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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994 .
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _____________________ to _____________________.
Commission file number 0-13089
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Hancock Holding Company
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(Exact name of registrant as specified in its charter)
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Mississippi 64-0693170
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
One Hancock Plaza, Gulfport, Mississippi 39501
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(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code (601) 868-4715
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Securities registered pursuant to Section 12(b) of the Act:
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Name of Each Exchange on
Title of Each Class Which Registered
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NONE NONE
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Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $3.33 PAR VALUE
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(Title of Class)
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. Yes X No
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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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Continued
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The aggregate market value of the voting stock held by non-affiliates of
the registrant as of January 14, 1995 was approximately $177,832,000. For
purposes of this calculation only, shares held by non-affiliates are deemed to
consist of (a) shares held by all shareholders other than directors and
executive officers of the registrant plus (b) shares held by directors and
officers as to which beneficial ownership has been disclaimed.
On December 31, 1994 the registrant had outstanding 7,562,049 shares of
common stock for financial statement purposes.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Stockholders for the year
ended December 31, 1994 filed with the Registrant's definitive proxy materials
on January 28, 1995 are incorporated herein by reference into Part II of this
report.
Portions of the definitive Proxy Statement used in connection with the
registrant's Annual Meeting of Stockholders to be held February 23, 1995 filed
by the Registrant on January 28, 1995 are herein incorporated by reference into
Part III of this report.
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PART I
ITEM 1 - BUSINESS
BACKGROUND AND CURRENT OPERATIONS
BACKGROUND
GENERAL:
Hancock Holding Company (the "Company") was organized in 1984 as a bank
holding company registered under the Bank Holding Company Act of 1956, as
amended. The Company, headquartered in Gulfport, Mississippi, operates 58
banking offices and 85 automated teller machines ("ATM's") (29 of which are
free-standing) in the states of Mississippi and Louisiana through two
wholly-owned bank subsidiaries, Hancock Bank, Gulfport, Mississippi ("Hancock
Bank MS") and Hancock Bank of Louisiana, Baton Rouge, Louisiana ("Hancock Bank
LA"). Hancock Bank MS and Hancock Bank LA hereinafter are referred to
collectively as the "Banks."
The Banks are community oriented and focus primarily on offering
commercial, consumer and mortgage loans and deposit services to individuals and
small to middle market businesses in their respective market areas. The
Company's operating strategy is to provide its customers with the financial
sophistication and breadth of products of a regional bank, while successfully
retaining the local appeal and level of service of a community bank. At
December 31, 1994, the Company had total assets of $1.9 billion and employed on
a full-time basis 819 persons in Mississippi and 383 persons in Louisiana.
Hancock Bank MS was originally chartered as Hancock County Bank in 1899
and since its organization the strategy of Hancock Bank MS has been to achieve
a dominant market share on the Mississippi Gulf Coast. Prior to a series of
acquisitions begun in 1985, growth was primarily internal and was accomplished
by concentrating branch expansions in areas of population growth where no
dominant financial institution previously served the market area. Economic
expansion on the Mississippi Gulf Coast has resulted primarily from growth of
military and government-related facilities, tourism, port facility activities,
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industrial complexes and the gaming industry. Hancock Bank MS currently has
the largest market share in each of the four counties in which it operates,
Harrison, Hancock, Jackson and Pearl River. With assets of $1.3 billion,
Hancock Bank MS currently ranks as the fifth largest bank in Mississippi.
Beginning with the 1985 acquisition of the Pascagoula-Moss Point Bank
("PMP") in Pascagoula, Mississippi, the Company has acquired approximately
$685.9 million in assets and approximately $618.2 million in deposit
liabilities through selected acquisitions or purchase and assumption
transactions.
RECENT ACQUISITION ACTIVITY:
The majority of the Company's acquisition activity occurred in 1990 and
1991, beginning with the June 1990, merger of Metropolitan National Bank
("MNB") Biloxi, Mississippi into Hancock Bank MS. At the time of its
acquisition, MNB had total assets of approximately $98.8 million and total
deposit liabilities of approximately $95.1 million.
Also in June 1990, pursuant to a purchase and assumption agreement,
Hancock Bank MS acquired the Poplarville, Mississippi branch of Unifirst Bank
for Savings from the Resolution Trust Corporation ("RTC"). The acquisition
increased Hancock Bank MS total assets by approximately $7.8 million and its
total deposit liabilities by approximately $7.4 million.
In August 1990, the Company formed Hancock Bank LA for the purpose of
assuming the deposit liabilities and acquiring the consumer loan portfolio,
corporate credit card portfolio and non-adversely classified securities
portfolio of American Bank and Trust ("AmBank") Baton Rouge, Louisiana, from
the Federal Deposit Insurance Corporation ("FDIC"). As a result of this
transaction, Hancock Bank LA acquired 15 banking offices in the greater Baton
Rouge area, approximately $337.5 million in assets and approximately $300.9
million in deposit liabilities. At December 31, 1994, Hancock Bank LA's
deposits were $506 million. It is currently one of the five largest banks in
East Baton Rouge Parish. Economic expansion in East Baton Rouge Parish has
resulted primarily from growth in state government and related service
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industries, educational and medical complexes, petrochemical industries, port
facility activities and transportation and related industries.
In August 1991, Hancock Bank MS acquired certain assets and deposit
liabilities of Peoples Federal Savings Association, Bay St. Louis, Mississippi,
from the RTC. As a result of this transaction, the Bank acquired assets of
approximately $39.0 million and deposit liabilities of approximately $38.5
million.
In connection with the MNB and AmBank acquisitions, the Company borrowed
$18,750,000 from Whitney National Bank, New Orleans, Louisiana ("Whitney") to
partially fund these acquisitions. On November 28, 1991, the Company sold
1,552,500 shares of its common stock at $17 per share, following a two-for-one
stock split in the form of a 100% stock dividend on October 15, 1991 and an
increase in the number of authorized shares to 20,000,000. The net proceeds of
this sale, after underwriting discount and expenses, of approximately
$24,700,000, were used to pay the interest, retire $18,500,000 of principal
debt on the Whitney loans and increase Hancock Bank LA's capital by $5,000,000.
In April 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. The merger was consummated by the
exchange of all outstanding common stock of First State Bank in return for
527,235 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.
In July 1994, the Company agreed to merge Hancock Bank of Louisiana with
Washington Bank & Trust Company ("Washington"), Franklinton, Louisiana. The
merger was consummated by the exchange of all outstanding common stock of
Washington in return for 542,350 shares of common stock of the Company. The
merger was accounted for using the pooling-of- interests method on February 1,
1995. Washington had total assets of approximately $86,100,000 (unaudited) and
stockholders' equity of approximately $12,400,000 (unaudited) as of December
31, 1994 and net earnings of approximately $1,300,000 (unaudited) for the year
then ended.
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On January 13, 1995, the Company merged with First Denham Bancshares,
Inc. ("Bancshares") which owns 100% of the stock of First National Bank of
Denham Springs, Denham Springs, Louisiana. The merger was in return for
approximately $4,000,000 cash and 774,098 shares of common stock of the
Company. The merger was accounted for using the purchase method. Bancshares
had total assets of approximately $111,000,000 (unaudited) and stockholders'
equity of approximately $10,300,000 (unaudited) as of December 31, 1994 and net
earnings of approximately $2,500,000 (unaudited) for the year then ended.
CURRENT OPERATIONS
LOAN PRODUCTION AND CREDIT REVIEW:
The Banks' primary lending focus is to provide commercial, consumer and
real estate loans to consumers and to small and middle market businesses in
their respective market areas. The Banks have no concentrations of loans to
particular borrowers or loans to any foreign entities. Each loan officer has
Board approved loan limits on the principal amount of secured and unsecured
loans he or she can approve for a single borrower without prior approval of a
loan committee. All loans, however, must meet the credit underwriting and loan
policies of the Banks.
For Hancock Bank MS, all loans over an individual loan officer's Board
approved lending authority and below $150,000 must be approved by his or her
region's loan committee or by another loan officer with greater lending
authority. If a borrower's total indebtedness exceeds $150,000, any loan must
be reviewed and approved by both the regional loan committee and the Bank's
senior loan committee. Each loan file is reviewed by the Bank's loan review
department to ensure proper documentation.
For Hancock Bank LA, all loans over an individual loan officer's Board
approved lending authority must be approved by the Bank's senior loan committee
or by another loan officer with greater lending authority. Aggregate lending
relationships above the loan officers' authority of up to
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$500,000 must be approved by the Company's loan committee. Each loan file is
reviewed by the Bank's loan review department to ensure proper documentation.
LOAN REVIEW AND ASSET QUALITY:
Each Bank's portfolio of credit relationships aggregating $250,000 or
more is continually reviewed by the respective Bank to identify any
deficiencies and to take corrective actions as necessary. Credit relationships
aggregating less than $250,000 are reviewed on a periodic basis. As a result
of such reviews, each Bank places on its Watchlist loans that are deemed to
require close or frequent review. All loans classified by a regulator are also
placed on the Watchlist. All Watchlist and past due loans are reviewed at
least monthly by the Banks' senior lending officers and monthly by the Banks'
Board of Directors.
In addition, all loans to a particular borrower are reviewed, regardless
of classification, each time such borrower requests a renewal or extension of
any loan or requests an additional loan. All lines of credit are reviewed
annually prior to renewal. The Banks currently have mechanisms in place which
allow for at least an annual review of the financial statements and the
financial condition of all borrowers, except borrowers with secured installment
and residential mortgage loans.
As a matter of policy, the Banks place loans on nonaccrual status
whenever debt service becomes impaired or collection becomes questionable.
The Banks follow the standard FDIC loan classification system which is
designed to serve the dual purpose of providing management with (1) a general
view of the quality of the overall loan portfolio (each branch's loans and each
commercial loan officer's lending portfolio) and (2) information on specific
loans which may need individual attention.
The Banks hold nonperforming assets, consisting of real property,
vehicles and other items held for resale, which were acquired generally through
the process of foreclosure. At December 31, 1994, the book value of
nonperforming assets held for resale was approximately $808 thousand.
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SECURITIES PORTFOLIO:
The Banks maintain portfolios of securities consisting primarily of U.S.
Treasury securities, U.S. Government agency issues and tax-exempt obligations
of states and political subdivisions. The portfolios are designed to enhance
liquidity while providing acceptable rates of return. Therefore, the Banks
invest only in high grade investment quality securities with acceptable yields
and generally with maturities or durations of less than 7 years.
Investments are limited by the Banks' policies to securities having a rating of
no less than "Baa" by Moody's Investors' Service, Inc., except that non-rated
but creditworthy general obligations of Mississippi or Louisiana governmental
agencies or political subdivisions are permissible.
DEPOSITS:
The Banks have a number of programs designed to attract depository
accounts which are offered to consumers and to small and middle market
businesses at interest rates generally consistent with market conditions.
Additionally, the Banks offer 85 ATMs, 56 ATMs at their 58 banking offices and
29 free-standing ATMs at other locations. As members of regional and
international ATM networks such as "GulfNet", "PLUS" and "CIRRUS", the Banks
offer customers access to their depository accounts from regional, national and
international ATM facilities. Deposit flows are controlled by the Banks
primarily through pricing of such deposits and to a certain extent through
promotional activities. Management believes that the rates it offers, which
are posted weekly on deposit accounts, are generally competitive with or, in
some cases, slightly below other financial institutions in the Banks'
respective market areas.
TRUST SERVICES:
The Banks', through their respective Trust Departments, offer a full range
of trust services on a fee basis. The Banks act as executor, administrator, or
guardian in administering estates. Also provided are investment custodial
services for individual, businesses and charitable and religious organizations.
In their trust capacities, the Banks provide investment management services on
an agency basis and act as trustee for pension plans, profit sharing plans,
corporate and municipal bond issues, living trusts, life insurance trusts and
various other types of trusts created by or for individuals, businesses and
charitable and
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religious organizations. As of December 31, 1994, the Trust Departments of the
Banks had approximately $1.6 billion of assets under management, of which $1.0
billion were corporate accounts and $600 million were personal, employee
benefit, estate and other trust accounts.
OPERATING EFFICIENCY STRATEGY:
The primary focus of the Company's operating strategy is to increase
operating income and to reduce operating expense. Management has taken steps
beginning in January of 1988 to improve operating efficiencies and as a result,
employees at Hancock Bank MS have been reduced from 0.78 per $1.0 million in
assets in February 1988 to .60 as of December 31, 1994. Since its acquisition
in August 1990, Hancock Bank LA's employees have been reduced from 0.97 per
$1.0 million of assets to .67 as of December 31, 1994. Management annually
establishes an employee to asset goal for each Bank. The Banks also have set
an internal long range goal of at least covering total salary and benefit costs
by fee income. The ratio of fee income to total salary and benefit costs is
$.53 per $1.00 of total salary and benefit costs at Hancock Bank MS. Hancock
Bank LA has a higher level of fee income and through December 31, 1994 has
achieved a ratio of $.77 to $1.00 of salary and benefit costs.
OTHER ACTIVITIES:
Hancock Bank MS has six subsidiaries through which it engages in the
following activities: providing consumer financing services; mortgage lending;
owning, managing and maintaining certain real property; providing general
insurance agency services; holding investment securities; and marketing credit
life insurance. The income of these subsidiaries generally accounts for less
than 10% of the Company's total income annually.
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During 1994, the Company began offering alternative investments through
a third party vendor. The Investment Center is now located in several branch
locations in Mississippi and Louisiana to accommodate the investment needs of
customers which fall outside the traditional commercial bank product line.
Hancock Bank MS also owns approximately 3,700 acres of timberland in
Hancock County, Mississippi, most of which was acquired through foreclosure in
the 1930's. Less than 1% of the Company's annual income is generated from
timber sales and oil and gas leases on this acreage.
COMPETITION:
The deregulation of the financial services industry, the elimination of
many previous distinctions between commercial banks and other types of
financial institutions and the enactment in Mississippi, Louisiana and other
states of legislation permitting state-wide branching or multi-bank holding
companies as well as regional interstate banking has created a highly
competitive environment for commercial banking in the Company's market area.
The principal competitive factors in the markets for deposits and loans are
interest rates paid and charged. The Company also competes through the
efficiency, quality, range of services and products it provides, convenience of
office and ATM locations and office hours.
In attracting deposits and in its lending activities, the Company competes
generally with other commercial banks, savings associations, credit unions,
mortgage banking firms, consumer finance companies, securities brokerage firms,
mutual funds, insurance companies and other financial institutions, many of
which have greater resources than those available to the Company.
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SUPERVISION AND REGULATION
BANK HOLDING COMPANY REGULATION
GENERAL:
As a bank holding company, the Company is subject to extensive regulation
by the Board of Governors of the Federal Reserve System (the "Federal Reserve")
pursuant to the Bank Holding Company Act of 1956, as amended (the "Bank Holding
Company Act"). The Company also is required to file certain reports with, and
otherwise comply with the rules and regulations of, the Securities and Exchange
Commission (the "Commission") under federal securities laws.
FEDERAL REGULATION:
The Bank Holding Company Act generally prohibits the Company from engaging
in activities other than banking or managing or controlling banks or other
permissible subsidiaries or from acquiring or obtaining direct or indirect
control of any company engaged in activities other than those activities
determined by the Federal Reserve to be so closely related to banking or
managing or controlling banks as to be proper incident thereto. In determining
whether a particular activity is permissible, the Federal Reserve must consider
whether the performance of such an activity can reasonably be expected to
produce benefits to the public, such as greater convenience, increased
competition or gains in efficiency, that outweigh possible adverse effects,
such as undue concentration of resources, decreased or unfair competition,
conflicts of interest or unsound banking practices. For example, making,
acquiring or servicing loans, leasing personal property, providing certain
investment or financial advice, performing certain data processing services,
acting as agent or broker in selling credit life insurance and certain other
types of insurance in connection with credit transactions and certain insurance
underwriting activities have all been determined by regulations of the Federal
Reserve to be permissible activities. The Bank Holding Company Act does not
place territorial limitations on permissible
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bank-related activities of bank holding companies. However, despite prior
approval, the Federal Reserve has the power to order a holding company or its
subsidiaries to terminate any activity, or terminate its ownership or control
of any subsidiary, when it has reasonable cause to believe that continuation of
such activity or ownership of such subsidiary or control constitutes a serious
risk to the financial safety, soundness or stability of any bank subsidiary of
that holding company.
The Bank Holding Company Act requires every bank holding company to obtain
the prior approval of the Federal Reserve: (1) before it may acquire direct or
indirect ownership or control of any voting shares of any bank if, after such
acquisition, such bank holding company will directly or indirectly own or
control more than 5% of the voting shares of such bank, (2) before it or any of
its subsidiaries other than a bank may acquire all or substantially all of the
assets of a bank, or (3) before it may merge or consolidate with any other bank
holding company. In reviewing a proposed acquisition, the Federal Reserve
considers financial, managerial and competitive aspects, and must take into
consideration the future prospects of the companies and banks concerned and the
convenience and needs of the community to be served. As part of its review,
the Federal Reserve reviews the indebtedness to be incurred by a bank holding
company in connection with the proposed acquisition to ensure that the bank
holding company can service such indebtedness in a manner that does not
adversely affect the capital requirements of the holding company or its
subsidiaries. The Bank Holding Company Act further requires that consummation
of approved acquisitions or mergers be delayed for a period of not less than 30
days following the date of such approval. During such 30-day period,
complaining parties may obtain a review of the Federal Reserve's order granting
its approval by filing a petition in the appropriate United States Court of
Appeals petitioning that the order be set aside.
