SECURITIES AND EXCHANGE COMMISSION
---- 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 June 30, 1997
Commission File Number 0-13089
HANCOCK HOLDING COMPANY
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
-------- -------
10,909,769 Common Shares were outstanding as of July 31, 1997 for financial
statement purposes.
<PAGE>
HANCOCK HOLDING COMPANY
INDEX
PART I. FINANCIAL INFORMATION PAGE NUMBER
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets --
June 30, 1997 and December 31, 1996 3
Condensed Consolidated Statements of Earnings --
Three Months Ended June 30, 1997 and 1996
Six Months Ended June 30, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows --
Six Months Ended June 30, 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 - 10
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
<PAGE>
<TABLE>
<CAPTION>
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
(Unaudited)
June 30, December 31,
ASSETS: 1997 1996 *
---------- ----------
<S> <C> <C>
Cash and due from banks (non-interest bearing) $ 137,906 $ 119,483
Interest-bearing time deposits with other banks 2,168 2,945
Securities available-for-sale (cost of $89,322
and $98,567) 88,476 97,595
Securities held-to-maturity (market value of $882,343
and $806,710) 880,997 803,998
Federal funds sold and securities purchased under
agreements to resell 46,500 12,000
Loans, net of unearned income 1,203,001 1,173,967
Less: Reserve for loan losses (20,000) (19,800)
---------- ----------
Net loans 1,183,001 1,154,167
Property and equipment, at cost,
less accumulated depreciation of $44,276 and $43,365 41,266 40,412
Other real estate 2,042 1,875
Accrued interest receivable 20,267 20,188
Other assets 39,818 36,919
---------- ----------
TOTAL ASSETS $2,442,441 $2,289,582
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits:
Non-interest bearing demand $ 445,790 $ 432,964
Interest-bearing savings, NOW, money market
and other time 1,591,494 1,493,612
---------- ----------
Total deposits 2,037,284 1,926,576
Federal funds purchased and securities sold under
agreements to repurchase 111,126 87,609
Other liabilities 16,442 12,409
Long-term bonds 1,050 1,050
---------- ----------
TOTAL LIABILITIES 2,165,902 2,027,644
---------- ----------
STOCKHOLDERS' EQUITY:
Common stock 36,655 36,255
Capital surplus 197,989 194,500
Undivided profits 42,445 31,816
Unrealized loss on securities available-for-sale (550) (633)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 276,539 261,938
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,442,441 $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.
<PAGE>
<TABLE>
<CAPTION>
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
UNAUDITED
(Amounts in thousands except per share data)
Three Months Ended June 30, Six Months Ended June 30,
INTEREST INCOME: 1997 1996 1997 1996
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Interest and fees on loans $ 29,030 $ 26,101 $ 57,678 $ 51,858
Interest on:
U. S. Treasury Securities 3,645 3,515 6,699 7,160
Obligations of other U.S. government agencies
and corporations 9,189 8,594 18,350 17,108
Obligations of states and political subdivisions 991 890 1,926 1,734
Interest on federal funds sold and securities
purchased under agreements to resell 474 1,460 1,160 3,534
Interest on time deposits and other 2,370 1,872 4,185 3,358
--------- --------- --------- ---------
Total interest income 45,699 42,432 89,998 84,752
--------- --------- --------- ---------
INTEREST EXPENSE:
Interest on deposits 16,554 15,100 32,429 30,276
Interest on federal funds purchased and securities
sold under agreements to repurchase 1,199 930 2,306 1,829
Interest on bonds and notes 30 74 51 151
--------- --------- --------- ---------
Total interest expense 17,783 16,104 34,786 32,256
--------- --------- --------- ---------
NET INTEREST INCOME 27,916 26,328 55,212 52,496
Provision for loan losses 1,509 797 2,344 1,801
--------- --------- --------- ---------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 26,407 25,531 52,868 50,695
--------- --------- --------- ---------
Non-Interest Income:
Service charges on deposit accounts 4,507 4,153 8,898 8,356
Income from fiduciary activities 651 633 1,503 1,153
Securities gains(losses) (1) (34) 1 (34)
Other 1,996 1,394 3,725 2,797
--------- --------- --------- ---------
Total non-interest income 7,153 6,146 14,127 12,272
--------- --------- --------- ---------
Non-Interest Expense:
Salaries and employee benefits 11,034 10,389 22,224 20,770
Net occupancy expense of premises
and equipment expense 3,487 3,761 6,947 7,604
Other 6,221 5,593 12,724 11,036
--------- --------- --------- ---------
Total non-interest expense 20,742 19,743 41,895 39,410
--------- --------- --------- ---------
EARNINGS BEFORE INCOME TAXES 12,818 11,934 25,100 23,557
INCOME TAXES 4,625 3,902 8,650 7,757
--------- --------- --------- ---------
NET EARNINGS $ 8,193 $ 8,032 $ 16,450 $ 15,800
========= ========= ========= =========
NET EARNINGS PER COMMON SHARE $ 0.76 $ 0.79 $ 1.52 $ 1.55
========= ========= ========= =========
DIVIDENDS PAID PER COMMON SHARE $ 0.25 $ 0.22 $ .50 $ .44
========= ========= ========= =========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 10,840 10,212 10,830 10,212
========= ========= ========= =========
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(Amounts in thousands)
Six Months Ended June 30,
1997 1996
---------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings $ 16,450 $ 15,800
