News Details

GULFPORT, Miss., July 25, 2013 (GLOBE NEWSWIRE) -- Hancock Holding Company (Nasdaq:HBHC) today announced its financial results for the second quarter of 2013. Net income was $46.9 million, or $.55 per diluted common share, compared to $48.6 million, or $.56, in the first quarter of 2013. Net income was $39.3 million, or $.46 per diluted common share, in the second quarter of 2012, which included pre-tax merger-related costs of $11.9 million.

Highlights of the Company's second quarter of 2013 results:

• Approximately $245 million linked-quarter net loan growth, or 9% annualized, and $760 million, or 7%, year-over-year loan growth (each excluding the FDIC-covered portfolio).
• Core net interest income (TE) and net interest margin (NIM) relatively stable, growth in fee income, led to improved core revenue.
• Continued improvement in overall asset quality metrics.
• Initiated 5% common stock buyback in May through an accelerated share repurchase (ASR) program, receiving 2.8 million shares to-date.

(The company defines its core results as reported results less the impact of net purchase accounting adjustments.)

"The second quarter's performance reflected an improvement in our core results, a trend we expect to build on in the future," said Hancock's President and Chief Executive Officer Carl J. Chaney. "Coupled with the ongoing implementation of the expense and efficiency initiative announced last quarter, we believe our Company is becoming better positioned to operate in both today's economic environment as well as an eventual sustained, positive turn in the overall economy." 

Return on average assets (ROA) was 0.99% for the second quarter of 2013, slightly down from 1.03% in the first quarter of 2013. ROA was 1.00% in the second quarter a year ago on an operating basis, which excludes tax-effected merger-related expenses in that period. 

Total assets were $18.9 billion at June 30, 2013, a decrease of less than 1% from $19.1 billion at March 31, 2013. 

Loans

Total loans at June 30, 2013 were $11.7 billion, up $199 million from March 31, 2013. Excluding the FDIC-covered portfolio, which declined $46 million during the second quarter of 2013, total loans increased $245 million, or 2.2% linked-quarter. The largest component of net growth during the quarter was in the commercial and industrial (C&I) portfolio which was up $228 million linked-quarter. Residential mortgage loans increased approximately $30 million, while construction and land development (C&D) loans continued to decline during the quarter. New loan activity in all markets across the Company's footprint contributed to the solid loan growth this quarter. 

For the second quarter of 2013, average total loans were $11.6 billion, up $93 million from the first quarter of 2013. 

Excluding the FDIC-covered portfolio, total loans were up $760 million, or 7%, from a year earlier.

Deposits

Total deposits at June 30, 2013 were $15.2 billion, down $97 million, or less than 1%, from March 31, 2013. Average deposits for the second quarter of 2013 were $15.2 billion, down $101 million, or less than 1%, from the first quarter of 2013. 

Noninterest-bearing demand deposits (DDAs) totaled $5.3 billion at June 30, 2013, down $78 million, or 1%, compared to March 31, 2013. The decline mainly reflects the movement from DDAs to sweep time deposit products for a few commercial customers. DDAs comprised 35% of total period-end deposits at June 30, 2013. 

Time deposits (CDs) totaled $2.4 billion at June 30, 2013, up $151 million, or 7%, from March 31, 2013. Excluding the impact from the $253 million increase in sweep time deposit product balances, CDs were down $102 million, or 5%, reflecting mainly the impact of the low rate environment for reinvestment opportunities on renewals.

Interest-bearing public fund deposits totaled $1.4 billion at June 30, 2013, down $118 million, or 8%, linked-quarter. As noted previously, public fund deposits typically reflect higher balances at year-end with subsequent reductions beginning in the first quarter and continuing into the second quarter.

Interest-bearing transaction and savings deposits totaled $6.0 billion at June 30, 2013, down $52 million, or less than 1%, compared to March 31, 2013. 

Asset Quality

Non-performing assets (NPAs) totaled $216 million at June 30, 2013, down $13 million from $229 million at March 31, 2013. Non-performing assets as a percent of total loans, foreclosed and surplus real estate (ORE) and other foreclosed assets was 1.84% at June 30, 2013, compared to 1.98% at March 31, 2013. The decrease in overall NPAs during the second quarter reflects a net reduction of $7.4 million in ORE properties and a $5.4 million reduction in non-performing loans. 

Future levels of ORE may be volatile in the near term due to ongoing activity related to the covered portfolio and the anticipated closings of certain bank locations in connection with the efficiency initiative.