The Federal Reserve has adopted capital adequacy guidelines for use in its
examination and regulation of bank holding companies. The regulatory capital
of a bank holding company under applicable federal capital adequacy guidelines
is particularly important in the Federal Reserve's evaluation of a bank holding
company and any applications by the bank holding company to the
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Federal Reserve. If regulatory capital falls below minimum guideline levels, a
bank holding company or bank may be denied approval to acquire or establish
additional banks or non-bank businesses or to open additional facilities. In
addition, a financial institution's failure to meet minimum regulatory capital
standards can lead to other penalties, including termination of deposit
insurance or appointment of a conservator or receiver for the financial
institution. There are two measures of regulatory capital presently applicable
to bank holding companies, (1) risk-based capital and (2) leverage capital
ratios.
The Federal Reserve rates bank holding companies by a component and
composite 1-5 rating system ("BOPEC"). The leverage ratios adopted by the
Federal Reserve requires all but the most highly rated bank holding companies
to maintain Tier 1 Capital at 4% to 5% of total assets. Certain bank holding
companies having a composite 1 BOPEC rating and not experiencing or
anticipating significant growth may satisfy the Federal Reserve guidelines by
maintaining Tier 1 Capital of at least 3% of total assets. Tier 1 Capital for
bank holding companies includes: stockholder's equity; minority interest in
equity accounts of consolidated subsidiaries; and qualifying perpetual
preferred stock. In addition, Tier 1 Capital excludes goodwill and other
disallowed intangibles. The Company's leverage ratio at December 31, 1994, was
8.59%.
The risk-based capital guidelines are designed to make regulatory capital
requirements more sensitive to differences in risk profile among banks and bank
holding companies, to account for off-balance sheet exposure and to minimize
disincentives for holding liquid assets. Under the risk-based capital
guidelines, assets are assigned to one of four risk categories; these are 0%,
20% 50% and 100%. As an example, U.S. Treasury securities are assigned to the
0% risk category while most categories of loans are assigned to the 100% risk
category. The risk weight of off-balance sheet items such as standby letters
of credit is determined by a two-step process. First, the amount of the
off-balance sheet item is multiplied by a credit conversion factor of either
0%, 20%, 50% or 100%. Then, the result is assigned to one of the four risk
categories. At December 31, 1994, the Company's off-balance
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sheet items aggregated $194.5 million; however, after the credit conversion
these items represented $13.2 million of balance sheet equivalents.
The primary component of risk-based capital is defined as Tier 1 Capital,
which is essentially equal to common stockholders' equity, plus a certain
portion of perpetual preferred stock. Tier 2 Capital, which consists primarily
of the excess of any perpetual preferred stock, mandatory convertible
securities, subordinated debt and general reserves for loan losses, is a
secondary component of risk-based capital. The risk-weighted asset base is
equal to the sum of the aggregate dollar values of assets and off-balance sheet
items in each risk category, multiplied by the weight assigned to that
category. Under these guidelines bank holding companies are required to
maintain a ratio of Tier 1 Capital to risk-weighted assets of at least 4% and a
ratio of Total Capital (Tier 1 and Tier 2) to risk-weighted assets of at least
8%. At December 31, 1994, the Company's Tier 1 and Total Capital ratios were
16.87% and 17.78%, respectively.
Proposed regulations will increase capital requirements when as yet
undetermined levels of interest rate risk are exceeded. Because the Company's
liabilities generally reprice within periods of one year, interest rate risk
occurs when assets funded by such liabilities reprice at longer intervals. It
is not anticipated that such regulations will have a significant impact on the
Company's capital requirements.
The Company, as a bank holding company within the meaning of the Bank
Holding Company Act, is required to obtain the prior approval of the Federal
Reserve before it may acquire substantially all the assets of any bank, or
ownership or control of any voting shares of any bank, if, after such
acquisition, it would own or control, directly or indirectly, more than 5% of
the voting shares of such bank. In no case, however, may the Federal Reserve
approve the acquisition by the Company of the voting shares, or substantially
all the assets, of any bank located outside Mississippi unless such acquisition
is specifically authorized by the laws of the state in which the bank to be
acquired is located. The banking laws of Mississippi presently permit
out-of-state banking organizations to acquire Mississippi banking
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organizations, provided the out-of-state banking organization's home state
grants similar privileges to banking organizations in Mississippi. This
reciprocity privilege is restricted to banking organizations in specified
geographic regions which encompass the states of Alabama, Arkansas, Florida,
Georgia, Kentucky, Louisiana, Mississippi, Missouri, North Carolina, South
Carolina, Tennessee, Texas, Virginia and West Virginia. In addition,
Mississippi banking organizations are permitted to acquire certain out-of-state
financial institutions. A bank holding company is additionally prohibited from
itself engaging in, or acquiring direct or indirect control of more than 5% of
the voting shares of any company engaged in, non-banking activities.
With passage of "The Interstate Banking and Branching Efficiency Act"
adequately capitalized bank holding companies will be permitted to acquire
control of banks in any state. States could limit acquisition eligibility and
states also can opt-in to interstate branching earlier, or opt-out before the
June 1, 1997 date. Branching where an out of state bank opens a new branch in
another state would require a state's specific approval. The legislation
further provides that no bank could acquire more than ten percent of nationwide
insured deposits or thirty percent of deposits statewide. States would have
the right to waive the thirty percent limit. Additional provisions require
that interstate activities conform to the Community Reinvestment Act.
As a bank holding company, the Company is required to give the Federal
Reserve prior written notice of any purchase or redemption of its outstanding
equity securities if the gross consideration for the purchase or redemption,
when combined with the net consideration paid for all such purchases or
redemptions during the proceeding 12 months, is equal to 10% or more of the
Company's consolidated net worth. The Federal Reserve may disapprove such a
purchase or redemption if it determines that the proposal constitutes an unsafe
or unsound practice, would violate any law, regulation, Federal Reserve order
or directive or any condition imposed by, or written agreement with, the
Federal Reserve.
In November 1985, the Federal Reserve adopted its Policy Statement on Cash
Dividends Not Fully Covered by Earnings (the "Policy Statement"). The
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Policy Statement sets forth various guidelines that the Federal Reserve
believes that a bank holding company should follow in establishing its dividend
policy. In general, the Federal Reserve stated that bank holding companies
should not pay dividends except out of current earnings and unless the
prospective rate of earnings retention by the holding company appears
consistent with its capital needs, asset quality and overall financial
condition.
The activities of the Company are also restricted by the provisions of the
Glass-Steagall Act of 1933 (the "Act"). The Act prohibits the Company from
owning subsidiaries engaged principally in the issue, floatation, underwriting,
public sale or distribution of securities. The interpretation, scope and
application of the provisions of the Act currently are being reviewed by
regulators and legislators. The outcome of the current examination and
appraisal of the provisions in the Act and effect of such outcome on the
ability of bank holding companies to engage in securities- related activities
cannot be predicted.
The Company is a legal entity separate and distinct from the Banks. There
are various restrictions which limit the ability of the Banks to finance, pay
dividends or otherwise supply funds to the Company or other affiliates. In
addition, subsidiary banks of holding companies are subject to certain
restrictions imposed by the Federal Reserve Act on any extension of credit to
the bank holding company or any of its subsidiaries, on investments in the
stock or other securities thereof and on the taking of such stock or securities
as collateral for loans to any borrower. Further, a bank holding company and
its subsidiaries are prohibited from engaging in certain tie-in arrangements in
connection with extensions of credit, or leases or sales of property or
furnishing of services.
BANK REGULATION:
The operations of the Banks are subject to state and federal statutes
applicable to state banks and the regulations of the Federal Reserve and of the
FDIC. Such statutes and regulations relate to, among other things, required
reserves, investments, loans, mergers and consolidations, issuance of
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securities, payment of dividends, establishment of branches and other aspects
of the Banks' operations.
Hancock Bank MS is subject to regulation and periodic examinations by
the FDIC and the State of Mississippi Department of Banking and Consumer
Finance. Hancock Bank LA is subject to regulation and periodic examinations by
the FDIC and the Office of Financial Institutions, State of Louisiana. These
regulatory authorities examine such areas as reserves, loan and investment
quality, management policies, procedures and practices and other aspects of
operations. These examinations are designed for the protection of the Banks'
depositors, rather than their stockholders. In addition to these regular
examinations, the Company and the Banks must furnish periodic reports to their
respective regulatory authorities containing a full and accurate statement of
their affairs.
The Banks are members of the FDIC, and their deposits are insured as
provided by law by the Bank Insurance Fund ("BIF"). On December 19, 1991, the
Federal Deposit Insurance Corporation Improvement Act of 1991 (the "FDIC
Improvement Act") was enacted. The Federal Deposit Insurance Act as amended by
Section 302 of the FDIC Improvement Act calls for risk-related deposit
insurance assessment rates. The risk classification of an institution will
determine its deposit insurance premium. Assignment to one of three capital
groups, coupled with assignment to one of three supervisory sub groups
determines which of the nine risk classifications is appropriate for an
institution.
There is currently a proposal by the FDIC to lower banks' deposit
insurance premiums from the current rates of 23 to 31 cents per hundred dollars
in insured deposits to a rate of 4 to 31 cents. This change is scheduled to be
effective in the third quarter of 1995 and will reduce the Banks' premium
payments. The Banks have received a risk classification of 1A for assessment
purposes and paid BIF premiums of 23 cents per hundred dollars of insured
deposits which amounted to $3.8 million in 1994.
In general, the FDIC Improvement Act subjects banks and bank holding
companies to significantly increased regulation and supervision. The FDIC
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<PAGE> 18
Improvement Act increased the borrowing authority of the FDIC in order to
bolster the Bank Insurance Fund, and the future borrowings are to be repaid by
increased assessments on FDIC member banks. Other significant provisions of
the FDIC Improvement Act require a new regulatory emphasis linking supervision
to bank capital levels and require the federal banking regulators to take
prompt regulatory action with respect to depository institutions that fall
below specified capital levels and to draft non-capital regulatory measures to
assure bank safety, including underwriting standards and minimum earnings
levels.
The FDIC Improvement Act contains a "prompt regulatory action" section
which is intended to resolve problem institutions at the least possible
long-term cost to the deposit insurance funds. Pursuant to this section, which
applies to both banks and savings associations, the federal banking agencies
are required to prescribe both a leverage limit and a risk- based capital
requirement indicating levels at which institutions will be deemed to be "well
capitalized," "adequately capitalized," "undercapitalized," "significantly
undercapitalized," and "critically undercapitalized." In the case of a
depository institution which is "critically undercapitalized" (a term defined
to include institutions which still have a positive net worth), the federal
banking regulators are generally required to appoint a conservator or receiver.
The FDIC Improvement Act further requires regulators to perform annual
on-site bank examinations, places limits on real estate lending and tightens
audit requirements. The new legislation eliminated the "too big to fail"
doctrine, which protects uninsured deposits of large banks, and restricts the
ability of undercapitalized banks to obtain extended loans from the Federal
Reserve Board discount window. As previously discussed, deposit insurance
premiums for the Bank Insurance Fund have changed from flat premiums to fees
that will require banks engaging in risk practices or with low capital to pay
higher deposit insurance premiums than conservatively managed banks. The FDIC
Improvement Act also imposes new disclosure requirements relating to fees
charged and interest paid on checking and deposit accounts. Most of the
significant changes brought about by the FDIC Improvement Act required new
regulations.
-17-
<PAGE> 19
In addition to regulating capital, the FDIC has broad authority to
prevent the development or continuance of unsafe or unsound banking practices.
Pursuant to this authority, the FDIC has adopted regulations which, among other
things, restrict preferential loans and loan amounts by banks to "affiliates"
and "insiders" of banks, require banks to keep information on loans to major
stockholders and executive officers and bar certain director and officer
interlocks between financial institutions. The FDIC also is authorized to
approve mergers, consolidations and assumption of deposit liability
transactions between insured banks and between insured banks and uninsured
banks or institutions to prevent capital or surplus diminution in such
transactions where the resulting, continuing or assumed bank is an insured
nonmember state bank, like the Banks.
Although the Banks are not members of the Federal Reserve System, they
are subject to Federal Reserve regulations that require the Banks to maintain
reserves against transaction accounts (primarily checking accounts), money
market deposit accounts and nonpersonal time deposits. Because reserves
generally must be maintained in cash or in noninterest-bearing accounts, the
effect of the reserve requirements is to increase the cost of funds for the
Banks. Subject to an exemption from reserve requirements on a limited amount
of an institution's transaction accounts, the Federal Reserve regulations
currently require that reserves be maintained against net transaction accounts
in the amount of 3% of the aggregate of such accounts up to $41.4 million, or,
if the aggregate of such accounts exceeds $41.4 million, $1.233 million plus
12% of the total in excess of $41.4 million.
The foregoing is a brief summary of certain statutes, rules and
regulations affecting the Company and the Banks and is not intended to be an
exhaustive discussion of all the statutes and regulations having an impact on
the operations of such entities.
EFFECT OF GOVERNMENTAL POLICIES:
In general, the difference between the interest rate paid by a bank on
its deposits and its other borrowings, and the interest rate received by a bank
on loans extended to its customers and securities held in its portfolios,
-18-
<PAGE> 20
will comprise a major portion of the bank's earnings. However, due to recent
deregulation of the industry, the banking business is becoming increasingly
dependent on the generation of fees and service charges.
The earnings and growth of a bank will be affected not only by general
economic conditions, both domestic and foreign, but also by the monetary and
fiscal policy of the United States Government and its agencies, particularly
the Federal Reserve. The Federal Reserve can and does implement national
monetary policy, such as seeking to curb inflation and combat recession by its
open-market operations in United States Government securities, adjustments in
the amount of reserves that banks and other financial institutions are required
to maintain and adjustments to the discount rates applicable to borrowings by
banks which are members of the Federal Reserve System and target rates for
federal funds transactions. The actions of the Federal Reserve in these areas
influence the growth of bank loans, investments and deposits and also affect
interest rates charged on loans and paid on deposits. The nature and timing of
any future changes in monetary policies and their potential impact on the
Company cannot be predicted.
-19-
<PAGE> 21
STATISTICAL INFORMATION
The following tables and other material present certain statistical
information regarding the Company. This information is not audited and should
be read in conjunction with the Company's consolidated financial statements and
the accompanying notes.
DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDER'S EQUITY
AND INTEREST RATES AND DIFFERENTIALS
Net interest income, the difference between interest income and interest
expense, is the most significant component of the Banks earnings. For internal
analytical purposes, management adjusts net interest income to a "taxable
equivalent" basis using a 34% in 1992, 35% in 1993 and 1994 federal tax rate on
tax exempt items (primarily interest on municipal securities).
Another significant statistic in the analysis of net interest income is
the effective interest differential, which is the difference between the
average rate of interest earned on earning assets and the effective rate paid
for all funds, non- interest bearing as well as interest bearing. Since a
portion of the Bank's deposits do not bear interest, such as demand deposits,
the rate paid for all funds is lower than the rate on interest bearing
liabilities alone. The rate differential for the years 1993 and 1994 was 4.88%
and 4.60%, respectively.
Recognizing the importance of interest differential to total earnings,
management places great emphasis on managing interest rate spreads. Although
interest differential is affected by national, regional, and area economic
conditions, including the level of credit demand and interest rates, there are
significant opportunities to influence interest differential through
appropriate loan and investment policies. These policies are designed to
maximize interest differential while maintaining sufficient liquidity and
availability of funds for purposes of meeting existing commitments and for
investment in loans and other investment opportunities that may arise.
