UNITED STATES
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 September 30, 1997
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
10,903,669 Common Shares were outstanding as of September 30, 1997 for financial
statement purposes.
Page 1 of 12
<PAGE>
CONTENTS
PART I. FINANCIAL INFORMATION PAGE NUMBER
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets --
September 30, 1997 and December 31, 1996 3
Condensed Consolidated Statements of Earnings --
Three Months Ended September 30, 1997 and 1996
Nine Months Ended September 30, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows --
Nine Months Ended September 30, 1997 and 1996 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
Page 2 of 12
<PAGE>
<TABLE>
<CAPTION>
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
(Unaudited)
September 30, December 31,
ASSETS: 1997 1996 *
------------ ------------
<S> <C> <C>
Cash and due from banks (non-interest bearing) $ 122,446 $ 119,483
Interest-bearing time deposits with other banks 2,168 2,945
Securities available-for-sale (cost of $121,825
and $98,567) 121,007 97,595
Securities held-to-maturity (market value of $884,739
and $806,710) 877,978 803,998
Federal funds sold and securities purchased under
agreements to resell 3,000 12,000
Loans, net of unearned income 1,219,079 1,173,967
Less: Reserve for loan losses (20,652) (19,800)
----------- -----------
Net loans 1,198,427 1,154,167
Property and equipment, at cost,
less accumulated depreciation of $45,151 and $43,365 41,665 40,412
Other real estate 2,329 1,875
Accrued interest receivable 19,730 20,188
Other assets 42,165 36,919
----------- ----------
TOTAL ASSETS $ 2,430,915 $ 2,289,582
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits:
Non-interest bearing demand $ 438,084 $ 432,964
Interest-bearing savings, NOW, money market
and other time 1,592,068 1,493,612
----------- -----------
Total deposits 2,030,152 1,926,576
Federal funds purchased and securities sold under
agreements to repurchase 98,133 87,609
Other liabilities 18,111 12,409
Long-term bonds 1,050 1,050
----------- -----------
TOTAL LIABILITIES 2,147,446 2,027,644
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock 36,870 36,255
Capital surplus 200,769 194,500
Undivided profits 46,368 31,816
Unrealized loss on securities available-for-sale (538) (633)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 283,469 261,938
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,430,915 $ 2,289,582
=========== ===========
<FN>
* 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.
</FN>
</TABLE>
Page 3 of 12
<PAGE>
<TABLE>
<CAPTION>
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
UNAUDITED
(Amounts in thousands except per share data)
Three Months Ended September 30, Nine Months Ended September 30,
INTEREST INCOME: 1997 1996 1997 1996
--------- --------- --------- -------
<S> <C> <C> <C> <C>
Interest and fees on loans $ 29,745 $ 27,159 $ 87,423 $ 79,011
Interest on:
U. S. Treasury Securities 3,913 3,378 10,612 10,532
Obligations of other U.S. government agencies
and corporations 8,679 8,824 27,030 25,932
Obligations of states and political subdivisions 1,064 880 2,990 2,614
Interest on federal funds sold and securities
purchased under agreements to resell 700 1,087 1,860 4,621
Interest on time deposits and other 2,255 1,810 6,440 5,180
--------- --------- --------- ---------
Total interest income 46,356 43,138 136,355 127,890
--------- --------- --------- ---------
INTEREST EXPENSE:
Interest on deposits 16,814 15,091 49,243 45,367
Interest on federal funds purchased and securities
sold under agreements to repurchase 1,237 899 3,542 2,728
Interest on bonds and notes 107 (11) 160 140
--------- --------- --------- ---------
Total interest expense 18,158 15,979 52,945 48,235
--------- --------- --------- ---------
NET INTEREST INCOME 28,198 27,159 83,410 79,655
Provision for loan losses 2,993 1,036 5,337 2,837
--------- --------- --------- ---------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 25,205 26,123 78,073 76,818
--------- --------- --------- ---------
Non-Interest Income:
Service charges on deposit accounts 4,775 4,129 13,673 12,485
Income from fiduciary activities 703 594 2,206 1,747
Securities gains (losses) 70 70 72 36
Other 2,093 1,802 5,817 4,599
--------- --------- --------- ---------
Total non-interest income 7,641 6,595 21,768 18,867
--------- --------- --------- ---------
Non-Interest Expense:
Salaries and employee benefits 11,982 10,624 34,206 31,394
Net occupancy expense of premises
and equipment expense 3,577 3,555 10,525 11,159
Other 6,810 6,534 19,533 17,570
--------- --------- --------- ---------
Total non-interest expense 22,369 20,713 64,264 60,123
--------- --------- --------- ---------
EARNINGS BEFORE INCOME TAXES 10,477 12,005 35,577 35,562
INCOME TAXES 3,790 3,923 12,440 11,680
--------- --------- --------- ---------
NET EARNINGS $ 6,687 $ 8,082 $ 23,137 $ 23,882
========= ========= ========= =========
