-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, SGfkbY8A+Iy7uVm7qx+99t/FAr3CFiPA/WWYQu80vePefOZ7sLlg7opQfK6/GhHX rh6DauXD6L8J+gci8yhNHA== 0000950129-94-000042.txt : 19940126 0000950129-94-000042.hdr.sgml : 19940126 ACCESSION NUMBER: 0000950129-94-000042 CONFORMED SUBMISSION TYPE: PRE 14A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940125 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HANCOCK HOLDING CO CENTRAL INDEX KEY: 0000750577 STANDARD INDUSTRIAL CLASSIFICATION: 6022 IRS NUMBER: 640693170 STATE OF INCORPORATION: MS FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: PRE 14A SEC ACT: 34 SEC FILE NUMBER: 000-13089 FILM NUMBER: 94502544 BUSINESS ADDRESS: STREET 1: ONE HANCOCK PLZ STREET 2: P.O. BOX 4019 CITY: GULFPORT STATE: MS ZIP: 39502 BUSINESS PHONE: 6018684605 PRE 14A 1 HANCOCK HOLDING COMPANY N&PS 1 SCHEDULE 14A (RULE 14a-101) INFORMATION REQUIRED IN PROXY STATEMENT SCHEDULE 14A INFORMATION PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. ) Filed by the registrant /X/ Filed by a party other than the registrant / / Check the appropriate box: / / Preliminary proxy statement /X/ Definitive proxy statement / / Definitive additional materials / / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12 Hancock Holding Company - -------------------------------------------------------------------------------- (Name of Registrant as Specified in Its Charter) Judy H. Galloway - -------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement) Payment of filing fee (Check the appropriate box): /X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2). / / $500 per each party to the controversy pursuant to Exchange Act Rule 14a-6(i)(3). / / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. (1) Title of each class of securities to which transaction applies: - -------------------------------------------------------------------------------- (2) Aggregate number of securities to which transactions applies: - -------------------------------------------------------------------------------- (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11:(1) - -------------------------------------------------------------------------------- (4) Proposed maximum aggregate value of transaction: - -------------------------------------------------------------------------------- / / Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. (1) Amount previously paid: - -------------------------------------------------------------------------------- (2) Form, schedule or registration statement no.: - -------------------------------------------------------------------------------- (3) Filing party: - -------------------------------------------------------------------------------- (4) Date filed: - -------------------------------------------------------------------------------- - --------------- (1) Set forth the amount on which the filing fee is calculated and state how it was determined. 2 (LOGO) HANCOCK HOLDING COMPANY One Hancock Plaza Gulfport, Mississippi 39501 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO THE HOLDERS OF SHARES OF COMMON STOCK: NOTICE IS HEREBY GIVEN that, pursuant to call of its Directors, the Annual Meeting of Shareholders of Hancock Holding Company (the "Company") will be held at HANCOCK BANK, One Hancock Plaza, Gulfport, Mississippi, on February 24, 1994, at 5:00 P.M., local time, for the purpose of considering and voting upon the following matters: 1. To elect three (3) Directors to hold office for a term of three (3) years or until their successors are elected and qualified. 2. To approve the appointment of Deloitte & Touche as the independent public accountants of the Company. 3. To transact such other business as may properly come before the meeting or any adjournments thereof. Only those shareholders of record at the close of business on December 31, 1993, shall be entitled to notice of, and to vote at, the meeting or any adjournments thereof. WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE DATE, SIGN AND RETURN PROMPTLY THE ACCOMPANYING PROXY. IF YOU DO ATTEND THE MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON. By Order of the Board of Directors Date: January 25, 1994 __________________________________ Leo W. Seal, Jr. President 3 HANCOCK HOLDING COMPANY One Hancock Plaza Gulfport, Mississippi 39501 (601) 868-4000 PROXY STATEMENT This statement is furnished in connection with the solicitation by the Board of Directors of Hancock Holding Company, Gulfport, Mississippi (the "Company" or "HHC"), of Proxies for the Annual Meeting of Shareholders (the "Annual Meeting") to be held at Hancock Bank, One Hancock Plaza, Gulfport, Mississippi, on February 24, 1994, at 5:00 P.M., local time, and any adjournment thereof, for the purposes stated below. It is anticipated that the Proxy Statement and Proxy first will be sent or given to shareholders on January 25, 1994. Holders of record of the Company's Common Stock, par value $3.33 per share (the "Common Stock"), as of December 31, 1993 (the "Record Date") are entitled to vote at the meeting or any adjournments thereof. Each share of Common Stock entitles the holder thereof to one (1) vote on each matter presented at the Annual Meeting for Shareholder approval. On December 31, 1993, there were 7,023,829 shares of Common Stock entitled to vote. Of this total, 937,229.3 shares of the Common Stock were held in various trust accounts by the Trust Department of the Company's wholly-owned subsidiary, Hancock Bank, in a fiduciary capacity as trustee, under terms that permit the Trust Department to vote the shares (either by itself or jointly with others). It is expected that these 937,229.3 shares will be voted in favor of the elections of the nominees listed on page 4 and the appointment of Deloitte & Touche. Shareholders of the Company do not have cumulative voting rights with respect to the election of Directors at the Annual Meeting. A shareholder has the right to vote the number of shares owned by him in the election of each Director. With respect to the election of three (3) Directors to hold office for a term of three (3) years, the nominees receiving the most votes, up to three (3), will be elected. If the proxy is marked to vote for the three (3) Directors as a group, one vote will be cast for each Director for each share entitled to vote. If any shareholder wishes to vote for fewer than three (3) Directors, he may line through or otherwise strike out the name of any nominee. Pursuant to Mississippi Law and the Company's Bylaws, Directors are elected by a plurality of the votes cast in the election of Directors. A "plurality" means that the individuals with the largest number of favorable votes are elected as Directors, up to the maximum number of Directors to be chosen at the meeting. 1 4 Pursuant to Mississippi law and the Company's Bylaws, action on a matter (other than the election of Directors) is approved if the votes cast favoring the action exceed the votes cast opposing the action, unless the Company's Articles of Incorporation or Mississippi law specifically requires a greater number of affirmative votes on a particular matter. Broker non-votes and shareholder abstentions are not counted in determining whether or not a matter has been approved by shareholders. The selection of Deloitte & Touche as the Company's Auditors for the fiscal year ending December 31, 1994 will be ratified if more votes are cast at the Annual Meeting favoring the appointment than opposing it. Any person giving a Proxy has the right to revoke it at any time before it is exercised. A shareholder may revoke his Proxy (1) by personally appearing at the Annual Meeting, (2) by written notification to the Company which is received prior to the exercise of the Proxy or (3) by a subsequent Proxy executed by the person executing the prior Proxy and presented at the Annual Meeting. All properly executed Proxies, if not revoked, will be voted as directed on all matters proposed by the Board of Directors, and, if the shareholder does not direct to the contrary, the shares will be voted "FOR" each of the proposals described below. Solicitation of Proxies will be primarily by mail. Officers, Directors, and employees of Hancock Bank and Hancock Bank of Louisiana (hereinafter referred to collectively as the "Banks") also may solicit Proxies personally. The Company will reimburse brokers and other persons holding stock in their names, or in the names of nominees, for their expenses for sending Proxy material to principals and obtaining their Proxies. The cost of soliciting Proxies will be borne by the Company. ELECTION OF DIRECTORS The Board of Directors, by a vote of a majority of the full Board, has nominated the persons named below for election to serve as Directors. The term of each of the three (3) newly-elected Directors will expire at the Annual Meeting of Shareholders in 1997 and when his successor has been elected and qualified. The Company's Articles of Incorporation provide for a Board of at least nine (9) Directors classified into three (3) classes of Directors. At each Annual Meeting, each class of Directors whose term has expired will be elected to hold office until the third succeeding Annual Meeting and until their successors have been elected and qualified. These staggered terms of service by Directors of the Company may make it more difficult for the Company's shareholders to effect a change in the 2 5 majority of the Company's Directors since replacement of a majority of the Board of Directors will normally require two (2) Annual Meetings of Shareholders. Accordingly, this provision may have the effect of discouraging hostile attempts to gain control of the Company, but is applicable to all elections of Directors. It is the intent of the persons named in the Proxy to vote such Proxy "FOR" the election of the nominees listed below, unless otherwise specified in the Proxy. In the event that any such nominee should be unable to accept the office of Director, which is not anticipated, it is intended that the persons named in the Proxy will vote for the election of such person in the place of such nominee as the Board of Directors may recommend. Nominations for election to the Board of Directors, other than those made by or at the direction of the Board of Directors, may be made by a shareholder by delivering written notice to the Company's secretary not less than fifty (50) nor more than ninety (90) days prior to the meeting at which Directors are to be elected, provided that the Company has mailed the first notice of the meeting at least sixty (60) days prior to the meeting date. If the Company has not given such notice, shareholder nominations must be submitted within ten (10) days following the earlier of (i) the date that notice of the date of the meeting was first mailed to the shareholders or (ii) the date on which public disclosure of such date was made. The shareholder's notice must set forth as to each nominee (i) the name, age, business address, and residence address of such nominee; (ii) the principal occupation or employment of such nominee; (iii) the class and number of shares of the Company's Common Stock which are beneficially owned by such nominee; and (iv) any other information relating to such nominee that may be required under federal securities laws to be disclosed in solicitations of proxies for the election of Directors. The shareholder's notice must also set forth as to the shareholder giving the notice (i) the name and address of such shareholder and (ii) the class and amount of such shareholder's beneficial ownership of the Company's Common Stock. If the information supplied by the shareholder is deficient in any material aspect or if the foregoing procedure is not followed, the chairman of the annual meeting may determine that such shareholder's nomination should not be brought before the meeting and that such nominee shall not be eligible for election as a Director of the Company. 3 6 INFORMATION CONCERNING NOMINEES
Amount and Nature of Beneficial Percent of Ownership of Common Name, Age, Principal Occupation for the Director Common Stock Stock Last Five Years and Bank or Company of Company as of December Beneficially Offices Currently Held Since 20, 1993(a) Owned(a) --------------------------------------- ---------- ----------------- ------------ For a Three (3) Year Term Expiring in 1997 - ------------------------------------------ L. A. Koenenn, Jr. (74) . . . . . . . . . . . . . . 1988 3,548(1) .05% Public Accountant, Gulfport, Mississippi Dr. Homer C. Moody, Jr. (69) . . . . . . . . . . . 1984 9,424(2) .1% Retired Doctor of Veterinary Medicine, Poplarville, Mississippi George A. Schloegel (53) . . . . . . . . . . . . . 1984 90,100.7(3) 1.3% President, Hancock Bank, Gulfport, Mississippi, since 1990; Vice Chairman of the Board, Hancock Holding Company, since 1984; Director, Hancock Bank of Louisiana since 1990
INFORMATION CONCERNING CONTINUING DIRECTORS
Term Expires ------- A. F. Dantzler (78) . . . . . . . . . . . . . . . . . 1985 44,694(4) .6% 1995 President and Chief Executive Officer of Fuel Services, Inc. (Chevron Jobber; Oil Field Vessels), Pascagoula, Mississippi Victor Mavar (67) . . . . . . . . . . . . . . . . . . 1993 8,926.9 .1% 1995 President of Mavar, Inc. (Real Estate Firm), Biloxi, Mississippi Leo W. Seal, Jr. (69) . . . . . . . . . . . . . . . . 1984 1,107,120.9(5) 15.8% 1995 Chief Executive Officer, Hancock Bank, Gulfport, Mississippi, since 1963; President and Chief Executive Officer, Hancock Holding Company, since 1984; Advisory Director, Hancock Bank of Louisiana since 1993
4 7
Amount and Nature of Beneficial Percent of Ownership of Common Name, Age, Principal Occupation for the Director Common Stock Stock Last Five Years and Bank or Company of Company as of December Beneficially Term Offices Currently Held Since 20, 1993 (a) Owned(a) Expires --------------------------------------- ---------- ----------------- ------------ ------- Joseph F. Boardman, Jr.(64) . . . . . . . . . . . . 1984 8,800(6) .1% 1996 Retired Director of Coast Materials Company (Ready Mixed Concrete Business), Gulfport, Mississippi; Chairman of the Board, Hancock Holding Company, Gulfport, Mississippi, since 1987 Charles H. Johnson(60) . . . . . . . . . . . . . . 1987 6,147.7(7) .09% 1996 President, Charles H. Johnson, Inc. (Residential General Contracting Business), Waveland, Mississippi; President, Universal Warehouse, Inc., (Mini-Storage Business), Waveland, Mississippi Thomas W. Milner, Jr.(80) . . . . . . . . . . . . . 1984 2,948 .04% 1996 Retired Vice Chairman of the Board, Hancock Bank, Gulfport, Mississippi
