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Table of Contents

 

 

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

For the quarterly period ended September 30, 2014

OR

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number 0-13089

 

 

HANCOCK HOLDING COMPANY

(Exact name of registrant as specified in its charter)

 

 

 

Mississippi   64-0693170

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

One Hancock Plaza, P.O. Box 4019, Gulfport, Mississippi   39502
(Address of principal executive offices)   (Zip Code)

(228) 868-4000

(Registrant’s telephone number, including area code)

NOT APPLICABLE

(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  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer   x    Accelerated filer   ¨
Non-accelerated filer   ¨    Smaller reporting company   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 81,568,836 common shares were outstanding as of November 1, 2014.

 

 

 


Table of Contents

Hancock Holding Company

Index

 

Part I. Financial Information    Page Number  

ITEM 1. Financial Statements

  
  Consolidated Balance Sheets — September 30, 2014 (unaudited) and December 31, 2013      1   
  Consolidated Statements of Income (unaudited) — Three and nine months ended September 30, 2014 and 2013      2   
  Consolidated Statements of Comprehensive Income (unaudited) — Three and nine months ended September 30, 2014 and 2013      3   
  Consolidated Statements of Changes in Stockholders’ Equity (unaudited) – Nine months ended September 30, 2014 and 2013      4   
  Consolidated Statements of Cash Flows (unaudited) — Nine months ended September 30, 2014 and 2013      5   
  Notes to Consolidated Financial Statements (unaudited) — September 30, 2014      6-47   

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     48-74   

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

     74   

ITEM 4. Controls and Procedures

     75   
Part II. Other Information   

ITEM 1. Legal Proceedings

     75   

ITEM1A. Risk Factors

     75   

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

     76   

ITEM 3. Default on Senior Securities

     N/A   

ITEM 4. Mine Safety Disclosures

     N/A   

ITEM 5. Other Information

     N/A   

ITEM 6. Exhibits

     76   
Signatures      78   


Table of Contents

Part I. Financial Information

Item 1. Financial Statements

Hancock Holding Company and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share data)

 

     September 30,     December 31,  
     2014     2013  
     unaudited        

ASSETS

    

Cash and due from banks

   $ 332,359      $ 348,440   

Interest-bearing bank deposits

     467,218        267,236   

Federal funds sold

     4,340        1,604   

Securities available for sale, at fair value (amortized cost of $1,640,299 and $1,408,780)

     1,662,410        1,421,772   

Securities held to maturity (fair value of $2,253,219 and $2,576,584)

     2,250,960        2,611,352   

Loans held for sale

     15,098        24,515   

Loans

     13,348,574        12,324,817   

Less: allowance for loan losses

     (125,572     (133,626
  

 

 

   

 

 

 

Loans, net

     13,223,002        12,191,191   
  

 

 

   

 

 

 

Property and equipment, net of accumulated depreciation of $187,692 and $172,798

     407,987        432,346   

Prepaid expenses

     66,996        65,220   

Other real estate, net

     55,898        76,668   

Accrued interest receivable

     44,164        42,977   

Goodwill

     621,193        625,675   

Other intangible assets, net

     139,256        159,773   

Life insurance contracts

     422,562        381,437   

FDIC loss share receivable

     81,906        113,834   

Deferred tax asset, net

     60,323        89,708   

Other assets

     130,278        155,503   
  

 

 

   

 

 

 

Total assets

   $ 19,985,950      $ 19,009,251   
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

    

Deposits:

    

Noninterest-bearing demand

   $ 5,866,255      $ 5,530,253   

Interest-bearing transaction, savings, money market and time

     9,870,439        9,830,263   
  

 

 

   

 

 

 

Total deposits

     15,736,694        15,360,516   
  

 

 

   

 

 

 

Short-term borrowings

     1,171,809        657,960   

Long-term debt

     376,452        385,826   

Accrued interest payable

     5,663        4,353   

Other liabilities

     185,990        175,527   
  

 

 

   

 

 

 

Total liabilities

     17,476,608        16,584,182   
  

 

 

   

 

 

 

Stockholders’ equity

    

Common stock - $3.33 par value per share; 350,000,000 shares authorized, 81,566,640 and 82,237,162 shares outstanding

     271,617        273,850   

Capital surplus

     1,560,912        1,558,432   

Retained earnings

     703,506        628,166   

Accumulated other comprehensive (loss), net

     (26,693     (35,379
  

 

 

   

 

 

 

Total stockholders’ equity

     2,509,342        2,425,069   
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 19,985,950      $ 19,009,251   
  

 

 

   

 

 

 

See notes to consolidated financial statements.

 

1


Table of Contents

Hancock Holding Company and Subsidiaries

Consolidated Statements of Income

(Unaudited)

(In thousands, except per share amounts)

 

     Three Months Ended     Nine Months Ended  
     September 30,     September 30,  
     2014     2013     2014     2013  

Interest income:

        

Loans, including fees

   $ 150,481      $ 158,715      $ 453,066      $ 478,751   

Loans held for sale

     197        177        544        774   

Securities-taxable

     20,824        21,318        64,601        62,242   

Securities-tax exempt

     954        1,176        2,946        3,615   

Federal funds sold and other short term investments

     245        253        685        1,178   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest income

     172,701        181,639        521,842        546,560   
  

 

 

   

 

 

   

 

 

   

 

 

 

Interest expense:

        

Deposits

     5,828        5,851        16,431        18,785   

Short-term borrowings

     238        1,074        2,109        3,448   

Long-term debt and other interest expense

     3,094        3,184        9,421        9,603   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest expense

     9,160        10,109        27,961        31,836   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

     163,541        171,530        493,881        514,724   

Provision for loan losses

     9,468        7,569        24,122        25,404   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income after provision for loan losses

     154,073        163,961        469,759        489,320   
  

 

 

   

 

 

   

 

 

   

 

 

 

Noninterest income:

        

Service charges on deposit accounts

     20,000        20,519        57,981        59,398   

Trust fees

     11,530        9,477        33,267        27,972   

Bank card and ATM fees

     11,641        12,221        33,806        34,678   

Investment and annuity fees

     5,506        5,186        15,555        14,955   

Secondary mortgage market operations

     2,313        2,467        6,036        10,989   

Insurance commissions and fees

     1,979        3,661        7,611        12,500   

Amortization of FDIC loss share receivable

     (2,760     (590     (9,989     (590

Other income

     7,732        10,116        26,771        27,239   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total noninterest income

     57,941        63,057        171,038        187,141   
  

 

 

   

 

 

   

 

 

   

 

 

 

Noninterest expense:

        

Compensation expense

     69,207        73,037        204,900        215,715   

Employee benefits

     11,957        16,340        38,812        49,184   
  

 

 

   

 

 

   

 

 

   

 

 

 

Personnel expense

     81,164        89,377        243,712        264,899   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net occupancy expense

     10,848        12,369        32,983        37,099   

Equipment expense

     4,619        5,127        12,958        15,347   

Data processing expense

     13,004        12,031        38,310        36,346   

Professional services expense

     7,229        10,899        22,817        27,571   

Amortization of intangibles

     6,570        7,306        20,352        22,292   

Telecommunications and postage

     3,648        4,397        11,094        13,484   

Deposit insurance and regulatory fees

     2,967        3,789        8,677        11,635   

Other real estate expense, net

     (104     2,439        1,757        6,502   

Other expense

     19,134        34,471        60,259        68,882   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total noninterest expense

     149,079        182,205        452,919        504,057   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     62,935        44,813        187,878        172,404   

Income taxes

     16,382        11,611        52,248        43,764   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 46,553      $ 33,202      $ 135,630      $ 128,640   
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic earnings per common share

   $ 0.56      $ 0.40      $ 1.62      $ 1.51   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted earnings per common share

   $ 0.56      $ 0.40      $ 1.62      $ 1.51   
  

 

 

   

 

 

   

 

 

   

 

 

 

Dividends paid per share

   $ 0.24      $ 0.24      $ 0.72      $ 0.72   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding-basic

     81,721        82,091        81,965        83,404   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding-diluted

     81,942        82,205        82,204        83,496   
  

 

 

   

 

 

   

 

 

   

 

 

 

See notes to unaudited consolidated financial statements.

 

2


Table of Contents

Hancock Holding Company and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)

(In thousands)

 

     Three Months Ended     Nine Months Ended  
     September 30,     September 30,  
     2014     2013     2014      2013  

Net income

   $ 46,553      $ 33,202      $ 135,630       $ 128,640   

Other comprehensive income:

         

Net change in unrealized (losses) gains

     (6,293     (9,685     9,119         (96,074

Reclassification adjustment for net (gains) losses realized and included in earnings

     (6     1,553        2,195         5,835   

Amortization of unrealized net gain (loss) on securities transferred to held to maturity

     892        (1,456     2,463         (7,099
  

 

 

   

 

 

   

 

 

    

 

 

 

Other comprehensive (expense) income, before income taxes

     (5,407     (9,588     13,777         (97,338

Income tax (benefit) expense

     (2,005     (3,512     5,091         (35,492
  

 

 

   

 

 

   

 

 

    

 

 

 

Other comprehensive (loss) income net of income taxes

     (3,402     (6,076     8,686         (61,846
  

 

 

   

 

 

   

 

 

    

 

 

 

Comprehensive income

   $ 43,151      $ 27,126      $ 144,316       $ 66,794   
  

 

 

   

 

 

   

 

 

    

 

 

 

See notes to unaudited consolidated financial statements.

 

3


Table of Contents

Hancock Holding Company and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)

(In thousands, except share and per share data)

 

     Common Stock     Capital     Retained     Accumulated
Other
Comprehensive
Income (Loss),
       
     Shares     Amount     Surplus     Earnings     net     Total  

Balance, January 1, 2013

     84,847,796      $ 282,543      $ 1,647,638      $ 546,022      $ (22,925   $ 2,453,278   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     —          —          —          128,640        —          128,640   

Other comprehensive income

     —          —          —          —          (61,846     (61,846
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

     —          —          —          128,640        (61,846     66,794   

Cash dividends declared ($0.72 per common share)

     —          —          —          (61,000     —          (61,000

Common stock activity, long-term incentive plan

     76,801        256        12,114        —          —          12,370   

Purchase of common stock

     (2,817,640     (9,383     (105,617     —          —          (115,000
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, September 30, 2013

     82,106,957      $ 273,416      $ 1,554,135      $ 613,662      $ (84,771   $ 2,356,442   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, January 1, 2014

     82,237,162      $ 273,850      $ 1,558,432      $ 628,166      $ (35,379   $ 2,425,069   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     —          —          —          135,630        —          135,630   

Other comprehensive income

     —          —          —          —          8,686        8,686   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

     —          —          —          135,630        8,686        144,316   

Cash dividends declared ($0.72 per common share)

     —          —          —          (60,290     —          (60,290

Common stock activity, long-term incentive plan

     224,963        749        9,465        —          —          10,214   

Purchase of common stock

     (895,485     (2,982     (6,985     —          —          (9,967
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, September 30, 2014

     81,566,640      $ 271,617      $ 1,560,912      $ 703,506      $ (26,693   $ 2,509,342   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See notes to unaudited consolidated financial statements.

 

4


Table of Contents

Hancock Holding Company and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

     Nine Months Ended September 30,  
     2014     2013  

CASH FLOWS FROM OPERATING ACTIVITIES:

    

Net income

   $ 135,630      $ 128,640   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization

     22,976        24,178   

Provision for loan losses

     24,122        25,404   

(Gain) loss on other real estate owned

     (34     3,519   

Deferred tax expense

     24,295        20,807   

Increase in cash surrender value of life insurance contracts

     (6,960     (8,764

Gain on disposal of other assets

     (1,411     —     

Write-downs on closed branch transfers to other real estate owned

     2,683        8,450   

Net decrease in loans originated for sale

     7,017        35,497   

Net amortization of securities premium/discount

     12,891        27,095   

Amortization of intangible assets

     20,352        22,292   

Amortization of FDIC indemnification asset

     9,989        590   

Stock-based compensation expense

     10,514        10,435   

(Decrease ) increase in interest payable and other liabilities

     (9,132     7,673   

Net payments (to) from FDIC

     (366     60,886   

Decrease (increase) in FDIC loss share receivable

     7,729        (7,108

Decrease in other assets

     21,086        43,091   

Other, net

     6,256        8,502   
  

 

 

   

 

 

 

Net cash provided by operating activities

     287,637        411,187   
  

 

 

   

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

    

Proceeds from sales of securities available for sale

     1,301        —     

Proceeds from maturities of securities available for sale

     218,351        510,886   

Purchases of securities available for sale

     (440,187     (1,017,578

Proceeds from maturities of securities held to maturity

     358,649        419,334   

Purchases of securities held to maturity

     (1,031     (450,661

Net (increase) decrease in interest-bearing bank deposits

     (199,982     1,052,369   

Net increase in federal funds sold and short-term investments

     (2,736     (14,493

Net increase in loans

     (1,060,864     (229,913

Purchase of life insurance contracts

     (30,000     —     

Purchases of property and equipment

     (14,370     (25,855

Proceeds from sales of property and equipment

     8,607        —     

Proceeds from sales of other real estate

     42,913        70,220   

Other, net

     4,273        (7,280
  

 

 

   

 

 

 

Net cash (used in) provided by investing activities

     (1,115,076     307,029   
  

 

 

   

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

    

Net increase (decrease) in deposits

     376,178        (689,317

Net increase in short-term borrowings

     513,849        143,646   

Repayments of long-term debt

     (26,558     (26,469

Issuance of long-term debt

     17,184        6,544   

Dividends paid

     (60,290     (61,000

Repurchase of common stock

     (9,967     (115,000

Proceeds from exercise of stock options

     962        582   
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     811,358        (741,014
  

 

 

   

 

 

 

NET DECREASE IN CASH AND DUE FROM BANKS

     (16,081     (22,798

CASH AND DUE FROM BANKS, BEGINNING

     348,440        448,491   
  

 

 

   

 

 

 

CASH AND DUE FROM BANKS, ENDING

   $ 332,359      $ 425,693   
  

 

 

   

 

 

 

SUPPLEMENTAL INFORMATION FOR NON-CASH

    

INVESTING AND FINANCING ACTIVITIES

    

Assets acquired in settlement of loans

   $ 23,920      $ 42,070   

Transfers from available for sale securities to held to maturity securities

   $ —        $ 983,162   
  

 

 

   

 

 

 

See notes to unaudited consolidated financial statements.

 

5


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

1. Basis of Presentation

The consolidated financial statements include the accounts of Hancock Holding Company and all other entities in which it has a controlling interest (the “Company”). The financial statements include all adjustments that are, in the opinion of management, necessary to present fairly the Company’s financial condition, results of operations, changes in stockholders’ equity and cash flows for the interim periods presented. Some financial information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the U.S. (U.S. GAAP) have been condensed or omitted in this Form 10-Q pursuant to Securities and Exchange Commission rules and regulations. These financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. Financial information reported in these financial statements is not necessarily indicative of the Company’s financial condition, results of operations, or cash flows for any other interim or annual period.

Use of Estimates

The accounting principles the Company follows and the methods for applying these principles conform with U.S. GAAP and with those generally practiced within the banking industry. These accounting principles require management to make estimates and assumptions about future events that affect the amounts reported in the consolidated financial statements and the accompanying notes. Actual results could differ from those estimates.

Critical Accounting Policies and Estimates

Income Taxes

Income taxes are accounted for using the asset and liability method. Current tax liabilities or assets are recognized for the estimated income taxes payable or refundable on tax returns to be filed with respect to the current year. Deferred tax assets and liabilities are based on temporary differences between the financial statement carrying amounts and the tax bases of the Company’s assets and liabilities. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be realized or settled. Valuation allowances are established against deferred tax assets if, based on all available evidence, it is more likely than not that some or all of the assets will not be realized. The benefit of a position taken or expected to be taken in a tax return is recognized when it is more likely than not that the position will be sustained on its technical merits.

The Company invests in projects that yield tax credits issued under the Qualified Zone Academy Bonds (QZAB), Qualified School Construction Bonds (QSCB), Federal and State New Market Tax Credit (NMTC), and Low-Income Housing Tax Credit (LIHTC) programs. Returns on these investments are generated through the receipt of federal and state tax credits. The tax credits are recorded as a reduction to the income tax provision in the year that they are earned. Tax credits from QZAB and QSCB bonds are generally earned over the life of the bonds in lieu of interest income. Credits on Federal NMTC investments are earned over the seven-year compliance period beginning with the year of investment. Credits on State NMTC investments are generally earned over a three- to five- year period depending upon the specific state program. Tax Credits for Low-Income Housing investments are earned over a ten-year period beginning with the year in which rental activity begins. These tax credits, if not used in the tax return for the year when the credits are first available for use, can be carried forward for 20 years. For those investments where the return of the principal is not expected, the equity investment is amortized over the life of the tax compliance period as a component of noninterest expense.

 

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Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

1. Basis of Presentation (continued)

 

Reportable Segment Disclosures

Accounting standards require that information be reported about a company’s operating segments using a “management approach.” Reportable segments are identified in these standards as those revenue-producing components for which separate financial information is produced internally and which are subject to evaluation by the chief operating decision maker in deciding how to allocate resources to segments. On March 31, 2014, the Company combined its two state bank charters into one charter. Due to the charter change and consistent with its stated strategy that is focused on providing a consistent package of community banking products and services across all markets, the Company has identified its overall banking operations as its only reportable segment. Because the overall banking operations comprise substantially all of the consolidated operations, no separate segment disclosures are presented.

There were no other material changes or developments with respect to methodologies that the Company uses when applying what management believes are critical accounting policies and developing critical accounting estimates as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2013.

2. Securities

The amortized cost and fair value of securities classified as available for sale and held to maturity follow (in thousands):

 

Securities Available for Sale

                                                       
     September 30, 2014      December 31, 2013  
            Gross      Gross                    Gross      Gross         
     Amortized      Unrealized      Unrealized      Fair      Amortized      Unrealized      Unrealized      Fair  
     Cost      Gains      Losses      Value      Cost      Gains      Losses      Value  

US Treasury and government agency securities

   $ 300,257       $ 446       $ 1       $ 300,702       $ 504       $ 2       $ 1       $ 505   

Municipal obligations

     18,495         272         —           18,767         35,809         177         25         35,961   

Mortgage-backed securities

     1,218,982         27,566         5,325         1,241,223         1,262,633         24,402         10,077         1,276,958   

CMOs

     90,281         —           1,723         88,558         96,369         —           2,244         94,125   

Corporate debt securities

     3,500         —           —           3,500         3,500         —           —           3,500   

Equity securities

     8,784         877         1         9,660         9,965         785         27         10,723   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 1,640,299       $ 29,161       $ 7,050       $ 1,662,410       $ 1,408,780       $ 25,366       $ 12,374       $ 1,421,772   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Securities Held to Maturity

                                                       
     September 30, 2014      December 31, 2013  
            Gross      Gross                    Gross      Gross         
     Amortized      Unrealized      Unrealized      Fair      Amortized      Unrealized      Unrealized      Fair  
     Cost      Gains      Losses      Value      Cost      Gains      Losses      Value  

US Treasury and government agency securities

   $ —         $ —         $ —         $ —         $ 100,000       $ 316       $ —         $ 100,316   

Municipal obligations

     183,379         2,911         1,709         184,581         193,189         919         6,436         187,672   

Mortgage-backed securities

     926,163         12,426         1,258         937,331         1,003,327         296         4,671         998,952   

CMOs

     1,141,418         5,888         15,999         1,131,307         1,314,836         1,062         26,254         1,289,644   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 2,250,960       $ 21,225       $ 18,966       $ 2,253,219       $ 2,611,352       $ 2,593       $ 37,361       $ 2,576,584   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

2. Securities (continued)

 

The following table presents the amortized cost and fair value of debt securities at September 30, 2014 by contractual maturity (in thousands). Actual maturities will differ from contractual maturities because of rights to call or repay obligations with or without penalties and scheduled and unscheduled principal payments on mortgage-backed securities and CMOs.

 

     Amortized      Fair  
     Cost      Value  

Debt Securities Available for Sale

     

Due in one year or less

   $ 307,762       $ 308,233   

Due after one year through five years

     153,025         152,887   

Due after five years through ten years

     218,513         225,794   

Due after ten years

     952,215         965,836   
  

 

 

    

 

 

 

Total available for sale debt securities

   $ 1,631,515       $ 1,652,750   
  

 

 

    

 

 

 
     Amortized      Fair  
     Cost      Value  

Debt Securities Held to Maturity

     

Due in one year or less

   $ 5,302       $ 5,317   

Due after one year through five years

     638,277         626,915   

Due after five years through ten years

     100,941         99,697   

Due after ten years

     1,506,440         1,521,290   
  

 

 

    

 

 

 

Total held to maturity securities

   $ 2,250,960       $ 2,253,219   
  

 

 

    

 

 

 

The Company held no securities classified as trading at September 30, 2014 or December 31, 2013.

The details for securities classified as available for sale with unrealized losses for the periods indicated follow (in thousands):

 

September 30, 2014

   Losses < 12 months      Losses 12 months or >      Total  
            Gross             Gross             Gross  
     Fair      Unrealized      Fair      Unrealized      Fair      Unrealized  
     Value      Losses      Value      Losses      Value      Losses  

US Treasury and government agency securities

   $ 163       $ 1       $ 25       $ —         $ 188       $ 1   

Municipal obligations

     —           —           —           —           —           —     

Mortgage-backed securities

     64,485         514         125,977         4,811         190,462         5,325   

CMOs

     48,604         324         39,954         1,399         88,558         1,723   

Equity securities

     —           —           3         1         3         1   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 113,252       $ 839       $ 165,959       $ 6,211       $ 279,211       $ 7,050   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

2. Securities (continued)

 

December 31, 2013

   Losses < 12 months      Losses 12 months or >      Total  
            Gross             Gross             Gross  
     Fair      Unrealized      Fair      Unrealized      Fair      Unrealized  
     Value      Losses      Value      Losses      Value      Losses  

US Treasury and government agency securities

   $ 205       $ 1       $ —         $ —         $ 205       $ 1   

Municipal obligations

     7,975         25         —           —           7,975         25   

Mortgage-backed securities

     376,350         7,164         49,061         2,913         425,411         10,077   

CMOs

     94,125         2,244         —           —           94,125         2,244   

Equity securities

     3,282         26         3         1         3,285         27   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 481,937       $ 9,460       $ 49,064       $ 2,914       $ 531,001       $ 12,374   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The details for securities classified as held to maturity with unrealized losses for the periods indicated follow (in thousands):

 

Held to maturity                                          

September 30, 2014

   Losses < 12 months      Losses 12 months or >      Total  
            Gross             Gross             Gross  
     Fair      Unrealized      Fair      Unrealized      Fair      Unrealized  
     Value      Losses      Value      Losses      Value      Losses  

Municipal obligations

   $ 2,812       $ 54       $ 55,817       $ 1,655       $ 58,629       $ 1,709   

Mortgage-backed securities

     —           —           128,802         1,258         128,802         1,258   

CMOs

     68,903         350         557,747         15,649         626,650         15,999   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 71,715       $ 404       $ 742,366       $ 18,562       $ 814,081       $ 18,966   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

                                           

December 31, 2013

   Losses < 12 months      Losses 12 months or >      Total  
            Gross             Gross             Gross  
     Fair      Unrealized      Fair      Unrealized      Fair      Unrealized  
     Value      Losses      Value      Losses      Value      Losses  

Municipal obligations

   $ 131,499       $ 6,311       $ 2,878       $ 125       $ 134,377       $ 6,436   

Mortgage-backed securities

     950,288         4,671         —           —           950,288         4,671   

CMOs

     947,061         25,088         175,633         1,166         1,122,694         26,254   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 2,028,848       $ 36,070       $ 178,511       $ 1,291       $ 2,207,359       $ 37,361   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

2. Securities (continued)

 

The unrealized losses relate to changes in market rates on fixed-rate debt securities since the respective purchase dates. In all cases, the indicated impairment would be recovered no later than the security’s maturity date or possibly earlier if the market price for the security increases with a reduction in the yield required by the market. None of the unrealized losses relate to the marketability of the securities or the issuer’s ability to meet contractual obligations. The Company believes it has adequate liquidity and, therefore, does not plan to and, more likely than not, will not be required to sell these securities before recovery of the indicated impairment. Accordingly, the unrealized losses on these securities have been determined to be temporary.

