News Details

GULFPORT, Miss., July 20, 2010 (GLOBE NEWSWIRE) -- Hancock Holding Company (Nasdaq: HBHC) — "the Company" — today announced net income for the quarter ended June 30, 2010. Hancock's second quarter 2010 net income was $6.5 million, and diluted earnings per share were $0.17. On a year-to-date basis, Hancock earned $20.3 million, with diluted earnings per share of $0.55.

Hancock's year-to-date 2010 results include the impact of the Company's recent common stock offering and acquisition of Peoples First Community Bank (Peoples First), both of which were completed in the fourth quarter of 2009.

Hancock's second quarter earnings were significantly impacted by a larger allowance for loan losses. At June 30, 2010, Hancock's allowance for loan losses was $77.2 million, which represents an increase of $10.6 million, or 15.9 percent, from the level at March 31, 2010. Approximately $5.4 million of the higher allowance level was necessitated, in part, by a $41.4 million net increase in substandard loans that resulted from the Company's normal loan review process. The majority of the aforementioned credit quality deterioration was related to the ongoing economic impact of the national recession. In addition, due to recent extraordinary events in the Gulf of Mexico (described below), the Company has established a specific reserve for potential loan losses of $5.2 million. 

On April 20, 2010, BP's Deepwater Horizon oil rig exploded and sank in the Gulf of Mexico just off the Louisiana coast. The Gulf Oil Spill continues to be a complex and ongoing event with significant economic and ecological impacts. In addition, the Gulf Oil Spill already is the largest spill of its kind in both U.S. and Gulf of Mexico history. Much of the relevant information and ultimate impact related to these events is still unknown, including the economic consequences of any deepwater drilling moratorium. The Company does expect significant and potentially lasting impact to the coastal regions in the four U.S. states that comprise Hancock's footprint. 

Shortly after the explosion and sinking of the Deepwater Horizon rig, Hancock began an in-depth assessment of the Company's loan portfolio in the coastal regions of Hancock's market area in Louisiana, Mississippi, Alabama and Florida (similar to the process followed to assess loss exposure in the aftermath of Hurricane Katrina in 2005). The process first assessed the overall pool of loans that could have some potential impact from the Gulf Oil Spill. Based on the FDIC loss share coverage on the Peoples First acquired loans, the information contained in the following table is focused on our legacy loan portfolio. 

The $136.1 million of potential exposure from the above table represents just 2.7 percent of the Company's total loan portfolio at May 31, 2010. The above loan concentrations were then rated for potential negative or even positive impact. This analysis concluded that the Company could have about $26.1 million of negatively impacted loans in the following states:

From this analysis, it was then determined that a specific reserve of $5.2 million would be necessary to cover any potential losses that could arise from events related to the Gulf Oil Spill. 

Excluding the pre-tax impact of $1.7 million of one-time costs related to the acquisition of Peoples First and the aforementioned $5.2 million special reserve for potential losses related to the Gulf Oil Spill, net income for the second quarter was $11.0 million and diluted earnings per share was $0.30. Return on average assets (excluding the aforementioned special items) for the second quarter was 0.52 percent.    Compared to the second quarter of 2009, net income for 2010's second quarter (excluding one-time merger costs and specific reserve) was down $2.7 million, while diluted earnings per share were $0.13 lower.   

Hancock's pre-tax, pre-provision income for the second quarter was $32.8 million, an increase of $1.2 million, or 3.7 percent, over the first quarter of 2010. Pre-tax pre-provision income is total revenue less non-interest expense and excludes one-time merger expenses and securities transactions.

Commenting on the Company's second quarter results, Hancock Holding Company President and Chief Executive Officer Carl J. Chaney stated, "Hancock continues to monitor events in the Gulf of Mexico and also stands ready to assist our clients that may be impacted by the Gulf Oil Spill. We join the communities all along the Gulf Coast affected by these events in expressing concern and hope around efforts to stop the oil spill, ultimate clean up, and then eventual recovery.   As we did in the aftermath of Hurricane Katrina in 2005, the Company reacted quickly in assessing our overall loss exposure and then established a specific reserve for potential losses related to the Gulf Oil Spill of $5.2 million. Separate from the Gulf Oil Spill, the Company has experienced some deterioration in our loan portfolio, mostly related to the continued decline in real estate values and overall duration of the current economic recession, which required a separate $5.4 million increase in the allowance for loan losses. Hancock continues to generate significant capital, adding to our robust capitalization levels, while paying out a healthy dividend to our shareholders (tangible equity of 9.32 percent at June 30 and annualized dividends of $0.96 per share). This capital strength is supplemented with strong levels of operating earnings (pre-tax pre-provision earnings of $32.8 million in the second quarter) and will enable us to weather the current set of challenges as we have countless times before."

