UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
--X- 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, 1998
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
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
----- --------
10,910,570 Common Shares were outstanding as of April 29, 1998 for financial
statement purposes.
Page 1 of 13
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HANCOCK HOLDING COMPANY
INDEX
PART I. FINANCIAL INFORMATION PAGE NUMBER
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets --
March 31, 1998 and December 31, 1997 3
Condensed Consolidated Statements of Earnings --
Three Months Ended March 31, 1998 and 1997 4
Condensed Consolidated Statements of Cash Flows --
Three Months Ended March 31, 1998 and 1997 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 4. Submission of Matters to a Vote 11
of Security Holders
ITEM 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
Page 2 of 13
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<TABLE>
<CAPTION>
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
Unaudited)
March 31, December 31,
ASSETS: 1998 1997 *
------------ -------------
<S> <C> <C>
Cash and due from banks (non-interest bearing) $ 116,032 $ 113,125
Interest-bearing time deposits with other banks 596 2,068
Securities available-for-sale (cost of $269,950
and $163,531) 269,715 163,633
Securities held-to-maturity (market value of $917,105
and $924,958) 908,579 916,362
Federal funds sold and securities purchased under
agreements to resell 79,511 35,500
Loans, net of unearned income 1,226,178 1,220,630
Less: Reserve for loan losses (21,109) (21,000)
------------ -----------
Net loans 1,205,069 1,199,630
Property and equipment, at cost,
less accumulated depreciation of $47,531 and $46,285 42,659 42,810
Other real estate 2,412 2,357
Accrued interest receivable 20,748 20,977
Other assets 46,842 41,495
------------ -----------
TOTAL ASSETS $ 2,692,163 $ 2,537,957
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits:
Non-interest bearing demand $ 467,481 $ 462,731
Interest-bearing savings, NOW, money market
and other time 1,727,703 1,599,917
------------ -----------
Total deposits 2,195,184 2,062,648
Federal funds purchased and securities sold under
agreements to repurchase 184,527 170,534
Other liabilities 17,541 14,923
Long-term bonds 1,279 1,279
------------ -----------
TOTAL LIABILITIES 2,398,531 2,249,384
------------ -----------
STOCKHOLDERS' EQUITY:
Common stock 36,872 36,872
Capital surplus 200,153 200,766
Undivided profits 57,246 51,401
Unrealized (loss) gain on securities available-for-sale (153) 66
Unearned Compensation (486) (532)
------------ -----------
TOTAL STOCKHOLDERS' EQUITY 293,632 288,573
------------ -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,692,163 $ 2,537,957
=========== ===========
<FN>
* The balance sheet at December 31, 1997 has been taken from the audited
balance sheet at that date.
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
Page 3 of 13
<PAGE>
<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: 1998 1997
----------- ------------
<S> <C> <C>
Interest and fees on loans $ 29,589 $ 28,648
Interest on:
U. S. Treasury Securities 3,757 3,054
Obligations of other U.S. government agencies
and corporations 7,057 9,161
Obligations of states and political subdivisions 1,347 935
Interest on federal funds sold and securities
purchased under agreements to resell 1,347 686
Interest on time deposits and other 4,845 1,816
----------- ------------
Total interest income 47,942 44,300
----------- ------------
INTEREST EXPENSE:
Interest on deposits 17,420 15,875
Interest on federal funds purchased and securities
sold under agreements to repurchase 1,796 1,106
Interest on bonds and notes 32 22
----------- ------------
Total interest expense 19,248 17,003
----------- ------------
NET INTEREST INCOME 27,694 27,297
Provision for loan losses 1,359 836
----------- ------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 27,335 26,461
----------- ------------
Non-Interest Income:
Service charges on deposit accounts 4,656 4,391
Income from fiduciary activities 636 852
Securities gains (losses) (63) 2
Other 1,883 1,729
----------- ------------
Total non-interest income 7,112 6,974
----------- ------------
Non-Interest Expense:
Salaries and employee benefits 11,866 11,190
Net occupancy expense of premises
and equipment expense 2,812 3,460
Other 7,561 6,503
----------- ------------
Total non-interest expense 22,239 21,153
----------- ------------
EARNINGS BEFORE INCOME TAXES 12,208 12,282
INCOME TAXES 4,155 4,025
----------- ------------
NET EARNINGS $ 8,053 $ 8,257
=========== ============
NET EARNINGS PER COMMON SHARE $ 0.74 $ 0.76
=========== ============
DIVIDENDS PAID PER COMMON SHARE $ 0.25 $ 0.25
=========== ============
WEIGHTED AVERAGE NUMBER OF COMMON 10,917 10,816
SHARES OUTSTANDING
=========== ============
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
Page 4 of 13
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HANCOCK HOLDING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(Amounts in thousands)
Three Months Ended March 31,
1998 1997
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings $ 8,053 $ 8,257
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 1,280 1,139
Provision for loan losses 1,359 865
Provision for losses on real estate owned 83 80