The Company's total allowance for loan losses was $138.0 million at June 30, 2013, compared to $137.8 million at March 31, 2013.  The ratio of the allowance to period-end loans was 1.18% at June 30, 2013, down slightly from 1.20% at March 31, 2013. The allowance maintained on the originated portion of the loan portfolio totaled $76.4 million, or 0.93% of related loans, at June 30, 2013, up from $75.5 million, or 1.02%, at March 31, 2013.   

Net charge-offs from the non-covered loan portfolio were $7.0 million, or 0.24% of average total loans on an annualized basis in the second quarter of 2013 compared to $6.6 million, or 0.23% of average total loans in the first quarter of 2013. 

During the second quarter of 2013, Hancock recorded a total provision for loan losses of $8.3 million, down from $9.6 million in the first quarter of 2013. The provision for non-covered loans was $7.9 million in the second quarter of 2013, compared to $3.0 million in the first quarter of 2013. The increase was related in part to the increased volume of new loans originated during the second quarter. 

The Company recorded $1.4 million of impairment on certain pools of covered loans during the second quarter of 2013, with a related increase of $1.0 million in the Company's FDIC loss share receivable. The net provision from the covered portfolio was $.4 million in the second quarter of 2013 compared to $6.6 million for the first quarter of 2013. As a reminder, the first quarter provision for covered loans included approximately $6.5 million of impairment related to changes in the estimated timing of cash flows which does not result in an offsetting impact on the loss share receivable. 

Net Interest Income

Net interest income (TE) for the second quarter of 2013 was $171.8 million, down $4.9 million from the first quarter of 2013. Average earning assets were $16.5 billion in the second quarter of 2013, virtually unchanged from the first quarter of 2013. 

Approximately $4.4 million of the decline was related to a lower level of total purchase-accounting loan accretion on acquired loans in the second quarter, mainly related to the volatility from excess cash recoveries. The slide presentation referenced below includes detailed information on expected loan accretion and excess cash recoveries. Approximately $7.5 million ($.06 per diluted common share) of excess cash recoveries were included in the first quarter's results, while approximately $3.1 million ($.02 per diluted common share) was included in the second quarter's results. Excess cash recoveries include cash collected on certain zero carrying value acquired loan pools. 

The net interest margin (TE) was 4.17% for the second quarter of 2013, down 15 basis points (bps) from 4.32% in the first quarter of 2013. The core margin of 3.38% (reported net interest income (TE) excluding total net purchase accounting adjustments, annualized, as a percent of average earning assets) compressed approximately 3 bps during the second quarter of 2013, mainly related to the continued decline in the core loan yield. The margin was favorably impacted from the investment of excess liquidity discussed last quarter and a 3 bps reduction in the total cost of funds. 

The slide presentation referenced below includes additional information on historical and expected future levels of purchase accounting adjustments.

Noninterest Income

Noninterest income totaled $63.9 million for the second quarter of 2013, up $3.7 million, or 6%, from the first quarter of 2013. 

Service charges on deposits totaled $19.9 million for the second quarter of 2013, up $.8 million, or 4%, from the first quarter of 2013. The linked-quarter increase partly reflects the impact of two additional business days in the second quarter.

Trust, investment and annuity fees, and insurance fees totaled $19.8 million, up $2.6 million, or 15%, from the first quarter of 2013. The linked-quarter increase reflects some seasonality in these lines of business, in addition to the impact of higher stock market values. 

Bankcard fees and ATM fees totaled $11.4 million, up $.3 million, or 3%, from the first quarter of 2013, reflecting additional activity during the second quarter.

Fees from secondary mortgage operations totaled $4.1 million for the second quarter of 2013, down $.2 million, or 6%, linked-quarter. 

Noninterest Expense & Taxes

Noninterest expense for the second quarter of 2013 totaled $162.3 million, up $2.6 million, or 2%, from the first quarter of 2013. The overall increase is mainly related to a $2.6 million increase in other real estate (ORE) expense. ORE expense, included in other operating expense, totaled $3.4 million in the second quarter of 2013, compared to $.7 million in the first quarter of 2013.

Total personnel expense, the largest component of the Company's expense base, was $87.6 million in the second quarter of 2013, down slightly from $87.9 million in the first quarter of 2013. 

Despite the increase in overall expenses, the Company remains on track to achieve its efficiency and expense reduction target for the first quarter of 2014. In May of 2013, the Company announced the planned closing of approximately 40 branch locations across its 5-state footprint as part of the expense reduction initiative. As discussed below, the Company announced earlier this week the sale of 10 of these 40 branch locations. A significant portion of the cost savings targeted for the first quarter of 2014 will be derived from these closures and sales. Currently the Company plans to complete the majority of branch closings on August 30, 2013, with the remaining branches scheduled to close or be sold by year-end. Management expects one-time costs associated with the branch closures and sales, to be booked in the third quarter of 2013. These costs are expected to be lower than the previous guidance of between $18 and $22 million. The branch sales, which are subject to regulatory approvals and certain closing conditions, will be reflected in Hancock's fourth quarter 2013 financial results. The buyers expect to acquire approximately $54 million in loans and $60 million in deposits booked in the 10 retail branches. 

