0000950134-95-001979.txt : 19950815 0000950134-95-001979.hdr.sgml : 19950815 ACCESSION NUMBER: 0000950134-95-001979 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HANCOCK HOLDING CO CENTRAL INDEX KEY: 0000750577 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 640693170 STATE OF INCORPORATION: MS FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-13089 FILM NUMBER: 95563036 BUSINESS ADDRESS: STREET 1: ONE HANCOCK PLZ STREET 2: P.O. BOX 4019 CITY: GULFPORT STATE: MS ZIP: 39502 BUSINESS PHONE: 6018684605 MAIL ADDRESS: STREET 1: ONE HANCOCK PLZ STREET 2: P O BOX 4019 CITY: GULFPORT STATE: MS ZIP: 39502 10-Q 1 FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q /X/ Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 / / Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ending June 30, 1995 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, P. O. BOX 4019, GULFPORT, MISSISSIPPI 39502 ------------------------------------------------------------------------------ (Address of principal executive offices) (Zip Code) (601) 868-4605 ---------------------------------------------------- (Registrant's telephone number, including area code) NOT APPLICABLE -------------------------------------------------------------------- (Former name, address and fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO --------- --------- 8,880,605 Common Shares were outstanding as of August 1, 1995 for financial statement purposes. Page 1 of 12 2 HANCOCK HOLDING COMPANY I N D E X
PAGE NUMBER ----------- PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements Condensed Consolidated Balance Sheets -- June 30, 1995 and December 31, 1994 3 Condensed Consolidated Statements of Earnings -- Three Months Ended June 30, 1995 and 1994 Six Months Ended June 30, 1995 and 1994 4 Condensed Consolidated Statements of Cash Flows -- Six Months Ended June 30, 1995 and 1994 5 Notes to Condensed Consolidated Financial Statements 6 - 7 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 - 10 PART II. OTHER INFORMATION ITEM 6. Exhibits and Reports on Form 8K 11 SIGNATURES 12
Page 2 of 12 3 HANCOCK HOLDING COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in thousands) (Unaudited)
Unaudited Restated June 30 December 31 1995 1994* ---------- ---------- ASSETS: Cash and due from banks (non-interest bearing) $ 123,017 $ 120,532 Interest bearing time deposits with other banks 1,650 1,450 ---------- ---------- Total cash and due from banks 124,667 121,982 Securities available-for-sale (cost of $43,505 and $20,382) 43,399 19,747 Securities held-to-maturity (market value of $865,948and $828,968) 870,075 847,593 Federal funds sold and securities purchased under agreements to resell 102,425 55,900 Loans, net of unearned income 993,125 925,665 Less: Reserve for loan losses (16,581) (15,372) ---------- ---------- Net loans 976,544 910,293 Property and equipment, at cost, less accumulated depreciation of $42,673 and $36,458 39,150 35,470 Other real estate 1,062 1,000 Accrued interest receivable 18,339 17,425 Other assets 31,529 17,755 ---------- ---------- TOTAL ASSETS $2,207,190 $2,027,165 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY: Deposits: Non-interest bearing demand $ 443,425 $ 390,074 Interest bearing savings, NOW, money market and other time 1,458,089 1,385,652 ---------- ---------- Total deposits 1,901,514 1,775,726 Federal funds purchased and securities sold under agreements to repurchase 71,012 54,296 Other liabilities 16,747 11,753 Long-term bonds and notes 2,955 2,955 ---------- ---------- TOTAL LIABILITIES 1,992,228 1,844,730 ---------- ---------- STOCKHOLDERS' EQUITY: Common Stock 29,942 26,798 Capital Surplus 135,508 93,991 Undivided Profits 49,581 62,061 Unrealized loss on securities available for sale - net (69) (415) ---------- ---------- TOTAL STOCKHOLDERS' EQUITY 214,962 182,435 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,207,190 $2,027,165 ========== ==========
* The balance sheet at December 31, 1994 has been restated to reflect a 1995 transaction accounted for using the pooling-of-interests method. See notes to condensed consolidated financial statements. Page 3 of 12 4 HANCOCK HOLDING COMPANY CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS UNAUDITED DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA
Restated Restated Three Months Ended June 30 Six Months Ended June 30 -------------------------- ------------------------ 1995 1994 1995 1994 ----------- ---------- ---------- ---------- INTEREST INCOME: Interest and fees on loans $ 24,336 $ 20,421 $ 47,824 $ 40,223 Interest on: U. S. Treasury Securities 3,536 4,065 7,060 7,936 Obligations of other U. S. Government agencies and corporations 8,605 6,123 16,239 11,849 Obligations of states and political subdivisions 868 692 1,738 1,393 Interest on Federal funds sold and securities purchased under agreements to resell 1,504 865 2,752 1,834 Interest on time deposits and other 1,554 909 3,076 1,918 ---------- ---------- ---------- ---------- Total interest income 40,403 33,075 78,689 65,153 INTEREST EXPENSE: Interest on deposits 14,483 11,723 27,962 23,269 Interest on federal funds purchased and securities sold under agreements to repurchase 670 315 1,235 559 Interest on capital notes 0 6 0 12 Interest on long term bonds and notes 103 78 240 151 ---------- ---------- ---------- ---------- Total interest expense 15,256 12,122 29,437 23,991 ---------- ---------- ---------- ---------- NET INTEREST INCOME 25,147 20,953 49,252 41,162 PROVISION FOR LOAN LOSSES 1,002 366 1,177 829 ---------- ---------- ---------- ---------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 24,145 20,587 48,075 40,333 ---------- ---------- ---------- ---------- Other Operating Income: Service charges on deposit accounts 3,661 3,022 7,184 6,030 Income from fiduciary activities 507 539 1,105 1,150 Securities gains (losses) (41) 29 (91) 110 Other non-interest income 1,348 1,154 2,891 2,703 ---------- ---------- ---------- ---------- Total other operating income 5,475 4,744 11,089 9,993 Other Operating Expenses: Salaries and employee benefits 10,308 8,843 20,123 17,510 Net occupancy expense of bank premises and equipment expense 4,052 2,401 6,985 5,155 Other non-interest expense 5,382 6,036 12,056 11,838 ---------- ---------- ---------- ---------- Total other operating expenses 19,742 17,280 39,164 34,503 ---------- ---------- ---------- ---------- EARNINGS BEFORE INCOME TAXES 9,878 8,051 20,000 15,823 INCOME TAXES 3,266 2,646 6,608 4,953 ---------- ---------- ---------- ---------- NET EARNINGS $ 6,612 $ 5,405 13,392 10,870 ========== ========== ========== ========== NET EARNINGS PER COMMON SHARE $ 0.75 $ 0.66 $ 1.51 $ 1.34 ========== ========== ========== ========== DIVIDENDS PAID PER COMMON SHARE $ 0.23 $ 0.23 $ 0.46 $ 0.46 ========== ========== ========== ========== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 8,879 8,097 8,879 8,097 ========== ========== ========== ==========
The 1994 statments of earnings have been restated to reflect a 1995 transaction accounted for using the pooling-of-interests method. See notes to condensed consolidated financial statements. Page 4 of 12 5 HANCOCK HOLDING COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED (Amounts in thousands)
Six Months Ended June 30, 1995 1994 -------- -------- FINANCIAL RESOURCES PROVIDED: ---------------------------- Cash Flows From Operating Activities: Net earnings $ 13,392 $ 10,870 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation 2,500 2,346 Provision for loan losses 1,177 829 (Loss) gain on sales of investments (91) 110 (Increase) in interest receivable (183) (296) Amortization of intangible assets 1,198 737 Increase in interest payable 1,235 323 Other - net 1,999 1,313 --------- --------- Net cash provided by Operating Activities 21,227 16,232 --------- --------- Cash Flows from Investing Activities: Proceeds from sales/maturities of securities held-to-maturity 166,652 81,729 Purchase of securities held-to-maturity (197,509) (143,282) Proceeds from sales/maturities of securities available-for-sale 4,840 615 Purchase of securities available-for-sale (200) 0 Net (increase) decrease in federal funds sold and securities sold under agreements to repurchase (42,575) 30,415 Net decrease (increase) in loans 8,159 (1,018) Purchase of property and equipment, net (2,551) (2,093) Transfers from loans to other real estate (537) (546) Proceeds from sale of other real estate 540 519 Net cash received in connection with purchase transaction 7,872 0 --------- --------- Net cash used in Investing Activities (55,309) (33,661) --------- --------- Cash Flows from Financing Activities: Net increase in deposits 24,002 30,570 Dividends paid (4,150) (3,664) Net increase (decrease) in federal funds purchased, securities sold under agreements to repurchase and other temporary funds 16,715 (9,621) --------- --------- Net cash provided by Financing Activities 36,567 17,285 --------- --------- Net (Decrease) Increase in Cash and Due from Banks 2,485 (144) Cash and Due from Banks, Beginning 120,532 99,106 --------- --------- Cash and Due from Banks, Ending $ 123,017 $ 98,962 ========= =========