INFORMATION CONCERNING EXECUTIVE OFFICERS A. Bridger Eglin(50) . . . . . . . . . . . . . . . 803 .01% President, Hancock Bank of Louisiana since 1991; Director, Hancock Bank of Louisiana since 1991(10) Theresa Johnson(66) . . . . . . . . . . . . . . . 1,086 .01% Executive Vice President, Hancock Bank since 1985; Executive Vice President and Chief Financial Officer Hancock Holding Company since 1992 Charles A. Webb, Jr.(63) . . . . . . . . . . . . 6,596.4(8) .09% Executive Vice President, Chief Credit Officer and Secretary, Hancock Holding Company since 1992; Executive Vice President, Hancock Bank since 1977; Director, Hancock Bank of Louisiana since 1991 ALL DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP 1,290,185.6(9) 18.4%
5 8 __________ (a) Constitutes sole ownership unless otherwise indicated. (1) Represents 3,548 shares held in L.A., Jr. and Mae D. Koenenn Revocable Trust. Mr. Koenenn has the sole power to vote and dispose of these shares. (2) Includes 8,160 shares owned jointly by Dr. Moody and his wife and 504 shares owned jointly with his children and 504 shares owned jointly by his wife and children. (3) Includes 32,740 shares owned jointly by Mr. Schloegel and his wife; 84 shares owned by Mr. Schloegel's minor child; 1,696.8 shares held for Mr. Schloegel's account in the Company's Employee Stock Purchase Plan; 626.9 shares held in a self-directed IRA for Mr. Schloegel; and 156.7 shares held in a self-directed IRA for his wife. (4) Includes 3,000 shares owned by Mr. Dantzler's wife, and 35,694 shares held in a trust of which Mr. Dantzler serves as trustee and has sole voting rights and power of disposition. Does not include 6,000 shares held in his adult son's trust to which he has voting authority. Mr. Dantzler is not a beneficiary of these trusts. Mr. Dantzler disclaims beneficial owership of these 44,694 shares. (5) Includes 1,880.9 shares owned by Mr. Seal's wife, and excludes 378,108 shares held in a fiduciary capacity by the Hancock Bank's Trust Department as to which Mr. Seal has sole voting rights but no power of disposition. Mr. Seal's Sister and her children are beneficiaries of these trusts. Mr. Seal disclaims beneficial ownership of these 378,108 shares. (6) Includes 400 shares owned by Mr. Boardman's wife. (7) Includes 539.4 shares owned by Mr. Johnson's wife. (8) Includes 6,052 shares owned jointly with Mr. Webb's wife. (9) All of the Directors and executive officers of the Company as a group (consisting of twelve (12) persons) beneficially owned, in the aggregate, 1,712,987.6 shares (24.4%) of Common Stock of the Company, including the shares as to which beneficial ownership has been disclaimed above. (10) See "Executive Officers" for Mr. Eglin's principal occupations for the last five (5) years. None of the Directors is a director of another company with a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934 or subject to the reporting requirements of Section 15(d) of the Act, or registered as an investment company under the Investment Company Act of 1940, except Leo W. Seal, Jr., who is a director of Mississippi Power Company, Gulfport, Mississippi. 6 9 INDEPENDENT PUBLIC ACCOUNTANTS The Board of Directors has appointed Deloitte & Touche, a firm of independent certified public accountants, as auditors for the fiscal year ending December 31, 1994, and until their successors are selected. Deloitte & Touche and its predecessor, Touche Ross & Company, have been auditors for the Company since it commenced business in 1984, for Hancock Bank since 1981 and Hancock Bank of Louisiana since 1990. The Company has been advised that neither the firm nor any of its partners has any direct or any material indirect financial interest in the securities of the Company or any of its subsidiaries, except as auditors and consultants on accounting procedures and tax matters. The Board does not anticipate that representatives of Deloitte & Touche will attend the Annual Meeting. Although not required to do so, the Board of Directors has chosen to submit its appointment of Deloitte & Touche for ratification by the Company's shareholders. It is the intention of the persons named in the Proxy to vote such Proxy FOR the ratification of this appointment. If this proposal does not pass, the Board of Directors will reconsider the matter. The proposal will be ratified if the votes cast favoring the appointment exceed the votes cast opposing it. PRINCIPAL STOCKHOLDERS The following table sets forth information concerning the number of shares of Common Stock of the Company held as of December 20, 1993 by the only shareholders who are known to management to be the beneficial owners of more than five percent (5%) of the Company's outstanding shares:
Name and Address Amount and Nature of Percent of Beneficial Owner Beneficial Ownership of Class ------------------- -------------------- -------- Hancock Bank Trust Department 937,229.3(1) 13.3% One Hancock Plaza Gulfport, Mississippi 39501 Leo W. Seal, Jr. 1,107,120.9(2) 15.8% 408 North Beach Boulevard Bay St. Louis, Mississippi 39520 _______________ (1) Consists of shares held and voted by the Hancock Bank Trust Department as trustee for 141 different accounts. Within these 141 accounts, the Trust Department has sole voting rights on 917,659.8 shares, shared voting rights on 0 shares and no power to vote 95,088.7 shares. The Trust Department has the sole right to dispose of 863,785.1 shares, shared right to dispose of 311 shares and no authority to dispose of 148,652.3 shares.
7 10 (2) Includes 1,880.9 shares owned by Mr. Seal's wife, and excludes 378,108 shares held in three (3) trusts by Hancock Bank's Trust Department (not included in the 937,229.3 shares shown above as beneficially owned by the Trust Department) as to which Mr. Seal has sole voting rights, but no power of disposition. Mr. Seal's sister and her children are the beneficiaries of these trusts. COMMITTEES OF THE BOARD OF DIRECTORS The Company has an Audit Committee currently composed of Messrs. Boardman, Koenenn and Mavar. The Audit Committee was formed in October 1991 in connection with the listing of the Company's Common Stock on the NASDAQ National Market System. The Audit Committee oversees the operations of the Company's Audit Department and makes recommendations to the Board of Directors concerning the independent accountants for the Company and its subsidiaries. The Audit Committee met eleven (11) times during 1993. The Company has a Loan Review Committee which meets monthly and is currently composed of the following members: Joseph F. Boardman, Jr., A. F. Dantzler, Charles H. Johnson and Charles A. Webb, Jr. It met twelve (12) times during 1993. The Company has a Compensation Committee which determines the salary of the executive officers of the Company. It met one time during 1993 and is composed of J. F. Boardman, Jr., A. F. Dantzler, Donald Green, Charles H. Johnson, L. A. Koenenn, Jr., Victor Mavar, T. W. Milner, Jr., Dr. H. C. Moody, Victor Mavar, George A. Schloegel and Leo W. Seal, Jr. Hancock Holding Company does not have a Nominating Committee. Hancock Bank has, among other committees, an Investment Committee which meets monthly and a Salary Committee. The Salary Committee is composed of six members who determine wages and compensation for Bank officers and other employees. George A. Schloegel and Leo W. Seal, Jr., both of whom are Directors of the Company, are two of the six members. The Salary Committee of Hancock Bank met five (5) times during the year ended December 31, 1993. The Board of Directors of the Company met a total of thirteen (13) times during the year ended December 31, 1993. During 1993, all Directors attended 75 percent or more of the aggregate of the total number of meetings of the Board of Directors and the total number of meetings held by committees on which they served. 8 11 EXECUTIVE OFFICERS The following table sets forth certain information with respect to the executive officers of the Company and the Banks as of December 31, 1993:
NAME (AGE) PRESENT POSITION ---------- ---------------- Joseph F. Boardman, Jr. (64) Director since 1984; Chairman of the Board since 1987 George A. Schloegel (53) Director since 1984; Vice Chairman of the Board since 1984; President, Hancock Bank since 1990; Director, Hancock Bank of Louisiana since 1990 Leo W. Seal, Jr. (69) Director since 1984; President and Chief Executive Officer since 1984; Chairman and Chief Executive Officer, Hancock Bank since 1990 Charles A. Webb, Jr. (63) Executive Vice President, Chief Credit Officer and Secretary, Hancock Holding Company since 1992; Executive Vice President of Hancock Bank since 1977; Director, Hancock Bank of Louisiana since 1990 A. Bridger Eglin (50) President, Hancock Bank of Louisiana since 1991; Director, Hancock Bank of Louisiana since 1991 Theresa Johnson (66) Executive Vice President, Hancock Bank since 1985; Executive Vice President and Chief Financial Officer, Hancock Holding Company since 1992
- ------------ Mr. Boardman is a retired director and President of Coast Materials Company, which sells ready-mixed concrete, and is located in Gulfport, Mississippi. He was elected Chairman of the Company in 1987. Mr. Schloegel was employed part-time with Hancock Bank from 1956-1959 and began full-time employment in 1962. He served in various capacities until being named President in 1990. Mr. Schloegel serves as Vice Chairman of the Company and President of Hancock Bank Securities Corporation, a subsidiary of Hancock Bank. He is a member of the Boards of Directors of Hancock Bank and Hancock Bank of Louisiana. Mr. Seal was employed by Hancock Bank in 1947. He was elected to the Board of Directors in 1961 and named President of Hancock Bank in 1963. In 1977, he was named President and Chief Executive Officer of Hancock Bank. In 1990, he became Chairman and Chief Executive Officer of Hancock Bank. He is currently serving as President and Chief Executive Officer of the Company and also serves as an Advisory Director of Hancock Bank of Louisiana. 9 12 Mr. Webb served as Vice President and Secretary of the Company from 1984 until 1992, when he became Executive Vice President, Chief Credit Officer and Secretary. He has served as Executive Vice President of Hancock Bank since 1977 and as a Director of Hancock Bank of Louisiana since 1990. Mr. Eglin has served as President of Hancock Bank of Louisiana since 1991. Prior to that, he served for a brief time as Commissioner of Financial Institutions for the State of Louisiana. From 1989 to 1990 he served as First Assistant to the Secretary of the State of Louisiana. Mr. Eglin was President of Baton Rouge Bank and Trust Company, Baton Rouge, Louisiana from 1986 to 1988 and Executive Director of that institution from 1988 to 1989. Ms. Johnson joined Hancock Bank in 1985 following the acquisition of Pascagoula Moss Point Bank. No family relationships exist among the executive officers of the Company or the Banks. SUMMARY MANAGEMENT COMPENSATION TABLE
Annual Compensation - -------------------------------------------------------------------------------- (a) (b) (c) (d) (e) (f) Other Annual All Other Compen- Compen- Name and sation sation(5) Principal Position Year Salary($) Bonus($) ($) ($) - -------------------------------------------------------------------------------- Leo W. Seal, Jr. 1993 85,000 15,000 560(1) 2,547 CEO, Hancock Bank 18,000(2) President & CEO, HHC 4,506(3) 7,560(4) 1992 60,000 0 560(1) 1,349 18,000(2) 1,321(3) 7,560(4) 1991 60,000 0 2,085(1) 551 18,000(2) 7,560(4)
10 13
Annual Compensation - -------------------------------------------------------------------------------- (a) (b) (c) (d) (e) (f) Other Annual All Other Compen- Compen- Name and sation sation(5) Principal Position Year Salary($) Bonus($) ($) ($) - -------------------------------------------------------------------------------- George A. Schloegel 1993 185,000 35,000 1,181(1) 7,774 President, Hancock Bank 5,000(3) Vice Chairman, HHC 1,728(4) 1992 169,615 25,000 1,095(1) 5,855 3,744(2) 1,256(3) 1,728(4) 1991 153,229 20,000 874(1) 3,290 4,518(2) 482(3) 1,728(4) Charles A. Webb, Jr. 1993 122,500 24,000 1,743(1) 3,681 Ex. V.P., Hancock Bank 5,000(2) Ex. V.P., & Sec. and 4,212(4) Chief Credit Officer, HHC 1992 115,588 20,000 1,495(1) 2,600 5,000(2) 4,212(4) 1991 105,461 15,000 1,290(1) 952 5,000(2) 4,212(4) Theresa Johnson 1993 117,500 10,000 321(1) 3,541 Ex. V.P., Hancock Bank 7,560(4) Ex. V.P., & CFO, HHC 1992 115,000 3,500 751(1) 2,498 7,560(4) 1991 112,500 2,500 496(1) 905 4,212(4) A. Bridger Eglin 1993 116,500 9,000 1,523(1) 1,873 President, Hancock Bank 373(4) of Louisiana 1992 110,231 7,500 832(1) 965 205(4) 1991 67,981 1,000 208(1) N/A 89(4)