-20-
<PAGE> 22
The following table shows interest income on earning assets and related
average yields earned as well as interest expense on interest bearing
liabilities and related average rates paid for the periods indicated:
<TABLE>
<CAPTION>
Comparative Average Balances - Yields and Costs
-----------------------------------------------
Years Ended December 31,
---------------------------------------------------------------------------------------
1992 1993 1994
------------------------- --------------------------- ---------------------------
Amount Average Amount Average Amount Average
Average Paid or Yield or Average Paid or Yield or Average Paid or Yield or
Amount Earned Rate Amount Earned Rate Amount Earned Rate
------- -------- -------- ------- -------- -------- ------- -------- -------
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Earning assets:
Investment securities:
U.S. Treasury $ 277,614 $ 19,750 7.11% $ 278,842 $ 18,998 6.81% $ 310,191 $ 16,838 5.43%
U.S. Government 335,388 23,985 7.15% 391,740 21,932 5.60% 419,064 24,772 5.91%
Municipal securities 54,153 6,438 11.89% 42,736 5,167 12.09% 46,706 4,847 10.38%
Other securities 66,565 4,782 7.18% 85,712 4,775 5.57% 75,956 4,713 6.07%
Federal funds sold & repos 98,933 3,424 3.46% 114,337 3,245 2.84% 67,948 2,662 3.92%
Interest bearing deposits 1,121 41 3.66% 597 25 4.19% 576 32 5.56%
Net loans (1)(2)(3) 745,048 75,969 10.20% 798,168 75,929 9.51% 859,926 78,656 8.96%
---------- -------- ------ ---------- -------- ------ ---------- -------- ------
Total earning assets/
interest income 1,578,822 134,389 8.51% 1,712,132 130,071 7.60% 1,780,367 132,520 7.35%
Less: reserve for loan losses (12,323) --- (14,545) --- (14,120) ---
Nonearning assets:
Cash and due from banks 88,559 --- 100,774 --- 107,661 ---
Fixed assets 35,073 --- 34,045 --- 34,298 ---
Other assets 45,825 --- 45,874 --- 49,544 ---
---------- -------- ------ ---------- -------- ------ ---------- -------- ------
Total assets $1,735,956 $134,389 7.74% $1,878,280 $130,071 6.93% $1,957,750 $132,520 6.68%
========== ======== ====== ========== ======== ====== ========== ======== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Savings, NOW and money
market $ 611,662 $ 20,279 3.32% $ 690,662 $ 18,733 2.71% $ 728,624 $ 20,080 2.76%
Time 642,111 32,094 5.00% 631,451 26,522 4.20% 628,684 26,487 4.21%
Federal funds purchased 21,261 677 3.18% 18,023 537 2.98% 18,622 754 4.05%
Reverse repurchase agreement 22,571 731 3.24% 22,480 484 2.15% 24,710 718 2.91%
Long-term bonds and notes 6,523 543 8.32% 4,501 333 7.40% 3,656 256 7.00%
Capital notes & other
borrowings 480 24 5.00% 1,163 90 7.74% 1,571 76 4.84%
---------- -------- ------ ---------- -------- ------ ---------- ------- ------
Total interest bearing
liabilities/interest
expense 1,304,608 54,348 4.17% 1,368,280 46,699 3.41% 1,405,867 48,371 3.44%
</TABLE>
-21-
<PAGE> 23
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Noninterest bearing liabilities:
Demand 286,221 --- 348,665 --- 375,728 ---
Other liabilities 13,860 --- 12,699 --- 13,073 ---
Stockholders' equity 131,267 --- 148,636 --- 163,082 ---
---------- -------- ----- ---------- -------- ------ ---------- -------- ------
Total liabilities &
stockholders' equity $1,735,956 $ 54,348 3.13% $1,878,280 $ 46,699 2.49% $1,957,750 $ 48,371 2.47%
========== ======== ====== ========== ======== ====== ========== ======== ======
Interest earning assets $1,578,822 $1,712,132 $1,780,367
Interest bearing liabilities $1,304,608 $1,368,280 $1,405,867
Interest income $134,389 $130,071 $132,520
Interest expense 54,348 46,699 48,371
-------- -------- --------
Interest income/interest
earning assets 8.51% 7.60% 7.35%
Interest expense/interest
bearing liabilities 4.17% 3.41% 3.50%
Interest spread 4.35% 4.18% 3.84%
Interest differential $ 80,041 $ 83,372 $ 84,149
======== ======== ========
Interest margin 5.07% 4.87% 4.63%
</TABLE>
----------
(1) Includes tax equivalent adjustments to interest earned of $2.5 million,
$2.3 million and $2.1 million in 1992, 1993 and 1994 respectively, using
an effective tax rate of 34% in 1992 and 35% in 1993 and 1994.
(2) Interest earned includes fees on loans of $2.9 million in 1992, $3.1
million in 1993 and $2.9 million in 1994.
(3) Includes nonaccrual loans. See "Nonperforming Assets."
-22-
<PAGE> 24
The following table sets forth, for the periods indicated, a summary of
the changes in interest income on earning assets and interest expense on
interest bearing liabilities relating to rate and volume variances. Nonaccrual
loans are included in average amounts of loans and do not bear interest for
purposes of the presentation.
<TABLE>
<CAPTION>
Analysis of Changes in Net Interest Income
------------------------------------------
Years Ended December 31,
------------------------------------------------------------------------------------------
1992 1993 1994
--------------------------- --------------------------- ---------------------------
Volume Rate Total Volume Rate Total Volume Rate Total
------ ---- ----- ------ ---- ----- ------ ---- -----
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Investment securities:
U.S. Treasury $ (186) $(1,804) $(1,990) $ 87 $ (839) $ (752) $ 2,136 $ (4,296) $(2,160)
U.S. Government agencies 10,769 (3,069) 7,700 4,030 (6,083) (2,053) 1,530 1,310 2,840
Municipals (1) (1,253) 195 (1,058) (1,357) 86 (1,271) 480 (800) (320)
Other securities 3,731 (642) 3,089 1,376 (1,383) (7) (544) 482 (62)
Federal funds sold (826) (2,014) (2,840) 553 (712) (179) (1,317) 734 (583)
Interest bearing deposits
with banks (527) (8) (535) (19) 3 (16) (1) 8 7
Net loans 2,113 (5,873) (3,760) 5,416 (5,456) (40) 5,875 (3,148) 2,727
------- ------- ------- ------- -------- ------- ------- -------- -------
Total 13,821 (13,215) 606 10,066 (14,384) (4,318) 8,159 (5,710) 2,449
------- ------- ------- ------- -------- ------- ------- -------- -------
INTEREST EXPENSE
Deposits:
Savings, NOW and money
market 9,048 (9,572) (524) 2,619 (4,165) (1,546) 1,030 317 1,347
Time (3,063) (10,203) (13,266) (533) (5,039) (5,572) (116) 81 (35)
Federal funds purchased 29 (472) (443) (103) 447 344 18 199 217
Reverse repurchase
agreements (1,011) (504) (1,515) (3) (728) (731) 48 186 234
Long-term bonds and
notes (1,524) (50) (1,574) (168) (42) (210) (63) (14) (77)
Capital notes -- -- -- 34 32 66 32 (46) (14)
------- ------- ------- ------- -------- ------- ------- -------- -------
Total 3,479 (20,801) (17,322) 1,846 (9,495) (7,649) 949 723 1,672
------- ------- ------- ------- -------- ------- ------- -------- -------
Increase (decrease) in
net interest income $10,342 $ 7,586 $17,928 $ 8,220 $ (4,889) $ 3,331 $ 7,210 $ (6,433) $ 777
======= ======= ======= ======= ======== ======= ======= ======== =======
</TABLE>
----------
(1) Yields on tax-exempt investments have been adjusted to a tax equivalent
basis utilizing a 34% effective tax rate in 1992 and 35% in 1993 and 1994.
-23-
<PAGE> 25
RATE SENSITIVITY
In order to control interest rate risk, management regularly monitors
the volume of interest sensitive assets relative to interest sensitive
liabilities over specific time intervals. The Company's interest rate
management policy is to attempt to maintain a stable net interest margin in
periods of interest rate fluctuations. Interest sensitive assets and
liabilities are those that are subject to maturity or repricing within a given
time period. The interest sensitivity gap is the difference between total
interest sensitive assets and liabilities in a given time period. At December
31, 1994, the Company's cumulative interest sensitivity gap in the one year
interval was (17.15%) as compared to a cumulative interest sensitivity gap in
the one year interval of (19.72%) at December 31, 1993. The percentage
reflects a higher level of interest sensitive liabilities than assets repricing
within one year. Generally, where rate sensitive liabilities exceed rate
sensitive assets, the net interest margin is expected to be positively impacted
during periods of decreasing interest rates and negatively impacted during
periods of increasing rates.
The following tables set forth the Company's interest rate sensitivity
gap at December 31, 1994 and December 31, 1993:
-24-
<PAGE> 26
Analysis of Interest Sensitivity at December 31, 1994
-----------------------------------------------------
<TABLE>
<CAPTION>
After Three
Within Through One After Five
Three Twelve Through Years and
Months Months Five Years Insensitive Total
--------- --------- ---------- ----------- ----------
(Amounts in thousands)
<S> <C> <C> <C> <C> <C>
Net loans $ 225,264 $ 58,279 $ 379,946 $ 217,798 $ 881,287
Securities and time deposits 263,390 175,697 331,301 83,754 854,142
Federal funds 34,600 -- -- -- 34,600
--------- --------- --------- --------- ----------
Total earning assets $ 523,254 $ 233,976 $ 711,247 $ 301,552 $1,770,029
========= ========= ========= ========= ==========
29.56% 13.22% 40.18% 17.04% 100.00%
========= ========= ========= ========= ==========
Interest bearing deposits, excluding
CD's greater than $100,000 $ 516,219 $ 380,990 $ 264,132 $ 241 $1,161,582
CD's greater than $100,000 59,854 47,282 61,210 230 168,576
Short-term borrowings 54,324 -- -- -- 54,324
Other borrowings 1,386 700 2,255 -- 4,341
--------- --------- --------- --------- ----------
Total interest-bearing funds 631,783 428,972 327,597 471 1,388,823
Interest-free funds -- -- -- 381,206 381,206
--------- --------- --------- --------- ----------
Funds supporting earning assets $ 631,783 $ 428,972 $ 327,597 $ 381,677 $1,770,029
========= ========= ========= ========= ==========
35.69% 24.24% 18.51% 21.56% 100.00%
========= ========= ========= ========= ==========
Interest sensitivity gap $(108,529) $(194,996) $ 383,650 $ (80,125) (1,735,429)
Cumulative gap $(108,529) $(303,525) $ 80,125 -- 1,770,029
Percent of total earning assets (6.13%) (17.15%) 4.53% -- 100.00%
========= ========= ========= ========= ==========
</TABLE>
Analysis of Interest Sensitivity at December 31, 1993
-----------------------------------------------------
<TABLE>
<CAPTION>
After Three
Within Through One After Five
Three Twelve Through Years and
Months Months Five Years Insensitive Total
--------- --------- ---------- ----------- ----------
(Amounts in thousands)
<S> <C> <C> <C> <C> <C>
Net loans $ 236,268 $ 87,134 $ 378,552 $ 172,603 $ 874,557
Securities and time deposits 170,805 175,697 351,441 83,754 781,697
Federal funds 97,705 -- -- -- 97,705
--------- --------- --------- --------- ----------
Total earning assets $ 504,778 $ 262,831 $ 729,993 $ 256,357 $1,753,959
========= ========= ========= ========= ==========
28.78% 14.99% 41.62% 14.62% 100.00%
========= ========= ========= ========= ==========
Interest bearing deposits, excluding
CD's greater than $100,000 $ 639,836 $ 323,572 $ 207,071 $ 909 $1,171,388
CD's greater than $100,000 60,473 41,623 49,486 230 151,812
Short-term borrowings 45,799 -- -- -- 45,799
Other borrowings 1,373 780 3,588 320 6,061
--------- --------- --------- --------- ----------
Total interest-bearing funds 747,481 365,975 260,145 1,459 1,375,060
Interest-free funds -- -- -- 378,899 378,899
--------- --------- --------- --------- ----------
Funds supporting earning assets $ 747,481 $ 365,975 $ 260,145 $ 380,358 $1,753,959
========= ========= ========= ========= ==========
42.62% 20.87% 14.83% 21.69% 100.00%
========= ========= ========= ========= ==========
Interest sensitivity gap $(242,703) $(103,144) $ 469,848 $(124,001) --
Cumulative gap $(242,703) $(345,847) $ 124,001 -- --
Percent of total earning assets (13.84%) (19.72%) 7.07% -- --
========= ========= ========= ========= ==========
</TABLE>
-25-
<PAGE> 27
The Company had income tax expense of $9.9 million and $10.2 million for
the years ended December 31, 1994 and 1993, respectively. This represents
effective tax rates of 31.2% and 30.4% for December 31, 1994 and 1993,
respectively; a greater portion of the Company's income in 1994 has been
generated from taxable sources contributing to the rise in the effective tax
rate.
PERFORMANCE AND EQUITY RATIOS
The following table sets forth, for the periods indicated, the
percentage of net income to average assets and average stockholders' equity,
the percentage of common stock dividends to net income and the percentage of
average stockholders' equity to average assets.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1992 1993 1994
---- ---- ----
<S> <C> <C> <C>
Return on average assets (%) 1.17 1.24 1.11
Return on average stockholders' equity (%) 15.42 15.72 13.36
Dividend payout ratio (%) 25.83 29.13 32.37
Average stockholders' equity to average assets (%) 7.57 7.91 8.33
</TABLE>
SECURITIES PORTFOLIO
The Company generally purchases securities to be held to maturity, with
a maturity schedule that provides ample liquidity. Securities classified as
held-to-maturity are carried at amortized cost. Certain securities have been
classified as available-for-sale based on management's internal assessment of
the portfolio considering future liquidity and earning requirements. The
December 31, 1994 book value of the held-to-maturity portfolio was $833 million
and the market value was $815 million. The available-for-sale portfolio
balance was $20 million at December 31, 1994.
-26-
<PAGE> 28
The book and market values of securities classified as
available-for-sale as of December 31, 1994, and held-for-sale as of December
31, 1993, were as follows (in thousands):
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1993
--------------------------------------- ---------------------------------------
Gross Gross Gross Gross
Book Unrealized Unrealized Market Book Unrealized Unrealized Market
Value Gains Losses Value Value Gains Losses Value
-------- ---------- ---------- ------ -------- ---------- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CMO's $ 19,385 $ 134 $ 743 $ 18,776 $ 27,314 $ 791 $ 209 $ 27,896
Municipal obligations 997 0 26 971 930 10 0 940
-------- ------ ------- -------- -------- ------- ------ --------
$ 20,382 $ 134 $ 769 $ 19,747 $ 28,244 $ 801 $ 209 $ 28,836
======== ====== ======= ======== ======== ======= ====== ========
</TABLE>
The book value, book yield and market value of the securities classified
as available-for-sale as of December 31, 1994, by estimated maturity, were as
follows (in thousands):
<TABLE>
<CAPTION>
Book Value Yield (%) Market Value
---------- --------- ------------
<S> <C> <C> <C>
Due in one year or less $ 31 4.12 $ 31
Due after one year through five years 966 4.20 940
Due after five years through ten years 19,385 6.05 18,776
-------- ---- --------
$ 20,382 5.96 $ 19,747
======== ==== ========
</TABLE>
The book value and market values of securities classified as
held-to-maturity as of December 31, 1994, and December 31, 1993, were as
follows (in thousands):
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1993
--------------------------------------- ---------------------------------------
Gross Gross Gross Gross
Book Unrealized Unrealized Market Book Unrealized Unrealized Market
Value Gains Losses Value Value Gains Losses Value
-------- ---------- ---------- ------ -------- ---------- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury Securities $271,664 $ 362 $ 5,000 $267,026 $279,461 $ 6,048 $ 104 $285,405
Other U.S. Govt obligations 270,727 194 6,618 264,303 237,487 5,457 427 242,517
Municipal obligations 57,073 968 1,297 56,744 38,737 3,544 459 41,822
Other securities 15,746 92 520 15,318 13,316 3 76 13,243
Mortgage-backed securities 129,028 349 4,129 125,248 95,406 1,737 2,583 94,560
CMO's 88,807 57 2,999 85,865 87,171 2,148 250 89,069
-------- ------ ------- -------- -------- ------- ------ --------
$833,045 $2,022 $20,563 $814,504 $751,578 $18,937 $3,899 $766,616
======== ====== ======= ======== ======== ======= ====== ========
</TABLE>
-27-
<PAGE> 29
The book value, book yield and market value of the securities classified
as held-to-maturity as of December 31, 1994, by contractual maturity, were as
follows (in thousands):
<TABLE>
<CAPTION>
Book Value Yield (%) Market Value
---------- --------- ------------
<S> <C> <C> <C>
Due in one year or less $161,154 4.87 $159,904
Due after one year through five years 307,313 6.40 301,079
Due after five years through ten years 122,204 6.99 118,353
Due after ten years 242,374 7.17 235,168
-------- ---- --------
$833,045 6.40 $814,504
======== ==== ========
</TABLE>
-28-
<PAGE> 30
LOAN PORTFOLIO
The following tables set forth, for the periods indicated, the
composition of the loan portfolio of the Company:
<TABLE>
<CAPTION>
Loan Portfolio
--------------
December 31,
------------------------------------------------------------
1990 1991 1992 1993 1994
---- ---- ---- ---- ----
(Amounts in thousands)
<S> <C> <C> <C> <C> <C>
Real estate:
Residential mortgages 1-4 family $166,558 $182,981 $198,308 $201,633 $227,574
Residential mortgages multifamily 3,352 5,308 8,130 7,509 8,476
Home equity lines 10,505 12,205 13,412 13,858 13,628
Construction and development 8,294 10,815 15,462 22,785 40,039
Nonresidential 119,987 121,657 107,338 117,638 125,142
Commercial, industrial and other 139,018 137,728 149,121 147,042 104,640
Consumer 256,160 270,160 275,043 345,059 339,248
Lease financing and depository
institutions 4,044 9,733 6,079 6,673 10,075
Political subdivisions 18,337 15,710 12,791 11,668 12,806
Credit card 3,616 16,432 26,482 26,581 27,087
-------- -------- -------- -------- --------
729,871 782,729 812,166 900,446 908,715
Less, unearned income 19,738 19,713 21,703 25,888 27,428
-------- -------- -------- -------- --------
Net loans $710,133 $763,016 $790,463 $874,558 $881,287
======== ======== ======== ======== ========
</TABLE>
1990 consumer loan balances reflect an increase of 99.8% as a result of
the acquisitions of MNB (approximately $7.8 million) and AmBank (approximately
$127.0 million).
Prior to July 1991, a correspondent bank of Hancock Bank MS issued
credit cards under the Bank's name to customers of Hancock Bank MS and retained
the outstanding receivables. In July 1991, Hancock Bank MS purchased, at par,
from its correspondent bank, certain credit cards with outstanding balances of
approximately $7.8 million and simultaneously transferred, at par, the cards
and balances to Hancock Bank LA. The resulting combined consumer and corporate
credit card portfolio aggregated approximately $11.5 million with approximately
17,700 cards outstanding. At December 31, 1994, the portfolio balance had
increased to approximately $27.1 million with approximately 35,000 cards
outstanding.