Securities with carrying values totaling $3.0 billion at September 30, 2014 and $3.1 billion at December 31, 2013 were pledged as collateral primarily to secure public deposits or securities sold under agreements to repurchase.

 

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Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

3. Loans and Allowance for Loan Losses

Loans, net of unearned income, consisted of the following:

 

     September 30,      December 31,  
     2014      2013  
     (In thousands)  

Originated loans:

     

Commercial non-real estate

   $ 4,806,740       $ 4,113,837   

Construction and land development

     974,442         752,381   

Commercial real estate

     2,245,855         2,022,528   

Residential mortgages

     1,635,462         1,196,256   

Consumer

     1,623,069         1,409,130   
  

 

 

    

 

 

 

Total originated loans

   $ 11,285,568       $ 9,494,132   
  

 

 

    

 

 

 

Acquired loans:

     

Commercial non-real estate

   $ 769,226       $ 926,997   

Construction and land development

     110,294         142,931   

Commercial real estate

     813,429         967,148   

Residential mortgages

     37,739         315,340   

Consumer

     51,488         119,603   
  

 

 

    

 

 

 

Total acquired loans

   $ 1,782,176       $ 2,472,019   
  

 

 

    

 

 

 

Covered loans:

     

Commercial non-real estate

   $ 11,171       $ 23,390   

Construction and land development

     11,166         20,229   

Commercial real estate

     41,550         53,165   

Residential mortgages

     185,289         209,018   

Consumer

     31,654         52,864   
  

 

 

    

 

 

 

Total covered loans

   $ 280,830       $ 358,666   
  

 

 

    

 

 

 

Total loans:

     

Commercial non-real estate

   $ 5,587,137       $ 5,064,224   

Construction and land development

     1,095,902         915,541   

Commercial real estate

     3,100,834         3,042,841   

Residential mortgages

     1,858,490         1,720,614   

Consumer

     1,706,211         1,581,597   
  

 

 

    

 

 

 

Total loans

   $ 13,348,574       $ 12,324,817   
  

 

 

    

 

 

 

 

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Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

3. Loans and Allowance for Loan Losses (continued)

 

The following briefly describes the distinction between originated, acquired and covered loans and certain significant accounting policies relevant to each category.

Originated loans

Loans originated for investment are reported at the principal balance outstanding net of unearned income. Interest on loans and accretion of unearned income, including deferred loan fees, are computed in a manner that approximates a level yield on recorded principal. Interest on loans is recognized as income as earned.

The accrual of interest on an originated loan is discontinued when, in management’s opinion, it is probable that the borrower will be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. When accrual of interest is discontinued on a loan, all unpaid accrued interest is reversed and payments subsequently received are applied first to reduce principal, and interest income is recognized only for payments received after contractual principal has been satisfied. Loans are returned to accrual status when all the principal and interest contractually due are brought current and future payment performance is reasonably assured.

Acquired loans

Acquired loans are those purchased in the Whitney Holding Corporation acquisition on June 4, 2011. These loans were recorded at their estimated fair value at the acquisition date with no carryover of the related allowance for loan losses. The acquired loans were segregated between those considered to be performing (“acquired-performing”) and those with evidence of credit deterioration (“acquired-impaired”), based on such factors as past due status, nonaccrual status and credit risk ratings (rated substandard or worse). The acquired loans were further segregated into loan pools designed to facilitate the development of expected cash flows to be used in estimating their fair value.

Acquired-performing loans were segregated into pools based on common risk characteristics such as loan type, credit risk ratings, and contractual interest rate and repayment terms. The major loan types included commercial and industrial loans not secured by real estate, real estate construction and land development loans, commercial real estate loans, residential mortgage loans, and consumer loans, with further segregation within certain loan types as appropriate. Aggregate cash flows, both principal and interest, expected to be generated by each loan pool were estimated based on key assumptions covering such factors as prepayments, default rates, and severity of loss given a default. These assumptions were developed using both Whitney Holding Corporation’s historical experience and the portfolio characteristics at acquisition as well as available market research.

The difference at the acquisition date between the fair value and the contractual amounts due of an acquired-performing loan pool (the “fair value discount”) is accreted into income over the estimated life of the pool. Acquired-performing loans are placed on nonaccrual status and reported as nonperforming or past due using the same criteria applied to the originated portfolio.

Acquired-impaired loans were segregated into pools by identifying loans with common credit risk profiles based primarily on characteristics such as loan type and market area in which originated. Loan types included most of the major types used for the acquired-performing portfolio. The acquired-impaired loans that had been originated in Louisiana and Texas were further disaggregated from loans originated in Mississippi, Alabama and Florida, in recognition of the differences in general economic conditions affecting borrowers in these market areas. The fair value estimate for each pool of acquired performing and acquired-impaired loans was based on the estimate of expected cash flows from the pool discounted at prevailing market rates.

 

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Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

3. Loans and Allowance for Loan Losses (continued)

 

The excess of estimated cash flows expected to be collected from an acquired-impaired loan pool over the pool’s carrying value is referred to as the accretable yield and is recognized in interest income using an effective yield method over the estimated remaining life of the loan pool. Each pool of acquired-impaired loans is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows. Acquired-impaired loans in pools with an accretable yield and expected cash flows that are reasonably estimable are considered to be accruing and performing even though collection of contractual payments on loans within the pool may be in doubt, because the pool is the unit of accounting. Management recasts the estimate of cash flows expected to be collected on each acquired-impaired loan pool at each reporting date. If the present value of expected cash flows for a pool is less than its carrying value, impairment is recognized by an increase in the allowance for loan losses and a charge to the provision for loan losses. If the present value of expected cash flows for a pool is greater than its carrying value, any previously established allowance for loan losses is reversed and any remaining difference increases the accretable yield which will be taken into interest income over the remaining life of the loan pool. Acquired-impaired loans are generally not subject to individual evaluation for impairment and are not reported with impaired loans or troubled debt restructurings even if they would otherwise qualify for such treatment.

Covered loans and the related loss share receivable

The loans purchased in the 2009 acquisition of Peoples First Community Bank (Peoples First) are covered by two loss share agreements between the FDIC and the Company which afford the Company significant loss protection. These covered loans are accounted for as acquired-impaired loans as described above in the section on acquired loans. The Company treated all loans for the Peoples First acquisition as acquired-impaired loans based on the significant amount of deteriorating and nonperforming loans comprised mainly of adjustable rate mortgages and home equity loans located in Florida. The loss share receivable is measured separately from the related covered loans as it is not contractually embedded in the loans and is not transferrable if the loans are sold. The fair value of the loss share receivable at acquisition was estimated by discounting expected reimbursements for losses from the loans covered by the loss share agreements, including appropriate consideration of possible true-up payments to the FDIC at the expiration of the agreements.

The loss share receivable is reviewed at each reporting period and updated prospectively as loss estimates related to covered loan pools change. Increases in expected reimbursements under the loss sharing agreements will lead to an increase in the loss share receivable. A decrease in expected reimbursements is reflected first as a reversal of any previously recorded increase in the loss share receivable on the covered loan pool with the remainder reflected as a reduction in the loss share receivable’s accretion rate. Increases and decreases in the loss share receivable related to changes in loss estimates result in reductions in or additions to the provision for loan losses, which serves to offset the impact on the provision from impairments or impairment reversals recognized on the underlying covered loan pool. The excess (or shortfall) of expected claims as compared to the carrying value of the loss share receivable is accreted (amortized) into noninterest income over the shorter of the remaining life of the covered loan pool or the life of the loss share agreement. The impact on operations of a reduction in the loss share receivable’s accretion rate is associated with an increase in the accretable yield on the underlying loan pool. The indemnification asset is reduced as cash is received from the FDIC related to losses incurred on covered assets.

 

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Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

3. Loans and Allowance for Loan Losses (continued)

 

The following schedule shows activity in the loss share receivable for the nine months ended September 30, 2014 and 2013 (in thousands):

 

     Nine Months Ended  
     September 30,     September 30,  
     2014     2013  

Balance, January 1

   $ 113,834      $ 177,844   

Amortization

     (9,989     (590

Charge-offs, write-downs and other losses (recoveries)

     (793     (190

External expenses qualifying under loss share agreement

     3,325        7,918   

Changes due to changes in cash flow projections

     (14,569     —     

Settlement of disallowed loss claims

     (10,268     —     

Net payments to (from) FDIC

     366        (60,886
  

 

 

   

 

 

 

Ending balance

   $ 81,906      $ 124,096   
  

 

 

   

 

 

 

The loss share agreements contain specific terms and conditions regarding the management of the covered assets that the Company must follow in order to receive reimbursement for losses from the FDIC. During the second quarter of 2014, the Company reached a settlement agreement to reimburse the FDIC $10.3 million for certain claims previously received under the agreements. The disagreement arose from a targeted review of the Company’s compliance with the terms of the agreements and related to the matter in which certain assets were administered and losses were calculated. The FDIC had suspended processing the Company’s claims as of September 2013 pending settlement of these issues and outstanding claims. During the third quarter, the settlement was paid and the FDIC began payment of claims. The total due from the FDIC for the period December 2013 through August 2014 is $21.1 million.

 

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Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

3. Loans and Allowance for Loan Losses (continued)

 

The following schedule shows activity in the allowance for loan losses by portfolio segment for the nine months ended September 30, 2014 and 2013 as well as the corresponding recorded investment in loans at the end of each period.

 

     Commercial
non-real
estate
    Construction
and land
development
    Commercial
real estate
    Residential
mortgages
    Consumer     Total  

(In thousands)

   Nine Months Ended September 30, 2014  

Originated loans

            

Allowance for loan losses:

            

Beginning balance

   $ 33,091      $ 6,180      $ 20,649      $ 6,892      $ 12,073      $ 78,885   

Charge-offs

     (4,690     (2,615     (2,255     (1,793     (11,920     (23,273

Recoveries

     2,118        1,220        1,231        501        3,722        8,792   

Net provision for loan losses

     3,929        2,151        (3,231     3,647        10,921        17,417   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ 34,448      $ 6,936      $ 16,394      $ 9,247      $ 14,796      $ 81,821   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance:

            

Individually evaluated for impairment

   $ 24      $ 250      $ 98      $ 382      $ —        $ 754   

Collectively evaluated for impairment

     34,424        6,686        16,296        8,865        14,796        81,067   

Loans:

            

Ending balance:

   $ 4,806,740      $ 974,442      $ 2,245,855      $ 1,635,462      $ 1,623,069      $ 11,285,568   

Individually evaluated for impairment

     5,582        6,617        14,486        2,712        —          29,397   

Collectively evaluated for impairment

     4,801,158        967,825        2,231,369        1,632,750        1,623,069        11,256,171   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Acquired loans

            

Allowance for loan losses:

            

Beginning balance

   $ 1,603      $ 10      $ 34      $ —        $ —        $ 1,647   

Charge-offs

     —          —          —          —          —          —     

Recoveries

     —          —          —          —          —          —     

Net provision for loan losses

     5,800        1,436        57        (4     182        7,471   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ 7,403      $ 1,446      $ 91      $ (4   $ 182      $ 9,118   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance:

            

Individually evaluated for impairment

   $ 92      $ 426      $ 46      $ —        $ —        $ 564   

Amounts related to acquired-impaired loans

     —          —          —          —          —          —     

Collectively evaluated for impairment

     7,311        1,020        45        (4     182        8,554   

Loans:

            

Ending balance:

   $ 769,226      $ 110,294      $ 813,429      $ 37,739      $ 51,488      $ 1,782,176   

Individually evaluated for impairment

     931        2,284        458        28        —          3,701   

Acquired-impaired loans

     4,064        19,200        27,392        5,038        143        55,837   

Collectively evaluated for impairment

     764,231        88,810        785,579        32,673        51,345        1,722,638   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

15


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

3. Loans and Allowance for Loan Losses (continued)

 

     Commercial
non-real
estate
    Construction
and land
development
    Commercial
real estate
    Residential
mortgages
    Consumer     Total  

(In thousands)

   Nine Months Ended September 30, 2014  

Covered loans

            

Allowance for loan losses:

            

Beginning balance

   $ 2,323      $ 2,655      $ 10,929      $ 27,989      $ 9,198      $ 53,094   

Charge-offs

     (176     (350     (4,480     (677     (1,192     (6,875

Recoveries

     467        1,504        1,408        1        370        3,750   

Net provision for loan losses

     (79     (138     (125     (257     (167     (766

Decrease in FDIC loss share receivable

     (1,507     (2,404     (2,418     (4,873     (3,368     (14,570
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ 1,028      $ 1,267      $ 5,314      $ 22,183      $ 4,841      $ 34,633   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance:

            

Individually evaluated for impairment

   $ —        $ —        $ —        $ —        $ —        $ —     

Amounts related to acquired-impaired loans

     1,028        1,267        5,314        22,183        4,841        34,633   

Collectively evaluated for impairment

     —          —          —          —          —          —     

Loans:

            

Ending balance:

   $ 11,171      $ 11,166      $ 41,550      $ 185,289      $ 31,654      $ 280,830   

Individually evaluated for impairment

     —          —          —          —          —          —     

Acquired-impaired loans

     11,171        11,166        41,550        185,289        31,654        280,830   

Collectively evaluated for impairment

     —          —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total loans

            

Allowance for loan losses:

            

Beginning balance

   $ 37,017      $ 8,845      $ 31,612      $ 34,881      $ 21,271      $ 133,626   

Charge-offs

     (4,866     (2,965     (6,735     (2,470     (13,112     (30,148

Recoveries

     2,585        2,724        2,639        502        4,092        12,542   

Net provision for loan losses

     9,650        3,449        (3,299     3,386        10,936        24,122   

Decrease in FDIC loss share receivable

     (1,507     (2,404     (2,418     (4,873     (3,368     (14,570
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ 42,879      $ 9,649      $ 21,799      $ 31,426      $ 19,819      $ 125,572   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance:

            

Individually evaluated for impairment

   $ 116      $ 676      $ 144      $ 382      $ —        $ 1,318   

Amounts related to acquired-impaired loans

     1,028        1,267        5,314        22,183        4,841        34,633   

Collectively evaluated for impairment

     41,735        7,706        16,341        8,861        14,978        89,621   

Loans:

            

Ending balance:

   $ 5,587,137      $ 1,095,902      $ 3,100,834      $ 1,858,490      $ 1,706,211      $ 13,348,574   

Individually evaluated for impairment

     6,513        8,901        14,944        2,740        —          33,098   

Acquired-impaired loans

     15,235        30,366        68,942        190,327        31,797        336,667   

Collectively evaluated for impairment

     5,565,389        1,056,635        3,016,948        1,665,423        1,674,414        12,978,809   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

16


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

3. Loans and Allowance for Loan Losses (continued)

 

 

     Commercial
non-real
estate
    Construction
and land
development
    Commercial
real estate
    Residential
mortgages
    Consumer     Total  

(In thousands)

   Nine Months Ended September 30, 2013  

Originated loans

            

Allowance for loan losses:

            

Beginning balance

   $ 20,775      $ 11,415      $ 26,959      $ 6,406      $ 13,219      $ 78,774   

Charge-offs

     (5,199     (7,548     (3,718     (1,549     (13,372     (31,386

Recoveries

     3,381        1,243        2,340        991        4,336        12,291   

Net provision for loan losses

     11,152        2,072        (3,698     64        8,152        17,742   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ 30,109      $ 7,182      $ 21,883      $ 5,912      $ 12,335      $ 77,421   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance:

            

Individually evaluated for impairment

   $ 325      $ 211      $ 946      $ —        $ —        $ 1,482   

Collectively evaluated for impairment

     29,784        6,971        20,937        5,912        12,335        75,939   

Loans:

            

Ending balance:

   $ 3,633,490      $ 738,983      $ 1,816,402      $ 1,124,649      $ 1,387,243      $ 8,700,767   

Individually evaluated for impairment

     8,911        16,044        21,170        —          —          46,125   

Collectively evaluated for impairment

     3,624,579        722,939        1,795,232        1,124,649        1,387,243        8,654,642   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Acquired loans

            

Allowance for loan losses:

            

Beginning balance

   $ 788      $ —        $ —        $ —        $ —        $ 788   

Charge-offs

     —          —          —          —          —          —     

Recoveries

     —          —          —          —          —          —     

Net provision for loan losses

     (788     —          463        —          —          (325
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ —        $ —        $ 463      $ —        $ —        $ 463   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance:

            

Individually evaluated for impairment

   $ —        $ —        $ 463      $ —        $ —        $ 463   

Amounts related to acquired-impaired loans

     —          —          —          —          —          —     

Collectively evaluated for impairment

     —          —          —          —          —          —     

Loans:

            

Ending balance:

   $ 967,485      $ 158,228      $ 1,038,287      $ 347,054      $ 130,649      $ 2,641,703   

Individually evaluated for impairment

     2,179        730        2,371        502        —          5,782   

Acquired-impaired loans

     18,967        15,080        25,432        5,387        105        64,971   

Collectively evaluated for impairment

     946,339        142,418        1,010,484        341,165        130,544        2,570,950   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

17


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

3. Loans and Allowance for Loan Losses (continued)

 

     Commercial
non-real
estate
    Construction
and land
development
    Commercial
real estate
    Residential
mortgages
    Consumer     Total  

(In thousands)

   Nine Months Ended September 30, 2013  

Covered loans

            

Allowance for loan losses:

            

Beginning balance

   $ 2,162      $ 5,623      $ 9,433      $ 30,471      $ 8,920      $ 56,609   

Charge-offs

     (681     (1,784     (4,316     (947     (1,145     (8,873

Recoveries

     90        554        2,395        13        67        3,119   

Net provision for loan losses

     (328     (1,600     1,197        4,723        3,995        7,987   

Increase (Decrease) in FDIC loss share receivable

     447        (314     (732     1,261        835        1,497   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ 1,690      $ 2,479      $ 7,977      $ 35,521      $ 12,672      $ 60,339   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance:

            

Individually evaluated for impairment

   $ —        $ —        $ —        $ —        $ —        $ —     

Amounts related to acquired-impaired loans

     1,690        2,479        7,977        35,521        12,672        60,339   

Collectively evaluated for impairment

     —          —          —          —          —          —     

Loans:

            

Ending balance:

   $ 24,340      $ 23,197      $ 60,280      $ 223,494      $ 60,691      $ 392,002   

Individually evaluated for impairment

     —          —          —          —          —          —     

Acquired-impaired loans

     24,340        23,197        60,280        223,494        60,691        392,002   

Collectively evaluated for impairment

     —          —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total loans

            

Allowance for loan losses:

            

Beginning balance

   $ 23,725      $ 17,038      $ 36,392      $ 36,877      $ 22,139      $ 136,171   

Charge-offs

     (5,880     (9,332     (8,034     (2,496     (14,517     (40,259

Recoveries

     3,471        1,797        4,735        1,004        4,403        15,410   

Net provision for loan losses

     10,036        472        (2,038     4,787        12,147        25,404   

Increase (Decrease) in FDIC loss share receivable

     447        (314     (732     1,261        835        1,497   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ 31,799      $ 9,661      $ 30,323      $ 41,433      $ 25,007      $ 138,223   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance:

            

Individually evaluated for impairment

   $ 325      $ 211      $ 1,409      $ —        $ —        $ 1,945   

Amounts related to acquired-impaired loans

     1,690        2,479        7,977        35,521        12,672        60,339   

Collectively evaluated for impairment

     29,784        6,971        20,937        5,912        12,335        75,939   

Loans:

            

Ending balance:

   $ 4,625,315      $ 920,408      $ 2,914,969      $ 1,695,197      $ 1,578,583      $ 11,734,472   

Individually evaluated for impairment

     11,090        16,774        23,541        502        —          51,907   

Acquired-impaired loans

     43,307        38,277        85,712        228,881        60,796        456,973   

Collectively evaluated for impairment

     4,570,918        865,357        2,805,716        1,465,814        1,517,787        11,225,592   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

18


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

3. Loans and Allowance for Loan Losses (continued)

 

The following tables show the composition of nonaccrual loans by portfolio segment and class. Acquired-impaired and certain covered loans are considered to be performing due to the application of the accretion method and are excluded from the table. Covered loans accounted for using the cost recovery method do not have an accretable yield and are included below as nonaccrual loans. Acquired-performing loans that have subsequently been placed on nonaccrual status are also included below.

 

     September 30,      December 31,  

Nonaccrual Loans

   2014      2013  
     (In thousands)  

Originated loans:

     

Commercial non-real estate

   $ 9,279       $ 10,119   

Construction and land development

     6,083         13,171   

Commercial real estate

     26,432         32,772   

Residential mortgages

     21,326         13,449   

Consumer

     5,242         4,802   
  

 

 

    

 

 

 

Total originated loans

   $ 68,362       $ 74,313   
  

 

 

    

 

 

 

Acquired loans:

     

Commercial non-real estate

   $ 1,857       $ 3,209   

Construction and land development

     3,275         1,990   

Commercial real estate

     4,210         6,525   

Residential mortgages

     1,353         8,262   

Consumer

     877         1,814   
  

 

 

    

 

 

 

Total acquired loans

   $ 11,572       $ 21,800   
  

 

 

    

 

 

 

Covered loans:

     

Commercial non-real estate

   $ —         $ 2   

Construction and land development

     1,539         1,539   

Commercial real estate

     1,107         1,163   

Residential mortgages

     394         544   

Consumer

     180         296   
  

 

 

    

 

 

 

Total covered loans

   $ 3,220       $ 3,544   
  

 

 

    

 

 

 

Total loans:

     

Commercial non-real estate

   $ 11,136       $ 13,330   

Construction and land development

     10,897         16,700   

Commercial real estate

     31,749         40,460   

Residential mortgages

     23,073         22,255   

Consumer

     6,299         6,912   
  

 

 

    

 

 

 

Total loans

   $ 83,154       $ 99,657   
  

 

 

    

 

 

 

The estimated amount of interest that would have been recorded on nonaccrual loans had the loans not been classified as nonaccrual in the nine months ended September 30, 2014 was approximately $1 million. Interest actually received and recorded as income on nonaccrual loans during the nine months ended September 30, 2014 was approximately $1 million.

Nonaccrual loans include loans modified in troubled debt restructurings (TDRs) of $10 million. Total TDRs were $18 million as of September 30, 2014 and $25 million at December 31, 2013. Modified acquired-impaired loans are not removed from their accounting pool and accounted for as TDRs, even if those loans would otherwise be deemed TDRs.

 

19


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

3. Loans and Allowance for Loan Losses (continued)

 

The tables below detail TDRs that were modified during the nine months ended September 30, 2014 and September 30, 2013 by portfolio segment and TDRs that subsequently defaulted within twelve months of modification (dollar amounts in thousands). All TDRs are rated substandard and individually evaluated for impairment.