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 2,297 2,461
Provision for loan losses 2,344 1,801
Provision for losses on real estate owned 80 86
Gains (losses) on sales of securities 1 (34)
Increase (decrease) in interest receivable 201 (80)
Amortization of intangible assets 1,095 1,234
(Decrease) increase in interest payable (128) 643
Other, net 2,370 (404)
--------- ---------
Net cash provided by Operating Activities 24,710 21,507
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease (increase) in interest-bearing
time deposits 973 (1,395)
Proceeds from maturities of securities
held-to-maturity 137,959 187,198
Purchase of securities held-to-maturity (213,717) (256,601)
Proceeds from sales and maturities of securities
available-for-sale 24,522 18,627
Purchase of securities available-for-sale (8,009) (17,053)
Net (increase) decrease in federal funds sold and
securities purchased under agreements to resell (32,000) 81,550
Net increase in loans (4,837) (34,089)
Purchase of property and equipment, net (875) (2,314)
Proceeds from sales of other real estate 511 447
Net cash paid in connection with purchase
transaction (1,397) --
--------- ---------
Net cash used in Investing Activities (96,870) (23,630)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 72,570 11,434
Dividends paid (5,504) (4,511)
Net increase in federal funds purchased
and securities sold under agreements to repurchase
and other temporary funds 23,517 16,147
--------- ---------
Net cash provided by Financing Activities 90,583 23,070
--------- ---------
NET INCREASE IN CASH AND DUE FROM BANKS 18,423 20,947
CASH AND DUE FROM BANKS, BEGINNING 119,483 124,276
--------- ---------
CASH AND DUE FROM BANKS, ENDING $ 137,906 $ 145,223
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
(Six Months Ended June 30, 1997 and 1996)
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 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.
NEW ACCOUNTING STANDARDS
In March 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128, "Earnings per Share". This Statement establishes standards for
computing and presenting earnings per share ("EPS") and applies to all entities
with publicly held common stock or potential common stock. This Statement
replaces the presentation of primary EPS and fully diluted EPS with a
presentation of basic EPS and diluted EPS, respectively. Basic EPS excludes
dilution and is computed by dividing earnings available to common stockholders
by the weighted-average number of common shares outstanding for the period.
Similar to fully diluted EPS, diluted EPS reflects the potential dilution of
securities that could share in the earnings. This Statement is not expected to
have a material effect on the Company's reported EPS amounts. Restatement of
all prior period EPS data presented is required. This Statement is effective
for the Company's consolidated financial statements for the year ending
December 31, 1997.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income", effective for fiscal years beginning after December 15, 1997. This
Statement requires that all items that are required to be recognized under
accounting standards as components of comprehensive income be be reported in a
financial statement that is displayed with the same prominence as other
financial statements. This statement does not require a specific format for
that financial statement but requires that an entity display an amount
representing total comprehensive income for the period in that financial
statement. This statement requires that an entity classify items of other
comprehensive income by their nature in a financial statement. For example,
other comprehensive income may include foreign currency items, minimum pension
liability adjustments, and unrealized gains and losses on certain investments
in debt and equity securities. In addition, the accumulated balance of other
comprehensive income must be displayed separately from retained earnings and
additional paid-in capital in the equity section of a statement of financial
position. Reclassification of financial statements for earlier periods,
provided for comparative purposes, is required. The Company has not determined
the impact that the adoption of this new accounting standard will have on its
consolidated financial statements. The Company will adopt this accounting
standard on January 1, 1998, as required.
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 of accounting. 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
approximately $500,000 for the year then ended.
PROPOSED ACQUISITION
On July 15, 1997, the Company will acquire Commerce Corporation Inc.,
("COMMERCE"), St. Francisville, Louisiana, which owns 100% of the stock of Bank
of Commerce & Trust Company, for approximately $330,000 cash, 65,000
shares of common stock, and the assumption of COMMERCE debt owed to certain
noteholders in the aggregate principal amount of $1,251,022. Immediately after
the acquisition of COMMERCE, its wholly-owned subsidiary, Bank of Commerce &
Trust Co., will be merged with and into Hancock Bank of Louisiana, a
wholly-owned subsidiary of the Company. This transaction will be accounted
for using the purchase method of accounting and will result in no changes or
restatement of the Company's current or historical financial statements.
Commerce had total assets of approximately $29,000,000 as of June 30, 1997 and
net earnings of approximately $193,000 for the six month period then ended.
