<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ Quarterly Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
/ / Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ending June 30, 1995
Commission File Number 0-13089
HANCOCK HOLDING COMPANY
------------------------------------------------------
(Exact name of registrant as specified in its charter)
MISSISSIPPI 64-0693170
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
ONE HANCOCK PLAZA, P. O. BOX 4019, GULFPORT, MISSISSIPPI 39502
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(Address of principal executive offices) (Zip Code)
(601) 868-4605
----------------------------------------------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
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(Former name, address and fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
--------- ---------
8,880,605 Common Shares were outstanding as of August 1, 1995 for financial
statement purposes.
Page 1 of 12
<PAGE> 2
HANCOCK HOLDING COMPANY
I N D E X
<TABLE>
<CAPTION>
PAGE NUMBER
-----------
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets --
June 30, 1995 and December 31, 1994 3
Condensed Consolidated Statements of Earnings --
Three Months Ended June 30, 1995 and 1994
Six Months Ended June 30, 1995 and 1994 4
Condensed Consolidated Statements of Cash Flows --
Six Months Ended June 30, 1995 and 1994 5
Notes to Condensed Consolidated Financial
Statements 6 - 7
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8 - 10
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8K 11
SIGNATURES 12
</TABLE>
Page 2 of 12
<PAGE> 3
HANCOCK HOLDING COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Unaudited Restated
June 30 December 31
1995 1994*
---------- ----------
<S> <C> <C>
ASSETS:
Cash and due from banks (non-interest bearing) $ 123,017 $ 120,532
Interest bearing time deposits with other banks 1,650 1,450
---------- ----------
Total cash and due from banks 124,667 121,982
Securities available-for-sale (cost of $43,505 and $20,382) 43,399 19,747
Securities held-to-maturity (market value of $865,948and
$828,968) 870,075 847,593
Federal funds sold and securities purchased under
agreements to resell 102,425 55,900
Loans, net of unearned income 993,125 925,665
Less: Reserve for loan losses (16,581) (15,372)
---------- ----------
Net loans 976,544 910,293
Property and equipment, at cost, less accumulated
depreciation of $42,673 and $36,458 39,150 35,470
Other real estate 1,062 1,000
Accrued interest receivable 18,339 17,425
Other assets 31,529 17,755
---------- ----------
TOTAL ASSETS $2,207,190 $2,027,165
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits:
Non-interest bearing demand $ 443,425 $ 390,074
Interest bearing savings, NOW, money market and other time 1,458,089 1,385,652
---------- ----------
Total deposits 1,901,514 1,775,726
Federal funds purchased and securities sold under
agreements to repurchase 71,012 54,296
Other liabilities 16,747 11,753
Long-term bonds and notes 2,955 2,955
---------- ----------
TOTAL LIABILITIES 1,992,228 1,844,730
---------- ----------
STOCKHOLDERS' EQUITY:
Common Stock 29,942 26,798
Capital Surplus 135,508 93,991
Undivided Profits 49,581 62,061
Unrealized loss on securities available for sale - net (69) (415)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 214,962 182,435
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,207,190 $2,027,165
========== ==========
</TABLE>
* The balance sheet at December 31, 1994 has been restated to reflect a
1995 transaction accounted for using the pooling-of-interests method.
See notes to condensed consolidated financial statements.