11 14 1) Automobile compensation. 2) Deferred compensation. 3) Executive supplemental plan. 4) Cost of excess life insurance. 5) Includes stock purchase plan contribution and profit sharing plan contribution. Directors' Fees Directors of the Company who are not also full-time employees of Hancock Bank or Hancock Bank of Louisiana (i.e., all Directors except Messrs. Seal and Schloegel) receive $275 for each regular Board meeting attended and $200 for each special Board meeting attended. Mr. Dantzler, however, receives a consultant fee of $400 per month but no retainer or additional compensation for attendance at Board meetings. Directors may elect to defer the receipt of their Directors' fees for a specified period of time. Directors who choose such deferral also receive a $20,000 term life insurance policy. During 1993, Messrs. Milner and Johnson participated in this deferral program. Directors of the Company who are not full-time employees of Hancock Bank or Hancock Bank of Louisiana and are also Directors of one of the Banks, receive an additional $275 for each meeting of the Bank's Board of Directors attended, provided that such meetings are not held on the same day as meetings of the Company. Directors of the Company who are not full-time employees of Hancock Bank or Hancock Bank of Louisiana and are members of a Bank committee, also receive $225 for each committee meeting attended and $100 for each Gulfport loan meeting. Pension Plan Hancock Bank, along with some of its affiliated companies, maintains a non-contributory integrated pension plan and trust agreement (the "Pension Plan") covering all full-time salaried employees (including executive officers of the Company who are also employees of the Banks) who have completed one (1) year of service and have attained age 21. Employees become participants in the Pension Plan on the January 1 or July 1 following the satisfaction of the eligibility requirements. The benefit formula was modified by an amendment and restatement of the Pension Plan dated December 31, 1992. Under this formula, a participant accrues his benefit under the Pension Plan on the basis of his years of service with the Bank and its affiliated companies, his years of participation in the Pension Plan, his average annual compensation (calculated by using his base compensation for the five consecutive years of service that produce the highest average), and Social Security laws and amounts. His benefit accrues in increments based on his years of participation at any time of determination and the number of years of participation he would have at his normal retirement age (that is, the date on which the participant has attained age 65 but not earlier than the fifth anniversary of the first day of the Pension Plan year (January 1 - - December 31) during which the participant commenced participation in the Pension Plan). A participant's normal retirement date is the first day of the month coincident with or immediately preceding his normal retirement age. A participant is eligible to elect early retirement after he has either (1) completed fifteen years of service and attained age 55 or (2) completed twelve years of service and attained age 62. 12 15 A participant becomes vested in his accrued benefit under the Pension Plan upon the earlier of attainment of his normal retirement age or the completion of five years of service. A participant with a vested accrued benefit will be entitled to receive a retirement benefit upon termination of his employment. In some situations, distributions may be delayed until the participant attains his normal or early retirement date. The spouse or other beneficiary of a vested participant who dies while employed will be eligible for a survivor benefit. The normal form of benefit under the Pension Plan (1) for unmarried participants generally is a ten year certain and life annuity and (2) for married participants generally is a joint and 50% survivor annuity which is the actuarial equivalent of the unmarried participant's normal form. A participant may elect certain specified optional forms of distribution. The Pension Plan provides for the Banks and other participating companies to make all contributions to the Pension Plan in amounts sufficient to fund benefit payments and to satisfy legal funding requirements. All contributions are held in a trust fund of which Hancock Bank is the trustee. Pension costs were $1,075,347.00 for 1993. The table set forth below shows the estimated annual base payments payable under the present benefit formula to persons retiring upon attainment of age 65 in 1993 in the indicated earnings classifications and with the indicated number of years of service for purposes of computing retirement benefits. Pension Plan Table(1)(2)(3)
Years of Service --------------------------------------------------------------------- Remuneration 15 20 25 30 35 40 45 - ------------ -- -- -- -- -- -- -- $ 50,000 11,813 16,050 20,288 24,525 28,763 33,000 36,250 $100,000 24,413 33,150 41,888 50,625 59,363 68,100 74,600 $150,000 37,013 50,250 63,488 76,725 89,963 103,200(4) 112,950(4) $200,000 49,613 67,350 85,088 102,825(4) 120,563(4) 138,300(4) 151,300(4) $250,000 52,651 71,473 90,296 109,118(4) 127,941(4) 146,763(4) 160,547(4) __________ (1) Assuming continued employment, the years of service at age 65 for Mr. Schloegel will be 46 years; for Mr. Seal was 42; for Ms. Johnson was 45; for Mr. Webb will be 47; and for Mr. Egin will be 17. (2) Earnings covered by the Pension Plan consist of basic salary and do not include bonuses. The benefit amounts are not subject to reduction for social security benefits, but social security amounts were taken into account under the benefit formula. (3) This table reflects the normal form of benefit under the Pension Plan which is a ten year certain and life annuity.
13 16 (4) The annual amount exceeds the IRC Section 415 limit of $104,077 for a ten year certain and life annuity. The Section 415 is indexed, so that these amounts may eventually be paid. Compensation covered by the Pension Plan is found in the Salary column of the Summary Management Compensation Table for the executive officers of the Company. It covers the three years listed in the Table and 1989 and 1990. Covered compensation for named executive officers as of the end of the last calendar year is: Seal $62,800; Schloegel $158,200; Webb $108,200; Eglin $111,333; and Johnson $104,780. Executive Supplemental Reimbursement Plan Hancock Bank maintains an executive Supplemental Reimbursement Plan ("ESR Plan") for members of the Bank's Management Committee. Currently, Leo W. Seal, Jr., George A. Schloegel and Charles A. Webb are three of the six members of the Management Committee. Under the ESR Plan, Hancock Bank will pay or reimburse each participating committee member for up to $5,000 of expenses that the committee member incurs during each calendar year for life insurance, education, residential security system and club dues. If the amount paid or reimbursed for a committee member is less than $5,000 for a calendar year, the unused portion will be contributed to a deferred compensation account for all members except Leo W. Seal, Jr. An administrative committee of at least three persons appointed by the Board of Directors of Hancock Bank administers and interprets the plan and has sole discretion to award any benefit to committee members. Bank Automobile Plan Hancock Bank has a Bank Automobile Plan for the members of the Management Committee. The members are given the use of Bank automobiles for Bank business during the day and are permitted to take them home at night and on weekends for their personal use. Stock Purchase Plan The Company maintains an Employee Stock Purchase Plan (the "ESPP") that is designed to provide the employees of the Company, the Banks and certain subsidiaries of Hancock Bank a convenient means of purchasing Common Stock of the Company. All employees (except Leo W. Seal, Jr.) of the Company, the Banks, and the other participating subsidiaries, who have completed two or more years of continuous full-time, or five or more years of continuous part-time, employment with the Company, the Banks, or the participating subsidiaries, and are 21 years of age, are eligible to participate in the ESPP. Each employee of the Company, the Banks or a participating subsidiary who qualifies to and does participate in the ESPP (a "Participant") is permitted to authorize payroll deductions, which may not exceed 5% of the Participant's base salary for the pay period. At the end of each plan year (January 1 through December 31), the participating company employing a Participant who is still employed at that time, contributes an amount equal to 25% of such Participant's payroll deductions for that plan year. 14 17 Employee and Company contributions are forwarded to Hancock Bank's Trust Department, which uses the funds to purchase shares of the Company's Common Stock through brokers or dealers or directly from individuals (including officers, directors or employees of the Company, the Banks or the participating subsidiaries) at the prevailing market price in the Gulfport, Mississippi over-the-counter market on the date of such purchase. Brokerage commissions, service charges and other transactional costs associated with the purchase of shares by the Plan, if any, are paid by the Plan from its assets (and therefore are borne indirectly by the Plan Participants). Administrative fees and expenses are paid by the Company. Purchases are made in the name of the ESPP at such times and in such amounts as the Bank's Trust Department deems appropriate, and shares are allocated to each Participant as of June 30 and December 31 of each year. A Participant may withdraw the Common Stock and cash held in his Hancock Bank account at any time (but only once in a plan year without penalty). For 1993, Hancock Bank contributed $2,096 under the Plan on behalf of George A. Schloegel, and Hancock Bank of Louisiana contributed $650 on behalf of Bridger Eglin. These are the only two executive officers of the Company who participate in the Plan. COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION This report reflects the Company's compensation philosophy for all executive officers, as endorsed by the Board of Directors and the Compensation Committee. The Committee, comprised of the Company Directors and two advisory directors, named below, determines annual base salary adjustments and annual bonus awards. There are two interlocking Committee and Board member relationships which are disclosed elsewhere under "Compensation Committee Interlocks and Insider Participation." In determining the compensation to be paid to the Company's executive officers in 1993, the Compensation Committee employed compensation policies designed to align the compensation with the Company's overall business strategy, values and management initiatives. These policies are intended to reward executives for long-term strategic management and the enhancement of shareholder value and support a performance-oriented environment that rewards achievement of internal goals. Additionally, the Company subscribes to and participates in the Wyatt Data Services/Cole Survey for Financial Institutions Compensation and the Mississippi and Louisiana Bankers Associations' surveys, which provide the Committee with comparative compensation data from the Company's market areas and its peer groups. This information is used by the Committee to make sure that it is providing compensation opportunities comparable to its peer group, thereby allowing the Company to retain talented executive officers who contribute to the Company's overall and long-term success. Mr. Seal's compensation is reflective of his philosophy and heritage. His father, who served as Hancock Bank's President from 1932 until his demise in 1963, instilled in Mr. Seal a sense of responsibility as to their own compensation. Hence, like his father before him, Mr. Seal's relatively low salary, in comparison to the other executive officers of the Company, is the result of Mr. Seal's express wishes and it is in no way a reflection of his performance or ability as CEO or his value to the Company. 15 18 Submitted by the Company's Compensation Committee: J. F. Boardman, Jr. L. A. Koenenn, Jr. Vertis G. Ramsay A. F. Dantzler Victor Mavar George A. Schloegel Donald R. Green T. W. Milner, Jr. Leo W. Seal, Jr. Charles H. Johnson Dr. H. C. Moody, Jr. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION Leo W. Seal, Jr. and George A. Schloegel both served on the Compensation Committee of the Company for 1993. Although Mr. Seal, the Company's Chief Executive Officer, and Mr. Schloegel, the Company's Vice Chairman, served on the Committee, neither participated in any decisions regarding his own compensation as an executive officer other than on Mr. Seal's expressed wishes described in the aforementioned paragraph. CERTAIN TRANSACTIONS AND RELATIONSHIPS Directors, officers and principal shareholders of the Company and their associates have been customers of the Banks from time to time in the ordinary course of business and additional transactions may be expected to take place in the future. All loans to such persons were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and did not involve more than the normal risk of collectability or embody other unfavorable features. At December 31, 1993, the aggregate amount of such loans and extensions of credit outstanding was approximately $4.3 million. Leo W. Seal, Jr., serves as President of Hancock Insurance Agency ("Hancock Insurance"), for which he receives no fees or other compensation. For the year ended December 31, 1993, the Company paid Hancock Insurance $764,104 in premiums for general insurance products, which sum constituted approximately 24% of the gross consolidated revenues of Hancock Insurance for the year ended December 31, 1993. Management believes that the terms of the insurance transactions between the Company and Hancock Insurance were no less favorable to the Company than if the transactions had been made with nonaffiliates. FIVE YEAR SHAREHOLDER RETURN COMPARISION The Securities and Exchange Commission requires that the Company include in its Proxy Statement a line graph presentation comparing cumulative, five-year shareholder returns on an indexed basis with a performance indicator of the overall stock market and either a nationally recognized industry standard or an index of peer companies selected by the Company. The broad market index used in the graph is the NASDAQ Market Index. The peer group index is the Media General Financial Services Industry Group 045-East South Central Banks and a list of the companies included in the index follows the graph. 16 19 COMPARE 5-YEAR CUMULATIVE TOTAL RETURN AMONG HANCOCK HOLDING COMPANY, NASDAQ MARKET INDEX AND PEER GROUP INDEX
HANCOCK NASDAQ PEER GROUP HOLDING CO. MARKET INDEX INDEX ----------- ------------ ---------- 1989 . . . . . . . . $ 91.16 $112.89 $104.81 1990 . . . . . . . . 78.89 91.57 92.42 1991 . . . . . . . . 114 117.56 151.19 1992 . . . . . . . . 161.15 118.71 156.82 1993 . . . . . . . . 187.03 142.4 165.75
ASSUMES $100 INVESTED ON JANUARY 1, 1989 ASSUMES DIVIDEND REINVESTED FISCAL YEAR ENDING DEC. 31, 1993 20 MG Industry Group 045-East South Central Banks:
AmSouth Bancorporation First Alabama Bancshares, Inc. Bancfirst Corporation Alabama First American Corporation, Tennessee Banco Central Hispano S.A. First City Bancorp, Inc. BancorpSouth First Fed Financial, Kentucky Bank of Nashville, Tennessee First Tennessee National Corporation Cardinal Bancshares, Inc. Grenada Sunburst System Corporation CBT Corporation Hancock Holding Company Colonial BancGroup Class A Kentucky Enterprise Bancorp Community Bancshares Tennessee Leader Financial Corporation Compass Bancshares, Inc. Liberty National Bancorp, Inc. Deposit Guaranty Corporation Mid-America Bankcorp Farmers Capital Bank Corporation National Commerce Bancorporation Peoples First Corporation Peoples Holding Company Pikeville National S.Y. Bancorp, Inc. South Alabama Bancorp SouthTrust Corporation Tennessee Bancorp, Inc. Trans Financial Bancorp, Inc. Trustmark Corporation Union Planters Corporation