The effective income tax rate for the second quarter of 2013 was 25%, unchanged from the first quarter of 2013. Management expects the effective tax rate to approximate 26-27% for 2013. The effective income tax rate continues to be less than the statutory rate of 35% due primarily to tax-exempt income and tax credits. 

Capital

Common shareholders' equity totaled $2.3 billion at June 30, 2013, down almost $132 million from March 31, 2013. The tangible common equity (TCE) ratio declined 62 bps to 8.52% at June 30, 2013. The linked-quarter decline mainly reflects the $115 million (63 bps) used in May of 2013 to execute an accelerated share repurchase (ASR) program in conjunction with the previously announced program to repurchase up to 5% of the Company's outstanding common stock. Additionally, while the Company continued to add to its strong capital base through retained earnings, accumulated other comprehensive income (a component of equity) declined $47 million (26 bps) from March 31, 2013. The decline mainly reflects the impact of increased market rates on the valuation of the securities portfolio.

Management continues to review the strategic opportunities presented by Hancock's strong capital position, including additional stock buybacks, organic growth, acquisitions or increased dividends. Additional capital ratios are included in the financial tables.

Near Term EPS Guidance

Management expects earnings to remain flat to slightly down from current levels for the remainder of 2013, as expected declines and volatility in accretion levels on the acquired portfolios continue to impact reported results. 

Conference Call and Slide Presentation

Management will host a conference call for analysts and investors at 9:00 a.m. Central Time on Friday, July 26, 2013 to review the results. A live listen-only webcast of the call will be available under the Investor Relations section of Hancock's website at www.hancockbank.com. A slide presentation related to second quarter results is also posted as part of the webcast link. To participate in the Q&A portion of the call, dial (877) 564-1219 or (973) 638-3429. An audio archive of the conference call will be available under the Investor Relations section of our website. A replay of the call will also be available through August 1, 2013 by dialing (855) 859-2056 or (404) 537-3406, passcode 14843195. 

About Hancock Holding Company

Hancock Holding Company, the parent company of Hancock Bank and Whitney Bank, operates across a Gulf south corridor comprising south Mississippi; southern and central Alabama; southern Louisiana; the northern, central, and Panhandle regions of Florida; and Houston, Texas. The Hancock Holding Company family of financial services companies also includes Hancock Investment Services, Inc.; Hancock Insurance Agency and Whitney Insurance Agency, Inc.; corporate trust offices in Gulfport and Jackson, Mississippi, New Orleans and Baton Rouge, Louisiana, and Orlando, Florida; and Harrison Finance Company. Additional information is available at www.hancockbank.com and www.whitneybank.com.

Forward-Looking Statements

This news release contains "forward-looking statements" within the meaning of section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended, and we intend such forward-looking statements to be covered by the safe harbor provisions therein and are including this statement for purposes of invoking these safe-harbor provisions.  Forward-looking statements provide projections of results of operations or of financial condition or state other forward-looking information, such as expectations about future conditions and descriptions of plans and strategies for the future.  

Forward-looking statements that we may make include, but may not be limited to, comments with respect to future levels of economic activity in our markets, loan growth, deposit trends, credit quality trends, future sales of nonperforming assets, net interest margin trends, future expense levels and the ability to achieve reductions in non-interest expense or other cost savings, projected tax rates, future profitability, improvements in expense to revenue (efficiency) ratio, purchase accounting impacts such as accretion levels, the impact of the branch rationalization process, and the financial impact of regulatory requirements.

Hancock's ability to accurately project results or predict the effects of future plans or strategies is inherently limited.  Although Hancock believes that the expectations reflected in its forward-looking statements are based on reasonable assumptions, actual results and performance could differ materially from those set forth in the forward-looking statements.  Factors that could cause actual results to differ from those expressed in Hancock's forward-looking statements include, but are not limited to, those risk factors outlined in Hancock's public filings with the Securities and Exchange Commission, which are available at the SEC's internet site (http://www.sec.gov).

You are cautioned not to place undue reliance on these forward-looking statements.  Hancock does not intend, and undertakes no obligation, to update or revise any forward-looking statements, whether as a result of differences in actual results, changes in assumptions or changes in other factors affecting such statements, except as required by law.

CONTACT: Trisha Voltz Carlson
         SVP, Investor Relations Manager
         504.299.5208
         trisha.carlson@hancockbank.com