 

     Nine Months Ended  
     September 30, 2014      September 30, 2013  

Troubled Debt Restructurings:

   Number of
Contracts
     Pre-Modification
Outstanding
Recorded
Investment
     Post-Modification
Outstanding
Recorded
Investment
     Number of
Contracts
     Pre-Modification
Outstanding
Recorded
Investment
     Post-Modification
Outstanding
Recorded
Investment
 

Originated loans:

  

              

Commercial non-real estate

     —         $ —         $ —           1       $ 925       $ 920   

Construction and land development

     —           —           —           —           —           —     

Commercial real estate

     2         2,430         2,385         5         1,844         1,789   

Residential mortgages

     4         1,495         848         2         971         854   

Consumer

     —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total originated loans

     6       $ 3,925       $ 3,233         8       $ 3,740       $ 3,563   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Acquired loans:

                 

Commercial non-real estate

     —         $ —         $ —           —         $ —         $ —     

Construction and land development

     —           —           —           —           —           —     

Commercial real estate

     —           —           —           1         512         501   

Residential mortgages

     —           —           —           1         515         493   

Consumer

     —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total acquired loans

     —         $ —         $ —           2       $ 1,027       $ 994   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Covered loans:

                 

Commercial non-real estate

     —         $ —         $ —           —         $ —         $ —     

Construction and land development

     —           —           —           —           —           —     

Commercial real estate

     —           —           —           —           —           —     

Residential mortgages

     —           —           —           —           —           —     

Consumer

     —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total covered loans

     —         $ —         $ —           —         $ —         $ —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans:

                 

Commercial non-real estate

     —         $ —         $ —           1       $ 925       $ 920   

Construction and land development

     —           —           —           —           —           —     

Commercial real estate

     2         2,430         2,385         6         2,356         2,290   

Residential mortgages

     4         1,495         848         3         1,486         1,347   

Consumer

     —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

     6       $ 3,925       $ 3,233         10       $ 4,767       $ 4,557   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

20


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

3. Loans and Allowance for Loan Losses (continued)

 

     Nine Months Ended  
     September 30, 2014      September 30, 2013  

Troubled Debt Restructurings That Subsequently Defaulted:

   Number of
Contracts
     Recorded
Investment
     Number of
Contracts
     Recorded
Investment
 

Originated loans:

           

Commercial non-real estate

     1       $ 909         —         $ —     

Construction and land development

     —           —           —           —     

Commercial real estate

     —           —           —           —     

Residential mortgages

     —           —           —           —     

Consumer

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total originated loans

     1       $ 909         —         $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Acquired loans:

           

Commercial non-real estate

     —         $ —           —         $ —     

Construction and land development

     —           —           —           —     

Commercial real estate

     —           —           —           —     

Residential mortgages

     —           —           —           —     

Consumer

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total acquired loans

     —         $ —           —         $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Covered loans:

           

Commercial non-real estate

     —         $ —           —         $ —     

Construction and land development

     —           —           —           —     

Commercial real estate

     —           —           —           —     

Residential mortgages

     —           —           —           —     

Consumer

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total covered loans

     —         $ —           —         $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total loans:

           

Commercial non-real estate

     1       $ 909         —         $ —     

Construction and land development

     —           —           —           —     

Commercial real estate

     —           —           —           —     

Residential mortgages

     —           —           —           —     

Consumer

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

     1       $ 909         —         $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

 

21


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

3. Loans and Allowance for Loan Losses (continued)

 

Those loans that are determined to be impaired and have balances of $1 million or more are individually evaluated for impairment. The tables below present loans that are individually evaluated for impairment disaggregated by class at September 30, 2014 and December 31, 2013:

 

September 30, 2014

   Recorded
Investment
     Unpaid
Principal
Balance
     Related
Allowance
     Average
Recorded
Investment
     Interest
Income
Recognized
 
     (In thousands)  

Originated loans:

              

With no related allowance recorded:

              

Commercial non-real estate

   $ 1,498       $ 2,111       $ —         $ 1,157       $ 31   

Construction and land development

     3,320         5,459         —           3,218         112   

Commercial real estate

     10,502         13,011         —           8,428         246   

Residential mortgages

     263         647         —           88         1   

Consumer

     —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     15,583         21,228         —           12,891         390   

With an allowance recorded:

              

Commercial non-real estate

   $ 4,084       $ 4,173       $ 24       $ 5,922         77   

Construction and land development

     3,297         3,815         250         6,578         100   

Commercial real estate

     3,984         4,304         98         7,417         75   

Residential mortgages

     2,449         2,758         382         2,189         28   

Consumer

     —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     13,814         15,050         754         22,106         280   

Total:

              

Commercial non-real estate

     5,582         6,284         24         7,079         108   

Construction and land development

     6,617         9,274         250         9,796         212   

Commercial real estate

     14,486         17,315         98         15,845         321   

Residential mortgages

     2,712         3,405         382         2,277         29   

Consumer

     —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total originated loans

   $ 29,397       $ 36,278       $ 754       $ 34,997       $ 670   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Acquired loans:

              

With no related allowance recorded:

              

Commercial non-real estate

   $ —         $ 1,730       $ —         $ 357       $ —     

Construction and land development

     —           —           —           121         —     

Commercial real estate

     —           —           —           311         —     

Residential mortgages

     28         68         —           88         —     

Consumer

     —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     28         1,798         —           877         —     

With an allowance recorded:

              

Commercial non-real estate

     931         1,070         92       $ 1,304         118   

Construction and land development

     2,284         4,835         426         1,130         45   

Commercial real estate

     458         493         46         1,305         61   

Residential mortgages

     —           —           —           —           —     

Consumer

     —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     3,673         6,398         564         3,739         224   

Total:

              

Commercial non-real estate

     931         2,800         92         1,661         118   

Construction and land development

     2,284         4,835         426         1,251         45   

Commercial real estate

     458         493         46         1,616         61   

Residential mortgages

     28         68         —           88         —     

Consumer

     —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total acquired loans

   $ 3,701       $ 8,196       $ 564       $ 4,616       $ 224   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

22


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

3. Loans and Allowance for Loan Losses (continued)

 

September 30, 2014

   Recorded
Investment
     Unpaid
Principal
Balance
     Related
Allowance
     Average
Recorded
Investment
     Interest
Income
Recognized
 

Covered loans:

              

With no related allowance recorded:

              

Commercial non-real estate

   $ —         $ —         $ —         $ —         $ —     

Construction and land development

     —           —           —           —           —     

Commercial real estate

     —           —           —           —           —     

Residential mortgages

     —           —           —           —           —     

Consumer

     —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     —           —           —           —           —     

With an allowance recorded:

              

Commercial non-real estate

     —           —           —           —           —     

Construction and land development

     —           —           —           —           —     

Commercial real estate

     —           —           —           —           —     

Residential mortgages

     —           —           —           —           —     

Consumer

     —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     —           —           —           —           —     

Total:

              

Commercial non-real estate

     —           —           —           —           —     

Construction and land development

     —           —           —           —           —     

Commercial real estate

     —           —           —           —           —     

Residential mortgages

     —           —           —           —           —     

Consumer

     —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total covered loans

   $ —         $ —         $ —         $ —         $ —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans:

              

With no related allowance recorded:

              

Commercial non-real estate

   $ 1,498       $ 3,841       $ —         $ 1,514       $ 31   

Construction and land development

     3,320         5,459         —           3,339         112   

Commercial real estate

     10,502         13,011         —           8,739         246   

Residential mortgages

     291         715         —           176         1   

Consumer

     —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     15,611         23,026         —           13,768         390   

With an allowance recorded:

              

Commercial non-real estate

     5,015         5,243         116         7,226         195   

Construction and land development

     5,581         8,650         676         7,708         145   

Commercial real estate

     4,442         4,797         144         8,722         136   

Residential mortgages

     2,449         2,758         382         2,189         28   

Consumer

     —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     17,487         21,448         1,318         25,845         504   

Total:

              

Commercial non-real estate

     6,513         9,084         116         8,740         226   

Construction and land development

     8,901         14,109         676         11,047         257   

Commercial real estate

     14,944         17,808         144         17,461         382   

Residential mortgages

     2,740         3,473         382         2,365         29   

Consumer

     —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 33,098       $ 44,474       $ 1,318       $ 39,613       $ 894   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

23


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

3. Loans and Allowance for Loan Losses (continued)

 

December 31, 2013

   Recorded
Investment
     Unpaid
Principal
Balance
     Related
Allowance
     Average
Recorded
Investment
     Interest
Income
Recognized
 
     (In thousands)  

Originated loans:

              

With no related allowance recorded:

              

Commercial non-real estate

   $ 329       $ 442       $ —         $ 235       $ 18   

Construction and land development

     4,101         5,131         —           2,780         82   

Commercial real estate

     5,321         7,458         —           15,886         374   

Residential mortgages

     —           —           —           262         —     

Consumer

     —           —           —           1,013         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     9,751         13,031         —           20,176         474   

With an allowance recorded:

              

Commercial non-real estate

     4,965         5,303         477         8,936         180   

Construction and land development

     6,498         8,343         22         2,549         —     

Commercial real estate

     8,708         9,090         268         19,683         460   

Residential mortgages

     605         620         1         228         —     

Consumer

     —           —           —           1,025         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     20,776         23,356         768         32,421         640   

Total:

              

Commercial non-real estate

     5,294         5,745         477         9,171         198   

Construction and land development

     10,599         13,474         22         5,329         82   

Commercial real estate

     14,029         16,548         268         35,569         834   

Residential mortgages

     605         620         1         490         —     

Consumer

     —           —           —           2,038         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total originated loans

   $ 30,527       $ 36,387       $ 768       $ 52,597       $ 1,114   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Acquired loans:

              

With no related allowance recorded:

              

Commercial non-real estate

   $ 2,141       $ 3,275       $ —         $ 865       $ 8   

Construction and land development

     728         1,142         —           296         3   

Commercial real estate

     1,865         2,634         —           1,339         49   

Residential mortgages

     473         507         —           407         —     

Consumer

     —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     5,207         7,558         —           2,907         60   

With an allowance recorded:

              

Commercial non-real estate

     —           —           —           2,747         63   

Construction and land development

     —           —           —           157         —     

Commercial real estate

     —           —           —           2,663         —     

Residential mortgages

     —           —           —           845         —     

Consumer

     —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     —           —           —           6,412         63   

Total:

              

Commercial non-real estate

     2,141         3,275         —           3,612         71   

Construction and land development

     728         1,142         —           453         3   

Commercial real estate

     1,865         2,634         —           4,002         49   

Residential mortgages

     473         507         —           1,252         —     

Consumer

     —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total acquired loans

   $ 5,207       $ 7,558       $ —         $ 9,319       $ 123   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

24


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

3. Loans and Allowance for Loan Losses (continued)

 

            Unpaid             Average      Interest  
     Recorded      Principal      Related      Recorded      Income  

December 31, 2013

   Investment      Balance      Allowance      Investment      Recognized  

Covered loans:

              

With no related allowance recorded:

              

Commercial non-real estate

   $ —         $ —         $ —         $ —         $ —     

Construction and land development

     —           —           —           —           —     

Commercial real estate

     —           —           —           —           —     

Residential mortgages

     —           —           —           —           —     

Consumer

     —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     —           —           —           —           —     

With an allowance recorded:

              

Commercial non-real estate

     —           —           —           —           —     

Construction and land development

     —           —           —           —           —     

Commercial real estate

     —           —           —           —           —     

Residential mortgages

     —           —           —           —           —     

Consumer

     —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     —           —           —           —           —     

Total:

              

Commercial non-real estate

     —           —           —           —           —     

Construction and land development

     —           —           —           —           —     

Commercial real estate

     —           —           —           —           —     

Residential mortgages

     —           —           —           —           —     

Consumer

     —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total covered loans

   $ —         $ —         $ —         $ —         $ —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans:

              

With no related allowance recorded:

              

Commercial non-real estate

   $ 2,470       $ 3,717       $ —         $ 1,100       $ 26   

Construction and land development

     4,829         6,273         —           3,076         85   

Commercial real estate

     7,186         10,092         —           17,225         423   

Residential mortgages

     473         507         —           669         —     

Consumer

     —           —           —           1,013         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     14,958         20,589         —           23,083         534   

With an allowance recorded:

              

Commercial non-real estate

     4,965         5,303         477         11,683         243   

Construction and land development

     6,498         8,343         22         2,706         —     

Commercial real estate

     8,708         9,090         268         22,346         460   

Residential mortgages

     605         620         1         1,073         —     

Consumer

     —           —           —           1,025         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     20,776         23,356         768         38,833         703   

Total:

              

Commercial non-real estate

     7,435         9,020         477         12,783         269   

Construction and land development

     11,327         14,616         22         5,782         85   

Commercial real estate

     15,894         19,182         268         39,571         883   

Residential mortgages

     1,078         1,127         1         1,742         —     

Consumer

     —           —           —           2,038         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 35,734       $ 43,945       $ 768       $ 61,916       $ 1,237   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

25


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

3. Loans and Allowance for Loan Losses (continued)

 

Covered loans and acquired-impaired loans with an accretable yield are considered to be current in the following delinquency table. Certain covered loans accounted for using the cost recovery method are disclosed according to their contractual payment status below. The following tables present the age analysis of past due loans at September 30, 2014 and December 31, 2013:

 

                                        Recorded  
                Greater than                       investment  
    30-59 days     60-89 days     90 days     Total           Total     > 90 days  

September 30, 2014

  past due     past due     past due     past due     Current     Loans     and still accruing  
                      (In thousands)                    

Originated loans:

             

Commercial non-real estate

  $ 4,137      $ 4,039      $ 3,111      $ 11,287      $ 4,795,453      $ 4,806,740      $ 259   

Construction and land development

    1,159        651        6,185        7,995        966,447        974,442        1,443   

Commercial real estate

    3,524        2,170        12,271        17,965        2,227,890        2,245,855        257   

Residential mortgages

    606        5,071        10,503        16,180        1,619,282        1,635,462        220   

Consumer

    4,539        2,556        4,290        11,385        1,611,684        1,623,069        2,970   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 13,965      $ 14,487      $ 36,360      $ 64,812      $ 11,220,756      $ 11,285,568      $ 5,149   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Acquired loans:

             

Commercial non-real estate

  $ 151      $ 95      $ 1,734      $ 1,980      $ 767,246      $ 769,226      $ —     

Construction and land development

    231        1,649        1,400        3,280        107,014        110,294        17   

Commercial real estate

    522        641        3,534        4,697        808,732        813,429        1,471   

Residential mortgages

    27        —          228        255        37,484        37,739        —     

Consumer

    358        241        593        1,192        50,296        51,488        30   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 1,289      $ 2,626      $ 7,489      $ 11,404      $ 1,770,772      $ 1,782,176      $ 1,518   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Covered loans:

             

Commercial non-real estate

  $ —        $ —        $ —        $ —        $ 11,171      $ 11,171      $ —     

Construction and land development

    —          —          —          —          11,166        11,166        —     

Commercial real estate

    —          —          —          —          41,550        41,550        —     

Residential mortgages

    —          149        —          149        185,140        185,289        —     

Consumer

    1        —          35        36        31,618        31,654        —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 1      $ 149      $ 35      $ 185      $ 280,645      $ 280,830      $ —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total loans:

             

Commercial non-real estate

  $ 4,288      $ 4,134      $ 4,845      $ 13,267      $ 5,573,870      $ 5,587,137      $ 259   

Construction and land development

    1,390        2,300        7,585        11,275        1,084,627        1,095,902        1,460   

Commercial real estate

    4,046        2,811        15,805        22,662        3,078,172        3,100,834        1,728   

Residential mortgages

    633        5,220        10,731        16,584        1,841,906        1,858,490        220   

Consumer

    4,898        2,797        4,918        12,613        1,693,598        1,706,211        3,000   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 15,255      $ 17,262      $ 43,884      $ 76,401      $ 13,272,173      $ 13,348,574      $ 6,667   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

26


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

3. Loans and Allowance for Loan Losses (continued)

 

 

                                        Recorded  
                Greater than                       investment  
    30-59 days     60-89 days     90 days     Total           Total     > 90 days  

December 31, 2013

  past due     past due     past due     past due     Current     Loans     and still accruing  
                      (In thousands)                    

Originated loans:

             

Commercial non-real estate

  $ 11,645      $ 1,203      $ 4,803      $ 17,651      $ 4,096,186      $ 4,113,837      $ 521   

Construction and land development

    5,877        1,264        5,970        13,111        739,270        752,381        —     

Commercial real estate

    8,178        5,744        14,620        28,542        1,993,986        2,022,528        420   

Residential mortgages

    12,410        3,870        3,540        19,820        1,176,436        1,196,256        —     

Consumer

    8,798        1,913        3,823        14,534        1,394,596        1,409,130        2,344   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 46,908      $ 13,994      $ 32,756      $ 93,658      $ 9,400,474      $ 9,494,132      $ 3,285   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Acquired loans:

             

Commercial non-real estate

  $ 1,982      $ 2,332      $ 1,467      $ 5,781      $ 921,216      $ 926,997      $ 541   

Construction and land development

    862        1,529        1,161        3,552        139,379        142,931        541   

Commercial real estate

    3,742        1,345        9,026        14,113        953,035        967,148        5,853   

Residential mortgages

    5,632        2,698        5,503        13,833        301,507        315,340        72   

Consumer

    1,029        120        1,013        2,162        117,441        119,603        82   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 13,247      $ 8,024      $ 18,170      $ 39,441      $ 2,432,578      $ 2,472,019      $ 7,089   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Covered loans:

             

Commercial non-real estate

  $ —        $ —        $ —        $ —        $ 23,390      $ 23,390      $ —     

Construction and land development

    —          —          1,539        1,539        18,690        20,229        —     

Commercial real estate

    —          —          675        675        52,490        53,165        —     

Residential mortgages

    —          —          3        3        209,015        209,018        —     

Consumer

    —          —          —          —          52,864        52,864        —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ —        $ —        $ 2,217      $ 2,217      $ 356,449      $ 358,666      $ —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total loans:

             

Commercial non-real estate

  $ 13,627      $ 3,535      $ 6,270      $ 23,432      $ 5,040,792      $ 5,064,224      $ 1,062   

Construction and land development

    6,739        2,793        8,670        18,202        897,339        915,541        541   

Commercial real estate

    11,920        7,089        24,321        43,330        2,999,511        3,042,841        6,273   

Residential mortgages

    18,042        6,568        9,046        33,656        1,686,958        1,720,614        72   

Consumer

    9,827        2,033        4,836        16,696        1,564,901        1,581,597        2,426   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 60,155      $ 22,018      $ 53,143      $ 135,316      $ 12,189,501      $ 12,324,817      $ 10,374   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

27


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

3. Loans and Allowance for Loan Losses (continued)

 

The following tables present the credit quality indicators of the Company’s various classes of loans at September 30, 2014 and December 31, 2013.

Commercial Non-Real Estate Credit Exposure

Credit Risk Profile Based on Payment Activity

 

                                                                                                                       
    September 30, 2014     December 31, 2013  
    Originated     Acquired     Covered     Total     Originated     Acquired     Covered     Total  
          (In thousands)                 (In thousands)        

Grade:

               

Pass

  $ 4,656,899      $ 698,111      $ 1,856      $ 5,356,866      $ 3,990,320      $ 846,134      $ 10,477      $ 4,846,931   

Pass-Watch

    58,894        32,372        —          91,266        46,734        44,105        9        90,848   

Special Mention

    26,869        26,635        521        54,025        41,812        19,915        2,897        64,624   

Substandard

    63,959        12,108        8,794        84,861        34,276        16,125        9,662        60,063   

Doubtful

    119        —          —          119        695        718        345        1,758   

Loss

    —          —          —          —          —          —          —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 4,806,740      $ 769,226      $ 11,171      $ 5,587,137      $ 4,113,837      $ 926,997      $ 23,390      $ 5,064,224   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Construction Credit Exposure

Credit Risk Profile Based on Payment Activity

  

  

    September 30, 2014     December 31, 2013  
    Originated     Acquired     Covered     Total     Originated     Acquired     Covered     Total  
          (In thousands)                 (In thousands)        

Grade:

               

Pass

  $ 923,800      $ 82,067      $ 2,323      $ 1,008,190      $ 709,261      $ 112,773      $ 1      $ 822,035   

Pass-Watch

    17,576        2,911        1,000        21,487        7,817        1,907        1,226        10,950   

Special Mention

    5,832        5,737        29        11,598        3,926        9,409        276        13,611   

Substandard

    27,234        19,579        7,814        54,627        31,377        18,842        11,498        61,717   

Doubtful

    —          —          —          —          —          —          7,228        7,228   

Loss

    —          —          —          —          —          —          —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 974,442      $ 110,294      $ 11,166      $ 1,095,902      $ 752,381      $ 142,931      $ 20,229      $ 915,541   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Commercial Real Estate Credit Exposure

Credit Risk Profile by Internally Assigned Grade

  

  

    September 30, 2014     December 31, 2013  
    Originated     Acquired     Covered     Total     Originated     Acquired     Covered     Total  
          (In thousands)                 (In thousands)        

Grade:

               

Pass

  $ 2,048,886      $ 758,092      $ 6,805      $ 2,813,783      $ 1,864,115      $ 896,578      $ 1,678      $ 2,762,371   

Pass-Watch

    83,729        8,725        5,811        98,265        49,578        9,530        10,266        69,374   

Special Mention

    25,842        9,029        863        35,734        15,785        19,798        1,999        37,582   

Substandard

    87,369        37,583        28,039        152,991        93,034        41,242        31,350        165,626   

Doubtful

    29        —          32        61        16        —          7,872        7,888   

Loss

    —          —          —          —          —          —          —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 2,245,855      $ 813,429      $ 41,550      $ 3,100,834      $ 2,022,528      $ 967,148      $ 53,165      $ 3,042,841   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

28


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

3. Loans and Allowance for Loan Losses (continued)

 

Residential Mortgage Credit Exposure

Credit Risk Profile Based on Payment Activity

 

    September 30, 2014     December 31, 2013  
    Originated     Acquired     Covered     Total     Originated     Acquired     Covered     Total  
          (In thousands)                 (In thousands)        

Performing

  $ 1,624,959      $ 37,511      $ 185,289      $ 1,847,759      $ 1,182,266      $ 307,078      $ 209,015      $ 1,698,359   

Nonperforming

    10,503        228        —          10,731        13,990        8,262        3        22,255   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 1,635,462      $ 37,739      $ 185,289      $ 1,858,490      $ 1,196,256      $ 315,340      $ 209,018      $ 1,720,614   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consumer Credit Exposure

Credit Risk Profile Based on Payment Activity

  

  

    September 30, 2014     December 31, 2013  
    Originated     Acquired     Covered     Total     Originated     Acquired     Covered     Total  
          (In thousands)                 (In thousands)        

Performing

  $ 1,618,779      $ 50,895      $ 31,619      $ 1,701,293      $ 1,404,032      $ 117,789      $ 52,864      $ 1,574,685   

Nonperforming

    4,290        593        35        4,918        5,098        1,814        —          6,912   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 1,623,069      $ 51,488      $ 31,654      $ 1,706,211      $ 1,409,130      $ 119,603      $ 52,864      $ 1,581,597   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loan review uses a risk-focused continuous monitoring program that provides for an independent, objective and timely review of credit risk within the company’s loan portfolio. Below are the definitions of the Company’s internally assigned grades:

Commercial:

 

    Pass - Loans properly approved, documented, collateralized, and performing which do not reflect an abnormal credit risk.

 

    Pass - Watch - Credits in this category are of sufficient risk to cause concern. This category is reserved for credits that display negative performance trends. The “Watch” grade should be regarded as a transition category.

 

    Special Mention - These credits exhibit some signs of “Watch,” but to a greater magnitude. These credits constitute an undue and unwarranted credit risk, but not to a point of justifying a classification of “Substandard.” They have weaknesses that, if not checked or corrected, weaken the asset or inadequately protect the bank.