17 21 OTHER MATTERS The Board of Directors does not intend to bring any matters before the Annual Meeting other than those specifically set forth in the Notice of Annual Meeting of Shareholders, nor does it know of any matters to be brought before the Annual Meeting by others. If, however, any other matters properly come before the Annual Meeting, it is the intention of the persons named in the accompanying Proxy to vote such Proxy in accordance with the judgment of the Board on any such matters. The Annual Report of the Company for the fiscal year ended December 31, 1993 is enclosed. The Annual Report is not to be regarded as proxy soliciting material. Any shareholder who has not received an Annual Report may obtain one from the Company. The Company also will provide, on request, without charge, copies of its Annual Report on Form 10-K for the year ended December 31, 1993, as filed with the Securities and Exchange Commission. Shareholders wishing to receive a copy of the Annual Report on Form 10-K are directed to write to George A. Schloegel, Vice Chairman, at the address of the Company. PROPOSALS FOR 1995 ANNUAL MEETING Any shareholder who wishes to present a proposal at the Company's next Annual Meeting and who wishes to have the proposal included in the Company's Proxy Statement and form of proxy for the meeting, must submit the proposal to the undersigned at the address of the Company not later than September 20, 1994. THE ACCOMPANYING PROXY IS SOLICITED BY THE BOARD OF DIRECTORS AND MAY BE REVOKED PRIOR TO ITS EXERCISE. By Order of the Board of Directors Dated January 25, 1994 ______________________________ Leo W. Seal, Jr. President 18 22 PROXY FOR ANNUAL MEETING HANCOCK HOLDING COMPANY, GULFPORT, MISSISSIPPI SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS KNOW ALL MEN BY THESE PRESENTS that the undersigned shareholder of HANCOCK HOLDING COMPANY, GULFPORT, MISSISSIPPI, does hereby nominate, constitute, and appoint Leo W. Seal, Jr., Thomas W. Milner, Jr., and J.F. Boardman, Jr. as proxies or any of them (with full power of substitution), and hereby authorizes them to represent and vote, as designated below, all the shares of Hancock Holding Company held of record by the undersigned on December 31, 1993, at the annual meeting of its stockholders to be held at HANCOCK BANK, One Hancock Plaza, Gulfport, Mississippi, on February 24, 1994, or any adjournments thereof, with all the powers the undersigned would possess if personally present, as follows: 1. The election of the following 3 persons as directors, to serve until the Annual Meeting in 1997 or until each person's successor has been elected and qualified. (INSTRUCTION: AUTHORITY TO VOTE FOR ANY NOMINEE MAY BE WITHHELD BY LINING THROUGH OR OTHERWISE STRIKING OUT THE NAME OF ANY NOMINEE). L. A. KOENENN, JR. DR. HOMER C. MOODY, JR. GEORGE A. SCHLOEGEL For all nominees except as indicated ______________ Withhold authority to vote for all nominees _______________ 2. Proposal to approve the appointment of Deloitte & Touche as the independent public accountants of the Company. For _______ Against _______ Abstain ______ 3. In their descretion, Proxies are authorized to vote upon such other business as may properly come before the meeting or any adjournment thereof. For _______ Against _______ Abstain ______ 23 This Proxy, when properly executed, will be voted in accordance with the specific indication above, IN THE ABSENCE OF SUCH INDICATION, THIS PROXY WILL BE VOTED "FOR" THE NOMINEES LISTED IN PROPOSAL 1, and ''FOR'' PROPOSAL 2. If any other matters shall properly come before the meeting, it is the intention of the persons named as proxy holders to vote on such matters in accordance with their judgment. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND MAY BE REVOKED PRIOR TO ITS EXERCISE. DATED: _____________________ 1994 Signature _______________________ Signature _______________________ When signing as attorney, executor, trustee, or guardian, please give full title. If more than one trustee, all should sign. All joint owners must sign. Number of shares: _________________ IF YOU PLAN TO ATTEND THE MEETING, PLEASE PLACE A CHECK MARK HERE ____________. WHETHER OR NOT YOU PLAN TO ATTEND, PLEASE SIGN AND RETURN AT ONCE. 24 Index to Exhibits Exhibit 13 -- Form of Annual Report for Hancock Holding Company for the period ended December 31, 1993. EX-13 2 HANCOCK HOLDING COMPANY ANNUAL REPORT 1 TABLE OF CONTENTS TO OUR STOCKHOLDERS 3 FINANCIAL HIGHLIGHTS 5 DESCRIPTION OF BUSINESS 6 CONSOLIDATED SUMMARY OF 7 SELECTED FINANCIAL INFORMATION OUTDOOR RECREATION SECTION 8 CONSOLIDATED BALANCE SHEETS 18 CONSOLIDATED STATEMENTS 19 OF EARNINGS CONSOLIDATED STATEMENTS 20 OF STOCKHOLDERS' EQUITY CONSOLIDATED STATEMENTS 21 OF CASH FLOW NOTES TO CONSOLIDATED 22 FINANCIAL STATEMENTS INDEPENDENT AUDITOR'S REPORT 31 MANAGEMENT'S DISCUSSION AND 32 ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OFFICERS 34 GLOSSARY 36 2 TO OUR STOCKHOLDERS The twelve month period that ended December 31 saw America's commercial banking industry experience a most unusual year. In general, in spite of sluggish loan demand and a record flow of dollars from the public into the stock market and mutual funds, the vast majority of the nation's banks realized good earnings. For your Banks (Hancock of MS and Hancock of LA), 1993 was another very good year. Efforts on the part of the Officers and Staff to implement existing programs, as well as the introduction of several new products and services, resulted in the loan portfolio averaging 7 1/2% higher than the previous year, while deposits' average for the year was about 8 1/2% greater, and year-end total assets were in excess of $1.8 billion. Undoubtedly, you will be pleased with our after-tax earnings, which ended up a little over $22 million for $3.08 per share versus $2.74 for 1992. On the strength of these earnings, an extra fourth quarter dividend of 22 cents, in addition to the regular dividend, was paid, for a total of 90 cents per share for the year. It should be of further interest to you as shareholders to know that your equity is now in excess of $143 million, which provides a capital ratio of approximately 8%, exceeding most banks of similar size across the country. To improve our ability to serve the public, we opened a facility at the U.S. Navy Retirement Center in Mississippi City, relocated our Edgewater Branch at the request of Mall management, and also installed a second Automatic Teller Machine in a separate mall location. Throughout both service areas we replaced 50 of the older model ATM's and installed 13 new ones, including ones at the Waveland, D'Iberville and Navy CB Base Branches, plus built a free-standing unit in Harrison County at the intersection of Dedeaux and Three Rivers Roads north of I-10. We also made a significant investment in a new main-frame computer system, which provides us with the most up-to-date hardware and software for integrated data processing that is available in the market today. This new equipment should serve us into the 21st century, and has already enabled us to consolidate most of the Louisiana and Mississippi branches and customer service operations into one location, resulting in more efficiency and lower costs. Our wholly-owned Hancock Mortgage Corporation, specializing in long-term FHA, VA and conventional loans, experienced a very successful 3 3 beginning year in the Louisiana market. We are now looking forward to commencing long-term mortgage operations in Mississippi. Both of these functions should generate additional income for 1994. Loan-by-Phone was another innovation that began in 1993, whereby customers use their telephone to arrange a loan from 8 a.m. to 6 p.m. daily and 9 a.m. to noon on Saturdays, and then go to the nearest branch to close the loan. With the continued growth and expansion of our Louisiana operation, we were privileged to add two successful businessmen in the persons of J.B. Olinde, a Baton Rouge entrepreneur engaged in several business pursuits, and Jose R. "Rick" Tarajano, a highly regarded industrial contractor, to the Hancock Bank of Louisiana Board. Looking forward, unemployment is at its lowest level in a decade on the Mississippi Coast, construction, hotel/motel, automobile and casino businesses are enjoying considerable activity, and with the outlook for even further impact from increased Port tonnage, tourism and the gaming industry, we hope to have another good year in our Mississippi market. At the same time, indications are that the Greater Baton Rouge area expects 1994 to be similar to 1993, with about the same industrial outlook, but continued increased activity in real estate and residential construction; hence, we anticipate more progress in our Louisiana service area, too. As we enter the new year, we should report that plans are progressing rapidly to provide facilities where our customers may purchase mutual funds and other non-traditional bank investments throughout the Banks' branching system. Progress toward the merger announced in November with First State Bank of Baker, Louisiana, a successful, well established $80 million institution just north of Baton Rouge, is moving right along with applications now in the hands of the various regulatory authorities whose approval is required. Upon passage, it will provide us several additional geographical locations in the Louisiana market. While 1993, in nearly all respects, was one of the most notable in the Bank's long history, it was not without its sadder moments as we witnessed the passing of Vertis Ramsay, Pascagoula, and Dr. C.D. Taylor, Pass Christian, two of our long-time, very capable Directors, as well as Yvonne Dedeaux, one of our Officers who managed our Central Information Department. As we enter our 95th year in the banking business, our Directors, Officers and Staff thank you for the opportunity to serve you and appreciate the confidence you evidence in us through your stock ownership and your referrals of business. We also pledge to you our continuing efforts to move the institution forward in a manner that we trust you will find favorable and to your liking, as well as continue to embody our creed and reputation for an institution that is known for its STRENGTH, STABILITY & INTEGRITY. /s/ J.F. BOARDMAN, JR. 4 J.F. Boardman, Jr. Chairman /s/ GEORGE A. SCHLOEGEL George A. Schloegel Vice Chairman /s/ LEO W. SEAL, JR. Leo W. Seal, Jr. President and CEO 4 HANCOCK HOLDING COMPANY AND SUBSIDIARIES FINANCIAL HIGHLIGHTS Amounts in thousands (except per share data)
1993 1992 % CHANGE ------------ ------------ ----------- EARNINGS STATEMENT DATA: Net interest income $ 77,904 $ 74,325 4.8 Provision for loan losses 4,231 7,655 (44.7) Earnings before income taxes 31,786 25,861 22.9 Net earnings 22,116 19,211 15.1 PER SHARE DATA: Net earnings $ 3.15 $ 2.74 15.0 Cash dividends paid 0.90 0.68 32.4 Book value (period end) 20.48 18.25 12.2 Weighted average shares outstanding 7,023 7,023 0.0 Shares outstanding 12/31 7,023 7,023 0.0 BALANCE SHEET DATA (PERIOD END): Securities $ 729,180 $ 721,361 10.8 Net loans 871,809 776,101 12.3 Reserve for loan losses 14,028 13,275 5.7 Total assets 1,821,050 1,735,192 4.9 Total deposits 1,615,595 1,550,844 4.2 Long-term debt and capital notes 4,300 5,115 (15.9) Total stockholders' equity 143,826 128,170 12.2 BALANCE SHEET DATA (AVERAGE FOR THE YEAR): Securities $ 748,711 $ 688,213 8.8 Net loans 783,773 731,048 7.2 Reserve for loan losses 14,302 12,322 16.1 Total assets 1,788,720 1,658,918 7.8 Total deposits 1,598,280 1,473,994 8.4 Long-term debt and capital notes 4,979 5,275 (5.6) Total stockholders' equity 137,536 121,267 13.4 PERFORMANCE RATIOS: Return on average assets 1.24 1.16 6.9 Return on average stockholders' equity 16.08 15.84 15.2 Reserve for loan losses to average net loans 1.82 1.68 8.3 Reserve for loan losses to nonperforming loans 264.33 220.88 19.8 Net charge-offs to average net loans 0.64 0.80 (20.0) Net interest margin 4.87 5.09 (4.3)
REQUIRED MINIMUM ---------------- CAPTIAL RATIOS (%): Primary capital 7.90 7.74 -- Tier 1 leverage 7.62 7.03 4% - 5% Tier 1 risk-based 14.49 14.09 4% Total risk-based 15.42 15.62 8%
5 5 HANCOCK HOLDING COMPANY AND SUBSIDIARIES DESCRIPTION OF BUSINESS Hancock Holding Company (the "Company") is a bank holding company headquartered in Gulfport, Mississippi with total consolidated assets of approximately $1.8 billion at December 31, 1993. The Company operates a total of 54 banking offices and 80 automated teller machines ("ATMs") (34 of which are free-standing) in the states of Mississippi and Louisiana through two wholly-owned bank subsidiaries, Hancock Bank, Gulfport, Mississippi and Hancock Bank of Louisiana, Baton Rouge, Louisiana. The Banks are community oriented and focus primarily on offering commercial, consumer and mortgage loans and deposit services to individuals and small to middle market businesses in their respective market areas. The Company's operating strategy is to provide its customers with the financial sophistication and breadth of products of a regional bank, while successfully retaining the local appeal and level of service of a community bank. SUMMARY OF QUARTERLY OPERATING RESULTS
1993 1992 --------------------------------------------- ------------------------------------------ FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH --------- --------- --------- --------- --------- --------- --------- --------- (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) Net interest income $ 19,798 $ 19,905 $ 19,225 $ 18,976 $ 17,040 $ 18,111 $ 18,812 $ 20,362 Provision for loan losses 1,530 1,326 197 1,178 1,500 1,922 2,041 2,192 Earnings before income taxes 8,554 8,254 8,477 6,501 5,859 5,630 6,961 7,411 Net earnings 5,923 5,755 5,808 4,630 4,434 4,230 4,842 5,705 Net earnings per share 0.84 0.82 0.83 0.66 0.63 0.60 0.69 0.82
MARKET INFORMATION The Company's Common Stock trades on the NASDAQ National Market System under the symbol "HBHC" and is listed in the newspaper under NASDAQ market quotations under "HancHd." The following table sets forth the high and low last sale prices of the Company's Common Stock as reported on the NASDAQ National Market System. These prices do not reflect retail mark-ups, mark-downs or commissions.
