UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
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Transition Report Pursuant to Section 13 or 15(d)of the Securities Exchange Act of 1934
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For Quarter Ending September 30, 2002
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Commission File Number 0-13089
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HANCOCK HOLDING COMPANY
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(Exact name of registrant as specified in its charter)
MISSISSIPPI 64-0693170
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
ONE HANCOCK PLAZA, P.O. BOX 4019, GULFPORT, MISSISSIPPI 39502
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(Address of principal executive offices) (Zip Code)
(228) 868-4872
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(Registrant's telephone number, including area code)
NOT APPLICABLE
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(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
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15,493,900 common shares were outstanding as of November 12, 2002 for financial statement purposes.
HANCOCK HOLDING COMPANY
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INDEX
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PART I. FINANCIAL INFORMATION PAGE NUMBER
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ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets --
September 30, 2002 and December 31, 2001 3
Condensed Consolidated Statements of Earnings --
Three Months and Nine Months Ended September 30, 2002 and 2001 4
Condensed Statements of Common Stockholder's Equity 5
Condensed Consolidated Statements of Cash Flows --
Nine Months Ended September 30, 2002 and 2001 6
Notes to Condensed Consolidated Financial Statements 7
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 13
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk 20
ITEM 4. Controls and Procedures 21
PART II. OTHER INFORMATION
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ITEM 6. Exhibits and Reports on Form 8-K 22
SIGNATURES 23
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CERTIFICATIONS 24
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HANCOCK HOLDING COMPANY AND SUBSIDIARIES
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CONDENSED CONSOLIDATED BALANCE SHEETS
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(amounts in thousands)
(Unaudited)
September 30, December 31,
2002 2001 *
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ASSETS:
Cash and due from banks (non-interest bearing) $ 153,422 $ 164,808
Interest-bearing time deposits with other banks 4,820 8,433
Securities available for sale (amortized cost of
$1,244,779 and $1,078,129) 1,273,492 1,085,425
Securities held to maturity (fair value of $249,471
and $292,650) 236,439 287,370
Federal funds sold 132,500 92,000
Loans, net of unearned income 2,020,171 1,890,039
Less: Allowance for loan losses (33,315) (34,417)
-------------------- -------------------
Loans, net 1,986,856 1,855,622
Property and equipment, net of accumulated
depreciation of $65,352 and $62,912 70,288 66,266
Other real estate, net 7,178 3,003
Accrued interest receivable 26,234 27,860
Goodwill and other intangibles 53,432 53,910
Other assets 27,093 35,148
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TOTAL ASSETS $ 3,971,754 $ 3,679,845
==================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits:
Non-interest bearing demand $ 657,211 $ 624,058
Interest-bearing savings, NOW, money market
and time 2,621,082 2,415,676
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Total deposits 3,278,293 3,039,734
Federal funds purchased 900 125
Securities sold under agreements to repurchase 177,462 161,208
Other liabilities 36,583 22,556
Long-term notes 51,178 51,606
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TOTAL LIABILITIES 3,544,416 3,275,229
CONVERTIBLE PREFERRED STOCK:
Preferred Stock - $20 par value per share; 50,000,000
shares authorized and 1,658,275 issued 37,069 37,069
COMMON STOCKHOLDERS' EQUITY:
Common Stock-$3.33 par value per share; 75,000,000
shares authorized and 16,608,120 issued 55,305 55,305
Capital surplus 195,892 177,736
Retained earnings 148,476 141,099
Unrealized gain (loss) on securities available for
sale, net 18,664 4,742
Unearned compensation (674) (433)
Treasury stock (792,517 and 437,032 shares, respectively) (27,394) (10,902)
-------------------- -------------------
TOTAL COMMON STOCKHOLDERS' EQUITY 390,269 367,547
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TOTAL LIABILITIES, PREFERRED STOCK
AND COMMON STOCKHOLDERS' EQUITY $ 3,971,754 $ 3,679,845
==================== ===================
* The balance sheet at December 31, 2001 has been taken from the audited balance sheet at that date.
See notes to unaudited condensed conslidated financial statements.
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
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CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
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(UNAUDITED)
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(amounts in thousands except per share)
Three Months Ended Sept. 30, Nine Months Ended Sept. 30,
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2002 2001 2002 2001
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INTEREST INCOME:
Loans $ 40,060 $ 43,320 $ 117,567 $ 121,154
U. S. Treasury securities 416 596 1,189 2,604
Obligations of U. S. government agencies 6,322 7,033 19,577 18,059
Obligations of states and political subdivisions 2,630 2,823 8,071 7,653
Mortgage-backed securities 1,374 2,240 4,414 5,956
CMOs 6,796 5,033 20,360 13,347
Federal funds sold 173 865 1,094 4,695
Other investments 632 480 1,807 1,398
----------- ------------ ------------ -------------
Total interest income 58,403 62,390 174,079 174,866
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INTEREST EXPENSE:
Deposits 16,399 25,528 51,774 73,718
Federal funds purchased and securities sold
under agreements to repurchase 574 1,212 1,675 4,422
Notes and other interest-bearing liabilities 624 845 1,842 980
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Total interest expense 17,597 27,585 55,291 79,120
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NET INTEREST INCOME 40,806 34,805 118,788 95,746
Provision for loan losses 3,597 2,088 13,804 6,116
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NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 37,209 32,717 104,984 89,630
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NON-INTEREST INCOME
Service charges on deposit accounts 11,080 7,635 31,095 21,093
Other service charges, commissions and fees 5,085 3,863 16,587 12,124
Other 1,509 1,874 4,901 4,393
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Total non-interest income 17,674 13,372 52,583 37,610
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NON-INTEREST EXPENSE
Salaries and employee benefits 19,510 17,537 58,571 48,883
Net occupancy expense of premises 2,220 2,343 6,331 5,959
Equipment rentals, depreciation and maintenance 2,260 2,045 6,319 5,766
Amortization of intangibles 188 1,265 563 3,084
Other 10,985 8,881 31,036 24,045
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Total non-interest expense 35,163 32,071 102,820 87,737
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EARNINGS BEFORE INCOME TAXES 19,720 14,018 54,747 39,503