Highlights & Key Operating Items from Hancock's Second Quarter Results

Balance Sheet & Capital

Total assets at June 30, 2010, were $8.50 billion, down $65.5 million, or 0.8 percent, from $8.57 billion at March 31, 2010. Compared to June 30, 2009, total assets increased $1.45 billion, or 20.6 percent. The overall increase in total assets from 2009's second quarter was due to the acquisition of Peoples First in December 2009. Hancock continued to remain very well capitalized with total equity of $861.3 million at June 30, 2010, up $230.5 million, or 36.5 percent, from June 30, 2009. Hancock's tangible equity ratio at June 30, 2010, was 9.32 percent, up 22 basis points from the 9.10 percent reported at March 31, 2010.

Loan Growth

For the quarter ended June 30, 2010, Hancock's average total loans were $5.01 billion, which represented an increase of $731.5 million, or 17.1 percent, from the same quarter a year ago but was down $79.7 million, or 1.6 percent, from the first quarter of 2010. The increased level of average loans from the same quarter a year ago was related to the acquisition of Peoples First in which Hancock acquired $950 million of fair-value adjusted loans with loss share coverage from the FDIC. Period-end loans were down $39.5 million, or 0.8 percent, from March 31, 2010. The decrease in period-end loans was reflected in commercial/real estate (down $77.9 million, or 2.5 percent), indirect consumer loans (down $16.5 million or 4.8 percent), and finance company loans (down $2.0 million or 1.9 percent). The overall decline in loans was offset by increases in mortgage loans (up $32.9 million or 4.6 percent) and direct consumer loans (up $24.0 million or 3.3 percent).

Deposit Growth

Period-end deposits for the second quarter were $6.96 billion, up $1.30 billion, or 23.1 percent, from June 30, 2009, but were down $44.2 million, or 0.6 percent, from March 31, 2010. The increase in period-end deposits as compared to June 30, 2009, was due primarily to the acquisition of People's First. Average deposits were down $129.1 million, or 1.8 percent, from the first quarter of 2010 but were up $1.29 billion, or 22.5 percent, from June 30, 2009. The increase in average deposits from the same quarter a year ago was due to the acquisition of Peoples First in December 2009.   

Asset Quality

Net charge-offs for 2010's second quarter were $13.9 million, or 1.11 percent of average loans, up $0.7 million from the $13.3 million, or 1.06 percent of average loans, reported for the first quarter of 2010. Non-performing assets as a percent of total loans and foreclosed assets were 3.66 percent at June 30, 2010, up from 2.44 percent at March 31, 2010. Non-accrual loans increased $46 million, while other real estate owned (ORE) increased $14.7 million compared to the prior quarter. Loans 90 days past due or greater (accruing) as a percent of period end loans, decreased 11 basis points from March 31, 2010 to 0.16 percent at June 30, 2010.

Hancock recorded a provision for loan losses for the second quarter of $24.5 million. The Company's allowance for loan losses was $77.2 million at June 30, 2010, and $66.6 million at March 31, 2010. The ratio of the allowance for loan losses as a percent of period-end loans was 1.55 percent at June 30, 2010, compared to 1.33 percent at March 31, 2010. As previously mentioned, the Company's allowance for loan losses at June 30, 2010, was increased $10.6 million, or 15.9 percent, from the level at March 31, 2010. Of the $10.6 million increase, approximately $5.4 million was necessitated by an increase in substandard loans that resulted from the Company's normal loan review process. The remaining increase of $5.2 million was due to the specific reserve for potential losses related to the Gulf Oil Spill. 