 

    Substandard - These credits constitute an unacceptable risk to the bank. They have recognized credit weaknesses that jeopardize the repayment of the debt. Repayment sources are marginal or unclear.

 

    Doubtful - A doubtful credit has all of the weaknesses inherent in one classified “Substandard” with the added characteristic that weaknesses make collection in full highly questionable or improbable.

 

    Loss - Credits classified as Loss are considered uncollectable and are charged off promptly once so classified.

 

29


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

3. Loans and Allowance for Loan Losses (continued)

 

Residential and Consumer:

 

    Performing - Loans on which payments of principal and interest are less than 90 days past due.

 

    Nonperforming - A nonperforming loan is a loan that is in default or close to being in default and there are good reasons to doubt that payments will be made in full. All loans rated as nonaccrual loans are also classified as nonperforming.

Changes in the carrying amount of acquired-impaired loans and accretable yield are presented in the following table for the nine months ended September 30, 2014 and the year ended December 31, 2013:

 

    September 30, 2014     December 31, 2013  
    Covered     Noncovered     Covered     Noncovered  
    Carrying           Carrying           Carrying           Carrying        
    Amount     Accretable     Amount     Accretable     Amount     Accretable     Amount     Accretable  
    of Loans     Yield     of Loans     Yield     of Loans     Yield     of Loans     Yield  
(In thousands)                                                

Balance at beginning of period

  $ 358,666      $ 122,715      $ 68,075      $ 131,370      $ 515,823      $ 115,594      $ 141,201      $ 203,186   

Additions

    —          —          —          —          —          —          —          —     

Payments received, net

    (92,890     (953     (47,979     (28,487     (189,987     (1,298     (116,187     (47,330

Accretion

    15,054        (15,054     35,741        (35,741     32,830        (32,830     43,061        (43,061

Increase (Decrease) in expected cash flows based on actual cash flows and changes in cash flow assumptions

    —          1,783        —          (380     —          (17,433     —          3,894   

Net transfers from nonaccretable difference to accretable yield

    —          11,917        —          19,076        —          58,682        —          14,681   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at end of period

  $ 280,830      $ 120,408      $ 55,837      $ 85,838      $ 358,666      $ 122,715      $ 68,075      $ 131,370   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

4. Fair Value

The Financial Accounting Standards Board (FASB) defines fair value as the exchange price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The FASB’s guidance also established a fair value hierarchy that prioritizes the inputs to these valuation techniques used to measure fair value, giving preference to quoted prices in active markets for identical assets or liabilities (level 1) and the lowest priority to unobservable inputs such as a reporting entity’s own data (level 3). Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical assets or liabilities in markets that are not active, observable inputs other than quoted prices, such as interest rates and yield curves, and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

 

30


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

4. Fair Value (continued)

 

Fair Value of Assets and Liabilities Measured on a Recurring Basis

The following tables present for each of the fair value hierarchy levels the Company’s assets and liabilities that are measured at fair value (in thousands) on a recurring basis in the consolidated balance sheets.

 

     September 30, 2014  
     Level 1      Level 2      Total  

Assets

        

Available for sale debt securities:

        

U.S. Treasury and government agency securities

   $ 300,702       $ —         $ 300,702   

Municipal obligations

     —           18,767         18,767   

Corporate debt securities

     3,500         —           3,500   

Mortgage-backed securities

     —           1,241,223         1,241,223   

Collateralized mortgage obligations

     —           88,558         88,558   

Equity securities

     9,660         —           9,660   
  

 

 

    

 

 

    

 

 

 

Total available for sale securities

     313,862         1,348,548         1,662,410   
  

 

 

    

 

 

    

 

 

 

Derivative assets (1)

     —           16,012         16,012   
  

 

 

    

 

 

    

 

 

 

Total recurring fair value measurements - assets

   $ 313,862       $ 1,364,560       $ 1,678,422   
  

 

 

    

 

 

    

 

 

 

Liabilities

        

Derivative liabilities (1)

   $ —         $ 16,440       $ 16,440   
  

 

 

    

 

 

    

 

 

 

Total recurring fair value measurements - liabilities

   $ —         $ 16,440       $ 16,440   
  

 

 

    

 

 

    

 

 

 

 

(1) For further disaggregation of derivative assets and liabilities, see Note 5 - Derivatives.

 

31


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

4. Fair Value (continued)

 

 

     December 31, 2013  
     Level 1      Level 2      Total  

Assets

        

Available for sale debt securities:

        

U.S. Treasury and government agency securities

   $ 505       $ —         $ 505   

Municipal obligations

     —           35,961         35,961   

Corporate debt securities

     3,500         —           3,500   

Mortgage-backed securities

     —           1,276,958         1,276,958   

Collateralized mortgage obligations

     —           94,125         94,125   

Equity securities

     10,723         —           10,723   
  

 

 

    

 

 

    

 

 

 

Total available for sale securities

     14,728         1,407,044         1,421,772   
  

 

 

    

 

 

    

 

 

 

Derivative assets (1)

     —           15,579         15,579   
  

 

 

    

 

 

    

 

 

 

Total recurring fair value measurements - assets

   $ 14,728       $ 1,422,623       $ 1,437,351   
  

 

 

    

 

 

    

 

 

 

Liabilities

        

Derivative liabilities (1)

   $ —         $ 15,006       $ 15,006   
  

 

 

    

 

 

    

 

 

 

Total recurring fair value measurements - liabilities

   $ —         $ 15,006       $ 15,006   
  

 

 

    

 

 

    

 

 

 

 

(1) For further disaggregation of derivative assets and liabilities, see Note 5 - Derivatives.

Securities classified as level 1 within the valuation hierarchy include U.S. Treasury securities, obligations of U.S. Government-sponsored agencies, and certain other debt and equity securities. Level 2 classified securities include residential mortgage-backed securities and collateralized mortgage obligations that are issued or guaranteed by U.S. government agencies, and state and municipal bonds. The level 2 fair value measurements for investment securities are obtained quarterly from a third-party pricing service that uses industry-standard pricing models. Substantially all of the model inputs are observable in the marketplace or can be supported by observable data. The Company invests only in high quality securities of investment grade quality with a targeted duration, for the overall portfolio, generally between two and five. Company policies limit investments to securities having a rating of not less than “Baa” or its equivalent by a nationally recognized statistical rating agency. There were no transfers between valuation hierarchy levels during the periods shown.

The fair value of derivative financial instruments, which are predominantly customer interest rate swaps, is obtained from a third-party pricing service that uses an industry-standard discounted cash flow model that relies on inputs, LIBOR swap curves and Overnight Index swap rate curves, observable in the marketplace. To comply with the accounting guidance, credit valuation adjustments are incorporated in the fair values to appropriately reflect nonperformance risk for both the Company and the counterparties. Although the Company has determined that the majority of the inputs used to value the derivative instruments fall within level 2 of the fair value hierarchy, the credit value adjustments utilize level 3 inputs, such as estimates of current credit spreads. The Company has determined that the impact of the credit valuation adjustments is not significant to the overall valuation of these derivatives. As a result, the Company has classified its derivative valuations in their entirety in level 2 of the fair value hierarchy. The Company’s policy is to measure counterparty credit risk quarterly for all derivative instruments, including those subject to master netting arrangements consistent with how market participants would price the net risk exposure at the measurement date.

 

32


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

4. Fair Value (continued)

 

The Company also has certain derivative instruments associated with the Bank’s mortgage-banking activities. These derivative instruments include interest rate lock commitments on prospective residential mortgage loans and forward commitments to sell these loans to investors on a best efforts delivery basis. The fair value of these derivative instruments is measured using observable market prices for similar instruments and is classified as a level 2 measurement.

Fair Value of Assets Measured on a Nonrecurring Basis

Certain assets and liabilities are measured at fair value on a nonrecurring basis. Collateral-dependent impaired loans are level 2 assets measured at the fair value of the underlying collateral based on independent third-party appraisals that take into consideration market-based information such as recent sales activity for similar assets in the property’s market.

Other real estate owned, including both foreclosed property and surplus banking property, are level 3 assets that are adjusted to fair value, less estimated selling costs, upon transfer to other real estate owned. Subsequently, other real estate owned is carried at the lower of carrying value or fair value less estimated selling costs. Fair values are determined by sales agreement or third-party appraisals as discounted for estimated selling costs, information from comparable sales, and marketability of the property.

The following tables present the Company’s financial assets that are measured at fair value (in thousands) on a nonrecurring basis for each of the fair value hierarchy levels.

 

     September 30, 2014         
     Level 1      Level 2      Level 3      Total  

Collateral-dependent impaired loans

   $ —         $ 34,482       $ —         $ 34,482   

Other real estate owned

     —           —           20,742         20,742   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total nonrecurring fair value measurements

   $ —         $ 34,482       $ 20,742       $ 55,224   
  

 

 

    

 

 

    

 

 

    

 

 

 
     December 31, 2013         
     Level 1      Level 2      Level 3      Total  

Collateral-dependent impaired loans

   $ —         $ 24,392       $ —         $ 24,392   

Other real estate owned

     —           —           25,525         25,525   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total nonrecurring fair value measurements

   $ —         $ 24,392       $ 25,525       $ 49,917   
  

 

 

    

 

 

    

 

 

    

 

 

 

Accounting guidance from the FASB requires the disclosure of estimated fair value information about certain on-and off-balance sheet financial instruments, including those financial instruments that are not measured and reported at fair value on a recurring basis. The significant methods and assumptions used by the Company to estimate the fair value of financial instruments are discussed below.

Cash, Short-Term Investments and Federal Funds Sold - For these short-term instruments, the carrying amount is a reasonable estimate of fair value.

 

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Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

4. Fair Value (continued)

 

Securities – The fair value measurement for securities available for sale was discussed earlier in the note. The same measurement techniques were applied to the valuation of securities held to maturity.

Loans, Net - The fair value measurement for certain impaired loans was discussed earlier in the note. For the remaining portfolio, fair values were generally determined by discounting scheduled cash flows using discount rates determined with reference to current market rates at which loans with similar terms would be made to borrowers of similar credit quality.

Loans Held for Sale – Residential mortgage loans originated for sale are classified as loans held for sale and carried at the lower of cost or market. These loans are generally sold within 90 days. For these short-term instruments, the carrying amounts are a reasonable estimate of fair values.

Accrued Interest Receivable and Accrued Interest Payable – For these short-term instruments, the carrying amounts are a reasonable estimate of fair values.

Deposits - The accounting guidance requires that the fair value of deposits with no stated maturity, such as noninterest-bearing demand deposits, interest-bearing checking and savings accounts, be assigned fair values equal to amounts payable upon demand (carrying amounts). The fair value of fixed-maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities.

Securities Sold under Agreements to Repurchase, Federal Funds Purchased, and FHLB Borrowings - For these short-term liabilities, the carrying amount is a reasonable estimate of fair value.

Long-Term Debt - The fair value is estimated by discounting the future contractual cash flows using current market rates at which debt with similar terms could be obtained.

Derivative Financial Instruments – The fair value measurement for derivative financial instruments was discussed earlier in the note.

 

34


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

4. Fair Value (continued)

 

The following tables present the estimated fair values of the Company’s financial instruments by fair value hierarchy levels and the corresponding carrying amount at September 30, 2014 and December 31, 2013 (in thousands):

 

     September 30, 2014                
        Total      Carrying  
     Level 1      Level 2      Level 3      Fair Value      Amount  

Financial assets:

              

Cash, interest-bearing bank deposits, and federal funds sold

   $ 803,917       $ —         $ —         $ 803,917       $ 803,917   

Available for sale securities

     313,862         1,348,548         —           1,662,410         1,662,410   

Held to maturity securities

     —           2,253,219         —           2,253,219         2,250,960   

Loans, net

     —           34,482         13,081,700         13,116,182         13,223,002   

Loans held for sale

     —           15,098         —           15,098         15,098   

Accrued interest receivable

     44,164         —           —           44,164         44,164   

Derivative financial instruments

     —           16,012         —           16,012         16,012   

Financial liabilities:

              

Deposits

   $ —         $ —         $ 15,434,876       $ 15,434,876       $ 15,736,694   

Federal funds purchased

     7,625         —           —           7,625         7,625   

Securities sold under agreements to repurchase

     599,184         —           —           599,184         599,184   

FHLB borrowings

     565,000         —           —           565,000         565,000   

Long-term debt

     —           344,636         —           344,636         376,452   

Accrued interest payable

     5,663         —           —           5,663         5,663   

Derivative financial instruments

     —           16,440         —           16,440         16,440   

 

35


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

4. Fair Value (continued)

 

     December 31, 2013                
        Total      Carrying  
     Level 1      Level 2      Level 3      Fair Value      Amount  

Financial assets:

              

Cash, interest-bearing bank deposits, and federal funds sold

   $ 617,280       $ —         $ —         $ 617,280       $ 617,280   

Available for sale securities

     14,728         1,407,044         —           1,421,772         1,421,772   

Held to maturity securities

     100,316         2,476,268         —           2,576,584         2,611,352   

Loans, net

     —           24,392         12,023,330         12,047,722         12,191,191   

Loans held for sale

     —           24,515         —           24,515         24,515   

Accrued interest receivable

     42,977         —           —           42,977         42,977   

Derivative financial instruments

     —           15,579         —           15,579         15,579   

Financial liabilities:

              

Deposits

   $ —         $ —         $ 15,352,024       $ 15,352,024       $ 15,360,516   

Federal funds purchased

     7,725         —           —           7,725         7,725   

Securities sold under agreements to repurchase

     650,235         —           —           650,235         650,235   

Long-term debt

     —           385,557         —           385,557         385,826   

Accrued interest payable

     4,353         —           —           4,353         4,353   

Derivative financial instruments

     —           15,006         —           15,006         15,006   

5. Derivatives

Risk Management Objective of Using Derivatives

The Bank has entered into interest rate derivative agreements as a service to certain qualifying customers. The Bank manages a matched book with respect to these customer derivatives in order to minimize the net risk exposure resulting from such agreements. The Company enters into derivative financial instruments to manage risks related to differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments. The Bank also enters into risk participation agreements under which it may either sell or buy credit risk associated with a customer’s performance under certain interest rate derivative contracts related to loans in which participation interests have been sold to or purchased from other banks.

 

36


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

5. Derivatives (continued)

 

Fair Values of Derivative Instruments on the Balance Sheet

The table below presents the notional amounts and fair values (in thousands) of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets as of September 30, 2014 and December 31, 2013.

 

                        Fair Values (1)  
          Notional Amounts      Assets      Liabilities  
     Type of
Hedge
   September
30, 2014
     December
31, 2013
     September
30, 2014
     December
31, 2013
     September
30, 2014
     December
31, 2013
 

Derivatives not designated as hedging instruments:

                    

Interest rate swaps (2)

   N/A    $ 753,382       $ 650,667       $ 14,585       $ 14,147       $ 14,974       $ 13,777   

Risk participation agreements

   N/A      80,989         19,736         105         2         156         2   

Forward commitments to sell residential mortgage loans

   N/A      40,873         45,910         56         326         640         115   

Interest rate-lock commitments on residential mortgage loans

   N/A      28,025         25,956         595         56         27         107   

Foreign exchange forward contracts

   N/A      37,127         21,299         671         1,048         643         1,005   
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
      $ 940,396       $ 763,568       $ 16,012       $ 15,579       $ 16,440       $ 15,006   
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Derivative assets and liabilities are reported with other assets or other liabilities, respectively, in the consolidated balance sheets.
(2) The notional amount represents both the customer accommodation agreements and offsetting agreements with unrelated financial institutions.

Derivatives Not Designated as Hedges

Customer interest rate derivatives

The Bank enters into interest rate derivative agreements, primarily rate swaps, with commercial banking customers to facilitate their risk management strategies. The Bank simultaneously enters into offsetting agreements with unrelated financial institutions, thereby mitigating its net risk exposure resulting from such transactions. Because the interest rate derivatives associated with this program do not meet hedge accounting requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings as part of other income.

 

37


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

5. Derivatives (continued)

 

Risk participation agreements

The Bank enters into risk participation agreements under which it may either assume or sell credit risk associated with a borrower’s performance under certain interest rate derivative contracts. In those instances where the Bank has assumed credit risk, it is not a direct counterparty to the derivative contract with the borrower and has entered into the risk participation agreement because it is a party to the related loan agreement with the borrower. In those instances in which the Bank has sold credit risk, it is the sole counterparty to the derivative contract with the borrower and has entered into the risk participation agreement because other banks participate in the related loan agreement. The Bank manages its credit risk under risk participation agreements by monitoring the creditworthiness of the borrower, based on its normal credit review process.

Mortgage banking derivatives

The Bank also enters into certain derivative agreements as part of its mortgage banking activities. These agreements include interest rate lock commitments on prospective residential mortgage loans and forward commitments to sell these loans to investors on a best efforts delivery basis.

Customer foreign exchange forward contract derivatives

The Bank enters into foreign exchange forward derivative agreements, primarily forward currency contracts, with commercial banking customers to facilitate its risk management strategies. The Bank manages its risk exposure from such transactions by entering into offsetting agreements with unrelated financial institutions. Because the foreign exchange forward contract derivatives associated with this program do not meet hedge accounting requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings as part of other income.

Effect of Derivative Instruments on the Income Statement

The effect of the Company’s derivative financial instruments on the income statement was immaterial for the three-month and nine-month periods ended September 30, 2014 and 2013.

Credit risk-related Contingent Features

Certain of the Bank’s derivative instruments contain provisions allowing the financial institution counterparty to terminate the contracts in certain circumstances, such as the downgrade of the Bank’s credit ratings below specified levels, a default by the Bank on its indebtedness, or the failure of the Bank to maintain specified minimum regulatory capital ratios or its regulatory status as a well-capitalized institution. These derivative agreements also contain provisions regarding the posting of collateral by each party. As of September 30, 2014, the aggregate fair value of derivative instruments with credit risk-related contingent features that were in a net liability position was $6 million, for which the Bank had posted collateral of $17 million.

 

38


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

5. Derivatives (continued)

 

Offsetting Assets and Liabilities

Offsetting information in regards to derivative assets and liabilities subject to master netting agreements at September 30, 2014 and December 31, 2013 is presented in the following tables (in thousands):

 

            Gross
Amounts
Offset in
     Net Amounts
Presented in
     Gross
Amounts
Not Offset
in the
Statement
of Financial
               

Description

   Gross
Amounts
Recognized
     the
Statement of
Financial
Position
     the
Statement
of Financial
Position
     Financial
Instruments
     Cash
Collateral
     Net
Amount
 

As of September 30, 2014

                 

Derivative Assets

   $ 14,690       $ —         $ 14,690       $ 2,206       $ —         $ 12,484   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 14,690       $ —         $ 14,690       $ 2,206       $ —         $ 12,484   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Derivative Liabilities

   $ 15,129       $ —         $ 15,129       $ 2,206       $ 16,767       $ (3,844
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 15,129       $ —         $ 15,129       $ 2,206       $ 16,767       $ (3,844
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

As of December 31, 2013

                 

Derivative Assets

   $ 14,149       $ —         $ 14,149       $ 3,462       $ —         $ 10,687   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 14,149       $ —         $ 14,149       $ 3,462       $ —         $ 10,687   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Derivative Liabilities

   $ 13,779       $ —         $ 13,779       $ 3,462       $ 7,406       $ 2,911   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 13,779       $ —         $ 13,779       $ 3,462       $ 7,406       $ 2,911   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

6. Stockholders’ Equity

Stock Repurchase Program

On July 16, 2014, the Company’s board of directors approved a stock repurchase plan that authorizes the repurchase of up to 5%, or approximately 4 million shares, of its currently outstanding common stock. The approved plan allows the Company to repurchase its common shares either in the open market in compliance with Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended, or in privately negotiated transactions with non-affiliated sellers or as otherwise determined by the Company in one or more transactions, from time to time until December 31, 2015. Under this plan, we have repurchased 305,263 shares of our common stock at an average price of $32.65 per share.

The Company’s board of directors approved a stock repurchase program on April 30, 2013 that authorized the repurchase of up to 5% of the Company’s outstanding common stock. On May 8, 2013 Hancock entered into an accelerated share repurchase (ASR) transaction with Morgan Stanley & Co. LLC (Morgan Stanley). In the ASR transaction, the Company paid $115 million to Morgan Stanley and received from them approximately 3 million shares of Hancock common stock, representing approximately 76% of the estimated total number of shares to be repurchased. On May 5, 2014, final settlement of the ASR agreement occurred at which time the Company received approximately 0.6 million shares from Morgan Stanley. The number of shares delivered to the Company in this

 

39


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

6. Stockholders’ Equity (continued)

 

ASR transaction was based generally on the volume-weighted average price per share of the Hancock common stock during the term of the ASR agreement less a specified discount and on the amount paid at inception to Morgan Stanley, subject to certain adjustments in accordance with the terms of the ASR agreement. The ASR transaction was treated as two separate transactions: (i) the acquisition of treasury shares on the dates the shares were received; and (ii) a forward contract indexed to the Company’s common stock that was classified as equity. The 2013 program was superseded by the 2014 program.

Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) (AOCI) is reported as a component of stockholders’ equity. AOCI can include, among other items, unrealized holding gains and losses on securities available for sale (AFS), gains and losses associated with pension or other post retirement benefits that are not recognized immediately as a component of net periodic benefit cost, and gains and losses on derivative instruments that are designated as, and qualify as, cash flow hedges. Net unrealized gains/losses on AFS securities reclassified as securities held to maturity (HTM) also continue to be reported as a component of AOCI and will be amortized over the estimated remaining life of the securities as an adjustment to interest income. The components of AOCI are reported net of related tax effects.

The components of AOCI and changes in those components are presented in the following table (in thousands).

 

     Available     HTM Securities           Loss on        
     for Sale     Transferred     Employee     Effective Cash        
     Securities     from AFS     Benefit Plans     Flow Hedges     Total  

Balance, January 1, 2013

   $ 38,854      $ 19,090      $ (80,688   $ (181   $ (22,925
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income before income taxes:

          

Net change in unrealized (loss) gain

     (96,070     —          —          (4     (96,074

Transfer of net unrealized gain from AFS to HTM, net of cumulative tax effect

     36,208        (36,208     —          —          —     

Reclassification of net losses realized and included in earnings

     —          —          5,534        301        5,835   

Amortization of unrealized net gain on securities transferred to HTM

     —          (7,099     —          —          (7,099

Income tax (benefit) expense

     (35,115     (2,563     2,070        116        (35,492
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, September 30, 2013

   $ 14,107      $ (21,654   $ (77,224   $ —        $ (84,771
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, January 1, 2014

   $ 8,263      $ (21,189   $ (22,453   $ —        $ (35,379
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income before income taxes:

          

Net change in unrealized gain

     9,119        —          —          —          9,119   

Reclassification of net losses realized and included in earnings

     —          —          2,195        —          2,195   

Amortization of unrealized net gain on securities transferred to HTM

     —          2,463        —          —          2,463   

Income tax expense

     3,309        879        903        —          5,091   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, September 30, 2014

   $ 14,073      $ (19,605   $ (21,161   $ —        $ (26,693
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

40


Table of Contents

Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

6. Stockholders’ Equity (continued)

 

The following table shows the line item affected by amounts reclassified from accumulated other comprehensive income:

 

Amount reclassified from AOCI    Nine Months Ended
September 30,
    Increase (decrease)         
in affected line item       

(in thousands)

   2014      2013     on the income statement

Amortization/accretion of unrealized net gain/(loss) on securities transferred to HTM

   $ 2,463       $ (7,099   Interest income

Tax effect

     879         (2,563   Income taxes
  

 

 

    

 

 

   

 

Net of tax

     1,584         (4,536   Net income
  

 

 

    

 

 

   

 

Amortization of defined benefit pension and post-retirement items

   $ 293       $ 5,534      (a) Employee benefits expense

Tax effect

     103         2,070      Income taxes
  

 

 

    

 

 

   

 

Net of tax

     190         3,464      Net income
  

 

 

    

 

 

   

 

Gains and losses on cash flow hedges

   $ —         $ 301      Interest expense

Tax effect

     —           105      Income taxes
  

 

 

    

 

 

   

 

Net of tax

     —           196      Net income
  

 

 

    

 

 

   

 

Total reclassifications, net of tax

   $ 1,774       $ (876   Net income
  

 

 

    

 

 

   

 

 

(a) These accumulated other comprehensive income components are included in the computation of net periodic pension and post-retirement cost that is reported with employee benefits expense (see Note 9 for additional details).

