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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 June 30, 1994
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Commission File Number 0-13089
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HANCOCK HOLDING COMPANY
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
MISSISSIPPI 64-0693170
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(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
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(Registrant's telephone number, including area code)
NOT APPLICABLE
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(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
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7,557,018 Common Shares were outstanding as of August 1, 1994 for financial
statement purposes.
Page 1 of 12
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HANCOCK HOLDING COMPANY
I N D E X
PART I. FINANCIAL INFORMATION PAGE NUMBER
- - ------------------------------ -----------
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets --
June 30, 1994 and December 31, 1993 3
Condensed Consolidated Statements of Earnings --
Three Months Ended June 30, 1994 and 1993
Six Months Ended June 30, 1994 and 1993 4
Condensed Consolidated Statements of Cash Flows --
Six Months Ended June 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
Page 2 of 12
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HANCOCK HOLDING COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Restated
June 30 December 31
1994 1993 *
---------- -----------
<S> <C> <C>
ASSETS:
Cash and due from banks (non-interest bearing) $ 93,950 $ 94,198
Interest bearing time deposits with other banks 1,702 1,875
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Total cash and due from banks 95,652 96,073
Securities available for sale 21,373 0
Securities held for sale (market value $28,836) 0 28,244
Investment securities (market value of $832,069 and $766,616) 836,410 751,578
Federal funds sold and securities purchased under
agreements to resell 59,625 97,705
Loans, net of unearned income 863,193 874,558
Less: Reserve for loan losses (14,241) (14,219)
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Net loans 848,952 860,339
Property and equipment, at cost,
less accumulated depreciation of $33,184 and $32,081 35,026 35,219
Other real estate 875 695
Accrued interest receivable 15,341 14,669
Other assets 17,822 18,637
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TOTAL ASSETS $1,931,076 $1,903,159
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits:
Non-interest bearing demand $ 368,376 $ 362,457
Interest bearing savings, NOW, money market and other time 1,346,383 1,323,200
---------- ----------
Total deposits 1,714,759 1,685,657
Federal funds purchased and securities sold under
agreements to repurchase 36,178 45,799
Other liabilities 13,660 12,028
Capital notes 480 480
Long-term bonds and notes 3,820 3,820
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TOTAL LIABILITIES 1,768,897 1,747,784
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STOCKHOLDERS' EQUITY:
Common Stock 25,659 25,659
Capital Surplus 95,130 95,130
Undivided Profits 41,264 34,586
Unrealized gain on securities available for sale - net 126 0
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TOTAL STOCKHOLDERS' EQUITY 162,179 155,375
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,931,076 $1,903,159
========== ==========
</TABLE>
* The balance sheet at December 31, 1993 has been restated to reflect
the acquisition of First State Bank and Trust Co., Baker, Louisiana.
See notes to condensed consolidated financial statements.
Restated
Page 3 of 12
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HANCOCK HOLDING COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
UNAUDITED
DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA
<TABLE>
<CAPTION>
Restated Restated
Three Months Ended June 30 Six Months Ended June 30
---------------------------- ---------------------------
1994 1993 1994 1993
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 19,316 $ 18,762 $ 37,976 $ 37,293
Interest on:
U. S. Treasury Securities 4,976 5,663 8,843 9,798
Obligations of other U. S. Government agencies
and corporations 5,155 5,035 10,819 11,508
Obligations of states and political subdivisions 679 831 1,364 1,783
Interest on Federal funds sold and securities
purchased under agreements to resell 590 684 1,380 1,536
Interest on time deposits and other 910 1,492 1,918 2,897
---------- ---------- ---------- ----------
Total interest income 31,626 32,467 62,300 64,815
INTEREST EXPENSE:
Interest on deposits 11,333 11,349 22,498 22,712
Interest on federal funds purchased and securities
sold under agreements to repurchase 315 276 559 536
Interest on capital notes 6 6 12 12
Interest on long term bonds and notes 78 101 151 209
---------- ---------- ---------- ----------
Total interest expense 11,732 11,732 23,220 23,469
---------- ---------- ---------- ----------
NET INTEREST INCOME 19,894 20,735 39,080 41,346
PROVISION FOR LOAN LOSSES 337 1,366 709 2,926
---------- ---------- ---------- ----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 19,557 19,369 38,371 38,420
---------- ---------- ---------- ----------
Other Operating Income:
Service charges on deposit accounts 2,850 2,701 5,678 5,418
Income from fiduciary activities 539 561 1,150 1,208
Securities gains (losses) 29 (44) 110 (44)
Other non-interest income 1,162 1,482 2,673 3,137
---------- ---------- ---------- ----------
Total other operating income 4,580 4,700 9,611 9,719
Other Operating Expenses:
Salaries and employee benefits 8,413 7,635 16,687 15,103
Net occupancy expense of bank premises
and equipment expense 1,659 2,465 4,974 4,725
Other non-interest expense 6,531 5,380 11,423 10,777
---------- ---------- ---------- ----------
Total other operating expenses 16,603 15,480 33,084 30,605
---------- ---------- ---------- ---------
EARNINGS BEFORE INCOME TAXES 7,534 8,589 14,898 17,534
INCOME TAXES 2,403 2,588 4,710 5,332
---------- ---------- ---------- ----------
NET EARNINGS $ 5,131 $ 6,001 10,188 12,202
========== ========== ========== ==========
NET EARNINGS PER COMMON SHARE $ 0.68 $ 0.79 $ 1.35 $ 1.62
========== ========== ========== ==========
DIVIDENDS PAID PER COMMON SHARE $ 0.23 $ 0.17 $ 0.46 $ 0.34
========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 7,555 7,550 7,555 7,550
========== ========== ========== ==========
</TABLE>
The statments of earnings have been restated to reflect the acquisition of
First State Bank and Trust Co., Baker, Louisiana.