<PAGE>
HANCOCK HOLDING COMPANY
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:
June 30, March 31, December 31,
1997 1997 1996
-------- --------- -----------
Total securities to total deposits 47.59% 47.32% 46.80%
Total loans (net of unearned
discount) to total deposits 59.05% 58.62% 60.94%
Interest-earning assets
to total assets 90.94% 91.30% 91.30%
Interest-bearing deposits
to total deposits 78.12% 77.97% 77.53%
Capital Resources
The Company continues to maintain an adequate capital position, as the
following ratios indicate:
June 30, March 31, December 31,
1997 1997 1996
-------- --------- ------------
Equity capital to total assets (1) 11.34% 11.11% 11.47%
Total capital to risk-weighted assets (2) 19.87% 17.51% 19.02%
Tier 1 Capital to risk-weighted
assets (3) 18.90% 16.56% 18.03%
Leverage Capital to total assets (4) 10.20% 9.94% 10.37%
Property and equipment to equity capital 14.89% 15.28% 15.39%
<PAGE>
(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 $650,000 or 4.1% for the first six months of 1997
compared to the first six months of 1996. The increase in earnings is
attributable primarily to an increase in loan portfolio balances.
<TABLE>
Three Months Six Months
Ended June 30, Ended June 30,
------------------- -----------------
1997 1996 1997 1996
------ ----- ------ ------
<S> <C> <C> <C> <C>
Results of Operations:
Return on average assets 1.34% 1.39% 1.36% 1.37%
Return on average equity 11.88% 14.15% 12.05% 14.09%
Net Interest Income:
Return on average interest-earning assets
(tax equivalent) 8.33% 8.19% 8.29% 8.21%
Cost of average interest-bearing funds 4.19% 4.11% 4.14% 4.11%
----- ----- ----- -----
Net interest spread 4.13% 4.08% 4.15% 4.10%
===== ===== ===== =====
Net yield on interest-earning assets
(net interest income on a tax equivalent basis
divided by average interest-earning assets) 5.13% 5.12% 5.13% 5.13%
===== ===== ===== =====
</TABLE>
<PAGE>
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>
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
1997 1996 1997 1996
----- ----- ----- ------
<S> <C> <C> <C> <C>
Annualized net charge-offs to average loans 0.44% 0.20% 0.42% 0.22%
Annualized provision for loan losses to average
loans 0.50% 0.30% 0.39% 0.34%
Average reserve for loan losses to average loans 1.65% 1.65% 1.67% 1.67%
</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 1997 was $2,280,000
compared to $2,121,000 for the comparable period in 1996. Income tax expense
increased from $7,757,000 in the first six months of 1996 to $8,650,000 in the
first six months of 1997. This increase is primarily due to increased earnings.
<PAGE>
Part II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit (27) Selected financial data.
<PAGE>
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 14, 1997 By: /s/ Leo W. Seal, Jr.
- ------------------------- ----------------------
Date Leo W. Seal, Jr.
President and CEO
August 14, 1997 By: /s/ George A. Schloegel
- ------------------------ --------------------------
Date George A. Schloegel
Vice-Chairman of the Board
August 14, 1997 By: /s/ C. Stanley Bailey
- ----------------------- ------------------------
Date C. Stanley Bailey
Chief Financial Officer
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-01-1997
<PERIOD-END> Jun-30-1997
<CASH> 137,906
<INT-BEARING-DEPOSITS> 2,168
<FED-FUNDS-SOLD> 46,500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 88,476
<INVESTMENTS-CARRYING> 880,997
<INVESTMENTS-MARKET> 882,343
<LOANS> 1,203,001
<ALLOWANCE> (20,000)
<TOTAL-ASSETS> 2,442,441
<DEPOSITS> 2,037,284
<SHORT-TERM> 111,126
<LIABILITIES-OTHER> 16,442
<LONG-TERM> 1,050
0
0
<COMMON> 36,655
<OTHER-SE> 239,884
<TOTAL-LIABILITIES-AND-EQUITY> 2,442,441
<INTEREST-LOAN> 57,678
<INTEREST-INVEST> 26,975
<INTEREST-OTHER> 5,345
<INTEREST-TOTAL> 89,998
<INTEREST-DEPOSIT> 32,429
<INTEREST-EXPENSE> 34,786
<INTEREST-INCOME-NET> 55,212
<LOAN-LOSSES> 2,344
<SECURITIES-GAINS> 1
<EXPENSE-OTHER> 41,895
<INCOME-PRETAX> 25,100
<INCOME-PRE-EXTRAORDINARY> 25,100
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,450
<EPS-PRIMARY> 1.52
<EPS-DILUTED> 1.52
<YIELD-ACTUAL> 5.13
<LOANS-NON> 3,409
<LOANS-PAST> 6,127
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 19,800
<CHARGE-OFFS> 3,570
<RECOVERIES> 1,061
<ALLOWANCE-CLOSE> 20,000
<ALLOWANCE-DOMESTIC> 20,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,000
</TABLE>