 

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Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

7. Earnings Per Share

Hancock calculates earnings per share using the two-class method. The two-class method allocates net income to each class of common stock and participating security according to common dividends declared and participation rights in undistributed earnings. Participating securities consist of unvested stock-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents.

A summary of the information used in the computation of earnings per common share follows (in thousands, except per share amounts):

 

    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2014     2013     2014     2013  

Numerator:

       

Net income to common shareholders

  $ 46,553      $ 33,202      $ 135,630      $ 128,640   

Net income allocated to participating securities - basic and diluted

    883        616        2,783        2,398   
 

 

 

   

 

 

   

 

 

   

 

 

 

Net income allocated to common shareholders - basic and diluted

  $ 45,670      $ 32,586      $ 132,847      $ 126,242   
 

 

 

   

 

 

   

 

 

   

 

 

 

Denominator:

       

Weighted average common shares - basic

    81,721        82,091        81,965        83,404   

Dilutive potential common shares

    221        114        239        92   
 

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average common shares - diluted

    81,942        82,205        82,204        83,496   
 

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per common share:

       

Basic

  $ 0.56      $ 0.40      $ 1.62      $ 1.51   

Diluted

  $ 0.56      $ 0.40      $ 1.62      $ 1.51   
 

 

 

   

 

 

   

 

 

   

 

 

 

Potential common shares consist of employee and director stock options. These potential common shares do not enter into the calculation of diluted earnings per share if the impact would be anti-dilutive, i.e., increase earnings per share or reduce a loss per share. Weighted average anti-dilutive potential common shares totaled 569,404 and 639,486 respectively for the three and nine months ended September 30, 2014 and 721,863 and 1,076,894, respectively, for the three and nine months ended September 30, 2013.

 

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Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

8. Share-Based Payment Arrangements

Hancock maintains incentive compensation plans that provide for awards of share-based compensation to employees and directors. These plans have been approved by the Company’s shareholders. Detailed descriptions of these plans were included in Note 13 to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

A summary of option activity for the nine months ended September 30, 2014 is presented below:

 

                  Weighted         
                  Average         
           Weighted      Remaining         
           Average      Contractual      Aggregate  
     Number of     Exercise      Term      Intrinsic  

Options

   Shares     Price      (Years)      Value ($000)  

Outstanding at January 1, 2014

     1,332,656      $ 38.85         

Exercised

     (32,618     29.51         

Cancelled/Forfeited

     (16,549     38.26         

Expired

     (113,447     63.41         
  

 

 

   

 

 

    

 

 

    

 

 

 

Outstanding at September 30, 2014

     1,170,042      $ 36.74         4.4       $ 799   
  

 

 

   

 

 

    

 

 

    

 

 

 

Exercisable at September 30, 2014

     885,673      $ 38.55         3.6       $ 373   
  

 

 

   

 

 

    

 

 

    

 

 

 

The total intrinsic value of options exercised during the nine months ended September 30, 2014 and 2013 was $0.2 million and $0.1 million, respectively.

A summary of the status of the Company’s nonvested restricted and performance shares as of September 30, 2014 and changes during the nine months ended September 30, 2014, is presented below. These restricted and performance shares are subject to service requirements.

 

           Weighted  
           Average  
     Number of     Grant Date  
     Shares     Fair Value  

Nonvested at January 1, 2014

     1,981,820      $ 31.75   

Granted

     120,396        36.23   

Vested

     (272,788     32.00   

Forfeited

     (85,873     31.69   
  

 

 

   

 

 

 

Nonvested at September 30, 2014

     1,743,555      $ 32.02   
  

 

 

   

 

 

 

 

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Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

8. Share-Based Payment Arrangements (continued)

 

As of September 30, 2014, there were $31.7 million of total unrecognized compensation expense related to nonvested restricted and performance shares expected to vest. This compensation is expected to be recognized in expense over a weighted average period of 3.1 years. The total fair value of shares which vested during the nine months ended September 30, 2014 and 2013 was $10 million and $1 million, respectively.

During the nine months ended September 30, 2014, the Company granted 69,857 performance shares with a grant date fair value of $38.14 per share to key members of executive and senior management. The number of 2014 performance shares that ultimately vest at the end of the three-year required service period, if any, will be based on the relative rank of Hancock’s three-year total shareholder return (TSR) among the TSRs of a peer group of fifty regional banks. The maximum number of performance shares that could vest is 200% of the target award. The fair value of the performance awards at the grant date was determined using a Monte Carlo simulation method. Compensation expense for these performance shares will be recognized on a straight-line basis over the service period.

9. Retirement Plans

The Company has a qualified defined benefit pension plan covering all eligible employees. Eligibility is based on minimum age- and service-related requirements as well as job classification. Accrued benefits under a nonqualified plan covering certain legacy Whitney employees were frozen as of December 31, 2012 and no future benefits will be accrued under this plan.

The Company also sponsors defined benefit postretirement plans for both legacy Hancock and legacy Whitney employees that provide health care and life insurance benefits. Benefits under the Hancock plan are not available to employees hired on or after January 1, 2000. Benefits under the Whitney plan are restricted to retirees who were already receiving benefits at the time of plan amendments in 2007 or active participants who were eligible to receive benefits as of December 31, 2007.

The following table shows the components of net periodic benefits cost included in expense for the plans for the periods indicated (in thousands).

 

     Three Months Ended September 30,  
     2014     2013     2014      2013  
                 Other Post-  
     Pension benefits     retirement Benefits  

Service cost

   $ 3,230      $ 3,969      $ 31       $ 52   

Interest cost

     4,812        4,151        285         327   

Expected return on plan assets

     (8,056     (6,982     —           —     

Amortization of net loss

     7        1,605        91         459   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net periodic benefit cost

   $ (7   $ 2,743      $ 407       $ 838   
  

 

 

   

 

 

   

 

 

    

 

 

 

 

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Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

9. Retirement Plans (continued)

 

     Nine Months Ended September 30,  
     2014     2013     2014      2013  
                 Other Post-  
     Pension benefits     retirement Benefits  

Service cost

   $ 9,690      $ 11,905      $ 94       $ 162   

Interest cost

     14,438        12,457        855         987   

Expected return on plan assets

     (24,167     (20,946     —           —     

Amortization of net loss

     20        4,813        273         1,320   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net periodic benefit cost

   $ (19   $ 8,229      $ 1,222       $ 2,469   
  

 

 

   

 

 

   

 

 

    

 

 

 

Based on currently available information, Hancock does not anticipate making a contribution to the pension plan during 2014.

The Company also provides a defined contribution retirement benefit plan (401(k) plan). Under the plan, the Company matches 100% of the first 1% of compensation saved by a participant, and 50% of the next 5% of compensation saved.

10. Other Noninterest Income

Components of other noninterest income are as follows:

 

     Three Months Ended      Nine Months Ended  
     September 30,      September 30,  
     2014     2013      2014      2013  
(In thousands)                           

Income from bank owned life insurance

   $ 2,377      $ 2,656       $ 7,048       $ 8,764   

Credit related fees

     2,822        2,995         8,388         5,969   

Income from derivatives

     191        1,257         1,431         3,296   

Net (loss) gain on sale of assets

     (56     801         1,409         1,277   

Safety deposit box income

     448        467         1,404         1,480   

Other miscellaneous

     1,950        1,940         7,091         6,453   
  

 

 

   

 

 

    

 

 

    

 

 

 

Total other noninterest income

   $ 7,732      $ 10,116       $ 26,771       $ 27,239   
  

 

 

   

 

 

    

 

 

    

 

 

 

 

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Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

11. Other Noninterest Expense

Components of other noninterest expense are as follows:

 

     Three Months Ended      Nine Months Ended  
     September 30,      September 30,  

(In thousands)

   2014      2013      2014      2013  

Advertising

   $ 2,457       $ 2,858       $ 6,395       $ 7,216   

Ad valorem and franchise taxes

     3,098         2,809         8,397         7,193   

Printing and supplies

     1,189         1,143         3,467         3,963   

Insurance expense

     944         887         3,002         3,018   

Travel expense

     1,009         1,074         2,966         3,475   

Entertainment and contributions

     1,396         969         4,337         3,960   

Tax credit investment amortization

     2,220         4,880         6,590         7,553   

Other miscellaneous

     6,821         19,851         25,105         32,504   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total other noninterest expense

   $ 19,134       $ 34,471       $ 60,259       $ 68,882   
  

 

 

    

 

 

    

 

 

    

 

 

 

Other miscellaneous expense for the nine months ended September 30, 2014 as shown in the table above includes nonoperating items totaling $1.1 million in the third quarter of 2014, $7.3 million in the second quarter of 2014 and $12.6 million in the third quarter of 2013. These items are further discussed below:

FDIC Settlement

During the second quarter of 2014, the Company recorded a $10.3 million expense for the settlement of an assessment by the FDIC related to its targeted review of certain previously paid loss claim reimbursement amounts. The assessment demanded repayment of these amounts due to the FDIC’s disagreement with the manner in which certain assets were administered and losses were calculated. During the third quarter, the settlement was paid and the FDIC began payment of claims.

Sale of Insurance Business

In April 2014, the Company sold its property and casualty and group benefits insurance intermediary business. The lines of business being divested represent approximately half of the Company’s 2013 insurance commissions and fees. A gain of $9.4 million was recorded on the sale based on a $15.5 million sales price less the related tangible and intangible assets.

Branch Closures

During the second and third quarters of 2014, the Company recorded $3.5 million and $1.1 million, respectively, in write-downs related to the 2014 closure of 15 branch locations in Mississippi, Florida and Louisiana as part of its ongoing branch rationalization process. Of the $3.5 million, $2.9 million is included in other miscellaneous expense.

Reverse Repurchase Obligations Early Termination Fee

During the second quarter of 2014, the Company recorded $3.5 million in fees related to the early termination of reverse repurchase obligations.

 

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Hancock Holding Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

 

12. New Accounting Pronouncements

In June 2014, the Financial Accounting Standards Board (FASB) issued an Accounting Standard Update (ASU) that requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. For all entities, the amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. The effective date is the same for both public business entities and all other entities. The adoption of this guidance is not expected to have a material impact on the Company’s financial condition or results of operations.

In June 2014, the FASB issued an ASU regarding repurchase-to-maturity transactions, repurchase financings, and disclosures. Under the new standard, repurchase-to-maturity transactions will be reported as secured borrowings, and transferors will no longer apply the current “linked” accounting model to repurchase agreements executed contemporaneously with the initial transfer of the underlying financial asset with the same counterparty. Public business entities are generally required to apply the accounting changes and comply with the enhanced disclosure requirements for periods beginning after December 15, 2014 and interim periods beginning after March 15, 2015. A public business entity may not early adopt the standard’s provisions. The adoption of this guidance is not expected to have a material impact on the Company’s financial condition or results of operations.

In May 2014, the FASB issued an ASU regarding revenue from contracts with customers affecting any entity that enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. The core principle of this standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard will be effective for the Company for periods beginning after December 15, 2016. The Company is currently assessing this pronouncement and adoption of this guidance is not expected to have a material impact on the Company’s financial condition or results of operations.

In April 2014, the FASB issued a new standard changing the threshold for reporting discontinued operations and adding new disclosures for disposals. The new guidance defines a discontinued operation as a component or group of components that is disposed of or is classified as held for sale and “represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results.” New disclosure and presentation requirements apply to discontinued operations and to disposals of individually significant components that do not qualify as discontinued operations. The guidance applies prospectively to new disposals of components and new classifications as held for sale beginning in 2015 for most entities, with early adoption allowed. The Company early adopted this pronouncement in the second quarter of 2014. The adoption of this guidance did not have a material impact on the Company’s financial condition or results of operations.

In January 2014, the FASB issued an ASU on reclassification of residential real estate collateralized consumer mortgage loans upon foreclosure. The new ASU clarifies when an in substance repossession or foreclosure occurs – that is, when a creditor should be considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan such that the loan receivable should be derecognized and the real estate property recognized. The new ASU requires a creditor to reclassify a collateralized consumer mortgage loan to real estate property upon obtaining legal title to the real estate collateral, or the borrower voluntarily conveying all interest in the real estate property to the lender to satisfy the loan through a deed in lieu of foreclosure or similar legal agreement. The ASU is effective for interim and annual reporting periods beginning after December 15, 2014. The adoption of this guidance is not expected to have a material impact on the Company’s financial condition or results of operations.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW

Recent Economic and Industry Developments

October reports from the Federal Reserve point to continued improvement of economic activity throughout most of Hancock’s market area. Activity among energy-related businesses operating mainly in Hancock’s south Louisiana and Houston, Texas market areas remained strong, although some concern was expressed that the strength of the dollar has made U.S. exports more expensive internationally. The travel and tourism industry, which is important within several of the Company’s market areas, saw an increase in activity with many local hotels and resorts reporting high occupancy levels. Companies reported several tourism-related capital projects in progress that are anticipated to encourage travel to the areas in which we operate. Retailers are showing improved sales over prior-year levels, and the outlook for the remainder of the year is positive. Auto sales were especially strong, although an increase in interest rates could drastically change the landscape of that industry. Reports on manufacturing activity were generally positive, with purchasing managers expecting higher production over the next three to six months.

The real estate markets for residential properties were mixed. Some of Hancock’s market areas reported growth in activity, while others were slightly down to flat. Inventory levels remained flat or declined year-over-year. The demand for apartments increased, keeping occupancy rates at high levels. Although the outlook for home sales has weakened since the last quarter, this was generally attributed to seasonality and the future outlook remains positive. New home sales and construction activity are ahead of prior-year levels and expected to steadily improve.

The commercial real estate market continues to improve, with growing demand for office and industrial space in certain market areas and continued high occupancy for apartments throughout the region. Commercial construction activity has increased in these sectors. Continued improvement is expected in the commercial real estate market.

The recovery of the overall U.S. economy continues. However, the rate of growth is not consistent across all regions, leading to slow and erratic overall improvement. National unemployment rates continue to decrease, but are still well above full employment levels and labor force participation rates remain near historic lows. Competition among financial services firms remains intense for high quality customers, continuing to exert downward pressure on loan pricing.

The Federal Reserve has responded to the slow and tenuous recovery from the deep recession by taking steps to hold interest rates at unprecedented low levels and has expressed its intent to maintain rates at these levels pending further improvement in the unemployment rate and low inflation rate. In addition, in July, the Federal Reserve began gradually curtailing the expansion of their portfolio of Treasuries and mortgage bonds. On October 29, 2014, the Federal Reserve announced the conclusion of its bond-buying initiative. The Federal Reserve anticipates that it likely will be appropriate to maintain the current federal funds rate for a considerable time after the asset purchase program ends, especially if inflation continues to run below the long-term goal.

 

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Table of Contents

Highlights of Third Quarter 2014 Financial Results

Net income in the third quarter of 2014 was $46.6 million, or $0.56 per diluted common share, compared to $40.0 million, or $0.48, in the second quarter of 2014. Net income was $33.2 million, or $0.40 per diluted common share, in the third quarter of 2013. Net income for the third quarter of 2014 reflects the impact of certain nonoperating items totaling $3.9 million. The second quarter of 2014 and third quarter of 2013 included nonoperating items of $12.1 million and $20.9 million, respectively. Net income for the nine months ended September 30, 2014 was $135.6 million, or $1.62 per diluted common share, compared to $128.6 million, or $1.51 per diluted common share, for the nine months ended September 30, 2013.

Operating income for the third quarter of 2014 was $49.1 million or $0.59 per diluted common share, compared to $49.6 million, or $0.59 in the second quarter of 2014. Operating income was $46.8 million, or $0.56, in the third quarter of 2013. For the nine months ended September 30, 2014, operating income was $147.8 million, an increase of $5.6 million, or 4% from the same period of 2013. We define operating income as net income excluding tax-effected securities transactions gains or losses and nonoperating expense items. Management believes that operating income provides a useful measure of financial performance that helps investors compare the Company’s fundamental operations over time. A reconciliation of net income to operating income is included in the later section on “Selected Financial Data.”

Highlights of the Company’s third quarter of 2014 results:

 

    Revenue remained relatively flat linked quarter despite a $5 million decrease in purchase accounting accretion

 

    Operating expenses remained relatively stable and remain below the targeted expense goal for the fourth quarter of 2014

 

    Net loan growth of $488 million, or 16%, linked-quarter annualized; approximately $1.7 billion, or 15%, year-over-year loan growth (each excluding the FDIC-covered portfolio)

 

    Deposit growth of $492 million, or 13%, linked-quarter annualized

 

    Solid capital levels with a tangible common equity (TCE) ratio of 9.10%; approximately $10 million of capital used to repurchase stock during the quarter

 

    Return on average assets (ROA) (operating) of 1.00% down from 1.04% in the second quarter of 2014; total assets grew to $20 billion

RESULTS OF OPERATIONS

Net Interest Income

Net interest income taxable equivalent (te) for the third quarter of 2014 was $166.2 million, down $1.1 million from the second quarter of 2014 due to the $5.2 million decline in purchase accounting accretion. Excluding this impact, net interest income increased $4.1 million. The positive impact from a $533 million increase in average earning assets, a better earning asset mix and one more day of interest accruals was partially offset by declining loan and investment securities yields. The increase in average earning assets was primarily due to a $421.2 million, or 3%, growth in loans. For analytical purposes, management adjusts net interest income to a taxable equivalent basis using a 35% federal tax rate on tax exempt items (primarily interest on municipal securities and loans).

Net interest income (te) for the third quarter of 2014 was down $7.9 million, or 5%, compared to the third quarter of 2013, primarily due to a $14.1 million reduction in total purchase accounting accretion. A $1.3 billion increase in average loans and a more favorable earning asset mix offset an 18 bps decrease in the loan yield, excluding the net impact of purchase accounting adjustments.

The net interest margin was 3.81% for the third quarter of 2014, down 18 bps from the second quarter of 2014, and down 42 bps from the third quarter of 2013. The current quarter’s core margin of 3.32% (reported net interest income (te) excluding purchase accounting accretion, annualized, as a percent of average earning assets) compressed 3 bps compared to the second quarter of 2014 and 5 bps compared to the third quarter of 2013. The continued decline in the core loan yield (reported interest income (te) on loans, excluding purchase accounting accretion, annualized, as a percent of average total loans) was partially offset by the favorable impact of net loan growth.

 

49


Table of Contents

The overall reported yield on earning assets was 4.02% in the third quarter of 2014, a decrease of 19 bps from the second quarter of 2014 and 45 bps from the third quarter of 2013. The reported loan portfolio yield of 4.63% for the current quarter was down 23 bps from the second quarter of 2014 and 78 bps from the third quarter of 2013. The core loan yield of 3.94% in the current quarter was down 3 bps from the second quarter of 2014 and 18 bps from a year earlier.

The overall cost of funding earning assets was 0.21% in the third quarter of 2014, down 1 bp from the second quarter of 2014. The linked quarter decrease in the cost of funds was mainly attributable to the June 2014 early redemption of $115 million in fixed rate reverse repurchase obligations with an average rate of 3.43%. This early redemption resulted in a 26 bps reduction in the average rate paid on short-term borrowings compared to the second quarter and offset a 2 bps increase in the overall rate paid on interest-bearing deposits. This increase reflects the initiatives implemented during the second quarter of 2014 to increase deposits in an effort to support the funding for loan growth.

The overall cost of funding earning assets decreased 3 bps from the third quarter of 2013. The mix of funding sources improved in the third quarter of 2014 compared to the third quarter of 2013. Interest-free sources, including noninterest-bearing demand deposits, funded 35.5% of earning assets in the current period, up from 34.0% a year ago.

Net interest income (te) for the first nine months of 2014 totaled $501.9 million, a $20.8 million, or 4%, decrease from the first nine months of 2013. Excluding a $28.8 million decrease in purchase accounting accretion, net interest income was up approximately $8.0 million for the first nine months of 2014 as compared to the same period of 2013. A $487 million, or 3%, increase in average earning assets, a more favorable earning asset mix, a 25 bp increase in investment yields and a 4 bp decrease in the costs of funds offset a 28 bp decrease in the core loan yield.

The reported net interest margin for the first nine months of 2014 was 3.95% compared to 4.24% in 2013, while the core margin declined to 3.35% in 2014 compared to 3.38% in 2013. Changes in net interest income (te) and the net interest margin between the year-to-date periods reflected for the most part the same factors that affected the quarterly comparisons.

The following tables detail the components of our net interest income and net interest margin.

 

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Table of Contents
     Three Months Ended  
     September 30, 2014     June 30, 2014     September 30, 2013  

(dollars in millions)

   Volume      Interest      Rate     Volume      Interest      Rate     Volume      Interest      Rate  

Average earning assets

                        

Commercial & real estate loans (te) (a) (b)

   $ 9,627.6       $ 108.2         4.46   $ 9,355.2       $ 108.2         4.64   $ 8,581.2       $ 109.4         5.06

Mortgage loans

     1,814.2         20.0         4.41        1,744.3         21.0         4.83        1,653.8         24.8         5.99   

Consumer loans

     1,660.4         24.0         5.74        1,581.4         23.6         5.99        1,570.3         25.7         6.51   

Loan fees & late charges

     —           0.4           —           0.8           —           0.7      
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total loans (te)

     13,102.2         152.6         4.63        12,680.9         153.6         4.86        11,805.3         160.6         5.41   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Loans held for sale

     16.9         0.1         4.66        14.7         0.1         4.14        16.1         0.2         4.38   

US Treasury and agency securities

     184.8         0.7         1.47        —           —           0.00        5.6         —           2.34   

Mortgage-backed securities and CMOs

     3,379.2         19.2         2.27        3,490.9         20.1         2.30        3,874.1         20.3         2.10   

Municipals (te) (a)

     203.7         2.4         4.62        205.8         2.4         4.63        247.1         2.7         4.39   

Other securities

     12.3         0.1         2.21        19.8         0.1         1.19        8.5         0.1         2.51   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total securities (te) (c)

     3,780.0         22.4         2.36        3,716.5         22.6         2.43        4,135.3         23.1         2.24   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total short-term investments

     425.3         0.3         0.23        379.6         0.2         0.22        427.9         0.3         0.23   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Average earning assets (te)

   $ 17,324.4       $ 175.4         4.02   $ 16,791.7       $ 176.5         4.21   $ 16,384.6       $ 184.2         4.47
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Average interest-bearing liabilities

                        

Interest-bearing transaction and savings deposits

   $ 6,160.9       $ 1.6         0.11   $ 6,078.1       $ 1.5         0.10   $ 5,919.7       $ 1.4         0.09

Time deposits

     1,955.3         3.1         0.64        2,026.4         3.0         0.60        2,384.3         3.7         0.61   

Public funds

     1,547.5         1.1         0.27        1,450.3         0.7         0.21        1,302.4         0.7         0.23   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total interest-bearing deposits

     9,663.7         5.8         0.24        9,554.8         5.2         0.22        9,606.4         5.8         0.24   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Short-term borrowings

     1,139.7         0.2         0.08        957.4         0.9         0.34        820.5         1.1         0.52   

Long-term debt

     375.9         3.2         3.27        380.2         3.1         3.32        385.2         3.2         3.28   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total borrowings

     1,515.6         3.4         0.87        1,337.6         4.0         1.19        1,205.7         4.3         1.40   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total interest-bearing liabilities

     11,179.3         9.2         0.33     10,892.4         9.2         0.34     10,812.1         10.1         0.37
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Net interest-free funding sources

     6,145.1              5,899.3              5,572.5         
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total cost of funds

   $ 17,324.4       $ 9.2         0.21   $ 16,791.7       $ 9.2         0.22   $ 16,384.6       $ 10.1         0.24
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Net interest spread (te)

      $ 166.2         3.69      $ 167.3         3.87      $ 174.1         4.10

Net interest margin

   $ 17,324.4       $ 166.2         3.81   $ 16,791.7       $ 167.3         3.99   $ 16,384.6       $ 174.1         4.23
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

 

(a) Tax equivalent (te) amounts are calculated using a marginal federal income tax rate of 35%.
(b) Includes nonaccrual loans.
(c) Average securities do not include unrealized holding gains/losses on available for sale securities.