Income taxes 6,430 4,283 17,453 12,234
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NET EARNINGS 13,290 9,735 37,294 27,269
PREFERRED DIVIDEND REQUIREMENT 663 663 1,990 663
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NET EARNINGS AVAILABLE TO COMMON STOCKHOLDERS $ 12,627 $ 9,072 $ 35,304 $ 26,606
=========== ============ ============ =============
BASIC EARNINGS PER COMMON SHARE $ 0.80 $ 0.56 $ 2.23 $ 1.65
=========== ============ ============ =============
DILUTED EARNINGS PER COMMON SHARE $ 0.78 $ 0.57 $ 2.18 $ 1.65
=========== ============ ============ =============
DIVIDENDS PAID PER COMMON SHARE $ 0.20 $ 0.19 $ 0.60 $ 0.56
=========== ============ ============ =============
WEIGHTED AVG. COMMON SHARES OUTSTANDING-BASIC 15,709 16,061 15,825 16,085
=========== ============ ============ =============
WEIGHTED AVG. COMMON SHARES OUTSTANDING-DILUTED 17,047 17,214 17,116 16,494
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See notes to unaudited condensed consolidated financial statements
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
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CONDENSED STATEMENTS OF COMMMON STOCKHOLDERS' EQUITY
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(UNAUDITED)
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(amounts in thousands except per share)
Common Capital Retained Available For Unearned Treasury
Amount Surplus Earnings Sale, Net Compensation Stock
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Balance, January 1, 2000 $ 36,872 $ 196,047 $ 92,153 $ (13,764) $ (808) $ (73)
Net earnings 36,824
Cash dividends - $0.83 per share (13,611)
Change in unrealized gain (loss) on
securities available for sale, net 12,303
Transactions relating to restricted
stock grants, net (36)
Purchase of treasury stock, net (23) (4,494)
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Balance, December 31, 2000 36,872 196,024 115,366 (1,461) (844) (4,567)
Net earnings 39,255
Cash dividends - $.75 per share (12,195)
Cash dividends - $0.80 per preferred share (1,327)
Change in unrealized gain (loss) on
securities available for sale, net 6,203
Transactions relating to restricted
stock grants, net 411
Purchase of treasury stock, net 146 (6,335)
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Balance, December 31, 2001 36,872 196,170 141,099 4,742 (433) (10,902)
Net earnings 37,294
Cash dividends - $0.60 per common share (9,452)
Cash dividends - $1.20 per preferred share (1,990)
50% Common Stock Dividend 18,433 (18,475)
Change in unrealized gain (loss) on
securities available for sale, net 13,922
Transactions relating to restricted
stock grants, net (241)
Purchase of treasury stock, net (278) (16,492)
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Balance, September 30, 2002 $ 55,305 $ 195,892 $ 148,476 $ 18,664 $ (674) $ (27,394)
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See notes to unaudited condensed consolidated financial statements
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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UNAUDITED
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(amounts in thousands)
Nine Months Ended September 30,
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2002 2001
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 37,294 $ 27,269
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation 4,784 4,499
Amortization of software 1,671 1,862
Provision for loan losses 13,804 6,116
Provision for losses on other real estate owned 1,518 85
Gain on sales of securities (5) (16)
Loss on sale of other real estate owned 125 (24)
Decrease (Increase) in interest receivable 1,626 (470)
Amortization of intangible assets 563 3,084
Increase in accrued expenses 9,924 6,621
Increase in other liabilities 7,573 2,611
Decrease in interest payable (3,470) (1,171)
Other, net (4,897) (11,092)
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Net cash provided by operating activities 70,510 39,374
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CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease (increase) in interest-bearing time deposits 3,613 (5,204)
Proceeds from maturities of securities held
to maturity 50,431 106,228
Proceeds from maturities of securities available
for sale 521,283 406,704
Purchase of securities available for sale (687,433) (710,344)
Net decrease (increase) in federal funds sold (40,500) 32,775
Net (increase) decrease in loans (150,845) 5,812
Purchase of property, equipment and software, net (7,863) (9,214)
Proceeds from sales of other real estate 2,469 1,914
Net cash used in connection with purchase transaction - (52)
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Net cash used in investing activities (308,845) (171,381)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 238,559 171,406
Dividends paid (11,442) (9,831)
Net increase in federal funds purchased and
securities sold under agreements to repurchase
and other temporary funds 17,029 10,414
Treasury stock transactions (16,769) (3,453)
Reductions of long-term notes (428) (20,425)
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Net cash provided by (used in) financing activities 226,949 148,111
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NET (DECREASE) INCREASE IN CASH AND DUE FROM BANKS (11,386) 16,104
CASH AND DUE FROM BANKS, BEGINNING 164,808 130,380
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CASH AND DUE FROM BANKS, ENDING $ 153,422 $ 146,484
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See notes to unaudited condensed consolidated financial statements.
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 accounting principles generally accepted in the United States of America 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 accounting principles generally accepted in the United States of America 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 2001 Annual Report to Shareholders.
GOODWILL AND OTHER INTANGIBLESIn June 2001 the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141 "Business Combinations" and No. 142 "Goodwill and Other Intangibles". These Statements provide that, among other things, (1) all business combinations on or after July 1, 2001 be accounted for as purchases, (2) any related goodwill on those acquisitions does not require amortization, but is subject to a periodic impairment test and that (3) goodwill on any of the Company's acquisitions prior to July 1, 2001 not be amortized after January 1, 2002, but is subject to a periodic impairment test. The Company has performed a transitional fair value based impairment test on its goodwill and determined that the fair value exceeded the recorded value at December 31, 2001. No impairment loss, therefore, was recorded on January 1, 2002. There was no amortization of goodwill recorded in the nine months ended September 30, 2002. Amortization of goodwill by the Company amounted to approximately $3.6 million in the year ended December 31, 2001 and is not deductible for income tax purposes. The Company has approximately $5.5 million of other intangible assets that will continue to amortize.
Following is a reconciliation of net earnings and basic and diluted net earnings per share as reported to the amounts that would have been reported if SFAS No 142 had been effective as of January 1, 2001 and the amortization of goodwill had been discontinued as of that date.