Losses on sales of securities 63 ( 2)
Decrease (increase) in interest receivable ( 229) 801
Amortization of intangible assets 598 542
Increase (decrease) in interest payable 767 ( 280)
Other, net ( 5,560) 2,818
--------- ---------
Net cash provided by Operating Activities 6,414 14,220
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease in interest-bearing
time deposits 1,472 804
Proceeds from sales and maturities of securities
held-to-maturity 100,973 65,561
Purchase of securities held-to-maturity ( 93,190) (139,069)
Proceeds from sales and maturities of securities
available-for-sale 22,062 19,107
Purchase of securities available-for-sale (128,144) ( 1,000)
Net decrease in federal funds sold and
securities purchased under agreements to resell ( 44,011) ( 53,000)
Net (increase) decrease in loans ( 5,439) 1,866
Purchase of property and equipment, net ( 1,130) ( 822)
Proceeds from sales of other real estate 139 278
Net cash paid in connection with purchase
transaction ( 1,397)
Net cash used in Investing Activities (147,268) (107,672)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 132,536 79,123
Dividends paid ( 2,769) ( 2,752)
Net increase in federal funds purchased
and securities sold under agreements to repurchase
and other temporary funds 13,994 25,767
--------- ---------
Net cash provided by Financing Activities 143,761 102,138
--------- ---------
NET INCREASE IN CASH AND DUE FROM BANKS 2,907 8,686
CASH AND DUE FROM BANKS, BEGINNING 113,125 119,483
--------- ---------
CASH AND DUE FROM BANKS, ENDING $ 116,032 $ 128,169
========== =========
See notes to condensed consolidated financial statements.
Page 5 of 13
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HANCOCK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
(Three Months Ended March 31, 1998 and 1997)
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 1997 Annual Report to Shareholders.
RECENT CHANGES IN FINANCIAL ACCOUNTING STANDARDS
The Company adopted Statement of Financial Accounting Standards No. 130
"Reporting Comprehensive Income" (SFAS 130) effective January 1, 1998.
SFAS 130 establishes standards for reporting and display of comprehensive
income and its major components. Comprehensive income includes net income
and other comprehensive income which, in the case of the Company, only
includes unrealized gains and losses on investments available for sale.
Following is a summary of the Company's comprehensive income for the
three months ended March 31, 1998 and 1997.
(Amounts in thousands)
Three Months Ended March 31,
1998 1997
------------ ----------
Net Earnings $ 8,053 $ 8,257
Other Comprehensive Income (net of income tax):
Unrealized Holding (Losses)/Gains ( 219) 51
------------ -----------
Comprehensive Income $ 7,834 $ 8,308
============ ===========
In June 1997, the Financial Accounting Standards Board issued SFAS
No. 131 "Disclosures about Segments of an Enterprise and Related Information"
which establishes annual and interim reporting standards for an enterprise's
operating segments and related disclosures about its products, services,
geographic areas
Page 6 of 13
<PAGE>
and major customers. Adoption of these statements will not impact the Company's
consolidated financial position, results of operations or cash flows, and any
effect will be limited to the form and content of its disclosures. Both
statements became effective for fiscal years beginning after December 15, 1997.
The Company is in the process of reviewing its operating segments.
PROPOSED ACQUISITION
In April 1998, the Company entered into an Agreement for the acquisition of
American Security Bancshares of Ville Platte, Inc. (American Security), Ville
Platte, Louisiana and its subsidiary, American Security Bank (ASB). The merger
will be consummated by the exchange of all outstanding shares of American
Security stock in return for approximately 990,000 shares of common stock of the
Company. Completion of the merger is contingent upon approval by American
Security's shareholders and appropriate regulatory authorities. It is
anticipated that ASB will initially remain a separate wholly-owned subsidiary of
the Company.
It is intended that the merger will be accounted for using the pooling of
interests method. American Security had total assets of approximately
$230,000,000 as of December 31, 1997 and net earnings of approximately
$2,775,000 for the year then ended.
Page 7 of 14
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HANCOCK HOLDING COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
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,
1998 1997
--------- ------------
Total securities to total deposits 53.68% 52.36%
Total loans (net of unearned
discount) to total deposits 55.86% 59.18%
Interest-earning assets
to total assets 92.29% 92.13%
Interest-bearing deposits
to total deposits 78.70% 77.57%
Capital Resources
The Company continues to maintain an adequate capital position, as the
following ratios indicate:
March 31, December 31,
1998 1997
--------- ------------
Equity capital to total assets (1) 10.91% 11.37%
Total capital to risk-weighted assets (2) 19.34% 19.18%
Tier 1 Capital to risk-weighted 18.83% 18.22%
assets (3)
Leverage Capital to total assets (4) 9.87% 10.24%
Property and equipment to equity capital 14.52% 14.84%
(1) Equity capital consists of stockholder's equity (common stock, capital
surplus and undivided profits).