HIGH BID LOW BID CASH OR LAST OR LAST DIVIDENDS SALE PRICE SALE PRICE PAID ---------- ---------- --------- 1992 1st Quarter $22.75 $19.75 $0.15 2nd Quarter $25.00 $20.50 $0.15 3rd Quarter $27.75 $24.75 $0.15 4th Quarter $30.75 $24.75 $0.23 1993 1st Quarter $28.75 $28.25 $0.17 2nd Quarter $35.00 $30.50 $0.17 3rd Quarter $32.75 $28.75 $0.17 4th Quarter $34.50 $32.00 $0.39
On January 14, 1994, the high and low last sale prices of the Company's common stock as reported on the NASDAQ National Market System were $33.00 and $31.75, respectively. The principal source of funds to the Company to pay cash dividends are the earnings of the Bank subsidiaries. Consequently, dividends are dependent upon earnings, capital needs, regulatory policies and other policies affecting the Banks. For example, federal and state banking laws and regulations restrict the amount of dividends and loans a bank may make to its parent company. Dividends paid to the Company by Hancock Bank are subject to approval by the Commissioner of Banking and Consumer Finance of the State of Mississippi. The Company's management does not expect regulatory restrictions to affect its policy of paying cash dividends, although no assurance can be given that Hancock Holding Company will continue to declare and pay regular quarterly cash dividends on its common stock. However, since 1937, the Company or its predecessor has paid regular cash dividends without interruption. 6 6 HANCOCK HOLDING COMPANY AND SUBSIDIARIES CONSOLIDATED SUMMARY OF SELECTED FINANCIAL INFORMATION Amounts In Thousands (except for share and per share data)
YEARS ENDED DECEMBER 31, ------------------------------------------------------------------ 1993 1992 1991 1990 1989 ---------- ---------- ---------- ---------- ---------- INTEREST INCOME: Interest and Fees on Loans $ 74,209 $ 73,941 $ 77,299 $ 62,256 $ 48,782 Income on Federal Funds Sold 3,075 3,124 5,983 6,129 1,618 Interest and Dividends on Investments 45,897 49,562 41,471 33,633 30,296 ---------- ---------- ---------- ---------- ---------- TOTAL INTEREST INCOME 123,181 126,627 124,753 102,018 80,696 INTEREST EXPENSE: Interest on Deposits 43,833 50,327 63,239 57,606 47,931 Interest on Federal Funds Purchased 1,021 1,408 3,366 3,671 1,304 Interest on Bonds and Notes 423 567 2,141 1,382 596 ---------- ---------- ---------- ---------- ---------- TOTAL INTEREST EXPENSE 45,277 52,302 68,746 62,659 49,831 NET INTEREST INCOME 77,904 74,325 56,007 39,359 30,865 Provision for Loan Losses 4,231 7,655 4,686 2,939 3,355 ---------- ---------- ---------- ---------- ---------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 73,673 66,670 51,321 36,420 27,510 Other Income 19,768 19,480 19,950 13,064 10,798 Other Expenses 61,655 60,289 54,883 40,023 31,918 ---------- ---------- ---------- ---------- ---------- Earnings before Income Taxes (Credit) 31,786 25,861 16,388 9,461 6,390 Income Taxes (Credit) 9,670 6,650 4,000 1,490 (250) ---------- ---------- ---------- ---------- ---------- NET EARNINGS $ 22,116 $ 19,211 $ 12,388 $ 7,971 $ 6,640 ========== ========== ========== ========== ========== PER COMMON SHARE: Net Earnings $ 3.15 $ 2.74 $ 2.21 $ 1.46 $ 1.21 Cash Dividends 0.90 0.68 0.60 0.57 0.55 Stock Splits and Dividends 2 for 1 Weighted Average Number of Shares 7,023,000 7,023,000 5,595,000 5,466,000 5,466,000 RETURN ON AVERAGE ASSETS 1.24% 1.16% 0.84% 0.69% 0.72% BALANCE SHEET DATA DECEMBER 31: Total Assets $1,821,050 1,735,192 1,554,536 $1,405,002 $ 980,604 Total Deposits 1,615,595 1,550,844 1,367,792 1,220,934 824,489 Total Long-Term Debt and Capital Notes 4,300 5,115 6,880 25,350 7,275 Stockholders' Equity 143,826 128,170 113,840 80,252 75,516
On June 4, 1990, the Company acquired Metropolitan National Bank (MNB), pursuant to a merger of MNB into Hancock Bank. On August 2, 1990, a newly-created subsidiary of the Company, Hancock Bank of Louisiana, acquired certain assets and deposit liabilities of American Bank & Trust Company (AMBANK), Baton Rouge, Louisiana, a failed institution. On August 9, 1991, Hancock Bank acquired certain assets and assumed the deposit liabilities of Peoples Federal Savings Association (PEOPLES). These acquisitions have been accounted for as purchases and the results of operations since the dates of acquisition have been included in the consolidated statements of earnings. 7 7 HANCOCK HOLDING COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
DECEMBER 31, --------------------------------------- 1993 1992 --------------- --------------- ASSETS: Cash and due from banks (non-interest bearing) $ 90,544,403 $ 99,472,480 Interest bearing time deposits with other banks 1,875,001 4,875,001 Securities held for sale - (market value of $28,836,000) 28,244,000 -- Investment Securities - (market value of $714,754,000 and $737,557,000) 700,935,962 721,360,933 Federal funds sold and securities purchased under agreements to resell 85,500,000 79,000,000 Loans 885,837,920 797,660,419 Less: Reserve for loan losses (14,028,158) (13,275,161) Unearned income (25,710,324) (21,559,200) --------------- --------------- Loans, Net 846,099,438 762,826,058 Property and equipment 34,997,577 35,113,998 Other real estate 654,459 1,327,370 Accrued interest receivable 13,799,949 15,289,306 Other assets 18,399,564 15,927,075 --------------- --------------- TOTAL ASSETS $ 1,821,050,353 $ 1,735,192,221 =============== =============== LIABILITIES AND STOCKHOLDERS' EQUITY: Deposits: Non-interest bearing demand $ 346,307,348 $ 318,946,144 Interest bearing savings, NOW, money market and other time 1,269,287,887 1,231,898,250 --------------- --------------- Total Deposits 1,615,595,235 1,550,844,394 Federal funds purchased and securities sold under agreements to repurchase 45,798,931 36,390,981 Other liabilities 11,529,912 14,671,698 Capital notes 480,000 480,000 Long-term bonds and notes 3,820,000 4,635,000 --------------- --------------- TOTAL LIABILITIES 1,677,224,078 1,607,022,073 COMMITMENTS AND CONTINGENCIES -- -- STOCKHOLDERS' EQUITY: Common stock - $3.33 par value per share; authorized 20,000,000 shares authorized, 7,177,966 shares issued and outstanding 23,902,625 23,902,625 Capital surplus 95,130,500 81,130,500 Undivided profits 24,793,150 23,137,023 --------------- --------------- TOTAL STOCKHOLDERS' EQUITY 143,826,275 128,170,148 --------------- --------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,821,050,353 $ 1,735,192,221 =============== ===============
See notes to consolidated financial statements. 18 8 HANCOCK HOLDING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 31, -------------------------------------------- 1993 1992 1991 ---- ---- ---- INTEREST INCOME: Interest and fees on loans $ 74,209,279 $ 73,940,807 $ 77,298,426 Interest on: U.S. Treasury Securities 16,056,255 19,749,117 21,740,052 Obligations of other U.S. Government agencies and corporations 21,919,860 20,824,658 12,740,689 Obligations of states and political subdivisions 3,120,480 4,059,923 4,720,853 Interest on federal funds sold and securities purchased under agreements to resell 3,075,363 3,123,807 5,982,690 Interest on time deposits and other 4,800,246 4,928,531 2,269,985 ------------- ------------- ------------- Total interest income 123,181,483 126,626,843 124,752,695 ------------- ------------- ------------- INTEREST EXPENSE: Interest on deposits 43,832,977 50,326,792 63,239,175 Interest on federal funds purchased and securities sold under agreements to repurchase 1,021,161 1,407,842 3,366,423 Interest on bonds and notes 423,666 566,861 2,140,378 ------------- ------------- ------------- Total interest expense 45,277,804 52,301,495 68,745,976 ------------- ------------- ------------- NET INTEREST INCOME 77,903,679 74,325,348 56,006,719 Provision for loan losses 4,230,983 7,654,996 4,686,138 ------------- ------------- ------------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 73,672,696 66,670,352 51,320,581 ------------- ------------- ------------- NON-INTEREST INCOME: Service charges on deposit accounts 10,448,854 10,731,508 8,872,375 Other service charges, commissions and fees 5,682,187 4,999,283 5,089,838 Securities gains 216,983 632,580 1,236,838 Other 3,420,243 3,116,494 4,751,365 ------------- ------------- ------------- Total non-interest income 19,768,267 19,479,865 19,950,416 ------------- ------------- ------------- NON-INTEREST EXPENSE: Salaries and employee benefits 30,623,211 28,528,492 25,773,437 Net occupancy expense of premises 3,020,522 3,358,815 3,417,415 Equipment rentals, depreciation and maintenance 6,471,618 6,765,037 5,988,228 Other 21,539,314 21,636,418 19,703,450 ------------- ------------- ------------- Total non-interest expense 61,654,665 60,288,762 54,882,530 ------------- ------------- ------------- EARNINGS BEFORE INCOME TAXES 31,786,298 25,861,455 16,388,467 INCOME TAXES 9,670,000 6,650,000 4,000,000 ------------- ------------- ------------- NET EARNINGS $ 22,116,298 $ 19,211,455 $ 12,388,467 ============= ============= ============= NET EARNINGS PER COMMON SHARE $ 3.15 $ 2.74 $ 2.21 ============= ============= =============
See notes to consolidated financial statements. 19 9 HANCOCK HOLDING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
COMMON STOCK --------------------------- SHARES CAPITAL UNDIVIDED ISSUED AMOUNT SURPLUS PROFITS ------ ------ ------- -------- BALANCE, JANUARY 1, 1991 5,625,466 $ 18,732,800 $ 46,633,600 $ 14,885,637 Net earnings 12,388,467 Cash dividends - $.60 per share (3,467,521) Sale of common stock 1,552,500 5,169,825 19,496,900 Transfer from undivided profits 2,000,000 (2,000,000) --------- ------------- ------------- ------------- BALANCE, DECEMBER 31, 1991 7,177,966 23,902,625 68,130,500 21,806,583 Net earnings 19,211,455 Cash dividends - $.68 per share (4,881,015) Transfer from undivided profits 13,000,000 (13,000,000) --------- ------------- ------------- ------------- BALANCE, DECEMBER 31, 1992 7,177,966 23,902,625 81,130,500 23,137,023 Net earnings 22,116,298 Cash dividends - $.90 per share (6,460,171) Transfer from undivided profits 14,000,000 (14,000,000) --------- ------------- ------------- ------------- BALANCE, DECEMBER 31, 1993 7,177,966 $ 23,902,625 $ 95,130,500 $ 24,793,150 ========= ============= ============= =============
See notes to consolidated financial statements. 20 10 HANCOCK HOLDING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, --------------------------------------------------------- 1993 1992 1991 ---------- ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Earnings $ 22,116,298 $ 19,211,455 $ 12,388,467 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation 3,794,739 3,883,980 3,685,098 Provision for loan losses 4,230,983 7,654,996 4,686,138 Provision for losses on other real estate owned 157,996 652,984 229,328 Deferred income taxes (credit) 70,000 (350,000) 400,000 Gain on sales of securities (216,983) (632,580) (1,236,838) Decrease (increase) in interest receivable 1,489,357 1,488,003 (2,252,547) Amortization of intangibles assets 1,513,500 1,655,700 1,832,309 Decrease in interest payable (362,639) (1,587,662) (1,136,000) Other - net (6,835,136) 4,987,219 2,885,681 ------------- ------------- -------------- Net cash provided by Operating Activities 25,958,115 36,964,095 21,481,636 ------------- ------------- -------------- Cash Flows from Investing Activities: Net (increase) decrease in interest bearing time deposits (10,474,873) (4,000,001) 6,618,400 Proceeds from maturities of securities 236,153,527 319,389,207 252,505,536 Proceeds from sales of securities 9,014,692 65,448,000 59,767,000 Purchase of securities (249,770,265) (499,981,819) (483,082,491) Net (increase) decrease in federal funds sold and securities sold under agreements to repurchase (6,500,000) (22,600,000) 76,750,000 Net increase in loans (87,289,448) (32,596,069) (35,486,804) Purchase of loans (7,800,000) Purchase of property and equipment, net (3,678,318) (2,899,725) (3,550,353) Proceeds from sale of other real estate 300,000 500,000 400,000 Net cash received in connection with acquisitions -- -- 23,263,345 ------------- ------------- -------------- Net cash used in Investing Activities (112,244,685) (176,740,407) (110,615,367) ------------- ------------- -------------- CASH FLOWS FROM FINANCING ACTIVITIES: Net increase in deposits 75,225,714 183,052,144 107,834,305 Dividends paid (6,460,171) (4,881,015) (3,467,521) Repayments of long-term bonds and notes (815,000) (1,765,000) (18,470,000) Sale of common stock -- -- 24,666,725 Net increase (decrease) in federal funds purchased, securities sold under agreements to repurchase and other temporary funds 9,407,950 (17,116,796) (10,181,427) ------------- ------------- -------------- Net cash provided by Financing Activities 77,358,493 159,289,333 100,382,082 NET (DECREASE) INCREASE IN CASH AND DUE FROM BANKS (8,928,077) 19,513,021 11,248,351 CASH AND DUE FROM BANKS, BEGINNING 99,472,480 79,959,459 68,711,108 ------------- ------------- -------------- CASH AND DUE FROM BANKS, ENDING $ 90,544,403 $ 99,472,480 $ 79,959,459 ============= ============= ==============
