<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) Quarterly Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
( ) Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ending September 30, 1994
-------------------------------------------------------
Commission File Number 0-13089
----------------------------------------------------
HANCOCK HOLDING COMPANY
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
MISSISSIPPI 64-0693170
- - --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
ONE HANCOCK PLAZA, P. O. BOX 4019, GULFPORT, MISSISSIPPI 39502
- - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(601) 868-4605
- - --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
- - --------------------------------------------------------------------------------
(Former name, address and fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
--- ---
7,557,924 Common Shares were outstanding as of October 1, 1994 for financial
statement purposes.
Page 1 of 12
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HANCOCK HOLDING COMPANY
I N D E X
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NUMBER
------------------------------ -----------
<S> <C>
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets --
September 30, 1994 and December 31, 1993 3
Condensed Consolidated Statements of Earnings --
Three Months Ended September 30, 1994 and 1993
Nine Months Ended September 30, 1994 and 1993 4
Condensed Consolidated Statements of Cash Flows --
Nine Months Ended September 30, 1994 and 1993 5
Notes to Condensed Consolidated Financial
Statements 6 - 7
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8 - 10
PART II. OTHER INFORMATION
---------------------------
ITEM 6. Exhibits and Reports on Form 8K 11
SIGNATURES 12
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</TABLE>
Page 2 of 12
<PAGE> 3
HANCOCK HOLDING COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Restated
September 30 December 31
1994 1993 *
------------ -----------
<S> <C> <C>
ASSETS:
Cash and due from banks (non-interest bearing) $ 113,205 $ 94,198
Interest bearing time deposits with other banks 1,375 1,875
---------- ----------
Total cash and due from banks 114,580 96,073
Securities available for sale 20,737 0
Securities held for sale (market value $28,836) 0 28,244
Investment securities (market value of $872,729 and $766,616) 875,260 751,578
Federal funds sold and securities purchased under
agreements to resell 33,750 97,705
Loans, net of unearned income 873,651 874,558
Less: Reserve for loan losses (14,055) (14,219)
---------- ----------
Net loans 859,596 860,339
Property and equipment, at cost,
less accumulated depreciation of $33,942 and $32,081 34,906 35,219
Other real estate 675 695
Accrued interest receivable 16,498 14,669
Other assets 18,184 18,637
---------- ----------
TOTAL ASSETS $1,974,186 $1,903,159
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits:
Non-interest bearing demand $ 373,165 $ 362,457
Interest bearing savings, NOW, money market and other time 1,378,412 1,323,200
---------- ----------
Total deposits 1,751,577 1,685,657
Federal funds purchased and securities sold under
agreements to repurchase 44,353 45,799
Other liabilities 7,702 12,029
Capital notes 480 480
Long-term bonds and notes 3,820 3,820
---------- ----------
TOTAL LIABILITIES 1,807,932 1,747,785
---------- ----------
STOCKHOLDERS' EQUITY:
Common Stock 25,658 25,658
Capital Surplus 95,130 95,130
Undivided Profits 45,466 34,586
Unrealized gain on securities available for sale - net 0 0
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 166,254 155,374
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,974,186 $1,903,159
========== ==========
</TABLE>
* The balance sheet at December 31, 1993 has been restated for the
acquisition of First State Bank and Trust Co., Baker, Louisiana which
has been accounted for using the pooling-of-interests method.
See notes to condensed consolidated financial statements.