Page 8 of 13
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(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 decreased $204,000 or 2.5% for the first quarter of 1998
compared to the first quarter of 1997. The decrease in earnings is
attributable, in part, to an increase in the loan loss provision charged to
income resulting from the Company taking a more aggressive stance in the
monitoring of loans and potential future collectibility. The Company has also
accrued additional income tax expense to more closely match this liability with
the period in which it is incurred.
Three Months Ended March 31,
1998 1997
--------- ------------
Results of Operations:
Return on average assets 1.23% 1.38%
Return on average equity 11.25% 12.21%
Net Interest Income:
Return on average interest-earning assets
(tax equivalent) 8.10% 8.29%
Cost of average interest-bearing funds 4.19% 4.09%
Net interest spread 3.91% 4.20%
====== ======
Net yield on interest-earning assets
(net interest income on a tax equivalent basis
divided by average interest-earning assets) 4.91% 5.15%
====== ======
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
Page 9 of 13
<PAGE>
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,
1998 1997
--------- ------------
Annualized net charge-offs to average loans 0.41% 0.40%
Annualized provision for loan losses to average 0.45% 0.28%
loans
Average reserve for loan losses to average loans 1.74% 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 1998 was $1,572,000
compared to $1,115,000 for the comparable period in 1997. Income tax expense
increased from $4,025,000 in the first three months of 1997 to $4,155,000 in the
first three months of 1998.
Page 10 of 13
<PAGE>
Part II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A. Annual Meeting held February 19, 1998.
B. Directors elected at the Annual Meeting held February 19, 1998:
Votes Cast
Affirmed Withheld
1. James B. Estabrook, Jr. 8,569,389.7 8,798.4
2. Victor Mavar 8,567,290.5 10,897.6
3. Leo W. Seal, Jr. 8,574,010.7 4,177.4
Continuing Directors:
4. Joseph F. Boardman, Jr.
5. Charles H. Johnson
6. Thomas W. Milner, Jr.
7. L. A. Koennen, Jr.
8. Dr. Homer C. Moody
9. George A. Schloegel
C.(1) Approval of Deloitte & Touche LLP as the independent public
accountants of the Company. Approval was made with a favorable
vote of 99.8%
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit (27) Selected financial data.
Page 11 of 14
<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
May 14, 1998 By: /s/ Leo W. Seal, Jr.
Date Leo W. Seal, Jr.
President and CEO
May 14, 1998 By: /s/ George A. Schloegel
Date George A. Schloegel
Vice-Chairman of the Board
May 14, 1998 By: /s/ Carl J. Chaney
Date Carl J. Chaney
Chief Financial Officer
Page 12 of 13
<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
May 14, 1998 By:
Date Leo W. Seal, Jr.
President and CEO
May 14, 1998 By:
Date George A. Schloegel
Vice-Chairman of the Board
May 14, 1998 By:
Date Carl J. Chaney
Chief Financial Officer
Page 12 of 13
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 116,032
<INT-BEARING-DEPOSITS> 596
<FED-FUNDS-SOLD> 79,511
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 269,715
<INVESTMENTS-CARRYING> 908,579
<INVESTMENTS-MARKET> 917,105
<LOANS> 1,226,178
<ALLOWANCE> (21,109)
<TOTAL-ASSETS> 2,692,163
<DEPOSITS> 2,195,184
<SHORT-TERM> 184,527
<LIABILITIES-OTHER> 17,541
<LONG-TERM> 1,279
<COMMON> 36,872
0
0
<OTHER-SE> 256,760
<TOTAL-LIABILITIES-AND-EQUITY> 2,632,163
<INTEREST-LOAN> 29,589
<INTEREST-INVEST> 11,913
<INTEREST-OTHER> 4,845
<INTEREST-TOTAL> 47,942
<INTEREST-DEPOSIT> 17,420
<INTEREST-EXPENSE> 19,248
<INTEREST-INCOME-NET> 27,694
<LOAN-LOSSES> 1,359
<SECURITIES-GAINS> (63)
<EXPENSE-OTHER> 22,238
<INCOME-PRETAX> 12,208
<INCOME-PRE-EXTRAORDINARY> 12,208
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,053
<EPS-PRIMARY> 0.74
<EPS-DILUTED> 0.74
<YIELD-ACTUAL> 4.91
<LOANS-NON> 4,407
<LOANS-PAST> 4,534
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 21,000
<CHARGE-OFFS> 1,602
<RECOVERIES> 352
<ALLOWANCE-CLOSE> 21,109
<ALLOWANCE-DOMESTIC> 21,109
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,000
</TABLE>
