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 June 30, 2003
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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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Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
YES X NO
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Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable
date.
15,331,176 common shares were outstanding as of July 31, 2003 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 --
June 30, 2003 and December 31, 2002 3
Condensed Consolidated Statements of Earnings --
Six Months Ended June 30, 2003 and 2002 4
Condensed Statements of Common Stockholder's Equity
Six Months Ended June 30, 2003 and Year Ended December 31, 2002 5
Condensed Consolidated Statements of Cash Flows --
Six Months Ended June 30, 2003 and 2002 6
Notes to Condensed Consolidated Financial Statements 7
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
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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PART I FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS
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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)
June 30, December 31,
2003 2002*
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ASSETS:
Cash and due from banks (non-interest bearing) $ 175,695 $ 187,786
Interest-bearing time deposits with other banks 7,041 4,268
Securities available for sale (amortized cost of
$1,344,315 and $1,233,459) 1,362,168 1,258,831
Securities held to maturity (fair value of $199,803
and $238,196) 187,354 227,979
Federal funds sold 754 42,989
Loans, net of unearned income 2,250,770 2,104,982
Less: Allowance for loan losses (35,240) (34,740)
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Loans, net 2,215,530 2,070,242
Property and equipment, net of accumulated
depreciation of $69,974 and $66,720 72,706 71,355
Other real estate, net 5,462 5,936
Accrued interest receivable 23,844 25,480
Goodwill, net 49,400 49,100
Other intangible assets, net 9,257 7,266
Other assets 23,841 21,915
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TOTAL ASSETS $ 4,133,052 $ 3,973,147
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LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits:
Non-interest bearing demand $ 612,098 $ 630,790
Interest-bearing savings, NOW, money market
and time 2,817,898 2,670,710
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Total deposits 3,429,996 3,301,500
Securities sold under agreements to repurchase 175,962 161,058
Other liabilities 41,853 34,988
Long-term notes 50,697 51,020
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TOTAL LIABILITIES 3,698,508 3,548,566
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 143,834 145,949
Retained earnings 225,822 208,253
Accumulated other comprehensive income 5,158 10,049
Unearned compensation (1,224) (552)
Treasury stock (914,865 and 881,607 shares, respectively) (31,420) (31,492)
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TOTAL COMMON STOCKHOLDERS' EQUITY 397,475 387,512
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TOTAL LIABILITIES, PREFERRED STOCK
AND COMMON STOCKHOLDERS' EQUITY $ 4,133,052 $ 3,973,147
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* The balance sheet at December 31, 2002 has been taken from the audited balance sheet at that date.
See notes to unaudited condensed consolidated 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 June 30, Six Months Ended June 30,
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2003 2002 2003 2002
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INTEREST INCOME:
Loans $ 39,375 $ 38,694 $ 77,743 $ 77,508
U. S. Treasury securities 400 420 812 773
Obligations of U. S. government agencies 4,665 6,849 10,371 13,255
Obligations of states and political subdivisions 2,339 2,685 4,832 5,440
Mortgage-backed securities 3,367 1,406 4,841 3,040
CMOs 4,087 7,116 8,506 13,564
Federal funds sold 119 182 449 481
Other investments 275 719 690 1,614
--------- --------- --------- ---------
Total interest income 54,627 58,071 108,244 115,675
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INTEREST EXPENSE
Deposits 14,007 17,189 28,625 35,375
Federal funds purchased and securities sold
under agreements to repurchase 352 572 723 1,111
Long-term notes and other interest 603 612 1,196 1,208
--------- --------- --------- ---------
Total interest expense 14,962 18,373 30,544 37,694
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NET INTEREST INCOME 39,665 39,698 77,700 77,981
Provision for loan losses 3,966 4,879 6,986 10,207
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NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 35,699 34,819 70,714 67,774
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NON-INTEREST INCOME
Service charges on deposit accounts 10,202 10,568 20,357 20,016
Other service charges, commissions and fees 5,788 5,508 10,942 11,501
Securities transactions gains 659 - 1,114 -
Other income 1,012 1,443 3,042 3,392
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Total non-interest income 17,661 17,519 35,455 34,909
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NON-INTEREST EXPENSE
Salaries and employee benefits 20,706 19,995 40,877 39,061
Net occupancy expense of premises 2,294 2,075 4,411 4,111
Equipment rentals, depreciation and maintenance 2,221 2,171 4,307 4,059
Amortization of intangibles 178 188 356 375
Other expense 9,898 9,634 18,337 20,051
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Total non-interest expense 35,297 34,063 68,288 67,657
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EARNINGS BEFORE INCOME TAXES 18,063 18,275 37,881 35,026
Income taxes 5,681 5,694 11,836 11,023
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NET EARNINGS 12,382 12,581 26,045 24,003
PREFERRED DIVIDEND REQUIREMENT 663 663 1,327 1,327
--------- --------- --------- ---------
NET EARNINGS AVAILABLE TO COMMON STOCKHOLDERS $ 11,719 $ 11,918 $ 24,718 $ 22,676
========= ========= ========= =========
BASIC EARNINGS PER COMMON SHARE $ 0.76 $ 0.75 $ 1.60 $ 1.43