Page 3 of 12
<PAGE> 4
HANCOCK HOLDING COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
UNAUDITED
DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA
<TABLE>
<CAPTION>
Restated Restated
Three Months Ended September 30 Nine Months Ended September 30
------------------------------- ------------------------------
1994 1993 * 1994 1993 *
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 19,915 $ 19,065 $ 57,891 $ 56,358
Interest on:
U. S. Treasury Securities 3,984 4,722 12,827 14,520
Obligations of other U. S. Government agencies
and corporations 6,715 5,333 17,534 16,841
Obligations of states and political subdivisions 799 800 2,163 2,583
Interest on Federal funds sold and securities
purchased under agreements to resell 679 864 2,059 2,400
Interest on time deposits and other 1,346 958 3,264 3,855
---------- ---------- ---------- ----------
Total interest income 33,438 31,742 95,738 96,557
INTEREST EXPENSE:
Interest on deposits 11,895 11,334 34,393 34,046
Interest on federal funds purchased and securities
sold under agreements to repurchase 435 281 994 817
Interest on capital notes 6 6 18 18
Interest on long term bonds and notes 88 96 239 305
---------- ---------- ---------- ----------
Total interest expense 12,424 11,717 35,644 35,186
---------- ---------- ---------- ----------
NET INTEREST INCOME 21,014 20,025 60,094 61,371
PROVISION FOR LOAN LOSSES 494 287 1,203 3,213
---------- ---------- ---------- ----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 20,520 19,738 58,891 58,158
---------- ---------- ---------- ----------
Other Operating Income:
Service charges on deposit accounts 2,948 2,699 8,626 8,117
Income from fiduciary activities 616 646 1,766 1,854
Securities gains (losses) (13) 265 97 221
Other non-interest income 1,919 1,545 4,592 4,682
---------- ---------- ---------- ----------
Total other operating income 5,470 5,155 15,081 14,874
Other Operating Expenses:
Salaries and employee benefits 8,742 8,093 25,429 23,196
Net occupancy expense of bank premises
and equipment expense 3,379 2,546 8,353 7,271
Other non-interest expense 5,183 5,534 16,606 16,311
---------- ---------- ---------- ----------
Total other operating expenses 17,304 16,173 50,388 46,778
---------- ---------- ---------- ----------
EARNINGS BEFORE INCOME TAXES 8,686 8,720 23,584 26,254
INCOME TAXES 2,725 2,719 7,435 8,051
---------- ---------- ---------- ----------
NET EARNINGS $ 5,961 $ 6,001 16,149 18,203
========== ========== ========== ==========
NET EARNINGS PER COMMON SHARE $ 0.79 $ 0.79 $ 2.14 $ 2.41
========== ========== ========== ==========
DIVIDENDS PAID PER COMMON SHARE $ 0.23 $ 0.17 $ 0.69 $ 0.51
========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 7,555 7,550 7,555 7,550
========== ========== ========== ==========
</TABLE>
* The statments of earnings have been restated for the acquisition of First
State Bank and Trust Co., Baker, Louisiana which has been accounted for
using the pooling-of-interests method.
See notes to condensed consolidated financial statements.
Page 4 of 12
<PAGE> 5
HANCOCK HOLDING COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(Amounts in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
FINANCIAL RESOURCES PROVIDED: 1994 1993 *
----------------------------- --------- ---------
(Restated)
<S> <C> <C>
Cash Flows From Operating Activities:
Net earnings $ 16,149 $ 18,203
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 4,281 2,926
Provision for loan losses 1,203 3,213
Gain on sales of investments 97 221
(Increase) decrease in interest receivable (1,829) 615
Amortization of intangible assets 737 756
Increase in interest payable 896 572
Other - net (5,506) (4,316)
--------- ---------
Net cash provided by Operating Activities 16,028 22,190
--------- ---------
Cash Flows from Investing Activities:
Proceeds from sales/maturities of investment
securities 154,942 94,627
Purchase of investment securities (271,214) (96,814)
Net decrease (decrease) in federal funds sold and
securities sold under agreements to repurchase 63,955 (9,875)
Net (increase) decrease in loans (460) (34,173)
Purchase of property and equipment, net (3,968) (2,381)
Transfers from loans to other real estate (675) (1,145)
Proceeds from sale of other real estate 695 1,530
--------- ---------
Net cash used in Investing Activities (56,725) (48,231)
--------- ---------
Cash Flows from Financing Activities:
Net increase in deposits 65,920 38,729
Dividends paid (5,270) (3,921)
Net increase (decrease) in federal funds purchased,
securities sold under agreements to repurchase and
other temporary funds (1,446) (7,272)
--------- ---------
Net cash provided by Financing Activities 59,204 27,536
--------- ---------
Net Decrease in Cash and Due from Banks 18,507 1,495
Cash and Due from Banks, Beginning 96,073 107,800
Cash and Due from Banks, Ending $ 114,580 $ 109,295
========= =========
</TABLE>
* The statement of cash flows has been restated for the acquisition of
First State Bank and Trust Co., Baker, Louisiana which has been
accounted for using the pooling-of-interests method.
