<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 March 31, 1995
-------------------------------------------------------------
Commission File Number 0-13089
----------------------------------------------------------
HANCOCK HOLDING COMPANY
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
MISSISSIPPI 64-0693170
- ------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
ONE HANCOCK PLAZA, P. O. BOX 4019, GULFPORT, MISSISSIPPI 39502
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(601) 868-4606
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
- --------------------------------------------------------------------------------
(Former name, address and fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
--- ---
8,880,192 Common Shares were outstanding as of April 29, 1995 for financial
statement purposes.
Page 1 of 12
<PAGE> 2
HANCOCK HOLDING COMPANY
I N D E X
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NUMBER
- ------------------------------ -----------
<S> <C>
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets --
March 31, 1995 and December 31, 1994 3
Condensed Consolidated Statements of Earnings --
Three Months Ended March 31, 1995 and 1994 4
Condensed Consolidated Statements of Cash Flows --
Three Months Ended March 31, 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 4. Submission of Matters to a Vote 11
of Security Holders
ITEM 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
- ----------
</TABLE>
Page 2 of 12
<PAGE> 3
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
<TABLE>
<CAPTION>
Unaudited Restated
March 31 December 31
ASSETS: 1995 1994 *
---------- ----------
<S> <C> <C>
Cash and due from banks (non-interest bearing) $ 117,639 $ 120,532
Interest bearing time deposits with other banks 1,250 1,450
---------- ----------
Total cash and due from banks 118,889 121,982
Securities available-for-sale (cost of $46,449 and $20,382) 45,748 19,747
Securities held-to-maturity (market value of $807,234
and $828,968) 828,675 847,593
Federal funds sold and securities purchased under
agreements to resell 138,350 55,900
Loans, net of unearned income 994,581 925,665
Less: Reserve for loan losses (16,417) (15,372)
---------- ----------
Net loans 978,164 910,293
Property and equipment, at cost,
less accumulated depreciation of $26,156 and $26,784 39,797 35,470
Other real estate 1,179 1,000
Accrued interest receivable 17,294 17,425
Other assets 33,087 17,755
---------- ----------
TOTAL ASSETS $2,201,183 $2,027,165
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits:
Non-interest bearing demand $ 443,154 $ 390,074
Interest bearing savings, NOW, money market and other time 1,483,437 1,385,652
---------- ----------
Total deposits 1,926,591 1,775,726
Federal funds purchased and securities sold under
agreements to repurchase 45,433 54,296
Other liabilities 16,078 11,753
Long-term bonds and notes 2,955 2,955
---------- ----------
TOTAL LIABILITIES 1,991,057 1,844,730
---------- ----------
STOCKHOLDERS' EQUITY:
Common Stock 29,942 26,798
Capital Surplus 135,087 93,991
Undivided Profits 45,132 62,061
Unrealized loss on securities available for sale - net (35) (415)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 210,126 182,435
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,201,183 $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 AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
UNAUDITED
(Amounts in thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended March 31
---------------------------
INTEREST INCOME: 1995 1994
---------- ----------
<S> <C> <C>
Interest and fees on loans $ 23,488 $ 19,802
Interest on:
U. S. Treasury Securities 3,524 3,871
Obligations of other U. S. Government agencies
and corporations 7,634 5,726
Obligations of states and political subdivisions 870 701
Interest on Federal funds sold and securities
purchased under agreements to resell 1,248 969
Interest on time deposits and other 1,522 1,009
---------- ----------
Total interest income 38,286 32,078
INTEREST EXPENSE:
Interest on deposits 13,479 11,546
Interest on federal funds purchased and securities
sold under agreements to repurchase 565 244
Interest on bonds and other debt 137 73
Interest on subordinated notes --- 6
---------- ----------
Total interest expense 14,181 11,869
---------- ----------
NET INTEREST INCOME 24,105 20,209
PROVISION FOR LOAN LOSSES 175 463
---------- ----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 23,930 19,746
---------- ----------
Other Operating Income:
Service charges on deposit accounts 3,523 3,008
Income from fiduciary activities 598 611
Securities gains (losses) (50) 81
Other non-interest income 1,543 1,549
---------- ----------
Total other operating income 5,614 5,249
---------- ----------
Other Operating Expenses:
Salaries and employee benefits 9,815 8,667
Net occupancy expense of bank premises
and equipment expense 2,933 2,754
Other non-interest expense 6,674 5,802
---------- ----------
Total other operating expenses 19,422 17,223
---------- ----------
EARNINGS BEFORE INCOME TAXES 10,122 7,772
INCOME TAXES 3,342 2,307
---------- ----------
NET EARNINGS $ 6,780 $ 5,465