========= ========= ========= =========
DILUTED EARNINGS PER COMMON SHARE $ 0.74 $ 0.73 $ 1.56 $ 1.40
========= ========= ========= =========
DIVIDENDS PAID PER COMMON SHARE $ 0.21 $ 0.20 $ 0.42 $ 0.40
========= ========= ========= =========
WEIGHTED AVG. COMMON SHARES OUTSTANDING-BASIC 15,420 15,869 15,431 15,880
========= ========= ========= =========
WEIGHTED AVG. COMMON SHARES OUTSTANDING-DILUTED 16,742 17,156 16,748 17,140
========= ========= ========= =========
See notes to unaudited condensed consolidated financial statements
HANCOCK HOLDING COMPANY AND SUBSIDIARIES
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CONDENSED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY
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UNAUDITED
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(amounts in thousands, except per share data)
Accumulated
Other
Common Capital Retained Comprehensive Unearned Treasury
Stock Surplus Earnings Income Compensation Stock
---------- ---------- ---------- ------------- ------------ ---------
Balance, January 1, 2002 $ 55,305 $ 146,252 $172,584 $ 4,742 $ (433) $(10,902)
Net earnings 51,043
Cash dividends (15,374)
Minimum pension liability adjustment, net (6,442)
Change in unrealized gain on
securities available for sale, net 11,749
Transactions relating to restricted
stock grants, net (119)
Treasury stock transactions, net (303) (20,590)
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Balance, December 31, 2002 55,305 145,949 208,253 10,049 (552) (31,492)
Net earnings 26,045
Cash dividends (8,476)
Change in unrealized gain on
securities available for sale, net (4,891)
Transactions relating to restricted
stock grants, net (672)
Treasury stock transactions, net (2,115) 72
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Balance, June 30, 2003 $ 55,305 $ 143,834 $225,822 $ 5,158 $ (1,224) $(31,420)
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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)
Six Months Ended June 30,
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2003 2002
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 26,045 $ 24,003
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation 3,454 3,132
Amortization of software 1,344 1,088
Provision for loan losses 6,986 10,207
Provision for losses on other real estate owned 250 793
Gain on sales of securities available for sale (1,114) -
Decrease (increase) in interest receivable 1,636 (693)
Amortization of intangible assets 356 375
Increase in accrued expenses 7,331 3,341
Increase in other liabilities 794 4,771
Decrease in interest payable (1,260) (3,392)
Other, net (6,750) (2,265)
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Net cash provided by operating activities 39,072 41,360
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CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in interest-bearing time deposits (2,772) (2,448)
Proceeds from maturities of securities held
to maturity 40,625 35,633
Proceeds from sales and maturities of securities
available for sale 755,778 415,604
Purchase of securities available for sale (866,634) (654,281)
Net decrease in federal funds sold 42,235 82,900
Net increase in loans (149,721) (78,823)
Purchase of property, equipment and software, net (5,455) (6,404)
Proceeds from sales of other real estate 2,463 1,358
Net cash received in connection with purchase transaction 38,933 -
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Net cash used in investing activities (144,548) (206,461)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 89,322 158,006
Dividends paid (8,475) (7,797)
Net increase in federal funds purchased and
securities sold under agreements to repurchase 14,904 10,869
Treasury stock transactions, net (2,043) (4,007)
Reductions of long-term notes (323) (272)
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Net cash provided by financing activities 93,385 156,799
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NET DECREASE IN CASH AND DUE FROM BANKS (12,091) (8,302)
CASH AND DUE FROM BANKS, BEGINNING 187,786 164,808
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CASH AND DUE FROM BANKS, ENDING $ 175,695 $ 156,506
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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 2002 Annual Report to Shareholders.
COMPREHENSIVE EARNINGSFollowing is a summary of the Company's comprehensive earnings for the three months and six months ended June 30, 2003 and 2002.
(Amounts in thousands)
Three Months Ended June 30, Six Months Ended June 30,
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2003 2002 2003 2002
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Net earnings $12,382 $12,581 $26,045 $24,003
Other comprehensive income
(net of income tax):
Unrealized holding (losses) gains on
securities available for sale (872) 12,418 (4,167) 9,974
Reclassification adjustments for gains
included in earnings, net (428) - (724) -
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Total Comprehensive Earnings $11,082 $24,999 $21,154 $33,977
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ACQUISITIONSOn February 22, 2003, the Company completed the acquisition of two Dryades Savings Bank branches located in Metairie, LA and Kenner, LA (both suburbs of New Orleans, LA). Both locations are within minutes of the causeway connecting metropolitan Jefferson Parish to St. Tammany Parish's thriving Northshore communities. The two acquired facilities have a combined total deposit base of approximately $40 million. The aggregate purchase price was approximately $39 million. The core deposit intangible was approximately $2.4 million and goodwill was approximately $300,000. No amortization of the goodwill related to this acquisition will be recorded in 2003 in accordance with Statement of Financial Accounting Standards No. 142.
On 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 has been adjusted to give effect to this split.
SELECTED FINANCIAL DATAThe following tables present selected comparative financial data. All share and per share data ha been restated to give effect of a 50% stock dividend made August 5, 2002.