See notes to consolidated financial statements. 21 11 HANCOCK HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES THE CONSOLIDATED FINANCIAL STATEMENTS include the accounts of the Hancock Holding Company (Company), its wholly-owned banks, Hancock Bank (Mississippi) and Hancock Bank of Louisiana and other subsidiaries. Intercompany profits, transactions and balances have been eliminated in consolidation. INTEREST on commercial and real estate mortgage loans is recorded as income daily based upon the principal amount outstanding. Unearned income on installment loans is credited to operations based on a method which approximates the interest method. Where doubt exists as to collectibility of a loan, the accrual of interest is terminated and payments received are applied first to principal. Interest income is recorded after principal has been satisfied and as payments are received. INVESTMENT SECURITIES are carried at net amortized cost. The Company carries these investments at amortized cost because it has the ability and intent to hold them to maturity. Securities held for sale are carried at the lower of net amortized cost or market value. These securities are generally acquired with the intent to hold them to maturity but may be sold under certain circumstances. Gains and losses on the sales of securities are computed on the specific identification method. The related income tax provisions on securities gains were $75,000 in 1993, $215,000 in 1992, $420,000 in 1991. PROPERTY AND EQUIPMENT are recorded at cost. Depreciation is computed principally by the straight-line method based on the estimated useful lives of the related assets. Leasehold improvements are amortized over the shorter of the term of the lease or the asset's useful life. INTANGIBLE ASSETS, which include the values assigned to the core deposits of acquired banks, are being amortized over lives ranging from six to seven years using accelerated methods and goodwill which is being amortized over fifteen years using an accelerated method. OTHER REAL ESTATE acquired through foreclosure and bank acquisitions is stated at the lower of cost or fair market value, net of the costs of disposal. When a reduction to fair market value is required it is charged to the reserve for loan losses at the time of foreclosure and any subsequent adjustments are charged to expense. Transfers from loans to other real estate amounted to approximately $780,000, $1,900,000 and $3,400,000 in 1993, 1992 and 1991, respectively. Loans made in connection with the sale of other real estate amounted to approximately $1,200,000, $2,200,000 and $2,700,000 in 1993, 1992 and 1991, respectively. LONG-TERM BOND ISSUANCE COSTS are being amortized over the term of the bonds. TRUST FEES are recorded when received which is the general practice within the banking industry. INCOME TAXES are accounted for using the liability method beginning in 1993. In prior years income taxes were accounted for using the deferred method and alternative minimum tax credits were utilized to reduce income taxes in the year allowed. THE RESERVE FOR LOAN LOSSES is a valuation reserve available for losses incurred on loans. All losses are charged to the reserve for loan losses when the loss actually occurs or when a determination is made that a loss is likely to occur. Recoveries are credited to the reserve at the time of recovery. Periodically during the year management estimates the likely level of future losses to determine whether the reserve for loan losses is adequate to absorb reasonably anticipated losses in the existing portfolio based upon management#s knowledge of the loan portfolio and current and expected economic conditions. Based on these estimates, an amount is charged to the provision for loan losses and credited to the reserve for loan losses in order to adjust the reserve to a level determined to be adequate to absorb future losses. CASH AND CASH equivalents have been defined as those amounts included in the balance sheet caption "Cash and due from banks." 22 12 B. ACQUISITION On August 9, 1991, Hancock Bank acquired certain assets and assumed the deposit liabilities of Peoples Federal Savings Association (PEOPLES), a failed savings institution in Bay St. Louis, Mississippi. The acquisition of the PEOPLES assets and liabilities has been accounted for as a purchase and the results of operations since August 9, 1991 are included in the consolidated statements of earnings. The premium paid and the amount of intangible assets acquired were not significant. PEOPLES has been merged into Hancock Bank. In connection with the acquisition, liabilities were assumed as follows (in thousands): Fair value of tangible and intangible assets, excluding cash $ 15,737 Cash acquired, net of amount paid 23,263 --------- Liabilities assumed $ 39,000 =========
C. SECURITIES HELD FOR SALE AND INVESTMENT SECURITIES The book and market values of securities held for sale were as follows (in thousands):
DECEMBER 31, 1993 ------------------------------------------------------- GROSS GROSS BOOK UNREALIZED UNREALIZED MARKET VALUE GAINS LOSSES VALUE ----- ---------- ---------- ------ CMO's $ 27,314 $ 791 $ 209 $ 27,896 Municipal obligations 930 10 -- 940 --------- ------- ------- ---------- $ 28,244 $ 801 $ 209 $ 28,836 ========= ======= ======= ==========
The book value and market value of the securities held for sale at December 31, 1993, by estimated maturity, were as follows (in thousands):
BOOK VALUE MARKET VALUE ---------- ------------ Due in one year or less $ 4,001 $ 4,001 Due after one year through five years 19,616 19,642 Due after five years through ten years 4,627 5,193 --------- --------- $ 28,244 $ 28,836 ========= =========
The book and market values of the investment securities were as follows (in thousands):
DECEMBER 31, 1993 DECEMBER 31, 1992 -------------------------------------------- ---------------------------------------------- GROSS GROSS GROSS GROSS BOOK UNREALIZED UNREALIZED MARKET BOOK UNREALIZED UNREALIZED MARKET VALUE GAINS LOSSES VALUE VALUE GAINS LOSSES VALUE ----- ---------- ---------- ------ ----- ---------- ---------- ------ U.S.Treasury Securities $ 279,461 $ 6,048 $ 104 $ 285,405 $ 249,087 $ 6,452 $ 29 $ 255,510 Other U.S. Gov. obligations 192,400 4,526 346 196,580 215,550 4,243 473 219,320 Municipal obligations 35,383 3,272 459 38,196 45,467 3,615 512 48,570 Other securities 13,316 3 76 13,243 11,278 125 356 11,047 Mortgage-backed securities 93,205 1,639 2,583 92,261 62,563 2,575 672 64,466 CMO's 87,171 2,148 250 89,069 137,416 1,858 630 138,644 --------- -------- -------- --------- --------- -------- ------- ---------- $ 700,936 $ 17,636 $ 3,818 $ 714,754 $ 721,361 $ 18,868 $ 2,672 $ 737,557 ========= ======== ======== ========= ========= ======== ======= ==========
The book value and market value of investment securities at December 31, 1993, by contractual maturity, were as follows (in thousands):
BOOK VALUE MARKET VALUE ---------- ------------ Due in one year or less $ 257,587 $ 263,803 Due after one year through five years 240,880 242,774 Due after five years through ten years 93,495 95,034 Due after ten years 108,974 113,143 ----------- ----------- $ 700,936 $ 714,754 =========== ===========
23 13 Proceeds from sales of securities were $9,015,000 in 1993, $65,448,000 in 1992 and $59,767,000 in 1991. Gross gains of $244,000 in 1993, $654,000 in 1992 and $1,264,000 in 1991 and gross losses of $27,000 in 1993, $21,000 in 1992 and $27,000 in 1991 were realized on those sales. At December 31, 1993, the Company reclassified securities with a book value of $28,244,000 from investment securities to securities held-for-sale. Securities with a book value of approximately $335,000,000 at December 31, 1993, and $300,000,000 at December 31, 1992, were pledged to secure public deposits, securities sold under agreements to repurchase, and for other purposes as required or permitted by law. The Company's collateralized mortgage obligations (CMO's) generally consist of first and second tranche sequential pay and/or planned amortization class (PAC) instruments. Interest income on CMO's and mortgage-backed securities is generally included with interest on obligations of other U.S. Government agencies and corporations due to their guarantees of underlying mortgages. The Financial Accounting Standards Board has issued Statement of Financial Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities which is effective in 1994. This Statement requires securities to be classified into one of three reporting categories (held-to-maturity, available-for-sale, or trading). Securities classified as held-to-maturity are carried at amortized cost.Those classified as available-for-sale are carried at market value with the unrealized gain or loss (net of income tax effect) reflected as a component of stockholder's equity. Those classified as trading are carried at market value with the unrealized gain or loss reflected in the statement of earnings. The Company has not yet completed its review of Statement No. 115 relative to its securities portfolio but does not believe that the adoption of the Statement will have a material effect on its financial statements. D. LOANS Loans consisted of the following (in thousands):
DECEMBER 31, --------------------- 1993 1992 ---- ---- Real estate loans - primarily mortgage $ 336,597 $ 320,673 Commercial and industrial loans 149,544 146,426 Loans to individuals for household, family and other consumer expenditures 380,682 311,184 Leases 6,673 6,079 Other loans 12,342 13,298 ---------- ---------- $ 885,838 $ 797,660 ========== ==========
Changes in the reserve for loan losses are as follows (in thousands):
1993 1992 1991 ---- ---- ---- Balance at January 1 $ 13,275 $ 11,492 $ 11,689 Recoveries 1,551 1,034 896 Loans charged off (5,029) (6,906) (5,779) Provision charged to operating expense 4,231 7,655 4,686 --------- --------- ---------- Balance at December 31 $ 14,028 $ 13,275 $ 11,492 ========= ========= ==========
The Company generally makes loans in its market areas of South Mississippi and East Baton Rouge Parish, Louisiana. Loans are made in the normal course of business to its directors and executive officers, and their associates on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons. Such loans did not involve more than normal risk of collectibility or contain other unfavorable features. The balance of loans to related parties at December 31, 1993, was approximately $5,000,000. Nonaccrual and renegotiated loans amounted to approximately 1% of total loans at December 31, 1993 and 1992. The amount of interest not accrued on these loans did not have a significant effect on earnings in 1993, 1992 or 1991. The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 114, Accounting by Creditors for Impairment of Certain Loans, which requires the present value of expected future cash flows of impaired loans be discounted at the loan's effective interest rate. The Company does not anticipate that the adoption of this Statement in 1995 will have a significant effect on its financial condition or results of operations. 24 14 E. PROPERTY AND EQUIPMENT Property and equipment are stated at cost less accumulated depreciation and amortization as follows (in thousands):
DECEMBER 31, -------------------- 1993 1992 ---- ---- Land, buildings and leasehold improvements $ 35,522 $ 36,531 Furniture, fixtures and equipment 29,414 25,367 ---------- ---------- 64,936 61,898 Less accumulated depreciation and amortization (29,938) (26,784) ---------- ---------- $ 34,998 $ 35,114 ========== ==========
F. CAPITAL NOTES The capital notes issued by Hancock Bank are 5% term notes due December 31,1994. These capital notes are subordinated to the claims of the depositors and other creditors of the Bank. There are no restrictive provisions of the capital note agreement. G. LONG-TERM BONDS Long-term bonds consist of Urban Development Refunding Revenue Bonds, with interest at 7% to 7.25%. Interest is payable semi-annually with principal payable annually in installments ranging from $865,000 due November 1, 1994 to $1,050,000 due November 1, 1997. Principal payments are payable as follows (in thousands): 1994 $ 865 1995 920 1996 985 1997 1,050 -------- $ 3,820 ========
The Urban Development Refunding Revenue Bonds are obligations of Hancock Bank and are collateralized by land and buildings with a book value of $12,000,000. The Bank has deposited with the bond trustee U.S. Treasury securities whose principal maturities and interest payments will be sufficient to service all future principal and interest payments due on the Urban Development Refunding Revenue Bonds. H. STOCKHOLDERS' EQUITY On October 15, 1991, the Company's Board of Directors approved a two-for-one split in the form of a 100% stock dividend paid on November 4, 1991. On the same date the Company's stockholders approved an increase in the number of authorized shares to 20,000,000. The "Consolidated Statement of Stockholders' Equity" has been restated to give retroactive effect to this split. On November 28, 1991, the Company sold 1,552,500 shares of its common stock in a public offering at $17 per share. After underwriting discount and expenses, the Company realized net proceeds of approximately $24,700,000 from the stock sale. Earnings per common share is based on the weighted average number of shares outstanding of approximately 7,023,000 in 1993 and 1992, and 5,595,000 in 1991, after giving retroactive effect to the two-for-one stock split, reduced by shares of stock owned by subsidiaries. At December 31, 1993 these subsidiaries owned 154,000 shares of stock. Stockholders' equity of the Company includes the undistributed earnings of the subsidiary Banks. Dividends are payable only out of undivided profits or current earnings. Moreover, dividends to the Company's stockholders can generally be paid only from dividends paid to the Company by the Banks which, with respect to Hancock Bank are subject to approval by the Commissioner of Banking and Consumer Finance of the State of Mississippi. The amount of retained earnings of the subsidiary banks available for dividends at December 31, 1993 was approximately $50,000,000. The Company and its Bank subsidiaries are required to maintain certain minimum capital levels. At December 31, 1993, the Company and the Banks were in compliance with their respective statutory minimum capital requirements. Following is a summary of the minimum required consolidated capital levels and the actual amounts at December 31, 1993:
REQUIRED MINIMUM ACTUAL ---------------- ------ Tier 1 leverage 4% - 5% 8% Tier 1 Risk-based 4% 14% Total Risk-based 8% 15%
25 15 I. INCOME TAXES Effective January 1, 1993, the Company changed its method of accounting for income taxes from the deferred method to the liability method as required by Statement of Financial Accounting Standard No. 109. Prior years have not been restated. The cumulative effect of this accounting change did not have a significant effect on the Company's financial statements and was recorded in income tax expense in the year ended December 31, 1993. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities as of December 31, 1993 are as follows (in thousands): Deferred tax assets: Postretirement benefit obligation $ 279 Reserve for loan losses not currently deductible 4,122 Reserve for other real estate not currently deductible 342 Deferred compensation 521 Lease accounting 522 Other 47 -------- 5,833 -------- Deferred tax liabilities: Tax over book depreciation (3,113) Core deposit intangible (2,365) Prepaid pension (154) Market discount accretion (331) -------- (5,963) -------- Net deferred tax liability $ (130) ========
Income taxes consists of the following components (in thousands):
1993 1992 1991 ---- ---- ---- Currently payable $ 9,600 $ 7,000 $ 3,600 Deferred 70 (350) 400 --------- --------- --------- $ 9,670 $ 6,650 $ 4,000 ========= ========= =========
Deferred income taxes resulted from the following (in thousands):
1992 1991 ---- ---- Accelerated depreciation $ 100 $ 500 Provision for loan losses (800) (800) AMT credit restoration (100) 200 Other - net 450 500 ------- ------- $ (350) $ 400 ======= =======
26 16 Income taxes amounted to less than the amounts computed by applying the U.S. Federal income tax rate of 35% in 1993 and 34% in 1992 and 1991 to earnings before income taxes. The reasons for these differences are as follows (in thousands):
1993 1992 1991 -------------- -------------- -------------- AMOUNT % AMOUNT % AMOUNT % ------ --- ------ --- ------ --- Taxes computed at statutory rate $ 11,125 35 $ 8,790 34 $ 5,572 34 Increases (decreases) in taxes resulting from: Tax exempt interest income (1,200) (4) (1,600) (6) (1,884) (12) Alternative minimum tax -- (980) (4) (100) (1) Miscellaneous items - net (255) (1) 440 2 412 3 --------- -- --------- -- --------- --- Income tax expense $ 9,670 30 $ 6,650 26 $ 4,000 24 ========= == ========= == ========= ==
The Tax Reform Act of 1986 generally became effective with respect to the Company in 1987. The Act provides for an alternative minimum tax (AMT) which decreased the tax otherwise payable by the Company by $1,000,000 in 1992 and $500,000 in 1991. J. EMPLOYEE BENEFIT PLANS The Company has a non-contributory pension plan covering substantially all salaried full-time employees who have been employed by the Company the required length of time. The Company's current policy is to contribute annually the minimum amount that can be deducted for federal income tax purposes. The benefits are based upon years of service and employee's compensation during the last five years of employment. Data relative to the pension plan follows (in thousands):
DECEMBER 31, ------------------------ 1993 1992 ---- ---- Actuarial present value of benefit obligations: Vested benefit obligation $ 16,403 $ 14,179 ========== ========== Accumulated benefit obligation $ 16,471 $ 14,240 ========== ========== Projected benefit obligation for service rendered to date $ (19,246) $ (17,449) Plan assets at fair value 17,465 15,964 ---------- ---------- Projected benefit obligation in excess of plan assets (1,781) (1,485) Remaining unrecognized portion of net obligation being amortized over 15 years 366 411 Unrecognized prior service cost 1,026 1,118 Unrecognized net loss from past experience different from that assumed 2,207 1,518 ---------- ---------- Prepaid pension cost included in other assets $ 1,818 $ 1,562 ========== ==========
1993 1992 1991 ---- ---- ---- Net pension expense included the following (income) expense components: Service cost - benefits earned during the period $ 698 $ 757 $ 464 Interest cost on projected benefit obligation 1,369 1,218 1,052 Return on plan assets (1,158) (1,454) (1,504) Net amortization and deferral (89) 235 336 --------- --------- --------- Net pension expense $ 820 $ 756 $ 348 ========= ========= =========
The discount rate and rate of increase in future compensation levels used in determining the actuarial present value of the projected benefit obligation were 7.75% and 4%, respectively, in 1993 and 8% and 4% respectively, in 1992. The expected rate of return on plan assets was 8% in 1993 and 10% in 1992. The plan's assets consist primarily of U.S. government and agency obligations, certificates of deposit and other fixed income obligations. During 1992 the Company adopted Statement of Financial Accounting Standards No. 106, Employer's Accounting for Postretirement Benefits Other Than Pensions. This Statement requires accrual of postretirement benefits (such as health care benefits) during the years an employee provides services. The costs of these benefits were previously expensed on a pay-as-you-go basis. The adoption of this Statement decreased 1992 net earnings by $250,000 ($.04 per share). 27 17 The Company sponsors two defined benefit postretirement plans other than the pension plan that cover full time employees who have reached 45 years of age. One plan provides medical benefits and the other provides life insurance benefits. The postretirement health care plan is contributory, with retiree contributions adjusted annually and subject to certain employer contribution maximums; the life insurance plan in noncontributory.The actuarial and recorded liabilities for these postretirement benefits, none of which have been funded, are as follow at December 31, 1993, (in thousands):
1993 1992 ---- ---- Accumulated postretirement benefit obligations: Retirees $ 1,888 $ 1,378 Fully eligible active plan participants 826 792 Other active plan participants 1,161 993 --------- --------- 3,875 3,163 Unrecognized transition obligation (2,579) (2,770) Unrecognized net (loss) gain (499) -- --------- --------- Accrued postretirement benefit cost $ 797 $ 393 ========= =========
Net periodic postretirement benefit cost for 1993 and 1992 included the following components (in thousands):
1993 1992 ---- ---- Amortization of Unrecognized Net Gain $ (5) $ -- Service cost-benefits attributed to service during the year 162 165 Interest costs on accumulated postretirement benefit obligations 254 237 Amortization of transition obligation over 20 years 143 146 --------- --------- Net periodic postretirement benefit cost $ 554 548 ========= =========
For measurement purposes in 1993, a 12% annual rate of increase in the per capita cost of covered health care benefits was assumed for 1993. The rate was assumed to decrease gradually to 5.5% for 2006 and remain at that level thereafter. In 1992, rates of 12% and 6% were assumed. The health care cost trend rate assumption has an affect on the amounts reported. To illustrate, increasing the assumed health care cost trend rates by 1% in each year would increase the accumulated postretirement benefit obligation as of December 31, 1993 by $52,000 and the aggregate of the service and interest cost components of net periodic postretirement benefit cost for the year then ended by $6,000. The weighted average discount rate used in determining the accumulated postretirement benefit obligation was 7% in 1993 and 8.75% in 1992. The Company has a non-contributory profit sharing plan covering substantially all salaried full-time employees who have been employed the required length of time. Contributions are made at the discretion of the Board of Directors and amounted to $450,000 in 1993, $346,000 in 1992, and $117,000 in 1991. In addition, the Company has an employee stock purchase plan that is designed to provide the employees of the Company a convenient means of purchasing common stock of the Company. Substantially all salaried, full time employees , with the exception of Leo W. Seal, Jr., who have been employed by the Company the required length of time are eligible to participate if they so elect. The Company contributes an amount equal to 25% of each participant's contribution, which contribution cannot exceed 5% of his base pay. The Company's contribution amounted to $45,000 in 1993, $45,000 in 1992, and $37,000 in 1991. The postretirement plans relating to health care payments, life insurance and the stock purchase plan are not guaranteed and are subject to immediate cancellation and/or amendment. These plans are predicated on future Company profit levels that will justify their continuance. Overall health care costs are also a factor in the level of benefits provided and continuance of these postretirement plans. There are no vested rights under the postretirement health or life insurance plans. The Financial Accounting Standards Board has also issued Statement of Financial Accounting Standards No. 112, Employers' Accounting for Post Employment Benefits which requires the accrual of certain post employment benefits other than pension and health care. The Company does not anticipate that the adoption of this Statement in 1994 will have a significant effect on its financial condition or results of operations. K. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value: CASH, SHORT-TERM INVESTMENTS AND FEDERAL FUNDS SOLD -- For those short-term instruments, the carrying amount is a reasonable estimate of fair value. SECURITIES -- For securities, fair value equals quoted market price, if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities. 28 18 LOANS -- The fair value of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. DEPOSITS -- The fair value of demand deposits, savings accounts, and certain money market deposits is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities. LONG-TERM BONDS AND NOTES -- Rates currently available to the Company for debt with similar terms and remaining maturities are used to estimate fair value of existing debt. COMMITTMENTS -- The fair value of committments to extend credit was not significant. The estimated fair values of the Company's financial instruments are as follows at December 31, 1993 and 1992 (in thousands):
1993 1992 ---------------------- ---------------------- CARRYING FAIR CARRYING FAIR AMOUNT VALUE AMOUNT VALUE -------- ----- -------- ----- Financial assets: Cash, short-term investments and federal funds sold $ 177,919 $ 177,919 $ 183,347 $ 183,347 Securities held-for-sale 28,244 28,836 -- -- Investment securities 700,936 714,754 721,361 737,557 Loans 860,127 868,500 776,101 789,000 Less: reserve for loan losses (14,028) (14,028) (13,275) (13,275) ----------- ----------- ----------- ----------- Loans, net of reserve 846,099 854,472 762,826 775,725 Financial liabilities: Deposits 1,615,595 1,618,000 1,550,844 1,559,000 Federal Funds purchased, etc. 45,799 45,799 36,391 36,391 Long-term bonds and notes 4,300 4,600 5,115 5,600
L. COMMITMENTS AND CONTINGENCIES In the normal course of business, there are various commitments and contingent liabilities, such as commitments to extend credit and outstanding letters of credit, which are not reflected in the accompanying consolidated financial statements. Outstanding letters of credit amounted to approximately $7,000,000 at December 31, 1993, and $5,400,000 at December 31, 1992. No losses are anticipated as a result of these transactions. Commitments to extend credit amounted to approximately $200,000,000 at December 31, 1993 and $150,000,000 at December 31, 1992, and most are at variable rates. The agreements to extend credit generally include provisions which allow the Company to terminate its obligations under certain circumstances. The Bank is required to maintain certain reserves at the Federal Reserve Bank. This requirement approximated $40,000,000 and $37,000,000 at December 31, 1993 and 1992, respectively. M. SUPPLEMENTAL INFORMATION The following is selected supplemental information for the years ended December 31, 1993, 1992, and 1991(in thousands) :
1993 1992 1991 ---- ---- ---- Trust fee income $ 2,600 $ 2,300 $ 2,600 Deposit insurance premium expense 3,450 3,200 2,650 Postage expense 1,610 1,644 1,618 Interest paid 45,600 53,900 69,900 Income taxes paid 10,000 7,600 3,000
29 19 N. SUMMARIZED FINANCIAL INFORMATION OF HANCOCK HOLDING COMPANY (PARENT COMPANY ONLY) BALANCE SHEETS
DECEMBER 31, ------------------------------ 1993 1992 ---- ---- ASSETS: Investment in subsidiaries $ 143,623,923 $ 127,884,758 Other 202,412 693,702 --------------- --------------- 143,826,335 $ 128,578,460 =============== =============== LIABILITIES AND STOCKHOLDERS' EQUITY: Accrued expenses $ 54 $ 408,312 Stockholders' equity 143,826,281 128,170,148 --------------- --------------- $ 143,826,335 $ 128,578,460 =============== ===============
STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 31, --------------------------------------------------- 1993 1992 1991 ---- ---- ---- Dividends received from subsidiary $ 6,343,450 $ 5,428,570 $ 3,841,918 Excess equity in earnings of subsidiaries over dividends received 15,739,162 14,037,989 9,882,824 Interest and other (expenses) income 56,738 (375,104) (2,016,275) Income tax credit (expense) (23,052) 120,000 680,000 -------------- ------------- ------------- Net earnings $ 22,116,298 $ 19,211,455 $ 12,388,467 ============== ============= =============
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, --------------------------------------------------- 1993 1992 1991 ---- ---- ---- Cash Flows from Operating Activities -- principally dividends from subsidiary $ 6,291,142 $ 5,409,484 $ 1,790,803 -------------- ------------- ------------- Cash Flows Invested in Subsidiaries -- -- (5,000,000) -------------- ------------- ------------- Cash Flows from Financing Activities: Sale of common stock -- -- 24,666,725 Prepayments of notes payable -- (1,000,000) (17,750,000) Dividends paid (6,460,169) (4,881,015) (3,467,521) -------------- ------------- ------------- Net cash provided by (used in) financing activities (6,460,169) (5,881,015) 3,449,204 -------------- ------------- ------------- Net (decrease) increase in cash (169,027) (471,531) 240,007 Cash, Beginning 282,372 753,903 513,896 -------------- ------------- ------------- Cash, Ending $ 113,345 $ 282,372 $ 753,903 ============== ============= =============
O. PROPOSED ACQUISITION In November 1993, the Company agreed to merge Hancock Bank of Louisiana, a wholly owned subsidiary of the Company with First State Bank and Trust Company of Baker Louisiana (BAKER). The merger will be consummated by the exchange of all outstanding common stock of BAKER in return for approximately 520,000 shares of common stock of the Company. Completion of the merger is contingent upon approval by BAKER's shareholders, the Louisiana Commissioner of Financial Institutions and the Federal Deposit Insurance Corporation. It is intended that the merger will be accounted for using the pooling of interests method. BAKER had total assets of $82,000,000 and stockholders equity of $11,500,000 as of December 31, 1993 and net earnings of $1,250,000 for the year then ended. 30 20 INDEPENDENT AUDITORS' REPORT BOARD OF DIRECTORS AND STOCKHOLDERS HANCOCK HOLDING COMPANY GULFPORT, MISSISSIPPI We have audited the accompanying consolidated balance sheets of Hancock Holding Company and subsidiaries as of December 31, 1993 and 1992, and the related statements of earnings, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1993. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Hancock Holding Company and subsidiaries as of December 31, 1993 and 1992, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. As discussed in Note J to the consolidated financial statements, in 1992 the Company changed its method of accounting for post retirement benefits other than pensions to conform with Statement of Financial Accounting Standards No. 106. DELOITTE & TOUCHE Certified Public Accountants New Orleans, Louisiana January 14, 1994 31 21 HANCOCK HOLDING COMPANY AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1992 The Company's net income increased to $22.1 million, $3.15 per share, for the year ended December 31, 1993, compared to $19.2 million, or $2.74 per share, for the year ended December 31, 1992. The $2.9 million increase in net income was attributable primarily to deposit growth which funded additional earning assets and a lower level of loan charge offs. Growth in earning assets resulted in a $3.5 million increase in net interest income. A 26% decline in non performing asset balances and a lower level of loan charge offs in 1993 allowed the Company to reduce its loan loss provision by $3.4 from $7.6 million in 1992 to $4.2 million in 1993. The reserve for loan loss balance was 1.82% of average loans in 1993 and represented 264% of non performing asset balances at December 31, 1993. The net interest margin declined from 5.09% in 1992 to 4.87% in 1993. Since the Company's balance sheet is liability sensitive, deposits reprice before loans and investment securities, stable or rising interest rates will negatively impact the net interest margin. FOR THE YEARS ENDED DECEMBER 31, 1992 AND 1991 The Company's net income increased to $19.2 million, $2.74 per share, for the year ended December 31, 1992, compared to $124 million, or $2.21 per share, for the year ended December 31, 1991. The increase in net income was attributable primarily to a $18.3 million increase in net interest income. The Company's balance sheet is liability sensitive in the one year interval therefore, declining interest rates positively impacted the net interest margin, increasing net income over the prior year. The net interest margin improved 70 basis points to 5.09% in 1992 from 4.39% in 1991. The Company's provision for loan losses increased by $3.0 million; of that provision, $1.8 million increased our reserve balances. The current year's provision for loan losses reflects the increase of $19.7 million in average loans outstanding and raised our reserve balance to 1.7% of outstanding loans. FINANCIAL CONDITION SECURITIES The Company generally purchases securities to be held to maturity, with a maturity schedule that provides ample liquidity. Investment securities are carried at net amortized cost. However, during 1993, certain securities were reclassified as held for sale. These securities were generally acquired with the intent to hold to maturity but may be sold under certain circumstances. Securities sold during 1993 were or would have been in the held-for-sale classification. The December 31, 1993 book value of the consolidated portfolio was $729.2 million and the market value was $743.6 million. LOANS The Company's loan portfolio represented 48.7% of its December 31, 1993 earning asset base. Average loans outstanding in 1993 increased 7.2% over the 1992 level. The Company's net loan portfolio totaled $860 million at December 31, 1993, compared to $776 million at December 31, 1992. Non-performing loans were $4.7 million or 0.55% of net loans of December 31, 1993 compared to $6.0 million or 0.77% at December 31, 1992. Restructured loan balances were insignificant. The amount of interest not accrued on non-performing loans did not significantly effect earnings in 1993 or 1992. DEPOSITS The total deposits at the end of 1993 were $1,615.6 million compared to $1,550.8 million at December 31, 1992, representing 4.2% increase. Time deposit balances increased 26% compared to a 7% growth in savings, now and money market accounts. Deposits are the Company's primary source of funds supporting the earning asset base. 32 22 LIQUIDITY Liquidity represents the Company's ability to provide funds to satisfy demands from depositors, borrowers and other commitments by either converting assets to cash or accessing new or existing sources of funds. The principal sources of funds which provide liquidity are customer deposits, payments of principal and interest on loans, maturities and sales of securities, earnings and borrowings. At December 31, 1993, cash and due from banks, securities, federal funds sold and repurchase agreements were 56.0% of total deposits, as compared to 58.3% at December 31, 1992. CAPITAL RESOURCES Currently, the Company and the Banks are required to maintain minimum risk-based capital ratios of 8%, with not less than 4% in Tier 1 capital. Additionally, the Company and the Banks must maintain minimum Tier 1 leverage ratios of at least 3%, subject to increase to at least 4% to 5%, depending on the composite rating by the respective regulatory authorities of the Company and the Banks. As of December 31, 1993, the Company and the Banks capital balances were in excess of current regulatory minimum requirements. RECENT CHANGES IN FINANCIAL ACCOUNTING STANDARDS During 1992, the Company adopted Statement of Financial Accounting Standards No. 106, Employer's Accounting for Postretirement Benefits Other Than Pensions. This Statement requires accrual of postretirement benefits (such as health care benefits) during the years an employee provides services. The costs of these benefits were previously expensed on a pay-as-you-go basis. The adoption of this Statement decreased net earnings by $250,000 (0.04 per share) in 1992. Effective January 1, 1993, the Company changed its method of accounting for income taxes for the deferred method to the liability method as required by Statement of Financial Accounting Standard No. 109. Prior years have not been restated. The cumulative effect of this accounting change did not have a significant effect on the Company's financial statements and was recorded in income tax expense in the year ended December 31, 1993. The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 112, Employers' Accounting for Post Employment Benefits which requires the accrual of certain post employment benefits other than pension and health care. The Company does not anticipate that the adoption of this Statement in 1994 will have a significant effect on its financial condition or results of operations. The Financial Accounting Stardards Board issued Statement of Financial Accounting Standards No. 114, Accounting by Creditors for Impairment of Certain Loans, which requires the present value of expected future cash flows of impaired loans be discounted at the loan's effective interest rate. The Company does not anticipate that the adoption of this Statement in 1995 will have a significant effect on its financial condition or results of operations. The Financial Accounting Standards Board has issued Statement of Financial Standards No. 115 Accounting for Certain Investments in Debt and Equity Securities which is effective in 1994. This Statement requires the investment portfolio to be classified into one of three reporting categories, held-to-maturity, available-for-sale, or trading. The Company has not yet completed its review of Statement No. 115 relative to its securities portfolio but does not believe that the adoption of the Statement will have a material effect on its financial statements. FORM 10-K ANNUAL REPORT HANCOCK HOLDING COMPANY FILES AN ANNUAL REPORT WITH THE SECURITIES AND EXCHANGE COMMISSION ON FORM 10-K. A COPY OF THE REPORT FILED ON FORM 10-K, WHEN COMPLETED, WILL BE SENT FREE OF CHARGE TO ANY SHAREHOLDER BY WRITING TO: GEORGE A. SCHLOEGEL, VICE-CHAIRMAN, HANCOCK HOLDING COMPANY, P.O. BOX 4019, GULFPORT, MS 39502. 33 23 GLOSSARY OF FINANCIAL TERMS BOOK VALUE PER SHARE -- Total stockholders' equity divided by common shares outstanding. CHARGE-OFFS -- Loan balances written off against the reserve for possible loan losses, once a loan is deemed to be uncollectible. CORE DEPOSITS -- Deposits that are traditionally stable, including all deposits other than time deposits of $100,000 or more. EARNING ASSETS -- Interest-or dividend-bearing assets, including loans and securities. EARNINGS PER SHARE -- Net income divided by weighted average common shares outstanding. FEDERAL FUNDS -- Generally one-day loans of excess reserves from one bank to another. When a bank buys (borrows) federal funds, these funds are called "federal funds purchased." When it sells (lends) them, they are called "federal funds sold." FORECLOSED ASSETS -- Property, including OREO, acquired because the borrower defaulted on the loan. LEVERAGE RATIO -- A ratio of equity to assets adjusted for goodwill and other disallowed intangibles. NET INTEREST INCOME -- The difference between interest income on earning assets and interest expense on interest-bearing liabilities. NET INTEREST MARGIN -- Taxable-equivalent net interest income as a percentage of average earning assets for the period. NET INTEREST SPREAD -- The difference between the yield on earning assets and the cost of funds. NON-PERFORMING ASSETS -- Non-performing loans plus foreclosed assets. NON-PERFORMING LOANS -- Loans which interest income is not currently recognized because of the borrower's financial problems (non-accrual loans), or loans which have been restructured. OTHER REAL ESTATE OWNED (OREO) -- Real estate which the bank takes or to which it assumes title in order to sell the property, obtained as the result of a loan default. PROVISION FOR LOAN LOSSES -- A charge against current-period earnings which reflects actual and expected loan losses. RESERVE FOR LOAN LOSSES -- A balance sheet account which is an estimation of future loan losses. The provision for possible loan losses is added to the reserve account each quarter. Charge-offs decrease the reserve. Recoveries on loans previously charged off increase the reserve. RETURN ON ASSETS -- Net income as a percentage of average total assets for the period. The return on assets measures profitability in terms of how efficiently assets are being utilized. RETURN ON EQUITY -- Net income as a percentage of average total equity. The return on equity measures profitability in terms of how efficiently equity or capital is being invested. RISK-BASED CAPITAL -- The amount of capital (Tier 1 plus Tier 2 capital) required by federal regulatory standards, based on a risk-weighting of assets. For example, more capital is required for an unsecured loan than for investments in U.S. Treasury securities. The minimum ratio of capital to risk-weighted assets is 8%. TAXABLE-EQUIVALENT BASIS -- The result of adding to income earned on tax-free loans and investments the amount necessary to make yields comparable to yields on taxable assets. TIER 1 CAPITAL -- Common stockholders' equity less goodwill and other disallowed intangibles. TIER 2 CAPITAL -- Tier 1 Capital, plus reserve for possible loan losses (limited to a certain percentage of risk-weighted assets). 36 -----END PRIVACY-ENHANCED MESSAGE-----