-----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, BQrvum6d6lVihblu3hf3l4T8er+A6xl5n+ZCjX1MxWBJ89JQR3t93mlI+Qq3A9Nw eig0bZyyMKNjJWu8wwvRRw== 0000950134-94-000106.txt : 19940214 0000950134-94-000106.hdr.sgml : 19940214 ACCESSION NUMBER: 0000950134-94-000106 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940211 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: 10-K SEC ACT: 34 SEC FILE NUMBER: 000-13089 FILM NUMBER: 94506659 BUSINESS ADDRESS: STREET 1: ONE HANCOCK PLZ STREET 2: P.O. BOX 4019 CITY: GULFPORT STATE: MS ZIP: 39502 BUSINESS PHONE: 6018684605 10-K 1 FORM 10-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 (Mark One) { X } ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 {FEE REQUIRED} For the fiscal year ended December 31, 1993. OR { } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 {NO FEE REQUIRED} For the transition period from _____________________ to _____________________. Commission file number 0-13089 Hancock Holding Company (Exact name of registrant as specified in its charter) Mississippi 64-0693170 (State or other jurisdiction of (I.R.S. Employer Identification incorporation or organization) Number) One Hancock Plaza, Gulfport, Mississippi 39501 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (601) 868-4715 Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange on Title of Each Class Which Registered ------------------- ------------------------ NONE NONE Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, $3.33 PAR VALUE (Title of Class) Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes X No _______ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No _______ Continued 2 The aggregate market value of the voting stock held by non-affiliates of the registrant as of January 14, 1994 was approximately $183,476,600. For purposes of this calculation only, shares held by non-affiliates are deemed to consist of (a) shares held by all shareholders other than directors and executive officers of the registrant plus (b) shares held by directors and officers as to which beneficial ownership has been disclaimed. On December 31, 1993 the registrant had outstanding 7,023,829 shares of common stock for financial statement purposes. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's Annual Report to Stockholders for the year ended December 31, 1993 filed with the Registrant's definitive proxy materials on January 24, 1994 are incorporated herein by reference into Part II of this report. Portions of the definitive Proxy Statement used in connection with the registrant's Annual Meeting of Stockholders to be held February 24, 1994 filed by the Registrant on January 24, 1994 are herein incorporated by reference into Part III of this report. 3 PART I ITEM 1 - BUSINESS BACKGROUND AND CURRENT OPERATIONS BACKGROUND GENERAL: Hancock Holding Company (the "Company") was organized in 1984 as a bank holding company registered under the Bank Holding Company Act of 1956, as amended. The Company, headquartered in Gulfport, Mississippi, operates 54 banking offices and 80 automated teller machines ("ATM's") (34 of which are free-standing) in the states of Mississippi and Louisiana through two wholly-owned bank subsidiaries, Hancock Bank, Gulfport, Mississippi ("Hancock Bank MS") and Hancock Bank of Louisiana, Baton Rouge, Louisiana ("Hancock Bank LA"). Hancock Bank MS and Hancock Bank LA hereinafter are referred to collectively as the "Banks." 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. At December 31, 1993, the Company had total assets of $1.8 billion and employed on a full-time basis 776 persons in Mississippi and 327 persons in Louisiana. Hancock Bank MS was originally chartered as Hancock County Bank in 1899 and since its organization the strategy of Hancock Bank MS has been to achieve a dominant market share on the Mississippi Gulf Coast. Prior to a series of acquisitions begun in 1985, growth was primarily internal and was accomplished by concentrating branch expansions in areas of population growth where no dominant financial institution previously served the market area. Economic expansion on the Mississippi Gulf Coast has resulted primarily from growth of -2- 4 military and government-related facilities, tourism, port facility activities, industrial complexes and the gaming industry. Hancock Bank MS currently has the largest market share in each of the four counties in which it operates, Harrison, Hancock, Jackson and Pearl River. With assets of $1.3 billion, Hancock Bank MS currently ranks as the fifth largest bank in Mississippi. Beginning with the 1985 acquisition of the Pascagoula-Moss Point Bank ("PMP") in Pascagoula, Mississippi, the Company has acquired approximately $611.9 million in assets and approximately $556.2 million in deposit liabilities through selected acquisitions or purchase and assumption transactions. RECENT ACQUISITION ACTIVITY: The majority of the Company's acquisition activity occurred in 1990 and 1991, beginning with the June 1990, merger of Metropolitan National Bank ("MNB") Biloxi, Mississippi into Hancock Bank MS. At the time of its acquisition, MNB had total assets of approximately $98.8 million and total deposit liabilities of approximately $95.1 million. Also in June 1990, pursuant to a purchase and assumption agreement, Hancock Bank MS acquired the Poplarville, Mississippi branch of Unifirst Bank for Savings from the Resolution Trust Corporation ("RTC"). The acquisition increased Hancock Bank MS total assets by approximately $7.8 million and its total deposit liabilities by approximately $7.4 million. In August 1990, the Company formed Hancock Bank LA for the purpose of assuming the deposit liabilities and acquiring the consumer loan portfolio, corporate credit card portfolio and non-adversely classified securities portfolio of American Bank and Trust ("AmBank") Baton Rouge, Louisiana, from the Federal Deposit Insurance Corporation ("FDIC"). As a result of this transaction, Hancock Bank LA acquired 15 banking offices in the greater Baton Rouge area, approximately $337.5 million in assets and approximately $300.9 million in deposit liabilities. During 1993, Hancock Bank LA's deposits increased approximately 3.4% to $468.2 million. It is currently one of the five largest banks in East Baton Rouge Parish. Economic expansion in East -3- 5 Baton Rouge Parish has resulted primarily from growth in state government and related service industries, educational and medical complexes, petrochemical industries, port facility activities and transportation and related industries. In August 1991, Hancock Bank MS acquired certain assets and deposit liabilities of Peoples Federal Savings Association, Bay St. Louis, Mississippi, from the RTC. As a result of this transaction, the Bank acquired assets of approximately $39.0 million and deposit liabilities of approximately $38.5 million. In connection with the MNB and AmBank acquisitions, the Company borrowed $18,750,000 from Whitney National Bank, New Orleans, Louisiana ("Whitney") to partially fund these acquisitions. On November 28, 1991, the Company sold 1,552,500 shares of its common stock at $17 per share, following a two-for-one stock split in the form of a 100% stock dividend on October 15, 1991 and an increase in the number of authorized shares to 20,000,000. The net proceeds of this sale, after underwriting discount and expenses, of approximately $24,700,000, were used to pay the interest, retire $18,500,000 of principal debt on the Whitney loans and increase Hancock Bank LA's capital by $5,000,000. 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 East Baton Rouge Parish, Baker, Louisiana. The merger will be consummated by the exchange of all outstanding common stock of First State Bank in return for approximately 520,000 shares of common stock of the Company. Completion of the merger is contingent upon approval by First State Bank shareholders, the Louisiana Commissioner of Financial Institutions, the Federal Deposit Insurance Corporation and the Federal Reserve. It is intended that the merger will be accounted for using the pooling of interests method. First State Bank 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. -4- 6 CURRENT OPERATIONS LOAN PRODUCTION AND CREDIT REVIEW: The Banks' primary lending focus is to provide commercial, consumer and real estate loans to consumers and to small and middle market businesses in their respective market areas. The Banks have no concentrations of loans to particular borrowers or loans to any foreign entities. Each loan officer has Board approved loan limits on the principal amount of secured and unsecured loans he or she can approve for a single borrower without prior approval of a loan committee. All loans, however, must meet the credit underwriting and loan policies of the Banks. For Hancock Bank MS, all loans over an individual loan officer's Board approved lending authority and below $150,000 must be approved by his or her region's loan committee or by another loan officer with greater lending authority. If a borrower's total indebtedness exceeds $150,000, any loan must be reviewed and approved by both the regional loan committee and the Bank's senior loan committee. Each loan file is reviewed by the Bank's loan review department to ensure proper documentation. For Hancock Bank LA, all loans over an individual loan officer's Board approved lending authority must be approved by the Bank's senior loan committee or by another loan officer with greater lending authority. Aggregate lending relationships above the loan officers' authority of up to $500,000 must be approved by the Company's loan committee. Each loan file is reviewed by the Bank's loan review department to ensure proper documentation. LOAN REVIEW AND ASSET QUALITY: Each Bank's portfolio of credit relationships aggregating $250,000 or more is continually reviewed by the respective Bank to identify any deficiencies and to take corrective actions as necessary. Credit relationships aggregating less than $250,000 are reviewed on a periodic basis. As a result of such reviews, each Bank places on its Watchlist loans that are -5- 7 deemed to require close or frequent review. All loans classified by a regulator are also placed on the Watchlist. All Watchlist and past due loans are reviewed at least monthly by the Banks' senior lending officers and monthly by the Banks' Board of Directors. In addition, all loans to a particular borrower are reviewed, regardless of classification, each time such borrower requests a renewal or extension of any loan or requests an additional loan. All lines of credit are reviewed annually prior to renewal. The Banks currently have mechanisms in place which allow for at least an annual review of the financial statements and the financial condition of all borrowers, except borrowers with secured installment and residential mortgage loans. As a matter of policy, the Banks place loans on nonaccrual status whenever debt service becomes impaired or collection becomes questionable. The Banks follow the standard FDIC loan classification system which is designed to serve the dual purpose of providing management with (1) a general view of the quality of the overall loan portfolio (each branch's loans and each commercial loan officer's lending portfolio) and (2) information on specific loans which may need individual attention. The Banks hold nonperforming assets, consisting of real property, vehicles and other items held for resale, which were acquired generally through the process of foreclosure. At December 31, 1993, the book value of nonperforming assets held for resale was approximately $700 thousand. SECURITIES PORTFOLIO: The Banks maintain portfolios of securities consisting primarily of U.S. Treasury securities, U.S. Government agency issues and tax-exempt obligations of states and political subdivisions. The portfolios are designed to enhance liquidity while providing acceptable rates of return. Therefore, the Banks invest only in high grade investment quality securities with acceptable yields and generally with maturities of less than 7 years. -6- 8 Investments are limited by the Banks' policies to securities having a rating of no less than "Baa" by Moody's Investors' Service, Inc., except that non-rated but creditworthy general obligations of Mississippi or Louisiana governmental agencies or political subdivisions are permissible. DEPOSITS: The Banks have a number of programs designed to attract depository accounts which are offered to consumers and to small and middle market businesses at interest rates generally consistent with market conditions. Additionally, the Banks offer 80 ATMs, 46 ATMs at their 54 banking offices and 34 free-standing ATMs at other locations. As members of regional and international ATM networks such as "GulfNet", "PLUS" and "CIRRUS", the Banks offer customers access to their depository accounts from regional, national and international ATM facilities. Deposit flows are controlled by the Banks primarily through pricing of such deposits and to a certain extent through promotional activities. Management believes that the rates it offers, which are posted weekly on deposit accounts, are generally competitive with or, in some cases, slightly below other financial institutions in the Banks' respective market areas. TRUST SERVICES: The Banks', through their respective Trust Departments, offer a full range of trust services on a fee basis. The Banks act as executor, administrator, or guardian in administering estates. Also provided are investment custodial services for individual, businesses and charitable and religious organizations. In their trust capacities, the Banks provide investment management services on an agency basis and act as trustee for pension plans, profit sharing plans, corporate and municipal bond issues, living trusts, life insurance trusts and various other types of trusts created by or for individuals, businesses and charitable and religious organizations. As of December 31, 1993, the Trust Departments of the Banks had approximately $2.3 billion of assets under management, of which $1.7 billion were corporate accounts and $600 million were personal, employee benefit, estate and other trust accounts. -7- 9 OPERATING EFFICIENCY STRATEGY: The primary focus of the Company's operating strategy is to increase operating income and to reduce operating expense. Management has taken steps beginning in January of 1988 to improve operating efficiencies and as a result, employees at Hancock Bank MS have been reduced from 0.78 per $1.0 million in assets in February 1988 to 0.61 as of December 31, 1993. Since its acquisition in August 1990, Hancock Bank LA's employees have been reduced from 0.97 per $1.0 million of assets to 0.62 as of December 31, 1993. Management annually establishes an employee to asset goal for each Bank. The Banks also have set an internal long range goal of at least covering total salary and benefit costs by fee income. The ratio of fee income to total salary and benefit costs is $0.49 per $1.00 of total salary and benefit costs at Hancock Bank MS. Hancock Bank LA has a higher level of fee income and through December 31, 1993 has achieved a ratio of $0.69 to $1.00 of salary and benefit costs. OTHER ACTIVITIES: Hancock Bank MS has six subsidiaries through which it engages in the following activities: providing consumer financing services; mortgage lending; owning, managing and maintaining certain real property; providing general insurance agency services; holding investment securities; and marketing credit life insurance. The income of these subsidiaries generally accounts for less than 10% of the Company's total income annually. Hancock Bank MS also owns approximately 3,700 acres of timberland in Hancock County, Mississippi, most of which was acquired through foreclosure in the 1930's. Less than 1% of the Company's annual income is generated from timber sales and oil and gas leases on this acreage. COMPETITION: The deregulation of the financial services industry, the elimination of many previous distinctions between commercial banks and other types of financial institutions and the enactment in Mississippi, Louisiana and other -8- 10 states of legislation permitting state-wide branching or multi-bank holding companies as well as regional interstate banking has created a highly competitive environment for commercial banking in the Company's market area. The principal competitive factors in the markets for deposits and loans are interest rates paid and charged. The Company also competes through the efficiency, quality, range of services and products it provides, convenience of office and ATM locations and office hours. In attracting deposits and in its lending activities, the Company competes generally with other commercial banks, savings associations, credit unions, mortgage banking firms, consumer finance companies, securities brokerage firms, mutual funds, insurance companies and other financial institutions, many of which have greater resources than those available to the Company. -9- 11 SUPERVISION AND REGULATION BANK HOLDING COMPANY REGULATION GENERAL: As a bank holding company, the Company is subject to extensive regulation by the Board of Governors of the Federal Reserve System (the "Federal Reserve") pursuant to the Bank Holding Company Act of 1956, as amended (the "Bank Holding Company Act"). The Company also is required to file certain reports with, and otherwise comply with the rules and regulations of, the Securities and Exchange Commission (the "Commission") under federal securities laws. FEDERAL REGULATION: The Bank Holding Company Act generally prohibits the Company from engaging in activities other than banking or managing or controlling banks or other permissible subsidiaries or from acquiring or obtaining direct or indirect control of any company engaged in activities other than those activities determined by the Federal Reserve to be so closely related to banking or managing or controlling banks as to be proper incident thereto. In determining whether a particular activity is permissible, the Federal Reserve must consider whether the performance of such an activity can reasonably be expected to produce benefits to the public, such as greater convenience, increased competition or gains in efficiency, that outweigh possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interest or unsound banking practices. For example, making, acquiring or servicing loans, leasing personal property, providing certain investment or financial advice, performing certain data processing services, acting as agent or broker in selling credit life insurance and certain other types of insurance in connection with credit transactions and certain insurance underwriting activities have all been determined by regulations of the Federal Reserve to be permissible activities. The Bank Holding Company Act does not place territorial limitations on permissible -10- 12 bank-related activities of bank holding companies. However, despite prior approval, the Federal Reserve has the power to order a holding company or its subsidiaries to terminate any activity, or terminate its ownership or control of any subsidiary, when it has reasonable cause to believe that continuation of such activity or ownership of such subsidiary or control constitutes a serious risk to the financial safety, soundness or stability of any bank subsidiary of that holding company. The Bank Holding Company Act requires every bank holding company to obtain the prior approval of the Federal Reserve: (1) before it may acquire direct or indirect ownership or control of any voting shares of any bank if, after such acquisition, such bank holding company will directly or indirectly own or control more than 5% of the voting shares of such bank, (2) before it or any of its subsidiaries other than a bank may acquire all or substantially all of the assets of a bank, or (3) before it may merge or consolidate with any other bank holding company. In reviewing a proposed acquisition, the Federal Reserve considers financial, managerial and competitive aspects, and must take into consideration the future prospects of the companies and banks concerned and the convenience and needs of the community to be served. As part of its review, the Federal Reserve reviews the indebtedness to be incurred by a bank holding company in connection with the proposed acquisition to ensure that the bank holding company can service such indebtedness in a manner that does not adversely affect the capital requirements of the holding company or its subsidiaries. The Bank Holding Company Act further requires that consummation of approved acquisitions or mergers be delayed for a period of not less than 30 days