NET EARNINGS PER COMMON SHARE $ 0.61 $ 0.79 $ 2.13 $ 2.34
========= ========= ========= =========
DIVIDENDS PAID PER COMMON SHARE $ 0.25 $ 0.22 $ 0.75 $ 0.66
========= ========= ========= =========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 10,899 10,212 10,857 10,212
========= ========= ========= =========
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
Page 4 of 12
<PAGE>
<TABLE>
<CAPTION>
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(Amounts in thousands)
Nine Months Ended September 30,
1997 1996
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Earnings $ 23,137 $ 23,882
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 2,567 3,567
Provision for loan losses 5,336 2,836
Provision for losses on real estate owned 300 118
Gains on sales of securities (72) (36)
Decrease (Increase) in interest receivable 955 (212)
Amortization of intangible assets 1,685 1,810
Increase in interest payable 420 66
Other, net 1,496 (4,792)
--------- ---------
Net cash provided by Operating Activities 35,824 27,239
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (decrease)increase in interest-bearing
time deposits (973) 1,395
Proceeds from sales and maturities of securities
held-to-maturity 180,789 243,179
Purchase of securities held-to-maturity (253,214) (303,986)
Proceeds from sales and maturities of securities
available-for-sale 8,776 28,610
Purchase of securities available-for-sale (19,309) (17,604)
Net decrease in federal funds sold and
securities purchased under agreements to resell 12,000 103,225
Net increase decrease in loans (4,061) (84,149)
Purchase of property and equipment, net (1,929) (3,283)
Proceeds from sales of other real estate 1,263 688
Net cash disbursed in connection with purchase
transactions (1,725) ---
--------- ---------
Net cash used in Investing Activities (78,383) (31,925)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 41,320 16,150
Dividends paid (8,272) (6,766)
Net increase in federal funds purchased and
securities sold under agreements to repurchase
and other temporary funds 12,474 13,661
--------- ---------
Net cash provided by Financing Activities 45,522 23,045
--------- ---------
NET INCREASE IN CASH AND DUE FROM BANKS 2,963 18,359
CASH AND DUE FROM BANKS, BEGINNING 119,483 124,276
--------- ---------
CASH AND DUE FROM BANKS, ENDING $ 122,446 $ 142,635
========= =========
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
Page 5 of 12
<PAGE>
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
(Nine Months Ended September 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.
RECENT CHANGES IN FINANCIAL 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 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 the comprehensive income by
their nature in a financial statement. For example, other comprehensive income
may include foreign currency items, minimum
Page 6 of 12
<PAGE>
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.
ACQUISITIONS
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 approximately $500,000 for the year
then ended.
On July 15, 1997 the Company acquired Commerce Corporation, Inc.
(COMMERCE), St. Francisville, Louisiana, which owned 100% of the stock of Bank
of Commerce and Trust Company, for approximately $330,000 cash and 65,000 shares
of common stock and the assumption of COMMERCE debt owed to certain individuals
in the aggregate principal amount of $1,251,022. Immediately after the
acquisition of COMMERCE, its wholly owned subsidiary, Bank Commerce and Trust
Co., was merged with and into Hancock Bank of Louisiana, a wholly owned
subsidiary of the Company. This transaction was 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 7 of 12
<PAGE>
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.
<TABLE>
<CAPTION>
The following liquidity ratios compare certain assets and liabilities to
total deposits or total assets:
Sept.30, June 30, March 31, December 31,
1997 1997 1997 1996
------ -------- --------- -----------
<S> <C> <C> <C> <C>
Total securities to total
deposits 49.21% 47.59% 47.32% 46.80%
Total loans (net of unearned
discount) to total deposits 60.05% 59.05% 58.62% 60.94%
Interest-earning assets
to total assets 91.46% 90.94% 91.30% 91.30%
Interest-bearing deposits
to total deposits 78.42% 78.12% 77.97% 77.53%
Capital Resources
The Company continues to maintain an adequate capital position, as the
following ratios indicate:
Sept. 30, June 30, March 31, December 31,
1997 1997 1997 1996
-------- ------- -------- -----------
Equity capital to total assets (1) 11.68% 11.34% 11.11% 11.47%
Total capital to risk-weighted
assets (2) 19.98% 19.87% 19.63% 19.02%
Tier 1 Capital to risk-weighted
assets (3) 19.01% 18.90% 18.66% 18.03%
Leverage Capital to total assets (4) 10.46% 10.20% 10.27% 10.37%
Property and equipment to equity
capital 14.67% 14.89% 15.28% 15.39%
Page 8 of 12
<PAGE>
<FN>
(1) Equity capital consists of stockholders' 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.