(amounts in thousands, except per share data)
Three Months Ended Six Months Ended
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6/30/03 6/30/02 6/30/03 6/30/02
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Per Common Share Data
Earnings per share:
Basic $0.76 $0.75 $1.60 $1.43
Diluted $0.74 $0.73 $1.56 $1.40
Earnings per share before amortization of
purchased intangibles:
Basic $0.77 $0.76 $1.62 $1.45
Diluted $0.75 $0.74 $1.58 $1.42
Cash dividends per share $0.21 $0.20 $0.42 $0.40
Book value per share (period end) $25.83 $24.65 $25.83 $24.65
Weighted average number of shares:
Basic 15,420 15,869 15,431 15,880
Diluted 16,742 17,156 16,748 17,140
Period end number of shares 15,389 15,798 15,389 15,798
Market data:
High closing price $49.25 $45.13 $49.25 $45.13
Low closing price $42.00 $35.17 $42.00 $27.56
Period end closing price $46.75 $44.92 $46.75 $44.92
Trading volume 1,274 2,246 2,695 3,363
(amounts in thousands, except per share data)
Three Months Ended Six Months Ended
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6/30/03 6/30/02 6/30/03 6/30/02
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Performance Ratios
Return on average assets 1.20% 1.30% 1.28% 1.27%
Return on average common equity 12.42% 13.04% 13.24% 12.65%
Earning asset yield (Tax Equivalent("TE")) 5.95% 6.73% 6.00% 6.83%
Total cost of funds 1.58% 2.06% 1.64% 2.16%
Net interest margin (TE) 4.37% 4.66% 4.36% 4.67%
Non-interest expense as a percent of total revenue (TE)
before amortization of purchased intangibles
and securities transactions 60.09% 57.34% 58.73% 57.68%
Average common equity as a percent of average total assets 9.68% 9.97% 9.70% 10.01
Leverage ratio (period end) 9.16% 9.35% 9.16% 9.35%
FTE Headcount 1,789 1,769 1,789 1,769
Asset Quality Information
Non-accrual loans $16,860 $12,210 $16,860 $12,210
Foreclosed assets $5,685 $7,335 $5,685 $7,335
Total non-performing assets $22,545 $19,545 $22,545 $19,545
Non-performing assets as a percent of loans and foreclosed assets 1.00% 1.00% 1.00% 1.00%
Accruing loans 90 days past due $2,817 $6,702 $2,817 $6,702
Accruing loans 90 days past due as a percent of loans 0.13% 0.34% 0.13% 0.34%
Non-performing assets + accruing loans 90 days past due
to loans and foreclosed assets 1.12% 1.34% 1.12% 1.34%
Net charge-offs $3,466 $4,198 $6,486 $11,959
Net charge-offs as a percent of average loans 0.64% 0.88% 0.61% 1.27%
Allowance for loan losses $35,240 $32,265 $35,240 $32,265
Allowance for loan losses as a percent of period end loans 1.57% 1.65% 1.57% 1.65%
Allowance for loan losses to NPAs + accruing loans 90 days past due 138.95% 122.93% 138.95% 122.93%
Provision for loan losses $3,966 $4,879 $6,986 $10,207
Provision for loan losses to net charge-offs 114.43% 116.21% 107.71% 85.35%
Average Balance Sheet
Total loans $2,172,805 $1,917,200 $2,133,227 $1,900,006
Securities 1,575,392 1,554,012 1,521,177 1,493,956
Short-term investments 46,818 99,121 93,552 118,137
Earning assets 3,795,016 3,570,333 3,747,956 3,512,099
Allowance for loan losses (34,911) (31,819) (34,826) (33,044)
Other assets 372,555 342,972 376,074 343,100
Total assets $4,132,659 $3,881,486 $4,089,204 $3,822,155
Non-interest bearing deposits $599,041 $623,300 $591,061 $616,210
Interest bearing transaction deposits 1,686,294 1,436,384 1,668,968 1,408,195
Time deposits 1,142,855 1,147,475 1,132,752 1,129,980
Total interest bearing deposits 2,829,150 2,583,859 2,801,720 2,538,175
Total deposits 3,428,190 3,207,159 3,392,781 3,154,385
Other borrowed funds 231,726 224,474 227,832 222,440
Other liabilities 35,815 25,833 34,776 25,654
Preferred stock 37,069 37,069 37,069 37,069
Common shareholders' equity 399,859 386,950 396,745 382,608
Total liabilities, preferred stock & common equity $4,132,659 $3,881,486 $4,089,204 $3,822,155
(amounts in thousands, except per share data) Three Months Ended Six Months Ended
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6/30/03 6/30/02 6/30/03 6/30/02
---------------------------- ----------------------------
Period end Balance Sheet
Commercial/real estate loans $1,137,004 $992,584 $1,137,004 $992,584
Mortgage loans 360,997 237,888 360,997 237,888
Direct consumer loans 489,972 501,633 489,972 501,633
Indirect consumer loans 211,903 178,903 211,903 178,903
Finance Company loans 50,894 42,802 50,894 42,802
Total loans 2,250,770 1,953,810 2,250,770 1,953,810
Securities 1,549,522 1,591,182 1,549,522 1,591,182
Short-term investments 7,795 19,981 7,795 19,981
Earning assets 3,808,087 3,564,973 3,808,087 3,564,973
Allowance for loan losses (35,240) (32,265) (35,240) (32,265)
Other assets 360,205 342,372 360,205 342,372
Total assets $4,133,052 $3,875,080 $4,133,052 $3,875,080
Non-interest bearing deposits $612,098 $633,374 $612,098 $633,374
Interest bearing transaction deposits 1,668,000 1,435,330 1,668,000 1,435,330