(Amounts in thousands)
Three Months Ended Sept. 30, Nine Months Ended Sept. 30,
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2002 2001 2002 2001
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Net earnings $ 13,290 $ 9,735 $ 37,294 $ 27,269
Add back goodwill amortization - 902 - 2,704
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Adjusted net earnings $ 13,290 $ 10,637 $ 37,294 $ 29,973
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Basic earnings per common share
Reported net earnings $ 0.80 $ 0.56 $ 2.23 $ 1.65
Goodwill amortization - 0.06 - 0.17
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Adjusted net earnings $ 0.80 $ 0.62 $ 2.23 $ 1.82
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Diluted earnings per common share
Reported net earnings $ 0.78 $ 0.57 $ 2.18 $ 1.65
Goodwill amortization - 0.05 - 0.16
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Adjusted net earnings $ 0.78 $ 0.62 $ 2.18 $ 1.82
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COMPREHENSIVE EARNINGS
Following is a summary of the Company's comprehensive earnings for the three months and nine months ended
September 30, 2002 and 2001.
(Amounts in thousands)
Three Months Ended Sept. 30, Nine Months Ended Sept. 30,
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2002 2001 2002 2001
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Net earnings $ 13,290 $ 9,735 $ 37,294 $ 27,269
Other comprehensive income
(net of income tax):
Unrealized holding gains on
securities available for sale 3,948 10,352 13,922 14,826
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Total Comprehensive Earnings $17,238 $20,087 $51,216 $42,095
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ACQUISITIONSOn July 1, 2001 the Company acquired 100% of the common stock of Lamar Capital Corporation (LCC), Purvis, Mississippi and its subsidiaries, The Lamar Bank and Southern Financial Services, Inc. The acquisition was accounted for as a purchase and the results of LCC's operations are included in the consolidated financial statements of the Company from the date of acquisition. LCC operated 9 banking offices in southern Mississippi. The Company acquired LCC in order to expand the geographic area in which its services are offered. The aggregate price was approximately $51.3 million, including cash of $14.2 million and 1,658,275 shares of manditorily redeemable convertible preferred stock with a fair value of $37.1 million at December 31, 2001.
The unaudited pro forma consolidated results of operations give effect to the acquisition of LCC as though it had occurred on January 1, 2001 (in thousands, except per share data):
Three Months Ended Sept. 30, Nine Months Ended Sept. 30,
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2002 2001 2002 2001
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Interest Income $58,403 $62,390 $ 174,079 $ 190,136
Interest expense 17,597 27,585 55,291 88,713
Provision for loan losses 3,597 2,088 13,804 9,387
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Net interest income after provision for loan losses 37,209 32,717 104,984 92,036
Net earnings available to common stockholders $12,627 $ 9,072 $ 35,304 $ 23,939
Basic earnings per common share $ 0.80 $ 0.56 $ 2.23 $ 1.49
Diluted earnings per common share $ 0.78 $ 0.57 $ 2.18 $ 1.49
STOCK SPLITOn July 12, 2002 the Company's Board of Directors declared a three-for-two stock split in the form of a 50% common stock dividend. The additional shares were payable August 5, 2002 to shareholders of record at the close of business on July 23, 2002.
All information concerning earnings per share, dividends per share, and number of shares outstanding have been adjusted to give effect to this split.
SELECTED FINANCIAL DATAThe following tables present selected comparative financial data. All share and per share data has been restated to give effect of a 50% stock dividend made August 5, 2002.
(amounts in thousands, except per share data)
Three Months Ended Nine Months Ended
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9/30/2002 9/30/2001 9/30/2002 9/30/2001
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Per Common Share Data
Earnings per share:
Basic $0.80 $0.56 $2.23 $1.65
Diluted $0.78 $0.57 $2.18 $1.65
Earnings per share before amortization of
purchased intangibles:
Basic $0.82 $0.64 $2.27 $1.85
Diluted $0.79 $0.64 $2.21 $1.84
Cash dividends per share $0.20 $0.19 $0.60 $0.56
Book value per share (period end) $25.15 $23.26 $25.15 $23.26
Weighted average number of shares:
Basic 15,709 16,061 15,825 16,085
Diluted 17,047 17,214 17,116 16,494
Period end number of shares 15,517 15,982 15,517 15,982
Market data:
High closing price $49.73 $29.33 $49.73 $29.66
Low closing price $39.33 $25.99 $27.56 $23.33
Period end closing price $46.97 $27.05 $46.97 $27.05
Trading volume 3,690 1,042 7,054 2,404
(amounts in thousands, except per share data)
Three Months Ended Nine Months Ended
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9/30/2002 9/30/2001 9/30/2002 9/30/2001
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Performance Ratios
Return on average assets 1.36% 1.06% 1.30% 1.09%
Return on average common equity 13.30% 10.60% 12.87% 10.29%
Earning asset yield (TE) 6.77% 7.64% 6.81% 7.88%
Total cost of funds 1.97% 3.27% 2.10% 3.46%
Net interest margin (TE) 4.80% 4.38% 4.71% 4.42%
Non-interest expense as a percent of total revenue (TE)
before amortization of purchased intangibles
and securities transactions 57.97% 61.49% 57.78% 60.99%
Average common equity as a percent of average total assets 10.24% 9.98% 10.09% 10.63%
Leverage ratio (period end) 9.30% 8.42% 9.30% 8.42%
FTE Headcount 1,773 1,727 1,773 1,727
Asset Quality Information
Non-accrual loans $12,373 $16,214 $12,373 $16,214
Restructured loans - - - -
Other real estate 7,178 3,161 7,178 3,161
Total nonperforming assets $19,551 $19,375 $19,551 $19,375
Nonperforming assets as a percent of loans and ORE 0.96% 1.02% 0.96% 1.02%
Loans 90 days past due $5,234 $7,648 $5,234 $7,648
Loans 90 days past due as a percent of loans 0.26% 0.40% 0.26% 0.40%
