As far as the quarter's concerned, again, you've got basically 1 month's impact of Whitney's expenses.

If you look at the expenses that came over from Whitney, it is probably on, before cost saves, about a $39 million run rate. And, then of course you apply the cost saves to that number. And, basically, what is included in the numbers for this month is a $28 million or thereabouts from the Whitney. Before we get into additional cost saves, that is a good run rate to use, going forward.

And, then, on the -- just as we think about the margin, you noted that funding costs have been down pretty significantly. How much of that came from the Legacy Hancock's side? I know you've got a fair amount of CD repricing that's happening there. Could you help us understand, maybe, what the impact was from Whitney, just to give us a sense of what the bleed through is going to be like in the third quarter?

When we look at the funding costs reductions that were made during the quarter, the vast majority that came from the Hancock side. There was very little in the way of cost reductions for deposit costs, on Legacy Whitney.

You asked a great question about the CD repricing, for the combined company, over the next 2 quarters we have approximately $2.95 billion of CDs that will be maturing. Those CDs will be coming off at about 129 basis points, and again, that is over the next 4 quarters. There is a tremendous opportunity to retain that CD book and reprice it at lower levels.

Jennifer Demba, SunTrust.

I think you said your credit mark was a little bit different than your original expectation. Could you repeat that information and comment on what the variation was? What caused the variation?

The original estimated credit mark was $447 million, as you recall. The actual credit mark that's in the numbers as of today is $463 million. So, for all practical purposes, I mean, we are within 3% or 4%. We knew the market wasn't going to come in at exactly the $447 million. It probably would be a little bit lower or a little bit higher.

The way it turned out, it came in a little bit higher. We don't perceive that to be any kind of issue, or certainly a significant difference at all.

Actually, we were please it had came in roughly 3% with our initial estimate.

Could you talk about what you are seeing in the economy throughout your footprint? Just give us a sense of what you are seeing?

We are starting to -- I think you can see that the economy is starting to pick up. Now, is it going to be a quick recovery? Absolutely not. It is going to be a slow recovery, but we are starting to see, as I mentioned earlier, some loan growth, specifically C & I loan growth at the very end of the quarter. We think that trend is likely to continue as that line starts to increase.

A lot of growth, particularly in the oil and gas sector, being Louisiana and Houston as well. Very safe and secure credits going out in that area. Also, you'll start to see some commerce picking up in relation to the ports. That's a real opportunity.

I know you have heard, you and I have spoken about the opportunities for the widening of the Panama Canal and the fact that will be completed in 2014. That is going to certainly open up a tremendous amount of commerce for the Gulf Coast. And, we think we are positioned extremely well, having a very significant presence in every single port along the Gulf of Mexico, from Houston all the way along the Gulf Coast to Tampa.

So, there are certain different drivers that are coming together. There was a recent piece that, if you haven't seen it let me know, I'll be glad to send it to you, it came out ten days ago, Forbes put out a very positive piece on the Gulf Coast, and how that is quickly emerging as a major center of commerce for the future.

Christopher Marinac, FIG Partners.

Just wanted to extend from Jenny's question about the credit mark. It seems to me, Mike, that the overall goodwill and tangibles is a little bit less than you had in the proformas, be it $10 million to $12 million, do I have that right?

Thereabouts, that's right.

Then, just from a financial reporting standpoint, the table that you have in the press release that lays out the existing loans, the acquired loans, and, of course, the small covered loans. How does that evolve 6 and 12 months from now from a perspective of trying to show to ourselves and, also, externally how the relationships that have been retained, as well as grown, as Carl was alluding to before?

When you say see evolve, obviously our intent is to continue to report this information going forward. So, it is as transparent as possible. The different dynamics related to our loan portfolio. Again I think the table that you are referring to is the one that breaks out our originated loans, acquired loans and then covered loans, is that correct?

Yes, that's right. Six months from now we'll probably see the acquired loans slightly lower as you have payoffs. Covered loans, of course, will be lower as they pay off, and originated loans presumably should be higher.

Exactly, the acquired loans and the covered loans will essentially accrete down, over time. Then, more of the newly originated loans will appear, obviously, in the first column on the left.

One last question on what this whole concept is. Have there been many instances where you've had to reconsider pricing on relationships? I know it's only the first month that has transpired, just curious how you think about pricing as the retention comes up from a competitive standpoint?