Time deposits 1,149,898 1,129,035 1,149,898 1,129,035
Total interest bearing deposits 2,817,898 2,564,365 2,817,898 2,564,365
Total deposits 3,429,996 3,197,740 3,429,996 3,197,740
Other borrowed funds 229,123 224,666 229,123 224,666
Other liabilities 39,389 26,146 39,389 26,146
Preferred stock 37,069 37,069 37,069 37,069
Common shareholders' equity 397,475 389,459 397,475 389,459
Total liabilities, preferred stock & common equity $4,133,052 $3,875,080 $4,133,052 $3,875,080
Net Charge-Off Information
Net charge-offs:
Commercial/real estate loans $1,605 $2,111 $2,346 $7,405
Mortgage loans 4 - 39 1
Direct consumer loans 1,094 1,167 2,345 2,566
Indirect consumer loans 334 462 922 1,114
Finance company loans 429 458 834 873
Total net charge-offs $3,466 $4,198 $6,486 $11,959
Net charge-offs to average loans:
Commercial/real estate loans 0.59% 0.87% 0.44% 1.55%
Mortgage loans 0.00% 0.00% 0.03% 0.00%
Direct consumer loans 0.89% 0.93% 0.95% 1.02%
Indirect consumer loans 0.67% 1.07% 0.95% 1.34%
Finance Company loans 3.50% 4.60% 3.48% 4.51%
Total net charge-offs to average loans 0.64% 0.88% 0.61% 1.27%
(amounts in thousands, except per share amounts)
Three Months Ended Six Months Ended
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6/30/03 6/30/02 6/30/03 6/30/02
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Average Balance Sheet Composition
Percentage of earning assets/funding sources:
Loans 57.25% 53.70% 56.92% 54.10%
Securities 41.51% 43.53% 40.59% 42.54%
Short-term investments 1.23% 2.78% 2.50% 3.36%
Earning assets 100.00% 100.00% 100.00% 100.00%
Non-interest bearing deposits 15.78% 17.46% 15.77% 17.55%
Interest bearing transaction deposits 44.43% 40.23% 44.53% 40.10%
Time deposits 30.11% 32.14% 30.22% 32.17%
Total deposits 90.33% 89.83% 90.52% 89.81%
Other borrowed funds 6.11% 6.29% 6.08% 6.33%
Other net interest-free funding sources 3.56% 3.88% 3.40% 3.85%
Total funding sources 100.00% 100.00% 100.00% 100.00%
Loan mix:
Commercial/real estate loans 50.64% 50.71% 50.68% 50.56%
Mortgage loans 15.28% 12.03% 14.69% 11.92%
Direct consumer loans 22.67% 26.17% 23.23% 26.65%
Indirect consumer loans 9.15% 9.00% 9.13% 8.82%
Finance Company loans 2.26% 2.08% 2.27% 2.05%
Total loans 100.00% 100.00% 100.00% 100.00%
Average dollars (in thousands)
Loans $2,172,805 $1,917,200 $2,133,227 $1,900,006
Securities 1,575,392 1,554,012 1,521,177 1,493,956
Short-term investments 46,818 99,121 93,552 118,137
Earning assets $3,795,016 $3,570,333 $3,747,956 $3,512,099
Non-interest bearing deposits $599,041 $623,300 $591,061 $616,210
Interest bearing transaction deposits 1,686,294 1,436,384 1,668,968 1,408,195
Time deposits 1,142,855 1,147,475 1,132,752 1,129,980
Total deposits 3,428,190 3,207,159 3,392,781 3,154,385
Other borrowed funds 231,726 224,474 227,832 222,440
Other net interest-free funding sources 135,099 138,700 127,343 135,274
Total funding sources $3,795,016 $3,570,333 $3,747,956 $3,512,099
Loans:
Commercial/real estate loans $1,100,310 $972,234 $1,081,084 $960,636
Mortgage loans 331,930 230,653 313,374 226,467
Direct consumer loans 492,484 501,761 495,636 506,346
Indirect consumer loans 198,917 172,605 194,805 167,542
Finance Company loans 49,164 39,949 48,329 39,015
Total average loans $2,172,805 $1,917,200 $2,133,227 $1,900,006
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:
June 30, March 31, December 31,
2003 2003 2002
---------- --------- ------------
Total securities to total deposits 45.18% 48.04% 45.03%
Total loans (net of unearned
income) to total deposits 65.62% 61.33% 63.76%
Interest-earning assets
to total assets 92.14% 92.06% 91.59%
Interest-bearing deposits
to total deposits 82.15% 82.31% 80.89%
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 June 30, Six Months Ended June 30,
------------------------------ ------------------------------
2003 2002 2003 2002
-------------- ------------- ------------- -------------
Balance of allowance for loan losses
at beginning of period $ 34,740 $ 31,584 $ 34,740 $ 34,417
Balance acquired through acquisition & other - - - (400)
Provision for loan losses 3,966 4,879 6,986 10,207
Loans charged-off:
Commercial, Real Estate & Mortgage 1,779 2,249 2,882 7,656
Direct & Indirect Consumer 1,402 1,693 3,618 3,915
Finance Company 488 539 962 1,043
Demand Deposit Accounts 1,119 1,093 2,097 2,159
--------- -------- -------- --------
Total charge-offs 4,788 5,574 9,559 14,773
--------- -------- -------- --------
Recoveries of loans previously
charged-off:
Commercial, Real Estate & Mortgage 169 137 496 249
Direct & Indirect Consumer 402 526 1,003 965
Finance Company 59 81 128 170
Demand Deposit Accounts 692 632 1,446 1,430
--------- -------- -------- --------
Total recoveries 1,322 1,376 3,073 2,814
--------- -------- -------- --------