Page 3 of 12
<PAGE> 4
HANCOCK HOLDING COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
UNAUDITED
DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA
<TABLE>
<CAPTION>
Restated Restated
Three Months Ended June 30 Six Months Ended June 30
-------------------------- ------------------------
1995 1994 1995 1994
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 24,336 $ 20,421 $ 47,824 $ 40,223
Interest on:
U. S. Treasury Securities 3,536 4,065 7,060 7,936
Obligations of other U. S. Government agencies
and corporations 8,605 6,123 16,239 11,849
Obligations of states and political subdivisions 868 692 1,738 1,393
Interest on Federal funds sold and securities
purchased under agreements to resell 1,504 865 2,752 1,834
Interest on time deposits and other 1,554 909 3,076 1,918
---------- ---------- ---------- ----------
Total interest income 40,403 33,075 78,689 65,153
INTEREST EXPENSE:
Interest on deposits 14,483 11,723 27,962 23,269
Interest on federal funds purchased and securities
sold under agreements to repurchase 670 315 1,235 559
Interest on capital notes 0 6 0 12
Interest on long term bonds and notes 103 78 240 151
---------- ---------- ---------- ----------
Total interest expense 15,256 12,122 29,437 23,991
---------- ---------- ---------- ----------
NET INTEREST INCOME 25,147 20,953 49,252 41,162
PROVISION FOR LOAN LOSSES 1,002 366 1,177 829
---------- ---------- ---------- ----------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 24,145 20,587 48,075 40,333
---------- ---------- ---------- ----------
Other Operating Income:
Service charges on deposit accounts 3,661 3,022 7,184 6,030
Income from fiduciary activities 507 539 1,105 1,150
Securities gains (losses) (41) 29 (91) 110
Other non-interest income 1,348 1,154 2,891 2,703
---------- ---------- ---------- ----------
Total other operating income 5,475 4,744 11,089 9,993
Other Operating Expenses:
Salaries and employee benefits 10,308 8,843 20,123 17,510
Net occupancy expense of bank premises
and equipment expense 4,052 2,401 6,985 5,155
Other non-interest expense 5,382 6,036 12,056 11,838
---------- ---------- ---------- ----------
Total other operating expenses 19,742 17,280 39,164 34,503
---------- ---------- ---------- ----------
EARNINGS BEFORE INCOME TAXES 9,878 8,051 20,000 15,823
INCOME TAXES 3,266 2,646 6,608 4,953
---------- ---------- ---------- ----------
NET EARNINGS $ 6,612 $ 5,405 13,392 10,870
========== ========== ========== ==========
NET EARNINGS PER COMMON SHARE $ 0.75 $ 0.66 $ 1.51 $ 1.34
========== ========== ========== ==========
DIVIDENDS PAID PER COMMON SHARE $ 0.23 $ 0.23 $ 0.46 $ 0.46
========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 8,879 8,097 8,879 8,097
========== ========== ========== ==========
</TABLE>
The 1994 statments of earnings have been restated to reflect a 1995 transaction
accounted for using the pooling-of-interests method.
See notes to condensed consolidated financial statements.
Page 4 of 12
<PAGE> 5
HANCOCK HOLDING COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(Amounts in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1995 1994
-------- --------
<S> <C> <C>
FINANCIAL RESOURCES PROVIDED:
----------------------------
Cash Flows From Operating Activities:
Net earnings $ 13,392 $ 10,870
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 2,500 2,346
Provision for loan losses 1,177 829
(Loss) gain on sales of investments (91) 110
(Increase) in interest receivable (183) (296)
Amortization of intangible assets 1,198 737
Increase in interest payable 1,235 323
Other - net 1,999 1,313
--------- ---------
Net cash provided by Operating Activities 21,227 16,232
--------- ---------
Cash Flows from Investing Activities:
Proceeds from sales/maturities of securities
held-to-maturity 166,652 81,729
Purchase of securities held-to-maturity (197,509) (143,282)
Proceeds from sales/maturities of securities
available-for-sale 4,840 615
Purchase of securities available-for-sale (200) 0
Net (increase) decrease in federal funds sold and
securities sold under agreements to repurchase (42,575) 30,415
Net decrease (increase) in loans 8,159 (1,018)
Purchase of property and equipment, net (2,551) (2,093)
Transfers from loans to other real estate (537) (546)
Proceeds from sale of other real estate 540 519
Net cash received in connection with purchase
transaction 7,872 0
--------- ---------
Net cash used in Investing Activities (55,309) (33,661)
--------- ---------
Cash Flows from Financing Activities:
Net increase in deposits 24,002 30,570
Dividends paid (4,150) (3,664)
Net increase (decrease) in federal funds purchased,
securities sold under agreements to repurchase and
other temporary funds 16,715 (9,621)
--------- ---------
Net cash provided by Financing Activities 36,567 17,285
--------- ---------
Net (Decrease) Increase in Cash and Due from Banks 2,485 (144)
Cash and Due from Banks, Beginning 120,532 99,106
--------- ---------
Cash and Due from Banks, Ending $ 123,017 $ 98,962
========= =========
</TABLE>
The 1994 statements of cash flows has been restated to reflect a 1995
transaction accounted for using the pooling-of- interests method.