following the date of such approval. During such 30-day period, complaining parties may obtain a review of the Federal Reserve's order granting its approval by filing a petition in the appropriate United States Court of Appeals petitioning that the order be set aside. The Federal Reserve has adopted capital adequacy guidelines for use in its examination and regulation of bank holding companies. The regulatory capital of a bank holding company under applicable federal capital adequacy guidelines is particularly important in the Federal Reserve's evaluation of a bank holding company and any applications by the bank holding company to the -11- 13 Federal Reserve. If regulatory capital falls below minimum guideline levels, a bank holding company or bank may be denied approval to acquire or establish additional banks or non-bank businesses or to open additional facilities. In addition, a financial institution's failure to meet minimum regulatory capital standards can lead to other penalties, including termination of deposit insurance or appointment of a conservator or receiver for the financial institution. There are two measures of regulatory capital presently applicable to bank holding companies, (1) risk- based capital and (2) leverage capital ratios. The Federal Reserve rates bank holding companies by a component and composite 1-5 rating system ("BOPEC"). The leverage ratios adopted by the Federal Reserve requires all but the most highly rated bank holding companies to maintain Tier 1 Capital at 4% to 5% of total assets. Certain bank holding companies having a composite 1 BOPEC rating and not experiencing or anticipating significant growth may satisfy the Federal Reserve guidelines by maintaining Tier 1 Capital of at least 3% of total assets. Tier 1 Capital for bank holding companies includes: stockholder's equity; minority interest in equity accounts of consolidated subsidiaries; and qualifying perpetual preferred stock. In addition, Tier 1 Capital excludes goodwill and other disallowed intangibles. The Company's leverage ratio at December 31, 1993, was 7.62%. The risk-based capital guidelines are designed to make regulatory capital requirements more sensitive to differences in risk profile among banks and bank holding companies, to account for off-balance sheet exposure and to minimize disincentives for holding liquid assets. Under the risk-based capital guidelines, assets are assigned to one of four risk categories; these are 0%, 20% 50% and 100%. As an example, U.S. Treasury securities are assigned to the 0% risk category while most categories of loans are assigned to the 100% risk category. The risk weight of off-balance sheet items such as standby letters of credit is determined by a two-step process. First, the amount of the off-balance sheet item is multiplied by a credit conversion factor of either 0%, 20%, 50% or 100%. Then, the result is assigned to one of the four risk categories. At December 31, 1993, the Company's off-balance -12- 14 sheet items aggregated $189.9 million; however, after the credit conversion these items represented $5.6 million of balance sheet equivalents. The primary component of risk-based capital is defined as Tier 1 Capital, which is essentially equal to common stockholders' equity, plus a certain portion of perpetual preferred stock. Tier 2 Capital, which consists primarily of the excess of any perpetual preferred stock, mandatory convertible securities, subordinated debt and general reserves for loan losses, is a secondary component of risk-based capital. The risk-weighted asset base is equal to the sum of the aggregate dollar values of assets and off-balance sheet items in each risk category, multiplied by the weight assigned to that category. Under these guidelines bank holding companies are required to maintain a ratio of Tier 1 Capital to risk-weighted assets of at least 4% and a ratio of Total Capital (Tier 1 and Tier 2) to risk-weighted assets of at least 8%. At December 31, 1993, the Company's Tier 1 and Total Capital ratios were 14.49% and 15.42%, respectively. Proposed regulations will increase capital requirements when as yet undetermined levels of interest rate risk are exceeded. Because the Company's liabilities generally reprice within periods of one year, interest rate risk occurs when assets funded by such liabilities reprice at longer intervals. It is not anticipated that such regulations will have a significant impact on the Company's capital requirements. The Company, as a bank holding company within the meaning of the Bank Holding Company Act, is required to obtain the prior approval of the Federal Reserve before it may acquire substantially all the assets of any bank, or ownership or control of any voting shares of any bank, if, after such acquisition, it would own or control, directly or indirectly, more than 5% of the voting shares of such bank. In no case, however, may the Federal Reserve approve the acquisition by the Company of the voting shares, or substantially all the assets, of any bank located outside Mississippi unless such acquisition is specifically authorized by the laws of the state in which the bank to be acquired is located. The banking laws of Mississippi presently permit out-of-state banking organizations to acquire Mississippi banking -13- 15 organizations, provided the out-of-state banking organization's home state grants similar privileges to banking organizations in Mississippi. This reciprocity privilege is restricted to banking organizations in specified geographic regions which encompass the states of Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, Missouri, North Carolina, South Carolina, Tennessee, Texas, Virginia and West Virginia. In addition, Mississippi banking organizations are permitted to acquire certain out-of-state financial institutions. A bank holding company is additionally prohibited from itself engaging in, or acquiring direct or indirect control of more than 5% of the voting shares of any company engaged in, non-banking activities. As a bank holding company, the Company is required to give the Federal Reserve prior written notice of any purchase or redemption of its outstanding equity securities if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the proceeding 12 months, is equal to 10% or more of the Company's consolidated net worth. The Federal Reserve may disapprove such a purchase or redemption if it determines that the proposal constitutes an unsafe or unsound practice, would violate any law, regulation, Federal Reserve order or directive or any condition imposed by, or written agreement with, the Federal Reserve. In November 1985, the Federal Reserve adopted its Policy Statement on Cash Dividends Not Fully Covered by Earnings (the "Policy Statement"). The Policy Statement sets forth various guidelines that the Federal Reserve believes that a bank holding company should follow in establishing its dividend policy. In general, the Federal Reserve stated that bank holding companies should not pay dividends except out of current earnings and unless the prospective rate of earnings retention by the holding company appears consistent with its capital needs, asset quality and overall financial condition. The activities of the Company are also restricted by the provisions of the Glass-Steagall Act of 1933 (the "Act"). The Act prohibits the Company -14- 16 from owning subsidiaries engaged principally in the issue, floatation, underwriting, public sale or distribution of securities. The interpretation, scope and application of the provisions of the Act currently are being reviewed by regulators and legislators. The outcome of the current examination and appraisal of the provisions in the Act and effect of such outcome on the ability of bank holding companies to engage in securities-related activities cannot be predicted. The Company is a legal entity separate and distinct from the Banks. There are various restrictions which limit the ability of the Banks to finance, pay dividends or otherwise supply funds to the Company or other affiliates. In addition, subsidiary banks of holding companies are subject to certain restrictions imposed by the Federal Reserve Act on any extension of credit to the bank holding company or any of its subsidiaries, on investments in the stock or other securities thereof and on the taking of such stock or securities as collateral for loans to any borrower. Further, a bank holding company and its subsidiaries are prohibited from engaging in certain tie-in arrangements in connection with extensions of credit, or leases or sales of property or furnishing of services. BANK REGULATION: The operations of the Banks are subject to state and federal statutes applicable to state banks and the regulations of the Federal Reserve and of the FDIC. Such statutes and regulations relate to, among other things, required reserves, investments, loans, mergers and consolidations, issuance of securities, payment of dividends, establishment of branches and other aspects of the Banks' operations. Hancock Bank MS is subject to regulation and periodic examinations by the FDIC and the State of Mississippi Department of Banking and Consumer Finance. Hancock Bank LA is subject to regulation and periodic examinations by the FDIC and the Office of Financial Institutions, State of Louisiana. These regulatory authorities examine such areas as reserves, loan and investment quality, management policies, procedures and practices and other aspects of -15- 17 operations. These examinations are designed for the protection of the Banks' depositors, rather than their stockholders. In addition to these regular examinations, the Company and the Banks must furnish periodic reports to their respective regulatory authorities containing a full and accurate statement of their affairs. The Banks are members of the FDIC, and their deposits are insured as provided by law by the Bank Insurance Fund ("BIF"). As of July 1, 1991, the annual BIF premium was 0.23% of the Banks' deposits. BIF premiums for the year ended December 31, 1993, were $3.45 million, 10% higher than the BIF premiums for the same period in 1992. This increase can be attributed to growth in deposits. On December 19, 1991, the Federal Deposit Insurance Corporation Improvement Act of 1991 (the "FDIC Improvement Act") was enacted. The Federal Deposit Insurance Act as amended by Section 302 of the FDIC Improvement Act calls for risk-related deposit insurance assessment rates. The risk classification of an institution will determine its deposit insurance premium. Assignment to one of three capital groups, coupled with assignment to one of three supervisory sub groups determines which of the nine risk classifications is appropriate for an institution. The Banks have received a risk classification of 1A for assessment purposes for the first six months of 1994 which translates to a 0.23% rate. In general, the FDIC Improvement Act subjects banks and bank holding companies to significantly increased regulation and supervision. The FDIC Improvement Act increased the borrowing authority of the FDIC in order to bolster the Bank Insurance Fund, and the future borrowings are to be repaid by increased assessments on FDIC member banks. Other significant provisions of the FDIC Improvement Act require a new regulatory emphasis linking supervision to bank capital levels and require the federal banking regulators to take prompt regulatory action with respect to depository institutions that fall below specified capital levels and to draft non-capital regulatory measures to assure bank safety, including underwriting standards and minimum earnings levels. -16- 18 The FDIC Improvement Act contains a "prompt regulatory action" section which is intended to resolve problem institutions at the least possible long-term cost to the deposit insurance funds. Pursuant to this section, which applies to both banks and savings associations, the federal banking agencies are required to prescribe both a leverage limit and a risk-based capital requirement indicating levels at which institutions will be deemed to be "well capitalized," "adequately capitalized," "undercapitalized," "significantly undercapitalized," and "critically undercapitalized." In the case of a depository institution which is "critically undercapitalized" (a term defined to include institutions which still have a positive net worth), the federal banking regulators are generally required to appoint a conservator or receiver. The FDIC Improvement Act further requires regulators to perform annual on-site bank examinations, places limits on real estate lending and tightens audit requirements. The new legislation will eliminate after 1994 the "too big to fail" doctrine, which protects uninsured deposits of large banks, and restricts the ability of undercapitalized banks to obtain extended loans from the Federal Reserve Board discount window. As previously discussed, deposit insurance premiums for the Bank Insurance Fund have changed from flat premiums to fees that will require banks engaging in risk practices or with low capital to pay higher deposit insurance premiums than conservatively managed banks. The FDIC Improvement Act also imposes new disclosure requirements relating to fees charged and interest paid on checking and deposit accounts. Most of the significant changes brought about by the FDIC Improvement Act required new regulations. In addition to regulating capital, the FDIC has broad authority to prevent the development or continuance of unsafe or unsound banking practices. Pursuant to this authority, the FDIC has adopted regulations which, among other things, restrict preferential loans and loan amounts by banks to "affiliates" and "insiders" of banks, require banks to keep information on loans to major stockholders and executive officers and bar certain director and officer interlocks between financial institutions. The FDIC also is authorized to approve mergers, consolidations and assumption of deposit liability transactions between insured banks and between insured banks and -17- 19 uninsured banks or institutions to prevent capital or surplus diminution in such transactions where the resulting, continuing or assumed bank is an insured nonmember state bank, like the Banks. Although the Banks are not members of the Federal Reserve System, they are subject to Federal Reserve regulations that require the Banks to maintain reserves against transaction accounts (primarily checking accounts), money market deposit accounts and nonpersonal time deposits. Because reserves generally must be maintained in cash or in noninterest-bearing accounts, the effect of the reserve requirements is to increase the cost of funds for the Banks. Subject to an exemption from reserve requirements on a limited amount of an institution's transaction accounts, the Federal Reserve regulations currently require that reserves be maintained against net transaction accounts in the amount of 3% of the aggregate of such accounts up to $41.4 million, or, if the aggregate of such accounts exceeds $41.4 million, $1.233 million plus 12% of the total in excess of $41.4 million. The foregoing is a brief summary of certain statutes, rules and regulations affecting the Company and the Banks and is not intended to be an exhaustive discussion of all the statutes and regulations having an impact on the operations of such entities. EFFECT OF GOVERNMENTAL POLICIES: In general, the difference between the interest rate paid by a bank on its deposits and its other borrowings, and the interest rate received by a bank on loans extended to its customers and securities held in its portfolios, will comprise a major portion of the bank's earnings. However, due to recent deregulation of the industry, the banking business is becoming increasingly dependent on the generation of fees and service charges. The earnings and growth of a bank will be affected not only by general economic conditions, both domestic and foreign, but also by the monetary and fiscal policy of the United States Government and its agencies, particularly the Federal Reserve. The Federal Reserve can and does implement national monetary policy, such as seeking to curb inflation and combat recession by its -18- 20 open-market operations in United States Government securities, adjustments in the amount of reserves that banks and other financial institutions are required to maintain and adjustments to the discount rates applicable to borrowings by banks which are members of the Federal Reserve System and target rates for federal funds transactions. The actions of the Federal Reserve in these areas influence the growth of bank loans, investments and deposits and also affect interest rates charged on loans and paid on deposits. The nature and timing of any future changes in monetary policies and their potential impact on the Company cannot be predicted. -19- 21 STATISTICAL INFORMATION The following tables and other material present certain statistical information regarding the Company. This information is not audited and should be read in conjunction with the Company's consolidated financial statements and the accompanying notes. DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDER'S EQUITY AND INTEREST RATES AND DIFFERENTIALS Net interest income, the difference between interest income and interest expense, is the most significant component of the Banks earnings. For internal analytical purposes, management adjusts net interest income to a "taxable equivalent" basis using a 34% in 1992 and 35% in 1993 federal tax rate on tax exempt items (primarily interest on municipal securities). Another significant statistic in the analysis of net interest income is the effective interest differential, which is the difference between the average rate of interest earned on earning assets and the effective rate paid for all funds, non-interest bearing as well as interest bearing. Since a portion of the Bank's deposits do not bear interest, such as demand deposits, the rate paid for all funds is lower than the rate on interest bearing liabilities alone. The rate differential for the years 1992 and 1993 was 5.12% and 4.85%, respectively. Recognizing the importance of interest differential to total earnings, management places great emphasis on managing interest rate spreads. Although interest differential is affected by national, regional, and area economic conditions, including the level of credit demand and interest rates, there are significant opportunities to influence interest differential through appropriate loan and investment policies. These policies are designed to maximize interest differential while maintaining sufficient liquidity and availability of funds for purposes of meeting existing commitments and for investment in loans and other investment opportunities that may arise. -20- 22 The following table shows interest income on earning assets and related average yields earned as well as interest expense on interest bearing liabilities and related average rates paid for the periods indicated: Comparative Average Balances - Yields and Costs
Years Ended December 31, --------------------------------------------------------------------------------------- 1991 1992 1993 ------------------------- --------------------------- --------------------------- Average Average Average Amount Yield or Amount Yield or Amount Yield or Average Paid or Rate Average Paid or Rate Average Paid or Rate Amount Earned (%) Amount Earned (%) Amount Earned (%) ------- ------- -------- ------- ------- -------- ------- ------- -------- (Amounts in thousands) Assets: Earning assets: Investment securities: U.S. Treasury $ 280,010 $ 21,740 7.76 $ 277,614 $ 19,750 7.11 $ 278,821 $ 16,056 5.76 U.S. Government agencies 162,085 12,741 7.86 293,568 20,825 7.09 346,650 21,920 6.32 Municipal securities (1) 60,219 7,153 11.88 50,308 6,152 12.23 39,371 4,646 11.80 Other securities 20,778 1,693 8.15 66,565 4,782 7.18 86,258 4,775 5.54 Federal funds sold 104,461 5,983 5.73 90,933 3,124 3.44 104,369 3,075 2.95 Repurchase agreements -- -- -- -- -- -- -- -- -- Interest bearing deposits with banks 13,089 576 4.40 1,121 41 3.66 597 26 4.36 Net loans (1)(2)(3) 711,311 78,187 10.99 731,048 74,584 10.20 780,787 74,480 9.54 ---------- -------- ----- ---------- -------- ----- ---------- -------- ----- Total earning assets/ interest income 1,351,953 128,073 9.47 1,511,157 129,258 8.55 1,636,853 124,978 7.64 ---------- -------- ----- ---------- -------- ----- ---------- -------- ----- Less: reserve for loan losses 11,534 -- -- 12,323 -- -- (14,302) -- -- ---------- -------- ----- ---------- -------- ----- ---------- -------- ----- 1,340,419 $1,498,834 $1,622,551 Nonearning assets: Cash and due from banks 65,925 -- -- 85,059 -- -- 97,677 -- -- Fixed assets 34,884 -- -- 34,838 -- -- 33,811 -- -- Other assets 40,929 -- -- 41,225 -- -- 34,681 -- -- ---------- -------- ----- ---------- -------- ----- ---------- -------- ----- Total assets $1,482,157 $1,659,956 $1,788,720 ========== ========== ========== Liabilities and Stockholders Equity: Interest bearing liabilities: Deposits: Savings, NOW and money market $ 405,266 $ 19,341 4.77 $ 586,662 19,331 3.30 $ 684,857 18,196 2.66 Time 659,713 43,898 6.65 617,111 31,146 5.05 580,805 25,637 4.41 Federal funds purchased 20,724 1,120 5.40 21,261 677 3.18 18,046 487 2.70 Reverse repurchase agreement 41,038 2,246 5.47 22,571 731 3.24 23,607 534 2.26 Long-term bonds and notes 23,276 2,117 9.10 6,523 543 8.32 4,501 400 8.89 Capital notes 480 24 5.00 480 24 5.00 480 24 5.00 ---------- -------- ----- ---------- -------- ----- ---------- -------- ----- Total interest bearing liabilities/interest expense 1,150,497 68,746 5.98 1,254,608 52,452 4.18 1,312,296 45,278 3.45 ---------- -------- ----- ---------- -------- ----- ---------- -------- -----