</FN>
</TABLE>
RESULTS OF OPERATIONS
Net Earnings
Net earnings decreased $745,000, or 3.1% for the first nine months of
1997 compared to the first nine months of 1996. The decrease in earnings is
attributable to a higher level of loan loss provision and non-interest expense.
<TABLE>
Three Months Nine Months
Ended Sept. 30, Ended Sept. 30,
------------------- --------------------
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Results of Operations:
Return on average assets 1.07% 1.21% 1.28% 1.39%
Return on average equity 9.47% 12.71% 11.51% 14.04%
Net Interest Income:
Return on average interest-earning assets
(tax equivalent) 8.29% 8.29% 8.34% 8.23%
Cost of average interest-bearing funds 4.29% 4.16% 4.18% 4.10%
----- ----- ----- -----
Net interest spread 4.04% 4.13% 4.16% 4.13%
===== ===== ===== =====
Net interest margin
(net interest income on a tax equivalent basis
divided by average interest-earning assets) 5.09% 5.14% 5.15% 5.17%
===== ===== ===== =====
</TABLE>
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
Page 9 of 12
<PAGE>
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 Nine Months
Ended Sept. 30, Ended Sept. 30,
-------------------- -------------------
1997 1996 1997 1996
------ ----- ----- ----
<S> <C> <C> <C> <C>
Annualized net charge-offs to average loans 0.93% 0.39% 0.59% 0.32%
Annualized provision for loan losses to average
loans 0.99% 0.38% 0.59% 0.35%
Average reserve for loan losses to average loans 1.69% 1.62% 1.68% 1.65%
</TABLE>
Income Taxes
The effective federal tax rate of the Company is slightly 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 1997 was $3,542,000
compared to $3,195,000 for the comparable period in 1996. Income tax expense
increased from $11,680,000 in the first nine months of 1996 to $12,440,000 in
the first nine months of 1997. This increase results from income taxes due to
the State of Mississippi as a result of utilization of previous years' NOL
carryforwards, and additional federal taxes due from the settlement of Internal
Revenue Service audit issues for the years 1994 and 1995.
Page 10 of 12
<PAGE>
Part II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(27) Selected financial data.
Page 11 of 12
<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
November 14, 1997 By: /s/ Leo W. Seal, Jr.
Date Leo W. Seal, Jr.
President and CEO
November 14, 1997 By: /s/ George A. Schloegel
Date George A. Schloegel
Vice-Chairman of the Board
November 14, 1997 By: /s/ C. Stanley Bailey
Date C. Stanley Bailey
Chief Financial Officer
Page 12 of 12
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 122,446
<INT-BEARING-DEPOSITS> 2,945
<FED-FUNDS-SOLD> 3,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 121,007
<INVESTMENTS-CARRYING> 877,978
<INVESTMENTS-MARKET> 884,739
<LOANS> 1,219,079
<ALLOWANCE> (20,652)
<TOTAL-ASSETS> 2,430,915
<DEPOSITS> 2,030,152
<SHORT-TERM> 98,133
<LIABILITIES-OTHER> 18,111
<LONG-TERM> 1,050
<COMMON> 36,870
0
0
<OTHER-SE> 247,137
<TOTAL-LIABILITIES-AND-EQUITY> 2,430,915
<INTEREST-LOAN> 87,423
<INTEREST-INVEST> 42,492
<INTEREST-OTHER> 6,440
<INTEREST-TOTAL> 136,355
<INTEREST-DEPOSIT> 49,243
<INTEREST-EXPENSE> 52,944
<INTEREST-INCOME-NET> 83,410
<LOAN-LOSSES> 5,337
<SECURITIES-GAINS> 72
<EXPENSE-OTHER> 64,265
<INCOME-PRETAX> 35,577
<INCOME-PRE-EXTRAORDINARY> 35,577
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,137
<EPS-PRIMARY> 2.13
<EPS-DILUTED> 2.13
<YIELD-ACTUAL> 5.15
<LOANS-NON> 5,308
<LOANS-PAST> 3,446
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 19,800
<CHARGE-OFFS> 6,795
<RECOVERIES> 1,478
<ALLOWANCE-CLOSE> 20,652
<ALLOWANCE-DOMESTIC> 20,652
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,000
</TABLE>