-29-
<PAGE> 31
The following table sets forth, for the periods indicated, the
approximate maturity by type of the loan portfolio of the Company:
<TABLE>
<CAPTION>
Loan Maturity Schedule
----------------------
December 31, 1993 December 31, 1994
--------------------------------------- ---------------------------------------
Maturity Range Maturity Range
--------------------------------------- ---------------------------------------
After One After One
Within Through After Five Within Through After Five
One Year Five Years Years Total One Year Five Years Years Total
-------- ---------- ----- ----- -------- ---------- ----- -----
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial, industrial and
other $ 95,940 $ 40,137 $ 10,965 $147,042 $ 51,956 $ 43,750 $ 8,934 $104,640
Real estate - construction 13,259 7,579 1,947 22,785 21,169 12,798 6,072 40,039
All other loans 157,818 337,445 235,356 730,619 238,663 323,398 201,975 764,036
-------- -------- -------- -------- -------- -------- -------- --------
Total loans $267,017 $385,161 $248,268 $900,446 $311,788 $379,946 $216,981 $908,715
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
The sensitivity to interest rate changes of that portion of the
Company's loan portfolio that matures after one year is shown below:
Loan Sensitivity to Changes in Interest Rates
<TABLE>
<CAPTION>
December 31, December 31,
1993 1994
----------- -----------
(Amounts in thousands)
<S> <C> <C>
Commercial, industrial, and real estate construction
maturing after one year:
Fixed rate $ 33,956 $ 52,398
Floating rate 26,672 19,156
Other loans maturing after one year:
Fixed rate 537,552 459,031
Floating rate 35,249 66,342
-------- --------
Total $633,429 $596,927
======== ========
</TABLE>
-30-
<PAGE> 32
NONPERFORMING ASSETS
The following table sets forth nonperforming assets by type for the
periods indicated, consisting of nonaccrual loans, restructured loans, real
estate owned and loans past due 90 days or more and still accruing:
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------
1990 1991 1992 1993 1994
---- ---- ---- ---- ----
(Amounts in thousands)
<S> <C> <C> <C> <C> <C>
Nonaccrual loans:
Real estate $ 3,153 $ 5,057 $ 3,986 $ 1,671 $ 1,828
Consumer 903 843 293 1,371 525
Lease financing 1,588 1,214 1,715 1,322 1,287
Depository institutions -- -- 22 -- --
Political subdivisions -- -- -- -- --
Commercial, industrial and other -- -- -- -- --
Restructured loans 120 111 194 482 614
------- ------- ------- ------- -------
Total nonperforming loans 5,764 7,225 6,210 4,846 4,254
Acquired real estate owned 1,843 -- -- -- --
Real estate owned 4,127 4,208 1,425 695 808
------- ------- ------- ------- -------
Total nonperforming assets $11,734 $11,433 $ 7,635 $ 5,541 $ 5,062
======= ======= ======= ======= =======
Loans 90+ days past due and still accruing $ 6,541 $ 5,825 $ 7,204 $ 4,175 $ 2,633
======= ======= ======= ======= =======
Ratios (%):
Nonperforming loans to net loans 0.81 0.95 0.79 0.55 0.48
Nonperforming assets to net loans and
foreclosed properties 1.64 1.49 0.96 0.63 0.57
Nonperforming loans to average loans 1.02 1.00 0.83 0.61 0.49
Allowance to nonperforming loans 206.56 162.19 218.53 293.40 333.76
</TABLE>
The following table sets forth, for the periods indicated, the amount of
interest that would have been recorded on nonaccrual loans had the loans not
been classified as "nonaccrual" as well as the interest which would have been
recorded under the original terms of restructured loans:
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------
1990 1991 1992 1993 1994
---- ---- ---- ---- ----
(Amounts in thousands)
<S> <C> <C> <C> <C> <C>
Nonaccrual $ 557 $ 685 $ 585 $ 506 $ 327
Restructured 10 10 17 43 55
------- ------- ------- ------- -------
Total $ 567 $ 695 $ 602 $ 549 $ 382
======= ======= ======= ======= =======
</TABLE>
Interest actually received on nonaccrual and restructured loans was
insignificant.
-31-
<PAGE> 33
LOAN LOSS, CHARGE-OFF AND RECOVERY EXPENSES
The following table sets forth, for the periods indicated, average net
loans outstanding, reserve for loan losses, amounts charged-off and recoveries
of loans previously charged-off.
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------------
1990 1991 1992 1993 1994
---- ---- ---- ---- ----
(Amounts in thousands)
<S> <C> <C> <C> <C> <C>
Net loans outstanding at end of period $710,603 $763,016 $790,463 $874,557 $881,287
======== ======== ======== ======== ========
Daily average net loans outstanding $563,478 $726,068 $745,410 $798,168 $859,926
======== ======== ======== ======== ========
Balance of reserve for loan losses
at beginning of period $ 6,218 $ 11,906 $ 11,718 $ 13,571 $ 14,218
Loans charged-off:
Real estate 268 270 584 111 60
Commercial 1,637 2,834 2,516 2,202 586
Consumer 1,885 2,779 3,857 3,021 2,614
Lease financing 99 -- 2 53 --
Depository institutions -- -- -- -- --
Political subdivisions -- -- -- -- --
-------- -------- -------- -------- --------
Total charge-offs 3,889 5,883 6,959 5,387 3,260
-------- -------- -------- -------- --------
Recoveries of loans previously
charged-off:
Real estate -- 54 57 51 23
Commercial 363 412 430 669 487
Consumer 249 429 556 830 862
Lease financing 6 6 1 2 8
Depository institutions -- -- -- -- --
Political subdivisions -- -- -- -- --
-------- -------- -------- -------- --------
Total recoveries 618 901 1,044 1,552 1,380
-------- -------- -------- -------- --------
Net charge-offs 3,271 4,982 5,915 3,835 1,880
Provision for loan losses 3,023 4,794 7,768 4,482 1,860
Reserves of acquired companies 5,936 -- -- -- --
-------- -------- -------- -------- --------
Balance of reserve for loan losses
at end of period $ 11,906 $ 11,718 $ 13,571 $ 14,218 $ 14,198
======== ======== ======== ======== ========
</TABLE>
The following table sets forth, for the periods indicated, certain
ratios related to the Company's charge-offs, reserve for loan losses and
outstanding loans:
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------------------
1990 1991 1992 1993 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratios (%):
Net charge-offs to average net loans 0.58 0.69 0.79 0.48 0.21
Net charge-offs to period end net loans 0.46 0.65 0.75 0.44 0.22
Reserve for loan losses to average net loans 2.11 1.61 1.82 1.78 1.65
Reserve for loan losses to period end net loans 1.68 1.54 1.72 1.63 1.61
Net charge-offs to loan loss reserve 27.47 42.52 43.59 26.97 13.24
Net charge-offs to loan loss provision 108.20 103.92 76.15 85.56 101.08
</TABLE>
-32-
<PAGE> 34
An allocation of the loan loss reserve by major loan category is set
forth in the following table. The allocation is not necessarily indicative of
the category of future losses and the full reserve at December 31, 1994 is
available to absorb losses occurring in any category of loans.
<TABLE>
<CAPTION>
December 31,
1990 1991 1992 1993 1994
----------------- ----------------- ----------------- ------------------ ------------------
Reserve % of Reserve % of Reserve % of Reserve % of Reserve % of
for Loans for Loans for Loans for Loans for Loans
Loan to Total Loan to Total Loan to Total Loan to Total Loan to Total
Losses Loans Losses Loans Losses Loans Losses Loans Losses Loans
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate $ 1,000 42.29 $ 1,000 42.54 $ 1,000 42.19 $ 1,000 40.36 $ 1,000 45.65
Commercial, industrial
and other 4,000 22.11 4,000 20.85 4,500 20.68 4,750 18.37 4,750 14.03
Consumer 5,000 35.10 5,000 34.52 5,500 33.87 5,750 38.32 5,750 37.33
Credit card 500 .50 500 2.10 500 3.26 500 2.95 500 2.98
Unallocated 1,406 -- 1,218 -- 2,071 -- 2,218 -- 2,198 --
------- ------ ------- ------ ------- ------ ------- ------ ------- ------
$11,906 100.00 $11,718 100.00 $13,571 100.00 $14,218 100.00 $14,198 100.00
======= ====== ======= ====== ======= ====== ======= ====== ======= ======
</TABLE>
DEPOSITS AND OTHER DEBT INSTRUMENTS
The following table sets forth the distribution of the average deposit
accounts for the periods indicated and the weighted average interest rates on
each category of deposits:
<TABLE>
<CAPTION>
1992 1993 1994
------------------------------- --------------------------------- ----------------------------------
Percent Percent Percent
of of of
Amount Deposits Rate (%) Amount Deposits Rate (%) Amount Deposits Rate (%)
------ -------- -------- ------ -------- -------- ------ -------- --------
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Noninterest bearing
accounts $ 286,874 18.63 -- $ 344,340 20.69 -- $ 375,728 21.77 --
NOW accounts 229,581 14.91 2.98 243,457 14.63 2.84 291,325 16.88 2.58
Money market and other
savings accounts 380,888 24.74 3.49 471,769 28.35 2.51 437,216 25.33 2.87
Time deposits 642,435 41.72 5.05 604,348 36.32 4.39 621,874 36.03 4.26
---------- ------ ---------- ------ ---------- ------
$1,539,778 100.00 $1,663,914 100.00 $1,726,143 100.00
========== ====== ========== ====== ========== ======
</TABLE>
-33-
<PAGE> 35
The Banks traditionally price their deposits to position themselves in
the middle of the local market. The Banks' policy is not to accept brokered
deposits.
Maturities of CD's of $100,000 and Over
<TABLE>
<CAPTION>
Less
Than Three After Percent
Three to Twelve Twelve of Total
Months Months Months Total Deposits
------ ------ ------ ----- --------
<S> <C> <C> <C> <C> <C>
At December 31, 1994 $59,854 $47,282 $61,440 $168,576 9.9%
At December 31, 1993 60,473 41,623 49,716 151,812 9.0%
</TABLE>
SHORT-TERM BORROWINGS
The following table sets forth certain information concerning the
Company's short-term borrowings, which consist of federal funds purchased and
securities sold under agreements to repurchase.
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------
1992 1993 1994
---- ---- ----
<S> <C> <C> <C>
Federal funds purchased:
Amount outstanding at period end $19,300 $14,650 $42,659
Weighted average interest at period end 3.12% 2.75% 5.63%
Maximum amount at any month end during period $41,625 27,725 $37,000
Average amount outstanding during period 21,261 18,046 15,247
Weighted average interest rate during period 3.18% 2.70% 4.81%
Securities sold under repurchase agreements:
Amount outstanding at period end $17,091 $31,149 $11,637
Weighted average interest at period end 2.50% 2.50% 3.00%
Maximum amount at any month end during period $44,418 $31,289 $43,096
Average amount outstanding during period 22,571 23,607 23,553
Weighted average interest rate during period 3.24% 2.26% 3.13%
</TABLE>
Hancock Bank LA acts as a correspondent bank for 70 Louisiana financial
institutions. Many of those banks maintain federal funds relationships which
accounts for most of the volume of federal funds bought and sold.
-34-
<PAGE> 36
LIQUIDITY
Liquidity represents an institution's ability to provide funds to
satisfy demands from depositors, borrowers and other commitments by either
converting assets into cash or accessing new or existing sources of incremental
funds. The principal sources of funds which provide liquidity are customer
deposits, payments of interest and principal on loans, maturities in and sales
of investment securities, earnings and borrowings. At December 31, 1994, cash
and due from banks, securities available- for-sale, federal funds sold and
repurchase agreements were in excess of 10% of total deposits at December 31,
1994.
The Company depends upon the dividends paid to it from the Banks as a
principal source of funds for its debt service requirements. As of December
31, 1994, there was approximately $47 million available to be dividended up to
the Company from the Banks.
CAPITAL RESOURCES
Risk-based and leverage capital ratios for the Company and the Banks for
the periods indicated are shown in the following table:
<TABLE>
<CAPTION>
Risk-Based Capital Ratios Tier 1 Leverage
-------------------------------------------------------- --------------------------
Total Tier 1 Ratio
-------------------------- -------------------------- --------------------------
December 31, December 31, December 31, December 31, December 31, December 31,
1993 1994 1993 1994 1993 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Hancock Bank MS 15.45% 16.67% 14.62% 15.84% 8.14% 8.12%
Hancock Bank LA 17.34 18.44 16.39 17.25 7.48 8.66
Company 16.86 17.78 15.61 16.87 7.90 8.59
</TABLE>
Risk-based capital requirements are intended to make regulatory capital
more sensitive to risk elements of the Company. Currently, the Company is
required to maintain a minimum risk-based capital ratio of 8.0%, with not less
than 4.0% in Tier 1 capital. In addition, the Company must maintain a minimum
Tier 1 leverage ratio (Tier 1 capital to total assets) of at least 3.0% based
upon the regulators latest composite rating of the institution.
-35-
<PAGE> 37
RECENT CHANGES IN FINANCIAL ACCOUNTING STANDARDS
During 1992, the Company adopted Statement of Financial Accounting
Standards No. 106, "Employer's Accounting for Postretirement Benefits Other
Than Pensions." This Statement requires accrual of postretirement benefits
(such as health care benefits) during the years an employee provides services.
The costs of these benefits were previously expenses on a pay-as-you-go basis.
The adoption of this Statement decreased net earnings by $250,000 ($0.03 per
share) in 1992.
Effective January 1, 1993, the Company changed its method of accounting
for income taxes from the deferred method to the liability method as required
by Statement of Financial Accounting Standard No. 109. Prior years were not
restated. The cumulative effect of this accounting change did not have a
significant effect on the Company's financial statements and was recorded in
income tax expense in the year ended December 31, 1993.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment of
Certain Loans," which requires the present value of expected future cash flows
of impaired loans be discounted at the loan's effective interest rate. The
Financial Accounting Standards Board has also issued Statement of Financial
Accounting Standards No. 118, "Accounting by Creditors for Impairment of
Loan-Income Recognition and Disclosures," which allows a creditor to use
existing methods for recognizing interest income on impaired loans. The
Company does not anticipate that the adoption of this Statement in 1995 will
have a significant effect on its financial condition or results of operations.
The Financial Accounting Standards Board has issued Statement of
Financial Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities," which required the investment portfolio to be classified
into one of three reporting categories, held-to-maturity, available-for-sale,
or trading. The Company's Adoption of this statement did not have a material
effect on its financial statements.
-36-
<PAGE> 38
IMPACT OF INFLATION:
Unlike most industrial companies, the assets and liabilities of
financial institutions such as the Banks are primarily monetary in nature.
Therefore, interest rates have a more significant effect on the Banks'
performance than the effect of general levels of inflation on the price of
goods and services. While interest rates earned and paid by the Banks are
affected to a degree by the rate of inflation, and noninterest income and
expenses can be affected by increasing rates of inflation, the Company believes
that the effects of inflation are generally manageable through asset/liability
management.
-37-
<PAGE> 39
ITEM 2 - PROPERTIES
The Company's main offices are located at One Hancock Plaza, Gulfport,
Mississippi. The building has fourteen stories, of which seven are utilized by
the Company. The remaining seven stories are presently leased to outside
parties.
The building is leased from the City of Gulfport in connection with a
urban development revenue bond issue with a present balance of $2,955,000. The
lease payments by Hancock Bank MS, which are equivalent in amount to the
payments of principal and interest on the bonds, are used by the City to make
payments on the bonds. Hancock Bank MS, however, effectively has ownership of
the building since title will revert when all outstanding bonds have been paid.
For this reason, the Company carries the building as an asset and the bonds as
a long term payable on its balance sheet. The bonds mature at various dates
through 1997.
The following banking offices in Mississippi and Louisiana are held in
fee (number of locations shown in parenthesis):
Albany, LA (1) Long Beach, MS (2)
Angie, LA (1) Lyman, MS (1)
Baker, LA (3) Mississippi City, MS (1)
Baton Rouge, LA (13) Moss Point, MS (2)
Bay St. Louis, MS (2) Ocean Springs, MS (3)
Biloxi, MS (2) Orange Grove, MS (1)
Bogalusa, LA (2) Pascagoula, MS (4)
Denham Springs, LA (2) Pass Christian, MS (1)
D'Iberville, MS (1) Picayune, MS (4)
Escatawpa, MS (1) Poplarville, MS (1)
Franklinton, LA (2) Walker, LA (1)
French Settlement, LA (1) Washington Parish, LA (1)
Gautier, MS (1) Watson, LA (1)
Gulfport, MS (4) Waveland, MS (1)
The following banking offices in Mississippi and Louisiana are leased
under agreements with unexpired terms of from one to twelve years including
renewal options (number of locations shown in parenthesis):
Baker, LA (2) Gulfport, MS (3)
Baton Rouge, LA (1) Pascagoula, MS (1)
Bay St. Louis, MS (1) Springfield, LA (1)
Biloxi, MS (1) Vancleave, MS (1)
Diamondhead, MS (1)
-38-
<PAGE> 40
In addition to the above, Hancock Bank MS owns land and other properties
acquired through foreclosures of loans. The major item is approximately 3,700
acres of timber land in Hancock County, Mississippi, which Hancock Bank MS
acquired by foreclosure in the 1930's.