The 1994 statements of cash flows has been restated to reflect a 1995 transaction accounted for using the pooling-of- interests method. See notes to condensed consolidated financial statements. Page 5 of 12 6 HANCOCK HOLDING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED (Six Months Ended June 30, 1995 and 1994) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying Unaudited Condensed Consolidated Financial Statements include the accounts of Hancock Holding Company, its wholly owned banks, Hancock Bank, Hancock Bank of Louisiana and First National Bank of Denham Springs since its acquisition on January 13, 1995, and other subsidiaries. Intercompany profits, transactions and balances have been eliminated in consolidation. The accompanying Unaudited Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for interim periods are not necessarily indicative of the results that may be expected for the entire year. For further information, refer to the consolidated financial statements and notes thereto of Hancock Holding Company's 1994 Annual Report to Shareholders. RECENT CHANGES IN FINANCIAL ACCOUNTING STANDARDS The Company adopted Statement of Accounting Standards (SFAS) No. 114, "Accounting by Creditors for Impairment of a Loan," effective January 1, 1995. SFAS No. 114 requires the measurement of impaired loans be based on the present value of expected future cash flows discounted at the loan's effective interest rate, or at the loan's observable market price or the fair value of its collateral. SFAS No. 114 does not apply to large groups of smaller balance homogeneous loans that are collectively evaluated for impairment. For the Company, loans collectively evaluated for impairment include all single family mortgage loans, loans to individuals for household family and other consumer expenditures and commercial and industrial and real estate loans ("major loans") under a certain dollar amount, excluding loans which have entered the workout process. The adoption of SFAS No. 114 did not result in additional provisions for loan losses due to the Company's continuing policy of measuring loan impairment based on methods prescribed in SFAS No. 114. The Company considers a loan to be impaired when, based upon current information and events, it believes it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. The Company's impaired loans within the scope of SFAS No. 114 include troubled debt restructurings, and performing and non-performing major loans in which full payment of principal or interest is not expected. The Company also adopted Statement of Financial Accounting Standards No. 118, "Accounting by Creditors for Impairment of a Loan-Income Recognition and Page 6 of 12 7 Disclosures," effective January 1, 1995. This statement allows a creditor to use existing methods for recognizing interest income on impaired loans and thus the adoption of SFAS No. 114 did not result in any change in the amount of interest income reported. The Company's impaired loans amounted to approximately 1/2% of total loans at June 30, 1995 and the related reserve amount was not significant at that date. There was no significant change in these amounts during the six months ended June 30, 1995. Interest income recognized on these loans amounted to approximately $200,000 for the six months ended June 30, 1995. ACQUISITIONS On January 31, 1995, the Company merged Washington Bancorp, Inc. (Washington), Franklinton, Louisiana, and merged its wholly owned subsidiary, Washington Bank & Trust Company, with Hancock Bank of Louisiana. The merger was consummated by the exchange of all outstanding common stock of Washington in return for approximately 542,350 shares of common stock of the Company. The merger was accounted for using the pooling-of-interests method effective February 1, 1995 and accordingly all prior periods' financial information has been restated. Washington had total assets of approximately $86,100,000 and stockholders' equity of approximately $12,400,000 as of December 31, 1994. Net interest income and net earnings of the separate companies for the periods preceding the acquisition were as follows:
January 1, 1995 Six Months Ended to January 31, 1995 June 30, 1994 ------------------- ------------- Net Interest Income Company $7,535 $39,080 Washington 372 3,082 ------ ------- Combined $7,907 $41,162 ====== ======= Net Earnings Company $2,382 $10,188 Washington 144 682 ------ ------- Combined $2,526 $10,870 ====== =======
On January 13, 1995, the Company merged with First Denham Bancshares, Inc. (Bancshares) which owns 100% of the stock of First National Bank of Denham Springs, Denham Springs, Louisiana. The merger was in return for approximately $4,000,000 cash and 774,098 shares of common stock of the Company. The merger was accounted for using the purchase method. Bancshares had total assets of approximately $111,000,000 and stockholders' equity of approximately $10,300,000 as of December 31, 1994 and net earnings of approximately $2,500,000 for the year then ended. Following is certain selected unaudited proforma combined financial information assuming the Bancshares acquisition had been consummated January 1, 1994.
Six Months Ended June 30, 1995 1994 ---- ---- Net Interest Income $49,531 $44,896 Net Earnings $13,467 12,122 Net Earnings Per Share $1.52 $1.37
Page 7 of 12 8 HANCOCK HOLDING COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion provides management's analysis of certain factors which have affected the Company's financial condition and operating results during the periods included in the accompanying condensed consolidated financial statements. CHANGES IN FINANCIAL CONDITION Liquidity The Company manages liquidity through traditional funding sources of core deposits, federal funds, and maturities of loans and investment securities. The following liquidity ratios compare certain assets and liabilities to total deposits or total assets:
Restated Restated June 30 March 31 December 31 1995 1995 1994 -------- -------- -------- Total securities to total deposits 45.8% 45.4% 48.9% Total loans (net of unearned discount) to total deposits 52.2% 51.6% 52.1% Interest-earning assets to total assets 90.4% 90.6% 90.6% Interest-bearing deposits to total deposits 76.7% 77.0% 78.0%
Capital Resources The Company continues to maintain an adequate capital position, as the following ratios indicate:
Restated Restated June 30 March 31 December 31 1995 1995 1994 -------- -------- -------- Equity capital to total assets (1) 9.73% 9.53% 8.99% Total capital to risk-weighted 18.13% 17.21% 17.52% assets (2) Tier 1 Capital to risk-weighted 17.18% 16.25% 16.26% assets (3) Leverage Capital to total assets (4) 8.92% 8.71% 8.20% Fixed assets to equity capital 18.21% 18.96% 19.47%
Page 8 of 12 9 (1) Equity capital consists of stockholder's equity (common stock, capital surplus and undivided profits). (2) Total capital consists of equity capital less intangible assets plus a limited amount of loan loss reserves. Risk-weighted assets represent the assigned risk portion of all on and off balance sheet assets. Based on Federal Reserve Board guidelines, assets are assigned a risk factor percentage from 0% to 100%. A minimum ratio of total capital to risk-weighted assets of 8% is required. (3) Tier 1 capital consists of equity capital less intangible assets. A minimum ratio of tier 1 capital to risk- weighted assets of 4% is required. (4) Leverage capital consists of equity capital less goodwill and core deposit intangibles. The Federal Reserve Board currently requires bank holding companies rated Composite 1 under the BOPEC rating system to maintain a minimum 3% leverage capital ratio and all other bank holding companies not rated a Composite 1 under the BOPEC rating system to maintain a minimum 4% to 5% leverage capital ratio. RESULTS OF OPERATIONS Net Earnings Net earnings increased 22% or $1,207,000 for the second quarter of 1995. Net earnings for the first six months of 1995 increased 23% or $2,522,000 from the comparable period in 1994. The increase in earnings for the first six months and quarter is attributed to an acquisition in January of 1995 accounted for as a purchase and increased net interest margin as a result of higher loan and investment yields.