 

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Table of Contents
     Nine Months Ended  
     September 30, 2014     September 30, 2013  

(dollars in millions)

   Volume      Interest      Rate     Volume      Interest      Rate  

Average earning assets

                

Commercial & real estate loans (te) (a) (b)

   $ 9,361.4       $ 324.4         4.63   $ 8,427.0       $ 326.0         5.17

Mortgage loans

     1,760.1         62.4         4.73        1,615.7         77.4         6.36   

Consumer loans

     1,601.9         70.8         5.91        1,589.4         78.8         6.63   

Loan fees & late charges

     —           1.9           —           2.5      
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total loans (te)

     12,723.4         459.5         4.82        11,632.1         484.7         5.56   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Loans held for sale

     16.9         0.5         4.29        27.1         0.8         3.72   

US Treasury and agency securities

     93.1         1.2         1.73        3.8         0.1         1.81   

Mortgage-backed securities and CMOs

     3,493.5         60.5         2.31        3,918.9         59.6         2.03   

Municipals (te) (a)

     208.8         7.2         4.60        232.5         7.9         4.53   

Other securities

     14.8         0.2         2.22        8.3         0.2         2.42   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total securities (te) (c)

     3,810.2         69.1         2.42        4,163.5         67.8         2.17   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total short-term investments

     403.8         0.7         0.23        644.3         1.2         0.24   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Average earning assets (te)

   $ 16,954.3       $ 529.8         4.17   $ 16,467.0       $ 554.5         4.50
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Average interest-bearing liabilities

                

Interest-bearing transaction and savings deposits

   $ 6,104.0       $ 4.6         0.10   $ 5,955.7       $ 4.6         0.10

Time deposits

     2,049.9         9.3         0.60        2,402.1         11.6         0.64   

Public funds

     1,508.2         2.5         0.23        1,463.8         2.6         0.24   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total interest-bearing deposits

     9,662.1         16.4         0.23        9,821.6         18.8         0.26   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Short-term borrowings

     962.0         2.1         0.29        791.6         3.4         0.58   

Long-term debt

     380.7         9.4         3.31        391.7         9.6         3.28   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total borrowings

     1,342.7         11.5         1.15        1,183.3         13.0         1.47   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total interest-bearing liabilities

     11,004.8         27.9         0.34     11,004.9         31.8         0.39
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Net interest-free funding sources

     5,949.5              5,462.1         
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total cost of funds

   $ 16,954.3       $ 27.9         0.22   $ 16,467.0       $ 31.8         0.26
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Net interest spread (te)

      $ 501.9         3.83      $ 522.7         4.11

Net interest margin

   $ 16,954.3       $ 501.9         3.95   $ 16,467.0       $ 522.7         4.24
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

 

(a) Tax equivalent (te) amounts are calculated using a marginal federal income tax rate of 35%.
(b) Includes nonaccrual loans.
(c) Average securities do not include unrealized holding gains/losses on available for sale securities.

 

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Due to the significant, unsustainable contribution from purchase accounting accretion, management believes that core net interest income and core margin provide meaningful financial measures to investors of the Company’s performance over time. The following table provides a reconciliation of reported and core net interest income and reported and core net interest margin.

 

Reconciliation of Reported Net Interest Margin to Core Margin

 
     Three Months Ended     Nine Months Ended  

(dollars in millions)

   September 30,
2014
    June 30,
2014
    September 30,
2013
    September 30,
2014
    September 30,
2013
 

Net interest income (te) (a)

   $ 166.2      $ 167.3      $ 174.1      $ 501.9      $ 522.7   

Purchase accounting accretion

          

Loan accretion

     22.8        28.0        38.3        80.6        114.4   

Whitney premium bond amortization

     (1.3     (1.4     (2.8     (4.2     (9.6

Whitney and Peoples First CD accretion

     —          0.1        0.1        0.2        0.6   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total net purchase accounting accretion

     21.5        26.7        35.6        76.6        105.4   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income (te) - core

   $ 144.7      $ 140.6      $ 138.5      $ 425.3      $ 417.3   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average earning assets

   $ 17,324.4      $ 16,791.7      $ 16,384.6      $ 16,954.3      $ 16,467.0   

Net interest margin - reported

     3.81     3.99     4.23     3.95     4.24

Net purchase accounting accretion (%)

     0.49     0.64     0.86     0.60     0.86
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest margin - core

     3.32     3.35     3.37     3.35     3.38
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) Tax equivalent (te) amounts are calculated using a marginal federal income tax rate of 35%.

Provision for Loan Losses

During the third quarter of 2014, Hancock recorded a total provision for loan losses of $9.5 million, up $2.8 million from the second quarter of 2014. The provision for noncovered loans was $9.9 million in the third quarter of 2014, compared to $6.8 million in the second quarter of 2014 and $6.5 million in the third quarter of 2013. The provision for the covered portfolio was a small net credit in each of the three-month periods ended September 30, 2014 and June 30, 2014 and $1.0 million expense for the quarter ended September 30, 2013. For the first nine months of 2014, the total provision for loans losses was $24.1 million, down slightly from $25.4 million for the same period in 2013.

The section below on “Allowance for Loan Losses and Asset Quality” provides additional information on changes in the allowance for loan losses and general credit quality. Certain differences in the determination of the allowance for loan losses for originated loans and for acquired-performing loans and acquired-impaired loans (which includes all covered loans) are described in Note 4 to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

Noninterest Income

Noninterest income totaled $57.9 million for the third quarter of 2014, up $1.5 million, or 3%, compared to the second quarter of 2014, but down $5.1 million, or 8% from the third quarter of 2013. Excluding the impact of lost revenue from the sale of certain insurance business lines during the second quarter of 2014 and the impact from the amortization of the FDIC loss share receivable discussed further below, third quarter 2014 noninterest income increased approximately $1.0 million from second quarter 2014, but was down $1.1 million from the third quarter of 2013. Noninterest income totaled $171.0 million for the first nine months of 2014, down $16.1 million, or 9%, from the first nine months of 2013. Excluding the impact of the lost revenues describe above, total noninterest income declined $3.1 million, or 2%.

 

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The components of noninterest income are presented in the following table for the indicated periods:

 

     Three Months Ended     Nine Months Ended  
     September 30,     June 30,     September 30,     September, 30  

(In thousands)

   2014     2014     2013     2014     2013  

Service charges on deposit accounts

   $ 20,000      $ 19,269      $ 20,519      $ 57,981      $ 59,398   

Trust fees

     11,530        11,499        9,477        33,267        27,972   

Bank card and ATM fees

     11,641        11,596        12,221        33,806        34,678   

Investment and annuity fees

     5,506        5,097        5,186        15,555        14,955   

Secondary mortgage market operations

     2,313        1,758        2,467        6,036        10,989   

Insurance commissions and fees

     1,979        1,888        3,661        7,611        12,500   

Amortization of FDIC loss share receivable

     (2,760     (3,321     (590     (9,989     (590

Income from bank owned life insurance

     2,377        2,357        2,656        7,048        8,764   

Credit related fees

     2,822        2,834        2,995        8,388        5,969   

Income from derivatives

     191        481        1,257        1,431        3,296   

(Loss) gain on sale of assets

     (56     (217     801        1,409        1,277   

Safety deposit box income

     448        443        467        1,404        1,480   

Other miscellaneous

     1,950        2,714        1,940        7,091        6,453   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total noninterest income

   $ 57,941      $ 56,398      $ 63,057      $ 171,038      $ 187,141   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Service charges on deposits totaled $20.0 million for the third quarter of 2014, up $0.7 million, or 4%, from the second quarter of 2014, but down $0.5 million, or 3%, from the third quarter of 2013. The increase from the second quarter of 2014 to the third quarter of 2014 reflects a $0.4 million increase in service charges from both business and consumer accounts, partially as a result of a number of initiatives implemented during 2014 to enhance growth in deposit balances and fee income.

Trust fees totaled $11.5 million for the quarter ended September 30, 2014. Excluding $0.5 million in seasonal tax preparation fees in the second quarter of 2014, linked-quarter trust fees increased $0.5 million, or 5%, with approximately half of the increase related to an increase in investment management and advisory service revenue. Trust fees increased $2.1 million, or 22%, compared to the third quarter of 2013 with growth in virtually all products and services. Investment management and advisory service revenue accounted for $1.6 million of the increase. For the first nine months of 2014 compared to 2013, trust fees increased $5.3 million, or 19%, with growth in all products and services, but primarily due to a $4.7 million, or 41% increase in investment management and advisory service revenue resulting from growth in the value of assets managed. Managed assets were $6.4 billion as of September 30, 2014, slightly down from $6.6 billion at June 30, 2014, but up 12% from $5.7 billion as of September 30, 2013.

Bank card fees and ATM fees totaled $11.6 million in the third quarter of 2014 virtually unchanged from the second quarter of 2014, but down $0.6 million, or 5%, compared to the third quarter of 2013. Included in bank card and ATM fees are fees from credit card, debit card and ATM transactions, and merchant service fees. For the third quarter of 2014, a $0.4 million, or 12% linked-quarter increase in credit card-related interchange fee income offset a slight decrease in debit card and ATM interchange fees as well as a decrease in merchant service fees. The increase in credit card fees resulted from various strategic initiatives during 2014 to increase card usage, including specific commercial card enhancements. The decrease in ATM fee income was due in part to the closing of 16 branches in July 2014 as part of the Company’s branch rationalization program. For the nine months ended 2014, bank card and ATM fees decreased $0.9 million, or 3%, compared to the same period in 2013.

Insurance fees remained relatively flat for the third quarter of 2014 compared to the second quarter of 2014. Insurance fees decreased $1.7 million, or 46%, from third quarter of 2013 and decreased $4.9 million, or 39%, for the first nine months of 2014 compared to the first nine months of 2013. These decreases resulted from the Company selling its property and casualty and group benefits insurance intermediary business in April 2014.

 

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Fees from the secondary mortgage operations in the third quarter of 2014 were up $0.6 million, or 32%, compared to the second quarter of 2014 and down $0.2 million, or 6%, compared to the third quarter of 2013. Secondary mortgage operations fee income is generated from selling certain types of originated single family mortgage loans into the secondary market in an effort to manage interest rate risk and liquidity. The Company typically sells its longer-term fixed-rate loans while retaining in the portfolio the majority of its adjustable rate loans as well as loans generated through certain programs to support customer relationships including programs for high net worth individuals and non-builder construction loans. The increase in fee income during the third quarter of 2014 compared to the second quarter of 2014 was due to a slightly higher percentage of mortgage loans originated during the quarter being sold in the secondary market. Through the first nine months of 2014, fees from the secondary mortgage operations decreased $5.0 million, or 45%, compared to the first nine months of 2013. The decline reflects reduced loan sales in the secondary market due to a 30% reduction in loan originations, primarily from refinancing activities, for the nine months ended September 30, 2014 as compared to the same period in 2013.

Amortization of the FDIC loss share receivable totaled $2.8 million in the third quarter of 2014 compared to $3.3 million in the second quarter of 2014. For the first nine months of 2014, amortization of the FDIC loss share receivable totaled $10.0 million compared to less than $1 million for the first nine months of 2013. The amortization reflects a reduction in the amount of expected reimbursements under the loss share agreements due to lower loss projections for the related covered loan pools. Elevated levels of amortization of the loss share receivable are anticipated throughout 2014 as projected losses from the covered portfolio have decreased.

Noninterest Expense

Noninterest expense for the third quarter of 2014 was $149.1 million, down $7.8 million, or 5%, compared to the second quarter of 2014, and down $33.1 million, or 18%, from the third quarter of 2013. Noninterest expense for the nine months ended September 30, 2014 was $452.9 million, down $51.1 million, or 10%, from the same period of 2013. Excluding nonoperating expense items, operating expense for the third quarter of 2014 totaled $145.2 million, which was up $0.5 million from the second quarter of 2014 and down $16.1 million, or 10%, from the same period in 2013. Operating expense for the first nine months of 2014 totaled $436.9 million, down $46.3 million, or 10%, compared to the first nine months of 2013. The decreases are primarily related to cost savings realized from the divestiture of certain insurance business lines and the Company’s expense and efficiency initiatives that has included either selling or closing approximately 60 branches and reducing headcount by almost 450 full-time-equivalent employees since January 1, 2013.

Total personnel expense (excluding $1.1 million in nonoperating expense) totaled $80.0 million for the third quarter of 2014, up slightly compared to the second quarter of 2014 and down $6.8 million, or 8%, from the third quarter of 2013. Total personnel expense (excluding $2.7 million in nonoperating expense) for the first nine months of 2014 decreased $21.4 million, or 8%, compared to the first nine months of 2013. The Company has reduced its work force by over 11% during the past 21 months. In addition, the Company’s benefit costs declined by over 20% for both the quarter and nine months compared to 2013 primarily due to reduced pension costs resulting from a better overall performance of our pension plan assets.

Occupancy and equipment expenses totaled $15.3 million for the third quarter of 2014, up $0.4 million, or 3%, from the second quarter of 2014 and down $2.1 million, or 12%, from the third quarter of 2013. Occupancy and equipment expenses totaled $45.8 million for the first nine months of 2014, down $6.7 million, or 13%, from the first nine months of 2013. The reduction in occupancy and equipment expenses reflects the impact of the closures or sales mentioned above and other expense and efficiency initiatives.

 

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Table of Contents

All other expenses, excluding amortization of intangibles and $2.6 million of nonoperating expense items, totaled $43.2 million for the third quarter of 2014, down slightly from the second quarter of 2014 and down $6.4 million, or 13%, from third quarter of 2013. For the first nine months of 2014, all other expenses decreased $16.3 million, or 11%, primarily due to decreases in professional services, deposit insurance, telecommunications and postage and other real estate (ORE) expense. Net gains on ORE dispositions exceeded ORE expense in the third quarter of 2014 by $0.1 million compared to $0.1 million expense in the second quarter of 2014 and $2.4 million in the third quarter of 2013. For the first nine months of 2014, ORE expense totaled $1.8 million compared to $6.5 million in 2013.

Tax credit investment amortization totaling $2.2 million in each of the first three quarters of 2014 reflects amortization of equity investments in entities that undertake projects that qualify under a variety of state or federal laws for tax credits against federal and state income taxes. The Company amortizes equity investments over the tax credit compliance period for those investments where return of the capital invested is not expected. The increase in year-over-year amortization expense reflects increases in the amount invested in projects throughout the period. The financial return from these investments is provided through tax credits earned and received, all of which are accounted for as a reduction of the provision for income taxes.

All of the current quarter nonoperating expense relates to the Company’s expense and efficiency initiative. Included in this total for the first nine months of 2014 were expenses of $10.3 million for the settlement of an assessment by the FDIC related to a targeted review of certain previously paid claims under the loss sharing agreements, $11.4 million related to the Company’s expense and efficiency initiative including $3.5 million for the closure of certain branch locations as part of the ongoing branch rationalization process, and $3.5 million related to the early termination of reverse repurchase obligations. These expenses were partially offset by the $9.1 million gain from the divestiture of certain insurance business lines, net of costs related to discontinuing the operations.

 

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Table of Contents

The components of noninterest expense are presented in the following table for the indicated periods:

 

     Three Months Ended      Nine Months Ended  
     September 30,     June 30,     September 30,      September 30,  

(In thousands)

   2014     2014     2013      2014     2013  

Operating expense

           

Compensation expense

   $ 68,151      $ 66,948      $ 70,614       $ 202,264      $ 213,292   

Employee benefits

     11,892        12,558        16,236         38,717        49,080   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Personnel expense

     80,043        79,506        86,850         240,981        262,372   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Net occupancy expense

     10,799        10,840        12,369         32,905        37,099   

Equipment expense

     4,542        4,059        5,120         12,875        15,340   

Data processing expense

     12,984        12,828        12,031         38,231        36,346   

Professional services expense

     5,879        6,421        8,715         18,709        25,387   

Amortization of intangibles

     6,570        6,744        7,306         20,352        22,292   

Telecommunications and postage

     3,640        3,835        4,397         11,058        13,484   

Deposit insurance and regulatory fees

     2,967        2,743        3,789         8,677        11,635   

Other real estate owned expense, net

     (104     84        2,439         1,757        6,502   

Advertising

     2,412        2,006        2,825         6,177        7,183   

Ad valorem and franchise taxes

     3,098        2,638        2,809         8,397        7,193   

Printing and supplies

     1,123        792        1,143         3,244        3,963   

Insurance expense

     944        1,018        887         3,002        3,018   

Travel

     1,006        1,059        1,065         2,961        3,466   

Entertainment and contributions

     1,396        1,529        969         4,337        3,960   

Tax credit investment amortization

     2,220        2,198        1,318         6,590        3,991   

Other expense

     5,673        6,427        7,286         16,648        19,939   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Total operating expense

   $ 145,192      $ 144,727      $ 161,318       $ 436,901      $ 483,170   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Nonoperating expense items

           

Impact of insurance business line divestiture

   $ —        $ (9,101   $ —         $ (9,101   $ —     

FDIC settlement

     —          10,268        —           10,268        —     

Expense and efficiency initiatives and other items

     3,887        7,503        20,887         11,390        20,887   

Early debt redemption

     —          3,461        —           3,461        —     
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Total nonoperating expense items

   $ 3,887      $ 12,131      $ 20,887       $ 16,018      $ 20,887   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Total noninterest expense

   $ 149,079      $ 156,858      $ 182,205       $ 452,919      $ 504,057   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Income Taxes

The effective income tax rate for the third quarter of 2014 was approximately 26% compared to 31% in the second quarter of 2014 and 26% in the third quarter of 2013. The increase in the tax rate for the 2014 second quarter was due in part to the tax impact of the gain on the divestiture of selected insurance business lines. Management expects the effective tax rate for the remainder of 2014 to be approximately 27%. Hancock’s effective tax rates have varied from the 35% federal statutory rate primarily because of tax-exempt income and the use of tax credits. Interest income on bonds issued by or loans to state and municipal governments and authorities, and earnings from the bank-owned life insurance program are the major components of tax-exempt income. The main source of tax credits has been investments in tax-advantaged securities and tax credit projects. These investments are made primarily in the markets the Company serves and are directed at tax credits issued under the Qualified Zone Academy Bonds (QZAB), Qualified School Construction Bonds (QSCB), Federal and State New Market Tax Credit (NMTC) and Low-Income Housing Tax Credit (LIHTC) programs. The investments generate tax credits, which reduce current and future taxes and are recognized when earned as a benefit in the provision for income taxes.

 

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Table of Contents

The Company invests in Federal NMTC projects related to tax credit allocations that have been awarded to its wholly-owned Community Development Entity (CDE) as well as projects that utilize credits awarded to unrelated CDEs. From 2008 through 2013, the Company’s CDE was awarded three allocations totaling $148 million. These awards are expected to generate tax credits totaling $57.7 million over their seven-year compliance periods.

The Company intends to continue making investments in tax credit projects, though its ability to access new credits will depend upon, among other factors, federal and state tax policies and the level of competition for such credits. Based on tax credit investments that have been made, the Company expects to realize tax credits over the next three years of $12.9 million, $10.1 million and $9.0 million for 2015, 2016 and 2017, respectively.

The following table reconciles reported income tax expense to that computed at the statutory federal tax rate for both the year-to-date and quarter-ended September 30, 2014 and 2013.

 

     Three Months Ended     Nine Months Ended  
     September 30,     June 30,     September 30,     September 30,  

(In thousands)

   2014     2014     2013     2014     2013  

Taxes computed at statutory rate

   $ 22,027      $ 20,170      $ 15,685      $ 65,757      $ 60,341   

Tax credits:

          

QZAB/QSCB

     (841     (769     (794     (2,378     (2,382

NMTC - Federal and State

     (3,173     (3,173     (2,152     (9,780     (6,456

LIHTC

     (113     (113     (231     (339     (693
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total tax credits

     (4,127     (4,055     (3,177     (12,497     (9,531

State income taxes, net of federal income tax benefit

     706        1,043        482        3,423        2,041   

Tax-exempt interest

     (1,577     (1,530     (1,648     (4,691     (4,951

Bank owned life insurance

     (790     (825     (900     (2,425     (3,066

Goodwill - writeoff

     —          1,112        —          1,112        —     

Other, net

     143        1,750        1,169        1,569        (1,070
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income tax expense

   $ 16,382      $ 17,665      $ 11,611      $ 52,248      $ 43,764   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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Selected Financial Data

The following tables contain selected financial data as of the dates and for the periods indicated.

 

     Three Months Ended      Nine Months Ended  
     September 30,      June 30,      September 30,      September 30,      September 30,  
     2014      2014      2013      2014      2013  

Common Share Data

              

Earnings per share:

              

Basic

   $ 0.56       $ 0.48       $ 0.40       $ 1.62       $ 1.51   

Diluted

   $ 0.56       $ 0.48       $ 0.40       $ 1.62       $ 1.51   

Operating earnings per share: (a)

              

Basic

   $ 0.59       $ 0.59       $ 0.56       $ 1.77       $ 1.67   

Diluted

   $ 0.59       $ 0.59       $ 0.56       $ 1.76       $ 1.67   

Cash dividends per share

   $ 0.24       $ 0.24       $ 0.24       $ 0.72       $ 0.72   

Book value per share (period-end)

   $ 30.76       $ 30.45       $ 28.70       $ 30.76       $ 28.71   

Tangible book value per share (period-end)

   $ 21.44       $ 21.08       $ 19.04       $ 21.44       $ 19.04   

Weighted average number of shares (000s):

              

Basic

     81,721         81,933         82,091         81,965         83,404   

Diluted

     81,942         82,174         82,205         82,204         83,496   

Period-end number of shares (000s)

     81,567         81,860         82,107         81,567         82,107   

Market data:

              

High price

   $ 36.47       $ 37.86       $ 33.85       $ 38.50       $ 33.85   

Low price

   $ 31.25       $ 32.02       $ 29.00       $ 31.25       $ 25.00   

Period-end closing price

   $ 32.05       $ 35.32       $ 31.38       $ 32.05       $ 31.38   

Trading volume (000s) (b)

     25,553         27,432         29,711         84,239         97,779   

 

(a) Excludes nonoperating expense items and securities transactions.
(b) Trading volume is based on the total volume as determined by NASDAQ on the last day of the quarter.