See notes to condensed consolidated financial statements.
Page 4 of 12
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HANCOCK HOLDING COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(Amounts in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30, Restated
FINANCIAL RESOURCES PROVIDED: 1994 1993
- - ---------------------------- -------- --------
<S> <C> <C>
Cash Flows From Operating Activities:
Net earnings $ 10,188 $ 12,202
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 2,079 750
Provision for loan losses 709 2,926
Gain on sales of investments 110 (44)
(Increase) decrease in interest receivable (672) 805
Amortization of intangible assets 737 756
Increase in interest payable 323 942
Other - net 1,388 (5,206)
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Net cash provided by Operating Activities 14,862 13,131
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Cash Flows from Investing Activities:
Proceeds from sales/maturities of
securities 62,837 146,416
Purchase of securities (140,782) (192,649)
Net decrease (decrease) in federal funds sold and
securities sold under agreements to repurchase 38,080 (2,135)
Net (increase) decrease in loans 10,678 (10,988)
Purchase of property and equipment, net (1,887) (883)
Transfers from loans to other real estate (546) (660)
Proceeds from sale of other real estate 367 1,049
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Net cash used in Investing Activities (31,253) (59,850)
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Cash Flows from Financing Activities:
Net increase in deposits 29,102 29,793
Dividends paid (3,511) (2,613)
Net increase (decrease) in federal funds purchased,
securities sold under agreements to repurchase and
other temporary funds (9,621) 11,248
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Net cash provided by Financing Activities 15,970 38,428
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Net Decrease in Cash and Due from Banks (421) (8,291)
Cash and Due from Banks, Beginning 96,073 107,800
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Cash and Due from Banks, Ending $ 95,652 $ 99,509
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
Page 5 of 12
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HANCOCK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
(Six Months Ended June 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
appproximately $75,000,000 and stockholders' equity of approximately
$11,800,000 as of April 29, 1994.
Page 6 of 12
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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 First State Bank 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 $87,000,000 and stockholders' equity of approximately
$11,700,000 as of March 31, 1994 and net earnings of $269,000 for the three
month period then ended.
Page 7 of 12
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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>
Restated Restated
June 30 March 31 December 31
1994 1994 1993
-------- -------- -----------
<S> <C> <C> <C>
Total securities to total
deposits 50.0% 48.6% 46.3%
Total loans (net of unearned
discount) to total
deposits 50.3% 49.1% 45.6%
Interest-earning assets
to total assets 91.6% 90.9% 91.5%
Interest-bearing deposits
to total deposits 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
June 30 March 31 December 31
1994 1994 1993
-------- -------- -----------
<S> <C> <C> <C>
Equity capital to total assets (1) 8.40% 8.20% 8.16%
Total capital to risk-weighted 17.18% 17.35% 16.28%
assets (2)
Tier 1 Capital to risk-weighted 15.93% 16.10% 15.03%
assets (3)
Leverage Capital to total assets (4) 8.17% 7.95% 7.90%
Fixed assets to equity capital 21.60% 22.10% 22.70%
</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 $870,000 or 14% for the second quarter of 1994
compared to the second quarter of 1993. Net earnings for the first six months
of 1994 decreased $2,014,000 or 17% from the comparable period in 1993. The
decline in earnings in the second quarter and first six 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 June 30 Six Months Ended June 30
-------------------------- ------------------------
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Results of Operations:
Return on average assets 1.06% 1.28% 1.06% 1.32%
Return on average equity 13.20% 16.40% 13.30% 16.40%
Net Interest Income:
Return on average interest-earning assets
(tax equivalent) 7.28% 7.72% 7.22% 7.80%
Cost of average interest-bearing funds 3.48% 3.56% 3.45% 3.57%
------ ------ ------ ------
Net interest spread 3.80% 4.16% 3.77% 4.23%
====== ====== ====== ======
Net interest margin
(net interest income on a tax equivalent basis
divided by average interest-earning assets) 4.62% 4.97% 4.57% 5.02%
====== ====== ====== ======
</TABLE>
Page 9 of 12
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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>
Three Months Ended June 30 Six Months Ended June 30
-------------------------- ------------------------
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Annualized net charge-offs to average loans 0.15% 0.35% 0.15% 0.31%
Annualized provision for loan losses to average 0.16% 0.68% 0.17% 0.75%
loans
Average reserve for loan losses to average loans 1.67% 1.88% 1.68% 1.85%
</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 six months of 1994 was $1,744,000
compared to $2,245,000 for the comparable period in 1993. Income tax expense
decreased from $5,332,000 in the first six months of 1993 to $4,710,000 in the
first six months of 1994. This decrease is primarily due to decreased net
income.
Page 10 of 12
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Part II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
Page 11 of 12
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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
August 12, 1994 By: /s/ LEO W. SEAL, JR.
Date Leo W. Seal, Jr.
President and CEO
August 12, 1994 By: /s/ GEORGE A. SCHLOEGELOPF
Date George A. Schloegel
Vice-Chairman of the Board
Page 12 of 12
