SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
---- Quarterly Report Pursuant to Section 13 or 15 (d)
--X- 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, 1997
Commission File Number 0-13089
HANCOCK HOLDING COMPANY
(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
(telephone number, including area code)
NOT APPLICABLE
(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
10,845,201 Common Shares were outstanding as of April 29, 1997 for financial
statement purposes.
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HANCOCK HOLDING COMPANY
INDEX
PART I. FINANCIAL INFORMATION PAGE NUMBER
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets --
March 31, 1997 and December 31, 1996 3
Condensed Consolidated Statements of Earnings --
Three Months Ended March 31, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows --
Three Months Ended March 31, 1997 and 1996 5
Notes to Condensed Consolidated Financial
Statements 6
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7 - 9
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote 10
of Security Holders
ITEM 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
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<TABLE>
<CAPTION>
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
(Unaudited)
March 31, December 31,
ASSETS: 1997 1996 *
---------- ----------
<S> <C> <C>
Cash and due from banks (non-interest bearing) $ 128,169 $ 119,483
Interest-bearing time deposits with other banks 2,141 2,945
Securities available-for-sale (cost of $87,777
and $98,567) 86,882 97,595
Securities held-to-maturity (market value of $874,859
and $806,710) 878,747 803,998
Federal funds sold and securities purchased under
agreements to resell 67,500 12,000
Loans, net of unearned income 1,196,298 1,173,967
Less: Reserve for loan losses (19,800) (19,800)
---------- ----------
Net loans 1,176,498 1,154,167
Property and equipment, at cost,
less accumulated depreciation of $43,022 and $43,365 41,512 40,412
Other real estate 2,065 1,875
Accrued interest receivable 19,667 20,188
Other assets 41,057 36,919
---------- ----------
TOTAL ASSETS $2,444,238 $2,289,582
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits:
Non-interest bearing demand $ 449,590 $ 432,964
Interest-bearing savings, NOW, money market
and other time 1,591,247 1,493,612
---------- ----------
Total deposits 2,040,837 1,926,576
Federal funds purchased and securities sold under
agreements to repurchase 113,376 87,609
Other liabilities 17,910 12,409
Long-term bonds 1,050 1,050
---------- ----------
TOTAL LIABILITIES 2,173,173 2,027,644
---------- ----------
STOCKHOLDERS' EQUITY:
Common stock 36,655 36,255
Capital surplus 143,513 140,024
Undivided profits 91,479 86,292
Unrealized loss on securities available-for-sale (582) (633)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 271,065 261,938
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,444,238 $2,289,582
========== ==========
</TABLE>
* The balance sheet at December 31, 1996 has been taken from the audited
balance sheet at that date.
See notes to condensed consolidated financial statements.
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<TABLE>
<CAPTION>
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
UNAUDITED
(Amounts in thousands except per share data)
THREE MONTHS ENDED MARCH 31,
INTEREST INCOME: 1997 1996
---------- -------
<S> <C> <C>
Interest and fees on loans $ 28,648 $ 25,757
Interest on:
U. S. Treasury Securities 3,054 3,645
Obligations of other U.S. government agencies
and corporations 9,161 8,514
Obligations of states and political subdivisions 935 844
Interest on federal funds sold and securities
purchased under agreements to resell 686 2,074
Interest on time deposits and other 1,816 1,486
--------- ---------
Total interest income 44,300 42,320
--------- ---------
INTEREST EXPENSE:
Interest on deposits 15,875 15,176
Interest on federal funds purchased and securities
sold under agreements to repurchase 1,106 899
Interest on bonds and notes 22 77
--------- ---------
Total interest expense 17,003 16,152
--------- ---------
NET INTEREST INCOME 27,297 26,168
Provision for loan losses 836 1,004
--------- ---------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 26,461 25,164
--------- ---------
Non-Interest Income:
Service charges on deposit accounts 4,391 4,203
Income from fiduciary activities 852 520
Securities gains 2 ---
Other 1,729 1,403
--------- ---------
Total non-interest income 6,974 6,126
--------- ---------
Non-Interest Expense:
Salaries and employee benefits 11,190 10,381
Net occupancy expense of premises
and equipment expense 3,460 3,843
Other 6,503 5,443
--------- ---------
Total non-interest expense 21,153 19,667
--------- ---------
EARNINGS BEFORE INCOME TAXES 12,282 11,623
INCOME TAXES 4,025 3,855
--------- ---------
NET EARNINGS $ 8,257 $ 7,768
========= =========
NET EARNINGS PER COMMON SHARE $ 0.76 $ 0.76
========= =========