See notes to condensed consolidated financial statements.
Page 5 of 12
<PAGE> 6
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
(Six Months Ended June 30, 1995 and 1994)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying Unaudited Condensed Consolidated Financial Statements
include the accounts of Hancock Holding Company, its wholly owned banks,
Hancock Bank, Hancock Bank of Louisiana and First National Bank of Denham
Springs since its acquisition on January 13, 1995, and other subsidiaries.
Intercompany profits, transactions and balances have been eliminated in
consolidation.
The accompanying Unaudited Consolidated Financial Statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting only of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for interim
periods are not necessarily indicative of the results that may be expected for
the entire year. For further information, refer to the consolidated financial
statements and notes thereto of Hancock Holding Company's 1994 Annual Report to
Shareholders.
RECENT CHANGES IN FINANCIAL ACCOUNTING STANDARDS
The Company adopted Statement of Accounting Standards (SFAS) No. 114,
"Accounting by Creditors for Impairment of a Loan," effective January 1, 1995.
SFAS No. 114 requires the measurement of impaired loans be based on the present
value of expected future cash flows discounted at the loan's effective interest
rate, or at the loan's observable market price or the fair value of its
collateral. SFAS No. 114 does not apply to large groups of smaller balance
homogeneous loans that are collectively evaluated for impairment. For the
Company, loans collectively evaluated for impairment include all single family
mortgage loans, loans to individuals for household family and other consumer
expenditures and commercial and industrial and real estate loans ("major
loans") under a certain dollar amount, excluding loans which have entered the
workout process. The adoption of SFAS No. 114 did not result in additional
provisions for loan losses due to the Company's continuing policy of measuring
loan impairment based on methods prescribed in SFAS No. 114.
The Company considers a loan to be impaired when, based upon current
information and events, it believes it is probable that the Company will be
unable to collect all amounts due according to the contractual terms of the
loan agreement. The Company's impaired loans within the scope of SFAS No. 114
include troubled debt restructurings, and performing and non-performing major
loans in which full payment of principal or interest is not expected.
The Company also adopted Statement of Financial Accounting Standards No.
118, "Accounting by Creditors for Impairment of a Loan-Income Recognition and
Page 6 of 12
<PAGE> 7
Disclosures," effective January 1, 1995. This statement allows a creditor to
use existing methods for recognizing interest income on impaired loans and thus
the adoption of SFAS No. 114 did not result in any change in the amount of
interest income reported.
The Company's impaired loans amounted to approximately 1/2% of total
loans at June 30, 1995 and the related reserve amount was not significant at
that date. There was no significant change in these amounts during the six
months ended June 30, 1995. Interest income recognized on these loans amounted
to approximately $200,000 for the six months ended June 30, 1995.
ACQUISITIONS
On January 31, 1995, the Company merged Washington Bancorp, Inc.
(Washington), Franklinton, Louisiana, and merged its wholly owned subsidiary,
Washington Bank & Trust Company, with Hancock Bank of Louisiana. The merger
was consummated by the exchange of all outstanding common stock of Washington
in return for approximately 542,350 shares of common stock of the Company. The
merger was accounted for using the pooling-of-interests method effective
February 1, 1995 and accordingly all prior periods' financial information has
been restated. Washington had total assets of approximately $86,100,000 and
stockholders' equity of approximately $12,400,000 as of December 31, 1994. Net
interest income and net earnings of the separate companies for the periods
preceding the acquisition were as follows:
<TABLE>
<CAPTION>
January 1, 1995 Six Months Ended
to January 31, 1995 June 30, 1994
------------------- -------------
<S> <C> <C>
Net Interest Income
Company $7,535 $39,080
Washington 372 3,082
------ -------
Combined $7,907 $41,162
====== =======
Net Earnings
Company $2,382 $10,188
Washington 144 682
------ -------
Combined $2,526 $10,870
====== =======
</TABLE>
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 and stockholders' equity of approximately
$10,300,000 as of December 31, 1994 and net earnings of approximately
$2,500,000 for the year then ended.