Nonperforming assets + loans 90 days past due to loans and ORE 1.22% 1.42% 1.22% 1.42%
Net charge-offs $2,547 $3,114 $14,506 $7,142
Net charge-offs as a percent of average loans 0.51% 0.65% 1.01% 0.54%
Allowance for loan losses $33,315 $36,122 $33,315 $36,122
Allowance for loan losses as a percent of period end loans 1.65% 1.90% 1.65% 1.90%
Allowance for loan losses to NPAs + loans 90 days past due 134.42% 133.67% 134.42% 133.67%
Provision for loan losses $3,597 $2,088 $13,804 $6,116
Provision for loan losses to net charge-offs 141.23% 67.06% 95.16% 85.64%
Average Balance Sheet
Total loans 1,985,726 1,902,652 1,928,893 1,758,787
Securities 1,511,750 1,337,757 1,499,953 1,158,392
Short-term investments 46,478 108,512 93,988 141,093
Earning assets 3,543,954 3,348,921 3,522,834 3,058,271
Allowance for loan losses (32,607) (36,688) (32,897) (31,377)
Other assets 360,824 336,340 349,073 306,658
Total assets $3,872,171 $3,648,573 $3,839,011 $3,333,552
Non-interest bearing deposits $616,347 $585,893 $616,256 $551,026
Interest bearing transaction deposits 1,427,413 1,176,022 1,414,671 1,080,717
Time deposits 1,134,825 1,236,775 1,131,613 1,128,793
Total interest bearing deposits 2,562,238 2,412,797 2,546,284 2,209,510
Total deposits 3,178,585 2,998,690 3,162,540 2,760,535
Other borrowed funds 228,757 227,267 224,569 183,633
Other liabilities 31,151 25,179 27,506 23,898
Preferred stock 37,069 33,171 37,069 11,179
Common shareholders' equity 396,609 364,266 387,326 354,306
Total liabilities, preferred stock & common equity $3,872,171 $3,648,573 $3,839,011 $3,333,552
(amounts in thousands, except per share data)
Three Months Ended Nine Months Ended
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9/30/2002 9/30/2001 9/30/2002 9/30/2001
---------------------------- ----------------------------
Period end Balance Sheet
Commercial/real estate loans $1,014,565 $914,500 $1,014,565 $914,500
Mortgage loans 271,891 235,024 271,891 235,024
Direct consumer loans 503,123 549,664 503,123 549,664
Indirect consumer loans 185,882 158,692 185,882 158,692
Finance Company loans 44,711 39,230 44,711 39,230
Total loans 2,020,171 1,897,110 2,020,171 1,897,110
Securities 1,509,931 1,383,742 1,509,931 1,383,742
Short-term investments 137,320 56,081 137,320 56,081
Earning assets 3,667,422 3,336,933 3,667,422 3,336,933
Allowance for loan losses (33,315) (36,122) (33,315) (36,122)
Other assets 337,647 334,138 337,647 334,138
Total assets $3,971,754 $3,634,948 $3,971,754 $3,634,948
Non-interest bearing deposits $657,211 $588,595 $657,211 $588,595
Interest bearing transaction deposits 1,462,363 1,197,310 1,462,363 1,197,310
Time deposits 1,158,720 1,205,611 1,158,720 1,205,611
Total interest bearing deposits 2,621,082 2,402,921 2,621,082 2,402,921
Total deposits 3,278,293 2,991,516 3,278,293 2,991,516
Other borrowed funds 232,067 206,438 232,067 206,438
Other liabilities 34,055 32,146 34,055 32,146
Preferred stock 37,069 33,171 37,069 33,171
Common shareholders' equity 390,269 371,677 390,269 371,677
Total liabilities, preferred stock & common equity $3,971,754 $3,634,948 $3,971,754 $3,634,948
Net Charge-Off Information
Net charge-offs:
Commercial/real estate loans $256 $716 $7,663 $1,527
Mortgage loans 1 105 - 106
Direct consumer loans 1,420 1,665 3,987 3,784
Indirect consumer loans 405 359 1,518 924
Finance company loans 465 269 1,338 801
Total net charge-offs $2,547 $3,114 $14,506 $7,142
Net charge-offs to average loans:
Commercial/real estate loans 0.10% 0.31% 1.05% 0.24%
Mortgage loans 0.00% 0.18% 0.00% 0.06%
Direct consumer loans 1.12% 1.19% 1.06% 1.05%
Indirect consumer loans 0.87% 0.93% 1.17% 0.88%
Finance Company loans 4.19% 2.89% 4.40% 3.33%
Total net charge-offs to average loans 0.51% 0.65% 1.01% 0.54%
(amounts in thousands, except per share amounts)
Three Months Ended Nine Months Ended
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9/30/2002 9/30/2001 9/30/2002 9/30/2001
---------------------------- ----------------------------
Average Balance Sheet Composition
Percentage of earning assets/funding sources:
Loans 56.03% 56.81% 54.75% 57.51%
Securities 42.66% 39.95% 42.58% 37.88%
Short-term investments 1.31% 3.24% 2.67% 4.61%
Earning assets 100.00% 100.00% 100.00% 100.00%
Non-interest bearing deposits 17.39% 17.49% 17.49% 18.02%
Interest bearing transaction deposits 40.28% 35.12% 40.16% 35.34%
Time deposits 32.02% 36.93% 32.12% 36.91%
Total deposits 89.69% 89.54% 89.77% 90.26%
Other borrowed funds 6.45% 6.79% 6.37% 6.00%
Other net interest-free funding sources 3.85% 3.67% 3.85% 3.73%
Total funding sources 100.00% 100.00% 100.00% 100.00%
Loan mix:
Commercial/real estate loans 50.56% 48.48% 50.56% 49.39%
Mortgage loans 12.71% 12.37% 12.19% 13.55%
Direct consumer loans 25.26% 29.17% 26.17% 27.28%
Indirect consumer loans 9.25% 8.05% 8.97% 7.96%
Finance Company loans 2.21% 1.94% 2.11% 1.83%
Total loans 100.00% 100.00% 100.00% 100.00%
Average dollars (in thousands)
Loans $1,985,726 $1,902,652 $1,928,893 $1,758,787
Securities 1,511,750 1,337,757 1,499,953 1,158,392
Short-term investments 46,478 108,512 93,988 141,093
Earning assets $3,543,954 $3,348,921 $3,522,834 $3,058,271
Non-interest bearing deposits $616,347 $585,893 $616,256 $551,026
Interest bearing transaction deposits 1,427,413 1,176,022 1,414,671 1,080,717
Time deposits 1,134,825 1,236,775 1,131,613 1,128,793
Total deposits 3,178,585 2,998,690 3,162,540 2,760,535
Other borrowed funds 228,757 227,267 224,569 183,633
Other net interest-free funding sources 136,612 122,964 135,725 114,103
Total funding sources $3,543,954 $3,348,921 $3,522,834 $3,058,271
Loans:
Commercial/real estate loans $1,004,067 $922,344 $975,272 $868,580
Mortgage loans 252,350 235,428 235,190 238,258
Direct consumer loans 501,673 554,920 504,771 479,742
Indirect consumer loans 183,652 153,076 172,971 140,010
Finance Company loans 43,983 36,884 40,689 32,196
Total average loans $1,985,726 $1,902,652 $1,928,893 $1,758,787
The following discussion provides management's analysis of certain factors that have affected the Company's financial condition and operating results during the periods included in the accompanying condensed consolidated financial statements.
