Executives at troubled Whitney Bank, which announced in December a merger with smaller, Mississippi-based Hancock Bank, may be able to skirt U.S. Treasury Department rules and get handsome payouts when the merger is complete and their tenure with Whitney comes to an end, according to an article in The Times-Picayune.

Whitney got into trouble when it expanded into Florida amid a housing bubble that later and spectacularly collapsed, leaving the New Orleans-based Whitney with a slew of bad loans. The bank later took $300 million from Treasury’s Troubled Asset Relief Program, designed to prop up failing banks as the U.S. financial crisis worsened in late 2008.

One stipulation of TARP was that executives at banks taking the financial assistance are prevented from accepting severance packages. But because Whitney is merging with Hancock, which did not participate in TARP, Whitney execs may be eligible for the severance payouts, even though many of them were behind the bad decisions that landed the bank in trouble in the first place. The severance packages would likely be three times an exec’s “average gross income for the highest of three of the past five calendar years.”

The story has outraged Whitney shareholders, who are also learning that a second bank — identified by the Times-Pic as Lafayette-based IberiaBank — made overtures to Whitney about a merger. IberiaBank has shown robust growth over the last two years and has become the second-largest Louisiana-based bank behind Whitney. And while IberiaBank initially chose to participate in TARP, it later returned the money to feds.

Read more about the Whitney execs’ possible golden parachutes here.

A story on the merger that didn’t happen with IberiaBank can be found here.

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