Whitney National Bank
Whitney National Bank's cleanup volunteers.
Whitney National Bank
Children receiving Whitney's donations of school supplies.
Liza Copping, Assistant Vice President, Whitney Bank
Whitney National Bank's business footprint extends along the Gulf Coast from Houston, Texas, to Tampa, Florida, with more than 150 branches and 2,500 employees. In 2005, hurricanes Katrina and Rita inflicted massive devastation and dislocation throughout South Louisiana and the coastal areas of Texas, Mississippi, and Alabama, including dozens of Whitney branch locations.
These two storms caused widespread property damage, required the relocation of an unprecedented number of residents and business operations, and severely disrupted normal economic activity in the affected areas. Many Whitney customers and more than 800 Whitney employees suffered staggering losses. Through it all, Whitney and its bankers relied upon their fundamental strengths while continuing to serve customers.
Meeting Customer Needs
Immediately following the storms, Whitney offered loan assistance and payment deferral programs, including a 90-day deferral period on all consumer loans in certain areas of Alabama, Louisiana, and Mississippi. Payments were automatically suspended and no credit reporting was required.
Consumers with first mortgage loans serviced by Whitney were offered a deferral of loan payments for up to three months. In addition, Whitney bankers worked with individual business clients to craft deferral arrangements designed for each unique situation. These programs provided a much-needed lifeline for the many customers in the affected markets displaced and incurring unexpected expenses.
Later that year, Whitney participated in a U.S. Small Business Administration-backed Gulf Opportunity Loan program that was designed to help expedite financing for recovery and rebuilding efforts in areas affected by hurricanes Katrina and Rita.
Whitney originated loans totaling $370,000 in the Houston area, $227,500 in the New Orleans assessment area, and $100,000 in Mississippi. Whitney also originated 61 loans totaling $2.9 million through the Louisiana Department of Economic Development, which established a bridge loan program for small businesses affected by the hurricanes. Loan proceeds could be used only for maintaining or restarting a business in a designated area or in a temporary location in one of the qualifying parishes that sustained damage or interruption of operations as a result of the storms.
Whitney is also among several other financial institutions participating in the Baton Rouge Small Business Loan Fund, a $2.5 million fund through Seedco Financial Services, a certified community development financial institution (CDFI). As described in this newsletter's This Just in ... , this fund is designed to serve small businesses that previously have been unable to obtain start-up or operational financing through traditional sources. It provides below-market-rate loans ranging from $5,000 to $150,000 with flexible repayment terms to eligible Baton Rouge entrepreneurs who employ fewer than 50 employees. Since its inception in the fourth quarter of 2007, the fund has closed seven loans totaling $441,000 and is currently processing over 50 loan applications.
Whitney also participates in the loan fund administered by Community Development Capital (CDCapital), a certified CDFI. This fund provides predevelopment financing to developers of affordable housing to cover acquisition, environmental, demolition, and other predevelopment costs.
This predevelopment financing supports these developers' ability to access more conventional financing for construction and permanent financing, thereby increasing the supply of affordable housing in New Orleans and southeast Louisiana. Since the hurricanes, CDCapital has made six loans totaling $1.85 million, resulting in 225 completed units and 147 additional planned units.
Whitney Community Development Corporation
Another part of Whitney's GO Zone strategy is to use Whitney Community Development Corporation (WCDC) to fund the interim construction of affordable housing. WCDC extended $2.9 million in lines of credit to the local NeighborWorks America nonprofit partner "DASH for the Gulf Coast" to construct homes in Mobile, Alabama, and Pascagoula, Mississippi, in participation with Neighborhood Housing Services of America -- CDFI (see NeighborWorks America article). "DASH" stands for "Dependable, Affordable, Sustainable Housing."
WCDC extended other lines of credit in excess of $1 million to enable nonprofit developers to renovate houses in New Orleans' Ninth Ward and the Central City area. Since the storms, WCDC has also financed several non-profit developers to build single-family homes in Lake Charles, Lafayette, and Boutte, Louisiana.
Federal Home Loan Bank
In early October 2005, the Federal Home Loan Bank (FHLB) of Dallas offered disaster-relief grants designed to address housing and community investment needs of areas in Louisiana, Mississippi, and Texas affected by hurricanes Katrina and Rita. As an FHLB member, Whitney obtained grants totaling over $284,000 through the three components of the program: the Economic Development Disaster Relief Grant ($20,000), the Disaster Relief Partnership Grant ($18,000), and the Housing Disaster Relief Grant ($246,000). For families that were uninsured or underinsured, the Housing Disaster Relief Grant quite literally put a roof over their heads.
Whitney also participates in the FHLB of Dallas Affordable Housing Program. Since the storms, the bank has sponsored and been awarded five grants in the GO Zones, totaling $654,000, to provide homeownership opportunities for 59 low- and moderate-income families and assistance with home repair for another 15 families.
GO Zone Investments
Whitney Bank invested $40 million in Mississippi General Obligation Gulf Tax Credit Bonds, otherwise known as GO Zone bonds, and another $25 million invested in similar bonds issued by the state of Louisiana. These GO Zone bonds were unique in that they did not pay a traditional semiannual cash coupon.