ITEM 3 - LEGAL PROCEEDINGS
Not applicable.
ITEM 4 - SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDERS MATTERS
The information under the caption "Market Information" on page 6 of the
Company's 1994 Annual Report to Stockholders (filed with the Registrant's
definitive proxy materials on January 28, 1995 and incorporated herein by
reference).
ITEM 6 - SELECTED FINANCIAL DATA
The information under the caption "Consolidated Summary of Selected
Financial Information" on Page 7 of the Company's 1994 Annual Report to
Stockholders (filed with the Registrant's definitive proxy materials on January
28, 1995 and incorporated herein by reference).
-39-
<PAGE> 41
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information under the caption "Management's Discussion and Analysis
of Financial Condition and Results of Operations" on Pages 32 and 33 of the
Company's 1994 Annual Report to Stockholders (filed with the Registrant's
definitive proxy materials on January 28, 1995 and incorporated herein by
reference).
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of the Company and
subsidiaries, and the independent auditors' report, appearing on Pages 18
through 31 of the Company's 1994 Annual Report to Stockholders (filed with the
Registrant's definitive proxy materials on January 28, 1995 and incorporated
herein by reference):
Consolidated Balance Sheets on Page 18
Consolidated Statements of Earnings on Page 19
Consolidated Statements of Stockholders' Equity on Page 20
Consolidated Statements of Cash Flows on Page 21
Notes to Consolidated Financial Statements on Pages 22 through 30
Independent Auditors' Report on Page 31
ITEM 9 - DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
For information responsive to this Item, see "Election of Directors"
(Pages 2-6) and "Management Compensation" (Pages 10-15) in the Proxy Statement
for the Annual Meeting of Stockholders held February 23, 1995 which was filed
by the Registrant in definitive form with the Commission on January 28, 1995
and is incorporated herein by reference.
-40-
<PAGE> 42
ITEM 11 - EXECUTIVE COMPENSATION
For information responsive to this item see "Management Compensation"
(Pages 10-15) in the Proxy Statement for the Annual Meeting of Stockholders
held February 23, 1994 which was filed by the Registrant in definitive form
with the Commission on January 28, 1995 and is incorporated herein by
reference.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
For information responsive to this item see "Principal Stockholders"
(Page 7) and "Election of Directors" (Pages 2-6) in the Proxy Statement for the
Annual Meeting of Stockholders held February 23, 1994 which was filed by the
Registrant in definitive form with the Commission on January 28, 1995 and is
incorporated herein by reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For information responsive to this item see "Certain Transactions and
Relationships" (Page 16) in the Proxy Statement for the Annual Meeting of
Stockholders held February 23, 1994 which was filed by the Registrant in
definitive form with the Commission on January 28, 1995 and is incorporated
herein by reference.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
HANCOCK HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES
(A) 1. AND 2. CONSOLIDATED FINANCIAL STATEMENTS:
The following have been incorporated herein from the Company's 1993
Annual Report to Stockholders (filed with the Registrant's definitive proxy
materials on January 28, 1995 and incorporated herein by reference):
- Independent Auditors' Report
-41-
<PAGE> 43
- Consolidated Balance Sheets as of December 31, 1994 and 1993
- Consolidated Statements of Earnings for the three years ended December
31, 1994
- Consolidated Statements of Stockholders' Equity for the three years
ended December 31, 1994
- Consolidated Statements of Cash Flows for the three years ended
December 31, 1994
- Notes to Consolidated Financial Statements for the three years ended
December 31, 1994
All other financial statements and schedules are omitted as the required
information is inapplicable or the required information is presented in the
consolidated financial statements or related notes.
(a) 3. Exhibits:
(2.1) Agreement and Plan of Merger dated May 30, 1985 among Hancock
Holding Company, Hancock Bank and Pascagoula-Moss Point Bank
(filed as Exhibit 2 to the Registrant's Form 8-K dated June 6,
1985 and incorporated herein by reference).
(2.2) Amendment dated July 9, 1985 to Agreement and Plan of Merger
dated May 30, 1985 among Hancock Holding Company, Hancock Bank
and Pascagoula-Moss Point Bank (filed as Exhibit 19 to
Registrant's Form 10-Q for the quarter ended June 30, 1985 and
incorporated herein by reference).
(2.3) Stock Purchase Agreement dated February 12, 1990 among Hancock
Holding Company, Metropolitan Corporation and Metropolitan
National Bank (filed as Exhibit 2.3 to Registrant's Form 10-K for
the year ended December 31, 1989 and incorporated herein by
reference).
(2.4) Modified Purchase and Assumption Agreement dated August 2, 1990,
among Hancock Bank of Louisiana and the Federal Deposit Insurance
Corporation, receiver of American Bank and Trust Company of Baton
Rouge, Louisiana (filed as Exhibit 2.1 to the Registrant's Form
10-Q for the quarter ended June 30, 1990 and incorporated herein
by reference).
-42-
<PAGE> 44
(2.5) Agreement and Plan of Reorganization dated November 30, 1993
among Hancock Holding Company, Hancock Bank of Louisiana and
First State Bank and Trust Company of East Baton Rouge Parish,
Baker, Louisiana (filed as Exhibit 2.5 to the Registrant's Form
10-K dated December 31, 1993).
(2.6) Agreement and Plan of Reorganization dated July 6, 1994 among
Hancock Holding Company and Washington Bancorp, Franklinton,
Louisiana (filed as Exhibit 2 to the Registrant's Form S-4,
Registration Number 33-56505, dated November 16, 1994).
(2.7) Agreement and Plan of Reorganization dated August 20, 1994 among
Hancock Holding Company and First Denham Bancshares, Inc., Denham
Springs, Louisiana (filed as Exhibit 2 to the Registrant's Form
S-4, Registration Number 33-56285, dated November 2, 1994).
(3.1) Amended and Restated Articles of Incorporation dated November 8,
1990 (filed as Exhibit 3.1 to the Registrant's Form 10-K for the
year ended December 31, 1990 and incorporated herein by
reference).
(3.2) Amended and Restated Bylaws dated November 8, 1990 (filed as
Exhibit 3.2 to the Registrant's Form 10-K for the year ended
December 31, 1990 and incorporated herein by reference).
(3.3) Articles of Amendment to the Articles of Incorporation of Hancock
Holding Company, dated October 16, 1991 (filed as Exhibit 4.1 to
the Registrant's Form 10-Q for the quarter ended September 30,
1991).
(3.4) Articles of Correction, filed with Mississippi Secretary of State
on November 15, 1991 (filed as Exhibit 4.2 to the Registrant's
Form 10-Q for the quarter ended September 30, 1991).
(3.5) Articles of Amendment to the Articles of Incorporation of Hancock
Holding Company, adopted February 13, 1992 (filed as Exhibit 3.5
to the Registrant's Form 10-K for the year ended December 31,
1992 and incorporated herein by reference).
-43-
<PAGE> 45
(3.6) Articles of Correction, filed with Mississippi Secretary of State
on March 2, 1992 (filed as Exhibit 3.6 to the Registrant's Form
10-K for the year ended December 31, 1992 and incorporated herein
by reference).
(4.1) Specimen stock certificate (reflecting change in par value from
$10.00 to $3.33, effective March 6, 1989) (filed as Exhibit 4.1
to the Registrant's Form 10-Q for the quarter ended March 31,
1989 and incorporated herein by reference).
(4.2) By executing this Form 10-K, the Registrant hereby agrees to
deliver to the Commission upon request copies of instruments
defining the rights of holders of long-term debt of the
Registrant or its consolidated subsidiaries or its unconsolidated
subsidiaries for which financial statements are required to be
filed, where the total amount of such securities authorized
thereunder does not exceed 10 percent of the total assets of the
Registrant and its subsidiaries on a consolidated basis.
(10.1) Description of Hancock Bank Executive Supplemental Reimbursement
Plan, as amended (provided on page 14 of the Registrant's
definitive proxy statement for its annual shareholders' meeting
on February 23, 1995 filed with the Registrant's definitive proxy
materials on January 28, 1995 and incorporated herein by
reference).
(10.2) Description of Hancock Bank Automobile Plan (provided on page 14
of the Registrant's definitive proxy statement for its annual
shareholders' meeting on February 23, 1995 filed with the
Registrant's definitive proxy materials on January 28, 1995 and
incorporated herein by reference).
(10.3) Description of Deferred Compensation Arrangement for Directors
(provided on pages 10-15 of the Registrant's definitive proxy
statement for its annual shareholders' meeting on February 23,
1995 filed with the Registrant's definitive proxy materials on
January 28, 1995 and incorporated herein by reference).
-44-
<PAGE> 46
(10.4) Site Lease Agreement between Hancock Bank and City of Gulfport,
Mississippi dated as of March 1, 1989 (filed as Exhibit 10.4 to
the Registrant's Form 10-K for the year ended December 31, 1989
and incorporated herein by reference).
(10.5) Project Lease Agreement between Hancock Bank and City of
Gulfport, Mississippi dated as of March 1, 1989 (filed as Exhibit
10.5 to the Registrant's Form 10-K for the year ended December
31, 1989 and incorporated herein by reference).
(10.6) Deed of Trust dated as of March 1, 1989 from Hancock Bank to
Deposit Guaranty National Bank as trustee (filed as Exhibit 10.6
to the Registrant's Form 10-K for the year ended December 31,
1989 and incorporated herein by reference).
(10.7) Trust Indenture between City of Gulfport, Mississippi and Deposit
Guaranty National Bank dated as of March 1, 1989 (filed as
Exhibit 10.7 to the Registrant's Form 10-K for the year ended
December 31, 1989 and incorporated herein by reference).
(10.8) Guaranty Agreement dated as of March 1, 1989 from Hancock Bank to
Deposit Guaranty National Bank as trustee (filed as Exhibit 10.8
to the Registrant's Form 10-K for the year ended December 31,
1989 and incorporated herein by reference).
(10.9) Bond Purchase Agreement dated as of February 23, 1989 among
Hancock Bank, J. C. Bradford & Co. and City of Gulfport,
Mississippi (filed as Exhibit 10.9 to the Registrant's Form 10-K
for the year ended December 31, 1989 and incorporated herein by
reference).
(13) Annual Report to Stockholders for year ending December 31, 1994
(furnished for the information of the Commission only and not
deemed "filed" except for those portions which are specifically
incorporated herein by reference).
-45-
<PAGE> 47
(21) Proxy Statement for the Registrant's Annual Meeting of
Shareholders on February 23, 1995 (deemed "filed" for the
purposes of this Form 10-K only for those portions which are
specifically incorporated herein by reference).
(22) Subsidiaries of the Registrant.
<TABLE>
<CAPTION>
Jurisdiction Holder of
Name Of Incorporation Outstanding Stock (1)
---- ---------------- ---------------------
<S> <C> <C>
Hancock Bank Mississippi Hancock Holding Company
Hancock Bank of Louisiana Louisiana Hancock Holding Company
Hancock Bank Securities Mississippi Hancock Bank
Corporation
Hancock Insurance Agency Mississippi Hancock Bank
Town Properties, Inc. Mississippi Hancock Bank
The Gulfport Building, Inc. Mississippi Hancock Bank
of Mississippi
Harrison Financial Services, Mississippi Hancock Bank
Inc.
Hancock Mortgage Corporation Mississippi Hancock Bank and
Hancock Securities Corp.
Harrison Life Insurance Mississippi 79% owned by Hancock
Company Bank
</TABLE>
(1) All are 100% owned except as indicated.
(23) Consent of Independent Accountants.
-46-
<PAGE> 48
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
DATE March 9, 1995 /s/ Leo W. Seal, Jr.
-------------------------- -----------------------------------
By Leo W. Seal, Jr., President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ Leo W. Seal, Jr. President and Director March 9, 1995
------------------------------ (Principal Executive
Leo W. Seal, Jr. Financial, and Accounting
Officer)
/s/ Joseph F. Boardman, Jr. Director, March 9, 1995
------------------------------ Chairman of the Board
Joseph F. Boardman, Jr.
/s/ Thomas W. Milner, Jr. Director March 9, 1995
------------------------------
Thomas W. Milner, Jr.
/s/ George A. Schloegel Director, March 9, 1995
------------------------------ Vice-Chairman of the Board
George A. Schloegel
/s/ Dr. Homer C. Moody, Jr. Director March 9, 1995
------------------------------
Dr. Homer C. Moody, Jr.
/s/ James B. Estabrook, Jr. Director March 9, 1995
------------------------------
James B. Estabrook, Jr.
/s/ Charles H. Johnson Director March 9, 1995
------------------------------
Charles H. Johnson
/s/ L. A. Koenenn, Jr. Director March 9, 1995
------------------------------
L. A. Koenenn, Jr.
/s/ Victor Mavar Director March 9, 1995
------------------------------
Victor Mavar
</TABLE>
-47-
<PAGE> 49
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<S> <C>
Exhibit 13 Annual Report to Stockholders for year ending
December 31, 1994 (furnished for the
information of the Commission only and not
deemed "filed" except for those portions which
are specifically incorporated herein by
reference).
Exhibit 22 Subsidiaries of the Registrant.
Exhibit 23 Consent of Independent Accountants.
Exhibit 27 Financial Data Schedule.
</TABLE>
<PAGE> 1
EXHIBIT (13)
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
DESCRIPTION OF BUSINESS
Hancock Holding Company (the "Company") is a bank holding company
headquartered in Gulfport, Mississippi with total consolidated assets of
approximately $1.9 billion at December 31, 1994. The Company operates a total
of 58 banking offices and 85 automated teller machines ("ATMs") (30 of which
are free-standing) in the states of Mississippi and Louisiana through two
wholly-owned bank subsidiaries, Hancock Bank, Gulfport, Mississippi and Hancock
Bank of Louisiana, Baton Rouge, Louisiana.
The Banks are community oriented and focus primarily on offering
commercial, consumer and mortgage loans and deposit services to individuals and
small to middle market businesses in their respective market areas. The
Company's operating strategy is to provide its customers with the financial
sophistication and breadth of products of a regional bank, while successfully
retaining the local appeal and level of service of a community bank.
SUMMARY OF QUARTERLY OPERATING RESULTS
<TABLE>
<CAPTION>
1994 1993
---------------------------------------------- ------------------------------------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
-------- --------- -------- -------- --------- -------- -------- ---------
(Amounts in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net interest income $ 19,207 $ 19,873 $ 21,014 $ 21,956 $ 20,629 $ 20,725 $ 20,008 $ 19,698
Provision for loan losses 373 336 494 675 1,560 1,366 287 1,269
Earnings before income taxes 7,362 7,536 8,686 8,106 8,944 8,590 8,720 7,313
Net earnings 5,056 5,132 5,961 5,646 6,200 6,002 6,001 5,165
Net earnings per share $ 0.67 $ 0.68 $ 0.79 $ 0.74 $ 0.82 $ 0.80 $ 0.80 $ 0.68
</TABLE>
MARKET INFORMATION
The Company's Common Stock trades on the NASDAQ National Market System under
the symbol "HBHC" and is listed in the newspaper under NASDAQ market quotations
under "HancHd." The following table sets forth the high and low last sale
prices of the Company's Common Stock as reported on the NASDAQ National Market
System. These prices do not reflect retail mark-ups, mark-downs or commissions.
<TABLE>
<CAPTION>
HIGH BID LOW BID CASH
OR LAST OR LAST DIVIDENDS
SALE PRICE SALE PRICE PAID
---------- ---------- ---------
<S> <C> <C> <C>
1994
1st Quarter $32.50 $28.50 $0.23
2nd Quarter $29.50 $26.25 $0.23
3rd Quarter $28.75 $28.00 $0.23
4th Quarter $29.25 $28.25 $0.23
1993
1st Quarter $28.75 $28.25 $0.17
2nd Quarter $35.00 $30.50 $0.17
3rd Quarter $32.75 $28.75 $0.17
4th Quarter $34.50 $32.00 $0.39
</TABLE>
On January 5, 1995, the high and low last sale prices of the Company's
common stock as reported on the NASDAQ National Market System were $29.00 and
$28.75, respectively.
The principal source of funds to the Company to pay cash dividends are the
earnings of the Bank subsidiaries. Consequently, dividends are dependent upon
earnings, capital needs, regulatory policies and other policies affecting the
Banks. For example, federal and state banking laws and regulations restrict the
amount of dividends and loans a bank may make to its parent company. Dividends
paid to the Company by Hancock Bank are subject to approval by the Commissioner
of Banking and Consumer Finance of the State of Mississippi. The Company's
management does not expect regulatory restrictions to affect its policy of
paying cash dividends, although no assurance can be given that Hancock Holding
Company will continue to declare and pay regular quarterly cash dividends on
its common stock. However, since 1937, the Company or its predecessor has paid
regular cash dividends without interruption.