Chris, I can tell you and I'll let Sam, our Chief Credit Officer, speak to this in more detail. I can tell you it has been a very, very rare instance when that would happen. Sam why don't you speak to that.

I would agree with that. What we have seen are very solid relationships that are deep-seeded in terms of relationships between the bank and the client, and pricing has not been a central point of negotiation.

We were very pleased with the relationships, and likewise, feel like the clients continue to be pleased with the service they are receiving from the company. So, pricing has not been a central focus, at least in the transactions that I've seen thus far.

Ebrahim Poonawala, Morgan Keegan.

I wanted to follow-up on your comments on loan growth. When you are looking at period-end loans, which is about $10.5 billion excluding the FDIC covered loans, is your best outlook for the next few quarters does that grow from there? Or, do we expect some shrinkage, maybe, related to X amount of Whitney portfolio that you may not want to carry forward any more? What is your outlook there?

Ebrahim, you're asking about the outlook for our legacy loans, including Whitney going forward, is that the question?

Yes, the legacy loans. When you look at Whitney, from what I understand, any new Whitney renewals will flow into the Hancock bucket going forward, is that correct?

Well, no. Any of the bank of Whitney renewals will still be in the acquired loan column. It's only a brand new originated loan that will appear in the originated column.

I guess my question is two part. One is, is any amount of that Whitney $6.3 billion portfolio that you don't intend to carry forward and there should be a runoff? Or, as of today, you want -- you would renew the entire $6.3 billion as it came up for renewal?

Well, Sam can certainly add to that comment. But, obviously, as we go through the process of renewing loans, that is a loan-by-loan, customer-by-customer-type decision, based on a lot of different factors. I don't know that we can sit here now and say that we are going to renew every single loan that comes up or not. So, Sam, maybe some --

That does include the problem loans right?

Potentially, yes. Yes.

As those loans come up for maturity, we will be making assessments as to the quality of the credit, in determining whether we want to renew and move forward, expand the relationship, or consider a different strategy. I don't know that I can characterize exactly how that's going to look.

And give a dollar amount. But, we will certainly look at those on an individual case by case basis.

Mike, in terms of the tax base going forward, is it going to be similar to second-quarter numbers, or levels?

Yes, at this point, our guidance on the effective tax rate is somewhere between the 20% to 21% range.

Bill Young, Macquarie.

Most of my questions have been answered, but I may have missed this. Can you talk about the timing of the deployment of the remaining $600 million in excess liquidity?

Yes. That's something that we are going to look at as the quarter goes on. I don't know that we are going to sit here and say we are going to deploy that to the bond portfolio in the third quarter.

A lot of factors, including liquidity needs of the combined company, prospects for loan growth, things like that. That is something we, of course, watch each and every day. When we feel like the time's right we'll certainly deploy that excess liquidity. But, there is not a hard and fast timeline right now.

Looking at that originated loans bucket and comparing it to the prior quarter, I know some of that was Whitney-originated, but, period-over-period end growth looks pretty good.

I'm getting about 2.9%, most of that is in a commercial real estate bucket. Was that all C & I growth that you are seeing? Is that more from Whitney's book business versus Hancock's core book? Could you just talk a little bit about the mix?

I think it is accurate to say at this point that the majority of that increase you're referring to was just C & I. Simply because the Whitney loan portfolio is much bigger than Hancock's. Probably a majority of that is coming from the Whitney side. But, a pretty good mix between the 2 companies.

My final question is, one of the big selling points of this deal was the potential synergies on the fee side. Could you just talk about timing of when you might get a little bit more aggressive on improving cross-sale there? Is that contingent on the systems integration getting in place?

Some of that is clearly tied to systems integration. I can tell you we are rapidly moving offensively in areas such as treasury management because that's not -- we don't have to wait on systems for that. That is already a place.

Whitney had a very robust treasury management platform. We are utilizing that aggressively. The other piece that is a major driver of potential revenue synergies that we did not factor into our initial proforma's is the commercial insurance piece, and that certainly does not have any dependencies whatsoever on systems.

We have been in the insurance business since 1902. In fact, J. Everett Eaves, the highly respected, regarded commercial insurance agency that we acquired several years ago, 6 years ago, is right down the street. Their main office is right down the street from Whitney's main office in downtown New Orleans.