Net charge-offs 3,466 4,198 6,486 11,959
--------- -------- -------- --------
Balance of allowance for loan losses
at end of period $ 35,240 $ 32,265 $ 35,240 $ 32,265
========= ======== ======== ========
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 June 30, Six Months Ended June 30,
------------------------------ ------------------------------
2003 2002 2003 2002
-------- ---------- ---------- -----------
Ratios:
Net charge-offs to average net loans 0.64% 0.88% 0.61% 1.27%
Net charge-offs to period-end net loans 0.62% 0.86% 0.58% 1.23%
Allowance for loan losses to average net loans 1.62% 1.68% 1.65% 1.70%
Allowance for loan losses to period-end net loans 1.57% 1.65% 1.57% 1.65%
Net charge-offs to loan loss allowance 9.84% 13.01% 18.41% 37.06%
Loan loss provision to net charge-offs 114.43% 116.21% 107.71% 85.35%
Capital ResourcesThe Company continues to maintain an adequate capital position. The ratios as of June 30, 2003, March 31, 2003 and December 31, 2002 are as follows:
June 30, March 31, December 31,
2003 2003 2002
------------ ------------ ---------------
Average equity to average assets (1) 9.68% 9.73% 10.08%
Total capital to risk-weighted assets (2) 16.08% 16.45% 17.25%
Tier 1 capital to risk-weighted assets (3) 14.82% 15.19% 15.73%
Leverage capital to average total assets (4) 9.16% 9.21% 9.35%
(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 decreased approximately $200,000 or 1.6% for the second quarter of 2003 compared to the second quarter of 2002. However, net earnings increased $2.0 million or 8.3% for the first half of 2003 compared to the first half of 2002. Following is selected information for quarterly and year-to-date comparison:
Three Months Ended June 30, Six Months Ended June 30,
-------------------------- -------------------------
2003 2002 2003 2002
----------- ------------- --------- -------------
Results of Operations:
Return on average assets 1.20% 1.30% 1.28% 1.27%
Return on average equity 12.42% 13.04% 13.24% 12.65%
Net Interest Income:
Yield on average interest-earning assets (TE) 5.95% 6.73% 6.00% 6.83%
Cost of average interest-bearing funds 1.96% 2.62% 2.03% 2.75%
------- ------- ------- -------
Net interest spread (TE) 3.99% 4.10% 3.97% 4.08%
======= ======= ======= =======
Net interest margin (TE)
(net interest income on a tax-equivalent basis
divided by average interest-earning assets) 4.37% 4.66% 4.36% 4.67%
======= ======= ======= =======
Net Interest IncomeNet interest income (te) for the second quarter of 2003 decreased $120,000, or 0.3%, from the second quarter of 2002, but was $1.5 million, or 3.9% higher than the previous quarter. The Company's net interest margin (te) was 4.37% in the second quarter of 2003, 29 basis points narrower than the same quarter a year ago, but 3 basis points higher than the previous quarter.
Compared to the same quarter a year ago, the primary driver of the slightly decreased level of net interest income (te) was the 29 basis point narrowing of the Company's net interest margin (te). The net interest margin narrowed as the overall yield on loans, securities and short-term investments fell more rapidly (78 basis points) than the Company's ability to reduce total funding costs (49 basis points). Largely mitigating the narrowing of the net interest margin was $256 million of average loan growth from second quarter 2002 to second quarter 2003, which was funded by $221 million of average
deposit growth for the same period. In addition, the Company's loan to deposit ratio improved to 63.4%, 360 basis points higher than the 59.8% reported in the same quarter a year ago. Loans now comprise 57.3% of the Company's average earning asset base as compared to 53.7% a year ago. The aforementioned improvements in the earning asset mix were a significant factor in the Company's ability to overcome the decline in its earning asset yield.
The higher level of net interest income (te) and net interest margin (te) expansion compared to the previous quarter was primarily due to an improved earning asset mix. Average loan growth of $80 million, funded by average deposit growth of $71 million, contributed to the $95 million increase in average earning assets. Also contributing to the improved earning assets mix was the shifting of approximately $94 million of funds previously invested in short-term investments to the Company's securities portfolio. The Company's loan to deposit ratio improved by 100 basis points compared to the previous quarter, while loans as a percent of earning assets grew by 70 basis points. In addition to the impact of a better earning asset mix, the net interest margin expanded by 3 basis points due to a smaller reduction in the yield on average earning assets (10 basis points) than the reduction in funding costs (13 basis points).