See notes to condensed consolidated financial statements.
Page 5 of 12
<PAGE> 6
HANCOCK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
(Nine Months Ended September 30, 1994 and 1993)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying Unaudited Condensed Consolidated Financial
Statements include the accounts of Hancock Holding Company, its wholly
owned banks, Hancock Bank and Hancock Bank of Louisiana and other
subsidiaries. Intercompany profits, transactions and balances have been
eliminated in consolidation.
The accompanying Unaudited Consolidated Financial Statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q
and Rule 10-01 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting only of normal recurring
accruals) considered necessary for a fair presentation have been
included. Operating results for interim periods are not necessarily
indicative of the results that may be expected for the entire year. For
further information, refer to the consolidated financial statements and
notes thereto of Hancock Holding Company's 1993 Annual Report to
Shareholders.
RECENT CHANGES IN FINANCIAL ACCOUNTING STANDARDS
Effective January 1, 1994, the Company adopted Statement of
Financial Accounting Standards No. 115, Accounting for Certain
Investments in Debt and Equity Securities. This Statement requires
securities to be classified into one of three reporting categories
(held-to-maturity, available-for-sale, or trading). Securities
classified as held-to-maturity, also referred to herein as investment
securities, are carried at amortized cost. Those classified as
available-for-sale are carried at market value with the unrealized gain
or loss (net of income tax effect) reflected as a component of
stockholder's equity. Those classified as trading are carried at market
value with the unrealized gain or loss reflected in the statement of
earnings.
ACQUISITION
On April 29, 1994, the Company merged Hancock Bank of Louisiana, a
wholly owned subsidiary of the Company, with First State Bank and Trust
Company of East Baton Rouge Parish, Baker, Louisiana (BAKER). The merger
was consummated by the exchange of all outstanding common stock of BAKER
in return for approximately 520,000 shares of common stock of the
Company. The merger was accounted for using the pooling of interests
method, therefore all prior years' financial information has been
restated. BAKER had total assets of approximately $75,000,000 and
stockholders' equity of approximately $11,800,000 as of April 29, 1994.
Net interest income and net earnings of Baker for the nine months ended
September 30, 1993 and the four months ended April 29, 1994 which are
included in the consolidated statements of earnings were $42,353,000,
$717,000, $992,000 and $335,000 respectively.
Page 6 of 12
<PAGE> 7
Following is a reconciliation of net interest income and net
earnings for the nine months ended September 30, 1993 and of
stockholders' equity at December 31, 1993 as previously reported to the
amounts reported herein (in thousands).
<TABLE>
<S> <C> <C> <C>
As previously reported $58,928 $17,486 $143,826
Merger with Baker 2,443 717 11,548
------- ------- --------
As reported herein $61,371 $18,203 $155,374
======= ======= ========
</TABLE>
PROPOSED ACQUISITIONS
In July 1994, the Company agreed to merge Hancock Bank of Louisiana,
a wholly owned subsidiary of the Company, with Washington Bank & Trust
Company (Washington), Franklinton, Louisiana. The merger will be
consummated by the exchange of all outstanding common stock of Washington
in return for approximately 540,000 shares of common stock of the
Company. Completion of the merger is contingent upon approval by
Washington shareholders, the Louisiana Commissioner of Financial
Institutions, the Federal Deposit Insurance Corporation and the Federal
Reserve. It is intended that the merger will be accounted for using the
pooling of interests method. Washington had total assets of
approximately $88,300,000 and stockholders' equity of approximately
$12,300,000 as of September 30, 1994 and net earnings of approximately
$928,000 for the nine month period then ended.
In August of 1994, the Company agreed to merge First Denham
Bancshares, Inc. (Bancshares). Bancshares owns 100% of the stock of
First National Bank of Denham Springs, Denham Springs, Louisiana. The
merger will be consummated by the exchange of all outstanding common
stock of Bancshares in return for approximately $4,000,000 cash and
770,000 shares of common stock of the Company. Completion of the merger
is contingent upon approval by Bancshares shareholders, the Federal
Reserve and the Federal Deposit Insurance Corporation. It is intended
that the merger will be accounted for using the purchase method.
