<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 September 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
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification 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 September 30, 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 --
September 30, 1996 and December 31, 1995 3
Condensed Consolidated Statements of Earnings --
Three Months Ended September 30, 1996 and 1995
Nine Months Ended September 30, 1996 and 1995
Condensed Consolidated Statements of Cash Flows --
Nine Months Ended September 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)
September 30, December 31,
1996 1995 *
------------- ----------
<S> <C> <C>
ASSETS:
Cash and due from banks (non-interest bearing) $ 142,635 $ 124,276
Interest-bearing time deposits with other banks 2,945 1,550
Securities available-for-sale (cost of $99,221
and $109,297) 98,517 109,777
Securities held-to-maturity (market value of $798,168
and $749,497) 799,336 738,529
Federal funds sold and securities purchased under
agreements to resell 50,500 153,725
Loans, net of unearned income 1,121,796 1,034,978
Less: Reserve for loan losses (17,659) (17,391)
---------- ----------
Net loans 1,104,137 1,017,587
Property and equipment, at cost,
less accumulated depreciation of $41,880 and $37,640 38,462 38,746
Other real estate 1,666 1,086
Accrued interest receivable 19,148 19,360
Other assets 27,707 29,650
---------- ----------
TOTAL ASSETS $2,285,053 $2,234,286
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits:
Non-interest bearing demand $ 473,880 $ 468,446
Interest-bearing savings, NOW, money market
and other time 1,469,951 1,459,235
---------- ----------
Total deposits 1,943,831 1,927,681
Federal funds purchased and securities sold under
agreements to repurchase 80,246 66,585
Other liabilities 18,602 13,806
Long-term bonds 2,035 2,035
---------- ----------
TOTAL LIABILITIES 2,044,714 2,010,107
---------- ----------
STOCKHOLDERS' EQUITY:
Common stock 30,043 30,043
Capital surplus 130,000 130,000
Undivided profits 80,933 63,824
Unrealized (loss) gain on securities available-for-sale (637) 312
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 240,339 224,179
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,285,053 $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 September 30, Nine Months Ended September 30,
------------------------------- -------------------------------
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 27,159 $ 24,834 $ 79,011 $ 72,391
Interest on:
U. S. Treasury Securities 3,378 3,616 10,532 10,676
Obligations of other U.S. government agencies
and corporations 8,824 9,142 25,932 25,381
Obligations of states and political subdivisions 880 876 2,614 2,614
Interest on federal funds sold and securities
purchased under agreements to resell 1,087 1,329 4,621 4,081
Interest on time deposits and other 1,810 1,507 5,180 4,850
--------- --------- --------- ---------
Total interest income 43,138 41,304 127,890 119,993
--------- --------- --------- ---------
INTEREST EXPENSE:
Interest on deposits 15,091 14,897 45,367 42,770
Interest on federal funds purchased and securities
sold under agreements to repurchase 899 947 2,728 2,182
Interest on bonds and notes (11) 53 140 382
--------- --------- --------- ---------
Total interest expense 15,979 15,897 48,235 45,334
--------- --------- --------- ---------
NET INTEREST INCOME 27,159 25,407 79,655 74,659
Provision for loan losses 1,036 1,140 2,837 2,317
--------- --------- --------- ---------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 26,123 24,267 76,818 72,342
--------- --------- --------- ---------
Non-Interest Income:
Service charges on deposit accounts 4,129 3,724 12,485 10,908
Income from fiduciary activities 594 561 1,747 1,667
Securities gains (losses) 70 (44) 36 (135)
Other 1,802 1,945 4,599 4,835
--------- --------- --------- ---------
Total non-interest income 6,595 6,186 18,867 17,275
--------- --------- --------- ---------
Non-Interest Expense:
Salaries and employee benefits 10,624 10,243 31,394 30,366
Net occupancy expense of premises
and equipment expense 3,555 1,765 11,159 8,750
Other 6,534 8,365 17,570 20,421
--------- --------- --------- ---------
Total non-interest expense 20,713 20,373 60,123 59,537
--------- --------- --------- ---------
EARNINGS BEFORE INCOME TAXES 12,005 10,080 35,562 30,080
INCOME TAXES 3,923 3,361 11,680 9,969
--------- --------- --------- ---------
NET EARNINGS $ 8,082 $ 6,719 $ 23,882 $ 20,111
========= ========= ========= =========
NET EARNINGS PER COMMON SHARE $ 0.91 $ 0.75 $ 2.69 $ 2.26
========= ========= ========= =========
DIVIDENDS PAID PER COMMON SHARE $ 0.25 $ 0.25 $ 0.75 $ 0.94
========= ========= ========= =========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 8,880 8,880 8,880 8,880
========= ========= ========= =========
</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>
Nine Months Ended September 30,
---------------------------------
1996 1995
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings $ 23,882 $ 20,111
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 3,567 3,473
Provision for loan losses 2,836 2,317
Provision for losses on real estate owned 118 73
Losses on sales of securities (145) (135)
Increase in interest receivable (212) (1,838)
Amortization of intangible assets 1,810 1,824
Increase in interest payable 66 1,061
Other, net (4,792) (2,386)
--------- ----------
Net cash provided by Operating Activities 27,130 24,500
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in interest-bearing
time deposits 1,395 (100)
Proceeds from sales and maturities of securities
held-to-maturity 243,179 292,551
Purchase of securities held-to-maturity (303,986) (339,077)
Proceeds from sales and maturities of securities
available-for-sale 28,719 4,310
Purchase of securities available-for-sale (17,604) (1,090)
Net decrease in federal funds sold and
securities purchased under agreements to resell 103,225 3,900
Net (increase) in loans (84,149) (13,014)
Purchase of property and equipment, net (3,283) (3,108)
Proceeds from sales of other real estate 688 563
Net cash received in connection with purchase
transaction --- 7,872
--------- ---------
Net cash used in Investing Activities (31,816) (47,193)
--------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 16,150 6,871
Dividends paid (6,766) (6,405)
Net increase in federal funds purchased and
securities sold under agreements to repurchase
and other temporary funds 13,661 39,652
--------- ---------
Net cash provided by Financing Activities 23,045 40,118
--------- ---------
NET INCREASE IN CASH AND DUE FROM BANKS 18,359 17,425
CASH AND DUE FROM BANKS, BEGINNING 124,276 120,532
--------- ---------
CASH AND DUE FROM BANKS, ENDING $ 142,635 $ 137,957
========= =========
</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
(Nine Months Ended September 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.