The following tables detail the components of the Company's net interest spread and net interest margin.
Three Months Ended June 30, Three Months Ended June 30,
------------------------------- ---------------------------------
2003 2002
------------------------------- ---------------------------------
(dollars in thousands) Interest Volume Rate Interest Volume Rate
--------- ----------- ----- -------- ---------- -------
Average Earning Assets
Commercial & real estate loans (TE) $16,253 $1,100,310 5.92% $16,414 $972,234 6.77%
Mortgage loans 5,108 331,930 6.16% 4,165 230,653 7.22%
Consumer loans 15,696 740,565 8.50% 16,397 714,314 9.21%
Loan fees & late charges 2,922 - 0.00% 2,240 - 0.00%
--------- ----------- ----- -------- ---------- -------
Total loans (TE) 39,979 2,172,805 7.38% 39,216 1,917,200 8.20%
US treasury securities 400 48,101 3.33% 420 50,448 3.34%
US agency securities 4,665 450,334 4.14% 6,849 568,330 4.82%
CMOs 4,087 530,975 3.08% 7,116 577,356 4.93%
Mortgage backed securities 3,367 321,640 4.19% 1,406 94,090 5.98%
Municipals (TE) 3,508 196,803 7.13% 4,023 224,361 7.17%
Other securities 267 27,539 3.88% 425 39,426 4.31%
--------- ----------- ----- -------- ---------- -------
Total securities (TE) 16,294 1,575,392 4.14% 20,239 1,554,012 5.22%
Fed funds sold 119 39,964 1.20% 182 41,733 1.75%
Cds with banks 8 6,854 0.45% 77 10,944 2.80%
Other short-term investments - - 0.00% 217 46,443 1.87%
--------- ----------- ----- -------- ---------- -------
Total short-term investments 127 46,818 1.09% 475 99,121 1.92%
Average earning assets yield (TE) $56,400 $3,795,016 5.95% $59,931 $3,570,333 6.73%
Interest-Bearing Liabilities
Interest-bearing transaction deposits $4,668 $1,686,294 1.11% $6,397 $1,436,384 1.79%
Time deposits 9,339 1,142,855 3.28% 10,792 1,147,475 3.77%
--------- ----------- ----- -------- ---------- -------
Total interest bearing deposits 14,007 2,829,150 1.99% 17,189 2,583,859 2.67%
Customer repos 340 177,369 0.77% 564 169,912 1.33%
Other borrowings 615 54,357 4.54% 620 54,562 4.56%
--------- ----------- ----- -------- ---------- -------
Total borrowings 955 231,726 1.65% 1,184 224,474 2.12%
Total interest bearing liab cost $14,963 $3,060,876 1.96% $18,373 $2,808,334 2.62%
Noninterest-bearing deposits 599,041 623,300
Other net interest-free funding sources 135,099 138,700
Total Cost of Funds $14,963 $3,795,016 1.58% $18,373 $3,570,333 2.06%
Net Interest Spread (TE) $41,438 3.99% $41,558 4.10%
Net Interest Margin (TE) $41,438 $3,795,016 4.37% $41,558 $3,570,333 4.66%
Six Months Ended June 30, Six Months Ended June 30,
------------------------------- -----------------------------
2003 2002
------------------------------- -----------------------------
(dollars in thousands) Interest Volume Rate Interest Volume Rate
--------- ----------- ------ ---------- ---------- -------
Average Earning Assets
Commercial & real estate loans (TE) $32,442 $1,081,084 6.05% $32,728 $960,636 6.87%
Mortgage loans 9,830 313,374 6.27% 8,271 226,467 7.30%
Consumer loans 31,387 738,770 8.57% 33,025 712,902 9.34%
Loan fees & late charges 5,304 - 0.00% 4,524 - 0.00%
--------- ----------- ------ ---------- ---------- -------
Total loans (TE) 78,963 2,133,227 7.45% 78,547 1,900,006 8.33%
US treasury securities 812 49,177 3.33% 773 46,425 3.36%
US agency securities 10,371 486,335 4.26% 13,255 530,392 5.00%
CMOs 8,506 537,947 3.16% 13,564 548,185 4.95%
Mortgage backed securities 4,841 216,350 4.48% 3,040 102,115 5.95%
Municipals (TE) 7,248 201,861 7.18% 8,152 227,445 7.17%
Other securities 603 29,508 4.09% 1,023 39,394 5.20%
--------- ----------- ------ ---------- ---------- -------
Total securities (TE) 32,381 1,521,177 4.26% 39,808 1,493,956 5.33%
Fed funds sold 449 76,612 1.18% 481 58,127 1.67%
Cds with banks 21 6,034 0.71% 152 10,111 3.03%
Other short-term investments 65 10,907 1.21% 439 49,900 1.77%
--------- ----------- ------ ---------- ---------- -------
Total short-term investments 535 93,552 1.15% 1,072 118,137 1.83%
Average earning assets yield (TE) $111,879 $3,747,956 6.00% $119,427 $3,512,099 6.83%
Interest-Bearing Liabilities
Interest-bearing transaction deposits $9,786 $1,668,968 1.18% $12,680 $1,408,195 1.82%
Time deposits 18,839 1,132,752 3.35% 22,695 1,129,980 4.05%
--------- ----------- ------ ---------- ---------- -------
Total interest bearing deposits 28,625 2,801,720 2.06% 35,375 2,538,175 2.81%
Customer repos 709 174,238 0.82% 1,101 168,234 1.32%
Other borrowings 1,209 53,594 4.55% 1,218 54,206 4.53%
--------- ----------- ------ ---------- ---------- -------
Total borrowings 1,919 227,832 1.70% 2,319 222,440 2.10%
Total interest bearing liab cost $30,544 $3,029,553 2.03% $37,694 $2,760,615 2.75%
Noninterest-bearing deposits 591,061 616,210
Other net interest-free funding sources 127,343 135,274
Total Cost of Funds $30,544 $3,747,956 1.64% $37,694 $3,512,099 2.16%