 

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Table of Contents
     Three Months Ended      Nine Months Ended  
     September 30,      June 30,      September 30,      September 30,  

(in thousands)

   2014      2014      2013      2014      2013  

Income Statement:

              

Interest income

   $ 172,701       $ 174,001       $ 181,639       $ 521,842       $ 546,560   

Interest income (te) (a)

     175,390         176,555         184,221         529,720         554,511   

Interest expense

     9,160         9,223         10,109         27,961         31,836   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net interest income (te)

     166,230         167,332         174,112         501,759         522,675   

Provision for loan losses

     9,468         6,691         7,569         24,122         25,404   

Noninterest income excluding securities transactions

     57,941         56,398         63,057         171,038         187,141   

Securities transactions gains

     —           —           —           —           —     

Noninterest expense

     149,079         156,858         182,205         452,919         504,057   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Income before income taxes

     62,935         57,627         44,813         187,878         172,404   

Income tax expense

     16,382         17,665         11,611         52,248         43,764   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net income

   $ 46,553       $ 39,962       $ 33,202       $ 135,630       $ 128,640   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total nonoperating expense items

     3,887         12,131         20,887         16,018         20,887   

Taxes on adjustments at marginal tax rate

     1,361         2,518         7,310         3,879         7,310   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Operating income (b)

   $ 49,079       $ 49,575       $ 46,779       $ 147,769       $ 142,217   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Purchase accounting adjustments, net of tax

     7,903         10,839         18,101         30,115         53,964   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Core income (c)

   $ 41,176       $ 38,736       $ 28,678       $ 117,654       $ 88,253   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(a) For analytical purposes, management adjusts net interest income to a “taxable equivalent” basis using a 35% federal tax rate on tax exempt items (primarily interest on municipal securities and loans).
(b) Net income less nonoperating expense items and securities gains/losses. Management believes that this is a useful financial measure because it enables investors to assess ongoing operations.
(c) Operating income excluding tax-effected purchase accounting adjustments. Management believes that reporting on core income provides a useful measure of financial performance that helps investors determine whether management is successfully executing its strategic initiatives.

 

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Table of Contents
     Three Months Ended     Nine Months Ended  
     September 30,     June 30,     September 30,     September 30,  
     2014     2014     2013     2014     2013  

Performance Ratios

          

Return on average assets

     0.94     0.84     0.70     0.94     0.91

Return on average assets (operating) (a)

     1.00     1.04     0.99     1.03     1.00

Return on average common equity

     7.42     6.51     5.63     7.36     7.18

Return on average common equity (operating) (a)

     7.82     8.07     7.93     8.02     7.93

Tangible common equity ratio

     9.10     9.29     8.68     9.10     8.68

Earning asset yield (te)

     4.02     4.21     4.47     4.17     4.50

Total cost of funds

     0.21     0.22     0.24     0.22     0.26

Net interest margin (te)

     3.81     3.99     4.23     3.95     4.24

Efficiency ratio (b)

     61.84     61.67     64.95     61.91     64.93

Allowance for loan losses to period-end loans

     0.94     1.00     1.18     0.94     1.18

Allowance for loan losses to nonperforming loans
+ accruing loans 90 days past due

     128.44     126.26     94.69     128.44     94.69

Average loan/deposit ratio

     85.24     84.20     78.70     83.52     76.80

Noninterest income excluding securities transactions to total revenue (te)

     25.85     25.21     26.59     25.42     26.36

 

(a) Excludes tax-effected securities transactions and nonoperating expense items. Management believes that this is a useful financial measure that helps investors compare the Company’s fundamental operations over time.
(b) Efficiency ratio is defined as noninterest expense as a percent of total revenue (te) before amortization of purchased intangibles, merger expenses and securities transactions.

 

     Three Months Ended     Nine Months Ended  
     September 30,     June 30,     September 30,     September 30,  

(in thousands)

   2014     2014     2013     2014     2013  

Asset Quality Information

          

Nonaccrual loans (a)

   $ 83,154      $ 89,901      $ 119,749      $ 83,154      $ 119,749   

Restructured loans - still accruing

     7,944        7,868        10,605        7,944        10,605   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total nonperforming loans

     91,098        97,769        130,354        91,098        130,354   

Other real estate (ORE) and foreclosed assets

     56,081        59,732        85,560        56,081        85,560   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total nonperforming assets

   $ 147,179      $ 157,501      $ 215,914      $ 147,179      $ 215,914   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Nonperforming assets to loans, ORE and foreclosed assets

     1.10     1.22     1.83     1.10     1.83

Accruing loans 90 days past due (a)

   $ 6,667      $ 4,142      $ 15,620      $ 6,667      $ 15,620   

Accruing loans 90 days past due to loans

     0.05     0.03     0.13     0.05     0.13

Nonperforming assets + accruing loans 90 days past due to loans, ORE and foreclosed assets

     1.15     1.25     1.96     1.15     1.96

Net charge-offs - noncovered

   $ 6,439      $ 4,064      $ 5,430      $ 14,481      $ 19,095   

Net charge-offs - covered

     (566     1,181        506        3,125        5,754   

Net charge-offs - noncovered to average loans

     0.19     0.13     0.18     0.15     0.22

Allowance for loan losses

   $ 125,572      $ 128,672      $ 138,223      $ 125,572      $ 138,223   

Allowance for loan losses to period-end loans

     0.94     1.00     1.18     0.94     1.18

Allowance for loan losses to nonperforming loans
+ accruing loans 90 days past due

     128.44     126.26     94.69     128.44     94.69

Provision for loan losses

   $ 9,468      $ 6,691      $ 7,569      $ 24,122      $ 25,404   

 

(a) Nonaccrual loans and accruing loans past due 90 days or more do not include acquired-impaired loans with an accretable yield. Included in nonaccrual loans are $10 million, $12 million, and $19 million in restructured loans at 9/30/14, 6/30/14, and 9/30/13, respectively.

 

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Supplemental Asset Quality Information

   Originated      Acquired (a)     Covered
(a) (b)
    Total  

(in thousands)

   September 30, 2014  

Nonaccrual loans

   $ 68,362       $ 11,572      $ 3,220      $ 83,154   

Restructured loans - still accruing

     7,944         —          —          7,944   

Total nonperforming loans

     76,306         11,572        3,220        91,098   

ORE and foreclosed assets (c)

     38,096         —          17,985        56,081   

Total nonperforming assets

     114,402         11,572        21,205        147,179   

Accruing loans 90 days past due

     5,149         1,518        —          6,667   

Allowance for loan losses

     81,822         9,117        34,633        125,572   
     June 30, 2014  

Nonaccrual loans

   $ 74,533       $ 12,048      $ 3,320      $ 89,901   

Restructured loans - still accruing

     4,823         3,045        —          7,868   

Total nonperforming loans

     79,356         15,093        3,320        97,769   

ORE and foreclosed assets

     40,158         —          19,574        59,732   

Total nonperforming assets

     119,514         15,093        22,894        157,501   

Accruing loans 90 days past due

     3,416         726        —          4,142   

Allowance for loan losses

     78,573         8,947        41,152        128,672   

Loans Outstanding

   Originated      Acquired (a)     Covered
(a) (b)
    Total  

(in thousands)

   September 30, 2014  

Commercial non-real estate loans

   $ 4,806,740       $ 769,226      $ 11,171      $ 5,587,137   

Construction and land development loans

     974,442         110,294        11,166        1,095,902   

Commercial real estate loans

     2,245,855         813,429        41,550        3,100,834   

Residential mortgage loans

     1,635,462         37,739        185,289        1,858,490   

Consumer loans

     1,623,069         51,488        31,654        1,706,211   

Total loans

     11,285,568         1,782,176        280,830        13,348,574   

Change in loan balance from previous quarter

     627,116         (139,603     (22,995     464,518   
     June 30, 2014  

Commercial non-real estate loans

   $ 4,610,696       $ 769,159      $ 13,836      $ 5,393,691   

Construction and land development loans

     903,610         119,847        17,199        1,040,656   

Commercial real estate loans

     2,173,006         836,646        46,611        3,056,263   

Residential mortgage loans

     1,469,977         111,724        189,570        1,771,271   

Consumer loans

     1,501,163         84,403        36,609        1,622,175   

Total loans

     10,658,452         1,921,779        303,825        12,884,056   

Change in loan balance from previous quarter

     734,088         (350,657     (27,312     356,119   

 

(a) Acquired and covered loans are subject to purchase accounting guidance as described in note 3 to the condensed consolidated financial statements.
(b) Acquired loans which are covered by loss sharing agreements with the FDIC, providing considerable protection against credit risk.
(c) ORE received in settlement of acquired loans is no longer subject to purchase accounting guidance and has been included with ORE from originated loans. ORE received in settlement of covered loans remains covered under the FDIC loss share agreements.

 

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     September 30,     June 30,     March 31,     December 31,     September 30,  

(in thousands)

   2014     2014     2014     2013     2013  

Period-End Balance Sheet

          

Total loans, net of unearned income (a)

   $ 13,348,574      $ 12,884,056      $ 12,527,937      $ 12,324,817      $ 11,734,472   

Loans held for sale

     15,098        22,017        15,911        24,515        18,444   

Securities

     3,913,370        3,677,229        3,797,883        4,033,124        4,124,202   

Short-term investments

     471,558        440,688        280,373        268,839        462,313   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earning assets

     17,748,600        17,023,990        16,622,104        16,651,295        16,339,431   

Allowance for loan losses

     (125,572     (128,672     (128,248     (133,626     (138,223

Goodwill

     621,193        621,193        625,675        625,675        625,675   

Other intangible assets, net

     139,256        145,825        152,734        159,773        167,116   

Other assets

     1,602,473        1,687,095        1,731,905        1,706,134        1,807,847   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 19,985,950      $ 19,349,431      $ 19,004,170      $ 19,009,251      $ 18,801,846   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Noninterest-bearing deposits

   $ 5,866,255      $ 5,723,663      $ 5,613,872      $ 5,530,253      $ 5,479,696   

Interest-bearing transaction and savings deposits

     6,325,671        6,079,837        6,118,150        6,162,959        6,008,042   

Interest-bearing public funds deposits

     1,534,678        1,484,188        1,451,430        1,571,532        1,240,336   

Time deposits

     2,010,090        1,957,539        2,091,322        2,095,772        2,326,797   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total interest-bearing deposits

     9,870,439        9,521,564        9,660,902        9,830,263        9,575,175   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total deposits

     15,736,694        15,245,227        15,274,774        15,360,516        15,054,871   

Short-term borrowings

     1,171,809        1,063,664        712,634        657,960        782,779   

Long-term debt

     376,452        374,991        380,001        385,826        376,664   

Other liabilities

     191,653        172,967        174,227        179,880        231,090   

Stockholders’ equity

     2,509,342        2,492,582        2,462,534        2,425,069        2,356,442   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities & stockholders’ equity

   $ 19,985,950      $ 19,349,431      $ 19,004,170      $ 19,009,251      $ 18,801,846   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     Three Months Ended     Nine Months Ended  
     September 30,     June 30,     September 30,     September 30,     September 30,  

(in thousands)

   2014     2014     2013     2014     2013  

Average Balance Sheet

          

Total loans, net of unearned income (a)

   $ 13,102,108      $ 12,680,861      $ 11,805,330      $ 12,723,409      $ 11,632,166   

Loans held for sale

     16,885        14,681        16,065        16,916        27,079   

Securities (b)

     3,780,089        3,716,563        4,135,348        3,810,186        4,163,436   

Short-term investments

     425,362        379,639        427,892        403,809        644,349   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earning assets

     17,324,444        16,791,744        16,384,635        16,954,320        16,467,030   

Allowance for loan losses

     (129,734     (126,887     (137,936     (130,412     (137,624

Goodwill and other intangible assets

     763,652        770,294        796,300        771,728        803,676   

Other assets

     1,591,585        1,604,113        1,753,028        1,620,949        1,856,115   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 19,549,947      $ 19,039,264      $ 18,796,027      $ 19,216,585      $ 18,989,197   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Noninterest-bearing deposits

   $ 5,707,523      $ 5,505,735      $ 5,415,303      $ 5,571,843      $ 5,359,325   

Interest-bearing transaction and savings deposits

     6,160,911        6,078,115        5,919,709        6,104,039        5,955,711   

Interest-bearing public fund deposits

     1,547,513        1,450,312        1,302,425        1,508,222        1,463,750   

Time deposits

     1,955,262        2,026,419        2,384,248        2,049,914        2,402,061   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total interest-bearing deposits

     9,663,686        9,554,846        9,606,382        9,662,175        9,821,522   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total deposits

     15,371,209        15,060,581        15,021,685        15,234,018        15,180,847   

Short-term borrowings

     1,139,694        957,386        820,500        962,014        791,641   

Long-term debt

     375,914        380,151        385,203        380,660        391,712   

Other liabilities

     173,182        177,761        229,694        176,591        228,056   

Stockholders’ equity

     2,489,948        2,463,385        2,338,945        2,463,302        2,396,941   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities & stockholders’ equity

   $ 19,549,947      $ 19,039,264      $ 18,796,027      $ 19,216,585      $ 18,989,197   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) Includes nonaccrual loans.
(b) Average securities does not include unrealized holding gains/losses on available for sale securities.

 

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LIQUIDITY

Liquidity management is focused on ensuring that funds are available to meet the cash flow requirements of our depositors and borrowers, while also meeting the operating, capital and strategic cash flow needs of the Company, the Bank and other subsidiaries. Hancock develops its liquidity management strategies and measures and monitors liquidity risk as part of its overall asset/liability management process.

The asset portion of the balance sheet provides liquidity primarily through loan principal repayments, maturities and repayments of investment securities, and occasional sales of various assets. Short-term investments such as federal funds sold, securities purchased under agreements to resell and interest-bearing deposits with the Federal Reserve Bank or with other commercial banks are additional sources of liquidity to meet cash flow requirements. As shown in the table below, our ratio of free securities to total securities was 23% at September 30, 2014, compared to 20% at June 30, 2014 and 22% at December 31, 2013. Free securities represent unpledged securities that can be sold or used as collateral for borrowings, and include unpledged securities assigned to short-term dealer repurchase agreements or to the Federal Reserve Bank discount window.

Liquidity Metrics

     September 30,     June 30,     March 31,     December 31,     September 30,  
     2014     2014     2014     2013     2013  

Free securities / total securities

     23.00     20.00     21.00     22.00     37.00

Noncore deposits / total deposits

     5.43     5.64     5.87     5.43     6.60

Wholesale funds / core deposits

     10.40     10.00     7.60     7.19     8.26

The liability portion of the balance sheet provides liquidity mainly through various customers’ interest-bearing and noninterest-bearing deposit and sweep accounts. Core deposits consist of total deposits less certificates of deposits (CDs) of $250,000 or more, brokered CDs, and balances in sweep time deposit products used by commercial customers. The ratio of noncore deposits to total deposits was 5.43% at September 30, 2014, down 21 bps from June 30, 2014 and unchanged from December 31, 2013. There were no brokered CDs outstanding as of September 30, 2014 or June 30, 2014 and $60.2 million outstanding at December 31, 2013.

Purchases of federal funds, securities sold under agreements to repurchase and other short-term borrowings are additional sources of liquidity to meet short-term funding requirements. Besides funding from customer sources, our short-term borrowing capacity includes an approved line of credit with the FHLB of $3.3 billion and borrowing capacity at the Federal Reserve’s discount window in excess of $1.8 billion at September 30, 2014. Wholesale funds, which are comprised of short-term borrowings and long-term debt, were 10.40% of core deposits at September 30, 2014, up from 10.00% at June 30, 2014 and 7.19% at December 31, 2013. The increases from December 31, 2013 reflect utilization of the FHLB line to help fund asset growth. At September 30, 2014, the Company had borrowings from the FHLB totaling $565 million compared to $415 million at June 30, 2014. There were no borrowings from the FHLB at the end of any prior periods. Loan growth of $1 billion since year-end has outpaced a $376 million increase in deposits. No amounts had been borrowed at the Federal Reserve’s discount window in any period. See the discussion on “Deposits” for more information.

Cash generated from operations is another important source of funds to meet liquidity needs. The consolidated statements of cash flows present operating cash flows and summarize all significant sources and uses of funds for the nine months ended September 30, 2014 and 2013.

Dividends received from the Bank have been the primary source of funds available to the Company for the payment of dividends to our stockholders, stock buybacks, and for servicing debt issued by the holding company. The liquidity management process takes into account the various regulatory provisions that can limit the amount of dividends the Bank can distribute to the Company. The Company maintains cash and other liquid assets at the holding company to provide liquidity sufficient to fund six quarters of anticipated common stockholder dividends.

 

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CAPITAL RESOURCES

Stockholders’ equity totaled $2.5 billion at September 30, 2014, up $84 million from December 31, 2013. The tangible common equity ratio increased to 9.10% at September 30, 2014 from 9.00% at December 31, 2013.

The Board of Directors authorized a new common stock buyback program in July for up to 5%, or approximately 4 million shares, of the Company’s common stock issued and outstanding. The shares may be repurchased in the open market or in privately negotiated transactions from time to time, depending upon market conditions and other factors, and in accordance with applicable regulations of the Securities and Exchange Commission. The buyback authorization will expire December 31, 2015. During the third quarter of 2014, the Company repurchased 305,263 shares at an average price of $32.65 per share under the buyback program. See Item 2 in Part II of this document for additional discussion of the Company’s common stock buyback program.

The primary quantitative measures that regulators use to gauge capital adequacy are the ratios of total and Tier 1 regulatory capital to risk-weighted assets (risk-based capital ratios) and the ratio of Tier 1 capital to average total assets (leverage ratio). Both the Company and its bank subsidiary are currently required to maintain minimum risk-based capital ratios of 8.0% total regulatory capital and 4.0% Tier 1 capital.

On July 2, 2013 the Federal Reserve Board finalized its rule implementing the Basel III regulatory capital framework and related Dodd-Frank Act changes. The interim final rule strengthens the definition of regulatory capital, increases risk-based capital requirements, and makes selected changes to the calculation of risk-weighted assets. The rule sets the Basel III minimum regulatory capital requirements for all organizations. It includes a new common equity Tier 1 ratio of 4.5% of risk-weighted assets, raises the minimum Tier 1 capital ratio from 4.0% to 6.0% of risk-weighted assets and sets a new conservation buffer of 2.5% of risk-weighted assets. The final rule is effective for the Company on January 1, 2015; however, the rule allows for transition periods for certain changes, including the conservation buffer. Based on estimated capital ratios using Basel III definitions, the Company and the Bank currently exceed all capital requirements of the new rule, including the fully phased-in conservation buffer.

At September 30, 2014, the regulatory capital ratios of the Company and the Bank were well in excess of current regulatory minimum requirements, as indicated in the table below. The Company and the Bank have been categorized as “well capitalized” in the most recent notices received from our regulators. As of September 30, 2014, risk-based ratios decreased compared to both June 30, 2014 and December 31, 2013, primarily as a result of asset growth.

The following table shows the regulatory capital ratios for the Company and the Bank for the indicated periods.

 

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     September 30,     June 30,     March 31,     December 31,  
     2014     2014     2014     2013  

Regulatory ratios:

        

Total capital (to risk weighted assets)

        

Hancock Holding Company

     12.66     12.96     13.20     13.11

Whitney Bank

     12.40     12.72     13.02     12.98 %* 

Tier 1 capital (to risk weighted assets)

        

Hancock Holding Company

     11.59     11.83     11.90     11.76

Whitney Bank

     11.32     11.58     11.72     11.64 %* 

Tier 1 leverage capital

        

Hancock Holding Company

     9.48     9.61     9.43     9.34

Whitney Bank

     9.31     9.44     9.32     9.29 %* 

*       Restated to give effect to merger of Hancock Bank and Whitney Bank

          

Regulatory definitions:

  (1) Tier 1 capital generally includes common equity, retained earnings, non-controlling interest in equity of consolidated subsidiaries and a limited amount of qualifying perpetual preferred stock, reduced by goodwill and other disallowed intangibles and disallowed deferred tax assets and certain other assets.
  (2) Total capital consists of Tier 1 capital plus perpetual preferred stock not qualifying as Tier 1 capital, mandatory convertible securities, certain types of subordinated debt and a limited amount of allowances for credit losses.
  (3) The risk-weighted asset base is equal to the sum of the aggregate value of assets and credit-converted off-balance sheet items in each risk category as specified in regulatory guidelines, multiplied by the weight assigned by the guidelines to that category.
  (4) The Tier 1 leverage capital ratio is Tier 1 capital divided by average total assets reduced by the deductions for Tier 1 capital noted above.

BALANCE SHEET ANALYSIS

Securities

Investment in securities totaled $3.9 billion at September 30, 2014, up $236 million from June 30, 2014 and down $120 million from December 2013. The quarterly increase in securities was necessary to support anticipated public fund collateralization and was funded with FHLB advances. The decrease in securities compared to year-end reflects the Company’s use of funds from repayments and maturities in the securities portfolio to support loan growth. At September 30, 2014, securities available for sale totaled $1.6 billion and securities held to maturity totaled $2.3 billion.

The securities portfolio consists mainly of residential mortgage-backed securities and collateralized mortgage obligations issued or guaranteed by U.S. government agencies. The portfolio is designed to enhance liquidity while providing an acceptable rate of return. The Company invests only in high quality securities of investment grade quality with a targeted duration for the overall portfolio of between two and five. At September 30, 2014, the average maturity of the portfolio was 4.45 years with an effective duration of 3.89 and a weighted-average yield of 2.36%. The effective duration increases, under management scenarios, to 4.32 with a 100 basis point increase in the yield curve and to 4.43 with a 200 basis point increase. At year-end 2013, the average maturity of the portfolio was 3.97 years with an effective duration of 3.93 and a weighted-average yield of 2.28%.

 

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Loans

Total loans at September 30, 2014 were $13.3 billion, up $465 million, or 4%, compared to June 30, 2014 and up $1.0 billion, or 8%, from December 31, 2013. Excluding the FDIC-covered portfolio, total loans increased $488 million, or 4%, from June 30, 2014 and $1.1 billion from year-end 2013. The noncovered loan portfolio was up $1.7 billion, or 15%, from September 30, 2013.

See Note 3 to the consolidated financial statements for the composition of originated, acquired and covered loans at September 30, 2014 and December 31, 2013. Originated loans include all loans not included in the acquired and covered loan portfolios described as follows. Acquired loans are those purchased in the Whitney acquisition on June 4, 2011 and that continue to be subject to purchase accounting considerations. Acquired loans include those that were performing satisfactorily at the acquisition date (acquired-performing) and loans acquired with evidence of credit deterioration (acquired-impaired). Covered loans are those purchased in the December 2009 acquisition of Peoples First, which are covered by loss share agreements between the FDIC and the Company that afford significant loss protection. Purchased loans acquired in a business combination are recorded at estimated fair value on their purchase date without carryover of any allowance for loan losses. Certain differences in the accounting for originated loans and for acquired-performing and acquired-impaired loans (which include all covered loans) are described in Note 3 to the consolidated financial statements.

All markets across the franchise reported net loan growth during the quarter, with south Louisiana, Houston and central Florida generating over half of the increase. Lending areas such as mortgage and indirect generated approximately 30% of the quarter’s net loan growth. For the quarter ended September 30, 2014, indirect loans grew $56 million, or 15%, to $427 million, while mortgage loans increased $87 million, or 5%, to $1.9 billion.