-21- 23 Noninterest bearing liabilities: Demand 233,080 -- -- 270,221 -- -- 328,195 Other liabilities 12,909 -- -- 13,860 -- -- 10,693 -- -- ---------- -------- ----- ---------- -------- ----- ---------- -------- ----- Total liabilities 1,396,486 -- -- 1,538,689 -- -- 1,651,184 -- -- Stockholders' equity 85,671 -- -- 121,267 -- -- 137,536 -- -- ---------- -------- ----- ---------- -------- ----- ---------- -------- ----- Total liabilities and stockholders' equity $1,482,157 $1,659,956 $1,788,720 ========== ========== ========== Net interest rate spread 3.49 4.37 4.12 ===== ===== ===== Net interest income/margin on earning assets $ 59,327 4.39 $ 76,806 5.08 $ 79,700 4.82 ======== ===== ======== ===== ======== =====
- ---------- (1) Includes tax equivalent adjustments to interest earned of $3.3 million, $2.6 million and $1.8 million in 1991, 1992 and 1993 respectively, using an effective tax rate of 34% in 1991 and 1992 and 35% in 1993. (2) Interest earned includes fees on loans of $3.2 million in 1991 and 1992 and $3.1 million in 1993. (3) Includes nonaccrual loans. See "Nonperforming Assets." -22- 24 The following table sets forth, for the periods indicated, a summary of the changes in interest income on earning assets and interest expense on interest bearing liabilities relating to rate and volume variances. Nonaccrual loans are included in average amounts of loans and do not bear interest for purposes of the presentation. Analysis of Changes in Net Interest Income
Years Ended December 31, ------------------------------------------------------------------------------------------- 1991 1992 1993 --------------------------- --------------------------- --------------------------- Volume Rate Total Volume Rate Total Volume Rate Total ------ ---- ----- ------ ---- ----- ------ ---- ----- (Amounts in thousands) Interest Income: Investment securities: U.S. Treasury $ 2,010 $ (56) $ 1,954 $ (186) $ (1,804) $(1,990) $ 70 $ (3,764) $(3,694) U.S. Government agencies 9,468 (1,378) 8,090 10,335 (2,251) 8,084 3,357 (2,262) 1,095 Municipals (1) (1,462) 11 (1,451) (1,177) 176 (1,001) (1,291) (215) (1,506) Other securities (1,446) 107 (1,339) 3,731 (642) 3,089 1,090 (1,097) (7) Federal funds sold 2,640 (2,307) 333 (775) (2,084) (2,859) 396 (445) (49) Repurchase agreements (479) -- (479) -- -- -- -- -- -- Interest bearing deposits with banks 641 (549) 92 (527) (8) (535) (23) 8 (15) Net loans 18,598 (3,290) 15,308 2,169 (5,772) (3,603) 4,745 (4,849) (104) ------- ------- ------- ------- -------- ------- ------- -------- ------- Total 29,970 (7,462) 22,508 13,570 (12,385) 1,185 8,344 (12,624) (4,280) ------- ------- ------- ------- -------- ------- ------- -------- ------- Interest Expense: Deposits: Savings, NOW and money market 4,682 (2,475) 2,207 8,657 (8,667) (10) 2,609 (3,744) (1,135) Time 10,257 (7,757) 2,500 (2,835) (9,917) (12,752) (1,603) (3,906) (5,509) Federal funds purchased (682) (312) (994) 29 (472) (443) (87) (103) (190) Reverse repurchase agreements 2,569 (954) 1,615 (1,011) (504) (1,515) 23 (220) (197) Long-term bonds and notes 666 93 759 (1,637) (88) (1,725) (180) 37 (143) Capital notes -- -- -- -- -- -- -- -- -- ------- ------- ------- ------- -------- ------- ------- ------- ------- Total 17,492 (11,405) 6,087 3,203 (19,648) (16,445) 762 (7,936) (7,174) ------- ------- ------- ------- -------- ------- ------- ------- ------- Increase (decrease) in net interest income $12,478 $ 3,943 $16,421 $10,367 $ 7,263 $17,630 $ 7,582 $ (4,688) $ 2,894 ======= ======= ======= ======= ======== ======= ======= ======== =======
- ---------- (1) Yields on tax-exempt investments have been adjusted to a tax equivalent basis utilizing a 34% effective tax rate in 1991 and 1992 and 35% in 1993. -23- 25 RATE SENSITIVITY In order to control interest rate risk, management regularly monitors the volume of interest sensitive assets relative to interest sensitive liabilities over specific time intervals. The Company's interest rate management policy is to attempt to maintain a stable net interest margin in periods of interest rate fluctuations. Interest sensitive assets and liabilities are those that are subject to maturity or repricing within a given time period. The interest sensitivity gap is the difference between total interest sensitive assets and liabilities in a given time period. At December 31, 1993, the Company's cumulative interest sensitivity gap in the one year interval was (20.48%) as compared to a cumulative interest sensitivity gap in the one year interval of (29.81%) at December 31, 1992. The percentage reflects a higher level of interest sensitive liabilities than assets repricing within one year. Generally, where rate sensitive liabilities exceed rate sensitive assets, the net interest margin is expected to be positively impacted during periods of decreasing interest rates and negatively impacted during periods of increasing rates. The following tables set forth the Company's interest rate sensitivity gap at December 31, 1993 and December 31, 1992: -24- 26 Analysis of Interest Sensitivity at December 31, 1993
After Three Within Through One After Five Three Twelve Through Years and Months Months Five Years Insensitive Total --------- --------- ---------- ----------- ---------- (Amounts in thousands) Net loans $ 233,673 $ 82,289 $ 372,059 $ 172,106 $ 860,127 Securities and time deposits 165,538 174,370 309,608 81,539 731,055 Federal funds 85,500 -- -- -- 85,500 --------- --------- --------- --------- ---------- Total earning assets $ 484,711 $ 256,659 $ 681,667 $ 253,645 $1,676,682 ========= ========= ========= ========= ========== 28.91% 15.31% 40.65% 15.13% 100.00% ========= ========= ========= ========= ========== Interest bearing deposits, excluding CD's greater than $100,000 $ 635,727 $ 325,762 $ 215,059 $ 909 $1,177,457 CD's greater than $100,000 43,862 31,449 16,290 230 91,831 Short-term borrowings 45,799 -- -- -- 45,799 Other borrowings 1,373 780 3,588 320 6,061 --------- --------- --------- --------- ---------- Total interest-bearing funds 726,761 357,991 234,937 1,459 1,321,148 Interest-free funds -- -- -- 355,534 355,534 --------- --------- --------- --------- ---------- Funds supporting earning assets $ 726,761 $ 357,991 $ 234,937 $ 356,993 $1,676,682 ========= ========= ========= ========= ========== 43.35% 21.35% 14.01% 21.29% 100.00% ========= ========= ========= ========= ========== Interest sensitivity gap $(242,050) $(101,332) $ 446,730 $(103,348) -- Cumulative gap $(242,050) $(343,382) $ 103,348 -- -- Percent of total earning assets (14.44%) (20.48%) 6.16% -- -- ========= ========= ========= ========= ==========
Analysis of Interest Sensitivity at December 31, 1992
After Three Within Through One After Five Three Twelve Through Years and Months Months Five Years Insensitive Total --------- --------- ---------- ----------- ---------- (Amounts in thousands) Net loans $ 245,792 $ 62,888 $ 300,229 $ 167,192 $ 776,101 Securities and time deposits 96,022 133,813 233,388 263,013 726,236 Federal funds 79,000 -- -- -- 79,000 --------- --------- --------- --------- ---------- Total earning assets $ 420,814 $ 196,701 $ 533,617 $ 430,205 $1,581,337 ========= ========= ========= ========= ========== 26.61% 12.44% 33.74% 27.21% 100.00% ========= ========= ========= ========= ========== Interest bearing deposits, excluding CD's greater than $100,000 $ 618,080 $ 331,675 $ 143,184 $ -- $1,092,939 CD's greater than $100,000 62,532 38,945 37,252 230 138,959 Short-term borrowings 36,909 -- -- -- 36,909 Other borrowings -- 815 4,300 -- 5,115 --------- --------- --------- --------- ---------- Total interest-bearing funds 717,521 371,435 184,736 230 1,273,922 Interest-free funds -- -- -- 307,415 307,415 --------- --------- --------- --------- ---------- Funds supporting earning assets $ 717,521 $ 371,435 $ 184,736 $ 307,645 $1,581,337 ========= ========= ========= ========= ========== 45.37% 23.49% 11.68% 19.46% 100.00% ========= ========= ========= ========= ========== Interest sensitivity gap $(296,707) $(174,734) $ 348,881 $ 122,560 -- Cumulative gap $(296,707) $(471,441) $(122,560) -- -- Percent of total earning assets (18.76%) (29.81%) (7.75%) -- -- ========= ========= ========= ========= ==========
-25- 27 The Company had income tax expense of $9.7 million and $6.7 million for the years ended December 31, 1993 and 1992, respectively. This represents effective tax rates of 30.42% and 25.71% for December 31, 1993 and 1992, respectively; a greater portion of the Company's income in 1993 has been generated from taxable sources coupled with a 1% corporate tax rate increasee contributed to the rise in the effective tax rate. PERFORMANCE AND EQUITY RATIOS The following table sets forth, for the periods indicated, the percentage of net income to average assets and average stockholders' equity, the percentage of common stock dividends to net income and the percentage of average stockholders' equity to average assets.
Years Ended December 31, ------------------------ 1991 1992 1993 ---- ---- ---- Return on average assets (%) 0.84 1.16 1.24 Return on average stockholders' equity (%) 14.12 15.84 16.08 Dividend payout ratio (%) 27.99 25.41 29.21 Average stockholders' equity to average assets (%) 5.92 7.31 7.69
SECURITIES PORTFOLIO The Company's general policy is to purchase securities to be held to maturity, with a maturity schedule that provides the Company with ample liquidity. Investment securities are carried at net amortized cost and securities held for sale are carried at the lower of net amortized cost or market value. The December 31, 1993 book value of the consolidated portfolio was $729.2 million and the market value was $743.6 million. -26- 28 The following table sets forth, for the period indicated, the composition and book value (purchase price less amortization of premiums plus discount accretion) of the portfolio of securities held for sale by the Company at December 31, 1993: Book Value of Securities Held for Sale
December 31, 1992 ----------------- (Amounts in thousands) CMOs $ 27,314 Municipal Obligations 930 -------- Total $ 28,244 ========
The following tables set forth, for the period indicated, the maturity distributions and yields of the portfolio of securities held for sale by the Company. Securities Held for Sale Maturity Distributions and Yields at December 31, 1993
After One Through After Five Through Within One Year Five Years Ten Years After Ten Years --------------- ----------------- ------------------ --------------- Yield Yield Yield Yield Amount (%) Amount (%) Amount (%) Amount (%) ------ ----- ------ ----- ------ ----- ------ ----- (Amounts in thousands) CMOs $ -- -- $ -- -- $ 551 6.05 $ 26,763 6.33 Municipal Obligations -- -- 875 4.16 55 6.51 -- -- -------- ----- -------- ----- -------- ----- -------- ----- Total investment securities and average yields (1) $ -- -- $ 875 4.16 $ 606 6.09 $ 26,763 6.33 ======== ===== ======== ===== ======== ===== ======== =====
-27- 29 The following table sets forth, for the periods indicated, the composition and book value (purchase price less amortization of premiums plus discount accretion) of the investment securities portfolio held by the Company: Book Value of Investment Securities
December 31, -------------------------------- 1991 1992 1993 ---- ---- ---- (Amounts in thousands) U.S. Treasury $264,280 $249,087 $279,461 U.S. Government agencies 259,632 333,326 192,400 Municipal Obligations 56,462 45,467 35,383 MBS, CMOs and Other 25,241 93,481 193,692 -------- -------- -------- Total $605,584 $721,361 $700,936 ======== ======== ========
The following tables set forth, for the periods indicated, the maturity distributions and yields of the investment securities portfolio of the Company. Investment Securities Maturity Distributions and Yields at December 31, 1993
After One Through After Five Through Within One Year Five Years Ten Years After Ten Years --------------- ----------------- ------------------ --------------- Yield Yield Yield Yield Amount (%) Amount (%) Amount (%) Amount (%) ------ ----- ------ ----- ------ ----- ------ ----- (Amounts in thousands) U.S. Treasury $127,252 4.57 $129,416 5.03 $ 17,349 6.90 $ 5,444 8.52 U.S. Government agencies 10,787 5.05 79,445 5.93 61,445 7.28 40,723 5.54 Municipal Obligations (1) 6,245 6.99 17,451 7.22 7,659 6.86 4,028 6.65 MBS, CMOs and Other 79,824 4.85 10,663 6.57 20,086 5.61 83,119 6.62 -------- ----- -------- ----- -------- ----- -------- ----- Total investment securities and average yields (1) $224,108 4.75 $236,975 5.56 $106,539 6.41 $133,314 6.37 ======== ===== ======== ===== ======== ===== ======== =====
Investment Securities Maturity Distributions and Yields at December 31, 1992
After One Through After Five Through Within One Year Five Years Ten Years After Ten Years --------------- ----------------- ------------------ --------------- Yield Yield Yield Yield Amount (%) Amount (%) Amount (%) Amount (%) ------ ----- ------ ----- ------ ----- ------ ----- (Amounts in thousands) U.S. Treasury $119,364 $113,229 $ 11,044 $ 5,450 U.S. Government agencies 10,236 115,179 97,494 110,417 Municipal Obligations (1) 7,794 21,943 12,615 3,115 MBS, CMOs and Other 5,960 15,264 5,982 66,275 -------- ----- -------- ----- -------- ----- -------- ----- Total investment securities and average yields (1) $143,354 6.11 $265,615 6.29 $127,135 7.49 $185,257 7.39 ======== ===== ======== ===== ======== ===== ======== =====
- ---------- (1) Yields on tax-exempt investments have been adjusted to a tax equivalent basis utilizing a 34% effective tax rate in 1992 and 35% in 1993. -28- 30 LOAN PORTFOLIO The following tables set forth, for the periods indicated, the composition of the loan portfolio of the Company:
Loan Portfolio -------------- December 31, ------------------------------------------------------------ 1989 1990 1991 1992 1993 ---- ---- ---- ---- ---- (Amounts in thousands) Real estate: Residential mortgages 1-4 family $127,719 $165,025 $180,031 $195,543 $198,537 Residential mortgages multifamily 3,660 3,352 5,308 8,130 7,509 Home equity lines 3,120 10,505 12,205 13,412 13,858 Construction and development 7,642 8,294 10,710 15,397 22,615 Nonresidential 87,395 115,026 115,845 101,603 112,703 Commercial, industrial and other 97,536 136,192 135,786 146,933 144,855 Consumer 125,524 250,829 266,047 271,290 340,839 Lease financing and depository institutions 5,549 4,044 9,733 6,079 6,673 Political subdivisions 13,833 18,275 15,710 12,791 11,668 Credit card -- 3,616 16,432 26,482 26,581 -------- -------- -------- -------- -------- 471,978 715,158 767,807 797,660 885,838 Less, unearned income 17,350 19,089 19,548 21,559 25,710 -------- -------- -------- -------- -------- Net loans $454,628 $696,069 $748,259 $776,101 $860,128 ======== ======== ======== ======== ========
1990 consumer loan balances reflect an increase of 99.8% as a result of the acquisitions of MNB (approximately $7.8 million) and AmBank (approximately $127.0 million). Prior to July 1991, a correspondent bank of Hancock Bank MS issued credit cards under the Bank's name to customers of Hancock Bank MS and retained the outstanding receivables. In July 1991, Hancock Bank MS purchased, at par, from its correspondent bank, certain credit cards with outstanding balances of approximately $7.8 million and simultaneously transferred, at par, the cards and balances to Hancock Bank LA. The resulting combined consumer and corporate credit card portfolio aggregated approximately $11.5 million with approximately 17,700 cards outstanding. At December 31, 1993, the portfolio balance had increased to approximately $26.6 million with approximately 45,000 cards outstanding. -29- 31 The following table sets forth, for the periods indicated, the approximate maturity by type of the loan portfolio of the Company:
Loan Maturity Schedule ---------------------- December 31, 1992 December 31, 1992 --------------------------------------- --------------------------------------- Maturity Range Maturity Range --------------------------------------- --------------------------------------- After One After One Within Through After Five Within Through After Five One Year Five Years Years Total One Year Five Years Years Total -------- ---------- ----- ----- -------- ---------- ----- ----- (Amounts in thousands) Commercial, industrial and other $103,765 $ 36,154 $ 7,014 $146,933 $ 93,753 $ 40,137 $ 10,965 $144,855 Real estate - construction 14,776 621 -- 15,397 13,089 7,579 1,947 22,615 All other loans 195,641 359,795 79,894 635,330 152,542 330,952 234,874 718,368 -------- -------- -------- -------- -------- -------- -------- -------- Total loans $314,182 $396,570 $ 86,908 $797,660 $259,384 $378,668 $247,786 $885,838 ======== ======== ======== ======== ======== ======== ======== ========
The sensitivity to interest rate changes of that portion of the Company's loan portfolio that matures after one year is shown below: Loan Sensitivity to Changes in Interest Rates
December 31, December 31, 1992 1993 ----------- ----------- (Amounts in thousands) Commercial, industrial, and real estate construction maturing after one year: Fixed rate $ 20,698 $ 27,412 Floating rate 23,091 23,690 Other loans maturing after one year: Fixed rate 404,440 554,245 Floating rate 35,249 21,107 -------- -------- Total $483,478 $626,454 ======== ========
-30- 32 NONPERFORMING ASSETS The following table sets forth nonperforming assets by type for the periods indicated, consisting of nonaccrual loans, restructured loans, real estate owned and loans past due 90 days or more and still accruing:
December 31, -------------------------------------------------------- 1989 1990 1991 1992 1993 ---- ---- ---- ---- ---- (Amounts in thousands) Nonaccrual loans: Real estate $ 2,102 $ 3,153 $ 5,057 $ 3,986 $ 1,478 Consumer 1,386 1,588 1,214 1,715 1,322 Lease financing -- -- -- 22 -- Depository institutions -- -- -- -- -- Political subdivisions -- -- -- -- -- Commercial, industrial and other 1,518 903 643 93 1,371 Restructured loans 447 120 111 194 482 ------- ------- ------- ------- ------- Total nonperforming loans 5,453 5,764 7,025 6,010 4,635 Acquired real estate owned -- 1,843 -- -- -- Real estate owned 2,129 3,676 3,599 1,327 654 ------- ------- ------- ------- ------- Total nonperforming assets $ 7,582 $11,283 $10,624 $ 7,337 $ 5,289 ======= ======= ======= ======= ======= Loans 90+ days past due and still accruing $ 3,523 $ 6,541 $ 5,825 $ 7,204 $ 4,175 ======= ======= ======= ======= ======= Ratios (%): Nonperforming loans to net loans 1.20 0.83 0.94 0.77 0.55 Nonperforming assets to net loans and foreclosed properties 1.66 1.61 1.41 0.94 0.61 Nonperforming loans to average loans 1.23 1.05 0.99 0.82 0.59 Allowance to nonperforming loans 110.03 202.78 163.57 220.88 302.65
The following table sets forth, for the periods indicated, the amount of interest that would have been recorded on nonaccrual loans had the loans not been classified as "nonaccrual" as well as the interest which would have been recorded under the original terms of restructured loans:
December 31, -------------------------------------------------------- 1989 1990 1991 1992 1993 ---- ---- ---- ---- ---- (Amounts in thousands) Nonaccrual $ 558 $ 587 $ 685 $ 585 $ 506 Restructured 50 10 10 17 43 ------- ------- ------- ------- ------- Total $ 608 $ 597 $ 695 $ 602 $ 549 ======= ======= ======= ======= =======
Interest actually received on nonaccrual and restructured loans was insignificant. -31- 33 LOAN LOSS, CHARGE-OFF AND RECOVERY EXPENSES The following table sets forth, for the periods indicated, average net loans outstanding, reserve for loan losses, amounts charged-off and recoveries of loans previously charged-off.