Following is certain selected unaudited proforma combined financial
information assuming the Bancshares acquisition had been consummated January 1,
1994.
<TABLE>
<CAPTION>
Six Months Ended June 30,
1995 1994
---- ----
<S> <C> <C>
Net Interest Income $49,531 $44,896
Net Earnings $13,467 12,122
Net Earnings Per Share $1.52 $1.37
</TABLE>
Page 7 of 12
<PAGE> 8
HANCOCK HOLDING COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion provides management's analysis of certain
factors which have affected the Company's financial condition and operating
results during the periods included in the accompanying condensed consolidated
financial statements.
CHANGES IN FINANCIAL CONDITION
Liquidity
The Company manages liquidity through traditional funding sources of
core deposits, federal funds, and maturities of loans and investment
securities.
The following liquidity ratios compare certain assets and liabilities to
total deposits or total assets:
<TABLE>
<CAPTION>
Restated Restated
June 30 March 31 December 31
1995 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Total securities to total
deposits 45.8% 45.4% 48.9%
Total loans (net of unearned
discount) to total
deposits 52.2% 51.6% 52.1%
Interest-earning assets
to total assets 90.4% 90.6% 90.6%
Interest-bearing deposits
to total deposits 76.7% 77.0% 78.0%
</TABLE>
Capital Resources
The Company continues to maintain an adequate capital position, as the
following ratios indicate:
<TABLE>
<CAPTION>
Restated Restated
June 30 March 31 December 31
1995 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Equity capital to total assets (1) 9.73% 9.53% 8.99%
Total capital to risk-weighted 18.13% 17.21% 17.52%
assets (2)
Tier 1 Capital to risk-weighted 17.18% 16.25% 16.26%
assets (3)
Leverage Capital to total assets (4) 8.92% 8.71% 8.20%
Fixed assets to equity capital 18.21% 18.96% 19.47%
</TABLE>
Page 8 of 12
<PAGE> 9
(1) Equity capital consists of stockholder's equity (common stock, capital
surplus and undivided profits).
(2) Total capital consists of equity capital less intangible assets plus a
limited amount of loan loss reserves. Risk-weighted assets represent
the assigned risk portion of all on and off balance sheet assets. Based
on Federal Reserve Board guidelines, assets are assigned a risk factor
percentage from 0% to 100%. A minimum ratio of total capital to
risk-weighted assets of 8% is required.
(3) Tier 1 capital consists of equity capital less intangible assets. A
minimum ratio of tier 1 capital to risk- weighted assets of 4% is
required.
(4) Leverage capital consists of equity capital less goodwill and core
deposit intangibles. The Federal Reserve Board currently requires bank
holding companies rated Composite 1 under the BOPEC rating system to
maintain a minimum 3% leverage capital ratio and all other bank holding
companies not rated a Composite 1 under the BOPEC rating system to
maintain a minimum 4% to 5% leverage capital ratio.
RESULTS OF OPERATIONS
Net Earnings
Net earnings increased 22% or $1,207,000 for the second quarter of 1995.
Net earnings for the first six months of 1995 increased 23% or $2,522,000 from
the comparable period in 1994. The increase in earnings for the first six
months and quarter is attributed to an acquisition in January of 1995 accounted
for as a purchase and increased net interest margin as a result of higher loan
and investment yields.
<TABLE>
<CAPTION>
Restated Restated
Three Months Ended June 30 Six Months Ended June 30
-------------------------- ------------------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Results of Operations:
Return on average assets 1.21% 1.11% 1.23% 1.08%
Return on average equity 12.50% 12.55% 12.62% 12.59%
Net Interest Income:
Return on average interest-earning assets
(tax equivalent) 8.20% 7.01% 8.08% 7.36%
Cost of average interest-bearing funds 4.25% 3.40% 4.11% 3.37%
------ ------ ------ ------
Net interest spread 3.95% 3.61% 3.97% 3.99%
===== ===== ===== =====
Net interest margin
(net interest income on a tax equivalent basis
divided by average interest-earning assets) 5.15% 4.55% 5.10% 4.76%
===== ===== ===== =====
</TABLE>
Page 9 of 12
<PAGE> 10
Provision for Loan Losses
The amount of the reserve equals the cumulative total of the provisions
for loan losses, reduced by actual loan charge-offs, and increased by reserves
acquired in acquisitions and recoveries of loans previously charged-off.
