<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, 1996
---------------------------------------------------------
Commission File Number 0-13089
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HANCOCK HOLDING COMPANY
- ----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
MISSISSIPPI 64-0693170
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
ONE HANCOCK PLAZA, P.O. BOX 4019, GULFPORT, MISSISSIPPI 39502
- ---------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(601) 868-4606
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(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
---------- ----------
8,880,857 Common Shares were outstanding as of July 31, 1996 for financial
statement purposes.
Page 1 of 12
<PAGE> 2
CONTENTS
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NUMBER
- ------------------------------ -----------
<S> <C>
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets --
June 30, 1996 and December 31, 1995 3
Condensed Consolidated Statements of Earnings --
Three Months Ended June 30, 1996 and 1995
Six Months Ended June 30, 1996 and 1995 4
Condensed Consolidated Statements of Cash Flows --
Six Months Ended June 30, 1996 and 1995 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 8-K 11
SIGNATURES 12
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</TABLE>
Page 2 of 12
<PAGE> 3
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
<TABLE>
<CAPTION>
(Unaudited)
June 30, December 31,
ASSETS: 1996 1995 *
---------- ----------
<S> <C> <C>
Cash and due from banks (non-interest bearing) $ 145,223 $ 124,276
Interest-bearing time deposits with other banks 2,945 1,550
Securities available-for-sale (cost of $109,320
and $109,297) 108,169 109,777
Securities held-to-maturity (market value of $804,416
and $749,497) 807,932 738,529
Federal funds sold and securities purchased under
agreements to resell 72,175 153,725
Loans, net of unearned income 1,070,561 1,034,978
Less: Reserve for loan losses (17,698) (17,391)
---------- ----------
Net loans 1,052,863 1,017,587
Property and equipment, at cost,
less accumulated depreciation of $41,153 and $37,640 38,599 38,746
Other real estate 749 1,086
Accrued interest receivable 19,440 19,360
Other assets 28,262 29,650
---------- ----------
TOTAL ASSETS $2,276,357 $2,234,286
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits:
Non-interest bearing demand $ 483,335 $ 468,446
Interest-bearing savings, NOW, money market
and other time 1,455,780 1,459,235
---------- ----------
Total deposits 1,939,115 1,927,681
Federal funds purchased and securities sold under
agreements to repurchase 82,732 66,585
Other liabilities 18,028 13,806
Long-term bonds 2,035 2,035
---------- ----------
TOTAL LIABILITIES 2,041,910 2,010,107
---------- ----------
STOCKHOLDERS' EQUITY:
Common stock 30,043 30,043
Capital surplus 130,000 130,000
Undivided profits 75,107 63,824
Unrealized (loss) gain on securities available-for-sale (703) 312
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 234,447 224,179
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,276,357 $2,234,286
========== ==========
</TABLE>
* The balance sheet at December 31, 1995, has been taken from the
audited balance sheet at that date.
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 June 30, Six Months Ended June 30,
--------------------------- -------------------------
INTEREST INCOME: 1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Interest and fees on loans $ 26,101 $ 24,336 $ 51,858 $ 47,824
Interest on:
U. S. Treasury Securities 3,515 3,536 7,160 7,060
Obligations of other U.S. government agencies
and corporations 8,594 8,605 17,108 16,239
Obligations of states and political subdivisions 890 868 1,734 1,738
Interest on federal funds sold and securities
purchased under agreements to resell 1,460 1,504 3,534 2,752
Interest on time deposits and other 1,872 1,554 3,358 3,076
--------- --------- --------- ---------
Total interest income 42,432 40,403 84,752 78,689
--------- --------- --------- ---------
INTEREST EXPENSE:
Interest on deposits 15,100 14,483 30,276 27,962
Interest on federal funds purchased and securities
sold under agreements to repurchase 930 670 1,829 1,235
Interest on bonds and notes 74 103 151 240
--------- --------- --------- ---------
Total interest expense 16,104 15,256 32,256 29,437
--------- --------- --------- ---------
NET INTEREST INCOME 26,328 25,147 52,496 49,252
Provision for loan losses 797 1,002 1,801 1,177
--------- --------- --------- ---------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 25,531 24,145 50,695 48,075
--------- --------- --------- ---------
Non-Interest Income:
Service charges on deposit accounts 4,153 3,661 8,356 7,184
Income from fiduciary activities 633 507 1,153 1,105
Securities gains (losses) (34) (41) (34) (91)
Other 1,394 1,348 2,797 2,891
--------- --------- --------- ---------
Total non-interest income 6,146 5,475 12,272 11,089
--------- --------- --------- ---------
Non-Interest Expense:
Salaries and employee benefits 10,389 10,308 20,770 20,123
Net occupancy expense of premises
and equipment expense 3,761 4,052 7,604 6,985
Other 5,593 5,382 11,036 12,056
--------- --------- --------- ---------
Total non-interest expense 19,743 19,742 39,410 39,164
--------- --------- --------- ---------
EARNINGS BEFORE INCOME TAXES 11,934 9,878 23,557 20,000
INCOME TAXES 3,902 3,266 7,757 6,608
--------- --------- --------- ---------
NET EARNINGS $ 8,032 $ 6,612 $ 15,800 $ 13,392