MERGER
On August 15, 1996, First National Bank of Denham Springs, a wholly owned
subsidiary of the Company merged with Hancock Bank of Louisiana, another wholly
owned subsidiary of the Company. This transaction only effected financial
reporting of the subsidiaries and resulted in no changes or restatements of the
Company's current or 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>
Sept.30, June 30, March 31, December 31,
1996 1996 1996 1995
-------- -------- --------- ------------
<S> <C> <C> <C> <C>
Total securities to total
deposits 47.24% 47.24% 46.39% 44.01%
Total loans (net of unearned
discount) to total
deposits 55.21% 55.21% 52.62% 53.69%
Interest-earning assets
to total assets 90.57% 90.57% 90.69% 91.24%
Interest-bearing deposits
to total deposits 75.07% 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>
Sept. 30, June 30, March 31, December 31,
1996 1996 1996 1995
-------- -------- -------- ------------
<S> <C> <C> <C> <C>
Equity capital to total assets (1) 10.55% 10.17% 9.88% 10.02%
Total capital to risk-weighted
assets (2) 19.12% 18.60% 18.99% 18.64%
Tier 1 Capital to risk-weighted
assets (3) 18.14% 17.62% 18.03% 17.69%
Leverage Capital to total assets (4) 9.86% 9.61% 9.47% 9.28%
Property and equipment to equity
capital 15.96% 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 20.3% or $1,363,000 for the third quarter of 1996
compared to the third quarter of 1995. Net earnings for the first nine months
of 1996 increased 18.8% or $3,771,000 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 Nine Months
Ended Sept. 30, Ended Sept. 30,
---------------------- ----------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Results of Operations:
Return on average assets 1.39% 1.21% 1.39% 1.23%
Return on average equity 13.95% 12.71% 14.04% 13.05%
Net Interest Income:
Return on average interest-earning assets
(tax equivalent) 8.33% 8.29% 8.23% 8.14%
Cost of average interest-bearing funds 4.11% 4.16% 4.10% 3.99%
----- ----- ----- -----
Net interest spread 4.22% 4.13% 4.13% 4.15%
===== ===== ===== =====
Net interest margin
(net interest income on a tax equivalent basis
divided by average interest-earning assets) 5.29% 5.14% 5.17% 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 Nine Months
Ended Sept. 30, Ended Sept. 30,
--------------------- ---------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Annualized net charge-offs to average loans 0.39% 0.44% 0.32% 0.30%
Annualized provision for loan losses to average
loans 0.38% 0.46% 0.35% 0.31%
Average reserve for loan losses to average loans 1.62% 1.67% 1.65% 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 nine months of 1996 was
$3,195,000 compared to $3,181,000 for the comparable period in 1995. Income
tax expense increased from $9,969,000 in the first nine months of 1995 to
$11,680,000 in the first nine 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
November 7, 1996 By: /s/ Leo W. Seal, Jr.
- ----------------------------- ------------------------------------
Date Leo W. Seal, Jr.
President and CEO
November 7, 1996 By: /s/ George A. Schloegel
- ----------------------------- ------------------------------------
Date George A. Schloegel
Vice-Chairman of the Board
November 7, 1996 By: /s/ Stan Bailey
- ----------------------------- ------------------------------------
Date Stan Bailey
Chief Financial Officer
Page 12 of 12
<PAGE> 13
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
27 - Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 142,635
<INT-BEARING-DEPOSITS> 2,945
<FED-FUNDS-SOLD> 50,500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 98,517
<INVESTMENTS-CARRYING> 799,336
<INVESTMENTS-MARKET> 798,168
<LOANS> 1,121,796
<ALLOWANCE> (17,659)
<TOTAL-ASSETS> 2,285,053
<DEPOSITS> 1,943,831
<SHORT-TERM> 80,246
<LIABILITIES-OTHER> 18,602
<LONG-TERM> 2,035
0
0
<COMMON> 30,043
<OTHER-SE> 210,296
<TOTAL-LIABILITIES-AND-EQUITY> 2,285,053
<INTEREST-LOAN> 79,011
<INTEREST-INVEST> 43,699
<INTEREST-OTHER> 5,180
<INTEREST-TOTAL> 127,890
<INTEREST-DEPOSIT> 45,367
<INTEREST-EXPENSE> 48,235
<INTEREST-INCOME-NET> 79,655
<LOAN-LOSSES> 2,837
<SECURITIES-GAINS> 36
<EXPENSE-OTHER> 60,123
<INCOME-PRETAX> 35,562
<INCOME-PRE-EXTRAORDINARY> 35,562
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,882
<EPS-PRIMARY> 2.69
<EPS-DILUTED> 2.69
<YIELD-ACTUAL> 5.29
<LOANS-NON> 3,461
<LOANS-PAST> 3,553
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 17,391
<CHARGE-OFFS> 4,216
<RECOVERIES> 1,647
<ALLOWANCE-CLOSE> 17,658
<ALLOWANCE-DOMESTIC> 17,658
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,000
</TABLE>