Provisions are made to the reserve to reflect the currently perceived risks of
loss associated with the company's loan portfolio. A specific loan is
charged-off when management believes, after considering, among other things,
the borrower's condition and the value of any collateral, that collection of
the loan is unlikely.
The following ratios are useful in determining the adequacy of the loan
loss reserve and loan loss provision and are calculated using average loan
balances.
<TABLE>
<CAPTION>
Three Months Ended June 30 Six Months Ended June 30
-------------------------- ------------------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Annualized net charge-offs to average loans 0.34% 0.17% 0.22% 0.15%
Annualized provision for loan losses to average 0.40% 0.16% 0.24% 0.19%
loans
Average reserve for loan losses to average loans 1.66% 1.72% 1.66% 1.73%
</TABLE>
Income Taxes
The effective tax rate of the Company continues to be less than the
statutory rate of 35%, due primarily to tax- exempt interest income. The
amount of tax-exempt income earned during the first six months of 1995 was
$2,133,365 compared to $1,772,911 for the comparable period in 1994. Income
tax expense increased from $4,953,000 in the first six months of 1994 to
$6,608,000 in the first six months of 1995. This increase is primarily due to
increased net income.
Page 10 of 12
<PAGE> 11
Part II _ OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(27) Selected financial data.
(b) Reports on Form 8-K - none.
Page 11 of 12
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
<TABLE>
<S> <C>
HANCOCK HOLDING COMPANY
---------------------------------------
Registrant
August 10, 1995 By: /s/ Leo W. Seal, Jr.
------------------------- ---------------------------------------
Date Leo W. Seal, Jr.
President and CEO
August 10, 1995 By: /s/ George A. Schloegel
------------------------- ---------------------------------------
Date George A. Schloegel
Vice-Chairman of the Board
</TABLE>
Page 12 of 12
<PAGE> 13
EXHIBIT INDEX
-------------
Exhibit 27 -- Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000750577
<NAME> HANCOCK HOLDING
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 124,667
<INT-BEARING-DEPOSITS> 1,458,089
<FED-FUNDS-SOLD> 102,425
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 43,399
<INVESTMENTS-CARRYING> 870,075
<INVESTMENTS-MARKET> 865,948
<LOANS> 993,125
<ALLOWANCE> (16,581)
<TOTAL-ASSETS> 2,207,190
<DEPOSITS> 1,901,514
<SHORT-TERM> 0
<LIABILITIES-OTHER> 16,747
<LONG-TERM> 2,955
<COMMON> 29,942
0
0
<OTHER-SE> 185,020
<TOTAL-LIABILITIES-AND-EQUITY> 2,207,190
<INTEREST-LOAN> 47,824
<INTEREST-INVEST> 27,789
<INTEREST-OTHER> 3,076
<INTEREST-TOTAL> 78,689
<INTEREST-DEPOSIT> 27,962
<INTEREST-EXPENSE> 29,437
<INTEREST-INCOME-NET> 49,252
<LOAN-LOSSES> 1,177
<SECURITIES-GAINS> (91)
<EXPENSE-OTHER> 39,164
<INCOME-PRETAX> 20,000
<INCOME-PRE-EXTRAORDINARY> 20,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,392
<EPS-PRIMARY> 1.51
<EPS-DILUTED> 1.51
<YIELD-ACTUAL> 5.10
<LOANS-NON> 5,058
<LOANS-PAST> 3,501
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 15,310
<CHARGE-OFFS> 2,320
<RECOVERIES> 1,207
<ALLOWANCE-CLOSE> 16,581
<ALLOWANCE-DOMESTIC> 16,581
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 3,000
</TABLE>