Bancshares had total assets of approximately $109,300,000 and
stockholders' equity of $10,900,000 as of September 30, 1994 and net
earnings of approximately $2,000,000 for the nine month period then
ended.
Page 7 of 12
<PAGE> 8
HANCOCK HOLDING COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion provides management's analysis of certain
factors which have affected the Company's financial condition and
operating results during the periods included in the accompanying
condensed consolidated financial statements.
CHANGES IN FINANCIAL CONDITION
Liquidity
The Company manages liquidity through traditional funding sources of
core deposits, federal funds, and maturities of loans and investment
securities.
The following liquidity ratios compare certain assets and
liabilities to total deposits or total assets:
<TABLE>
<CAPTION>
Restated Restated
Sept. 30 June 30 March 31 December 31
1994 1994 1994 1993
-------- ------- -------- -----------
<S> <C> <C> <C> <C>
Total securities to total
deposits 51.2% 50.0% 48.6% 46.3%
Total loans (net of unearned
discount) to total
deposits 49.9% 50.3% 49.1% 45.6%
Interest-earning assets
to total assets 90.8% 91.6% 90.9% 91.5%
Interest-bearing deposits
to total deposits 78.7% 78.5% 78.5% 78.5%
</TABLE>
Capital Resources
The Company continues to maintain an adequate capital position, as
the following ratios indicate:
<TABLE>
<CAPTION>
Restated Restated
Sept. 30 June 30 March 31 December 31
1994 1994 1994 1993
-------- ------- -------- -----------
<S> <C> <C> <C> <C>
Equity capital to total 8.42% 8.40% 8.20% 8.16%
assets (1)
Total capital to risk-weighted 17.39% 17.18% 17.35% 16.28%
assets (2)
Tier 1 Capital to risk-weighted 16.14% 15.93% 16.10% 15.03%
assets (3)
Leverage Capital to total 8.22% 8.17% 7.95% 7.90%
assets (4)
Fixed assets to equity capital 21.00% 21.60% 22.10% 22.70%
</TABLE>
Page 8 of 12
<PAGE> 9
(1) Equity capital consists of stockholder's equity (common stock,
capital surplus and undivided profits).
(2) Total capital consists of equity capital less intangible assets plus
a limited amount of loan loss reserves. Risk-weighted assets
represent the assigned risk portion of all on and off balance sheet
assets. Based on Federal Reserve Board guidelines, assets are
assigned a risk factor percentage from 0% to 100%. A minimum ratio
of total capital to risk-weighted assets of 8% is required.
(3) Tier 1 capital consists of equity capital less intangible assets. A
minimum ratio of tier 1 capital to risk-weighted assets of 4% is
required.
(4) Leverage capital consists of equity capital less goodwill and core
deposit intangibles. The Federal Reserve Board currently requires
bank holding companies rated Composite 1 under the BOPEC rating
system to maintain a minimum 3% leverage capital ratio and all other
bank holding companies not rated a Composite 1 under the BOPEC
rating system to maintain a minimum 4% to 5% leverage capital ratio.
RESULTS OF OPERATIONS
Net Earnings
Net earnings decreased $40,000 or 1% for the third quarter of 1994
compared to the third quarter of 1993. Net earnings for the first nine
months of 1994 decreased $2,054,000 or 11% from the comparable period in
1993. The decline in earnings in the third quarter and first nine months
of 1994 is largely attributable to a decreased net interest margin as a
result of lower loan and investment rates and increased operating
expenses.
<TABLE>
<CAPTION>
Restated Restated
Three Months Ended Sept. 30 Nine Months Ended Sept. 30
--------------------------- --------------------------
1994 1993 1994 1993
------ ------ ------ ------
<S> <C> <C> <C> <C>
Results of Operations:
Return on average assets 1.12% 1.29% 1.11% 1.36%
Return on average equity 14.29% 15.90% 13.30% 16.40%
Net Interest Income:
Return on average interest-earning assets
(tax equivalent) 7.40% 7.52% 7.28% 7.70%
Cost of average interest-bearing funds 3.49% 3.54% 3.46% 3.56%
------ ------ ------ ------
Net interest spread 3.91% 3.98% 3.82% 4.14%
====== ====== ====== ======
Net interest margin
(net interest income on a tax equivalent basis
divided by average interest-earning assets) 4.77% 4.79% 4.61% 5.00%
====== ====== ====== ======
</TABLE>
Page 9 of 12
<PAGE> 10
Provision for Loan Losses
The amount of the reserve equals the cumulative total of the
provisions for loan losses, reduced by actual loan charge-offs, and
increased by reserves acquired in acquisitions and recoveries of loans
previously charged-off. Provisions are made to the reserve to reflect
the currently perceived risks of loss associated with the bank's loan
portfolio. A specific loan is charged-off when management believes,
after considering, among other things, the borrower's condition and the
value of any collateral, that collection of the loan is unlikely.