========= ========= ========= =========
NET EARNINGS PER COMMON SHARE $ 0.91 $ 0.75 $ 1.78 $ 1.51
========= ========= ========= =========
DIVIDENDS PAID PER COMMON SHARE $ 0.25 $ 0.23 $ 0.50 $ 0.46
========= ========= ========= =========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 8,880 8,879 8,880 8,879
========= ========= ========= =========
</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>
Six Months Ended June 30,
--------------------------
1996 1995
--------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings $ 15,800 $ 13,392
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 2,461 2,500
Provision for loan losses 1,801 1,177
Provision for losses on real estate owned 86 30
Losses on sales of securities (34) (91)
Increase in interest receivable (80) (183)
Amortization of intangible assets 1,234 1,198
Increase in interest payable 643 1,235
Other, net (404) 1,632
--------- ---------
Net cash provided by Operating Activities 21,507 20,890
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in interest-bearing
time deposits (1,395) (200)
Proceeds from sales and maturities of securities
held-to-maturity 187,198 166,652
Purchase of securities held-to-maturity (256,601) (197,509)
Proceeds from sales and maturities of securities
available-for-sale 18,627 4,840
Purchase of securities available-for-sale (17,053) (200)
Net (increase) decrease in federal funds sold and
securities purchased under agreements to resell 81,550 (42,575)
Net (increase) decrease in loans (34,089) 8,159
Purchase of property and equipment, net (2,314) (2,551)
Proceeds from sales of other real estate 447 540
Net cash received in connection with purchase
transaction --- 7,872
--------- ---------
Net cash used in Investing Activities (23,630) (54,972)
--------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 11,434 24,002
Dividends paid (4,511) (4,150)
Net increase in federal funds purchased and
securities sold under agreements to repurchase
and other temporary funds 16,147 16,715
--------- ---------
Net cash provided by Financing Activities 23,070 36,567
--------- ---------
NET INCREASE IN CASH AND DUE FROM BANKS 20,947 2,485
CASH AND DUE FROM BANKS, BEGINNING 124,276 120,532
--------- ---------
CASH AND DUE FROM BANKS, ENDING $ 145,223 $ 123,017
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
Page 5 of 12
<PAGE> 6
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
(Six Months Ended June 30, 1996 and 1995)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying Unaudited Condensed Consolidated Financial Statements
include the accounts of Hancock Holding Company (the "Company"), its
wholly-owned banks, Hancock Bank, Hancock Bank of Louisiana and First National
Bank of Denham Springs and other subsidiaries. Intercompany profits,
transactions and balances have been eliminated in consolidation.
The accompanying Unaudited Condensed 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 1995 Annual Report to
Shareholders.
RECENT CHANGES IN FINANCIAL ACCOUNTING STANDARDS
The Financial Accounting Standards Board has recently issued Statement
No. 123 "Accounting for Stock Based Compensation" which is effective for stock
options issued and similar transactions entered into after 1995. Although the
Company has adopted a stock option plan, no options have been issued to date.
PROPOSED MERGER
On August 15, 1996, First National Bank of Denham Springs, a wholly owned
subsidiary of the Company will merge with Hancock Bank of Louisiana, another
wholly owned subsidiary of the Company. This transaction will only effect
financial reporting of the subsidiaries and will result in no changes or
restatements of current or the Company's historical financial statements.
PROPOSED ACQUISITIONS
In June of 1996, the Company entered into an Agreement and Plan of
Reorganization whereby Community Bancshares, Inc. (Community) Independence,
Louisiana, and its' subsidiary, Community State Bank, would be merged with and
into the Company and Hancock Bank of Louisiana, respectively. The merger will
be consummated by the exchange of all outstanding shares of Community and
Community State Bank in return for approximately 450,000 shares of common stock
of the Company and cash of approximately $5,500,000. Completion of the merger
is contingent upon approval by Community's and Community State Bank's
shareholders and appropriate regulatory authorities.
Page 6 of 12
<PAGE> 7
It is intended that the merger will be accounted for using the purchase method
of accounting. Community had total assets of approximately $91,000,000 as of
June 30, 1996 and net earnings of approximately $580,000 for the six month
period then ended.
In August of 1996, the Company entered into an Agreement and Plan of
Reorganization whereby Southeast National Bank (Southeast) Hammond, Louisiana,
would be merged with and into Hancock Bank of Louisiana, a wholly owned
subsidiary of the Company. The merger will be consummated by the exchange of
all outstanding shares of Southeast in return for approximately 105,000 shares
of common stock of the Company and cash of approximately $3,700,000.
Completion of the merger is contingent upon approval by Southeast's
shareholders and appropriate regulatory authorities. It is intended that the
merger will be accounted for using the purchase method of accounting.
Southeast had total assets of approximately $37,000,000 as of June 30, 1996 and
net earnings of approximately $250,000 for the six month period then ended.