So, we are able to -- have already, I'm saying we're able to, we have already started very aggressively moving that commercial insurance, those products and offering those to the very attractive commercial book of business that Whitney brings to the table. So, I would say the primary drivers of potential revenue synergies are not dependent on systems conversions and we are rapidly moving along those lines as we speak.

Would you be able to quantify average products sold per commercial client?

Gosh, I don't have that information handy. And, I certainly don't have that on the top of my head. But, I would be more than happy to get that information to you.

Dave Bishop, Stifel Nicolaus.

Hi Mike, you drew the short straw here. Had a question in terms of the other income, the $3 million in terms of the FDIC accretion. Was that due to any early payoffs, in terms of some of the covered assets there? And, was that a lumpy one-time payoff, or a sustainable --?

No, that is more or less a new run rate going forward. And Dave, as you know with us, we are conservative on every aspect of how we accrue or accrete income, and we were probably guilty of being a little bit too conservative in how we were pushing that go income onto the income statement. So, what you see in the second quarter is going to be representative for the next coming quarters.

And then, turning back, I guess in terms of -- I think it was touched upon, in terms of loan pricing, in terms of retaining customers, what do you see externally there? Obviously, Whitney brings over a pretty good large corporate commercial borrowing base.

We are hearing a lot of frothiness in terms of some of the larger banks looking to steal share there. Are you guys really having to aggressively fight them off, or what are you seeing out there in terms of competition?

I would say that we really haven't seen that type of threats. In fact, as we mentioned earlier in response to one of the other questions, pricing has not really been an issue, and I have been -- I continue to be amazed at how loyal the Whitney customer base is, considering all the things that the organization has gone through.

Let me tell you the Legacy Whitney team, they are energized; extremely energized to protect that loan book. They are very proud of that commercial loan book, and I say loan, but the commercial relationships, because 38% non-interest-bearing deposits on the Whitney book as well.

They are very proud of that, and they are also very energized to protect that, and I think that sense carries out through to the customer base. The customers are proud to now be with a company that is totally on the offense now. We haven't seen those kinds of pressures.

Andy Stapp, B. Riley & Co.

Could you talk about what you are doing to offset the impact of Durbin? In other words, are you starting to wait and see what the large banks are going to do to offset it and follow suit? Are you taking steps on your own?

Well, I would say a combination of all that, Andy. We are clearly working on the white board right now, looking at the various tools in our toolbox. And we certainly have very significant levers that we can use to offset that. While at the same time, of course we are going to pay attention to what the other larger banks should want to do, particularly those in our market.

We are not going to just sit back and wait and see what the big banks do. We are doing both and we are aggressively looking at the options. And, we have many different tools in our set to use. We are also going to pay attention to what the market is doing as well.

I know, it is early, but what are you seeing in terms of runoff of Whitney customers?

We have been extremely pleased in our ability to retain the customer base. As I mentioned earlier, the Legacy Whitney team, they are very proud of that customer base, as they should be. And, that flows through their actions and their attitude.

You can count on a couple of you know, in one hand, the number of relationships that we have lost, and we really have not lost any what I would call key, significant relationships.

At the same time, we've been able to pick up new relationships, from some of our competitors and some of the competitors that have certainly tried to make a run at our folks. It is certainly interesting how things go both ways.

Is that also true on the retail front?

Yes. Because if you think legacy Whitney has been really a commercial institution and Hancock brings the expertise on the retail side. While those numbers are not, just by the sheer nature of the size of the transactions, they are not very large because they are consumer-based. We do see that, though.

Do you happen to have early stage delinquencies for the legacy loan portfolio?

Ask that again now.

Early stage delinquencies for the legacy loan portfolio?

I don't have those handy with me here, Andy. But my recollection is we haven't seen any meaningful change in the trends.

And, with no further questions in queue, I would like to turn the conference back over to Mr. Carl Chaney for any closing remarks.

Thank you all for your interest in our company. We obviously are very proud of the first-quarter results with the combined company and look forward to a great future coming down. If any of you have any additional questions, please forward those to Trisha, and we'll be more than happy to respond appropriately. But again, thank you very much for your interest in the company.

Thank you, ladies and gentlemen, this does conclude today's program. You may all disconnect, and have a wonderful weekend.