December 31, ---------------------------------------------------------------- 1989 1990 1991 1992 1993 ---- ---- ---- ---- ---- (Amounts in thousands) Net loans outstanding at end of period $454,628 $696,069 $748,259 $776,101 $860,128 ======== ======== ======== ======== ======== Daily average net loans outstanding $443,804 $548,944 $711,311 $731,048 $780,787 ======== ======== ======== ======== ======== Balance of reserve for loan losses at beginning of period $ 6,000 $ 6,000 $ 11,688 $ 11,492 $ 13,275 Loans charged-off: Real estate 28 233 209 539 60 Consumer 1,184 1,882 2,741 3,850 3,012 Lease financing 9 99 -- 2 53 Depository institutions -- -- -- -- -- Political subdivisions -- -- -- -- -- Commercial, industrial and other 2,448 1,585 2,829 2,515 1,904 -------- -------- -------- -------- -------- Total charge-offs 3,669 3,799 5,779 6,906 5,029 -------- -------- -------- -------- -------- Recoveries of loans previously charged-off: Real estate -- -- 54 48 51 Consumer 224 243 424 555 829 Lease financing 11 6 6 1 2 Depository institutions -- -- -- -- -- Political subdivisions -- -- -- -- -- Commercial, industrial and other 79 363 412 430 669 -------- -------- -------- -------- -------- Total recoveries 314 612 896 1,034 1,551 -------- -------- -------- -------- -------- Net charge-offs 3,355 3,187 4,883 5,872 3,478 Provision for loan losses 3,355 2,939 4,687 7,655 4,231 Reserves of acquired companies -- 5,936 -- -- -------- -------- -------- -------- -------- Balance of reserve for loan losses at end of period $ 6,000 $ 11,688 $ 11,492 $ 13,275 $ 14,028 ======== ======== ======== ======== ========
The following table sets forth, for the periods indicated, certain ratios related to the Company's charge-offs, reserve for loan losses and outstanding loans:
Years Ended December 31, -------------------------------------------------- 1989 1990 1991 1992 1993 ---- ---- ---- ---- ---- Ratios (%): Net charge-offs to average net loans 0.76 0.58 0.69 0.80 0.44 Net charge-offs to period end net loans 0.74 0.46 0.65 0.76 0.40 Reserve for loan losses to average net loans 1.35 2.13 1.62 1.68 1.82 Reserve for loan losses to period end net loans 1.32 1.68 1.54 1.71 1.63 Net charge-offs to loan loss reserve 55.92 27.27 42.49 44.23 25.79 Net charge-offs to loan loss provision 100.00 108.44 104.18 76.71 82.20
-32- 34 An allocation of the loan loss reserve by major loan category is set forth in the following table. The allocation is not necessarily indicative of the category of future losses and the full reserve at December 31, 1993 is available to absorb losses occurring in any category of loans.
December 31, ----------------------------------------------------------------------------------------------------------- 1989 1990 1991 1992 1993 ----------------- ----------------- ----------------- ------------------ ------------------ Reserve % of Reserve % of Reserve % of Reserve % of Reserve % of for Loans for Loans for Loans for Loans for Loans Loan to Total Loan to Total Loan to Total Loan to Total Loan to Total Losses Loans Losses Loans Losses Loans Losses Loans Losses Loans ------ ----- ------ ----- ------ ----- ------ ----- ------ ----- (Amounts in thousands) Real estate $ 500 50.49 $ 1,700 43.42 $ 1,500 42.21 $ 2,000 41.88 $ 2,000 40.10 Commercial, industrial and other 3,000 25.72 4,000 22.77 4,000 21.00 4,000 20.79 4,000 18.42 Consumer 1,300 23.79 3,500 33.29 4,000 34.65 5,000 34.01 5,000 38.48 Credit card -- -- -- .52 500 2.14 500 3.32 500 3.00 Unallocated 1,200 -- 2,488 -- 1,492 -- 1,775 -- 2,528 -- ------ ------ ------- ------ ------- ------ ------- ------ ------- ------ $6,000 100.00 $11,688 100.00 $11,492 100.00 $13,275 100.00 $14,028 100.00 ====== ====== ======= ====== ======= ====== ======= ====== ======= ======
DEPOSITS AND OTHER DEBT INSTRUMENTS The following table sets forth the distribution of the average deposit accounts for the periods indicated and the weighted average interest rates on each category of deposits:
1991 1992 1993 ------------------------------- --------------------------------- --------------------------------- Percent Percent Percent of of of Amount Deposits Rate (%) Amount Deposits Rate (%) Amount Deposits Rate (%) ------ -------- -------- ------ -------- -------- ------ -------- -------- (Amounts in thousands) Noninterest bearing accounts $ 233,080 17.96 -- $ 270,221 18.33 -- $ 328,195 20.59 -- NOW accounts 133,527 10.29 3.91 223,544 15.17 2.98 237,496 14.90 2.95 Money market and other savings accounts 271,739 20.93 4.55 363,118 24.63 3.49 447,361 28.07 2.50 Time deposits 659,713 52.04 7.83 617,111 41.87 5.05 580,805 36.44 4.41 ---------- ------ ---------- ------ ---------- ------ $1,298,059 100.00 $1,473,994 100.00 $1,593,857 100.00 ========== ====== ========== ====== ========== ======
-33- 35 The Banks traditionally price their deposits to position themselves in the middle of the local market. The Banks' policy is not to accept brokered deposits. Maturities of CD's of $100,000 and Over
Less Than Three After Percent Three to Twelve Twelve of Total Months Months Months Total Deposits ------ ------ ------ ----- -------- At December 31, 1992 $62,532 $38,945 $37,482 $138,959 8.9 At December 31, 1993 43,862 31,449 16,520 91,831 5.7
SHORT-TERM BORROWINGS The following table sets forth certain information concerning the Company's short-term borrowings, which consist of federal funds purchased and securities sold under agreements to repurchase.
Years ended December 31, --------------------------- 1991 1992 1993 ---- ---- ---- Federal funds purchased: Amount outstanding at period end $14,350 $19,300 $14,650 Weighted average interest at period end 3.19% 3.12% 2.75% Maximum amount at any month end during period $25,775 $41,625 27,725 Average amount outstanding during period 21,674 21,261 18,046 Weighted average interest rate during period 5.17% 3.18% 2.70% Securities sold under repurchase agreements: Amount outstanding at period end $39,158 $17,091 $31,149 Weighted average interest at period end 4.40% 2.50% 2.50% Maximum amount at any month end during period $49,245 $44,418 $31,289 Average amount outstanding during period 41,109 22,571 23,607 Weighted average interest rate during period 5.46% 3.24% 2.26%
Hancock Bank LA acts as a correspondent bank for 70 Louisiana financial institutions. Many of those banks maintain federal funds relationships which accounts for most of the volume of federal funds bought and sold. -34- 36 LIQUIDITY Liquidity represents an institution's ability to provide funds to satisfy demands from depositors, borrowers and other commitments by either converting assets into cash or accessing new or existing sources of incremental funds. The principal sources of funds which provide liquidity are customer deposits, payments of interest and principal on loans, maturities in and sales of investment securities, earnings and borrowings. At December 31, 1993, cash and due from banks, investment securities, federal funds sold and repurchase agreements were 56.0% of total deposits, as compared to 58.3% at December 31, 1992. The Company depends upon the dividends paid to it from the Banks as a principal source of funds for its debt service requirements. As of December 31, 1993, there was approximately $50 million available to be dividended up to the Company from the Banks. CAPITAL RESOURCES Risk-based and leverage capital ratios for the Company and the Banks for the periods indicated are shown in the following table:
Risk-Based Capital Ratios Tier 1 Leverage -------------------------------------------------------- -------------------------- Total Tier 1 Ratio -------------------------- -------------------------- -------------------------- December 31, December 31, December 31, December 31, December 31, December 31, 1992 1993 1992 1993 1992 1993 ---- ---- ---- ---- ---- ---- Hancock Bank MS 14.56% 15.45% 13.65% 14.62% 7.50% 8.14% Hancock Bank LA 12.44 14.26 11.31 13.01 5.55 6.92 Company 15.62 15.42 14.09 14.49 7.03 7.62
Risk-based capital requirements are intended to make regulatory capital more sensitive to risk elements of the Company. Currently, the Company is required to maintain a minimum risk-based capital ratio of 8.0%, with not less than 4.0% in Tier 1 capital. In addition, the Company must maintain a minimum Tier 1 leverage ratio (Tier 1 capital to total assets) of at least 4.0% based upon the regulators latest composite rating of the institution. -35- 37 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 expenses 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 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. 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 -36- 38 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. IMPACT OF INFLATION: Unlike most industrial companies, the assets and liabilities of financial institutions such as the Banks are primarily monetary in nature. Therefore, interest rates have a more significant effect on the Banks' performance than the effect of general levels of inflation on the price of goods and services. While interest rates earned and paid by the Banks are affected to a degree by the rate of inflation, and noninterest income and expenses can be affected by increasing rates of inflation, the Company believes that the effects of inflation are generally manageable through asset/liability management. -37- 39 ITEM 2 - PROPERTIES The Company's main offices are located at One Hancock Plaza, Gulfport, Mississippi. The building has fourteen stories, of which seven are utilized by the Company. The remaining seven stories are presently leased to outside parties. The building is leased from the City of Gulfport in connection with a urban development revenue bond issue with a present balance of $3,820,000. The lease payments by Hancock Bank MS, which are equivalent in amount to the payments of principal and interest on the bonds, are used by the City to make payments on the bonds. Hancock Bank MS, however, effectively has ownership of the building since title will revert when all outstanding bonds have been paid. For this reason, the Company carries the building as an asset and the bonds as a long term payable on its balance sheet. The bonds mature at various dates through 1997. The following banking offices in Mississippi and Louisiana are held in fee (number of locations shown in parenthesis): Bay St. Louis, MS (2) Ocean Springs, MS (3) Biloxi, MS (2) Orange Grove, MS (1) D'Iberville, MS (1) Pascagoula, MS (4) Escatawpa, MS (1) Pass Christian, MS (1) Gautier, MS (1) Picayune, MS (4) Gulfport, MS (3) Poplarville, MS (1) Long Beach, MS (2) Waveland, MS (1) Lyman, MS (1) Baker, LA (1) Mississippi City, MS (1) Baton Rouge, LA (13) Moss Point, MS (2)
The following banking offices in Mississippi and Louisiana are leased under agreements with unexpired terms of from one to twelve years including renewal options (number of locations shown in parenthesis): Bay St. Louis, MS (1) Pascagoula, MS (1) Biloxi, MS (1) Vancleave, MS (1) Diamondhead, MS (1) Baton Rouge, LA (1) Gulfport, MS (3)
-38- 40 In addition to the above, Hancock Bank MS owns land and other properties acquired through foreclosures of loans. The major item is approximately 3,700 acres of timber land in Hancock County, Mississippi, which Hancock Bank MS acquired by foreclosure in the 1930's. ITEM 3 - LEGAL PROCEEDINGS Not applicable. ITEM 4 - SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS Not applicable. PART II ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDERS MATTERS The information under the caption "Market Information" on page 6 of the Company's 1993 Annual Report to Stockholders (filed with the Registrant's definitive proxy materials on January 25, 1994 and incorporated herein by reference). ITEM 6 - SELECTED FINANCIAL DATA The information under the caption "Consolidated Summary of Selected Financial Information" on Page 7 of the Company's 1993 Annual Report to Stockholders (filed with the Registrant's definitive proxy materials on January 25, 1994 and incorporated herein by reference). -39- 41 ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" on Pages 32 and 33 of the Company's 1993 Annual Report to Stockholders (filed with the Registrant's definitive proxy materials on January 25, 1994 and incorporated herein by reference). ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The following consolidated financial statements of the Company and subsidiaries, and the independent auditors' report, appearing on Pages 18 through 30 of the Company's 1993 Annual Report to Stockholders (filed with the Registrant's definitive proxy materials on January 25, 1994 and incorporated herein by reference): Consolidated Balance Sheets on Page 18 Consolidated Statements of Earnings on Page 19 Consolidated Statements of Stockholders' Equity on Page 20 Consolidated Statements of Cash Flows on Page 21 Notes to Consolidated Financial Statements on Pages 22 through 30 Independent Auditors' Report on Page 31 ITEM 9 - DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. PART III ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT For information responsive to this Item, see "Election of Directors" (Pages 2-6) and "Management Compensation" (Pages 10-15) in the Proxy Statement for the Annual Meeting of Stockholders held February 24, 1994 which was filed by the Registrant in definitive form with the Commission on January 25, 1994 and is incorporated herein by reference. -40- 42 ITEM 11 - EXECUTIVE COMPENSATION For information responsive to this item see "Management Compensation" (Pages 10-15) in the Proxy Statement for the Annual Meeting of Stockholders held February 24, 1994 which was filed by the Registrant in definitive form with the Commission on January 25, 1994 and is incorporated herein by reference. ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT For information responsive to this item see "Principal Stockholders" (Page 7) and "Election of Directors" (Pages 2-6) in the Proxy Statement for the Annual Meeting of Stockholders held February 24, 1994 which was filed by the Registrant in definitive form with the Commission on January 25, 1994 and is incorporated herein by reference. ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS For information responsive to this item see "Certain Transactions and Relationships" (Page 16) in the Proxy Statement for the Annual Meeting of Stockholders held February 24, 1994 which was filed by the Registrant in definitive form with the Commission on January 25, 1994 and is incorporated herein by reference. PART IV ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K HANCOCK HOLDING COMPANY AND CONSOLIDATED SUBSIDIARIES (A) 1. AND 2. CONSOLIDATED FINANCIAL STATEMENTS: The following have been incorporated herein from the Company's 1993 Annual Report to Stockholders (filed with the Registrant's definitive proxy materials on January 25, 1994 and incorporated herein by reference): - Independent Auditors' Report -41- 43 - Consolidated Balance Sheets as of December 31, 1993 and 1992. - Consolidated Statements of Earnings for the three years ended December 31, 1993 - Consolidated Statements of Stockholders' Equity for the three years ended December 31, 1993 - Consolidated Statements of Cash Flows for the three years ended December 31, 1993 - Notes to Consolidated Financial Statements for the three years ended December 31, 1993 All other financial statements and schedules are omitted as the required information is inapplicable or the required information is presented in the consolidated financial statements or related notes. (a) 3. Exhibits: (2.1) Agreement and Plan of Merger dated May 30, 1985 among Hancock Holding Company, Hancock Bank and Pascagoula-Moss Point Bank (filed as Exhibit 2 to the Registrant's Form 8-K dated June 6, 1985 and incorporated herein by reference). (2.2) Amendment dated July 9, 1985 to Agreement and Plan of Merger dated May 30, 1985 among Hancock Holding Company, Hancock Bank and Pascagoula-Moss Point Bank (filed as Exhibit 19 to Registrant's Form 10-Q for the quarter ended June 30, 1985 and incorporated herein by reference). (2.3) Stock Purchase Agreement dated February 12, 1990 among Hancock Holding Company, Metropolitan Corporation and Metropolitan National Bank (filed as Exhibit 2.3 to Registrant's Form 10-K for the year ended December 31, 1989 and incorporated herein by reference). (2.4) Modified Purchase and Assumption Agreement dated August 2, 1990, among Hancock Bank of Louisiana and the Federal Deposit Insurance Corporation, receiver of American Bank and Trust Company of Baton Rouge, Louisiana (filed as Exhibit 2.1 to the Registrant's Form 10-Q for the quarter ended June 30, 1990 and incorporated herein by reference). -42- 44 (2.5) Agreement and Plan of Reorganization dated November 30, 1993 among Hancock Holding Company, Hancock Bank of Louisiana and First State Bank and Trust Company of East Baton Rouge Parish, Baker, Louisiana (filed as Exhibit 2.5 to the Registrant's Form 10-K dated December 31, 1993). (3.1) Amended and Restated Articles of Incorporation dated November 8, 1990 (filed as Exhibit 3.1 to the Registrant's Form 10-K for the year ended December 31, 1990 and incorporated herein by reference). (3.2) Amended and Restated Bylaws dated November 8, 1990 (filed as Exhibit 3.2 to the Registrant's Form 10-K for the year ended December 31, 1990 and incorporated herein by reference). (3.3) Articles of Amendment to the Articles of Incorporation of Hancock Holding Company, dated October 16, 1991 (filed as Exhibit 4.1 to the Registrant's Form 10-Q for the quarter ended September 30, 1991). (3.4) Articles of Correction, filed with Mississippi Secretary of State on November 15, 1991 (filed as Exhibit 4.2 to the Registrant's Form 10-Q for the quarter ended September 30, 1991). (3.5) Articles of Amendment to the Articles of Incorporation of Hancock Holding Company, adopted February 13, 1992 (filed as Exhibit 3.5 to the Registrant's Form 10-K for the year ended December 31, 1992 and incorporated herein by reference). (3.6) Articles of Correction, filed with Mississippi Secretary of State on March 2, 1992 (filed as Exhibit 3.6 to the Registrant's Form 10-K for the year ended December 31, 1992 and incorporated herein by reference). (4.1) Specimen stock certificate (reflecting change in par value from $10.00 to $3.33, effective March 6, 1989) (filed as Exhibit 4.1 to the Registrant's Form 10-Q for the quarter ended March 31, 1989 and incorporated herein by reference). -43- 45 (4.2) By executing this Form 10-K, the Registrant hereby agrees to deliver to the Commission upon request copies of instruments defining the rights of holders of long-term debt of the Registrant or its consolidated subsidiaries or its unconsolidated subsidiaries for which financial statements are required to be filed, where the total amount of such securities authorized thereunder does not exceed 10 percent of the total assets of the Registrant and its subsidiaries on a consolidated basis. (10.1) Description of Hancock Bank Executive Supplemental Reimbursement Plan, as amended (provided on page 14 of the Registrant's definitive proxy statement for its annual shareholders' meeting on February 24, 1994 filed by the Registrant on January 25, 1994 and incorporated herein by reference). (10.2) Description of Hancock Bank Automobile Plan (provided on page 14 of the Registrant's definitive proxy statement for its annual shareholders' meeting on February 24, 1994 filed by the Registrant on January 25, 1994 and incorporated herein by reference). (10.3) Description of Deferred Compensation Arrangement for Directors (provided on pages 10-15 of the Registrant's definitive proxy statement for its annual shareholders' meeting on February 25, 1994 filed by the Registrant on January 25, 1994 and incorporated herein by reference). (10.4) Site Lease Agreement between Hancock Bank and City of Gulfport, Mississippi dated as of March 1, 1989 (filed as Exhibit 10.4 to the Registrant's Form 10-K for the year ended December 31, 1989 and incorporated herein by reference). (10.5) Project Lease Agreement between Hancock Bank and City of Gulfport, Mississippi dated as of March 1, 1989 (filed as Exhibit 10.5 to the Registrant's Form 10-K for the year ended December 31, 1989 and incorporated herein by reference). -44- 46 (10.6) Deed of Trust dated as of March 1, 1989 from Hancock Bank to Deposit Guaranty National Bank as trustee (filed as Exhibit 10.6 to the Registrant's Form 10-K for the year ended December 31, 1989 and incorporated herein by