The federal government paid the interest on these bonds via a quarterly tax credit in an amount equal to what a fair market rate on the bonds would equal. This federal-state partnership provided funds to local municipal entities to service their outstanding debt.
Ensuring that the affected jurisdictions could continue to make timely payments of principal and/or interest on their debt enabled them to focus their limited resources on immediate problems, such as the repair, renewal, and rebuilding of municipal infrastructure and meeting operating expenses. In essence, these tax-credit bonds helped municipal agencies to get and keep essential services operating.
New Markets Tax Credits
In 2007, the bank created the Whitney New Markets Fund (WNMF) and successfully applied for a $50 million new markets tax credit (NMTC) to more holistically meet the needs of its most vulnerable and economically distressed communities. Applications for this funding from developers have surpassed the available capital.
WNMF investments focus on lending to nonprofit community facilities to support the most vulnerable and economically disenfranchised citizens. WNMF has committed the majority of the 2007 NMTC allocation to funding these organizations, including schools, nursing homes for the indigent, nonprofit developers, and others. The effect of funding these nonprofit programs will be to strengthen these community stakeholders and enable them to continue indefinitely to serve the low-income communities and populations they benefit.
To date, WNMF has funded two projects. The first project was the redevelopment in downtown Jackson, Mississippi, of a blighted property, which had been vacant for more than 40 years. Named the King Edward Revitalization Project, it will include a 186-room Hilton Garden Inn, 3,000 square feet of retail space, 64 market-rate apartments, and a parking garage. This project was the result of a request for proposals issued by the Jackson Redevelopment Authority.
The second project is the rebuilding of the Holy Cross School, which, after 125 years in New Orleans' Ninth Ward District, was decimated by Hurricane Katrina. The school serves grades 5 through 12. WNMF financed the acquisition and construction of a new school campus in conjunction with several other NMTC allocatees. In addition to the acquisition and construction financing, each NMTC allocatee also decided to fund a 100 percent scholarship for a low-income minority student. This will allow up to five students to attend all eight years of school at no cost.
WNMF has many more projects in its pipeline, of which it hopes to finance at least seven -- four of which would involve nonprofit borrowers. From these, WNMF estimates that its NMTC allocation will create approximately 1,933 permanent jobs and 400 affordable for-sale units of housing in low-income areas throughout the GO Zones.
WNMF seeks projects that would not be viable without the subsidy provided by the NMTCs, of which the King Edward Revitalization Project is a prime example. Despite a total project cost of more than $80 million, the property appraised at only $40 million, creating a gap of $40 million. Conventional financing would not cover such a situation when the project costs were so high relative to the appraised value.
This was part of the reason the property sat vacant for so long. But with many different subsidies cobbled together from various local, state, and federal sources (including NMTCs), the project achieved financial feasibility and moved ahead. Ultimately, community development finance added to the community jobs, services, and an economically productive facility in place of a blighted, long-vacant property.
Community Lenders and Philanthropy
Whitney has designated specific mortgage originators as "community lenders" who work with first-time home buyers in the GO Zones. These lenders conduct home-buyer training programs and use bond programs, as well as the bank's in-house, affordable mortgage product.
Whitney participates in the United Way Individual Development Account program, along with other partners, promoting homeownership and encouraging financial independence by enabling participants to start or expand child-care facilities or purchase an automobile. The program was rolled out in the fall of 2007 with more than 60 accounts opened so far. The program expects to support 619 participants at full capacity. Displaced residents can take advantage of these programs to help them rebuild and return to hard-hit neighborhoods.
Whitney bankers throughout the Gulf Coast have devoted many hours volunteering for numerous organizations. Volunteers have constructed homes with Habitat for Humanity, built playgrounds with KaBOOM!, cleaned neighborhoods alongside the Katrina Krewe, bought and distributed school supplies, participated in regional recovery boards, volunteered at the local chamber, and so much more.
Whitney allocates a portion of its revenue each year for cash contributions to the community. These contributions take the form of grants that support critical services; housing initiatives; and innovative programs delivered by not-for-profit organizations, schools, universities, and community organizations located in our markets. Since the storm, a substantial portion of these grants have been allocated to recovery efforts, housing initiatives, and charter-school support.
Future Investments for Whitney Bank
While it will take a long time for the Gulf Coast to fully recover, partnerships between banks; local, state, and federal organizations; private corporations; and neighborhood associations can accelerate the revitalization. Whitney's strategy throughout the Gulf Coast is to create sustainable growth for long-term community recovery. Whitney is committed to continuing efforts to keep investment capital flowing, while nurturing partnerships with local leaders and community organizations.
Over the next few years, prospects for business and consumer growth are significant, relying not only on restoring what was but also creating new opportunities throughout the Gulf Coast. For Whitney Bank, investing in the future of the Gulf Coast is not only a priority -- it's a responsibility.
For more information, e-mail Richard Ainsworth, CRA Officer, Whitney Bank, or call (504) 586-3473.