The following ratios are useful in determining the adequacy of the
loan loss reserve and loan loss provision and are calculated using
average loan balances.
<TABLE>
<CAPTION>
Restated Restated
Three Months Ended Sept. 30 Nine Months Ended Sept. 30
--------------------------- --------------------------
1994 1993 1994 1993
------ ------ ------ ------
<S> <C> <C> <C> <C>
Annualized net charge-offs to average loans 0.32% 0.20% 0.21% 0.35%
Annualized provision for loan losses to average 0.22% 0.10% 0.18% 0.53%
loans
Average reserve for loan losses to average loans 1.63% 1.87% 1.64% 1.86%
</TABLE>
Income Taxes
The effective tax rate of the Company continues to be less than the
statutory rate of 35%, due primarily to tax-exempt interest income. The
amount of tax-exempt income earned during the first nine months of 1994
was $2,765,000 compared to $3,246,000 for the comparable period in 1993.
Income tax expense decreased from $8,050,500 in the first nine months of
1993 to $7,435,000 in the first nine months of 1994. This decrease is
primarily due to decreased net income.
Page 10 of 12
<PAGE> 11
Part II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(27) Selected Financial Data
(b) Reports on Form 8-K - None
Page 11 of 12
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
HANCOCK HOLDING COMPANY
Registrant
October 25, 1994 By: /s/ Leo W. Seal, Jr.
Date Leo W. Seal, Jr.
President and CEO
October 25, 1994 By: /s/ George A. Schloegel
Date George A. Schloegel
Vice-Chairman of the Board
Page 12 of 12
<PAGE> 13
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Page
Number Description Number
------- ----------- ------
<S> <C> <C>
(27) Selected Financial Data
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000750577
<NAME> HANCOCK HOLDING
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-1-1994
<PERIOD-END> SEP-30-1994
<CASH> 114,580
<INT-BEARING-DEPOSITS> 1,378,412
<FED-FUNDS-SOLD> 33,750
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 20,737
<INVESTMENTS-CARRYING> 875,260
<INVESTMENTS-MARKET> 895,997
<LOANS> 873,651
<ALLOWANCE> 14,055
<TOTAL-ASSETS> 1,974,186
<DEPOSITS> 1,751,577
<SHORT-TERM> 480
<LIABILITIES-OTHER> 7,702
<LONG-TERM> 3,820
<COMMON> 25,658
0
0
<OTHER-SE> 140,596
<TOTAL-LIABILITIES-AND-EQUITY> 1,974,186
<INTEREST-LOAN> 57,891
<INTEREST-INVEST> 34,583
<INTEREST-OTHER> 3,264
<INTEREST-TOTAL> 95,738
<INTEREST-DEPOSIT> 34,393
<INTEREST-EXPENSE> 35,644
<INTEREST-INCOME-NET> 60,094
<LOAN-LOSSES> 1,203
<SECURITIES-GAINS> 97
<EXPENSE-OTHER> 50,388
<INCOME-PRETAX> 23,584
<INCOME-PRE-EXTRAORDINARY> 23,584
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,149
<EPS-PRIMARY> 2.14
<EPS-DILUTED> 2.14
<YIELD-ACTUAL> 4.55
<LOANS-NON> 4,147
<LOANS-PAST> 2,073
<LOANS-TROUBLED> 630
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 14,219
<CHARGE-OFFS> 2,471
<RECOVERIES> 1,104
<ALLOWANCE-CLOSE> 14,055
<ALLOWANCE-DOMESTIC> 14,055
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