CHANGES IN FINANCIAL CONDITIONThe Company manages liquidity through traditional funding sources of core deposits, federal funds, and maturities of loans and securities held to maturity and sales and maturities of securities available for sale.
The following liquidity ratios compare certain assets and liabilities to total deposits or total assets:
September 30, June 30, March 31, December 31,
2002 2002 2002 2001
----------------- ------------------ -------------- --------------
Total securities to total deposits 46.06% 49.76% 45.85% 45.16%
Total loans (net of unearned
income) to total deposits 61.62% 61.10% 59.45% 62.18%
Interest-earning assets
to total assets 92.34% 92.00% 92.22% 91.20%
Interest-bearing deposits
to total deposits 79.95% 80.19% 80.08% 79.47%
Loans and Allowance for Loan LossesThe following table sets forth, for the periods indicated, average net loans outstanding, allowance for loan losses, amounts charged-off and recoveries of loans previously charged-off:
Three Months Ended Sept. 30, Nine Months Ended Sept. 30,
---------------------------------- --------------------------------
2002 2001 2002 2001
--------------- ---------------- --------------- ---------------
Balance of allowance for loan losses
at beginning of period $ 32,265 $ 28,604 $ 34,417 $ 28,604
Balance acquired through acquisition & other - 8,544 (400) 8,544
Provision for loan losses 3,597 2,088 13,804 6,116
Loans charged-off:
Commercial, Real Estate & Mortgage 509 369 8,165 1,310
Direct & Indirect Consumer 1,618 2,491 5,535 5,845
Finance Company 531 825 1,573 2,244
Demand Deposit Accounts 1,454 503 3,613 1,108
--------------- ---------------- --------------- ---------------
Total charge-offs 4,112 4,188 18,886 10,507
--------------- ---------------- --------------- ---------------
Recoveries of loans previously
charged-off:
Commercial, Real Estate & Mortgage 251 36 501 163
Direct & Indirect Consumer 394 513 1,362 1,565
Finance Company 66 473 235 1,512
Demand Deposit Accounts 854 52 2,282 125
--------------- ---------------- --------------- ---------------
Total recoveries 1,565 1,074 4,380 3,365
--------------- ---------------- --------------- ---------------
Net charge-offs 2,547 3,114 14,506 7,142
--------------- ---------------- --------------- ---------------
Balance of allowance for loan losses
at end of period $ 33,315 $ 36,122 $ 33,315 $ 36,122
=============== ================ =============== ===============
The following table sets forth, for the periods indicated, certain ratios related to the Company's charge-offs, allowance for loan losses and outstanding loans:
Three Months Ended Sept. 30, Nine Months Ended Sept. 30,
------------------------------------------------------------------------
2002 2001 2002 2001
---------------- ---------------- ---------------- ----------------
Ratios (%):
Net charge-offs to average net loans 0.51 0.65 1.01 0.54
Net charge-offs to period-end net loans 0.50 0.66 0.72 0.38
Allowance for loan losses to average net loans 1.68 1.90 1.73 2.05
Allowance for loan losses to period-end net loans 1.65 1.90 1.65 1.90
Net charge-offs to loan loss allowance 30.58 34.48 43.54 19.77
Loan loss provision to net charge-offs 141.23 67.06 95.16 85.64
Capital ResourcesThe Company continues to maintain an adequate capital position. The ratios as of September 30, 2002, June 30, 2002, March 31, 2002 and December 31, 2001 are as follows:
September 30, June 30, March 31, December 31,
2002 2002 2002 2001
--------------- -------------- ------------- --------------
Average equity to average assets 10.09% 10.01% 10.05% 10.51%
Total capital to risk-weighted assets (2) 16.80% 17.03% 17.40% 15.99%
Tier 1 capital to risk-weighted 15.48% 15.73% 16.12% 14.74%
assets (3)
Leverage capital to average total assets (4) 9.30% 9.35% 8.44% 9.49%
(1) Equity capital consists of stockholder's equity (excluding unrealized gains/(losses)).
(2) Total capital consists of equity capital less intangible assets plus a limited amount of loan loss allowance.
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. Regulations require a
minimum 4% leverage capital ratio for an entity to be considered adequately capitalized
RESULTS OF OPERATIONSNet earnings increased approximately $710,000 or 5.6% over the second quarter of 2002 and $3.6 million or 36.5% compared to the third quarter of 2001.
On a year-to-date basis net earnings have increased $10.0 million or 36.8% in 2002 as compared to 2001. Following is selected information for comparison:
Three Months Ended Sept. 30, Nine Months Ended Sept. 30,
------------------------------------------------------------------
2002 2001 2002 2001
-------------- --------------- -------------- --------------
Results of Operations:
Return on average assets 1.36 % 1.06 % 1.30 % 1.09 %
Return on average equity 13.30 % 10.60 % 12.87 % 10.29 %
Net Interest Income:
Yield on average interest-earning assets
(tax equivalent) 6.77 % 7.64 % 6.81 % 7.88 %
Cost of average interest-bearing funds 2.50 % 4.15 % 2.67 % 4.42 %
-------------- --------------- -------------- --------------
Net interest spread 4.26 % 3.50 % 4.14 % 3.45 %
============== =============== ============== ==============
Net yield on interest-earning assets
(net interest income on a tax-equivalent basis
divided by average interest-earning assets) 4.80 % 4.38 % 4.71 % 4.42 %
============== =============== ============== ==============
Net Interest IncomeThe third quarter of 2002 showed an increase in net interest income, on a tax-equivalent basis (TE), of $1.1 million, compared to the previous quarter and $6.0 million compared to the same period one year ago. The Company's net interest margin for the three-month period ended September 30, 2002 was 4.80% compared to 4.66% for the previous quarter and 4.38% for the prior year period. The higher level of net interest income (TE) and margin expansion as compared to the previous quarter was due principally to a better earning asset mix related to the third quarter's $69 million of loan growth. Although total deposits were down $29 million from the second quarter, total funding costs were also
down 9 basis points. Redeploying maturing cash flows from the securities portfolio to loans funded the quarter's loan growth. All of the aforementioned actions resulted in an increase in the Company's average loan to deposit ratio to 62.5% in the current quarter from 59.8% in the previous quarter.