6
<PAGE> 2
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
CONSOLIDATED SUMMARY OF SELECTED FINANCIAL INFORMATION
Amounts In Thousands (except for share and per share data)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------------
1994 1993 1992 1991 1990
------------ ----------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
INTEREST INCOME:
Interest and Fees on Loans $ 78,252 $ 75,433 $ 75,326 $ 78,841 $ 64,007
Income on Federal Funds Sold 2,662 3,245 3,424 6,264 6,549
Interest and Dividends on Investments 49,506 49,090 53,008 45,358 37,459
------------ ----------- ------------- ------------ -----------
TOTAL INTEREST INCOME 130,420 127,768 131,758 130,463 108,015
INTEREST EXPENSE:
Interest on Deposits 46,567 45,264 52,223 66,164 61,155
Interest on Federal Funds Purchased 1,472 1,021 1,408 3,366 3,671
Interest on Bonds and Notes 332 423 567 2,141 1,382
------------ ----------- ------------- ------------ -----------
TOTAL INTEREST EXPENSE 48,371 46,708 54,198 71,671 66,208
NET INTEREST INCOME 82,049 81,060 77,560 58,792 41,807
Provision for Loan Losses 1,878 4,482 7,768 4,793 3,023
------------ ----------- ------------- ------------ -----------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 80,171 76,578 69,792 53,999 38,784
Other Income 19,472 21,104 20,228 20,703 13,354
Other Expenses 67,953 64,116 62,755 57,669 42,291
------------ ----------- ------------- ------------ -----------
Earnings before Income Taxes 31,690 33,566 27,265 17,033 9,847
Income Taxes 9,895 10,199 7,027 4,122 1,537
------------ ----------- ------------- ------------ -----------
NET EARNINGS $ 21,795 $ 23,367 $ 20,238 $ 12,911 $ 8,310
============ =========== ============= ============ ===========
PER COMMON SHARE:
Net Earnings $ 2.88 $ 3.10 $ 2.68 $ 2.11 $ 1.39
Cash Dividends 0.92 0.90 0.68 0.60 0.57
Stock Splits and Dividends 2 for 1
Weighted Average Number
of Shares 7,556,512 7,550,235 7,550,235 6,122,235 5,993,235
RETURN ON AVERAGE ASSETS 1.11% 1.24% 1.17% 0.83% 0.68%
BALANCE SHEET DATA DECEMBER 31:
Total Assets $ 1,940,845 $ 1,903,159 $ 1,812,208 $ 1,628,712 $ 1,483,753
Total Deposits 1,702,079 1,685,657 1,616,633 1,431,496 1,289,173
Total Long-Term Debt and Capital Notes 2,955 4,300 5,115 6,880 25,350
Stockholders' Equity 169,927 155,374 138,804 123,804 90,040
</TABLE>
On June 4, 1990, the Company acquired Metropolitan National Bank (MNB),
pursuant to a merger of MNB into Hancock Bank. On August 2, 1990, a
newly-created subsidiary of the Company, Hancock Bank of Louisiana, acquired
certain assets and deposit liabilities of American Bank & Trust Company
(AMBANK), Baton Rouge, Louisiana, a failed institution. On August 9, 1991,
Hancock Bank acquired certain assets and assumed the deposit liabilities of
Peoples Federal Savings Association (PEOPLES). These acquisitions have been
accounted for as purchases and the results of operations since the dates of
acquisition have been included in the consolidated statements of earnings. 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). This merger was accounted for
using the pooling-of-interests method, and, therefore, all prior years'
financial information has been restated.
7
<PAGE> 3
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1994 1993
---------------- ------------------
<S> <C> <C>
ASSETS:
Cash and due from banks (non-interest bearing) $ 114,900,228 $ 94,198,284
Interest bearing time deposits with other banks 1,350,001 1,875,001
Securities available-for-sale (cost of $20,382,000) 19,747,208 --
Securities held-for-sale (market value of $28,836,000) -- 28,244,000
Securities held-to-maturity-(market value of
$814,504,000 and $766,616,000) 833,045,196 751,578,446
Federal funds sold and securities purchased under agreements to resell 34,600,000 97,705,000
Loans 908,715,372 900,445,375
Less:
Reserve for loan losses (14,197,795) (14,218,231)
Unearned income (27,428,257) (25,887,947)
---------------- ------------------
Loans, net 867,089,320 860,339,197
Property and equipment 34,755,860 35,219,064
Other real estate 807,625 695,288
Accrued interest receivable 17,092,047 14,668,688
Other assets 17,457,623 18,636,096
---------------- ------------------
TOTAL ASSETS $ 1,940,845,108 $ 1,903,159,064
================ ==================
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits:
Non-interest bearing demand $ 371,920,719 $ 362,457,264
Interest bearing savings, NOW, money market and other time 1,330,157,906 1,323,199,994
---------------- ------------------
Total Deposits 1,702,078,625 1,685,657,258
Federal funds purchased and securities sold under
agreements to repurchase 54,296,358 45,798,931
Other liabilities 11,588,295 12,029,100
Capital notes-5% due December 31, 1994 -- 480,000
Long-term bonds and notes 2,955,000 3,820,000
---------------- ------------------
TOTAL LIABILITIES 1,770,918,278 1,747,785,289
COMMITMENTS -- --
STOCKHOLDERS' EQUITY:
Common stock-$3.33 par value per share;
20,000,000 shares authorized, 7,705,201 shares issued
and outstanding 25,658,319 25,658,319
Capital surplus 104,170,000 98,168,834
Undivided profits 40,513,581 31,546,622
Unrealized loss on securities available-for-sale (415,070) --
---------------- ------------------
TOTAL STOCKHOLDERS' EQUITY 169,926,830 155,373,775
---------------- ------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,940,845,108 $ 1,903,159,064
================ ==================
</TABLE>
See notes to consolidated financial statements.
18
<PAGE> 4
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1994 1993 1992
-------------- ---------------- ------------------
<S> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 78,252,094 $ 75,432,984 $ 75,325,595
Interest on:
U.S. Treasury Securities 16,837,738 16,056,255 19,749,117
Obligations of other U.S. Government agencies
and corporations 24,771,874 24,874,164 23,984,662
Obligations of states and political subdivisions 3,151,272 3,359,774 4,345,678
Interest on federal funds sold and securities purchased
under agreements to resell 2,661,592 3,245,386 3,424,008
Interest on time deposits and other 4,745,819 4,800,246 4,928,531
-------------- ---------------- ------------------
Total interest income 130,420,389 127,768,809 131,757,591
-------------- ---------------- ------------------
INTEREST EXPENSE:
Interest on deposits 46,566,632 45,264,190 52,222,926
Interest on federal funds purchased and securities
sold under agreements to repurchase 1,471,992 1,021,161 1,407,842
Interest on bonds and notes 332,051 423,666 566,861
-------------- ---------------- ------------------
Total interest expense 48,370,675 46,709,017 54,197,629
-------------- ---------------- ------------------
NET INTEREST INCOME 82,049,714 81,059,792 77,559,962
Provision for loan losses 1,878,367 4,481,983 7,767,996
-------------- ---------------- ------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 80,171,347 76,577,809 69,791,966
-------------- ---------------- ------------------
NON-INTEREST INCOME:
Service charges on deposit accounts 11,548,460 11,001,587 11,253,040
Other service charges, commissions and fees 5,565,439 5,841,827 5,162,548
Securities gains -- 783,468 632,580
Other 2,358,139 3,477,240 3,180,115
-------------- ---------------- ------------------
Total non-interest income 19,472,038 21,104,122 20,228,283
-------------- ---------------- ------------------
NON-INTEREST EXPENSE:
Salaries and employee benefits 34,936,695 32,012,442 29,897,510
Net occupancy expense of premises 3,541,259 3,394,947 3,708,558
Equipment rentals, depreciation and maintenance 9,402,089 6,471,618 6,765,037
Other 20,073,022 22,236,268 22,383,758
-------------- ---------------- ------------------
Total non-interest expense 67,953,065 64,115,275 62,754,863
-------------- ---------------- ------------------
EARNINGS BEFORE INCOME TAXES 31,690,320 33,566,656 27,265,386
INCOME TAXES 9,895,000 10,199,000 7,027,000
-------------- ---------------- ------------------
NET EARNINGS $ 21,795,320 $ 23,367,656 $ 20,238,386
============== ================ ==================
NET EARNINGS PER COMMON SHARE $ 2.88 $ 3.10 $ 2.68
============== ================ ==================
</TABLE>
See notes to consolidated financial statements.
19
<PAGE> 5
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992
COMMON STOCK UNREALIZED LOSS
--------------------------- ON SECURITIES
SHARES CAPITAL UNDIVIDED AVAILABLE-FOR
ISSUED AMOUNT SURPLUS PROFITS SALE
----------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1992
As previously reported 7,177,966 $ 23,902,625 $ 68,130,500 $ 21,806,583 $
Merger with Baker accounted for as
a pooling-of-interests 527,235 1,755,694 3,038,334 5,168,183
----------- ------------ ------------- ------------- -------------
As restated 7,705,201 25,658,319 71,168,834 26,974,766
Net earnings 20,238,386
Cash dividends-$.68 per share (4,881,015)
Cash dividends paid by Baker (346,500)
Transfer from undivided profits 13,000,000 (13,000,000)
----------- ------------ ------------- ------------- -------------
BALANCE, DECEMBER 31, 1992 7,705,201 25,658,319 84,168,834 28,985,637
Net earnings 23,367,656
Cash dividends-$.90 per share (6,460,171)
Cash dividends paid by Baker (346,500)
Transfer from undivided profits 14,000,000 (14,000,000)
----------- ------------ ------------- ------------- -------------
BALANCE, DECEMBER 31, 1993 7,705,201 25,658,319 98,168,834 31,546,622
Net earnings 21,795,320
Cash dividends-$.92 per share (6,967,488)
Cash dividends paid by Baker (86,625)
Transfer from undivided profits 5,774,248 (5,774,248)
Unrealized loss on securities
available-for-sale (415,070)
Sale of common stock by subsidiary 226,918
----------- ------------ ------------- ------------- -------------
BALANCE, DECEMBER 31, 1994 7,705,201 $ 25,658,319 $ 104,170,000 $ 40,513,581 $ (415,070)
=========== ============ ============= ============= =============
</TABLE>
See notes to consolidated financial statements.
20
<PAGE> 6
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------------------
1994 1993 1992
-------------- ---------------- ------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings $ 21,795,320 $ 23,367,656 $ 20,238,386
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 4,358,463 3,854,959 3,951,758
Provision for loan losses 1,878,367 4,481,983 7,767,996
Provision for losses on real estate owned 104,625 174,796 710,322
Deferred income taxes (credit) (477,000) 113,600 (345,000)
Gain on sales of securities -- (783,468) (632,580)
Decrease (increase) in interest receivable (2,423,359) 1,581,413 1,682,540
Amortization of intangible assets 1,473,756 1,513,500 1,655,700
Increase (decrease) in interest payable 706,366 (386,862) (1,746,327)
Other -- net (605,161) (6,872,584) 5,651,646
-------------- ---------------- ------------------
Net cash provided by Operating Activities 26,811,377 27,044,993 38,934,441
-------------- ---------------- ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in interest bearing
time deposits 525,000 3,000,000 (4,000,001)
Proceeds from maturities of securities 271,134,817 251,534,085 344,303,200
Proceeds from sales of investment securities -- 9,764,692 65,448,000
Purchase of securities (344,739,845) (269,118,458) (530,700,034)
Net (increase) decrease in federal funds sold and
securities sold under agreements to repurchase 63,105,000 (10,650,000) (22,600,000)
Net increase in loans (10,088,252) (87,724,795) (30,752,206)
Purchase of property and equipment, net (3,895,259) (3,725,820) (2,924,260)
Proceeds from sales of other real estate 1,242,800 338,306 916,367
-------------- ---------------- ------------------
Net cash used in Investing Activities (22,715,739) (106,581,990) (180,308,934)
-------------- ---------------- ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 16,421,367 69,023,473 185,137,919
Dividends paid (6,967,488) (6,806,671) (5,227,515)
Repayments of long-term bonds and notes (1,345,000) (815,000) (1,765,000)
Net increase (decrease) in federal funds purchased,
securities sold under agreements to repurchase
and other temporary funds 8,497,427 9,407,950 (17,116,796)
-------------- ---------------- ------------------
Net cash provided by Financing Activities 16,606,306 70,809,752 161,028,608
-------------- ---------------- ------------------
NET INCREASE (DECREASE) IN CASH AND DUE FROM BANKS 20,701,944 (8,727,245) 19,654,115
CASH AND DUE FROM BANKS, BEGINNING 94,198,284 102,925,529 83,271,414
-------------- ---------------- ------------------
CASH AND DUE FROM BANKS, ENDING $ 114,900,228 $ 94,198,284 $ 102,925,529
============== ================ ==================
</TABLE>
21
<PAGE> 7
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION -- The consolidated financial statements of Hancock
Holding Company (Company) includes the accounts of the Company, its
wholly-owned banks, Hancock Bank (Mississippi) and Hancock Bank of Louisiana,
and other subsidiaries. Significant intercompany transactions and balances have
been eliminated in consolidation.
SECURITIES -- Securities are being accounted for in accordance with
Statement of Financial Accounting Standards (SFAS) No. 115 "Accounting for
Certain Investments in Debt and Equity Securities." SFAS No. 115, which was
adopted effective January 1, 1994, requires the classification of securities
into one of three categories: Trading, Available-for-Sale, or Held-to-Maturity.
Management determines the appropriate classification of debt
securities at the time of purchase and re-evaluates this classification
periodically. Trading account securities are held for resale in anticipation of
short-term market movements. Debt securities are classified as held-to-maturity
when the Company has the positive intent and ability to hold the securities to
maturity. Securities not classified as held to maturity or trading are
classified as available-for-sale. The Company had no trading account securities
at December 31, 1994. Held-to-maturity securities are stated at amortized cost.
Available-for-sale securities are stated at market value, with unrealized gains
and losses, net of income taxes, reported as a separate component of
stockholders' equity until realized. Securities classified as held-for-sale at
December 31, 1993, were recorded at the lower of cost or market value.
The amortized cost of debt securities classified as held-to-maturity
or available-for-sale is adjusted for amortization of premiums and accretion of
discounts to maturity or, in the case of mortgage-backed securities, over the
estimated life of the security. Amortization, accretion and accruing interest
are included in interest income on securities. Realized gains and losses, and
declines in value judged to be other than temporary, are included in net
securities gains. Gains and losses on the sale of securities available-for-sale
are determined using the specific-identification method. The related income tax
provisions on securities gains were $270,000 in 1993 and $214,000 in 1992.
RESERVE FOR LOAN LOSSES -- The reserve for loan losses is a valuation
account available to absorb probable losses on loans. All losses are charged
to the reserve for loan losses when the loss actually occurs or when a
determination is made that a loss is likely to occur, recoveries are credited
to the reserve for loan losses at the time of recovery. Periodically during the
year management estimates the likely level of future losses to determine
whether the reserve for loan losses is adequate to absorb reasonable
anticipated losses in the existing portfolio based upon management's knowledge
of the loan portfolio and current and expected economic conditions. Based on
these estimates, an amount is charged to the provision for loan losses and
credited to the reserve for loan losses in order to adjust the reserves to a
level determined by management to be adequate to absorb future losses.
PROPERTY AND EQUIPMENT -- Property and equipment are recorded at cost.
Depreciation is computed principally by the straight-line method based on the
estimated useful lives of the related assets. Leasehold improvements are
amortized over the shorter of the term of the lease or the asset's useful life.
INTANGIBLE ASSETS -- Intangible assets, which include the values
assigned to the core deposits of acquired banks, are being amortized over lives
ranging from six to seven years using accelerated methods and goodwill which is
being amortized over fifteen years using an accelerated method.
OTHER REAL ESTATE -- Other real estate acquired through foreclosure
and bank acquisitions is stated at the lower of cost or fair market value, net
of the costs of disposal. When a reduction to fair market value is required, it
is charged to the reserve for loan losses at the time of foreclosure and any
subsequent adjustments are charged to expense. Transfers from loans to other
real estate amounted to approximately $1,400,000, $780,000 and $1,900,000 in
1994, 1993 and 1992, respectively. Loans made in connection with the sale of
other real estate amounted to approximately $900,000, $1,200,000 and $2,200,000
in 1994, 1993 and 1992, respectively.
LOANS -- Loan origination fees and certain direct origination costs
are capitalized and recognized as an adjustment of the yield on the related
loan. Interest on commercial and real estate mortgage loans is recorded as
income based upon the principle amount outstanding. Unearned income on
installment loans is credited to operations based on a method which
approximates the interest method. Where doubt exists as to collectibility of a
loan, the accrual of interest is discontinued and payments received are applied
first to principal. Upon such discontinuances, all unpaid accrued interest is
reversed. Interest income is recorded after principal has been satisfied and as
payments are received.
TRUST FEES -- Trust fees are recorded when received which is the
general practice within the banking industry.
INCOME TAXES -- Provisions for income taxes are based on taxes payable
or refundable for the current year (after exclusion of non-taxable income such
as interest on state and municipal securities) and deferred taxes on temporary
differences
22
<PAGE> 8
between the amount of taxable income and pre-tax financial income and between
the tax bases of assets and liabilities and their reported amounts in the
financial statement. Deferred taxes on temporary differences are calculated at
the currently enacted tax rates applicable to the period in which the deferred
tax assets and liabilities are expected to be realized or settled. As changes
in tax laws or rates are enacted, deferred tax assets and liabilities are
adjusted through the provision for income taxes.
NET EARNINGS PER COMMON SHARE -- Net earnings per share of common
stock is computed by dividing net earnings by the weighted number of shares of
common stock outstanding during the period, after giving retroactive effect to
stock dividends and shares issued in acquisitions.
CASH -- For the purpose of presentation in the Statement of Cash
Flows, cash and cash equivalents are defined as those amounts included in the
balance sheet caption "Cash and Due from Banks."