Net Interest Spread (TE) $81,336 3.97% $81,733 4.08%
Net Interest Margin (TE) $81,336 $3,747,956 4.36% $81,733 $3,512,099 4.67%
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 June 30, Six Months Ended June 30,
--------------------------- ---------------------------
2003 2002 2003 2002
----------- ------------ ------------ -----------
Annualized net charge-offs to average loans 0.64% 0.88% 0.61% 1.27%
Annualized provision for loan losses to average
loans (1) 0.73% 1.02% 0.66% 1.08%
Average allowance for loan losses to average loans 1.61% 1.66% 1.63% 1.74%
Gross charge-offs (2) $ 4,788 $ 5,574 $ 9,559 $ 14,773
Gross recoveries $ 1,322 $ 1,376 $ 3,073 $ 2,814
Non-accrual loans $ 16,860 $ 12,210 $ 16,860 $ 12,210
Accruing loans 90 days or more past due $ 2,817 $ 6,702 $ 2,817 $ 6,702
(1) The 2003 provision decreased as a result of management's periodic review of the allowance for
loan losses. This review considered the effect of changes in the mix and the size of the loan
portfolio. Provision for loan losses was significantly higher in 2002 as the reserve was
replenished for large credits written off that were due to the Lamar acquisition. As overall credit
quality has improved, the need for higher reserves has decreased.
(2) Gross charge-offs were higher in 2002 primarily due to the removal of credits acquired in the
Lamar Capital Corporation acquisition that were determined to be uncollectible.
Non-Interest IncomeNon-interest income for the second quarter of 2003 was up $142,000, or 0.8%, compared to the same quarter a year ago, but was down $133,000, or 0.7%, compared to the previous quarter. The second quarter 2003 level includes a pre-tax net securities gain of $659,000, related to the sale of $50 million of U.S. Treasury and Agency securities with near-term maturity dates. The funds from the sale of these securities were reinvested in higher-yielding mortgage-backed securities with a 31 basis point yield advantage. The first quarter of 2003 also includes a pre-tax net securities gain of $455,000 related to the sale of floating-rate securities.
Also included in the second quarter 2003 level of non-interest income was a mortgage servicing rights temporary impairment write-down of $850,000. The Company maintains a mortgage-servicing portfolio of approximately $400 million and must periodically perform a valuation of those servicing rights. The $850,000 non-cash pre-tax write-down was required due to an increase in the expected speed of mortgage loan pre-payments resulting from the current low-interest rate environment and represents an after-tax charge of $.03 per share. Further impairment of the mortgage servicing rights portfolio is possible in future quarters and is dependent on mortgage pre-payment speeds. Somewhat mitigating this issue for the Company is a recent decision to begin selling mortgage servicing rights
versus retaining these rights in our servicing portfolio pending a change in the interest rate environment.
Excluding the impact of the aforementioned securities gains and mortgage servicing rights temporary impairment write-down, non-interest income increased $513,000, or 3.0%, from the first quarter of 2003 and was $333,000, or 1.9%, higher than the same quarter a year ago.
The components of non-interest income for the three months and six months ended June 30, 2003 and 2002 are presented in the following table.
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
(dollars in thousands) 2003 2002 2003 2002
--------- ------------- ---------- -----------
Service charges on deposit accounts $ 10,202 $ 10,568 $ 20,357 $ 20,016
Trust fees 2,032 1,829 3,972 3,915
Credit card merchant discount fees 1,091 887 1,891 1,641
Insurance fees 836 589 1,352 1,103
Investment & annuity fees 840 1,234 1,771 3,012
ATM fees 990 969 1,956 1,830
Secondary mortgage market operations (203) 539 436 1,218
Other income 1,214 904 2,606 2,174
Securities transactions gains 659 - 1,114 -
--------- ------------- ---------- -----------
Total non-interest income $ 17,661 $ 17,519 $ 35,455 $ 34,909
========= ============= ========== ===========
Non-Interest ExpenseOperating expenses for the second quarter of 2003 were $1.2 million, or 3.6%, higher compared to the same quarter a year ago and were $2.3 million, or 7.0%, higher than the previous quarter. The vast majority of these increases was reflected in other operating expenses and spread over a wide range of operating expense categories. In addition, the Company experienced an increase in personnel expenses primarily due to normal salary increases, as well as an increase in the number of full-time-equivalent employees (20 from the same quarter a year ago and 43 related to the previous quarter) partly due to the first quarter 2003 acquisition of two branch locations in Jefferson Parish, Louisiana.