Year-to-date net interest income (TE) increased $23.2 million or 23% over the same period last year. The Company's net interest margin for the first nine months of 2002 was 4.71% compared to 4.42% for the same period one year ago. The Company's growth in net interest income (TE) and net interest margin (TE) expansion compared to the same quarter a year ago was primarily due to a $195 million increase in average earning assets, as well as a 130 basis point reduction in total funding costs. The increase in average earning assets was fueled by a $180 million increase in total deposits, which, in turn, funded a $83 million increase in loans. The remaining funds were invested in the Company's security portfolio. The decrease in total funding costs resulted from continued falling market rates, coupled with on-going deposit pricing discipline.
The following tables detail the components of the Company's net interest spread and net interest margin.
Three Months Ended Three Months Ended
-------------------------------------------------------------------------
09/30/02 09/30/01
-------------------------------------------------------------------------
(dollars in thousands) Interest Volume Rate Interest Volume Rate
-------------------------------------------------------------------------
Average Earning Assets
Commercial & real estate loans (TE) $17,224 $1,004,067 6.81% $17,812 $922,344 7.66%
Mortgage loans 4,460 252,350 7.07% 4,458 235,428 7.57%
Consumer loans 16,671 729,308 9.07% 19,203 744,881 10.23%
Loan fees & late charges 2,248 - 0.00% 2,385 - 0.00%
-------------------------------------------------------------------------
Total loans (TE) 40,603 1,985,726 8.12% 43,858 1,902,652 9.16%
US treasury securities 416 50,452 3.27% 596 40,006 5.91%
US agency securities 6,322 538,059 4.70% 7,033 519,793 5.41%
CMOs 6,796 575,653 4.72% 5,033 346,330 5.81%
Mortgage backed securities 1,374 92,096 5.97% 2,240 158,167 5.67%
Municipals (TE) 3,943 219,373 7.19% 4,223 238,290 7.09%
Other securities 622 36,118 6.83% 402 35,170 4.54%
-------------------------------------------------------------------------
Total securities (TE) 19,473 1,511,750 5.15% 19,527 1,337,757 5.84%
Fed funds sold 164 39,638 1.65% 865 102,115 3.36%
Cds with banks 10 5,101 0.80% 77 6,397 4.76%
Other short-term investments 9 1,739 2.16% - - 0.00%
-------------------------------------------------------------------------
Total short-term investments 184 46,478 1.57% 942 108,512 3.44%
Average earning assets yield (TE) $60,260 $3,543,954 6.77% $64,327 $3,348,921 7.64%
Interest-Bearing Liabilities
Interest-bearing transaction deposits $6,114 $1,427,413 1.70% $8,833 $1,176,022 2.98%
Time deposits 10,285 1,134,825 3.60% 16,695 1,236,775 5.36%
-------------------------------------------------------------------------
Total interest bearing deposits 16,399 2,562,238 2.54% 25,528 2,412,797 4.20%
Customer repos 574 172,973 1.32% 1,212 154,640 3.11%
Other borrowings 624 55,784 4.44% 845 72,628 4.61%
-------------------------------------------------------------------------
Total borrowings 1,198 228,757 2.08% 2,056 227,267 3.59%
Total interest bearing liab cost $17,597 $2,790,995 2.50% $27,584 $2,640,064 4.15%
Noninterest-bearing deposits 616,347 585,893
Other net interest-free funding sources 136,612 122,964
Total Cost of Funds $17,597 $3,543,954 1.97% $27,584 $3,348,921 3.27%
Net Interest Spread (TE) $42,663 4.26% $36,743 3.50%
Net Interest Margin (TE) $42,663 $3,543,954 4.80% $36,743 $3,348,921 4.38%
-------------------------------------------------------------------------
Nine Months Ended Nine Months Ended
-------------------------------------------------------------------------
09/30/02 09/30/01
-------------------------------------------------------------------------
(dollars in thousands) Interest Volume Rate Interest Volume Rate
-------------------------------------------------------------------------
Average Earning Assets
Commercial & real estate loans (TE) $49,952 $975,272 6.85% $52,956 $868,580 8.15%
Mortgage loans 12,730 235,190 7.22% 13,743 238,258 7.69%
Consumer loans 49,696 718,431 9.25% 49,533 651,948 10.16%
Loan fees & late charges 6,772 - 0.00% 6,524 - 0.00%
-------------------------------------------------------------------------
Total loans (TE) 119,150 1,928,893 8.26% 122,755 1,758,787 9.33%
US treasury securities 1,189 47,782 3.33% 2,603 59,723 5.83%
US agency securities 19,577 532,976 4.90% 18,059 429,092 5.61%
CMOs 20,360 557,441 4.87% 13,347 297,718 5.98%
Mortgage backed securities 4,414 98,738 5.96% 5,956 129,253 6.14%
Municipals (TE) 12,095 224,725 7.18% 11,499 212,217 7.22%
Other securities 1,645 38,290 5.73% 1,175 30,390 5.17%
-------------------------------------------------------------------------
Total securities (TE) 59,281 1,499,953 5.27% 52,639 1,158,392 6.06%
Fed funds sold 645 51,896 1.66% 4,695 136,367 4.60%
Cds with banks 162 8,422 2.58% 223 4,726 6.31%
Other short-term investments 449 33,670 1.78% - - 0.00%
-------------------------------------------------------------------------
Total short-term investments 1,256 93,988 1.79% 4,918 141,093 4.66%
Average earning assets yield (TE) $179,686 $3,522,834 6.81% $180,312 $3,058,271 7.88%
Interest-Bearing Liabilities
Interest-bearing transaction deposits $18,794 $1,414,671 1.78% $25,800 $1,080,717 3.19%
Time deposits 32,980 1,131,613 3.89% 47,918 1,128,793 5.68%
-------------------------------------------------------------------------
Total interest bearing deposits 51,774 2,546,284 2.72% 73,718 2,209,510 4.46%
Customer repos 1,675 169,831 1.32% 4,422 155,809 3.79%
Other borrowings 1,842 54,738 4.50% 979 27,824 4.71%
-------------------------------------------------------------------------
Total borrowings 3,517 224,569 2.09% 5,401 183,633 3.93%
Total interest bearing liab cost $55,291 $2,770,853 2.67% $79,119 $2,393,142 4.42%
Noninterest-bearing deposits 616,256 551,026
Other net interest-free funding sources 135,725 114,103
Total Cost of Funds $55,291 $3,522,834 2.10% $79,119 $3,058,271 3.46%
Net Interest Spread (TE) $124,396 4.14% $101,193 3.45%
Net Interest Margin (TE) $124,396 $3,522,834 4.71% $101,193 $3,058,271 4.42%
-------------------------------------------------------------------------
The amount of the allowance for loan losses equals the cumulative total of the provisions for loan losses, reduced by actual loan charge-offs, and increased by allowances acquired in acquisitions and recoveries of loans previously charged-off. Provisions are made to the allowance 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 financial condition and the value of any collateral, that collection of the loan is unlikely.