reference). (10.7) Trust Indenture between City of Gulfport, Mississippi and Deposit Guaranty National Bank dated as of March 1, 1989 (filed as Exhibit 10.7 to the Registrant's Form 10-K for the year ended December 31, 1989 and incorporated herein by reference). (10.8) Guaranty Agreement dated as of March 1, 1989 from Hancock Bank to Deposit Guaranty National Bank as trustee (filedas Exhibit 10.8 to the Registrant's Form 10-K for the year ended December 31, 1989 and incorporated herein by reference). (10.9) Bond Purchase Agreement dated as of February 23, 1989 among Hancock Bank, J. C. Bradford & Co. and City of Gulfport, Mississippi (filed as Exhibit 10.9 to the Registrant's Form 10-K for the year ended December 31, 1989 and incorporated herein by reference). -45- 47 (13) Annual Report to Stockholders for year ending December 31, 1993 (furnished for the information of the Commission only and not deemed "filed" except for those portions which are specifically incorporated herein by reference). (21) Proxy Statement for the Registrant's Annual Meeting of Shareholders on February 24, 1994 (deemed "filed" for the purposes of this Form 10-K only for those portions which are specifically incorporated herein by reference). (22) Subsidiaries of the Registrant. Jurisdiction Holder of Name Of Incorporation Outstanding Stock (1) - ---- ---------------- --------------------- Hancock Bank Mississippi Hancock Holding Company Hancock Bank of Louisiana Louisiana Hancock Holding Company Hancock Bank Securities Mississippi Hancock Bank Corporation Hancock Insurance Agency Mississippi Hancock Bank Town Properties, Inc. Mississippi Hancock Bank The Gulfport Building, Inc. Mississippi Hancock Bank of Mississippi Harrison Financial Services, Mississippi Hancock Bank Inc. Hancock Mortgage Corporation Mississippi Hancock Bank Harrison Life Insurance Mississippi 79% owned by Hancock Company Bank (1) All are 100% owned except as indicated. (23) Consent of Independent Accountants. -46- 48 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. HANCOCK HOLDING COMPANY DATE February 1, 1994 /s/ LEO W. SEAL, JR. ___________________________________ By Leo W. Seal, Jr., President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. /s/ LEO W. SEAL, JR. President and Director February 1, 1994 ______________________________ (Principal Executive, Leo W. Seal, Jr. Financial, and Accounting Officer) /s/ JOSEPH F. BOARDMAN, JR. Director, February 1, 1994 ______________________________ Chairman of the Board Joseph F. Boardman, Jr. /s/ THOMAS W. MILNER, JR. Director February 1, 1994 ______________________________ Thomas W. Milner, Jr. /s/ GEORGE A. SCHLOEGEL Director, February 1, 1994 ______________________________ Vice-Chairman of the Board George A. Schloegel /s/ DR. HOMER C. MOODY, JR. Director February 1, 1994 ______________________________ Dr. Homer C. Moody, Jr. /s/ A. F. DANTZLER Director February 1, 1994 ______________________________ A. F. Dantzler /s/ CHARLES H. JOHNSON Director February 1, 1994 ______________________________ Charles H. Johnson /s/ L. A. KOENENN, JR. Director February 1, 1994 ______________________________ L. A. Koenenn, Jr. /s/ VICTOR MAVAR Director February 1, 1994 ______________________________ Victor Mavar -47- EX-2.5 2 AGREEMENT AND PLAN OF REORGANIZATION 1 EXHIBIT 2.5 AGREEMENT AND PLAN OF REORGANIZATION 2 AGREEMENT AND PLAN OF REORGANIZATION TABLE OF CONTENTS ARTICLE 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.1 "Agreement" . . . . . . . . . . . . . . . . . . . . . . 1 1.2 "Baker" . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 "Book Value" . . . . . . . . . . . . . . . . . . . . . 1 1.4 "Business Day" . . . . . . . . . . . . . . . . . . . . 1 1.5 "Closing" . . . . . . . . . . . . . . . . . . . . . . . 1 1.6 "Effective Date" . . . . . . . . . . . . . . . . . . . 2 1.7 "FDIC" . . . . . . . . . . . . . . . . . . . . . . . . 2 1.8 "FRB" . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.9 "HHC" . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.10 "Hancock Bank" . . . . . . . . . . . . . . . . . . . . 2 1.11 "OFI" . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.12 "Party" . . . . . . . . . . . . . . . . . . . . . . . . 2 1.13 "Person" . . . . . . . . . . . . . . . . . . . . . . . 2 1.14 "SEC" . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.15 "Valuation Date" . . . . . . . . . . . . . . . . . . . 3 ARTICLE 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 THE MERGER AND RELATED MATTERS . . . . . . . . . . . . . . . . . . . . . . 3 2.1 Merger . . . . . . . . . . . . . . . . . . . . . . . . 3 2.2 Effect of Merger . . . . . . . . . . . . . . . . . . . 3 2.3 Notice to Depositors . . . . . . . . . . . . . . . . . . 3 ARTICLE 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 CONVERSION OF STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 3.1 Conversion Amount . . . . . . . . . . . . . . . . . . . 3 3.2 Conversion . . . . . . . . . . . . . . . . . . . . . . 4 3.3 Adjustments . . . . . . . . . . . . . . . . . . . . . . 5 i 3 ARTICLE 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 BAKER'S COVENANTS AND AGREEMENTS . . . . . . . . . . . . . . . . . . . . . 6 4.1 Operation of Business . . . . . . . . . . . . . . . . . 6 4.2 Preservation of Business . . . . . . . . . . . . . . . 7 4.3 Insurance . . . . . . . . . . . . . . . . . . . . . . . 8 4.4 Stockholders' Meeting . . . . . . . . . . . . . . . . . 8 4.5 Affiliates . . . . . . . . . . . . . . . . . . . . . . . 8 4.6 Due Diligence . . . . . . . . . . . . . . . . . . . . . 8 4.7 Surrender of Charter . . . . . . . . . . . . . . . . . . 9 4.8 Baker Financial and Other Reports . . . . . . . . . . . 9 ARTICLE 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 BAKER'S REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . 9 5.1 Organization and Authority . . . . . . . . . . . . . . 9 5.2 Authorization . . . . . . . . . . . . . . . . . . . . . 9 5.3 Baker Financial and Other Reports . . . . . . . . . . . 10 5.4 Investment and Loan Portfolios . . . . . . . . . . . . 10 5.5 Capital Structure of Baker . . . . . . . . . . . . . . . 11 5.6 Title to Properties . . . . . . . . . . . . . . . . . . 11 5.7 Accuracy of Information . . . . . . . . . . . . . . . . 11 5.8 Compliance with Laws and Contracts . . . . . . . . . . . 11 5.9 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 11 5.10 Litigation . . . . . . . . . . . . . . . . . . . . . . . 11 5.11 Registration and Proxy Statements . . . . . . . . . . . 12 5.12 Commitments and Contracts . . . . . . . . . . . . . . . 12 5.13 Liabilities . . . . . . . . . . . . . . . . . . . . . . 12 5.14 Vote Required . . . . . . . . . . . . . . . . . . . . . 13 5.15 Continuity of Interest . . . . . . . . . . . . . . . . . 13 5.16 Continuity of Business Enterprise . . . . . . . . . . . 13 ARTICLE 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 HHC'S REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS . . . . . . . . 13 6.1 Organization and Authority . . . . . . . . . . . . . . . 13 6.2 Capitalization of HHC . . . . . . . . . . . . . . . . . 14 6.3 Authorization . . . . . . . . . . . . . . . . . . . . . 14 6.4 Conduct of Business . . . . . . . . . . . . . . . . . . 14 6.5 Registration of Stock . . . . . . . . . . . . . . . . . 14 6.6 Continuity of Business Enterprise . . . . . . . . . . . 15 ii 4 ARTICLE 7 .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 7.1 Conditions to Each Party's Obligations to Effect the Merger. . . . . . . . . . . . . . . . . . . . . . . 15 a. Stockholder Approval. . . . . . . . . . . . . . . 15 b. Regulatory Approvals . . . . . . . . . . . . . . 15 c. Registration Statement. . . . . . . . . . . . . . 15 d. Pooling Treatment . . . . . . . . . . . . . . . . 15 e. Tax Opinion . . . . . . . . . . . . . . . . . . . 16 7.2 Conditions to Obligations of Baker to Effect the Merger. . . . . . . . . . . . . . . . . . . . . . . . . 16 a. Representations and Warranties. . . . . . . . . . 16 B. Performance of Obligations . . . . . . . . . . . 16 c. Legal Opinion . . . . . . . . . . . . . . . . . . 16 7.3 Conditions to Obligations of HHC and Hancock Bank to Effect the Merger . . . . . . . . . . . . . . . . . . . 17 a. Representations and Warranties. . . . . . . . . . 17 b. Performance of Obligations. . . . . . . . . . . . 17 c. Legal Opinion . . . . . . . . . . . . . . . . . . 17 ARTICLE 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 8.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . 18 8.2 Deliveries at Closing . . . . . . . . . . . . . . . . . . 18 8.3 Documents . . . . . . . . . . . . . . . . . . . . . . . . 18 ARTICLE 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 EMPLOYMENT MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 9.1 Employees . . . . . . . . . . . . . . . . . . . . . . . . 18 9.2 Retirement Plan . . . . . . . . . . . . . . . . . . . . . 19 9.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 19 ARTICLE 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 10.1 Parties' Joint Remedies . . . . . . . . . . . . . . . . . 19 10.2 Baker's Remedies . . . . . . . . . . . . . . . . . . . . 19 10.3 HHC's Remedies . . . . . . . . . . . . . . . . . . . . . 20 10.4 Attorney Fees . . . . . . . . . . . . . . . . . . . . . . 20 iii 5 ARTICLE 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 11.1 Termination . . . . . . . . . . . . . . . . . . . . . . . 20 ARTICLE 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 APPRAISAL RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 12.1 Appraisal Rights of Baker . . . . . . . . . . . . . . . . 20 ARTICLE 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 13.1 Entire Agreement . . . . . . . . . . . . . . . . . . . . 21 13.2 Survival of Representations, Warranties and Agreements . 21 13.3 Headings . . . . . . . . . . . . . . . . . . . . . . . . 21 13.4 Duplicate Originals . . . . . . . . . . . . . . . . . . . 21 13.5 Governing Law . . . . . . . . . . . . . . . . . . . . . . 21 13.6 Successors; No Third Party Beneficiaries . . . . . . . . 21 13.7 Modification; Assignment . . . . . . . . . . . . . . . . 21 13.8 Notice . . . . . . . . . . . . . . . . . . . . . . . . . 21 13.9 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . 22 13.10 Costs, Fees and Expenses . . . . . . . . . . . . . . . . 23 13.11 Press Releases . . . . . . . . . . . . . . . . . . . . . 23 13.12 Severability . . . . . . . . . . . . . . . . . . . . . . 23 13.13 Mutual Covenant of Best Efforts and Good Faith . . . . . 23 EXHIBITS AND SCHEDULES Exhibit A Letter of Transmittal Exhibit B Form of Affiliate Agreement Exhibit C Joinder of Shareholder Exhibit D Cashier's Certificate Schedule A First State Bank Leased Properties Schedule B First State Bank List of Claims Schedule C First State Bank List of Contracts iv 6 AGREEMENT AND PLAN OF REORGANIZATION THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement"), dated as of November 30, 1993, is made between First State Bank & Trust Company of East Baton Rouge Parish, Baker, Louisiana, a Louisiana state bank ("Baker"), Hancock Holding Company, a Mississippi corporation ("HHC"), and Hancock Bank of Louisiana, a Louisiana state bank ("Hancock Bank"), a wholly-owned subsidiary of Hancock Holding Company. WHEREAS, by a two-thirds affirmative vote, the respective Boards of Directors of HHC, Hancock Bank, and Baker have approved the acquisition of Baker by HHC and subsequent merger of Baker with and into Hancock Bank (the "Merger"); NOW, THEREFORE, it is agreed: ARTICLE 1 DEFINITIONS Certain Defined Term. As used in this Agreement, the following terms shall have the following meanings (such meaning to be equally applicable to both the singular and plural forms of the terms defined): 1.1 "Agreement" shall mean this Agreement and Plan of Reorganization by and among HHC, Hancock Bank, and Baker and any amendments thereto. References to Articles, Sections, Schedules and the like refer to the Articles, Sections, Schedules and the like of this Agreement unless otherwise indicated. 1.2 "Baker" means First State Bank & Trust Company of East Baton Rouge Parish, a Louisiana state bank chartered, organized and existing under and pursuant to the laws of the State of Louisiana and maintaining its principal place of business at 3033 Ray Weiland, in Baker, East Baton Rouge Parish, Louisiana. 1.3 "Book Value" with respect to stockholders' equity of Baker shall mean the difference between the dollar amount of total liabilities of Baker reflected on the books and records of Baker as of the Valuation Date and the dollar amount of total assets of Baker reflected on the books and records of Baker as of Valuation Date. 1.4 "Business Day" shall mean a day on which Hancock Bank is open for business and which is not a Saturday, Sunday or legal bank holiday. 1.5 "Closing" The closing (the "Closing") of the transactions contemplated herein will take place at Hancock Bank's office at 3854 American Way, in Baton Rouge, Louisiana, on a date that is mutually agreed to by both parties ("Closing Date") that is within thirty (30) days following the later of the date of receipt of all applicable regulatory approvals relating to the transactions contemplated herein, the expiration of all applicable statutory and 1 7 regulatory waiting periods relative thereto, or the date the Registration Statement (the "Registration Statement") filed with the SEC is declared effective, or such later date as may be agreed to by the parties. At the Closing the parties shall each deliver to the other such evidence of the satisfaction of the conditions to the Merger as may reasonably be required (including material required to be delivered under this Agreement). 1.6 "Effective Date" The Agreement shall be filed with and recorded by the Commissioner of Financial Institutions of Louisiana immediately following, or concurrently with, the Closing, and the Merger shall be effective at Midnight, Central (Standard or Daylight, whichever is in effect in Baton Rouge, Louisiana on said date) Time, on the date the Commissioner issues a certificate of merger. 1.7 "FDIC" means that agency of the United States of America known as the Federal Deposit Insurance Corporation, or any successor United States governmental agency which insures deposits of commercial banks. 1.8 "FRB" means that agency of the United States of America which acts in the capacity of a governmental central bank known as the Federal Reserve System represented by actions of its Board of Governors, having regulatory authority over bank holding companies, or any successor United States governmental agency performing the function of exercising such regulatory authority. 1.9 "HHC" means Hancock Holding Company, a corporation chartered, organized and existing under and pursuant to the laws of the State of Mississippi and maintaining its principal place of business at One Hancock Plaza, in Gulfport, Harrison County, Mississippi. 1.10 "Hancock Bank" means Hancock Bank of Louisiana, a Louisiana state bank chartered, organized and existing under and pursuant to the laws of the State of Louisiana and maintaining its principal place of business at One American Place in Baton Rouge, East Baton Rouge Parish, Louisiana. 1.11 "OFI" means the Office of Financial Institutions of the State of Louisiana having regulatory authority over Hancock Bank and Baker or any successor Louisiana governmental agency exercising such regulatory authority. 1.12 "Party" shall mean HHC, Hancock Bank, or Baker and "Parties" shall mean HHC, Hancock Bank, and Baker. 1.13 "Person" shall mean any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. 2 8 1.14 "SEC" means that agency of the United State of America known as the Securities and Exchange Commission. 1.15 "Valuation Date" shall mean December 31, 1993. ARTICLE 2 THE MERGER AND RELATED MATTERS 2.1 Merger. On the Effective Date, Baker shall be merged with and into Hancock Bank in accordance with the provisions of this Agreement and in accordance with the provisions of applicable law, rules and regulations. For federal income tax purposes, it is intended that the Merger shall qualify as a non-taxable reorganization under and in accordance with Section 368(a)1(A) and Section 368 (a)(2)(D) of the Internal Revenue Code of 1986, as amended, and the applicable IRS regulations. The Parties expect that the Merger will further certain of their business objectives, including, and without limitation, the expansion of operations as a financial institution. 2.2 Effect of Merger. Upon consummation of the Merger, the separate existence of Baker shall cease and Hancock Bank shall continue as the surviving corporation. The name of Hancock Bank, as the surviving corporation, shall by virtue of the Merger remain unchanged. On the Effective Date, as hereinabove provided, all of the assets and property of every kind and character, real, personal and mixed, tangible and intangible, choses in action, rights, and credits then owned by Baker, or which would inure to it, shall immediately by operation of law and without any conveyance or transfer or without any further action or deed, be vested in and become the property of Hancock Bank, which shall have, hold, and enjoy the same in its own right as fully and to the same extent as the same were possessed, held, and enjoyed by Baker prior to such merger; and Hancock Bank shall be deemed to be and shall be a continuation of the original entities and all of the rights and obligations of Baker shall remain unimpaired, and Hancock Bank, on the Effective Date of the Merger shall succeed to all such rights, obligations, duties and liabilities connected therewith. 2.3 Notice to Depositors. Hancock Bank shall give notice of the Merger within the time and in the manner required by law or regulation, if any, to depositors of Baker. ARTICLE 3 CONVERSION OF STOCK 3.1 Conversion Amount. The Parties agree that, by virtue of the Merger, shares of Baker common stock shall be converted into shares of HHC common stock. The conversion amount shall be determined based on 1.5 times the book value of the outstanding stock of Baker calculated as of the Valuation Date, except $86,625 representing the first quarter, 1994 dividend, which shall be based on 1.0 times said amount. 