NOTE 2 -- 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 527,000 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. Net interest income and net earnings
of the separate companies for the periods preceeding the acquisition were as
follows (in thousands):
<TABLE>
<CAPTION>
JANUARY 1,1994 YEARS ENDED
THROUGH DECEMBER 31,
APRIL 29, 1994 1993 1992
-------------- ---------------- ------------------
<S> <C> <C> <C> <C> <C>
Company $ 24,778 $ 77,904 $ 74,325
Baker 992 3,156 3,235
-------------- ---------------- ------------------
Combined $ 25,770 $ 81,060 $ 77,560
============== ================ ==================
Net Earnings:
Company $ 6,575 $ 22,116 $ 19,212
Baker 248 1,252 1,026
-------------- ---------------- ------------------
Combined $ 6,823 $ 23,368 $ 20,238
============== ================ ==================
</TABLE>
NOTE 3 -- PROPOSED ACQUISITIONS
In July 1994, the Company agreed to merge Hancock Bank of Louisiana,
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 542,000 shares of common stock of the
Company. Completion of the merger is contingent upon approval by Washington's
shareholders. It is intended that the merger will be accounted for using the
pooling-of-interests method and will be consummated on February 1, 1995.
Washington had total assets of approximately $86,100,000 (unaudited) and
stockholders' equity of approximately $12,400,000 (unaudited) as of December
31, 1994 and net earnings of approximately $1,300,000 (unaudited) for the year
then ended.
On January 13, 1995, the Company merged with First Denham Bancshares,
Inc. (Bancshares) which owns 100% of the stock of First National Bank of Denham
Springs, Denham Springs, Louisiana. The merger was in return for approximately
$4,000,000 cash and 775,000 shares of common stock of the Company. It is
intended that the merger will be accounted for using the purchase method.
Bancshares had total assets of approximately $111,000,000 (unaudited) and
stockholders' equity of approximately $10,300,000 (unaudited) as of December
31, 1994 and net earnings of approximately $2,500,000 (unaudited) for the year
then ended.
Following is certain selected unaudited proforma combined financial
information as of December 31, 1994, and for the year then ended, assuming that
both of the above acquisitions are consummated and had been effective January
1, 1994 (in thousands except per share data):
Total Assets $ 2,144,000
Stockholders' Equity 205,000
Net Interest Income 95,750
Net Earnings 24,400
Net Earnings Per Share 2.75
23
<PAGE> 9
NOTE 4 -- SECURITIES
The book and market values of securities classified as available-for-sale as of
December 31, 1994, and held-for-sale as of December 31, 1993, were as follows
(in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1993
--------------------------------------------- ---------------------------------------------
GROSS GROSS GROSS GROSS
BOOK UNREALIZED UNREALIZED MARKET BOOK UNREALIZED UNREALIZED MARKET
VALUE GAINS LOSSES VALUE VALUE GAINS LOSSES VALUE
--------- -------- --------- --------- --------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CMO'S $ 19,385 $ 134 $ 743 $ 18,776 $ 27,314 $ 791 $ 209 $ 27,896
Municipal obligations 997 26 971 930 10 0 940
--------- -------- --------- --------- --------- ------- --------- ---------
$ 20,382 $ 134 $ 769 $ 19,747 $ 28,244 $ 801 $ 209 $ 28,836
========= ======== ========= ========= ========= ======= ========= =========
</TABLE>
The book value and market value of the securities classified as
available-for-sale at December 31, 1994, by estimated maturity, were as follows
(in thousands):
<TABLE>
<CAPTION>
BOOK VALUE MARKET VALUE
------------ ------------
<S> <C> <C>
Due in one year or less $ 31 $ 31
Due after one year through five years 966 940
Due after five years through ten years 19,385 18,776
------------ ----------
$ 20,382 $ 19,747
============ ==========
</TABLE>
The book and market values of securities classified as
held-to-maturity as of December 31, 1994, and December 31, 1993, were as
follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1993
--------------------------------------------- ---------------------------------------------
GROSS GROSS GROSS GROSS
BOOK UNREALIZED UNREALIZED MARKET BOOK UNREALIZED UNREALIZED MARKET
VALUE GAINS LOSSES VALUE VALUE GAINS LOSSES VALUE
--------- -------- --------- --------- --------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S.Treasury Securities $ 271,664 $ 362 $ 5,000 $ 267,026 $ 279,461 $ 6,048 $ 104 $ 285,405
Other U.S. Gov. obligations 270,727 194 6,618 264,303 237,487 5,457 427 242,517
Municipal obligations 57,073 968 1,297 56,744 38,737 3,544 459 41,822
Other securities 15,746 92 520 15,318 13,316 3 76 13,243
Mortgage-backed securities 129,028 349 4,129 125,248 95,406 1,737 2,583 94,560
CMO's 88,807 57 2,999 85,865 87,171 2,148 2508 9,069
--------- -------- --------- --------- --------- ------- --------- ---------
$ 833,045 $ 2,022 $ 20,563 $ 814,504 $ 751,578 $18,937 $ 3,899 $ 766,616
========= ======== ========= ========= ========= ======= ========= =========
</TABLE>
The book value and market value of securities classified as
held-to-maturity as of December 31, 1994, by contractual maturity, were as
follows (in thousands):
<TABLE>
<CAPTION>
BOOK VALUE MARKET VALUE
------------ ------------
<S> <C> <C>
Due in one year or less $ 161,154 $ 159,904
Due after one year through five years 307,313 301,079
Due after five years through ten years 122,204 118,353
Due after ten years 242,374 235,168
------------ ----------
$ 833,045 $ 814,504
============ ==========
</TABLE>
Proceeds from sales of securities were $9,765,000 in 1993 and
$65,448,000 in 1992. Gross gains of $810,000 in 1993 and $654,000 in 1992 and
gross losses of $27,000 in 1993, and $21,000 in 1992 were realized on those
sales. There were no sales of securities in 1994. At December 31, 1993, the
Company reclassified securities with a book value of $28,244,000 from
investment securities to securities held-for-sale. On January 1, 1994, the
Company reclassified these same securities to securities available- for-sale
which resulted in an increase of stockholders' equity of $390,000 at that date.
Securities with a book value of approximately $382,000,000 at December
31, 1994, and $335,000,000 at December 31, 1993, were pledged to secure public
deposits, securities sold under agreements to repurchase, and for other
purposes as required or permitted by law.
The Company's collateralized mortgage obligations (CMO's) generally
consist of first and second tranche sequential pay and/or planned amortization
class (PAC) instruments. Interest income on CMO's and mortgage-backed
securities is generally included with interest on obligations of other U.S.
Government agencies and corporations due to their guarantees of the underlying
mortgages.
24
<PAGE> 10
NOTE 5 -- LOANS
Loans consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1994 1993
------------ ----------
<S> <C> <C>
Real estate loans-primarily mortgage $ 353,427 $ 344,768
Commercial and industrial loans 114,179 151,224
Loans to individuals for household, family and
other consumer expenditures 417,939 384,018
Leases 10,074 6,673
Other loans 13,096 13,762
------------ ----------
$ 908,715 $ 900,445
============ ==========
</TABLE>
Changes in the reserve for loan losses are as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
------------ ---------- ---------
<S> <C> <C> <C>
Balance at January 1 $ 14,218 $ 13,571 $ 11,718
Recoveries 1,380 1,552 1,044
Loans charged off (3,260) (5,387) (6,959)
Provision charged to operating expense 1,860 4,482 7,768
------------ ---------- ---------
Balance at December 31 $ 14,198 $ 14,218 $ 13,571
============ ========== =========
</TABLE>
The Company generally makes loans in its market areas of South
Mississippi and East Baton Rouge Parish, Louisiana. Loans are made in the
normal course of business to its directors and executive officers, and their
associates on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other persons. Such loans did not involve more than normal risk of
collectibility or contain other unfavorable features. The balance of loans to
related parties at December 31, 1994, was approximately $4,635,000.
Nonaccrual and renegotiated loans amounted to approximately 1% of
total loans at December 31, 1994 and 1993. The amount of interest not accrued
on these loans did not have a significant effect on earnings in 1994, 1993 or
1992.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment of
Certain Loans", which requires the present value of expected future cash flows
of impaired loans be discounted at the loan's effective interest rate. The
Financial Accounting Standards Board has also issued Statement of Financial
Accounting Standards No. 118, "Accounting by Creditors for Impairment of a
Loan-Income Recognition and Disclosures", which allows a creditor to use
existing methods for recognizing interest income on impaired loans. The Bank
does not anticipate that the adoption of these Statements in 1995 will have a
significant effect on its financial condition or results of operations
NOTE 6 -- PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated
depreciation and amortization as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1994 1993
------------ ----------
<S> <C> <C>
Land, buildings and leasehold improvements $ 38,565 $ 36,764
Furniture, fixtures and equipment 32,649 30,537
------------ ----------
71,214 67,301
Less accumulated depreciation and amortization 36,458 32,082
------------ ----------
$ 34,756 $ 35,219
============ ==========
</TABLE>
NOTE 7 -- LONG-TERM BONDS
Long-term bonds consist of Urban Development Refunding Revenue Bonds,
with interest at 7% to 7.25%. Interest is payable semi-annually. Principal
payments are payable as follows (in thousands):
<TABLE>
<S> <C>
1995 $ 920
1996 985
1997 1,050
----------
$ 2,955
==========
</TABLE>
25
<PAGE> 11
The Urban Development Refunding Revenue Bonds are obligations of
Hancock Bank and are collateralized by land and buildings with a book value of
$11,700,000. The Bank has deposited with the bond trustee U.S. Treasury
securities whose principle maturities and interest payments will be sufficient
to service all future principle and interest payments due on the Urban
Development Refunding Revenue Bonds.
NOTE 8 -- STOCKHOLDERS' EQUITY
Earnings per common share is based on the weighted average number of
shares outstanding of approximately 7,550,000 in 1994, 1993, and 1992, reduced
by shares of stock owned by subsidiaries. At December 31, 1994, these
subsidiaries owned 143,000 shares of stock.
Stockholders' equity of the Company includes the undistributed
earnings of the subsidiary Banks. Dividends are payable only out of undivided
profits or current earnings. Moreover, dividends to the Company's stockholders
can generally be paid only from dividends paid to the Company by the Banks
which, with respect to Hancock Bank are subject to approval by the Commissioner
of Banking and Consumer Finance of the State of Mississippi. The amount of
capital of the subsidiary banks available for dividends at December 31, 1994
was approximately $47,000,000.
The Company and its Bank subsidiaries are required to maintain certain
minimum capital levels. At December 31, 1994, the Company and the Banks were in
compliance with their respective statutory minimum capital requirements.
Following is a summary of the minimum required consolidated capital levels and
the actual amounts at December 31, 1994:
<TABLE>
<CAPTION>
REQUIRED MINIMUM ACTUAL
---------------- -------
<S> <C> <C>
Tier 1 leverage 4% - 5% 9%
Tier 1 Risk-based 4% 17%
Total Risk-based 8% 18%
</TABLE>
NOTE 9 -- INCOME TAXES
Effective January 1, 1993, the Company changed its method of
accounting for income taxes from the deferred method to the liability method as
required by Statement of Financial Accounting Standard No. 109. Prior years
have not been restated. The cumulative effect of this accounting change did not
have a significant effect on the Company's financial statements and was
recorded in income tax expense in the year ended December 31, 1993.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax assets and liabilities as
of December 31, 1994, and 1993 are as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993
------------ ----------
<S> <C> <C>
Deferred tax assets:
Postretirement benefit obligation $ 442 $ 279
Reserve for loan losses not currently deductible 4,091 4,055
Reserve for other real estate not currently deductible 291 370
Deferred compensation 532 521
Lease accounting 117 522
Unrealized loss on securities available-for-sale 220 --
Other 123 47
------------ ----------
$ 5,816 $ 5,794
------------ ----------
Deferred tax liabilities:
Tax over book depreciation (3,296) (3,123)
Core deposit intangible (770) (2,365)
Prepaid pension (716) (154)
Market discount accretion (516) (331)
------------ ----------
(5,298) (5,973)
------------ ----------
Net deferred tax liability $ 518 $ (179)
============ ==========
</TABLE>
Income taxes consists of the following components (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
------------ ---------- ---------
<S> <C> <C> <C>
Currently payable $ 10,372 $ 10,085 $ 7,372
Deferred (477) 114 (345)
------------ ---------- ---------
$ 9,895 $ 10,199 $ 7,027
============ ========== =========
</TABLE>
26
<PAGE> 12
Deferred income taxes resulted from the following (in thousands):
<TABLE>
<CAPTION>
1992
------------
<S> <C>
Accelerated depreciation $ 100
Provision for loan losses (800)
AMT credit restoration (100)
Other - net 455
------------
$ (345)
============
</TABLE>
Income taxes amounted to less than the amounts computed by applying
the U.S. Federal income tax rate of 35% in 1994 and 1993, and 34% in 1992, to
earnings before income taxes. The reasons for these differences are as follows
(in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
------------------- ----------------- ------------------
Amount % Amount % Amount %
------------ ----- ---------- ----- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Taxes computed at statutory rate $ 11,092 35 $ 11,748 35 $ 9,270 34
Increases (decreases) in taxes resulting from: (1,245) (4)
Tax exempt interest income (1,294) (4) (1,703) (6)
Alternative minimum tax -- -- (980) (4)
Miscellaneous items - net 48 (255) (1) 440 2
------------ ----- ---------- ----- ----------- -----
Income tax expense $ 9,895 31 $ 10,199 30 $ 7,027 26
============ ===== ========== ===== =========== =====
</TABLE>
The Tax Reform Act of 1986 generally became effective with respect to
the Company in 1987. The Act provides for an alternative minimum tax (AMT)
which decreased the tax otherwise payable by the Company by $980,000 in 1992.
NOTE 10 -- EMPLOYEE BENEFIT PLANS
The Company has a non-contributory pension plan covering substantially
all salaried full-time employees who have been employed by the Company the
required length of time. The Company's current policy is to contribute annually
the minimum amount that can be deducted for federal income tax purposes. The
benefits are based upon years of service and employee's compensation during the
last five years of employment. Data relative to the pension plan follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1994 1993
------------ ----------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $ 17,835 $ 16,403
============ ==========
Accumulated benefit obligation $ 17,892 $ 16,471
============ ==========
Projected benefit obligation for service rendered
to date $ (20,545) $ (19,246)
Plan assets at fair value 17,892 17,465
------------ ----------
Projected benefit obligation in excess of plan assets (2,653) (1,781)
Remaining unrecognized portion of net obligation being
amortized over 15 years 320 366
Unrecognized prior service cost 935 1,026
Unrecognized net loss from past experience different
from that assumed 3,404 2,207
------------ ----------
Prepaid pension cost included in other assets $ 2,006 $ 1,818
============ ==========
<CAPTION>
1994 1993 1992
------------ ---------- ---------
<S> <C> <C> <C>
Net pension expense included the following (income)
expense components:
Service cost - benefits earned during the period $ 818 $ 698 $ 757
Interest cost on projected benefit obligation 1,463 1,369 1,218
Return on plan assets (93) (1,158) (1,454)
Net amortization and deferral (1,112) (89) 235
------------ ---------- ---------
Net pension expense $ 1,076 $ 820 $ 756
============ ========== =========
</TABLE>
The discount rate and rate of increase in future compensation levels
used in determining the actuarial present value of the projected benefit
obligation were 7.75% and 4%, respectively, in 1994 and 1993. The expected rate
of return on plan assets was 8% in 1994 and 1993. The plan's assets consist
primarily of U.S. government and agency obligations, certificates of deposit
and other fixed income obligations.
During 1992 the Company adopted Statement of Financial Accounting
Standards No. 106, Employer's Accounting for
27
<PAGE> 13
Postretirement Benefits Other Than Pensions. This Statement requires accrual of
postretirement benefits (such as health care benefits) during the years an
employee provides services. The costs of these benefits were previously
expensed on a pay-as-you-go basis. The adoption of this Statement decreased
1992 net earnings by $250,000 ($.03 per share).
The Company sponsors two defined benefit postretirement plans other
than the pension plan that cover full time employees who have reached 45 years
of age. One plan provides medical benefits and the other provides life
insurance benefits. The postretirement health care plan is contributory, with
retiree contributions adjusted annually and subject to certain employer
contribution maximums; the life insurance plan in noncontributory. The
actuarial and recorded liabilities for these postretirement benefits, none of
which have been funded, are as follow at December 31, 1994, and December 31,
1993 (in thousands):
<TABLE>
<CAPTION>
1994 1993
------------ ----------
<S> <C> <C>
Accumulated postretirement benefit obligations:
Retirees $ 2,052 $ 1,888
Fully eligible active plan participants 1,103 826
Other active plan participants 1,417 1,161
------------ ----------
4,572 3,875
Unrecognized transition obligation (2,436) (2,579)
Unrecognized net (loss) gain (873) (499)
------------ ----------
Accrued postretirement benefit cost $ 1,263 $ 797
============ ==========
</TABLE>
Net periodic postretirement benefit costs for 1994, 1993 and 1992 included
the following components (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
------------ ---------- ---------
<S> <C> <C> <C> <C>
Amortization of unrecognized net gain $ 18 $ (5) $ --
Service cost-benefits attributed to service
during the year 200 162 165
Interest costs on accumulated postretirement
benefit obligations 266 254 237
Amortization of transition obligation over 20 years 143 143 146
------------ ---------- ---------
Net periodic postretirement benefit cost $ 627 $ 554 $ 548
============ ========== =========
</TABLE>
For measurement purposes in 1994, a 9.5% annual rate of increase in
the per capita cost of covered health care benefits was assumed. The rate was
assumed to decrease gradually to 5% for 2006 and remain at that level
thereafter. In 1993, rates of 12% and 5.5% were assumed, and in 1992, rates of
12% and 6% were assumed. The health care cost trend rate assumption has an
affect on the amounts reported. To illustrate, increasing the assumed health
care cost trend rates by 1% in each year would increase the accumulated
postretirement benefit obligation as of December 31, 1994, by $81,000 and the
aggregate of the service and interest cost components of net periodic
postretirement benefit cost for the year then ended by $10,000. The weighted
average discount rate used in determining the accumulated postretirement
benefit obligation was 8.5% in 1994, 7% in 1993, and 8.75% in 1992.