========== ==========
NET EARNINGS PER COMMON SHARE $ 0.76 $ 0.68
========== ==========
DIVIDENDS PAID PER COMMON SHARE $ 0.23 $ 0.23
========== ==========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 8,879 8,092
========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
Page 4 of 12
<PAGE> 5
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(Amounts in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31
FINANCIAL RESOURCES PROVIDED: 1995 1994
- ---------------------------- -------- --------
<S> <C> <C>
Cash Flows From Operating Activities:
Net earnings $ 6,780 $ 5,465
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 1,104 1,045
Provision for loan losses 175 463
(Loss) gain on sales of investments (50) 81
Decrease (increase) in interest receivable 971 (690)
Amortization of intangible assets 575 368
Increase in interest payable 4,038 2,427
Other, net 490 (1,681)
--------- ---------
Net cash provided by Operating Activities 14,083 7,478
--------- ---------
Cash Flows from Investing Activities:
Proceeds from sales/maturities of securities
held-to-maturity 51,765 72,968
Purchase of securities held-to-maturity (36,592) (124,912)
Proceeds from sales/maturities of securities
available-for sale 1,500 5,521
Purchase of securities available-for-sale (375) 0
Net (increase) decrease in federal funds sold and
securities sold under agreements to repurchase (77,575) 3,465
Net decrease in loans 2,710 22,619
Purchase of property and equipment, net (1,020) (845)
Transfers from loans to other real estate (451) (117)
Proceeds from sale of other real estate 412 314
---------
Net cash received in connection with purchase
transaction 7,872
---------
Net cash used in Investing Activities (51,754) (20,987)
--------- ---------
Cash Flows from Financing Activities:
Net increase in deposits 45,716 35,122
Dividends paid (2,075) (1,651)
Net decrease in federal funds purchased and
securities sold under agreements to repurchase (8,863) (6,578)
--------- ---------
Net cash provided by Financing Activities 34,778 26,893
--------- ---------
Net (Decrease) Increase in Cash and Due From Banks (2,893) 13,384
Cash and Due from Banks, Beginning 120,532 99,106
--------- ---------
Cash and Due from Banks, Ending $117,639 $ 112,490
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
Page 5 of 12
<PAGE> 6
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
(Three Months Ended March 31, 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.
Page 6 of 12
<PAGE> 7
The Company also adopted Statement of Financial Accounting Standards No.
118, "Accounting by Creditors for Impairment of a Loan-Income Recognition and
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 March 31, 1995 and the related reserve amount was not significant at
that date. There was no significant change in these amounts during the three
months ended March 31, 1995. Interest income recognized on these loans
amounted to approximately $100,000 for the three months ended March 31, 1995.
ACQUISITIONS
On January 31, 1995, the Company merged 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 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 Three Months Ended
to January 31, 1995 March 31, 1994
------------------- --------------
<S> <C> <C>
Net Interest Income
Company $7,535 $18,432
Washington 372 1,777
------ -------
Combined $7,907 $20,209
====== =======
Net Earnings
Company $2,382 $ 4,797
Washington 144 668
------ -------
Combined $2,526 $ 5,465
====== =======
</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>
Three Months Ended March 31,
1995 1994
---- ----
<S> <C> <C>
Net Interest Income $24,384 $22,036
Net Earnings 6,855 6,103
Net Earnings Per Share $0.77 $0.69
</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 securities
held-to-maturity and sales of securities available-for-sale.
The following liquidity ratios compare certain assets and liabilities to
total deposits or total assets:
<TABLE>
<CAPTION>
March 31 December 31
1995 1994
-------- --------
<S> <C> <C>
Total securities to total deposits 45.4% 48.84%
Total loans (net of unearned
discount) to total deposits 51.6% 52.13%
Interest-earning assets
to total assets 90.6% 90.59%
Interest-bearing deposits
to total deposits 77.0% 78.03%
</TABLE>
Capital Resources
The Company continues to maintain an adequate capital position, as the
following ratios indicate:
<TABLE>
<CAPTION>
March 31 December 31
1995 1994
-------- --------
<S> <C> <C>
Equity capital to total assets (1) 9.53% 8.99%
Total capital to risk-weighted assets (2) 17.21% 17.52%
Tier 1 Capital to risk-weighted 16.25% 16.26%
assets (3)
Leverage Capital to total assets (4) 8.71% 8.20%
Fixed assets to equity capital 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 $1,315,000 or 24% for the first quarter of 1995
compared to the first quarter of 1994. The increase in earnings is primarily
attributable to a net interest margin improvement of 19.3% or $3,896,000 and
the acquisition of First National Bank of Denham Springs in January which was
accounted for as a purchase. This transaction improved net interest income by
$1,558,000 or 7.8% and net income by $393,000 or 7.2%.