3 9 3.2 Conversion. Shares of HHC common stock shall be issued to holders of Baker common stock plus cash for any fractional shares as follows: a. HHC shall calculate the conversion amount for each of Baker's stockholders by dividing the total conversion amount by the number of Baker's shares outstanding on the Effective Date and multiplying the per share value so determined by the number of shares owned by each holder as shown on a certified list prepared by Baker on the Effective Date. b. HHC shall issue to each Baker stockholder the number of whole shares of HHC's stock calculated by dividing the conversion amount for each stockholder by the market value of a share of HHC's common stock. Market value shall be deemed to mean the average of the daily average of the high and low prices of such common stock, as reported on the National Market Systems NASDAQ quotation service ("NASDAQ") for all of the trading days during the month of December, 1993 ("Market Value"). c. Notwithstanding any other provision hereof, each holder of shares of Baker's common stock who would otherwise have been entitled to receive a fraction of a share of HHC's common stock (after taking into account all certificates delivered by such holder) shall receive, in lieu thereof, cash in an amount equal to such fractional part of a share of HHC's common stock multiplied by the Market Value of such common stock. d. On or after the Effective Date, each holder of a certificate or certificates theretofore representing outstanding shares of Baker's common stock (any such certificate being hereinafter referred to as a "Certificate") other than a holder of Certificates who has elected to exercise dissenters' rights pursuant to Louisiana Revised Statutes 6:376 shall surrender the same to HHC or its agent for cancellation and each such holder shall be entitled upon such surrender to receive in exchange therefor certificate(s) representing the number of shares of HHC common stock to which such holder is entitled as provided herein and a check in an amount equal to the amount of cash, if any, without interest, to which such holder is entitled. Immediately after the Effective Date, HHC shall mail to each holder of record of Baker's common shares a form letter of transmittal and instructions, in the form of that set forth in Exhibit A, for use in effecting the surrender of the Certificates representing shares of Baker common stock to be exchanged for shares of HHC common stock and cash pursuant to this Agreement. Until so surrendered, each Certificate shall be deemed for all purposes to evidence ownership of the number of shares of HHC common stock into which the shares represented by such Certificates have been changed or converted as aforesaid. Certificates surrendered for exchange by any person who is an "affiliate" of Baker for purposes of Rule 145(c) under the Securities Act of 1933, as amended, shall not be exchanged for certificates representing shares of HHC common stock until Baker has received the written 4 10 agreement of such person contemplated by Article 4 of this Agreement. If any certificate for shares of Baker common stock is to be issued in a name other than that in which a Certificate surrendered for exchange is issued, the Certificate so surrendered shall be properly endorsed and otherwise in proper form for transfer. e. HHC reserves the right to withhold any cash dividends payable in respect to Certificates not surrendered by the holder thereof after the sixth (6th) month following the Effective Date. Cash dividends so withheld will be paid to the holder thereof, without interest, upon proper presentation as provided in this Section 3.2. In the event that any such holder fails to surrender either such Certificate or the documents and information contemplated by the letter of transmittal and instructions, set forth in Exhibit A attached hereto, on or before the fifth (5th) anniversary of the Effective Date, HHC shall not have any obligation to deliver the amount to which any such holder would have been entitled in-accordance with the provisions of this Agreement and any such holder shall not be entitled to receive from HHC any amount in substitution and exchange for each share cancelled and extinguished in accordance with this Agreement. f. Upon the Effective date, the stock transfer books of Baker shall be closed and no transfer of Baker common stock shall thereafter be made or recognized. Any other provision of this Agreement notwithstanding, neither HHC or its agent nor any party to the Merger shall be liable to a holder of Baker common stock for any amount paid or property delivered in good faith to a public official pursuant to any applicable abandoned property, escheat or similar law. g. No conversion under this Article 3 shall be made in respect of any share of Baker common stock as to which a shareholder of Baker has elected to exercise dissenters' rights pursuant to Louisiana Revised Statute 6:376, if any, until such time as such shareholder shall have effectively lost dissenters' rights. 3.3 Adjustments. It is understood that the book value of Baker as reflected in its books and records may not be complete as of the Valuation Date due to lack of complete information concerning Baker's operations through such date and that certain transactions occurring on the Valuation Date may not have been posted on such date or are carried in Baker's suspense accounts as of the Valuation Date. Baker, as soon as possible after the Valuation Date, shall provide HHC with a Statement of Financial Condition as of the Valuation Date reflecting the balances of all asset, liability and stockholders' equity accounts included in Baker's books and records maintained in accordance with generally accepted accounting principles consistently applied. HHC shall have access to Baker's books and records in order to confirm to its satisfaction that all material items have been recorded and that the assets and liabilities are fairly reported in Baker's Statement of Financial Condition. In the event any omissions or errors are discovered, the Parties agree to make any required adjustments to the Statement of Financial Condition. The Parties agree that the process of 5 11 financial statement preparation, review and adjustment, if necessary, should be completed as soon as possible so that closing can occur on the Effective date. ARTICLE 4 BAKER'S COVENANTS AND AGREEMENTS 4.1 Operation of Business. Between the date hereof and the Effective Date, Baker will operate its business solely in the ordinary course consistent with prudent business practices and in compliance with all applicable laws, regulations and rules; and, without prior written consent of HHC, it will not: a. Amend or otherwise change its articles of incorporation or bylaws, as each such document is in effect on the date hereof; b. Issue or sell, or authorize for issuance or sale, the shares of Baker or any additional shares of any class of capital stock of Baker; c. Issue, grant, or enter into any subscription, option, warrant, right, convertible security, or other agreement or commitment of any character obligating Baker to issue securities; d. Declare, set aside, make, or pay any dividend or other distribution with respect to its capital stock, provided, however, that Baker shall to the extent lawfully permitted declare and pay dividends for the purpose of allowing Baker's stockholders to receive the normal and customary fourth quarter, 1993 and first quarter, 1994 dividend in the amount of $86,625, respectfully, subject to the provisions and limitations set forth in Article 3 herein; e. Redeem, purchase, or otherwise acquire, directly or indirectly, any of its capital stock; f. Authorize any capital expenditure(s) which, individually or in the aggregate, exceed $20,000; g. Extend any new, or renew any existing, loan, credit, lease, or other type of financing which individually exceeds $50,000; h. Except in the ordinary course of business, sell, pledge, dispose of, or encumber, or agree to sell, pledge, dispose of, or encumber, any assets of Baker; i. Acquire (by merger, consolidation, lease or other acquisition of stock, ownership interests or assets) any corporation, partnership, or other business organization or division thereof, or enter into any contract, agreement, commitment, 6 12 or arrangement with respect to any of the foregoing, (ix) excluding normal and customary banking transactions, incur any indebtedness for borrowed money, issue any debt securities, or enter into or modify any contract, agreement, commitment, or arrangement with respect thereto, (x) enter into, amend, or terminate any employment agreement, relationship or responsibilities with any director, officer, or key employee or representative of Baker, or enter into, amend, or terminate any employment agreement with any other person otherwise than in the ordinary course of business, or take any action with respect to the grant or payment of any severance or termination pay except as expressly consented to in writing by HHC; j. Enter into, extend, or renew any lease for office or other space; k. Except as required by law, adopt or amend any bonus, profit sharing, compensation, stock option, pension, retirement, deferred compensation, employment, or other employee benefit plan, agreement, trust, fund, or arrangement for the benefit or welfare of any officer, employee or representative of Baker; l. Grant any increase in compensation to any director, officer, or key employee or representative of Baker; m. Grant any increase in compensation to any other employee or representative of Baker except in the ordinary course of business consistent with past practice; or n. Take any action or omit to take any action which would cause any of Baker's representations or warranties to be untrue or misleading in any material respect or any covenant of Baker under this Agreement incapable of being performed; o. Subject to the fiduciary duty of the Board of Directors, encourage, solicit or initiate offers from or negotiate with, or provide information or assistance to, any party other than HHC with respect to a merger, sale of assets, or similar transaction involving it, its common stock or its assets; provided, however, that if it receives, from time to time, an inquiry, proposal, plan, offer, bid or contract from any third party with respect to any of the foregoing, it will promptly notify HHC, and, subject to the fiduciary duty of the Board of Directors, will promptly furnish HHC with a copy of any document received or a summary of any other communication with respect thereto; or p. Agree in writing or otherwise to do any of the foregoing. 4.2 Preservation of Business. Between the date hereof and the Effective Date, Baker will use its best efforts to preserve its existing business and to keep its business 7 13 organization intact, including its present relationships with its employees and customers and others having business relations with it. 4.3 Insurance. Pending the Closing, Baker shall cause the real property owned by Baker to be insured at full insurable value against all insurable risks under policies with reasonable deductibles and in full compliance with any co-insurance provision. 4.4 Stockholders' Meeting. Baker will promptly give proper notice of a stockholders' meeting for the purpose of approving this Agreement. Said notice shall include notice of dissenter's rights, if any, and shall solicit stockholders' proxies in favor of this Agreement, and all notices shall be given in accordance with all applicable laws, regulations, and rules. Baker and its directors and principal stockholders will, to the extent not inconsistent with their fiduciary duties, support and vote in favor of a stockholder resolution approving this Agreement. 4.5 Affiliates. Baker and HHC shall cooperate and use their best efforts to identify those persons who may be deemed to be "affiliates" of Baker within the meaning of Rule 145 under the Securities Act of 1933 (the "Securities Act"). Baker shall use its best efforts to cause each person so identified to deliver to HHC, no later than 30 days prior to the Effective Date, a written agreement in the form set forth in Exhibit B attached hereto, satisfactory to HHC that such person will not sell, pledge, transfer or otherwise dispose of the shares of HHC's common stock to be received by such person pursuant to this Agreement except in compliance with applicable provisions of the Securities Act and rules and regulations thereunder and until such time as financial results covering at least 30 days of combined operations of HHC and Baker have been published within the meaning of Section 201.01 of the Securities and Exchange Commission's Codification of Financial Reporting Policies. If the transaction contemplated hereby will qualify for pooling of interests accounting treatment, shares of HHC's common stock received pursuant to this Agreement by such affiliates shall not be transferable until such time as financial results covering at least 30 days of combined operations of HHC and Baker have been published within the meaning of Section 201.01 of the Securities and Exchange Commission's Codification of Financial Reporting Policies, regardless of whether each such affiliate has provided the written agreement referred to in this section. HHC shall be entitled to place appropriate legends on the certificates evidencing shares of HHC's common stock to be received pursuant to this Agreement by such affiliates and to issue appropriate stop transfer instructions to the transfer agent for HHC's common stock. 4.6 Due Diligence. From the date of this Agreement to the Effective Date, Baker shall afford to Hancock Bank (including without limitation, Hancock Bank's counsel, financial advisers and independent accountants) full access to the properties, personnel, books, records and affairs of Baker and will furnish such information about its business and properties as may be reasonably requested. 8 14 4.7 Surrender of Charter. Concurrent with the Merger, and receipt of appropriate regulatory approval, Baker's Charter will be surrendered to the OFI. 4.8 Baker Financial and Other Reports. Baker has made or will make available to HHC and Hancock Bank the following statements and other reports and documents ("Baker Financial Statements"): a. Baker's audited financial statements for the years ended December 31, 1991, 1992 and 1993; b. All correspondence with the OFI and the FDIC from January 1, 1993 through the date of Closing (for inspection, but copying may be restricted by legal limitations); and c. Such additional financial or other information as may be required for the regulatory applications and Registration Statement in connection with the consummation of the Merger (subject to any legal limitations). ARTICLE 5 BAKER'S REPRESENTATIONS AND WARRANTIES Baker represents and warrants to HHC and Hancock Bank as follows: 5.1 Organization and Authority. Baker is a Louisiana state chartered bank duly organized, validly existing and in good standing under the laws of the State of Louisiana and has the corporate power and authority to own its property and assets and to carry on its business as it is now being conducted. 5.2 Authorization. The execution, delivery and performance of this Agreement by Baker and the consummation of the transactions contemplated hereby have been duly authorized by the Board of Directors of Baker, subject to regulatory approval. No other corporate proceedings on the part of Baker are necessary to authorize consummation of this Agreement, except for the approval of the transaction by Baker's stockholders, and the performance by Baker of the terms hereof. This Agreement is a valid and binding obligation of Baker enforceable against Baker in accordance with its terms except as may be limited by applicable bankruptcy, insolvency, reorganization or moratorium or other similar laws affecting creditors' rights generally and except that the availability of equitable remedies is within the discretion of the appropriate court and except that it is subject to approval by its stockholders and applicable regulatory agencies. Neither the execution, delivery or performance of this Agreement by Baker, nor the consummation of the transactions contemplated hereby, nor compliance by Baker with any of the provisions hereof, will (a) in any material respect violate, conflict with, or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse 9 15 of time or both, would constitute a default) under or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration, or the creation of any lien, security interest, charge or encumbrance upon any of the properties or assets of Baker under any terms, conditions or provisions of (i) Baker's Charter or Bylaws or other charter documents of Baker, or (ii) any material note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which Baker is a party or by which Baker may be bound, or to which Baker or the properties or assets of it may be subject, or (b) violate in any material respect any judgment, ruling, order, writ, injunction, decree, statute, rule or regulation applicable to Baker or any of its properties or assets. 5.3 Baker Financial and Other Reports. Baker's Financial Statements (i) will have been prepared in accordance with generally accepted accounting principles, consistently applied, (ii) will present fairly the results of operations and financial position of Baker for the periods and at the times indicated, and (iii) will be true and correct in all material respects for the periods and at the times indicated. 5.4 Investment and Loan Portfolios. All investment securities shown in Baker's Financial Statements at September 30, 1993, or which were purchased after September 30, 1993 but before the Effective Date were and will be carried in the aggregate at no more than cost adjusted for amortization of premiums and accretion of discounts, i.e., historical costs. All loans shown in Baker's Financial Statements at September 30, 1993 or which were entered into after September 30, 1993 but before the Effective Date were and will be made for good, valuable and adequate consideration in accordance with prudent business standards and in substantial compliance with all laws, regulations and rules and are enforceable, valid, true and genuine and what they purport to be and all security interests constitute good and valid first liens against the collateral. Substantially, all of the loans which were made based on the value of collateral are secured by collateral having value at the time the loan was made at least equal to the amount of the loan. Baker owns all interests in loans on its books and has not sold or agreed to sell any interest in such loans except as disclosed on its books and/or in Baker's Financial Statements. Baker has not agreed to any modification of loan terms, released any collateral or borrowers or otherwise made any agreements regarding the loans except as disclosed in writing in the loan files; and Baker has no knowledge of any defenses or offsets by any borrower to any loan. Baker has the exclusive right to service all loans owned by it. Baker's allowance for possible loan losses shown on Baker's Financial Statements as of September 30, 1993, or which was allocated after September 30, 1993, but before the Valuation Date will include those amounts required by applicable regulations and will be adequate to absorb reasonably anticipated losses in the loan portfolios of Baker in view of the size and character of such portfolios, current economic conditions, and other pertinent factors, and no facts have subsequently come to the attention of management of Baker which would cause it to restate in any material way the level of such allowance for possible losses on loans. 10 16 5.5 Capital Structure of Baker. On the date hereof, the authorized capital of Baker consists of 57,750 shares of common stock. On the date hereof 57,750 shares of such authorized common stock are issued and outstanding, all of which is validly issued, fully paid and nonassessable. There are no outstanding options, conversion rights, warrants, calls, rights, commitments or agreements to issue any form of stock of Baker. There are no outstanding obligations or commitments to purchase, redeem or otherwise acquire any outstanding shares of common stock of Baker. 5.6 Title to Properties. Baker has good and marketable fee simple title to all its owned properties and assets, real and personal, subject to no mortgage, pledge, lien, encumbrance, security interest or charge, except such minor imperfections of title which do not materially detract from the value of the properties, and Baker has no knowledge of any actual or claimed hazardous waste, toxic substance or environmental contaminant in, on or under said real property. A list of all leased or non-owned property used by Baker is attached as Schedule A and copies of all leases and/or contracts relating to such leases are attached to said Schedule and no default exists as to any such lease or contract. 5.7 Accuracy of Information. To the best of Baker's and its officers' and directors' knowledge, all information furnished by Baker to HHC and Hancock Bank relating to the assets, liabilities, and this Agreement is accurate, and Baker has not omitted to disclose any information which is or would be material to this Agreement. 5.8 Compliance with Laws and Contracts. To the best of Baker's and its officers' and directors' knowledge, Baker is not in violation of any laws, regulations, or agreements to which it is a party and has not failed to file any material reports required by any governmental or other regulatory body. 5.9 Taxes. Baker will make available to HHC and Hancock Bank copies of all the federal and state tax returns for Baker and all tax adjustments and notices related thereto for the five fiscal years immediately preceding the date of this Agreement. Baker has filed all material federal, state and local tax returns due in respect of any of its businesses or properties in a timely fashion and has paid or made appropriate provisions for all amounts due as shown on such returns. All such returns fairly reflect in all material respects the information required to be presented therein. All provisions for accrued but unpaid taxes contained in the Baker Financial Statements were made in accordance with generally accepted accounting principles and in the aggregate do not materially fail to provide for reasonable expected tax liabilities. 