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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 March 31, 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) 868-4606
(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 __________
7,027,932 Common Shares were outstanding as of April 29, 1994 for financial
statement purposes.
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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 --
March 31, 1994 and December 31, 1993 3
Condensed Consolidated Statements of Earnings --
Three Months Ended March 31, 1994 and 1993 4
Condensed Consolidated Statements of Cash Flows --
Three Months Ended March 31, 1994 and 1993 5
Notes to Condensed Consolidated Financial
Statements 6
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7 - 9
PART II. OTHER INFORMATION
- - ---------------------------
ITEM 4. Submission of Matters to a Vote 10
of Security Holders
ITEM 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
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</TABLE>
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HANCOCK HOLDING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
<TABLE>
<CAPTION>
Unaudited
March 31 December 31
ASSETS: 1994 1993 *
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<S> <C> <C>
Cash and due from banks (non-interest bearing) $ 103,565 $ 90,544
Interest bearing time deposits with other banks 1,775 1,875
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Total cash and due from banks 105,340 92,419
Securities available for sale 22,723 0
Securities held for sale (market value $28,836) 0 28,244
Investment securities (market value of $763,670 and $714,754) 763,926 700,936
Federal funds sold and securities purchased under
agreements to resell 85,500 85,500
Loans, net of unearned income 830,465 860,128
Less: Reserve for loan losses 14,058 14,029
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Net loans 816,407 846,099
Property and equipment, at cost,
less accumulated depreciation of $26,156 and $26,784 34,712 34,998
Other real estate 551 654
Accrued interest receivable 14,586 13,800
Other assets 18,965 18,400
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TOTAL ASSETS $1,862,710 $1,821,050
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits:
Non-interest bearing demand $ 355,356 $ 346,307
Interest bearing savings, NOW, money market and other time 1,302,621 1,269,288
---------- ----------
Total deposits 1,657,977 1,615,595
Federal funds purchased and securities sold under
agreements to repurchase 39,220 45,799
Other liabilities 14,126 11,530
Capital notes 480 480
Long-term bonds and notes 3,820 3,820
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TOTAL LIABILITIES 1,715,623 1,677,224
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STOCKHOLDERS' EQUITY:
Common Stock 23,903 23,903
Capital Surplus 95,130 95,130
Undivided Profits 27,940 24,793
Unrealized gain on securities available for sale - net 114 0
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TOTAL STOCKHOLDERS' EQUITY 147,087 143,826
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,862,710 $1,821,050
========== ==========
</TABLE>
* The balance sheet at December 31, 1993 has been taken from the audited
balance sheet at that date.
See notes to condensed consolidated financial statements.
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HANCOCK HOLDING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
UNAUDITED
(Amounts in thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended March 31
---------------------------
INTEREST INCOME: 1994 1993
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<S> <C> <C>
Interest and fees on loans $ 18,340 $ 18,208
Interest on:
U. S. Treasury Securities 3,867 4,135
Obligations of other U. S. Government agencies
and corporations 4,978 5,722
Obligations of states and political subdivisions 629 889
Interest on Federal funds sold and securities
purchased under agreements to resell 735 795
Interest on time deposits and other 1,037 1,406
---------- ----------
Total interest income 29,586 31,155
INTEREST EXPENSE:
Interest on deposits 10,831 10,982
Interest on federal funds purchased and securities
sold under agreements to repurchase 244 261
Interest on bonds and other debt 73 108
Interest on subordinated notes 6 6
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Total interest expense 11,154 11,357
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NET INTEREST INCOME 18,432 19,798
PROVISION FOR LOAN LOSSES 373 1,530
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NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 18,059 18,268
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Other Operating Income:
Service charges on deposit accounts 2,665 2,575
Income from fiduciary activities 611 648
Securities gains 81 0
Other non-interest income 1,483 1,610
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Total other operating income 4,840 4,833
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Other Operating Expenses:
Salaries and employee benefits 7,939 7,127
Net occupancy expense of bank premises
and equipment expense 3,214 2,163
Other non-interest expense 4,751 5,257
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Total other operating expenses 15,904 14,547
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EARNINGS BEFORE INCOME TAXES 6,995 8,554
INCOME TAXES 2,198 2,631
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NET EARNINGS $ 4,797 $ 5,923
========== ==========
NET EARNINGS PER COMMON SHARE $ 0.68 $ 0.84
========== ==========
DIVIDENDS PAID PER COMMON SHARE $ 0.23 $ 0.17
========== ==========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 7,022,124 7,022,124
========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
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HANCOCK HOLDING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(Amounts in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31
FINANCIAL RESOURCES PROVIDED: 1994 1993
- - ---------------------------- -------- --------
<S> <C> <C>
Cash Flows From Operating Activities:
Net earnings $ 4,797 $ 5,923
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 1,045 633
Provision for loan losses 373 1,530
Gain on sales of investments 81 0
Increase in interest receivable (786) (789)
Amortization of intangible assets 368 378
Increase (decrease) in interest payable 314 276
Other, net 1,288 (3,293)
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Net cash provided by Operating Activities 7,480 4,658
--------- ---------
Cash Flows from Investing Activities:
Proceeds from sales/maturities of securities 78,489 83,566
Purchase of securities (135,764) (144,396)
Net decrease in federal funds sold and securities
sold under agreements to repurchase 0 (12,500)
Net decrease in loans 29,320 11,748
Purchase of property and equipment, net (760) (751)
Transfers from loans to other real estate (110) (348)
Proceeds from sale of other real estate 214 194
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Net cash used in Investing Activities (28,611) (62,487)
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Cash Flows from Financing Activities:
Net increase in deposits 42,382 31,464
Dividends paid (1,651) (1,220)
Net decrease in federal funds purchased and
securities sold under agreements to repurchase (6,579) 16,206
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Net cash provided by Financing Activities 34,152 46,450
--------- ---------
Net Increase (Decrease) in Cash and Due From Banks 13,021 (11,379)
Cash and Due from Banks, Beginning 90,544 99,473
--------- ---------
Cash and Due from Banks, Ending $ 103,565 $ 88,094
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE> 6
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
(Three Months Ended March 31, 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
will be accounted for using the pooling of interests method. BAKER had total
assets of appproximately $75,000,000 and stockholders' equity of approximately
$11,800,000 as of April 29, 1994.