<TABLE>
<CAPTION>
Three Months Ended March 31
---------------------------
1995 1994
-------- --------
<S> <C> <C>
Results of Operations:
Return on average assets 1.26% 1.09%
Return on average equity 12.88% 12.81%
Net Interest Income:
Return on average interest-earning assets
(tax equivalent) 7.94% 7.09%
Cost of average interest-bearing funds 3.76% 3.29%
------ ------
Net interest spread 4.18% 3.80%
====== ======
Net yield on interest-earning assets
(net interest income on a tax equivalent basis
divided by average interest-earning assets) 5.05% 4.51%
====== ======
</TABLE>
Page 9 of 12
<PAGE> 10
Provision for Loan Losses
Provisions are made to the reserve in sufficient amounts to bring the
balance in the reserve for loan losses to a level adequate to absorb possible
loan losses based upon management's knowledge of the loan portfolio and current
and expected economic conditions. A specific loan is charged-off when
management believes, after considering, among other things, the borrower's
condition and the value of any collateral, that collection of the loan is
unlikely.
The following ratios are useful in determining the adequacy of the loan
loss reserve and loan loss provision and are calculated using average loan
balances.
<TABLE>
<CAPTION>
Three Months Ended March 31
---------------------------
1995 1994
-------- --------
<S> <C> <C>
Annualized net charge-offs to average loans 0.11% 0.13%
Annualized provision for loan losses to average 0.07% 0.18%
loans
Average reserve for loan losses to average loans 1.65% 1.80%
</TABLE>
Income Taxes
The effective tax rate of the Company continues to be less than the
statutory rate of 35%, due primarily to tax-exempt interest income. The amount
of tax-exempt income earned during the first three months of 1995 was
$1,078,000 compared to $902,000 for the comparable period in 1994. Income tax
expense increased from $2,307,000 in the first three months of 1994 to
$3,342,000 in the first three months of 1995. This increase is primarily due
to increased earnings.
Page 10 of 12
<PAGE> 11
Part II _ OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A. Annual Meeting held February 23, 1995.
B. Directors elected at the Annual Meeting held February 23, 1995:
<TABLE>
<CAPTION>
Votes Cast
--------------------
Affirmed Withheld
-------- --------
<S> <C> <C> <C>
1. James B. Estabrook, Jr. 6,506,080.0 15,889.6
2. Victor Mavar 6,516,657.0 5,312.6
3. Leo W. Seal, Jr. 6,516,895.6 4,874.0
</TABLE>
Continuing Directors:
4. L. A. Koenenn, Jr.
5. Dr. H. C. Moody, Jr.
6. George A. Schloegel
7. Joseph F. Boardman, Jr.
8. Charles H. Johnson
9. Thomas W. Milner, Jr.
C. Approval of Deloitte & Touche, LLP as the independent public
accountants of the company 6,500,215.4 affirmative votes, 1,679.2
negative and 11,075 abstained.
D. None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit-27 Financial Data Schedule
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
May 10, 1994 By: /s/ Leo W. Seal, Jr.
- ------------------------- ---------------------------------------
Date Leo W. Seal, Jr.
President and CEO
May 10, 1994 By: /s/ George A. Schloegel
- ------------------------- ---------------------------------------
Date George A. Schloegel
Vice-Chairman of the Board
May 10, 1995 By: /s/ Stan Bailey
- ------------------------- ---------------------------------------
Date Stan Bailey
Chief Financial Officer
</TABLE>
Page 12 of 12
<PAGE> 13
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000750577
<NAME> HANCOCK HOLDING COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 117,639
<INT-BEARING-DEPOSITS> 1,250
<FED-FUNDS-SOLD> 138,350
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 45,748
<INVESTMENTS-CARRYING> 828,675
<INVESTMENTS-MARKET> 807,234
<LOANS> 994,581
<ALLOWANCE> 16,417
<TOTAL-ASSETS> 2,201,183
<DEPOSITS> 1,926,591
<SHORT-TERM> 45,433
<LIABILITIES-OTHER> 16,078
<LONG-TERM> 2,955
<COMMON> 29,942
0
0
<OTHER-SE> 180,184
<TOTAL-LIABILITIES-AND-EQUITY> 2,201,183
<INTEREST-LOAN> 23,488
<INTEREST-INVEST> 13,276
<INTEREST-OTHER> 1,522
<INTEREST-TOTAL> 38,286
<INTEREST-DEPOSIT> 13,479
<INTEREST-EXPENSE> 702
<INTEREST-INCOME-NET> 24,105
<LOAN-LOSSES> 175
<SECURITIES-GAINS> (50)
<EXPENSE-OTHER> 19,422
<INCOME-PRETAX> 10,122
<INCOME-PRE-EXTRAORDINARY> 6,780
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,780
<EPS-PRIMARY> .76
<EPS-DILUTED> .76
<YIELD-ACTUAL> 5.05
<LOANS-NON> 3,687
<LOANS-PAST> 4,514
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 14,198
<CHARGE-OFFS> 1,056
<RECOVERIES> 794
<ALLOWANCE-CLOSE> 16,417
<ALLOWANCE-DOMESTIC> 16,417
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,000
</TABLE>