5.10 Litigation. To the best of Baker's and its officers' and directors' knowledge, Baker has no knowledge of any pending or threatened litigation, claim or other proceeding before any judicial, administrative or regulatory agency or tribunal to which Baker is a party or to which the property of Baker is subject, and Baker has no knowledge of any facts which could give rise to any presently unasserted claim against Baker or its property, except as listed on Schedule B attached hereto. For purposes of this provision, the parties agree that 11 17 as to pending and threatened litigation and as to claims, only those matters as to which liability is asserted against Baker for more than $10,000.00 shall be considered material and listed on the Schedule. However, all matters such as injunctions, restraining orders, and cease and desist orders shall be listed. 5.11 Registration and Proxy Statements. None of the information supplied or to be supplied by Baker for inclusion in (a) the Registration Statement to be filed by HHC with the SEC (b) the Notice of Meeting and Proxy Statement to be mailed by Baker to its stockholders in connection with the meeting referred to in Section 4.4 hereof (the "Proxy Statement"), and (c) any other documents to be filed with the SEC or any regulatory agency in connection with the transactions contemplated hereby will, as amended or supplemented at the time the Registration Statement is filed with the SEC or at the time it becomes effective, at the time the Proxy Statement is mailed to holders of Baker's stock, as may be amended at the time of Baker Stockholders' Meeting, and at the time of filing of such other documents, respectively, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein in order to make the statements therein, in light of the circumstances under which they were made, not misleading. All documents, financial statements, or other information or materials which Baker shall provide for filing with the SEC and any regulatory agency in connection with the Merger will comply with generally accepted accounting principles. 5.12 Commitments and Contracts. Baker is not a party or subject to any of the following (whether written or oral, express or implied): a. Except as listed on Schedule C attached hereto and with a complete copy attached thereto, any employment contract (including any obligations with respect to severance or termination pay liabilities or fringe benefits) with any present or former officer, director, employee or consultant (other than those which are terminable at will by Baker); b. Except as listed on Schedule C attached hereto and with a complete copy attached thereto, any plan or contract providing for any bonus, pension, option, deferred compensation, retirement payment, profit sharing or similar arrangement with respect to any present or former officer, director, employee or consultant; or c. Any contract not made in the ordinary course of business containing covenants which limit the ability of Baker to compete in any line of business or with any person or which involves any restriction of the geographical area in which, or method by which, Baker may carry on its business (other than as may be required by law or applicable regulatory authorities). 5.13 Liabilities. To the best of Baker's and its officers' and director's knowledge, all liabilities of Baker were, and will be created, for good, valuable and adequate 12 18 consideration in accordance with prudent business standards and in substantial compliance with all laws, regulations and rules and the accounts or evidence of ownership of accounts are and will be genuine, true, valid and enforceable in accordance with their written terms. Baker has not agreed to any modification or extension of accounts or account terms or otherwise made any agreements regarding such accounts except as disclosed in writing on the books and records of Baker; and Baker has no knowledge of any claim of ownership to any account other than as shown on the written ownership records of Baker for each account, and Baker has no knowledge of any alleged improper or wrongful withdrawal or payment of any such account. 5.14 Vote Required. The affirmative vote of the holders of at least two-thirds of the outstanding shares of Baker common stock, is the only vote of the stockholders of Baker necessary to approve the Merger and other transactions contemplated hereby. 5.15 Continuity of Interest. To the best knowledge of Baker, there is no plan or intention by the stockholders of Baker to sell, exchange, or otherwise dispose of a number of shares of HHC common stock, to be received in the Merger that would reduce Baker stockholders' ownership of the HHC common stock to a number of shares having a value, as of the date of the Merger, of less than 50% of the value of all of the formerly outstanding Baker common stock as of the same date. For purposes of this assumption, shares of Baker common stock surrendered by dissenters or exchanged for cash in lieu of fractional shares of Baker common stock will be treated as outstanding Baker common stock on the date of the Merger. Furthermore, shares of Baker common stock and shares of HHC common stock held by Baker stockholders and otherwise sold, redeemed, or disposed of prior to or subsequent to the Merger are considered in this assumption. See Exhibit B for additional representations regarding continuity of shareholder interest under Section 368(a)(1)(A) and Section 368(a)(2)(D) of the Internal Revenue Code of 1986, as amended. 5.16 Continuity of Business Enterprise. Baker operates at least one significant historic business line, namely, financial services, and owns at least a significant portion of its historic business assets within the meaning of Treasury Regulation Section 1.368-1(d). ARTICLE 6 HHC'S REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS HHC represents and warrants to Baker as follows: for purposes of this Agreement, except in Section 6.1 and where the context requires otherwise, any reference to HHC in this Article 6 shall be deemed to include HHC and Hancock Bank and any reference to "material", material adverse effect or a similar standard shall refer to the financial condition, operations or other aspects of HHC and its subsidiaries including Hancock Bank taken as a whole. 6.1 Organization and Authority. HHC is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Mississippi and has the 13 19 corporate power and authority to own its properties and assets and to carry on its business as it is now being conducted. 6.2 Capitalization of HHC. As of September 30, 1993, the authorized capital stock of HHC consisted of 20,000,000 shares of common stock, of which at September 30, 1993, 7,177,966 such shares were issued and outstanding. Other than as permitted pursuant to HHC's Employee Stock Purchase Plan described in HHC's Proxy Statement for the 1993 stockholders' meeting, and HHC's Automatic Dividend Reinvestment and Stock Purchase Plan, there are no other shares of capital stock or other equity securities of HHC outstanding and no other outstanding options, warrants, scrip, rights to subscribe, calls or commitments of any character whatsoever relating to, or securities or rights convertible into or exchangeable for, shares of any capital stock of HHC, or contracts, commitments, understandings, or arrangements by which HHC was or may become bound to issue additional shares of its capital stock or options, warrants or rights to purchase or acquire any additional shares of its capital stock. However, nothing in this Agreement shall be construed as limiting the future number and amount of outstanding shares of HHC's stock pending settlement of this transaction. 6.3 Authorization. The execution, delivery and performance of this Agreement by HHC and the consummation of the transactions contemplated hereby have been duly authorized by the Board of Directors of HHC and Hancock Bank, subject to regulatory approval. No other corporate proceedings on the part of HHC are necessary to authorize the execution and delivery of this Agreement and the performance by HHC of the terms hereof. This Agreement is a valid and binding obligation of HHC enforceable against HHC in accordance with its terms except as may be limited by applicable bankruptcy, insolvency, reorganization or moratorium or other similar laws affecting creditors' rights generally and except that the availability of equitable remedies is within the discretion of the appropriate court and except that it is subject to approval of applicable regulatory agencies. HHC covenants and agrees as follows: 6.4 Conduct of Business. HHC agrees to operate its business solely in the ordinary course consistent with prudent business practices and in compliance with all applicable laws, regulations, and rules; but nothing herein shall be construed as limiting or restricting HHC in its assets, liability, or capital structure or limiting any action of HHC or its affiliates, nor shall anything in this Agreement be construed as limiting the future number and amount of outstanding shares of HHC stock pending settlement of this transaction. 6.5 Registration of Stock. HHC agrees to register the shares to be issued to Baker stockholders pursuant to this Agreement with the Securities and Exchange Commission. 14 20 6.6 Continuity of Business Enterprise. It is the present intention of HHC to continue at least one significant historic business line of Baker, namely, financial services, and to use at least a significant portion of Baker's historic business assets in a business within the meaning of Treasury Regulation Section 1.368-1(d). ARTICLE 7 CONDITIONS TO CLOSING The obligations of Baker, HHC and Hancock Bank under this Agreement, except as otherwise provided herein, shall be subject to the satisfaction or waiver of the following conditions on or prior to the Closing: 7.1 Conditions to Each Party's Obligations to Effect the Merger. The respective obligation of each party to effect the Merger shall be subject to the following conditions: a. Stockholder Approval. The Merger shall have been approved by the requisite vote of the holders of the outstanding shares of Baker common stock at Baker's Stockholders' Meeting. b. Regulatory Approvals. The transactions contemplated by this Agreement shall have been approved by all governing regulatory authorities, without any condition or requirement that either HHC, Hancock Bank, or Baker deem burdensome, or which otherwise would have a material adverse effect on the business, operations, properties, assets or financial condition of HHC, Hancock Bank, or Baker after the Effective Date, all conditions required to be satisfied shall have been satisfied, and all waiting periods relating to such approvals shall have expired. c. Registration Statement. The Registration Statement shall have been declared effective and shall not be subject to a stop order or any threatened stop order, and all state securities and blue sky permits or approvals required to consummate the transactions contemplated by this Agreement shall have been received. d. Pooling Treatment. HHC shall be satisfied that the Merger will qualify for accounting by HHC as a pooling of interests under generally accepted accounting principles and under applicable rules and regulations of the Securities and Exchange Commission. In connection therewith, if requested by HHC, HHC shall have received, on or before the Closing Date, a letter from Deloitte & Touche (or any other accountants of HHC's choosing) dated as of the Closing Date to the effect that the transactions contemplated by this Agreement may be treated by HHC as a "pooling of interests" for accounting purposes. 15 21 e. Tax Opinion. If requested by HHC, HHC and Baker shall have received an opinion from Heidelberg & Woodliff, P.A. to the effect that the Merger will constitute a reorganization within the meaning of Section 368 of the Internal Revenue Code and no gain or loss will be recognized by those Baker stockholders who exchange their Baker common stock for HHC common stock, except for cash paid in lieu of fractional shares or to dissenting stockholders. 7.2 Conditions to Obligations of Baker to Effect the Merger. The obligations of Baker to effect the Merger shall be subject to the following additional conditions: a. Representations and Warranties. The representations and warranties of HHC set forth in this Agreement shall be true and correct in all material respects as of the date of this Agreement and as of the Closing as though made at and as of the Closing, except as otherwise contemplated by this Agreement or consented to in writing by Baker. b. Performance of Obligations. HHC shall have performed in all material respects all obligations required to be performed by it under this Agreement prior to the Closing. c. Legal Opinion. An opinion of HHC's legal counsel shall be delivered to Baker dated the Closing Date and in form and substance reasonably satisfactory to Baker and its counsel to the effect that: i. HHC is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Mississippi, and has corporate authority to own and operate its businesses and properties and to carry on its business as presently conducted by it; ii. Hancock Bank is a Louisiana state chartered bank, duly organized and validly existing and in good standing under the laws of the State of Louisiana, and has corporate authority to own and operate its businesses and properties and to carry on its business as presently conducted by it; iii. HHC and Hancock Bank had and have corporate authority to make, execute and deliver this Agreement, it has been duly authorized and approved by all necessary corporate action of HHC and Hancock Bank and has been duly executed and delivered and is as of the Closing Date its valid and binding obligation subject, however, to bankruptcy, insolvency and similar laws affecting the enforcement of creditors' rights generally and to the availability of equitable remedies in general; iv. All required regulatory approvals have been obtained; and 16 22 v. To such counsel's knowledge after inquiry, there is no litigation or proceeding pending or threatened against HHC or Hancock Bank relating to the participation in or consummation of this Agreement by HHC or Hancock Bank and consummation will not violate any other contract, agreement, charter or bylaw of HHC or Hancock Bank. 7.3 Conditions to Obligations of HHC and Hancock Bank to Effect the Merger. The obligations of HHC and Hancock Bank to effect the Merger shall be subject to the following additional conditions: a. Representations and Warranties. The representations and warranties of Baker set forth in this Agreement shall be true and correct in all material respects as of the date of this Agreement and as of the Closing as though made at and as of the Closing, except as otherwise contemplated by this Agreement or consented to in writing by HHC and Hancock Bank. b. Performance of Obligations. Baker shall have performed in all material respects all obligations required to be performed by it under this Agreement prior to the Closing. c. Legal Opinion. An Opinion of Baker's legal counsel shall be delivered to HHC dated the Closing Date, and in form and substance reasonably satisfactory to HHC to the effect that: i. Baker is a Louisiana state chartered bank, duly organized and validly existing and in good standing under the laws of the State of Louisiana, and has corporate authority to own and operate its businesses and properties and to carry on its business as presently conducted by it; ii. Baker had and has corporate authority to make, execute and deliver this Agreement and it has been duly authorized and approved by all necessary corporate action of Baker and has been duly executed and delivered and is as of the Closing Date its valid and binding obligation subject, however, to bankruptcy, insolvency and similar laws affecting the enforcement of creditors' rights generally and to the availability of equitable remedies in general; iii. All required regulatory approvals have been obtained; iv. To such counsel's knowledge after inquiry, there is no litigation or proceeding pending or threatened against Baker relating to the participation in or consummation of this Agreement by Baker and consummation will not violate any other contract, agreement, charter or bylaw of Baker; and 17 23 v. Baker has complied with all laws and regulations relating to dissenters' rights and all stock in Baker will be acquired by HHC pursuant to the terms of this Agreement and that the title and/or ownership interest in the shares of Baker stock are as represented in Baker's certificate at closing and that no known dispute exists as to the title and/or ownership of any such shares. ARTICLE 8 CLOSING 8.1 Closing. The Closing shall be held at the offices of Hancock Bank or such other place as HHC and Baker shall mutually designate. 8.2 Deliveries at Closing. At the Closing, all documents and instruments shall be duly and validly executed and delivered by HHC to Baker, and possession of all liabilities and assets shall be transferred and delivered. 8.3 Documents. The Parties shall execute any and all documents reasonably requested by them or their legal counsel for the purpose of effecting the transaction contemplated, including but not limited to the following: a. endorsement, negotiation, and/or assignment of all original notes and Security Agreements relating to all loans; b. warranty deeds for the real property; c. commitments for owners title insurance for the real property; d. such other endorsements, assignments or other conveyances as may be appropriate or necessary to effect the transfer to HHC of the assets, duties, responsibilities and obligations as referred to herein; and e. listing of dissenting stockholders, if any, including name, address, and number of shares owned. ARTICLE 9 EMPLOYMENT MATTERS 9.1 Employees. Neither HHC nor Hancock Bank shall be obligated to retain in any capacity any of Baker's officers, directors, or employees or to pay any stipulated compensation to any employees. Hancock Bank will make reasonable efforts to maintain compensation levels for any retained personnel commensurate with the employees' experience and qualifications, upon such terms as Hancock Bank desires. With regard to any 18 24 retained employee, HHC shall be free of any obligation to honor any past agreement of Baker to such person. Baker's group health and life benefit plan will be continued through 1994 and effective January 1, 1995, all retained employees will be eligible to participate in Hancock Bank's group health and life benefit plan. Retained employees will be given full credit for past service and Hancock Bank will waive pre-existing medical conditions for health insurance purposes as to all retained personnel. 9.2 Retirement Plan. Baker currently maintains a 401(k) Plan which will remain operative and in effect through December 31, 1994. Hancock Bank will make the normal and customary match to the 401(k) Plan for the calendar year 1994. However, Baker's 401(k) Plan will be terminated on December 31, 1994 and distributed to vested employees of Baker in accordance with the terms of the 401(k) Plan. The 401(k) Plan trustees will be responsible for the termination, allocation and distribution of plan assets and related notices and other reporting responsibilities to the IRS, Department of Labor and other government agencies. All such termination costs will be paid from the 401(k) Plan assets. Effective January 1, 1995, all retained employees will be eligible to enter the Hancock Bank Profit Sharing Plan and Hancock Bank Pension Plan with full credit for all prior service for vesting. Effective January 1, 1995, all retained employees will be eligible to participate in all other employment benefit plans. 9.3 Notices. Baker shall be responsible for notifying its employees of the terms of this Agreement as it affects and/or relates to them and for complying with any applicable laws regarding such notices. ARTICLE 10 REMEDIES For purposes of this Agreement, any reference to HHC in this Article 10 shall be deemed to include HHC and Hancock Bank. 10.1 Parties' Joint Remedies. In the event regulatory authorities impose requirements which do not materially alter this Agreement and which are not otherwise burdensome or objectionable to the Parties, then the Parties agree to amend this Agreement to conform to such regulatory requirements, and specific performance shall be available as a remedy for this purpose. 