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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>
March 31 December 31
1994 1993
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<S> <C> <C>
Total securities to total deposits 47.4% 45.1%
Total loans (net of unearned
discount) to total deposits 50.1% 53.2%
Interest-earning assets
to total assets 86.7% 91.4%
Interest-bearing deposits
to total deposits 78.6% 88.0%
</TABLE>
Capital Resources
The Company continues to maintain an adequate capital position, as the
following ratios indicate:
<TABLE>
<CAPTION>
March 31 December 31
1994 1993
-------- --------
<S> <C> <C>
Equity capital to total assets (1) 7.90% 7.90%
Total capital to risk-weighted assets (2) 17.61% 15.42%
Tier 1 Capital to risk-weighted 16.68% 14.49%
assets (3)
Leverage Capital to total assets (4) 7.99% 7.62%
Fixed assets to equity capital 23.60% 24.30%
</TABLE>
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(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 $1,126,000 or 19% for the first quarter of 1994
compared to the first quarter of 1993. The decrease in earnings is primarily
attributable to a net interest margin decline of .53% or $1,366,000.
<TABLE>
<CAPTION>
Three Months Ended March 31
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1994 1993
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<S> <C> <C>
Results of Operations:
Return on average assets 1.04% 1.35%
Return on average equity 13.35% 18.13%
Net Interest Income:
Return on average interest-earning assets
(tax equivalent) 7.14% 7.92%
Cost of average interest-bearing funds 3.35% 2.90%
------ ------
Net interest spread 3.79% 5.02%
====== ======
Net yield on interest-earning assets
(net interest income on a tax equivalent basis
divided by average interest-earning assets) 4.55% 5.08%
====== ======
</TABLE>
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Provision for Loan Losses
Provisions are made to the reserve in sufficient amounts to bring the
balance in the reserve for loan losses to a level adequate to absorb possible
loan losses based upon management's knowledge of the loan portfolio and current
and expected economic conditions. 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>
Three Months Ended March 31
---------------------------
1994 1993
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<S> <C> <C>
Annualized net charge-offs to average loans 0.13% 0.24%
Annualized provision for loan losses to average 0.18% 0.81%
loans
Average reserve for loan losses to average loans 1.70% 1.80%
</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 three months of 1994 was $830,000
compared to $1,134,000 for the comparable period in 1993. Income tax expense
decreased from $2,631,000 in the first three months of 1993 to $2,198,000 in
the first three months of 1994. This decrease is primarily due to decreased
earnings.
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Part II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A. Annual Meeting held February 24, 1994.
B. Directors elected at the Annual Meeting held February 24, 1994:
<TABLE>
<CAPTION>
Votes Cast
--------------------
Affirmed Withheld
-------- --------
<S> <C> <C> <C>
1. L. A. Koenenn, Jr. 5,922,201 9,036
2. Dr. Homer C. Moody, Jr. 5,916,598 14,639
3. George A. Schloegel 5,922,345 8,892
</TABLE>
Continuing Directors:
4. A. F. Dantzler
5. Vertis Ramsay
6. Leo W. Seal, Jr.
7. Joseph F. Boardman, Jr.
8. Charles H. Johnson
9. Thomas W. Milner, Jr.
C. Approval of Deloitte & Touche as the independent public
accountants of the company 5,921,347 affirmative votes, 7,440
negative and 2,450 abstained.
D. None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
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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
May 10, 1994 By: /s/ Leo W. Seal, Jr.
Date Leo W. Seal, Jr.
President and CEO
May 10, 1994 By: /s/ George A. Schloegel
Date George A. Schloegel
Vice-Chairman of the Board
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