The Company has a non-contributory profit sharing plan covering
substantially all salaried full-time employees who have been employed the
required length of time. Contributions are made at the discretion of the Board
of Directors and amounted to $413,000 in 1994, $450,000 in 1993, and $346,000
in 1992.
In addition, the Company has an employee stock purchase plan that is
designed to provide the employees of the Company a convenient means of
purchasing common stock of the Company. Substantially all salaried, full time
employees , with the exception of Leo W. Seal, Jr., who have been employed by
the Company the required length of time are eligible to participate if they so
elect. The Company contributes an amount equal to 25% of each participant's
contribution, which contribution cannot exceed 5% of his base pay. The
Company's contribution amounted to $52,000 in 1994, $45,000 in 1993, $45,000 in
1992.
The postretirement plans relating to health care payments, life
insurance and the stock purchase plan are not guaranteed and are subject to
immediate cancellation and/or amendment. These plans are predicated on future
Company profit levels that will justify their continuance. Overall health care
costs are also a factor in the level of benefits provided and continuance of
these postretirement plans. There are no vested rights under the postretirement
health or life insurance plans.
NOTE 11 -- DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practicable to
estimate that value:
CASH, SHORT-TERM INVESTMENTS AND FEDERAL FUNDS SOLD -- For those
short-term instruments, the carrying amount is a reasonable estimate of fair
value.
SECURITIES -- For securities, fair value equals quoted market price,
if available. If a quoted market price is not available, fair value is
estimated using quoted market prices for similar securities.
Loans -- The fair value of loans is estimated by discounting the
future cash flows using the current rates at which similar
28
<PAGE> 14
loans would be made to borrowers with similar credit ratings and for the same
remaining maturities.
DEPOSITS -- The fair value of demand deposits, savings accounts, and
certain money market deposits is the amount payable on demand at the reporting
date. The fair value of fixed-maturity certificates of deposit is estimated
using the rates currently offered for deposits of similar remaining maturities.
LONG-TERM BONDS AND NOTES -- Rates currently available to the Company
for debt with similar terms and remaining maturities are used to estimate fair
value of existing debt.
COMMITMENTS -- The fair value of commitments to extend credit was not
significant.
The estimated fair values of the Company's financial instruments are
as follows at December 31, 1994 and 1993 (in thousands):
<TABLE>
<CAPTION>
1994 1993
------------------------------ ------------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Financial assets:
Cash, short-term investments and federal
funds sold $ 150,850 $ 150,850 $ 193,788 $ 193,788
Securities available-for-sale 19,747 19,747 28,244 28,836
Securities held-to-maturity 833,045 814,504 751,578 766,616
Loans 881,287 875,715 874,557 883,000
Less: reserve for loan losses (14,198) (14,198) (14,218) (14,218)
------------ ------------ ------------ ------------
Loans, net of reserve 867,089 861,517 860,339 868,782
Financial liabilities:
Deposits $ 1,702,078 $ 1,699,242 $ 1,685,657 $ 1,688,000
Federal Funds purchased, etc. 54,296 54,296 45,799 45,799
Long-term bonds and notes 2,955 2,700 4,300 4,600
</TABLE>
NOTE 12--OFF-BALANCE-SHEET RISK
In the normal course of business, the Company enters into financial
instruments, such as commitments to extend credit and letters of credit, to
meet the financing needs of its customers which are not reflected in the
accompanying consolidated financial statements until they are funded or related
fees are incurred or received. These instruments involve, to varying degrees,
elements of credit risk not reflected in the consolidated balance sheets. The
contract amounts of these instruments reflect the Company's exposure to credit
loss in the event of nonperformance by the other party on whose behalf the
instrument has been issued. The Company undertakes the same credit evaluation
in making commitments and conditional obligations as it does for
on-balance-sheet instruments and may require collateral or other credit support
for off-balance-sheet financial instruments. These obligations are summarized
below as of December 31, 1994, and 1993 (in thousands):
<TABLE>
<CAPTION>
1994 1993
------------ ----------
<S> <C> <C>
Commitments to extend credit $ 165,000 $ 200,000
Letters of credit 9,500 7,000
</TABLE>
Approximately $130,000,000 of commitments to extend credit at December
31, 1994, were at variable rates and the remainder were at fixed rates. Most
commitments to extend credit at December 31, 1993, were at variable rates. The
difference between the interest rates on commitments to extend credit and
market rates is reflected in the consolidated financial statements over the
terms of the related loans when, and if, they are made.
A commitment to extend credit is an agreement to lend to a customer as
long as the conditions established in the agreement have been satisfied. A
commitment to extend credit generally has a fixed expiration date or other
termination clauses and may require payment of a fee by the borrower. Since
commitments often expire without being fully drawn, the total commitment
amounts do not necessarily represent future cash requirements of the Company.
The Company continually evaluates each customer's creditworthiness on a
case-by-case basis. Occasionally, a credit evaluation of a customer requesting
a commitment to extend credit results in the Company obtaining collateral to
support the obligation.
Letters of credit are conditional commitments issued by the Company to
guarantee the performance of a customer to a third party. The credit risk
involved in issuing a letter of credit is essentially the same as that involved
in extending a loan.
29
<PAGE> 15
NOTE 13 -- SUPPLEMENTAL INFORMATION
The following is selected supplemental information for the years ended
December 31, 1994, 1993, and 1992 (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
------------ ---------- ---------
<S> <C> <C> <C>
Trust fee income $ 2,500 $ 2,600 $ 2,300
Deposit insurance premium expense 4,000 3,600 3,360
Postage expense 2,200 1,670 1,708
Interest paid 47,660 47,050 55,950
Income taxes paid 10,320 10,560 7,750
</TABLE>
NOTE 14 -- SUMMARIZED FINANCIAL INFORMATION OF HANCOCK HOLDING COMPANY
(PARENT COMPANY ONLY)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1994 1993
------------- -------------
<S> <C> <C>
ASSETS:
Investment in subsidiaries $ 169,609,659 $ 155,171,417
Other 317,171 202,412
------------- -------------
$ 169,926,830 $ 155,373,829
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accrued expenses $ -- $ 54
Stockholders' equity 169,926,830 155,373,775
------------- -------------
$ 169,926,830 $ 155,373,829
============= =============
</TABLE>
STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1994 1993 1992
------------ ------------ -----------
<S> <C> <C> <C>
Dividends received from subsidiary $ 7,297,502 $ 6,343,450 $ 5,428,570
Excess equity in earnings of subsidiaries over
dividends received 14,284,093 16,990,520 15,064,920
Interest and other (expenses) income 327,632 56,738 (375,104)
Income tax credit (expense) (113,907) (23,052) 120,000
------------ ------------ -----------
Net earnings $ 21,795,320 23,367,656 $20,238,386
============ ============ ===========
</TABLE>
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1994 1993 1992
------------ ------------ -----------
<S> <C> <C> <C>
Cash Flows from Operating Activities--principally
dividends from subsidiary $ 6,928,267 $ 6,291,142 $ 5,409,484
------------ ------------ -----------
Cash Flows from Financing Activities:
Prepayments of notes payable -- -- (1,000,000)
Dividends paid (6,967,488) (6,460,169) (4,881,015)
------------ ------------ -----------
Net cash used in financing activities (6,967,488) (6,460,169) (5,881,015)
------------ ------------ -----------
Net decrease in cash (39,221) (169,027) (471,531)
Cash, Beginning 113,345 282,372 753,903
------------ ------------ -----------
Cash, Ending $ 74,124 $ 113,345 $ 282,372
============ ============ ===========
</TABLE>
30
<PAGE> 16
INDEPENDENT AUDITORS' REPORT
BOARD OF DIRECTORS AND STOCKHOLDERS
HANCOCK HOLDING COMPANY
GULFPORT, MISSISSIPPI
We have audited the accompanying consolidated balance sheets of
Hancock Holding Company and subsidiaries as of December 31, 1994 and 1993, and
the related statements of earnings, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of Hancock Holding Company and
subsidiaries as of December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1994, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
January 17, 1995
31
<PAGE> 17
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
The Company's net income was $21.8 million, $2.88 per share, for the
year ended December 31, 1994, compared with $23.4 million, or $3.10 per share,
for the year ended December 31, 1993. The change in net income was attributable
in part to a 6% increase in non interest expense and an 8% decline in non
interest income. Rising interest rates lowered the net interest margin causing
net interest income to rise only slightly from the previous year even though
earning assets grew 9%. A lower level of loan charge-offs in 1994 reduced loan
loss expense from $4.5 million in 1993 to $1.9 million in 1994. The loan loss
reserve balance was 1.65% of average loans in 1994 and represented 237% of
non-performing loans at December 31, 1994. The net interest margin declined to
4.63% from 4.87% in 1993. The Company's balance sheet is liability sensitive as
deposits tend to reprice faster than loans and investment securities.
Therefore, in a rising interest rate environment the Company's net interest
margin will decline.
FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1992
The Company's net income increased to $23.4 million, $3.10 per share,
for the year ended December 31, 1993, compared to $20.2 million, or $2.68 per
share, for the year ended December 31, 1992. The $3.1 million increase in net
income was attributable to deposit growth which funded additional earning
assets and a lower level of loan charge-offs. Growth in earning assets resulted
in a $3.5 million increase in net interest income. A 26% decline in
non-performing asset balances and a lower level of loan charge-offs in 1993
allowed the Company to reduce its loan loss provision by $3.3 million from $7.8
million in 1992 to $4.5 million in 1993. The reserve for loan losses balance
was 1.78% of average loans in 1993 and represented 211% of non-performing loans
at December 31, 1993. The net interest margin declined from 5.09% in 1992 to
4.87% in 1993.
FINANCIAL CONDITION
SECURITIES
The Company generally purchases securities to be held to maturity,
with a maturity schedule that provides ample liquidity. Securities classified
as held-to-maturity are carried at amortized cost. Certain securities have been
classified as available-for-sale based on management's internal assessment of
the portfolio considering future liquidity and earning requirements. The
December 31, 1994 book value of the held-to-maturity portfolio was $833 million
and the market value was $815 million. The available-for-sale portfolio balance
was $20 million at December 31, 1994.
LOANS
Average loans outstanding increased $60 million in 1994 bringing the
December 31, 1994, net loan portfolio balances to $881 million or 50% of
earning assets. Non-performing loans were $5.9 million or .67% of the December
31, 1994, loan balances. Restructured loans were insignificant and the amount
of interest not accrued on non-performing loans did not significantly effect
earnings in 1994 or 1993. The Company generally makes loans in its market areas
of South Mississippi and East Baton Rouge Parish.
DEPOSITS
Deposits grew $16 million bringing total deposits to $1.7 billion on
December 31, 1994. Savings deposit balances grew 6% compared with 3% growth in
the time deposit category. Deposits are the Company's primary source of funds
supporting its earning assets base.
LIQUIDITY
Liquidity represents the Company's ability to provide funds to satisfy
demands from depositors, borrowers and other commitments by either converting
assets to cash or accessing new or existing sources of funds. The principal
sources of
32
<PAGE> 18
funds which provide liquidity are customer deposits, payments of principal and
interest on loans, maturities and sales of securities, earnings and borrowings.
During 1994, the Company established a line of credit with the Federal Home
Loan Bank in excess of $30 million, providing an additional liquidity source.
At December 31, 1994, cash and due from banks, securities available-for-sale,
federal funds sold and repurchase agreements were in excess of 10% of total
deposits.
CAPITAL RESOURCES
Composite ratings by the respective regulatory authorities of the
Company and Banks, establish minimum capital levels. Currently, the Company
and the Banks are required to maintain minimum risk-based capital ratios of 8%,
with not less that 4% in Tier 1 capital. Additionally, the Company and the
Banks must maintain minimum Tier 1 leverage ratios of at least 3%, subject to
increase to at least 4% to 5%, depending on the composite rating. As of
December 31, 1994, the Company and the Banks capital balances were in excess of
current regulatory minimum requirements.
RECENT CHANGES IN FINANCIAL ACCOUNTING STANDARDS
During 1992, the Company adopted Statement of Financial Accounting
Standards No. 106, "Employer's Accounting for Postretirement Benefits Other
Than Pensions." This Statement requires accrual of postretirement benefits
(such as health care benefits) during the years an employee provides services.
The costs of these benefits were previously expensed on a pay-as-you-go basis.
The adoption of this Statement decreased net earnings by $250,000 ($0.03 per
share) in 1992.
Effective January 1, 1993, the Company changed its method of
accounting for income taxes from the deferred method to the liability method as
required by Statement of Financial Accounting Standard No. 109. Prior years
were not restated. The cumulative effect of this accounting change did not have
a significant effect on the Company's financial statements and was recorded in
income tax expense in the year ended December 31, 1993.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment of
Certain Loans", which requires the present value of expected future cash flows
of impaired loans be discounted at the loan's effective interest rate. The
Financial Accounting Standards Board has also issued Statement of Financial
Accounting Standards No. 118, "Accounting by Creditors for Impairment of a
Loan-Income Recognition and Disclosures," which allows a creditor to use
existing methods for recognizing interest income on impaired loans. The Bank
does not anticipate that the adoption of these Statements in 1995 will have a
significant effect on its financial condition or results of operations.
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," requires the investment portfolio to be classified
into one of three reporting categories, held-to-maturity, available-for-sale,
or trading. The Company's adoption of this Statement did not have a material
effect on its financial statements.
FORM 10-K ANNUAL REPORT
HANCOCK HOLDING COMPANY FILES AN ANNUAL REPORT WITH THE SECURITIES AND
EXCHANGE COMMISSION ON FORM 10-K. A COPY OF THE REPORT FILED ON FORM 10-K, WHEN
COMPLETED, WILL BE SENT FREE OF CHARGE TO ANY SHAREHOLDER BY WRITING TO: GEORGE
A. SCHLOEGEL, VICE-CHAIRMAN, HANCOCK HOLDING COMPANY, P.O. BOX 4019, GULFPORT,
MS 39502.
33
<PAGE> 1
Exhibit (22)
(22) Subsidiaries of the Registrant.
<TABLE>
<CAPTION>
Jurisdiction Holder of
Name Of Incorporation Outstanding Stock (1)
---- ---------------- ---------------------
<S> <C> <C>
Hancock Bank Mississippi Hancock Holding Company
Hancock Bank of Louisiana Louisiana Hancock Holding Company
Hancock Bank Securities Mississippi Hancock Bank
Corporation
Hancock Insurance Agency Mississippi Hancock Bank
Town Properties, Inc. Mississippi Hancock Bank
The Gulfport Building, Inc. Mississippi Hancock Bank
of Mississippi
Harrison Financial Services, Mississippi Hancock Bank
Inc.
Hancock Mortgage Corporation Mississippi Hancock Bank and
Hancock Securities Corp.
Harrison Life Insurance Mississippi 79% owned by Hancock
Company Bank
</TABLE>
(1) All are 100% owned except as indicated.
<PAGE> 1
Exhibit (23)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statement of
Hancock Holding Company on Form S-8 (No. 2- 99863) and on Form S-3 (No.
33-31782) of our report dated January 17, 1995 incorporated by reference in
this Annual Report on Form 10-K for the year ended December 31, 1994.
DELOITTE & TOUCHE
New Orleans, Louisiana
March 24, 1995
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000750577
<NAME> HANCOCK HOLDING COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 114,900
<INT-BEARING-DEPOSITS> 1,350
<FED-FUNDS-SOLD> 34,600
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 19,747
<INVESTMENTS-CARRYING> 833,045
<INVESTMENTS-MARKET> 814,504
<LOANS> 881,287
<ALLOWANCE> 14,198
<TOTAL-ASSETS> 1,940,845
<DEPOSITS> 1,702,079
<SHORT-TERM> 54,296
<LIABILITIES-OTHER> 11,588
<LONG-TERM> 2,955
<COMMON> 25,658
0
0
<OTHER-SE> 144,269
<TOTAL-LIABILITIES-AND-EQUITY> 1,940,845
<INTEREST-LOAN> 78,252
<INTEREST-INVEST> 47,423
<INTEREST-OTHER> 4,745
<INTEREST-TOTAL> 130,420
<INTEREST-DEPOSIT> 46,567
<INTEREST-EXPENSE> 1,804
<INTEREST-INCOME-NET> 82,049
<LOAN-LOSSES> 1,878
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 26,686
<INCOME-PRETAX> 31,690
<INCOME-PRE-EXTRAORDINARY> 21,795
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,795
<EPS-PRIMARY> 2.88
<EPS-DILUTED> 2.88
<YIELD-ACTUAL> 4.63
<LOANS-NON> 3,640
<LOANS-PAST> 2,633
<LOANS-TROUBLED> 614
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 14,218
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<ALLOWANCE-CLOSE> 14,198
<ALLOWANCE-DOMESTIC> 14,198
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,198
</TABLE>