10.2 Baker's Remedies. In the event HHC breaches this Agreement, then Baker shall give HHC notice of the breach, and HHC shall have a reasonable amount of time to cure the breach, and HHC shall be liable for such economic damages that are the direct result of any uncured breach, but HHC shall not be liable for consequential or punitive damages. If HHC breaches a warranty, representation or covenant that does not materially 19 25 affect the entire transaction, then the amount of the damages shall be mutually agreed upon by the Parties, and if they cannot agree as to the damage, then by an arbitrator mutually agreeable to them, and the damage determined shall be conclusively binding on both Parties and shall be treated as an adjustment to the Conversion Amount. 10.3 HHC's Remedies. In the event Baker breaches this Agreement, then HHC shall give Baker notice of the breach, and Baker shall have a reasonable amount of time to cure the breach, and Baker shall be liable for such economic damages that are the direct result of any uncured breach, but Baker shall not be liable for consequential or punitive damages. If Baker breaches a warranty, representation or covenant that does not materially affect the entire transaction, then the amount of the damages shall be mutually agreed upon by the Parties, and if they cannot agree as to the damage, then by an arbitrator mutually agreeable to them, and the damage determined shall be conclusively binding on both Parties and shall be treated as an adjustment to the Conversion Amount. 10.4 Attorney Fees. Each Party shall bear its own attorney fees except attorney fees may be awarded by the presiding judge if the trier of fact finds that the other Party has committed fraud against the other Party. ARTICLE 11 TERMINATION 11.1 Termination. This Agreement may be terminated, either before or after approval by the stockholders of Baker as follows: a. At any time on or prior to the Effective Date, by the mutual consent in writing of the Board of Directors of the Parties hereto; b. By HHC if the Merger will not qualify for accounting by HHC as a pooling of interests under generally accepted accounting principles and under applicable rules and regulations of the Securities and Exchange Commission; or c. By the Board of Directors of HHC or Hancock Bank in writing or by the Board of Directors of Baker in writing, if the Merger shall have not become effective on or before December 31, 1994, unless the absence of such occurrence shall be due to the failure of the Party seeking to terminate this Agreement to perform each of its obligations under this Agreement required to be performed by it on or prior to the Effective Date. ARTICLE 12 APPRAISAL RIGHTS 12.1 Appraisal Rights of Baker. Notwithstanding any other provision of this Agreement to the contrary, dissenting stockholders of Baker who comply with the procedural 20 26 requirements of the Louisiana Revised Statutes 6:376 will be entitled to receive payment of the fair cash value of their shares if the Merger is effected upon approval by less than eighty percent of Baker's total voting power. ARTICLE 13 MISCELLANEOUS 13.1 Entire Agreement. This Agreement embodies the entire understanding of the Parties in relation to the subject matter herein and supersede all prior understandings or agreements, oral or written, between the Parties hereto. 13.2 Survival of Representations, Warranties and Agreements. The representations, warranties and agreements made herein shall survive the Closing. 13.3 Headings. The headings and subheadings in this Agreement, except the terms identified for definition in Article 1 and elsewhere in this Agreement, are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or any provision hereof. 13.4 Duplicate Originals. This Agreement may be executed in any number of duplicate originals, any one of which when fully executed by all Parties shall be deemed to be an original without having to account for the other originals. 13.5 Governing Law. This Agreement and the rights and obligations hereunder shall be governed and construed by the laws of the State of Mississippi. 13.6 Successors; No Third Party Beneficiaries. All terms and conditions of this Agreement shall be binding on the successors and assigns of Baker, HHC and Hancock Bank. Except as otherwise specifically provided in this Agreement, nothing expressed or referred to in this Agreement is intended or shall be construed to give any person other than Baker, HHC or Hancock Bank any legal or equitable right, remedy or claim under or in respect of this Agreement or any provisions contained herein, it being the intention of the Parties hereto that this Agreement, the obligations and statements of responsibilities hereunder, and all other conditions and provisions hereof are for the sole and exclusive benefit of Baker, HHC and Hancock Bank and for the benefit of no other person. 13.7 Modification; Assignment. No amendment or other modification of any part of this Agreement shall be effective except pursuant to a written agreement subscribed by the duly authorized representatives of all of the Parties hereto. This Agreement may not be assigned without the express written consent of both Parties. 13.8 Notice. Any notice, request, demand, consent, approval or other communication to any Party hereof shall be effective when received and shall be given in writing, and delivered in person against receipt thereof, or sent by certified mail, postage 21 27 prepaid or courier service at its address set forth below or at such other address as it shall hereafter furnish in writing to the others. All such notices and other communications shall be deemed given on the date received by the addressee or its agent. Baker First State Bank & Trust Company of East Baton Rouge Parish 3033 Ray Weiland Baker, Louisiana 70714 Attn: W. R. Allison, Chairman of the Board HHC Hancock Holding Company Post Office Box 4019 Gulfport, MS 39502 Attn: Mr. George A. Schloegel, Vice Chairman Copy to: Carl J. Chaney, Esquire Heidelberg and Woodliff P. O. Box 23040 Jackson, MS 39225 or Suite 1400 125 South Congress Jackson, Mississippi 39201 Hancock Bank Hancock Bank of Louisiana Post Office Box 591 Baton Rouge, Louisiana 70821 Attn: Mr. A. Bridger Eglin, President Copy to: Carl J. Chaney, Esquire Heidelberg and Woodliff P. O. Box 23040 Jackson, MS 39225 or Suite 1400 125 South Congress Jackson, Mississippi 39201 13.9 Waiver. Baker, HHC and Hancock Bank may waive their respective rights, powers or privileges under this Agreement; provided that such waiver shall be in writing; and further provided that no failure or delay on the part of Baker, HHC or Hancock Bank 22 28 to exercise any right, power or privilege under this Agreement will operate as a waiver thereof, nor will any single or partial exercise of any right, power or privilege under this Agreement preclude any other or further exercise thereof or the exercise of any other right, power or privilege by Baker, HHC or Hancock Bank under the terms of this Agreement, nor will any such waiver operate or be construed as a future waiver of such right, power or privilege under this Agreement. 13.10 Costs, Fees and Expenses. Each Party hereto agrees to pay all costs, fees and expenses which it has incurred in connection with or incidental to the matters contained in this Agreement, including without limitation any fees and disbursements to its accountants and counsel, except that HHC or Hancock Bank will bear all costs and fees related to filing for regulatory approval of this Merger Agreement and filing the Registration Statement with the SEC. Baker will be responsible for the cost of its accountants and legal counsel and will bear all costs related to conducting and obtaining stockholders' approval of the Merger. 13.11 Press Releases. Baker and HHC shall consult with each other as to the form and substance of any press release related to this Agreement or the transactions contemplated hereby, and shall consult each other as to the form and substance of other public disclosures related thereto, provided, however, that nothing contained herein shall prohibit HHC, following notification to Baker, from making any disclosures which its counsel deems necessary to conform with requirements of law or the rules of the National Association of Securities Dealers Automated Quotation System. 13.12 Severability. If any provision of this Agreement is invalid or unenforceable then, to the extent possible, all of the remaining provisions of this Agreement shall remain in full force and effect and shall be binding upon the Parties hereto. 13.13 Mutual Covenant of Best Efforts and Good Faith. The Parties mutually covenant and agree with each other that they will use their best efforts to consummate the transactions herein contemplated and that they will act and deal with each other in good faith as to this Agreement and all matters arising from or related to it. [THIS SPACE LEFT BLANK INTENTIONALLY] 23 29 IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed by their duly authorized representatives on the date first above written. FIRST STATE BANK & TRUST COMPANY OF EAST BATON ROUGE PARISH Directors: /s/ LUCY C. BILLINGS, JR. /s/ W. R. ALLISON /s/ GLEN GRIFFIN, JR. /s/ H. A. GREY /s/ BRYANT D. HAYES /s/ J. C. KELLER, JR. /s/ MANSEL S. SLAUGHTER, SR. /s/ B. M. STAN, JR. /s/ A. J. FURR HANCOCK HOLDING COMPANY By: /s/ LEO W. SEAL, JR. Name: Leo W. Seal, Jr. Title: President and CEO HANCOCK BANK OF LOUISIANA By: /s/ A. BRIDGER EGLIN Name: A. Bridger Eglin Title: President 30 HANCOCK BANK OF LOUISIANA Directors: /s/ G. MISSIMO /s/ M. ALREDI /s/ GEORGE A. SCHLOEGEL /s/ CHARLES A WEBB, JR. (consisting of a mojority of its directors) ____________________________________ ____________________________________ 31 EXHIBIT A LETTER OF TRANSMITTAL FOR COMMON STOCK OF FIRST STATE BANK & TRUST COMPANY OF EAST BATON ROUGE PARISH BAKER, LOUISIANA (Please read carefully the Instructions on the Reverse Side of this Letter) (Affix Label) _____________________________ Mail or Deliver Letters of Transmittal to: Hancock Bank ATTN: Ms. Dot Miller Post Office Box 4019 Gulfport, Mississippi 39502 _______________________, 1994 (Please print date) Dear Sir: The undersigned hereby delivers to Hancock Bank, as Transfer Agent, all shares of common stock of First State Bank & Trust Company of East Baton Rouge Parish ("First State Bank") owned by the undersigned, which are evidenced by the certificates enclosed herewith, for exchange and conversion into shares of Hancock Holding Company, ("Hancock") common stock, $3.33 par value per share, pursuant to the terms of the Agreement and Plan of Reorganization dated November 30, 1993 and adopted by First State Bank's stockholders on ____________________, 1994. FILL IN ONLY IF DELIVERY IS TO BE MADE TO DIFFERENT ADDRESS THAN SHOWN ON THE ABOVE LABEL SPECIAL MAILING INSTRUCTIONS Name:____________________________________ (Type or print) Address:_________________________________ (Number) (Street) _________________________________________ (City) (State) (Zip) Witnessed: Signature of Stockholder(s) __________________________________ __________________________________ __________________________________ (Sign exactly as name appears on stock certificate or assignment) 32 INSTRUCTIONS 1. Completion and Delivery of Letter of Transmittal This Letter of Transmittal must be filled in properly, signed and delivered or forwarded with the certificate(s) of stock to Hancock Bank, Attn: Ms. Dot Miller, Post Office Box 4019, Gulfport, Mississippi 39502. SINCE THE RISK OF LOSS IN TRANSIT IS YOURS, THE USE OF INSURED REGISTERED MAIL IS SUGGESTED IN TRANSMITTING YOUR CERTIFICATE(S). 2. Signing Letter of Transmittal The stockholder's name on the Letter of Transmittal should be signed in exactly the same manner as the name appears on the stock certificate(s). If the certificate(s) is to be registered in a name other than that currently appearing on the certificate(s) then the signatures on the certificate(s) must be guaranteed by a Medallion Member. Signatures by the stockholder(s) should be witnessed by another person, who shall sign this Letter of Transmittal. When the Letter of Transmittal is signed by an attorney, administrator, trustee or guardian, or anyone acting in a fiduciary capacity, or by an officer of a corporation, the person executing the letter must give his full title in such capacity, and proper certified evidence of authority to act in such capacity, reasonably satisfactory to Hancock Bank, must be forwarded with the Letter of Transmittal. If a certificate is in the name of more than one holder, each holder named in the certificate should sign. (This shall apply in the event your certificate is registered in an "and", "or" or "joint tenants with right of survivorship" capacity.) If a joint tenant has deceased, the surviving joint tenant must submit to Hancock Bank a certified death certificate. 3. Lost or Destroyed Certificates If the certificate(s) representing your shares have been either lost or destroyed, notify Hancock Bank of this fact promptly at its address set forth on the reverse side hereof. In the event of lost or destroyed certificate(s), you will be required to take the following steps prior to the transmission and issuance of new Hancock certificates to you: (a) The delivery of an indemnity bond in an amount equal to or greater than the current market value of the securities, to indemnify and hold Hancock Bank harmless; and (b) The presentation of evidence to Hancock's reasonable satisfaction that you are the owner of the shares theretofore represented by the certificate(s) claimed by you to be lost, wrongfully taken or destroyed and that you are the person who would be entitled to present each such certificate for exchange pursuant to the terms of the Agreement and Plan of Reorganization. 4. Dividends Withheld In accordance with Section 3.2(e) of the Agreement and Plan of Reorganization, all dividends and similar distributions of Hancock payable to stockholders after ______________, 1994, may be withheld by Hancock until you have properly surrendered your First State Bank share certificate(s) for conversion into shares of Hancock. 5. Delivery of New Certificates Upon receipt of the properly executed Letter of Transmittal and related stock certificate(s), Hancock Bank will mail to the address indicated hereon, new stock certificate(s) of Hancock within five (5) business days of such receipt. 6. Questions or Clarifications Any questions regarding the completion of the Letter of Transmittal should be directed to Ms. Dot Miller at (601) 868-4414. 33 EXHIBIT B FORM OF AFFILIATE AGREEMENT ____________________, 1993 Hancock Holding Company One Hancock Plaza Gulfport, Mississippi 39502 Gentlemen: I, the undersigned director, executive officer or significant stockholder of First State Bank and Trust Company of East Baton Rouge Parish, Baker, Louisiana ("Baker"), acknowledge and understand that, as an affiliate of Baker, Rule 145 promulgated under the Securities Act of 1933, as amended (the "Act"), restricts my ability to sell, pledge, transfer or otherwise dispose of the shares of Hancock Holding Company ("HHC") common stock to be issued to me in the Agreement and Plan of Reorganization ("Merger") between HHC and Baker, unless the requirements of Rule 145(d) are satisfied or the sale, pledge, transfer or disposition is otherwise in compliance with the Act. Accordingly, I represent and agree that: 1. I will not sell, pledge, transfer or otherwise dispose of any shares of HHC common stock received in the Merger during the period beginning on the effective date of the Merger and ending 30 days following HHC's publication (within the meaning of Section 201.01 of the Securities and Exchange Commission's Codification of Financial Reporting Policies) of the results of combined operations of HHC and Baker; 2. I will not sell, pledge, transfer or otherwise dispose of said securities unless in accordance with the provisions of paragraphs (c), (e), (f) and (g) of Rule 144 under the Act or otherwise in compliance with the Act; 3. I have no plan or intention to sell, pledge, transfer or otherwise dispose of a number of said securities to be received in the Merger that would reduce Baker stockholders' ownership of the HHC common stock to a number of shares having a value, as of the date of the Merger, of less than 50% of the value of all of the formerly outstanding Baker common stock as of the same date. 4. I understand that the certificates for shares of HHC received pursuant to the Merger will bear a restrictive legend, to the effect that the shares were received in a transaction to which Rule 145 applies, as follows: "The shares represented by this certificate have been issued or transferred to the registered holder as a result of a transaction to which Rule 145 under the Securities Act of 1933, as amended (the "Act"), applies. The shares represented by this certificate may not be sold, transferred, pledged or assigned, and the issuer shall not be required to give effect to any attempted sale, transfer, pledge or assignment, except in accordance with the requirements of the Act and the other conditions specified in that certain Affiliates Agreement dated as of _________________________, 1993 between the issuer and the shareholder, a copy of which Agreement will be furnished, without charge, by Hancock Holding Company to the holder of this certificate upon written request therefor." 5. I agree to be bound by the terms of this letter until the expiration of the time period set forth in Rule 145(d)(2) or (3), whichever may apply. Sincerely, _____________________________________ Title:_______________________________ Accepted and agreed to: HANCOCK HOLDING COMPANY By:___________________________________ Title:________________________________ 34 EXHIBIT C JOINDER OF SHAREHOLDER In consideration of the foregoing Agreement, the undersigned joins therein, agrees, subject to his fiduciary duty as an officer and director of First State Bank & Trust Company of East Baton Rouge Parish, to use his best efforts to cause the transactions contemplated thereby to be accomplished, and agrees not to sell or otherwise dispose of any of his shares of common stock of First State Bank & Trust Company of East Baton Rouge Parish, or enter into any agreements or understandings with respect thereto, or grant any proxy or other right to vote such shares (other than to persons designated to vote in favor of the Agreement) unless this Agreement is terminated. Gulfport, Mississippi Dated as of ______________, 1994 /s/_____________________________ Guy C. Billups, Jr. 35 EXHIBIT D CASHIER'S CERTIFICATE I certify that I am the Cashier of Hancock Bank of Louisiana ("Hancock Bank") located in Baton Rouge, Louisiana, and that I have been appointed and that I am presently serving in that capacity in accordance with the Bylaws of Hancock Bank. I further certify that the Agreement and Plan of Reorganization dated as of November 30, 1993 (the "Agreement") by and among First State Bank & Trust Company of East Baton Rouge Parish, Baker, Louisiana; Hancock Holding Company, Gulfport, Mississippi; and Hancock Bank, a wholly owned subsidiary of Hancock Holding Company, does not amend the Articles of Hancock Bank as the surviving bank, and the shares of Hancock Holding Company common stock to be issued under the Agreement do not exceed fifteen percent (15%) of the shares of Hancock Holding Company or Hancock Bank outstanding immediately prior to effectiveness of the Merger, and thus pursuant to Louisiana Revised Statutes 6:352(6), the approval of the Agreement by Hancock Holding Company's stockholders or Hancock Bank's stockholders is not required. IN WITNESS WHEREOF, I have hereupon set the seal of this Bank, this the 19th day of January, 1994. HANCOCK BANK OF LOUISIANA By: /s/ JAMES D. LABAUVE ___________________________ James D. LaBauve, Cashier 36 SCHEDULE A FIRST STATE BANK & TRUST COMPANY OF EAST BATON ROUGE PARISH LEASED PROPERTIES See Attached 37 SCHEDULE B FIRST STATE BANK & TRUST COMPANY OF EAST BATON ROUGE PARISH LIST OF CLAIMS None 38 SCHEDULE C FIRST STATE BANK & TRUST COMPANY OF EAST BATON ROUGE PARISH LIST OF CONTRACTS None EX-23 3 CONSENT OF INDEPENDENT ACCOUNTANTS 1 Exhibit (23) INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in the Registration Statement of Hancock Holding Company on Form S-8 (No. 2-99863) and on Form S-3 (No. 33-31782) of our report dated January 14, 1994 incorporated by reference in this Annual Report on Form 10-K for the year ended December 31, 1993. DELOITTE & TOUCHE New Orleans, Louisiana February 10, 1994 -----END PRIVACY-ENHANCED MESSAGE-----