The following information is useful in determining the adequacy of the loan loss allowance and loan loss provision. The ratios are calculated using average loan balances. (Amounts shown are in thousands)
At and For the
---------------------------------------------------------------------------
Three Months Ended Sept. 30, Nine Months Ended Sept. 30,
---------------------------------------------------------------------------
2002 2001 2002 2001
--------------- --------------- --------------- ----------------
Annualized net charge-offs to average loans 0.51% 0.65% 1.01% 0.54%
Annualized provision for loan losses to average
loans (1) 0.72% 0.44% 0.96% 0.46%
Average allowance for loan losses to average loans 1.64% 1.93% 1.71% 1.78%
Gross charge-offs (2) $ 4,112 $ 4,188 $ 18,886 $ 10,507
Gross recoveries 1,565 1,074 4,380 3,365
Non-accrual loans 12,373 16,214 12,373 16,214
Accruing loans 90 days or more past due 5,234 7,648 5,234 7,648
(1) The provision increased as a result of Management's periodic review of the allowance for loan losses. This
review considered the effect of increased balance of loans and recent charge offs.
(2) The significant increase in gross charge-offs results, in part, from the removal of credits acquired in the Lamar
Capital Corporation acquisition that have been determined to be uncollectible. Additionally, a small number of
commercial credits totaling approximately $3.6 million were written off during the first two quarters of 2002.
Non-Interest IncomeNon-interest income increased $150,000 or 0.9% from the second quarter and increased $4.3 million or 32.3% when compared to the same period a year ago. The increase over the previous quarter is a combination of increased deposit service charges and decreased investment and annuity fees. The volatility of the capital markets has led to declines in investment fee income.
Significant factors impacting the growth in non-interest income from the third quarter of 2001 included expansion of Trust and Insurance revenues, as well as a series of initiatives related to pricing and processing for service charges on deposit accounts. Lower levels of investment & annuity fees, as well as a seasonal decrease in Trust revenue impacted non-interest income levels as compared to the previous quarter.
Three Months Ended Sept. 30, Nine Months Ended Sept. 30,
----------------------------------- --------------------------------
(dollars in thousands) 2002 2001 2002 2001
-------------- ---------------- --------------- ------------
Service charges on deposit accounts $ 11,080 $ 7,635 $ 31,095 $ 21,093
Trust fees 1,785 1,544 5,700 4,695
Credit card merchant discount fees 792 693 2,434 1,979
Insurance fees 650 412 1,753 1,052
Investment & annuity fees 855 832 3,867 2,462
ATM fees 1,003 382 2,833 1,120
Secondary mortgage market operations 416 416 1,634 760
Other income 1,088 1,441 3,261 4,431
Securities transactions gain/(losses) 5 16 5 16
-------------- ---------------- --------------- ------------
Total non-interest income $ 17,674 $ 13,371 $ 52,582 $ 37,608
============== ================ =============== ============
Non-Interest ExpenseNon-interest expense for the three-month period ended September 30, 2002 increased $1.1 million, or 3.2%, compared to the previous quarter and $3.1 million, or 9.6%, compared to the same period the previous year. Increases from the previous quarter and the same period the previous year resulted primarily from higher other real estate owned write-downs on two specific commercial real estate properties. Increases, as compared to the same period last year, result primarily from higher personnel expenses and franchise taxes.
On a year-to-date basis, non-interest expense is higher by $15 million and results primarily from increased personnel costs associated with the additional staffing resulting from the Lamar Capital Corporation acquisition, regular salary increases as well as higher staffing associated with growth in new and existing market areas. Franchise taxes, other real estate owned and advertising expense accounted for $4.6 million or 30.7% of the increased expenses as compared to a year ago. Other real estate owned expense for the nine-month period includes $1.5 million in write-downs.
Three Months Ended Sept. 30, Nine Months Ended Sept. 30,
-----------------------------------------------------------------------
(dollars in thousands) 2002 2001 2002 2001
---------------- ---------------- ---------------- ----------------
Employee compensation $ 16,070 $ 14,461 $ 47,044 $ 39,910
Employee benefits 3,441 3,076 11,528 8,973
---------------- ---------------- ---------------- ----------------
Total personnel expense 19,511 17,537 58,572 48,883
---------------- ---------------- ---------------- ----------------
Equipment and data processing expense 3,846 3,483 11,046 10,408
Net occupancy expense 2,220 2,343 6,331 5,959
Postage and communications 2,002 2,007 5,829 5,720
Ad valorem and franchise taxes 1,441 643 3,876 1,849
Legal and professional services 1,009 1,122 3,135 2,513
Stationery and supplies 518 515 1,460 1,324
Amortization of intangible assets 188 1,265 563 3,084
Advertising 752 942 2,812 1,869
Deposit insurance and regulatory fees 222 238 662 622
Training expenses 181 80 420 290
Other real estate owned expense 956 167 1,895 230
Other expense 2,317 1,729 6,219 4,986
---------------- ---------------- ---------------- ----------------
Total non-interest expense $ 35,163 $ 32,071 $ 102,820 $ 87,737
================ ================ ================ ================
Income TaxesThe effective federal income 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 nine months of 2002 was $5,607,000 compared to $5,447,000 for the comparable period in 2001.
Following is a summary of the information used in the computation of earnings per common share (in thousands).