Page 7 of 12
<PAGE> 8
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
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>
June 30, March 31, December 31,
1996 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Total securities to total
deposits 47.24% 46.39% 44.01%
Total loans (net of unearned
discount) to total
deposits 55.21% 52.62% 53.69%
Interest-earning assets
to total assets 90.57% 90.69% 91.24%
Interest-bearing deposits
to total deposits 75.07% 76.51% 75.70%
</TABLE>
Capital Resources
The Company continues to maintain an adequate capital position, as the
following ratios indicate:
<TABLE>
<CAPTION>
June 30, March 31, December 31,
1996 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Equity capital to total assets (1) 10.17% 9.88% 10.02%
Total capital to risk-weighted
assets (2) 18.60% 18.99% 18.64%
Tier 1 Capital to risk-weighted
assets (3) 17.62% 18.03% 17.69%
Leverage Capital to total assets (4) 9.61% 9.47% 9.28%
Property and equipment to equity
capital 16.41% 16.86% 17.31%
</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 21% or $1,420,000 for the second quarter of 1996
compared to the second quarter of 1995. Net earnings for the first six months
of 1996 increased 18% or $2,408,000 from the comparable period in 1995. The
increase in earnings is attributable to an increase in loan portfolio balances,
a stable net interest margin, increased fee income and lower operating expenses
due to FDIC premium insurance reductions.
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
--------------------- ---------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Results of Operations:
Return on average assets 1.39% 1.21% 1.37% 1.23%
Return on average equity 14.15% 12.50% 14.09% 12.62%
Net Interest Income:
Return on average interest-earning assets
(tax equivalent) 8.19% 8.20% 8.21% 8.08%
Cost of average interest-bearing funds 4.11% 4.25% 4.11% 4.11%
------ ------ ------ ------
Net interest spread 4.08% 3.95% 4.10% 3.97%
------ ------ ------ ------
Net interest margin
(net interest income on a tax equivalent basis
divided by average interest-earning assets) 5.12% 5.15% 5.13% 5.10%
------ ------ ------ ------
</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 bank's loan portfolio. A specific loan is charged-off
when management believes, after considering, among other things, the borrower's
condition and the value of any collateral, that collection of the loan is
unlikely.
The following ratios are useful in determining the adequacy of the loan
loss reserve and loan loss provision and are calculated using average loan
balances.
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
--------------------- ----------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Annualized net charge-offs to average loans 0.20% 0.34% 0.28% 0.22%
Annualized provision for loan losses to average
loans 0.30% 0.40% 0.34% 0.24%
Average reserve for loan losses to average loans 1.65% 1.66% 1.67% 1.66%
</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 1996 was
$2,121,000 compared to $2,133,000 for the comparable period in 1995. Income
tax expense increased from $6,608,000 in the first six months of 1995 to
$7,757,000 in the first six months of 1996. This increase is primarily due to
increased earnings.
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.
HANCOCK HOLDING COMPANY
------------------------------------
Registrant
August 13, 1996 By: /s/ Leo W. Seal, Jr.
- ---------------------------- ------------------------------------
Date Leo W. Seal, Jr.
President and CEO
August 13, 1996 By: /s/ George A. Schloegel
- ---------------------------- ------------------------------------
Date George A. Schloegel
Vice-Chairman of the Board
August 13, 1996 By: /s/ Stan Bailey
- ---------------------------- ------------------------------------
Date Stan Bailey
Chief Financial Officer
Page 12 of 12
<PAGE> 13
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION
- ----------- -------------------
<S> <C>
27 Selected Financial Data
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 145,223
<INT-BEARING-DEPOSITS> 2,945
<FED-FUNDS-SOLD> 72,175
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 108,169
<INVESTMENTS-CARRYING> 807,932
<INVESTMENTS-MARKET> 804,416
<LOANS> 1,070,561
<ALLOWANCE> (17,698)
<TOTAL-ASSETS> 2,276,357
<DEPOSITS> 1,939,115
<SHORT-TERM> 82,732
<LIABILITIES-OTHER> 18,028
<LONG-TERM> 2,035
<COMMON> 30,043
0
0
<OTHER-SE> 204,404
<TOTAL-LIABILITIES-AND-EQUITY> 2,276,357
<INTEREST-LOAN> 51,858
<INTEREST-INVEST> 29,536
<INTEREST-OTHER> 3,358
<INTEREST-TOTAL> 84,752
<INTEREST-DEPOSIT> 30,276
<INTEREST-EXPENSE> 32,256
<INTEREST-INCOME-NET> 52,496
<LOAN-LOSSES> 1,801
<SECURITIES-GAINS> (34)
<EXPENSE-OTHER> 39,410
<INCOME-PRETAX> 23,557
<INCOME-PRE-EXTRAORDINARY> 23,557
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,800
<EPS-PRIMARY> 1.78
<EPS-DILUTED> 1.78
<YIELD-ACTUAL> 5.12
<LOANS-NON> 5,177
<LOANS-PAST> 4,073
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 17,391
<CHARGE-OFFS> 2,630
<RECOVERIES> 1,136
<ALLOWANCE-CLOSE> 17,698
<ALLOWANCE-DOMESTIC> 17,698
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,000
</TABLE>