DIVIDENDS PAID PER COMMON SHARE $ 0.25 $ 0.22
========= =========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 10,816 10,212
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
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<TABLE>
<CAPTION>
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(Amounts in thousands)
THREE MONTHS ENDED MARCH 31,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Earnings $ 8,257 $ 7,768
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 1,139 1,188
Provision for loan losses 865 1,004
Provision for losses on real estate owned 80 80
Gains on sales of securities (2) --
Decrease (increase) in interest receivable 801 (3,709)
Amortization of intangible assets 542 615
Increase in interest payable (280) 418
Other, net 2,818 2,332
--------- ---------
Net cash provided by Operating Activities 14,220 9,696
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in interest-bearing
time deposits 804 (1,200)
Proceeds from maturities of securities
held-to-maturity 65,561 118,193
Purchase of securities held-to-maturity (139,069) (190,099)
Proceeds from sales and maturities of securities
available-for-sale 19,107 11,781
Purchase of securities available-for-sale (1,000) (13,518)
Net (increase) decrease in federal funds sold and
securities purchased under agreements to resell (53,500) 18,375
Net (increase) decrease in loans 1,866 (9,865)
Purchase of property and equipment, net (822) (1,125)
Proceeds from sales of other real estate 278 139
Net cash paid in connection with purchase
transaction (1,397) --
--------- ---------
Net cash used in Investing Activities (107,672) (67,319)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 79,123 59,907
Dividends paid (2,752) (2,255)
Net increase (decrease) in federal funds purchased
and securities sold under agreements to repurchase
and other temporary funds 25,767 17,055
--------- ---------
Net cash provided by Financing Activities 102,138 74,707
--------- ---------
NET INCREASE IN CASH AND DUE FROM BANKS 8,686 17,084
CASH AND DUE FROM BANKS, BEGINNING 119,483 124,276
--------- ---------
CASH AND DUE FROM BANKS, ENDING $ 128,169 $ 141,360
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
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HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
(Three Months Ended March 31, 1997 and 1996)
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 and Hancock Bank of Louisiana 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 1996 Annual Report to Shareholders.
ACQUISITION
On January 17, 1997 the Company merged Hancock Bank of Louisiana, a wholly
owned subsidiary of the Company with Southeast National Bank, Hammond, Louisiana
(SOUTHEAST). The merger was consummated by the exchange of all outstanding
common stock of SOUTHEAST in return for approximately $3,700,000 cash and
approximately 120,000 shares of common stock of the Company. The merger was
accounted for using the purchase method. SOUTHEAST had total assets of
approximately $40,000,000 and stockholders equity of approximately $4,000,000 as
of December 31, 1996 and net earnings of approximatley $500,000 for the year
then ended.
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HANCOCK HOLDING COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
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:
March 31, December 31,
1997 1996
Total securities to total deposits 47.32% 46.80%
Total loans (net of unearned
discount) to total deposits 58.62% 60.94%
Interest-earning assets
to total assets 91.30% 91.30%
Interest-bearing deposits
to total deposits 77.97% 77.53%
CAPITAL RESOURCES
The Company continues to maintain an adequate capital position, as the
following ratios indicate:
March 31, December 31,
1997 1996
Equity capital to total assets (1) 11.11% 11.47%
Total capital to risk-weighted assets (2) 17.51% 19.02%
Tier 1 Capital to risk-weighted
assets (3) 16.56% 18.03%
Leverage Capital to total assets (4) 9.94% 10.37%
Property and equipment to equity capital 15.28% 15.39%
(1) Equity capital consists of stockholder's equity (common stock, capital
Page 7 of 14
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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 $489,000 or 6.3% for the first quarter of 1997
compared to the first quarter of 1996. The increase in earnings is attributable
primarily to an increase in loan portfolio balances.
THREE MONTHS ENDED MARCH 31,
1997 1996
Results of Operations:
Return on average assets 1.38% 1.36%
Return on average equity 12.21% 13.70%
Net Interest Income:
Return on average interest-earning assets
(tax equivalent) 8.29% 8.24%
Cost of average interest-bearing funds 4.09% 4.11%
----- -----
Net interest spread 4.20% 4.13%
===== =====
Net yield on interest-earning assets
(net interest income on a tax equivalent basis
divided by average interest-earning assets) 5.15% 5.14%
===== =====
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.