Three Months Ended Sept. 30, Nine Months Ended Sept. 30,
--------------------------------------------------------------------
2002 2001 2002 2001
------------- ------------- ------------- -------------
Net earnings - used in computation of diluted
earnings per common share $ 13,290 $ 9,735 $37,294 $27,269
Preferred divdend requirement 663 663 1,990 663
------------- ------------- ------------- -------------
Net earnings available to common stockholders -
used in computation of basic earnings
per common share $ 12,627 $ 9,072 $35,304 $26,606
============= ============= ============= =============
Weighted average number of common shares
outstanding - used in computation of
basic earnings per common share 15,709 16,061 15,825 16,085
Effect of dilutive securities
Stock options 232 47 185 53
Convertible preferred stock 1,106 1,106 1,106 356
------------- ------------- ------------- -------------
Weighted average number of common shares
outstanding plus effect of dilutive
securities - used in computation of
diluted earnings per common share 17,047 17,214 17,116 16,494
============= ============= ============= =============
Forward Looking Information Congress passed the Private Securities Litigation Act of 1995 in an effort to encourage corporations to provide information about a company's anticipated future financial performance. This Act provides a safe harbor for such disclosures that protects the companies from unwarranted litigation if the actual results are different from management expectations. This report 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 that could cause the Company's actual results and experience to differ from the anticipated results and expectations expressed in such forward-looking statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKThe Company's net earnings are dependent, in part, on its net interest income. Net interest income is susceptible to interest rate risk to the degree that interest-bearing liabilities mature or reprice on a different basis than interest-earning assets. When interest-bearing liabilities mature or reprice more quickly than interest-earning assets in a given period, a significant increase in market rates of interest could adversely affect net interest income. Similarly, when interest-earning assets mature or reprice more quickly than interest-bearing liabilities, falling interest rates could result in a decrease in net interest income.
In an attempt to manage its exposure to changes in interest rates, management monitors the Company's interest rate risk. The Company's interest rate management policy is designed to produce a relatively stable net interest margin in periods of interest rate fluctuations. Interest sensitive assets and liabilities are those that are subject to maturity or repricing within a given time period. Management also reviews the Company's securities portfolio, formulates investment strategies and oversees the timing and implementation of transactions to assure attainment of the Board's objectives in the most effective manner. Notwithstanding the Company's interest rate risk management activities, the potential for changing interest rates is an uncertainty that can have an adverse effect on net income and the fair value of the Company's investment securities.
In adjusting the Company's asset/liability position, the Board and management attempt to manage the Company's interest rate risk while enhancing net interest margins. At times, depending on the level of general interest rates, the relationship between long and short-term interest rates, market conditions and competitive factors, the Board and management may determine to increase the Company's interest rate risk position somewhat in order to increase its net interest margin. The Company's results of operations and net portfolio values remain vulnerable to increases in interest rates and to fluctuations in the difference between long and short-term interest rates.
The Company also controls interest rate risk reductions by emphasizing non-certificate depositor accounts. The Board and management believe that a material portion of such accounts may be more resistant to changes in interest rates than are certificate accounts. At September 30, 2002 the Company had $244 million of regular savings and club accounts and $990 million of money market and NOW accounts, representing 47.1% of total interest-bearing depositor accounts.
The Company does not currently engage in significant trading activities or use derivative instruments to control interest rate risk. Even though such activities may be permitted with the approval of the Board of Directors, the Company does not intend to engage in such activities in the immediate future.
Interest rate risk is the most significant market risk affecting the Company. Other types of market risk, such as foreign currency exchange rate risk and commodity price risk, do not arise in the normal course of the Company's business activities.
ITEM 4. CONTROLS AND PROCEDURESThe Company's Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-14(c) and 15d-14(c) under Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, the Company's disclosure controls and procedures are effective in alerting them on a timely basis to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company's periodic filings under the Exchange Act.
Since the Evaluation Date, there have not been any significant changes in the Company's internal controls or in other factors that could significantly affect such controls.
Part II - OTHER INFORMATION
---------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
Exhibits:
None
Reports on Form 8-K:
1. A Form 8-K was filed on July 25, 2002 for the purpose of revising the Company's 2002 earnings-per-share guidance.
2. A Form 8-K was filed on August 14, 2002 to certify that the Form 10-Q for the periods ended June 30, 2002 fully
complied with the requirements of section 13(a) of the Securities Exchange Act of 1934.
3. A Form 8-K was filed on November 11, 2002 for the purpose of revising the Company's 2002 fourth quarter
earnings-per-share guidance.
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 13,2002 By: /s/ George A. Schloegel
- ------------------------- --------------------------------------
Date George A. Schloegel
Vice-Chairman of the Board and
Chief Executive Officer
November 13, 2002 By: /s/ Carl J. Chaney
- -------------------------- --------------------------------------
Carl J. Chaney
Executive Vice President and
Chief Financial Officer
CERTIFICATIONS
I, George A. Schloegel, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Hancock Holding Company.
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly
report, fairly present in all material respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a. designed such disclosure controls and procedures to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's board of directors (or persons performing the
equivalent function):
a. all significant deficiencies in the design or operation of internal controls which could adversely affect the
registrant's ability to record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there
were significant changes in internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: November 13, 2002 /s/ George A. Schloegel
--------------------------------
George A. Schloegel
Vice-Chairman of the Board &
Chief Executive Officer
I, Carl J. Chaney, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Hancock Holding Company.
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly
report, fairly present in all material respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a. designed such disclosure controls and procedures to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's board of directors (or persons performing the
equivalent function):
d. all significant deficiencies in the design or operation of internal controls which could adversely affect the
registrant's ability to record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
e. any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there
were significant changes in internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: November 13, 2002 /s/ Carl J. Chaney
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Carl J. Chaney
Executive Vice President &
Chief Financial Officer
The undersigned hereby certifies in his capacity as an officer of HANCOCK HOLDING COMPANY (the “Company”) that the Quarterly Report of the Company on Form 10-Q for the periods ended September 30, 2002 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition of the Company at the end of such periods and the results of operations of the Company for such periods.
Date: November 13, 2002 /s/ George A. Schloegel
--------------------------------
George A. Schloegel
Vice-Chairman of the Board &
Chief Executive Officer
The undersigned hereby certifies in his capacity as an officer of HANCOCK HOLDING COMPANY (the “Company”) that the Quarterly Report of the Company on Form 10-Q for the periods ended September 30, 2002 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition of the Company at the end of such periods and the results of operations of the Company for such periods.
Date: November 13, 2002 /s/ Carl J. Chaney
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Carl J. Chaney
Executive Vice President &
Chief Financial Officer