Additional asset quality information (inclusive and exclusive of the covered assets of Peoples First) is provided in the following table:

Net Interest Income

Net interest income (taxable equivalent or te) for the second quarter increased $11.3 million, or 18.9 percent, while the net interest margin (te) of 3.87 percent was 9 basis points wider than the same quarter a year ago. Growth in average earning assets was strong compared to the same quarter a year ago with an increase of $1.02 billion, or 16.1 percent, mostly reflected in higher average loans (up $731.5 million, or 17.1 percent) and was due primarily to the fourth quarter 2009 acquisition of Peoples First.

The Company's loan yield increased 7 basis points over the prior year's second quarter, while the yield on securities decreased 45 basis points, pushing the yield on average earning assets down 20 basis points. However, total funding costs over the same quarter a year ago were down 29 basis points. 

Compared to the prior quarter, the net interest margin (te) widened 12 basis points, and the level of net interest income was up $1.33 million, or 1.9 percent. The yield on average earning assets was down 9 basis points from last quarter at 5.06 percent, while the total cost of funds decreased 21 basis points.   

Non-interest Income

Non-interest income for the second quarter was up $0.8 million, or 2.3 percent, compared to the same quarter a year ago and increased $3.9 million, or 12.5 percent, compared to the previous quarter. Factors impacting non-interest income compared to the same quarter a year ago were higher levels of debit card and merchant fees (up $1.0 million or 35.7 percent), service charges on deposit accounts (up $1.1 million or 9.7 percent), trust fees (up $0.6 million or 14.4 percent), investment and annuity fees (up $1.0 million or 57.5 percent), and ATM fees (up $0.4 million or 22.5 percent) partially offset by a decrease in other income of $2.6 million, or 36.5 percent, primarily due to gains on sales of land in prior year.  

The increase in non-interest income compared to the prior quarter was due to the increase in service charges on deposit accounts (up $0.8 million or 7.3 percent), trust fees (up $0.6 million or 14.6 percent), debit card and merchant fees (up $0.3 million or 9.2 percent), investment and annuity fees (up $0.4 million or 16.9 percent), ATM fees (up $0.4 million or 19.0 percent), and other income (up $1.4 million or 45.9 percent).

Operating Expense & Taxes

Operating expenses for the second quarter were up $13.9 million, or 23.9 percent, compared to the same quarter a year ago, and were $4.3 million, or 6.3 percent, higher than the previous quarter. The increase from the same quarter a year ago was reflected in higher other operating expense (up $5.8 million or 27.0 percent), personnel expense (up $6.7 million or 23.3 percent), occupancy expense (up $1.0 million or 20.1 percent) and was primarily due to the acquisition of Peoples First.  One-time merger costs included in the second quarter of 2010 were $1.7 million. The increase from the prior quarter was due to an increase in personnel costs (up $0.6 million or 1.8 percent) and other operating expense (up $3.9 million or 16.8 percent).

For the six months ended June 30, 2010, and 2009, the effective income tax rates were approximately 11 percent and 19 percent, respectively. Because of the reduced level of pre-tax income in 2010, the tax exempt interest income and the utilization of tax credits (new market tax credits, worker opportunity tax credits, and historical tax credits) had a significant impact on the effective tax rate. 

About Hancock Holding Company

Hancock Holding Company — parent company of Hancock Bank (Mississippi), Hancock Bank of Louisiana, and Hancock Bank of Alabama — had assets of approximately $8.5 billion as of June 30, 2010. Founded in 1899, Hancock Bank consistently ranks as one of the country's strongest, safest financial institutions, according to BauerFinancial, Inc. More corporate information and e-banking are available at www.hancockbank.com.

The Hancock Holding Company logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=2758

"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: Congress passed the Private Securities Litigation Act of 1995 in an effort to encourage corporations to provide information about companies' anticipated future financial performance. This act provides a safe harbor for such disclosure, which protects the companies from unwarranted litigation if actual results are different from management expectations. This release contains forward-looking statements and reflects management's current views and estimates of future economic circumstances, industry conditions, company performance, and financial results. These forward-looking statements are subject to a number of factors and uncertainties which could cause the Company's actual results and experience to differ from the anticipated results and expectations expressed in such forward-looking statements.

CONTACT:  Hancock Holding Company
          Carl J. Chaney, President and Chief Executive Officer
          Michael M. Achary, E.V.P. and Chief Financial Officer
          Paul D. Guichet, V.P. Investor Relations
          800.522.6542
          228.563.6559