The Company's efficiency ratio (expressed as non-interest income as a percent of total revenue before securities transactions and amortization of purchased intangibles) increased to 60.09% in the second quarter of 2003. This was compared to 57.34% for the same quarter a year ago, and 57.33% for the previous quarter. This ratio is the indicator used to determine the amount of net interest income and non-interest income used by non-interest expenses. The increase in the efficiency ratio is due to higher non-interest expenses with revenue remaining relatively unchanged.
The following table presents the components of non-interest expense for the three months and six months ended June 30, 2003 and 2002.
Three Months Ended June 30, Six Months Ended June 30,
---------------------------- ---------------------------
(dollars in thousands) 2003 2002 2003 2002
----------- ------------- ------------ -------------
Employee compensation $ 16,657 $ 15,823 $ 32,950 $ 30,974
Employee benefits 4,048 4,172 7,926 8,087
----------- ------------- ------------ -------------
Total personnel expense 20,705 19,995 40,876 39,061
----------- ------------- ------------ -------------
Equipment and data processing expense 3,910 3,771 7,692 7,199
Net occupancy expense 2,294 2,074 4,411 4,111
Postage and communications 2,135 1,958 4,273 3,827
Ad valorem and franchise taxes 688 1,210 1,425 2,435
Legal and professional services 959 1,077 1,789 2,126
Stationery and supplies 446 446 955 942
Amortization of intangible assets 178 187 356 375
Advertising 888 858 1,653 2,060
Deposit insurance and regulatory fees 213 222 431 440
Training expenses 110 135 251 238
Other real estate owned expense 328 167 535 981
Other expense 2,443 1,963 3,641 3,862
----------- ------------- ------------ -------------
Total non-interest expense $ 35,297 $ 34,063 $ 68,288 $ 67,657
=========== ============= ============ =============
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 six months of 2003 was $6.8 million compared to $7.0 million for the comparable period in 2002.
Net Earnings Per Common ShareFollowing is a summary of the information used in the computation of earnings per common share (in thousands).
Three Months Ended June 30, Six Months Ended June 30,
------------------------- -------------------------
2003 2002 2003 2002
---------- --------- ----------- ----------
Net earnings - used in computation of diluted
earnings per common share $ 12,382 $ 12,581 $ 26,045 $ 24,003
Preferred dividend requirement 663 663 1,327 1,327
---------- --------- ----------- ----------
Net earnings available to common stockholders -
used in computation of basic earnings
per common share $ 11,719 $ 11,918 $ 24,718 $ 22,676
========== ========== =========== ==========
Weighted average number of common shares
outstanding - used in computation of
basic earnings per common share 15,420 15,869 15,431 15,880
Effect of dilutive securities
Stock options 216 181 211 154
Convertible preferred stock 1,106 1,106 1,106 1,106
---------- --------- ----------- ----------
Weighted average number of common shares
outstanding plus effect of dilutive
securities - used in computation of
diluted earnings per common share 16,742 17,156 16,748 17,140
========== ========== =========== ==========
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 June 30, 2003 the Company had $250.2 million of regular savings and club accounts and $1.1 billion of money market and NOW accounts, representing 48.2% of total interest-bearing depositor accounts.
Even though permissible under the Asset Liability Management Policy approved by the Board of Directors, the Company is not currently engaged in the use of derivatives to control interest rate risk. Management and the Board of Directors review the need for such activities on a regular basis as part of its monthly interest rate risk analysis.
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.
The 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 June 30, 2003, (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.
Exhibits:
1. Exhibit 99.1 - Certifications under Section 906 of the Sarbanes Oxley Act of 2002.
Reports on Form 8-K:
1. A Form 8-K was filed on April 14, 2003 for the purpose of announcing, by
press release, earnings for the first quarter ended March 31, 2003.
2. A Form 8-K was filed on May 2, 2003 for the purpose of announcing, by press
release, a presentation by the Company's officers at the Gulf South Bank
Conference on May 5, 2003 in New Orleans, LA.
3. A Form 8-K was filed June 3, 2003 for the purpose of announcing, by press
release, that Moody's Investor Services had assigned investment grade ratings
to the Company and it's two bank subsidiaries, Hancock Bank (MS) and Hancock
Bank of Louisiana.
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
August 12, 2003 By: /s/ George A. Schloegel
- ------------------------- --------------------------------------
Date George A. Schloegel
Vice-Chairman of the Board and
Chief Executive Officer
August 12, 2003 By: /s/ Carl J. Chaney
- -------------------------- --------------------------------------
Date 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: August 12, 2003 /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):
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: August 12, 2003 /s/ Carl J. Chaney
------------------ ------------------------------
Carl J. Chaney
Executive Vice President &
Chief Financial Officer