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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.
THREE MONTHS ENDED MARCH 31,
1997 1996
Annualized net charge-offs to average loans 0.40% 0.37%
Annualized provision for loan losses to average
loans 0.28% 0.39%
Average reserve for loan losses to average loans 1.69% 1.69%
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 1997 was $1,115,000
compared to $1,057,000 for the comparable period in 1996. Income tax expense
increased from $3,855,000 in the first three months of 1996 to $4,025,000 in the
first three months of 1997. This increase is primarily due to increased
earnings.
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PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A. Annual Meeting held February 20, 1997.
B. Directors elected at the Annual Meeting held February 20, 1997:
VOTES CAST
AFFIRMED WITHHELD
1. L. A. Koennen, Jr. 8,278,797.8 53,220.9
2. Dr. Homer C. Moody 8,271,811.9 60,206.8
3. George A. Schloegel 8,280,422.5 51,711.2
Continuing Directors:
4. James B. Estabrook, Jr.
5. Victor Mavar
6. Leo W. Seal, Jr.
7. Joseph F. Boardman, Jr.
8. Charles H. Johnson
9. Thomas W. Milner, Jr.
C.(1) Approval of Deloitte & Touche LLP as the independent public
accountants of the Company. 8,433,315.7 affirmative votes,
1,709 negative votes and 10,694.0 abstained.
C.(2) Approval of Amendment to the Amended and Restated Articles of
Incorporation (the "Articles") to conform with recent
amendments to the Mississippi Business Corporation Act
concerning indemnification of Directors and Officers.
8,294,723.3 affirmative votes, 4,614.5 negative votes and
17,718.8 abstained.
C.(3) Approval of Amendment to the Articles to increase the number of
authorized shares of common stock from 20,000,000 to
75,000,000. 7,762,126.2 affirmative votes, 539,376.7 negative
votes and 29,821.8 abstained.
C.(4) Approval of Shareholder Rights Plan. 7,419,824.9 affirmative
votes, 481,902.7 negative votes and 51,324.09 abstained.
D. None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit (27) Selected financial data.
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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
MAY 15, 1997 By: /S/ LEO W. SEAL, JR.
Date Leo W. Seal, Jr.
President and CEO
MAY 15, 1997 By: /S/ GEORGE A. SCHLOEGEL
Date George A. Schloegel
Vice-Chairman of the Board
MAY 15, 1997 By: /S/ STAN BAILEY
Date Stan Bailey
Chief Financial Officer
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
27 Financial Data Schedule
Page 12 of 14
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 128,169
<INT-BEARING-DEPOSITS> 2,141
<FED-FUNDS-SOLD> 67,500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 86,882
<INVESTMENTS-CARRYING> 878,747
<INVESTMENTS-MARKET> 874,859
<LOANS> 1,196,298
<ALLOWANCE> (19,800)
<TOTAL-ASSETS> 2,444,238
<DEPOSITS> 2,040,837
<SHORT-TERM> 113,376
<LIABILITIES-OTHER> 17,910
<LONG-TERM> 1,050
0
0
<COMMON> 36,655
<OTHER-SE> 234,410
<TOTAL-LIABILITIES-AND-EQUITY> 2,444,238
<INTEREST-LOAN> 28,648
<INTEREST-INVEST> 13,836
<INTEREST-OTHER> 1,816
<INTEREST-TOTAL> 44,300
<INTEREST-DEPOSIT> 15,875
<INTEREST-EXPENSE> 17,003
<INTEREST-INCOME-NET> 27,297
<LOAN-LOSSES> 836
<SECURITIES-GAINS> 2
<EXPENSE-OTHER> 21,153
<INCOME-PRETAX> 12,282
<INCOME-PRE-EXTRAORDINARY> 12,282
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,257
<EPS-PRIMARY> 0.76
<EPS-DILUTED> 0.76
<YIELD-ACTUAL> 5.15
<LOANS-NON> 1,206
<LOANS-PAST> 5,342
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 19,800
<CHARGE-OFFS> 1,842
<RECOVERIES> 642
<ALLOWANCE-CLOSE> 19,800
<ALLOWANCE-DOMESTIC> 19,800
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,000
</TABLE>