The Company’s commercial customer base is diversified over a range of industries, including oil and gas (O&G), wholesale and retail trade in various durable and nondurable products and the manufacture of such products, marine transportation and maritime construction, financial and professional services, and agricultural production. Loans outstanding to O&G industry customers totaled approximately $1.7 billion at September 30, 2014, up approximately $113 million from June 30, 2014. The majority of the O&G portfolio is with customers providing transportation and other services and products to support exploration and production activities. The Bank lends mainly to middle-market and smaller commercial entities, although it participates in larger shared-credit loan facilities with familiar businesses operating in the Company’s market areas. Shared credits funded at September 30, 2014 totaled approximately $1.7 billion, up approximately $97 million from the last quarter and $297 million from December 31, 2013. Approximately $1.0 billion of shared national credits were with O&G customers at September 30, 2014, up $81 million from June 30, 2014, and up $244 million from year-end.

Commercial non-real estate loans, construction and land development loans (C&D) loans, and commercial real estate (CRE) loans in the originated and acquired portfolios increased a net $794 million over the first nine months of 2014. CRE loans include loans on both income-producing properties as well as properties used by borrowers in commercial operations.

Residential mortgages in the originated and acquired portfolios were up a net $92 million during the third quarter and $162 million over the first nine months of 2014. Consumer loans increased by a net $89 million and $146 million over these periods.

Total covered loans at September 30, 2014 were down $23 million from June 30, 2014 and $78 million from December 31, 2013, reflecting normal repayments, charge-offs and foreclosures. The covered portfolio will continue to decline over the terms of the loss share agreements.

 

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Allowance for Loan Losses and Asset Quality

The Company’s total allowance for loan losses was $126 million at September 30, 2014, compared to $129 million at June 30, 2014. The decrease is a result of a $6.5 million reduction in the allowance on the covered portfolio as estimated losses in the covered portfolio have decreased from June 30, 2014.

The ratio of the allowance to period-end loans was 0.94% at September 30, 2014, down slightly from 1.00% at June 30, 2014. The allowance maintained on the originated portion of the loan portfolio totaled $82 million, or 0.73%, of related loans, at September 30, 2014, as compared to $79 million, or 0.74%, at June 30, 2014.

During the third quarter of 2014, Hancock recorded a total provision for loan losses of $9 million, up from $7 million in the second quarter of 2014. The total provision for loan losses for the first nine months of 2014 was $24 million, compared to $25 million provision for the same period in 2013.

Net charge-offs from the noncovered loan portfolio were $6 million, or 0.19% of average total loans on an annualized basis in the third quarter of 2014, compared to $4 million, or 0.13%, in the second quarter of 2014. Commercial net charge-offs increased $1.3 million. Charge-offs were up primarily due to a $1.5 million charge-off related to a single customer and a decline of $0.7 million in recoveries of previously charged-off loans. Consumer net charge-offs were up $1.1 million as charge-offs rose by $0.7 million and recoveries declined by $0.4 million.

The following table sets forth activity in the allowance for loan losses for the periods indicated.

 

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     Three Months Ended     Nine Months Ended  
     September 30,     June 30,     September 30,     September 30,  

(in thousands)

   2014     2014     2013     2014     2013  

Allowance for loan losses at beginning of period

   $ 128,672      $ 128,248      $ 137,969      $ 133,626      $ 136,171   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loans charged-off:

          

Noncovered loans:

          

Commercial non real estate

     1,032        1,272        999        4,690        5,199   

Construction and land development

     1,574        950        1,183        2,615        7,548   

Commercial real estate

     882        650        847        2,255        3,718   

Residential mortgages

     696        856        647        1,793        1,549   

Consumer

     4,298        3,581        5,022        11,920        13,372   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total noncovered charge-offs

     8,482        7,309        8,698        23,273        31,386   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Covered loans:

          

Commercial non real estate

     106        24        —          176        681   

Construction and land development

     (274     166        (537     350        1,784   

Commercial real estate

     458        905        2,195        4,480        4,316   

Residential mortgages

     (53     422        431        677        947   

Consumer

     62        1,049        54        1,192        1,145   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total covered charge-offs

     299        2,566        2,143        6,875        8,873   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total charge-offs

     8,781        9,875        10,841        30,148        40,259   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Recoveries of loans previously charged-off:

          

Noncovered loans:

          

Commercial non real estate

     707        585        1,043        2,118        3,381   

Construction and land development

     156        413        206        1,220        1,243   

Commercial real estate

     174        726        828        1,231        2,340   

Residential mortgages

     138        269        96        501        991   

Consumer

     868        1,252        1,095        3,722        4,336   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total noncovered recoveries

     2,043        3,245        3,268        8,792        12,291   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Covered loans:

          

Commercial non real estate

     16        6        —          467        90   

Construction and land development

     608        39        70        1,504        554   

Commercial real estate

     37        1,235        1,517        1,408        2,395   

Residential mortgages

     (18     13        11        1        13   

Consumer

     222        92        39        370        67   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total covered recoveries

     865        1,385        1,637        3,750        3,119   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total recoveries

     2,908        4,630        4,905        12,542        15,410   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net charge-offs - noncovered

     6,439        4,064        5,430        14,481        19,095   

Net charge-offs - covered

     (566     1,181        506        3,125        5,754   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total net charge-offs

     5,873        5,245        5,936        17,606        24,849   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Provision for loan losses before FDIC benefit - covered loans

     (7,086     (1,095     (355     (15,336     9,484   

Benefit attributable to FDIC loss share agreement

     6,695        1,022        1,379        14,570        (1,497

Provision for loan losses noncovered loans

     9,859        6,764        6,545        24,888        17,417   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Provision for loan losses, net

     9,468        6,691        7,569        24,122        25,404   

(Decrease) Increase in FDIC loss share receivable

     (6,695     (1,022     (1,379     (14,570     1,497   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Allowance for loan losses at end of period

   $ 125,572      $ 128,672      $ 138,223      $ 125,572      $ 138,223   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratios:

          

Gross charge-offs - noncovered to average loans

     0.26     0.23     0.29     0.24     0.36

Recoveries - noncovered to average loans

     0.06     0.10     0.11     0.09     0.14

Net charge-offs - noncovered to average loans

     0.19     0.13     0.18     0.15     0.22

Allowance for loan losses to period-end loans

     0.94     1.00     1.18     0.94     1.18

 

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The following table sets forth nonperforming assets by type for the periods indicated, consisting of nonaccrual loans, troubled debt restructurings and foreclosed and surplus ORE and other foreclosed assets. Loans past due 90 days or more and still accruing are also disclosed.

 

     September 30,     December 31,  

(In thousands)

   2014     2013  

Loans accounted for on a nonaccrual basis: (a)

    

Commercial non-real estate loans

   $ 9,021      $ 8,705   

Commercial non-real estate loans - restructured

     2,115        4,654   
  

 

 

   

 

 

 

Total commercial non-real estate loans

     11,136        13,359   
  

 

 

   

 

 

 

Construction and land development loans

     7,779        8,770   

Construction and land development loans - restructured

     3,118        7,930   
  

 

 

   

 

 

 

Total construction and land development loans

     10,897        16,700   
  

 

 

   

 

 

 

Commercial real estate loans

     27,914        37,369   

Commercial real estate loans - restructured

     3,835        3,091   
  

 

 

   

 

 

 

Total commercial real estate loans

     31,749        40,460   
  

 

 

   

 

 

 

Residential mortgage loans

     22,230        22,255   

Residential mortgage loans - restructured

     843        —     
  

 

 

   

 

 

 

Total residential mortgage loans

     23,073        22,255   
  

 

 

   

 

 

 

Consumer loans

     6,299        6,912   
  

 

 

   

 

 

 

Total nonaccrual loans

     83,154        99,686   
  

 

 

   

 

 

 

Restructured loans - still accruing:

    

Commercial non-real estate loans

     2,269        2,323   

Construction and land development loans

     2,284        3,298   

Commercial real estate loans

     3,391        3,144   

Residential mortgage loans

     —          507   

Consumer loans

     —          —     
  

 

 

   

 

 

 

Total restructured loans - still accruing

     7,944        9,272   
  

 

 

   

 

 

 

Total restructured loans

     17,855        24,947   
  

 

 

   

 

 

 

ORE and foreclosed assets

     56,081        76,979   
  

 

 

   

 

 

 

Total nonperforming assets (b)

   $ 147,179      $ 185,937   
  

 

 

   

 

 

 

Loans 90 days past due still accruing

   $ 6,667      $ 10,387   
  

 

 

   

 

 

 

Ratios:

    

Nonperforming assets to loans plus ORE and foreclosed assets

     1.10     1.50

Allowance for loan losses to nonperforming loans and accruing loans 90 days past due

     128.44     111.97

Loans 90 days past due still accruing to loans

     0.05     0.08

 

(a) Nonaccrual loans and accruing loans past due 90 days or more do not include acquired credit-impaired loans which were written down to fair value upon acquisition and accrete interest income over the remaining life of the loan.
(b) Includes total nonaccrual loans, total restructured loans - still accruing and ORE and foreclosed assets.

Nonperforming assets totaled $147 million at September 30, 2014, down $10 million from June 30, 2014 and $39 million from December 31, 2013. Nonperforming assets as a percent of total loans, ORE, and other foreclosed assets was 1.10% at September 30, 2014, compared to 1.22% at June 30, 2014 and 1.50% at December 31, 2013.

 

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Short-Term Investments

Short-term liquidity investments, including interest-bearing bank deposits and federal funds sold, increased $31 million from June 30, 2014 and $203 million from December 31, 2013, to a total of $472 million at September 30, 2014. Short-term liquidity assets are held to ensure funds are available to meet the cash flow needs of both borrowers and depositors. Average short-term investments for the third quarter of 2014 were up $46 million, or 12%, compared to the second quarter of 2014.

Deposits

Total deposits were $15.7 billion at September 30, 2014, up $491 million, or 3%, from June 30, 2014 and up $376 million, or 2% from December 31, 2013. Average deposits for the third quarter of 2014 were $15.4 billion, up $311 million, or 2% from the second quarter of 2014.

Noninterest-bearing demand deposits (DDAs) increased by $143 million, or 2%, during the third quarter to $5.9 billion at September 30, 2014, and were up $336 million, or 6%, from December 31, 2013. DDAs comprised 37% of total period-end deposits at September 30, 2014, up slightly from September 30, 2013 and year-end 2013.

Interest-bearing public fund deposits totaled $1.5 billion at September 30, 2014, up $50 million, or 3%, from June 30, 2014 and down $37 million, or 2%, from December 31, 2013. The increase compared to the prior quarter was primarily due to balances attracted to the Bank as a result of the Company’s deposit growth initiative that commenced in the second quarter of 2014. These balances helped to lessen the decline in public funds compared to year end when public entities typically carry higher balances with subsequent reductions throughout the first nine months of the year.

Time deposits totaled $2.0 billion at September 30, 2014, up $53 million, or 3%, from June 30, 2014, but down $86 million, or 4%, from December 31, 2013. CDs increased $79 million, or 5%, from June 30, 2014, but declined $102 million, or 6%, from December 31, 2013. Balances in sweep deposit products decreased $27 million, or 7%, from the prior quarter, but still $16 million, or 4%, over the balances at December 31, 2013. These increases also reflect the deposit growth initiative mentioned above.

Short-Term Borrowings

At September 30, 2014, short-term borrowings totaled $1.2 billion, up $514 million, or 78%, from December 31, 2013. The Company borrowed $565 million on the $3.3 billion line of credit with the FHLB to fund loan growth and to replace the $115 million in fixed rate reverse repurchase obligations that were redeemed during June. Securities sold under agreements to repurchase are the main source of short-term borrowings. These agreements are offered mainly to commercial customers to assist them with their cash management strategies or to provide a temporary investment vehicle for their excess liquidity pending redeployment for corporate or investment purposes. While customer repurchase agreements provide a recurring source of funds to the Bank, the amounts available over time can be volatile.

OFF-BALANCE SHEET ARRANGEMENTS

Loan Commitments and Letters of Credit

In the normal course of business, the Bank enters into financial instruments, such as commitments to extend credit and letters of credit, to meet the financing needs of their customers. Such instruments are not reflected in the accompanying consolidated financial statements until they are funded, although they expose the Bank to varying degrees of credit risk and interest rate risk in much the same way as funded loans.

 

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Commitments to extend credit include revolving commercial credit lines, nonrevolving loan commitments issued mainly to finance the acquisition and development or construction of real property or equipment, and credit card and personal credit lines. The availability of funds under commercial credit lines and loan commitments generally depends on whether the borrower continues to meet credit standards established in the underlying contract and has not violated other contractual conditions. Loan commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee by the borrower. Credit card and personal credit lines are generally subject to cancellation if the borrower’s credit quality deteriorates. A number of commercial and personal credit lines are used only partially or, in some cases, not at all before they expire, and the total commitment amounts do not necessarily represent future cash requirements of the Company.

A substantial majority of the letters of credit are standby agreements that obligate the Bank to fulfill a customer’s financial commitments to a third party if the customer is unable to perform. The Bank issues standby letters of credit primarily to provide credit enhancement to its customers’ other commercial or public financing arrangements and to help them demonstrate financial capacity to vendors of essential goods and services.

The contract amounts of these instruments reflect the Company’s exposure to credit risk. The Company undertakes the same credit evaluation in making loan commitments and assuming conditional obligations as it does for on-balance sheet instruments and may require collateral or other credit support.

The following table shows the commitments to extend credit and letters of credit at September 30, 2014 according to expiration date.

 

            Expiration Date  
            Less than      1-3      3-5      More than  

(In thousands)

   Total      1 year      years      years      5 years  

Commitments to extend credit

   $ 5,610,806       $ 2,738,896       $ 1,106,101       $ 1,237,266       $ 528,543   

Letters of credit

     423,609         274,051         70,490         75,675         3,393   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 6,034,415       $ 3,012,947       $ 1,176,591       $ 1,312,941       $ 531,936   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Income Taxes

Income taxes are accounted for using the asset and liability method. Current tax liabilities or assets are recognized for the estimated income taxes payable or refundable on tax returns to be filed with respect to the current year. Deferred tax assets and liabilities are based on temporary differences between the financial statement carrying amounts and the tax bases of the Company’s assets and liabilities. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be realized or settled. Valuation allowances are established against deferred tax assets if, based on all available evidence, it is more likely than not that some or all of the assets will not be realized. The benefit of a position taken or expected to be taken in a tax return is recognized when it is more likely than not that the position will be sustained on its technical merits.

The Company invests in projects that yield tax credits issued under the QZAB, QSCB, NMTC, and LIHTC programs. Returns on these investments are generated through the receipt of federal and state tax credits. The tax credits are recorded as a reduction to the income tax provision in the year that they are earned. Tax credits from QZAB and QSCB bonds are generally earned over the life of the bonds in lieu of interest income. Credits on Federal NMTC investments are earned over the seven-year compliance period beginning with the year of investment. Credits on State NMTC investments are generally earned over a three- to five- year period

 

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depending upon the specific state program. Tax Credits for Low-Income Housing investments are earned over a ten-year period beginning with the year in which rental activity begins. These tax credits, if not used in the tax return for the year when the credits are first available for use, can be carried forward for 20 years. For those investments where the return of the principal is not expected, the equity investment is amortized over the life of the tax compliance period as a component of noninterest expense.

Reportable Segment Disclosures

Accounting standards require that information be reported about a company’s operating segments using a “management approach.” Reportable segments are identified in these standards as those revenue-producing components for which separate financial information is produced internally and which are subject to evaluation by the chief operating decision maker in deciding how to allocate resources to segments. On March 31, 2014, the Company combined its two state bank charters into one charter. Due to the charter change and consistent with its stated strategy that is focused on providing a consistent package of community banking products and services throughout a coherent market area, the Company has identified its overall banking operations as its only reportable segment. Because the overall banking operations comprise substantially all of the consolidated operations, no separate segment disclosures are presented.

There were no other material changes or developments with respect to methodologies that the Company uses when applying what management believes are critical accounting policies and developing critical accounting estimates as disclosed in our Form 10-K for the year ended December 31, 2013.

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and with those generally practiced within the banking industry which require management to make estimates and assumptions about future events. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, and the resulting estimates form the basis for making judgments about the carrying values of certain assets and liabilities not readily apparent from other sources. Actual results could differ significantly from those estimates.

NEW ACCOUNTING PRONOUNCEMENTS

See Note 12 to our Consolidated Financial Statements included elsewhere in this report.

FORWARD-LOOKING STATEMENTS

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

Forward-looking statements that we may make include, but may not be limited to, comments with respect to future levels of economic activity in our markets, loan growth, deposit trends, credit quality trends, net interest margin trends, future expense levels, success of revenue-generating initiatives, projected tax rates, future profitability, improvements in expense to revenue (efficiency) ratio, purchase accounting impacts such as accretion levels, the impact of the branch rationalization process, details of the common stock buyback, possible repurchases of shares under stock buyback programs, and the financial impact of regulatory requirements. Hancock’s ability to accurately project results or predict the effects of future plans or strategies is inherently limited. Although Hancock believes that the expectations reflected in its forward-looking statements are based on

 

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reasonable assumptions, actual results and performance could differ materially from those set forth in the forward-looking statements. Factors that could cause actual results to differ from those expressed in Hancock’s forward-looking statements include, but are not limited to, those risk factors outlined in Hancock’s public filings with the Securities and Exchange Commission, which are available at the SEC’s internet site (http://www.sec.gov).

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our net income is materially dependent on our net interest income. Hancock’s primary market risk is interest rate risk that stems from uncertainty with respect to absolute and relative levels of future market interest rates that affect our financial products and services. In an attempt to manage our exposure to interest rate risk, management measures the sensitivity of our net interest income and cash flows under various market interest rate scenarios, establishes interest rate risk management policies and implements asset/liability management strategies designed to produce a relatively stable net interest margin under varying rate environments.

Hancock measures its interest rate sensitivity primarily by running net interest income simulations. The model measures annual net interest income sensitivity relative to a base case scenario and incorporates assumptions regarding balance sheet growth and the mix of earning assets and funding sources as well as pricing, re-pricing and maturity characteristics of the existing and projected balance sheet. The table below presents the results of simulations run as of September 30, 2014 for year 1 and year 2, assuming the indicated instantaneous and sustained parallel shift in the yield curve at the measurement date. These results indicate that we are slightly asset sensitive as compared to the stable rate environment assumed for the base case.

 

            Net Interest Income (te) at Risk  
            Estimated  
     Change in      increase (decrease)  
     interest rate      in net interest income  
     (basis points)      Year 1     Year 2  
     +100         1.11     3.02
     +200         2.72     5.78
     +300         4.17     7.75

Note: Decrease in interest rates discontinued in the current rate environment

The foregoing disclosures related to our market risk should be read in conjunction with our audited consolidated financial statements, related notes and management’s discussion and analysis for the year ended December 31, 2013 included in our 2013 Annual Report on Form 10-K.

 

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Item 4. Controls and Procedures

At the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officers and the Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act). Based upon that evaluation, our Chief Executive Officers and Chief Financial Officer have concluded that our disclosure controls and procedures are effective as of the end of the period covered by this report to timely alert them to material information relating to us (including our consolidated subsidiaries) required to be included in our Exchange Act filings.

Our management, including the Chief Executive Officers and Chief Financial Officer, identified no change in our internal control over financial reporting that occurred during the three-month period ended September 30, 2014, that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The Company, including subsidiaries, is party to various legal proceedings arising in the ordinary course of business. We do not believe that loss contingencies, if any, arising from pending litigation and regulatory matters will have a material adverse effect on our consolidated financial position or liquidity.

Item 1A. Risk Factors

There were no changes to the risk factors that were previously disclosed in our Form 10-K for the year ended December 31, 2013. In addition to the risk of vulnerability to certain sectors of the economy related to the real estate portfolio, recent trends in the energy sector point to possible vulnerability.

The oil and gas industry constitutes a significant component of the economy in several of our core markets. The oil and gas industry is particularly sensitive to certain industry specific economic factors, the most important of which is worldwide demand for oil and gas. When demand is soft, commodity prices decline and overall levels of activity in the sector, including capital expenditures, weaken. Moreover, given the importance of the energy industry to the economies of Louisiana and Texas, when the energy sector is weak, other business segments of the economy may be impaired. Although the Company mitigates risk by diversifying its borrower base, approximately 13% of the Company’s portfolio is comprised of loans to borrowers in the energy industry.

The risks described may not be the only risks facing us. Additional risks and uncertainties not currently known to us or that are currently considered to not be material also may materially adversely affect our business, financial condition, and/or operating results.

 

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The following table provides information with respect to purchases made by the issuer or any affiliated purchaser of the issuer’s equity securities for the three months ended September 30, 2014.

 

                   Total number         
     Total             of shares      Maximum number  
     number      Average      purchased as      of shares  
     of shares      price      a part of publicly      that may yet be  
     or units      paid      announced plans      purchased under  
     purchased      per share      or programs (1)      plans or programs  

Jul. 1, 2014 - Jul. 31, 2014

     —         $ —           —           4,093,149   

Aug 1, 2014 - Aug 31, 2014

     305,263         32.65         305,263         3,787,886   

Sep. 1, 2014 - Sep. 30, 2014

     —           —           —           3,787,886   
  

 

 

    

 

 

    

 

 

    

Total

     305,263       $ 32.65         305,263      
  

 

 

    

 

 

    

 

 

    

 

(1) The Company publicly announced its 2014 stock buyback program on July  24, 2014.

Item 6. Exhibits.

(a) Exhibits:

 

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Exhibit     

Number

  

Description

*10.1    Hancock Holding Company 2014 Long Term Incentive Plan (filed as Exhibit 10.1 to Hancock’s Form 8-K filed with the Commission on April 21, 2014 and incorporated herein by reference).
*10.2    Form of Change in Control Employment Agreement between the Company and its executive officers (filed as Exhibit 10.2 to Hancock’s Form 8-K filed with the Commission on June 20, 2014 and incorporated herein by reference).
*10.3    Addendum to Nonqualified Deferred Compensation Plan describing SERP benefit (filed as Exhibit 10.3 to Hancock’s Form 10-Q filed with the Commission on August 8, 2014 and incorporated herein by reference).
*10.4    Form of 2014 Restricted Stock Award Agreement (filed as Exhibit 10.4 to Hancock’s Form 10-Q filed with the Commission on August 8, 2014 and incorporated herein by reference).
  31.1    Certification of Chief Executive Officers pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  31.2    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  32.1    Certification of Chief Executive Officers pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
  32.2    Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
  101    XBRL Interactive Data.

 

* Compensatory plan or arrangement

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Hancock Holding Company
By:  

/s/ Carl J. Chaney

  Carl J. Chaney
  President & Chief Executive Officer
 

/s/ John M. Hairston

  John M. Hairston
  Chief Executive Officer & Chief Operating Officer
 

/s/ Michael M. Achary

  Michael M. Achary
  Chief Financial Officer
Date:   November 7, 2014

 

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Index to Exhibits

 

Exhibit
Number

  

Description

*10.1    Hancock Holding Company 2014 Long Term Incentive Plan (filed as Exhibit 10.1 to Hancock’s Form 8-K filed with the Commission on April 21, 2014 and incorporated herein by reference).
*10.2    Form of Change in Control Employment Agreement between the Company and its executive officers (filed as Exhibit 10.2 to Hancock’s Form 8-K filed with the Commission on June 20, 2014 and incorporated herein by reference).
*10.3    Addendum to Nonqualified Deferred Compensation Plan describing SERP benefit (filed as Exhibit 10.3 to Hancock’s Form 10-Q filed with the Commission on August 8, 2014 and incorporated herein by reference).
*10.4    Form of 2014 Restricted Stock Award Agreement (filed as Exhibit 10.4 to Hancock’s Form 10-Q filed with the Commission on August 8, 2014 and incorporated herein by reference).
  31.1    Certification of Chief Executive Officers pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  31.2    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  32.1    Certification of Chief Executive Officers pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
  32.2    Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101    XBRL Interactive Data.

 

* Compensatory plan or arrangement