Restated Restated Three Months Ended June 30 Six Months Ended June 30 -------------------------- ------------------------ 1995 1994 1995 1994 -------- -------- -------- -------- Results of Operations: Return on average assets 1.21% 1.11% 1.23% 1.08% Return on average equity 12.50% 12.55% 12.62% 12.59% Net Interest Income: Return on average interest-earning assets (tax equivalent) 8.20% 7.01% 8.08% 7.36% Cost of average interest-bearing funds 4.25% 3.40% 4.11% 3.37% ------ ------ ------ ------ Net interest spread 3.95% 3.61% 3.97% 3.99% ===== ===== ===== ===== Net interest margin (net interest income on a tax equivalent basis divided by average interest-earning assets) 5.15% 4.55% 5.10% 4.76% ===== ===== ===== =====
Page 9 of 12 10 Provision for Loan Losses The amount of the reserve equals the cumulative total of the provisions for loan losses, reduced by actual loan charge-offs, and increased by reserves acquired in acquisitions and recoveries of loans previously charged-off. Provisions are made to the reserve to reflect the currently perceived risks of loss associated with the company's loan portfolio. A specific loan is charged-off when management believes, after considering, among other things, the borrower's condition and the value of any collateral, that collection of the loan is unlikely. The following ratios are useful in determining the adequacy of the loan loss reserve and loan loss provision and are calculated using average loan balances.
Three Months Ended June 30 Six Months Ended June 30 -------------------------- ------------------------ 1995 1994 1995 1994 -------- -------- -------- -------- Annualized net charge-offs to average loans 0.34% 0.17% 0.22% 0.15% Annualized provision for loan losses to average 0.40% 0.16% 0.24% 0.19% loans Average reserve for loan losses to average loans 1.66% 1.72% 1.66% 1.73%
Income Taxes The effective tax rate of the Company continues to be less than the statutory rate of 35%, due primarily to tax- exempt interest income. The amount of tax-exempt income earned during the first six months of 1995 was $2,133,365 compared to $1,772,911 for the comparable period in 1994. Income tax expense increased from $4,953,000 in the first six months of 1994 to $6,608,000 in the first six months of 1995. This increase is primarily due to increased net income. Page 10 of 12 11 Part II _ OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits (27) Selected financial data. (b) Reports on Form 8-K - none. Page 11 of 12 12 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HANCOCK HOLDING COMPANY --------------------------------------- Registrant August 10, 1995 By: /s/ Leo W. Seal, Jr. ------------------------- --------------------------------------- Date Leo W. Seal, Jr. President and CEO August 10, 1995 By: /s/ George A. Schloegel ------------------------- --------------------------------------- Date George A. Schloegel Vice-Chairman of the Board
Page 12 of 12 13 EXHIBIT INDEX ------------- Exhibit 27 -- Financial Data Schedule EX-27 2 FINANCIAL DATA SCHEDULE
9 0000750577 HANCOCK HOLDING 1,000 6-MOS DEC-31-1995 JAN-01-1995 JUN-30-1995 124,667 1,458,089 102,425 0 43,399 870,075 865,948 993,125 (16,581) 2,207,190 1,901,514 0 16,747 2,955 29,942 0 0 185,020 2,207,190 47,824 27,789 3,076 78,689 27,962 29,437 49,252 1,177 (91) 39,164 20,000 20,000 0 0 13,392 1.51 1.51 5.10 5,058 3,501 0 0 15,310 2,320 1,207 16,581 16,581 0 3,000